2023 (5) TMI 1480 - AT - Income Tax

Unexplained cash and loan allegations in search proceedings: tribunal upholds some additions and deletes others partially

Unexplained cash found on search was explained as firm imprest withdrawals and supported by the firm cash-book; CIT(A) accepted this explanation and ... Unexplained cash - As during search proceeding, the authorities found physical cash available with the assessee - assessee submitted that the impugned cash was the residual amount of cash withdrawn from firm against imprest account for expenses. The assessee also filed cash-book of firm - AO did not accept reply of assessee for the reason that during the course of search proceeding, no such explanation was given and moreover the cash-book of firm was not produced - CIT(A) deleted addition by accepting assessee's explanation after examination of cash-book produced by assessee which showed available cash balance - HELD THAT:- We find that the assessee has made an identical explanation before both of the lower- authorities i.e. the impugned physical cash was out of withdrawals made from firm for imprest a/c of expenses. Assessee has also placed on record the copy of cash-book of firm which has been verified by Ld. CIT(A) according to which the firm had a total cash balance of Rs. 13,50,334/- on the date of search. This finding given by Ld. CIT(A) could not be controverted by revenue. We find that the balance of Rs. 13,50,334/- shown by cash-book is sufficient to cover the imprest cash of Rs. 4,71,000/- . Thus, there is no infirmity in the explanation given by assessee to lower- authorities. Income surrendered by assessee - On careful consideration of stand of the AO and basis taken by the Ld. CIT(A) for deleting the addition, we may point out that in the case of Kailasben Mangarlal Choksh [2008 (9) TMI 525 - GUJARAT HIGH COURT] held that merely on the basis of admission of assessee, the assessee could not have been subjected to addition, unless and until some collaborative evidence is found in support of such admission. Meaning thereby addition on the standalone basis of statement of assessee u/s 132(4) of the Act cannot be held as sustainable in absence of collaborative evidence found in support of such addition. Further, the Hon'ble Jharkhand High Court in the case of Shri Ganesh Trading Company [2013 (1) TMI 397 - JHARKHAND HIGH COURT] held that mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. In the present case also the assessee during the course of search operation in the statement and subsequently by way of letter was sure about the surrender of Rs. 10.25 crores under various heads, however regarding remaining Rs. 2.50 crore, the assessee in the said letter clarified that the said amount pertaining to miscellaneous surrender shall be confirmed after study of all papers. Subsequently at the time of filing return u/s 153A of the Act, the assessee-group included Rs. 10.25 crore leaving the amount of Rs. 2.50 crore for the precise reason, which has been clearly accepted by Ld. CIT(A), that the assessee right from search and seizure operation till filing of return could not find any substantive material or investment which could be considered for supporting the surrender of remaining amount Rs. 2.50 crore. Therefore the Ld. CIT(A) was right in deleting the unsustainable addition. Addition on account of cash loan given - AO was not satisfied with the submission of assessee mainly for the reasons that (i) the assessee had not submitted any evidence regarding source of cash-loan made to Vishal Chouhan; and (ii) the cash- loan was not recorded in the books of account of assessee - HELD THAT:- We are certainly in agreement with Ld. DR that the assessee's explanation before CIT(A) is deceptive/false/contradictory to assessee's own explanation before AO and hence the same cannot be given any credence. From the aforesaid reply dated 17.02.2014 filed by assessee to AO, we find that the assessee has himself admitted having given a loan to Vishal Chouhan. Further, it is also an undisputed fact that the impugned loan was not recorded in cash-book of assessee. Faced with these categorical facts, we are of the considered view that the AO has rightly taken a conclusion that impugned loan was given out of unexplained sources. Therefore, the addition made by AO is very much legal and justified. Protective Addition on account of on-money payment against land purchase - Clearly, therefore, the Hon'ble Co-ordinate Bench has deleted the substantive additions after considering the factual as well as legal position. Consequently, the protective additions relating to those transactions made in the hands of assessee cannot survive. Issues: (i) Whether the addition of Rs.4,71,000/- on account of unexplained cash was rightly deleted by the CIT(A)? (ii) Whether the addition of Rs.2,50,00,000/- made by the AO on account of surrender/retraction from surrendered income was rightly deleted by the CIT(A)? (iii) Whether the addition of Rs.10,00,000/- on account of cash loan given to Vishal Chouhan was rightly deleted by the CIT(A)? (iv) Whether the additions of Rs.3,50,000/-, Rs.3,50,000/-, Rs.17,04,000/- and Rs.8,52,000/- on account of on-money payments against land purchase were rightly deleted by the CIT(A)?Issue (i): Deletion of addition of Rs.4,71,000/- being unexplained cash.Analysis: The assessee consistently explained that the cash represented residual imprest withdrawals from the firm and produced the firm's cash-book. The CIT(A) examined the cash-book showing a sufficient cash balance (Rs.13,50,334/-) to cover the impugned cash; revenue did not controvert that finding or produce contrary documentary evidence.Conclusion: In favour of Assessee.Issue (ii): Deletion of addition of Rs.2,50,00,000/- asserted as retraction from surrendered income.Analysis: The assessee's surrender of Rs.2.50 crore was expressed in the letter as a conditional/miscellaneous surrender 'shall be confirmed after study of all papers' and was not ultimately reflected in returns after examination of seized papers. The CIT(A) found no specific incriminating material linking that Rs.2.50 crore to the assessee; reliance was placed on authorities holding that statements under section 132(4) require corroboration and admission alone is not conclusive. Revenue failed to produce positive documentary corroboration tying the disputed amount to undisclosed income.Conclusion: In favour of Assessee.Issue (iii): Deletion of addition of Rs.10,00,000/- on account of cash loan to Vishal Chouhan.Analysis: The seized receipt acknowledged a loan of Rs.10,00,000/-, and the assessee, in reply to the AO, admitted giving a temporary loan which was returned; the transaction was not recorded in books. The assessee later adopted a contradictory version before the CIT(A). The Tribunal found the assessee's inconsistent explanations deceptive and observed absence of book entry or satisfactory explanation linking the payment to recorded sources. The AO had therefore reasonably treated the amount as from unexplained sources and made addition under section 69.Conclusion: In favour of Revenue.Issue (iv): Deletion of additions of Rs.3,50,000/-, Rs.3,50,000/-, Rs.17,04,000/- and Rs.8,52,000/- as on-money payments against land purchase.Analysis: The substantive additions were made against another assessee (M/s Sagar Manufacturers Pvt. Ltd.) and were deleted by the coordinate ITAT Bench after finding shortcomings in the sellers' statements: contradictions, lack of corroborative evidence, failure to afford cross-examination, and absence of independent inquiry by AO. Those substantive deletions were upheld on appeal, rendering protective additions in the present assessee unsustainable.Conclusion: In favour of Assessee.Final Conclusion: The Tribunal affirms deletions made by the CIT(A) in respect of issues (i), (ii) and (iv) and allows the Revenue's appeal in respect of issue (iii); overall the Revenue's appeal is partly allowed.Ratio Decidendi: An admission in a statement recorded under section 132(4) is evidence but not conclusive; additions based solely on such admissions are unsustainable unless corroborative material linking the admitted amount to the assessee (seized documents, recovered assets, books, or other documentary/incriminating evidence) is produced by Revenue.