1998 (3) TMI 165 - AT - Income Tax

Tribunal upholds tax assessment decisions on seized cash & unexplained income

The Tribunal upheld the CIT(A)'s decision to tax the seized cash amount of Rs. 7,50,000 in the assessment year 1989-90, emphasizing that the cash belonged ... - Issues:1. Taxability of seized cash amount in the assessment year.2. Treatment of unexplained capital introduced by partners in the firm's case.Issue 1: Taxability of seized cash amount in the assessment yearThe Revenue contested the direction of the CIT(A) to tax the seized cash amount of Rs. 7,50,000 in the assessment year 1989-90. The cash was seized from an employee of the assessee-firm and was claimed to belong to the partners. The AO found discrepancies in statements but the CIT(A) disagreed, holding that the cash was in possession of the appellant in March 1989. The Revenue argued that the CIT(A) failed to apply Section 69A of the Act, which deems unexplained cash as income. The Tribunal upheld the CIT(A)'s decision, emphasizing that the cash was owned by the assessee-firm and existed before April 1, 1989, justifying its taxation in the assessment year 1989-90.Issue 2: Treatment of unexplained capital introduced by partners in the firm's caseThe second issue revolved around the addition of unexplained capital introduced by partners in the firm's case under Section 68 of the IT Act. The AO added Rs. 6,39,109 as the firm's income, citing lack of correlation between disclosed income and capital introduced by partners. However, the CIT(A) deleted the addition, following precedents that unexplained capital should be taxed only in the hands of partners, not the firm. The Revenue argued that unexplained cash credits can be added to the firm's income. The Tribunal upheld the CIT(A)'s decision, noting that partners owned up to the capital introduced by them, and there was no justification to add it to the firm's income. The Tribunal relied on previous decisions and declined to interfere, ultimately dismissing the appeal.---