Corroborated cash source evidence defeats unexplained income addition, while seizure power remains confined to statutory grounds.

Corroborated evidence explaining the source and ownership of cash can defeat an addition for unexplained income. On the facts noted, the cash carried by an employee was supported by statements of the employee and growers, confirmatory letters, and transaction records, so the Revenue's objection based on the absence of regular books was insufficient to displace the explanation. The note also states that police seizure powers under criminal procedure are limited to property suspected to be stolen or otherwise connected with an offence; where no lawful basis for seizure exists, the seizure is unwarranted and cannot sustain income-tax action founded on it.

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Issues: (i) Whether the cash of Rs. 1,80,000 seized from the employee represented unexplained income of the assessee; (ii) Whether the police had lawfully exercised power to seize the cash under the criminal procedure law.

Issue (i): Whether the cash of Rs. 1,80,000 seized from the employee represented unexplained income of the assessee.

Analysis: The assessee supported the explanation that the cash represented sale proceeds of grapes belonging to growers at Nasik and was being carried for delivery. The explanation was corroborated by the employee's statements, statements of the growers, confirmatory letters, and other surrounding material. The accepted commission business and the maintained transaction details further supported the assessee's version. Mere absence of regular books of account and the Revenue's objections were held insufficient to displace the corroborated explanation.

Conclusion: The addition of Rs. 1,80,000 as unexplained income was not sustainable and was rightly deleted, in favour of the assessee.

Issue (ii): Whether the police had lawfully exercised power to seize the cash under the criminal procedure law.

Analysis: The power of seizure under the criminal procedure law was confined to property suspected to be stolen or found under circumstances creating suspicion of an offence. The record did not show that the cash was stolen or that lawful grounds existed to treat its carriage as an offence. The seizure was therefore held to be without proper lawful basis, and the initiation of income-tax proceedings founded on that seizure was not approved.

Conclusion: The seizure was held to be unwarranted in law and did not justify the addition made against the assessee, in favour of the assessee.

Final Conclusion: The Revenue's challenge failed, the deletion of the addition was sustained, and the assessee's explanation regarding the cash was accepted.

Ratio Decidendi: Where contemporaneous and corroborative evidence satisfactorily explains the source and ownership of cash, an addition for unexplained income cannot stand; a seizure of cash is not valid unless exercised within the limited statutory grounds permitting seizure of property suspected to be connected with an offence.

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