2025 (3) TMI 251 - AT - Income Tax

Employee cash treated as unexplained income under section 69A remanded for fresh verification after retraction

Turab Ali Bohra Versus ACIT Central Circle, Ajmer

ITAT Jaipur remanded the case to AO for fresh verification regarding unexplained money under section 69A. Cash found with employee was treated as ... Unexplained money u/s 69A - additions made on account of the cash found from the possession of employee - HELD THAT:-Considering the facts and circumstances of the case and also the retraction made by the assessee from his earlier statement recorded u/s 131 the version of the assessee was not found acceptable and therefore, it is considered that the amount found from the possession of Shri Shyam Singh Rathore and belongs to Shri Turab Ali Bohra was considered as unexplained money of Shri Turab Ali Bohra for which he has not been able to satisfactorily prove the sources thereof. Accordingly, an addition was made to the total income of the assessee on substantive basis by considering the same as his unexplained money u/s 69A r.w.s. 115BBE of the I.T. Act, 1961 and brought to tax accordingly. Assessee though retracted from the statement, and he has filed the details relating to the claim and substantiated his case to support the cash found in possession of the employee of the assessee - DR objected that since these records are not discussed or verified the relief cannot be granted to the assessee without being confronted to the assessee on the material placed on the record - In light of this set of facts before us, we deem it fit to restore the matter to verify the contention that has been made by the assessee with that of the statement recorded at the time of survey. AO will verify the contentions of the cash sales made by the assessee and consequential collection of cash from that collection centre is requires in depth verification. Therefore, we deem it fit in the interest of justice to restore the matter to the file of ld. AO who will verify the contentions raised at the time of assessment which though contrary to the statement recorded at the time of survey. Ground allowed for statistical purposes. Addition being the amount of excess stock found at the premises of the assessee, during survey proceedings - During hearing of the present appeal when the details of difference of stock and the inventory prepared at the time of survey was requested to be placed on record. But both the parties did not consider it fit to place on record that as to how the difference is arrived whether it is on account of quantity difference or on account of valuation difference. Considering that peculiar facts being not available before us we deem it fit to restore the matter before ld. AO who will justify the addition after discussing the reasons of difference and after affording due to opportunity to the assessee to explain the difference. Based on these observations, ground No. 3 raised by the assessee is allowed for statistical purposes. Charging a special rate of tax on account of provisions of section 115BBE - Since we restore the matter of dispute to the file of ld. Assessing Officer on merits, so obviously the levy of tax being consequential in nature will depend upon the finding of the ld. AO. 1. ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this legal judgment include:Whether the cash amount of Rs. 22,49,500/- found in the possession of the assessee's employee, Shri Shyam Singh Rathore, should be treated as unexplained money under Section 69A of the Income Tax Act.Whether the addition of Rs. 1,34,212/- on account of alleged excess stock found during the survey should be upheld.The applicability of Section 115BBE of the Income Tax Act concerning the tax rate on the unexplained money.Procedural adherence to Section 144B of the Income Tax Act.Imposition of interest under Sections 234A, 234B, and 234C of the Income Tax Act.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Unexplained Money under Section 69ARelevant Legal Framework and Precedents: Section 69A of the Income Tax Act pertains to unexplained money, where the assessee is found to be the owner of any money not recorded in the books of account, and the explanation offered by the assessee is not satisfactory.Court's Interpretation and Reasoning: The court noted the conflicting statements made by the assessee and his employee regarding the source of the cash. Initially, the employee stated that the cash was collected from debtors, but during assessment, the assessee claimed it was from cash sales collected through designated collection points.Key Evidence and Findings: The assessee provided GST returns and sales invoices to support the claim that the cash was from recorded sales. However, the authorities initially found these explanations as afterthoughts and not credible.Application of Law to Facts: The court found that the lower authorities did not adequately consider the documentary evidence provided by the assessee. The matter was remanded to the Assessing Officer for a thorough verification of the claims.Treatment of Competing Arguments: The court acknowledged the assessee's contention that the cash was from legitimate sales and noted the need for further verification by the Assessing Officer.Conclusions: The issue was remanded for further verification, with instructions to the Assessing Officer to consider the evidence provided by the assessee.Issue 2: Addition on Account of Excess StockRelevant Legal Framework and Precedents: The addition was made based on the physical verification of stock during the survey, which showed a discrepancy.Court's Interpretation and Reasoning: The court noted the lack of clarity on whether the discrepancy was due to valuation or quantity differences.Key Evidence and Findings: The court found that neither party provided sufficient evidence regarding the nature of the discrepancy.Application of Law to Facts: The court decided that the matter required further examination to determine the nature of the discrepancy.Treatment of Competing Arguments: The court considered the assessee's argument that the discrepancy was minor and possibly due to errors in stock-taking.Conclusions: The issue was remanded to the Assessing Officer for a detailed examination of the stock discrepancy.Issue 3: Applicability of Section 115BBERelevant Legal Framework and Precedents: Section 115BBE provides for a higher tax rate on income deemed unexplained under certain sections, including Section 69A.Court's Interpretation and Reasoning: The applicability of Section 115BBE was contingent on the resolution of the primary issues regarding unexplained money and excess stock.Key Evidence and Findings: The court noted that the resolution of the substantive issues would determine the applicability of Section 115BBE.Application of Law to Facts: The court deferred the decision on this issue, pending the outcome of the remanded issues.Treatment of Competing Arguments: The court acknowledged the assessee's argument that the cash was business income, not unexplained money.Conclusions: The issue was deemed premature and contingent on the findings of the remand proceedings.Issue 4: Procedural Adherence to Section 144BThis issue was not substantively addressed in the judgment, as no arguments were made by the assessee regarding procedural adherence.Issue 5: Imposition of Interest under Sections 234A, 234B, and 234CThis issue was considered consequential and dependent on the final determination of the primary issues.3. SIGNIFICANT HOLDINGSThe court remanded the issues of unexplained money and excess stock to the Assessing Officer for further verification, emphasizing the need for a thorough examination of the evidence provided by the assessee.The applicability of Section 115BBE was deferred, pending the outcome of the remanded issues.The court did not substantively address the procedural issue under Section 144B or the imposition of interest, as these were considered dependent on the resolution of the primary issues.