TaxTMI 
TaxTMI 
2026 (2) TMI 1240
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....zed during the search. ii) Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-3 has erred in calculating the commission income from property dealing business at Rs. 35,79,000/- by applying rate of 4% on sum of Rs. 8,94,75,000/- mentioned in the seized incriminating documents and sustaining the addition to that extent, without appreciating the fact that the assessee failed to substantiate with documentary evidences that he has carried out the business of property dealing. Hence, decision of Ld. CIT(A) determining the unaccounted business income to the extent of Rs. 35,79,000 and sustaining the addition that that extent is not justifiable being based on surmises and conjecture. iii) Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 50,15,000 on account of unexplained cash found during the search, disregarding the fact that the assessee failed to discharge the onus cast upon him to explain the nature and source of the amount seized during the search. Merely recharacterizing the unexplained cash as 'income' without verification, does not absolve the assessee from statutory liabili....
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....2.2022, the assessee had stated out of the cash of Rs. 32,70,000/- seized from the residence of the assessee Rs. 22,00,000/- was from the income accumulated from chit fund and the rest was sourced from commission from property sales. In order to verify the claims and assertions of the assessee, specific questions were asked from the assessee regarding the source of the seized cash being the chit fund during the assessment proceedings vide the notices u/s 142(1) dated 27.10.2023 and 13.11.2023. 3.1 Further, AO noted that with respect to the remainder amount of Rs. 10,70,000/- the assessee had stated in his sworn statement dated 15.02.2022, the amount had arisen on account of sale and purchase of immovable properties. In order to verify the claims and assertions of the assessee, specific questions were asked from the assessee regarding the source of the seized cash being the sale of properties during the assessment proceedings vide the notices u/s 142(1) dated 27.10.2023 and13.11.2023. The assessee failed to file his reply to the aforementioned notices u/s 142(1). However, considering the principle of natural justice, the assessee was provided with one final opportunity vide show ....
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....he same. However, the sources of the impugned cash seized are not verifiable from the documents submitted by the assessee and therefore the source of this cash remained unexplained. With respect to the balance cash amounting to Rs. 17,45,000/-, the assessee has submitted that the aforementioned cash does not belong to the assessee but Sh. Pankaj Rawat. However, the assessee has failed to provide any documentary evidence with respect to the same. AO in this light, has observed that the impugned seized cash amounting to Rs. 17,45,000/- remained unexplained and in view of the facts and circumstances, the cash amounting to Rs. 50,15,000/- seized from the residential and office premises of the assessee during the search and seizure proceedings is being added to the total income of the assessee as unexplained money under section 69A r.w.s. 115BBE of the Act. Further, during the course of the search proceedings, several incriminating documents were also seized from the possession of the assessee. The assessee has not submitted any corroborative primary evidence to substantiate his explanation with respect to various seized documents. Therefore, AO noted that amounts of Rs. 2,48,000/- Rs. ....
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....gly, 4% commission rate can be applied to the total value of transaction mentioned in the seized documents. The money earned by the assessee from his unaccounted business of property dealing accordingly comes to Rs. 35,79,000 (4% of Rs. 8,94,75,000). Hence, addition to the extent of Rs. 35,79,000/- is sustained on account of the seized documents mentioned above being unaccounted business income of the assessee. Addition based on seized documents LP 2 page 130 and LP 2 page 178, An addition of Rs. 1,01,890/- and Rs. 2,48,000/- has been made by the AO on account of above documents. Perusal of the document LP 2 page 130 reveals that apart from cash transactions, some figures relating to electricity reimbursement are also mentioned. The said document does not appear to pertain to the property business of the assessee. Neither the appellant has been able to explain the nature of transactions in the said documents. Similarly, the transactions mentioned on LP 2 page 178 appear to be receipt of cash from various persons. The appellant has stated that the said cash pertains to rental receipts of his parents, though no documentary evidence in support of the same has been pr....
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.... have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.]" The provisions of Section 292C make it very clear that the incriminating material belongs to the assessee and the contents of the document are true. In view of above discussion and facts of the case, as the documents are clear that cash has been earned by the appellant, the additions made by the AO amounting to Rs. 3,49,890/- on the basis of above documents is sustained u/s 69A. Cash seizure of Rs. 50,15,000/- The contentions of the appellant on the issue of cash seizure have been examined. The assessee has submitted during the assessment proceedings a cash book wherein the source of cash amounting to Rs. 4,71,000/- has been ascribed to the commission income of the assessee. The AO has disregarded the said cash book in para 11 of the assessment order without giving justifiable reasons for the same. The copy of cash book is reproduced below for ready reference:-....
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....ing FY 2016-17 and any available cash in hand in currency denomination of Rs. 500/- and Rs. 1,000/-should have been deposited in the bank accounts. The. cash flow statement of rental receipts since FY 2013-14 does not take into account this critical factor. Hence, the above contentions of the appellant are not acceptable. Further, the appellant has stated that the cash of Rs. 17,45,000/- belongs to Sh. Pankaj Rawat. It needs to be emphasized that the cash was seized from the assessee and the assessee has failed during the assessment proceedings to provide any documentary evidence to prove that the cash belonged to Sh. Pankaj Rawat. In view of the discussion carried out above cash can be considered explained only to the extent of Rs. 6,71,000/-. The unexplained cash accordingly is Rs. 43,44,000/-. Telescoping The appellant has stated that in case the transactions in the seized documents are considered as pertain to the assessee then benefit of telescoping should be given as far as the cash seizure is concern. Telescoping is a technique by which the real income of an assessee is to be determined. The real income is subject to tax under the Income-tax Act, f....
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....nature of cash deficit and cash credit must be ascertained from an overall consideration of the particular facts and circumstances of case - Held, yes - Whether since Tribunal confined its finding only to fact that an intangible addition had been added to assessee's book profits in earlier years and that a part of that amount remained available to assessee thereafter, and did not consider other relevant facts and circumstances of case, such a finding could not be upheld and was rightly set aside by High Court - Held, yes" Further, in the judgment of Hon'ble High Court of Gujarat in the case of Principal Commissioner of Income-tax vs. Aliasgar Anvarali Varteji reported at [2018] 96 taxmann.com231 (Gujarat) it has been held as under: "Where entire unaccounted income found during search was offered as part of overall disclosure and negative balance in books of account was on account of payment made out of said unaccounted income, assessee could not be denied benefit of telescoping of original disclosure" Further, in the judgment of Ld. ITAT Bangalore Bench SMC-A in the case of Smt. Ganigara Rekha Venugopal vs. ACIT reported at [2023] 149 taxmann.com ....
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....tained with respect to the unaccounted business income. Addition of Rs. 2,48,000/- and Rs. l,01,890/-is sustained u/s 69A on account of notings on the seized documents. Also the addition with respect to excess cash to the extent of Rs. 4,15,110/- is sustained u/s 69A. In the result, the appeal is partly allowed." 4. Aggrieved, the Revenue is in appeal before the Tribunal. 5. At the time of hearing, Ld. DR relied upon the order of the Assessing Officer and stated that Ld. CIT(A) has erred in deleting the addition made by AO of Rs. 99,88,390 out of total addition of Rs. 1,43,32,390/- u/s. 69A of the Act by applying the principle of telescoping, without establishing a clear and direct nexus between the alleged unaccounted income determined by the Ld. CIT(A) and the specific cash seized during the search. She further submitted that Ld. CIT(A) has also erred in calculating the commission income from property dealing business at Rs. 35,79,000/- by applying rate of 4% on sum of Rs. 8,94,75,000/- mentioned in the seized incriminating documents and sustaining the addition to that extent, without appreciating the fact that the assessee failed to substantiate with documentary e....
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....he assessee. Further the AO made an addition of Rs. 2,48,000/- on basis of seized documents LP 2 page 178 wherein date wise monthly receipt of money from some persons namely Anuj, Manis and Wasim is mentioned. The AO treated the said receipt as unexplained income u/s 69A whereas the assessee stated that the said income emanated out of the rental income of the parents of the assessee. Further the AO made additions of Rs. 44,00,000/- Rs. 29,06,500/- and Rs. 16,61,000/- on account of seized documents i.e. BK 3 page 56, BK 9 page 18 and BK 9 page 19 respectively. The AO in the assessment order tabulated the transactions mentioned in the documents cited above and calculated the value of the cash transaction on the various documents and added the same to the income of the assessee as already mentioned above. During the assessment proceedings the appellant stated that the documents are merely rough calculations and the same do not carry much value. The assessee further stated during the assessment proceedings that the cheque of Rs. 15,00,000/- mentioned on page 56 of BK 3 does not appear in any bank account of the assessee. Similarly for documents BK 9 page 18, the assessee stated during ....
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....ssee that the documents carry no value are also not acceptable for the reason that the assessee is into the business of property dealing and the notings in the seized documents clearly are of the nature where property deals are being effected for other persons. Section 292C of the Act clearly provides that the ownership of a seized document lies with the person from whom it has been seized. It shall be appropriate if the complete value of transactions mentioned in the seized documents is calculated and appropriate rate of commission (assessee being a property dealer) is applied. Perusal of the analysis done by the AO reveals that a total of Rs. 8,94,75,000/- is mentioned on the seized documents if all the receipts and payments are taken into account as referred to in the assessment order. In the business of property dealing, 2% is the average commission charged by the property dealer from either of the parties. Accordingly, 4% commission rate was rightly applied to the total value of transaction mentioned in the seized documents. The money earned by the assessee from his unaccounted business of property dealing accordingly comes to Rs. 35,79,000 (4% of Rs. 8,94,75,000). Hence, addi....
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....re is adequate documentary proof available showing the receipts of cash, the assessee cannot be allowed to go scot free with respect to alleged unaccounted cash receipts. 6.6 Also the provisions of Section 292C make it very clear that the incriminating material belongs to the assessee and the contents of the document are true. In view of above discussion and facts of the case, as the documents are clear that cash has been earned by the assessee, the additions made by the AO amounting to Rs. 3,49,890/- on the basis of above documents was rightly sustained u/s 69 of the Act, which does not need any interference on our part, hence, we uphold the same; 6.7 As regards Cash seizure of Rs. 50,15,000/- is concerned, we find that the contentions of the assessee on the issue of cash seizure have been examined. The assessee has submitted during the assessment proceedings a cash book wherein the source of cash amounting to Rs. 4,71,000/- has been ascribed to the commission income of the assessee. The AO has disregarded the said cash book in para 11 of the assessment order without giving justifiable reasons for the same. Once the assessee had available cash in hand of Rs. 4,71,000/- as pe....
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....e cash in hand in currency denomination of Rs. 500/- and Rs. 1,000/- should have been deposited in the bank accounts. The. cash flow statement of rental receipts since FY 2013-14 does not take into account this critical factor. Hence, the above contentions of the assessee were rightly rejected by the Ld. CIT(A). 6.11 Further, the assessee stated that the cash of Rs. 17,45,000/- belongs to Sh. Pankaj Rawat. The cash was seized from the assessee and the assessee has failed during the assessment proceedings to provide any documentary evidence to prove that the cash belonged to Sh. Pankaj Rawat. In view of the discussion carried out above, Ld. CIT(A) correctly held that cash can be considered explained only to the extent of Rs. 6,71,000/-. The unexplained cash accordingly is Rs. 43,44,000/-. 6.12 We note that Ld. CIT(A) has adopted the telescopic theory which means identifying an income and its application, so that ultimately tax is levied either only on the income or only on its application. In other words, in case where an assessee has certain undisclosed income and also certain undisclosed investments/expenditure, then it could be reasonably presumed that the undisclosed inves....
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....erved that the unaccounted cash found has to be adjusted against the unaccounted cash earned by the assessee as both income and its application cannot be taxed simultaneously. Hence, the cash income of the assessee to the extent of Rs. 39,28,890/- was rightly adjusted against the cash found of Rs. 43,44,000/-. Accordingly, cash of Rs. 4,15,110/- was found to be excess over and above the cash earned by the assessee. Hence addition of cash found was rightly sustained to the extent of Rs. 4,15,110/-. 7.1 In view of the aforesaid factual matrix, the addition of Rs. 35,79,000/- was rightly sustained by the Ld. CIT(A) with respect to the unaccounted business income and addition of Rs. 2,48,000/- & Rs. l,01,890/- was also correctly sustained u/s 69A on account of notings on the seized documents. Also the addition with respect to excess cash to the extent of Rs. 4,15,110/- was rightly sustained u/s 69A by the Ld. CIT(A). In view of above, we do not find any infirmity in the order of the Ld. CIT(A) on the issues in dispute and therefore, we affirm the findings of the Ld. CIT(A) by rejecting the grounds raised by the Revenue. 8. In the result, the Revenue's appeal is dismissed. Orde....