TaxTMI 
TaxTMI 
2026 (9) TMI 1315
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....are reproduced as under: - "1. On the facts and circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the action of the ld. AO in making addition of Rs. 8,50,000/- on account of cash found during search by treating the same as unexplained u/s 69A of the Act, for the reason stated in the impugned order and otherwise." 2.1 The grounds raised by the Revenue are reproduced as under: - "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,35,42,400 made under section 69A of the income tax Act, 1961 on account of unexplained jewellery found during search, by accepting the assessee s explanation on the basis of aggregate reconciliation of jewellery with wealth tax returns and bullion purchases and considering joint family ownership, without establishing item wise identity, continued possession or adequate corroborative evidence, and thereby holding that the onus cast upon the assessee stood discharged." 3. Briefly stated facts of the case are that that the assessee filed his return of income declaring a total income of Rs. 3,80,06,080/-. Subsequently, a sea....
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....hat assessee and his son Shri Abhishek Jain had cash balance of aggregating to Rs. 14,07,933/-, which was sufficient enough to explain the cash of Rs. 9,58,000/- found in search. The availability of the cash explained by the assessee is reproduced as under:- Sr. No. Particulars Amount (Goutham Kumar Jain) Amount (Abhishek Kumar Jain) Total 1 Opening Balance as on 01.04.2022 6,19,733 4,38,200 10,57,933 2 Add: Cash Withdrawal from bank account for the year (before date of search i.e., before 31.01.2023) 2,00,000 1,50,000 4,61,236 3 Closing balance as on 31.01.2023 i.e.. as on date of search 8,19,733 5,88,200 14,07,933 4.3 The Assessing Officer, however, did not find the explanation satisfactory. According to him, while preparing the statement of cash availability, the assessee had merely aggregated the opening cash balances and cash withdrawn from the bank accounts without accounting for the normal household expenditure that would ordinarily have been incurred during the intervening period. The assessee explained that household expenses were incurred out of the cash withdrawal by his wife M/s Sangeeta Ja....
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....avir Drugs Plus as on 31.03.2023, a cash and bank balance of Rs. 1,49,74,307/- had been reflected and out of the same cash balance was of Rs. 2,20,991/-. With the help of the return of income the assessee further explained the position of the availability of the cash in hand as on the date of the search as under:- Sr. No. Particulars Amount (Goutham Kumar Jain) Amount (Abhishek Kumar Jain) Total 1 Total Opening Balance as on 01.04.2022 of personal 6,19,733 4,38,200 10,57,933 Total opening balance as on 01.04.2022 of proprietorship cash 2,79,470 0 2,79,470 2 Cash Withdrawal 2,00,000 1,50,000 4,61,236 3 Cash balance as on date of search 10,19,733 5,88,200 16,87,403 4.5 The learned CIT(A), however, was not persuaded by the aforesaid explanation. He observed that although the assessee had furnished an arithmetical statement indicating availability of sufficient cash, no contemporaneous material had been produced to establish that the cash claimed to be available had actually remained unutilized till the date of search. According to him, the explanation that all household expenditure had been met exclus....
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....hdrawals made by the appellant's wife, Smt. Sangeeta Jain, whose bank statements and ITR were furnished. The appellant argued that it is a common family practice for spouses to bear household expenses and therefore absence of cash drawings in the appellant's own account cannot justify adverse inference. It was also submitted that maintaining detailed household cash records is not mandatory and the AO cannot question the purpose of cash withdrawals once reflected in bank statements. 8.6 The appellant also clarified that personal cash and business cash of his proprietorship concern, M/s Mahaveer Drugs Plus, were separately disclosed in the ITR and together with withdrawals of himself and his son, total explained cash availability worked out to Rs. 16,87,403/- far exceeding the seized amount. It was further contended that the seized cash was duly covered by opening balances and withdrawals reflected in the respective bank accounts and returns of income. 8.7 The Assessing Officer, however, observed that the appellant failed to reconcile the cash found on the date of search with the books of account and cash balances disclosed in the returns of income. It was specifica....
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....he balance sheet of the proprietary concern it stands at Rs. 1,49,74,307/-, resulting in a difference of Rs. 2,20,991/-. The Assessing Officer has rightly observed that this Rs. 2,20,991/- represents the personal cash component of the appellant, whereas the appellant has claimed an opening personal cash balance of Rs. 6,19,733/-, thereby clearly demonstrating that the cash claimed by the appellant is substantially higher than what is reflected in the return of income. This material inconsistency remains unreconciled. The relevant sheet is reproduced as below: 8.10 Further, it is also evident from the assessment record that during the entire year, except for cash withdrawals, no drawings or household expenses have been reflected by either the appellant or his son, which is wholly unrealistic. The explanation that all household expenses were met exclusively from withdrawals made by Smt. Sangeeta Jain is not supported by any contemporaneous cash book, ledger or expenditure details. Merely producing bank statements showing withdrawals does not establish utilisation of cash for household purposes. More importantly, the appellant himself admits availability of substantial cash b....
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....im during the financial year is to the extent of Rs. 3,50,000/-. The cash withdrawal cannot be considered as source for the cash found during search because the appellant has not provided the details of source of personal expenses and drawings during financial year 2022-23 up to the date off search. 8.13 Section 69A of the Act clearly provides that where any money is found in the possession of the assessee and the assessee offers no satisfactory explanation about the nature and source thereof, the same may be deemed to be income of the assessee. The relevant section is reproduced as under: "69A. Where in any financial year the assessee is found to be the owner of anymoney, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable ....
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.... 0 0 2,79,470 As per page no.6 of PB 3. Cash Withdrawal during FY 2022-23 prior to search 2,00,000 1,50,000 2,00,000 5,50,000 As per page no. 73 and 113 and 114 of PB 4 Cash balance available as on date of search on 31.01.2013 10,99,203 5,88,200 6,26,106 23,13,509 4.7 The assessee before us referred to the return of income filed by the assessee, his son and his wife, wherein the opening cash balance in the personal hand of the assessee, his son, wife found reconciling with the income tax return. Similarly, the opening cash balance reported in the proprietorship concern was also reconciled with the income-tax return. It was submitted that the opening cash balances disclosed in the returns of income of all the family members were never disputed by the Department. Learned counsel submitted that even if the entire cash withdrawn during the relevant period is ignored or presumed to have been utilised towards household expenditure, the opening cash balances of Rs. 17,63,509, would sufficiently explain the cash of Rs. 9,58,000/- found during the search. According to him, the authorities below erred in rejecting documentary ev....
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....e Assessing Officer, the opening cash balances and the cash withdrawn from the bank could not be accepted at their face value because the assessee had not demonstrated the utilisation of cash towards household expenditure during the relevant period. The learned CIT(A) substantially affirmed this reasoning by observing that the assessee had only shown a theoretical availability of cash without establishing a live nexus between the opening balances and the cash physically found on the date of search. 4.12 Having examined the material placed before us, we find that the assessee has furnished the returns of income of himself, his son and his wife, wherein the respective opening cash balances stand disclosed. The opening cash balance pertaining to the proprietary concern also stands reflected in the financial statements accompanying the return of income. The Revenue has not disputed the authenticity of these returns or the correctness of the opening cash balances disclosed therein. In fact, before us, the learned Authorised Representative has furnished a consolidated reconciliation demonstrating the cash availability by taking into consideration the disclosed opening balances of all ....
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....rially affect the availability of the opening cash balance which admittedly stood disclosed in the returns of income much before the date of search. 4.16 The learned CIT(A) has also observed that the assessee failed to establish a live nexus between the opening cash and the cash found during search. We are unable to subscribe to this line of reasoning. Cash, unlike an identifiable capital asset, is inherently fungible. Once its existence is evidenced through contemporaneous records maintained in the ordinary course and the Revenue is unable to establish that the disclosed cash stood exhausted or otherwise ceased to exist, it would be wholly unrealistic to insist upon the assessee proving the identity of each currency note found during the search with the opening cash balance disclosed several months earlier. The law requires a satisfactory explanation regarding the source of the money and not an impossible demonstration of physical continuity of every currency note. 4.17 It is equally relevant that the Revenue has not disputed the genuineness of the returns of income, the opening cash balances reflected therein or the cash balance appearing in the books of the proprietary con....
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....xis Bank) of transactions dated 04.04.2019 & 05.04.2019. On the basis of these documents, the assessee prepared a reconciliation demonstrating that the aggregate quantity of jewellery and bullion available with the family exceeded the quantity found during the course of search, as under: Sr. No. Particulars Total Weight of Jewellery Found/ Found & Seized 1. Total Weight of Total jewelry Found/Found and Seized 5,699.13 grams 2. Less: Weight of Total Jewellery as per latest Wealth Tax Return filed by the assessee Shri Goutham Kumar Jain for FY 2012-13 768.00 grams 3. Less: Weight of Total Jewellery as per latest Wealth Tax Return filed by spouse of assessee Smt. Sangeeta Jain for FY 2012-13 1112.00 grams 4. Less: Weight of Total Jewellery as per latest Wealth Tax Return filed by son of assessee Shri Abhishek Kumar Jain for FY 2011-12 1148.00 grams 5. Less: Weight of Total Jewellery as per latest Wealth Tax Return filed by daughter-in-law of assessee Smt. Sonal Jain for FY 2011-12 1120.00 grams 6. Less: Weight of gold bullion purchased by HUF of son of the assessee i.e., Abhishek Kumar Jain HUF (1,000 grams on 04.04.2019 and ....
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....herein jewellery aggregating to 4,148 grams was declared much prior to the date of search. I consider that the claim that the jewellery found was fully covered by the explained sources. 10.6 I have also perused the documentary evidence of the purchase of gold bullion aggregating to 1,800 grams made in April 2019 by Abhishek Kumar Jain HUF, along with copies of purchase invoices and corresponding bank statements of Axis Bank, evidencing payment for the said bullion. It was submitted that cumulatively, the jewellery disclosed in wealth tax returns together with the bullion purchases aggregated to 5,948 grams, which exceeded the total jewellery found during the search of 5,699.13 grams. The appellant's contention that since the family resides jointly, the jewellery found at the premises represents cumulative holdings of family members and not of the appellant alone. 10.7 These factual figures are not disputed by the Assessing Officer. The only objection raised is that the wealth-tax returns pertain to earlier years and that item-wise malching of jewellery was not produced. However, it is noted that the Assessing Officer has not brought on record any material to s....
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....rely on technical grounds of item-wise identification or non-production of remoulding invoices. 10.10 The appellant relied upon various judgements in the case of Krishan Kumar Modi Vs. ACIT (ITA No. 2894/Del/2017), Rajkumar B. Agarwal Vs. DCIT (ITA No. 1648 & 1649/PUN/15) & Raj Kumar Saraogi (ITA No. 1779/Kol/2012 dated 01.09.2015). The Hon'ble tribunal in the case of Rajkumar B. Agarwal Vs. DCIT (ITA No. 1648 & 1649/PUN/15) held that jewellery found during search, when explained as belonging to family members and within reasonable limits considering social status and customary Indian practices, cannot be treated as unexplained merely due to the absence of purchase bills. It was emphasised that jewellery accumulated over long years through gifts, marriages, and family traditions deserves acceptance unless the Department brings specific contrary evidence. Accordingly, an addition to presumptions was deleted. 10.11 I further find that the Assessing Officer has not relied upon any incriminating material found during the search to demonstrate the acquisition of jewellery from undisclosed sources. The addition has been made merely on technical objections regarding ....
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.... was unable to establish item-wise identity of every ornament found during search with the jewellery declared in the Wealth-tax Returns filed several years earlier. 5.7 Section 69A casts an obligation upon the assessee to offer a satisfactory explanation regarding the nature and source of the money, bullion, jewellery or other valuable article found in his possession. The explanation has to be evaluated on the basis of the surrounding circumstances and the evidence brought on record. Once the assessee produces contemporaneous documentary evidence establishing prior ownership of jewellery and the Department does not dispute the authenticity of such evidence, the explanation cannot ordinarily be rejected unless the Revenue brings positive material demonstrating that the jewellery so disclosed had ceased to remain available or that the jewellery found represented an independent acquisition from undisclosed sources. 5.8 In the present case, the assessee has produced acknowledged Wealth-tax Returns filed by himself and his family members much before the search, evidencing jewellery aggregating to 4,148 grams. In addition thereto, documentary evidence in the form of purchase invoic....