TaxTMI 
TaxTMI 
2026 (9) TMI 1523
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.... 3. During the Karnataka Assembly Election, 2018, the Flying Squad intercepted a Mahindra XUV 500 bearing registration No. KA-16-M-9504 on 11 May 2018. The vehicle was driven by Shri Mrityunjaya, and cash of Rs.23,00,000 was found in it and placed in the safe custody of the Police Department. A warrant under section 132A was thereafter issued by the Principal Director of Income Tax, Panaji, and the cash was seized under the Income Tax Act. Statements were recorded from Shri Mrityunjaya, the driver, and Shri N.R. Ramesh Babu, the vehicle owner. Shri Mrityunjaya stated that he worked as an on-call driver and had been asked by Shri Ramesh Babu to drive the vehicle to Kudligi on that date. After dropping Shri Ramesh Babu and five others at about 12:30 p.m., he went for lunch; on returning, he found the Flying Squad near the vehicle and stated that he knew nothing about the cash. Shri N.R. Ramesh Babu stated that the Rs.23,00,000 belonged to farmers to whom he had given a lift, but he could provide only their names and no identities, contact numbers, or addresses. Following the search, the assessee filed his return on 28 November 2020 declaring business income of Rs.1,08,090. Althoug....
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....eposits or withdrawals. His bank statement also reflected no withdrawals in the days preceding the seizure. The CIT(A) held that a mere denial of ownership was insufficient to discharge the assessee's burden of proving that the seized cash was not his. Relying on CIT v. Naresh Kumar Agarwala, 331 ITR 510 (Delhi), the CIT(A) further held that the burden would shift to the Department only after the assessee established that the presumption against him was incorrect. The addition was accordingly confirmed by order dated 21 January 2026. 8. Aggrieved by the order, the assessee is in appeal before us. The learned Authorised Representative reiterated the submissions made before the lower authorities and contended that the cash belonged to the farmers, not to the assessee. Since the assessee had furnished the names of the farmers who allegedly left the cash in his car, it was argued that the addition of Rs.23,00,000 under section 69A in his hands was unsustainable and had been wrongly confirmed. 9. The learned Departmental Representative supported the orders of the lower authorities. He submitted that Rs.23,00,000 was found in the assessee's car during the election period, and the a....
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....ever he gets calls for driver requirement. Shri Mruthyunjaya further stated that on 11.05.2018, he was called by Shri Ramesh Babu, who owns a Mahindra XUV 500 vehicle, bearing registration number KA 16 M 9504 to drive the said vehicle to Kudligi. He has further stated that Shri N.R. Ramesh Babu and 5 others came in the vehicle and after dropping them at Kudligi at 12.30 PM, he went to have lunch on road side and when he returned from lunch, the flying squad were near the vehicle and after checking the vehicle found the cash of Rs. 23,84,500/-. He further stated that he does not know anything about the cash found in the vehicle. 9.3 Statement was also recorded from Shri N.R. Ramesh Babu, the owner of the Mahindra XUV 500 vehicle bearing registration number KA 16 M 9504, who has stated that the cash of Rs. 23.00 lakhs belonged to the farmers and he offered lift to the farmers during his trip. When enquired about the identities, contact numbers and address of the farmers, Sri Ramesh Babu responded that he only knows the names of the farmers and unable to provide any other information regarding farmers. Since the cash was found in the vehicle owned by Shri N R Ramesh Babu and ....
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.... identities, contact numbers and address of the farmers, Sri Ramesh Babu responded that he only knows the names of the farmers and unable to provide any other information regarding farmers. Since the cash was found in the vehicle owned by Shri N R Ramesh Babu and he was unable to explain the source of the cash satisfactorily, the same is treated as unexplained money of Shri N R Ramesh Babu substantively and protectively in the hands of Shri M. Mruthyunja, who was driving the vehicle at the time of cash seizure. Accordingly, an amount of Rs. 23,00,000/- is added back to the returned income as unexplained money u/s 69A of the I.T. Act in the hands of Shri N.R. Ramesh Babu substantively and protectively in the hands of Shri M. Mruthyunjaya. (Addition: Rs. 23,00,000/-) 12. Ld. CIT(A) dealt with the issue as follows: "Written Submissions: The appellant herein seeks the leave of the learned Commissioner of Income Tax (Appeals) to file the following written submissions in support of grounds of appeal. 1. Facts of the Case 1.1. The appellant is an individual who is engaged in the business of trading in construction materials such as jelly and m-sand a....
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.... 2.3 & 4: The sum of Rs. 23,00,000/- does not belong to the assessee. 2.1. Addition cannot be made u/s 69A of the Act. 2.1.1. It is submitted that the facts show that on 11.05.2018 a flying squad intercepted the appellant's vehicle and found Rs. 23,00,000 in one bag and Rs. 84,500 in another. The appellant was unaware of the Rs. 23,00,000, while the Rs. 84,500 was from his personal savings. The Assessing Officer nonetheless treated the entire Rs. 23,00,000 as unexplained income under section 69A. 2.1.2. The AO has produced no evidence that the Rs. 23,00,000 belonged to the appellant. It is undisputed that the appellant had no knowledge of this cash. The law is clear that Section 69A applies only where the assessee is shown to be the owner of the seized money. 2.1.3. The appellant categorically states that the sum of Rs. 23,00,000/- does not belong to him. The cash belonged to the farmers to whom the appellant had given a lift. It is submitted that to invoke the provisions of section 69A of the Act, it may be broken down into the following essential parts: a) The assessee must be found to be the owner; b) He must be the owner of any money, bul....
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....in their possession/bags. Applying this SC judgment, the assessee cannot be treated as the owner just because the goods/money are in their vehicle. Appellant only claimed only car and Rs. 84,500 as his money. 2.2.1. That the learned Commissioner of Income Tax (Appeals) has overlooked а crucial piece of evidence, namely the order passed by the Senior Civil Judge and JMFC, Kudligi. This judicial order, emanating from an independent legal proceeding, specifically records the claim made by the assessee. It is pertinent to note that the appellant claimed only a car and an amount of Rs. 84,500/-, The absence of any claim by the Appellant for the larger sum of Rs. 23,00,000/- in a formal judicial proceeding is a strong indicator that the said amount was not considered by the Appellant to be his own. 2.2.2. It is submitted that the appellant filed an application under Section 457 of the Criminal Procedure Code (CrPC), stating that the car found was his property and that the sum of Rs. 84,500/- also belonged to him. This application gave rise to a contemporaneous court record (Senior Civil Judge and JMFC, Kudligi) establishing that the appellant owned only Rs. 84,500....
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....y militates against the Revenue's assertion of ownership. This objective evidence from the bank records serves as a crucial piece of corroboration for the appellant's denial of ownership. The Revenue has failed to reconcile the alleged possession of cash with the Appellant's documented financial transactions, thereby failing to establish a credible link. 2.5. No books of account or records show such cash. 2.5.1. The appellant does not maintain any formal books of accounts. This fact is significant because individuals dealing with substantial amounts of cash, especially for business or investment purposes, typically maintain proper records. The absence of books of accounts further supports the appellant's contention that he was not involved in transactions of such magnitude and did not possess or manage such a large sum of cash. If the appellant were indeed the owner of Rs. 23,00,000/-, it would be reasonable to expect some form of recordkeeping, however rudimentary. The Revenue's failure to consider this aspect and draw appropriate inferences therefrom demonstrates a lack of appreciation of the factual matrix. 2.5.2. The appellant did ....
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....s are summarized as under: 1) The appellant was unable to provide details about the farmers who were stated to be owners of the money by the appellant. A search warrant u/s 132A was executed in the name of the driver of the vehicle, A Mahindra XUV 500, Sri. Mruthyunjaya. The driver stated that he works as a driver on call and on that day when the cash was seized, he was called for duty by the appellant. He stated that he does not know anything about the cash. The appellant's statement was also recorded. He stated that cash belonged to the farmers who had asked for a lift in his car and he does not know any other details about them except their names. As the appellant was not able to explain the sources of the cash found in his vehicle, the same was treated as undisclosed income of the appellant u/s 69A of the Act. 6.3 During the assessment proceedings, the appellant stated that he was on his way to offer prayers at Kottureshwara Temple and he saw some villagers waiting to catch a bus. Since they belonged to the same village of Kotturu and had luggage with them, he offered them a lift. They, after sometime stopped for refreshments. By then, the flying squad dep....
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....rs to whom he offered a lift. But he did not throw any light on their particulars except for knowing their names. The driver's statement is that the appellant and 5 others were driven by him to Kudligi. 6.7 The presumption is that when any money/bullion or article is found in the possession of a person, the onus is on him to prove that it does not belong to him. Section 132(4A) of the Act is very clear. It is reproduced as under: "(4-A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or things are or is found in the possession or control of any person in the course of a search, it may be presumed- (i)that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;" 6.8 It is a rebuttable presumption provided the appellant provides corroborative evidence to the contrary. A presumption is not a substitute to the evidence, so the AO needs further corroboration to link the seized money to the appellant's income. The appellant filed return of income declaring an income of Rs1,08,090/- under section 44AD of the Act. He does not maintain any....