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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 31.05.2022 for the A.Y.2020-21.
(A.Y. 2020-2021) M/s. Rashi Commercial Company 2. Brief facts of the case are, a search and survey action was conducted in the case of M/s Rashi Commercial Company and others on 04.12.2019. During the course of search action u/s 132 of Income-tax Act, 1961 (in short “Act”) at the office premises of the assessee, certain incriminating documents were seized. Based on the incriminating material found, notice u/s 153A was issued to the assessee for A.Y. 2014 15 to A.Y. 2019-20 and subsequently notice u/s. 143(2) for the A.Y. 2020-21 was issued and duly served on the assessee.
During survey action at the premises of the assessee, cash of ₹.1.22 crores were found. Shri Vivek Singhania explained the source of the above cash in statement recorded u/s. 131 of the Act dated 03.12.2019. As per the statement recorded u/s. 131 of the Act, wherein Shri Vivek Singhania accepted that the cash found of ₹.1.22 crores, whereas as per the book shown of all the entities the cash in hand is shown at ₹.23,50,831/-. Since the difference could not be explained, Assessing Officer issued warrant u/s. 132 of the Act to the other group- concerns on 04.12.2019. When the assessee was show caused to explain the details of extra cash found of ₹.98,49,169/-. In response vide submission dated 22.02.2021 the assessee submitted that the Books of (A.Y. 2020-2021) M/s. Rashi Commercial Company Accounts of certain family members of the directors Shri Vivek Singania and Shri Ashish Singhania were maintained at the same office premises of the assessee. The cash balance as per their Books of Accounts as on 02.12.2019 was as under: -
Sl. no Name Cash Balance 1 Jaishree Ashish Singhania 2,01,500 2 Abhilasha Vivek Singhania 2,76,500 3 Chandrakanta C Singhania 1,72,220 4 Pradyumna Ashish Singhania 3,27,000 TOTAL 9,77,220
Further, it was claimed that Grandmother Smt. Savitri Devi Nangalia of Shri Ashish Singhania has kept a sum of ₹.10,00,000/- out of her cash balance with Ashish Singhania for fulfillment of medical and other emergencies. It was submitted that she is aged about 90 years old and not keeping in good health. Further, it was claimed by the assessee that assessee has received cash back against the non-genuine losses booked by the assessee to the extent of ₹.16.39 crores which is treated as bogus loss and added to the total income. It was submitted that the assessee has to give cheque amount to the brokers for booking alleged loss and broker in turn bound to refund the same in the form of cash after deduction of certain expenses/charges. It is claimed that the assessee
(A.Y. 2020-2021) M/s. Rashi Commercial Company has received cash back against the alleged losses. Therefore, cash seized during the course of search is nothing but the balance lying as cash received against alleged bogus losses. However, Assessing Officer rejected the above said submissions relating to the excess cash found during search and accordingly, proceeded to make the above excess cash as additional income u/s. 69A of the Act.
Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and made detailed submissions. After considering the detailed submissions and grounds raised by the assessee Ld.CIT(A) allowed the claim of the assessee on the cash balance of other family members and cash of grandmother to the extent of ₹.10,00,000/-. With regard to the cash maintained by the assessee out of alleged bogus losses, Ld.CIT(A) rejected the same with the following observation: -
“The appellant has also explained that the appellant had booked bogus trading losses in F & O for A.Y.2014-15 & 2015-16. The bogus F & O were voluntarily disallowed amounting to Rs. 13,40,00,000/-. The cash generated from booking of such bogus losses was available with the appellant at the time of search. However, there is no evidence balance cash of Rs.78,71,949/- was out of cash generated from booking such non-genuine loss. Thus, the appellant has not explained satisfactorily the source of balance cash of Rs.78,71,949/-
(A.Y. 2020-2021) M/s. Rashi Commercial Company 6. Aggrieved, assessee is in appeal before us raising following grounds in its appeal: -
1. The CIT (A) has erred in law and on facts in confirming addition of Rs. an 78,71,949/- as unexplained cash u/s 69A of the Act. Reasons assigned by him in doing the same are wrong ignoring the submissions and evidences placed on records. Thus the addition so made should be deleted.
2. The Ld. CIT (A) further erred in rejecting the explanation of the appellant that the seized cash was nothing but balance amount lying from the cash received back against the alleged bogus losses recorded in the books of accounts which were disallowed while passing the assessment orders of the earlier assessment years. Thus the addition so made should be deleted.
3. The appellant craves the leave to add, substitute modify, delete or amend all or any ground of appeal either before or at the time of hearing.
7. Ld. AR brought to our notice the issues involved in this assessment and also relief given by Ld.CIT(A). Further, he submitted that Ld.CIT(A) has not appreciated that the assessee had a source for generating cash in the past and assessee has declared the bogus loss in the A.Y. 2014-15 and 2015-16 to the extent of ₹.13.40 crores. Therefore, the excess cash found during search is nothing but the cash available with the assessee out of the above declared bogus transactions. He prayed that the telescoping effect benefit should allowed in this case and addition sustained by the Ld.CIT(A) may be deleted.
(A.Y. 2020-2021) M/s. Rashi Commercial Company 8. Ld. DR relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record, we observe from the record that during search, the excess cash was found at the premises of the assessee to the extent of ₹.1.32 crores. The assessee has explained the sources of these cash and the relief was granted by Ld.CIT(A) to the extent of ₹.19.77 lakhs. The balance of ₹.78 lakhs was found to be excessive. The assessee has explained that the source for this excess cash is, in the past assessee had indulged in booking bogus trading losses and the same was declared and surrendered in the A.Y.2014-15 and 2015-16 to the extent of ₹.13.40 crores. It is fact on record that the assessee has indulged in such activities and has such checkered history. The excess cash found during the present search is only ₹.78 lakhs whereas the assessee has declared the bogus losses which the assessee was converting into cash. It is already established that assessee had huge cash under his disposal in the above mentioned Assessment Years. Assessee has not brought this cash into his books and how assessee has dealt with those cash. There is enough merit in this peculiar case to extend the benefit of telescoping effect. Therefore, we are inclined to direct the Assessing Officer to treat the excess cash found
(A.Y. 2020-2021) M/s. Rashi Commercial Company during the search is nothing but the cash generated by the assessee in the A.Y. 2014-15 and 2015-16. Accordingly, we direct Assessing Officer to delete the addition.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 30th November, 2022.