ASST COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -1, MANGALORE vs. MARLA KALLAJE PRASHANTH, MANGALORE

The AO at Para No.5.7.5 has observed that nowhere did Mr. A J Shetty mention during the search action that cash found at his house was part of the withdrawal from his business collection. Instead, he claimed the cash found at his home to be from his personal savings over a period of time.When Mr. A J Shetty was asked if he kept any cash belonging to him anywhere else, he categorically denied that he kept any cash with anyone else or at any other place in his statement recorded u/s. 132(4) of the Act on 17.02.2021 which is as under:

The AO noted at Para No.5.7.5 that Dr. Prashanth Marla never mentioned anywhere in his recorded statements during the Search that the cash found at his place was given to him by his father-in-law, Mr. A J Shetty.Dr. Marla’s wife, Ms. Amitha Marla, also stated in her recorded statement u/s. 132(4) of the Act on 18.02.2021 during the search action that the cash found from their residence was nothing but accumulation of spill-over from monthly expenses and also gifts received on various occasions at question answer No.9.At a very later stage when the assessee, Dr. Prashanth Marla, claimed that Rs.20,00,000/- out of the total cash seized from his residence was given to him by his father-in-law, Mr. A J Shetty, the same was cross-checked with Mr. A J Shetty. On this, Mr. A J Shetty accepted the claim made by Dr. Marla. Incidentally, Mr. Shetty didn’t make this claim when asked during the search proceedings but at a later stage. As per Mr. Shetty’s claim in his statement dated 23.09.2021, he took out a cash amount of Rs.46,84,850/- from the cash balance of A J Restaurant and out of this cash, he gave Rs.20,00,000/- to Dr. Marla and he kept the rest with himself. The books of accounts of A J Restaurant was also produced at the later stage. The cash balance was shown. Later the AO observed that Rs.20 lakhs was given to Dr. Prashanth Marla is fictitious , since M/s. A J Restaurant had only a cash balance of about Rs. 5lakhs as per the recalculation of books of account of M/s. A J Restaurant done by the Department based on the real picture of business transaction of Page 5 of 11 M/s. A J Restaurant and the same is discussed briefly below. Therefore, the argument of taking out Rs.46,84,850/- from M/s. A J Restaurant does not arise since there was only cash balance about Rs. 5 Lakhs available with M/s. A J Restaurant at the time of claimed transfer of Rs.46,84,850/- from M/s. A J Restaurant to Mr. A J Shetty and from books of accounts the analysis of cash balance was compared from previous years balance. The cash balance found was very minimal and the amounts withdrawn from the current account was only towards payments of salary or wages and at the end of February 2021 there was negative balance of Rs.37,07,924/-. The AO after analysis of the books of accounts he held at para No.5.7.9.7 that the cash withdrawal of Rs.46,50,000/- by AJ Shetty before that only Rs.5,82,070/- was available balance. The AO noted that after discussing in detail the cash found and seized of Rs.28,00,750/- he was unable to explain the source of cash found. During the course of assessment proceedings regarding jewellery seized assessee gave explanation that it belonged to his wife Ms. Amitha P. Marla and the seized jewellery was claimed to have received by her as gift on various occasions. Assessee however failed to substantiate the claim with supporting evidences. Therefore assessee’s explanation for the source of the seized jewellry was found unsatisfactory without any evidence to support the same. Therefore the jewellery seized was treated as unexplained money under section 69 of the Act. Sum of Rs.82,23,036/- towards jewellery measuring 2009.47 grams was added as income from other sources and applied section 115BBE of the Act and completed his Order on 31.03.2023.

Aggrieved from the above Order, assessee filed appeal before the learned CIT(A). The learned CIT(A) after considering the submissions, bills and vouchers towards purchase of jewellery of 526.98 grams were purchased by the assessee during the period April 2015 to the date of search through banking channels, credit cards, etc., were allowed. During the appellate Page 6 of 11 proceedings the submission of the assessee that 147.97 grams belongs to assessee’s mother. It was given in the search statement by Smt. Amitha Marla. The learned CIT(A) has also given benefit of CBDT’s instruction No.1916 dated 11.05.1994 of 950 grams credit. He has also given benefit of 1500 grams of gold jewellery received from Smt. Bhuvaneshwari Marla as per gift deed dated 31.03.2018. Accordingly, the addition made is allowed. Regarding cash seized of Rs.28,00,750/- the AO noted that assessee has withdrawn money earlier. Out of above assessee had savings and he noted that Rs.20 lakhs was accepted in statement recorded under section 131 of the Act of Mr. A J Shetty and this amount should be added in the hands of Mr. A J Shetty since the AO of both the assessees was same and the assessee has satisfied the source of cash found. Therefore he allowed appeal of the assessee.

Aggrieved from the Order of learned CIT(A), revenue is in appeal before the Tribunal.

The learned DR relied on the Order of AO and submitted that while recording the statement during the course of search under section 132(4) of the Act neither the assessee nor Mr. A J Shetty accepted that there was cash given / taken. However at the later stage statement under section 131 of the Act was recorded. Both accepted that Mr. A J Shetty has given and he further submitted that sum of Rs.46,84,850/- was withdrawn from the proprietorship and entry made in the books of accounts are afterthought. AO observed that in A J Restaurant there was no sufficient balance and cash balance was exaggerated and made entry in the books and only Rs.20 lakhs was given to the assessee for safe keeping and rest amount was kept with him. He strongly relied on the statement recorded during the course of search that both the parties were unable to explain regarding Rs.20 lakhs of cash. Assessee and Page 7 of 11 his wife have stated that cash found is out of past savings. This is huge amount in lakhs of rupees. How the assessee and A J Shetty could forget about this money. There is mismatch in the statements about the source of csh by both the persons. Therefore, whatever statements made at later stage are afterthought. Further in respect of gift deed dated 31.03.2018 as relied on by the learned CIT(A) he submitted that it was executed by Smt. Bhuvaneshwari Marla regarding gifting of gold of 1.5 Kgs. This is an afterthought and it cannot be said that it is gift deed. This is merely a plain paper prepared to prove the gifted gold and during the course of statement recorded under section 132(4) of the Act, had it been gifted by Smt. Bhuvaneshwari Marla then both assessee and his wife would have been explained the source of 1500 Kgs of gold but they could not explain during the course of search as well as at later stage when the statement was recorded under section 131 of the Act. Therefore credit should not be given to the assessee for 1.5 Kg of gold. Further he stated that the CBDT instruction as relied on by the learned CIT(A) is also not applicable to the present facts of the case since in this instruction it has been stated by the Board that the specified grams of jewelery not to be seized during the course of search but it has not been stated that in case of non- production of bills / vouchers specified limit may be treated as explained. Therefore entire credit given by learned CIT(A) is wrong.

On the other hand, learned Counsel for the assessee Shri. Srinivas Kamath, CA, strongly supported the Order of the learned CIT(A) and he submitted that sum of Rs.20 lakhs was given by Mr. A J Shetty out of money withdrawn from A J Restaurant and during the course of sworn statement recorded under section 131 of the Act both Mr. A J Shetty and Mr. Prashanth Marla accepted regarding giving and taking of money. Mr. A J Shetty has sufficient cash balance which was withdrawn from A J Restaurant. Details of bank statement was also produced. Mr. A J Shetty had withdrawn money Page 8 of 11 for last 2 years the details of reconciliation statement was also produced. However the AO brushed it aside. Regarding jewellery, he strongly supported Order of the learned CIT(A). He also relied on the Paper Book furnishing details containing Page Nos.1 to 240 which is placed on record.

Considering the rival submissions and perusing the entire material available on record and Orders of authorities below, we noted that there was search action carried out in the office premises of M/s. Laxmi Memorial Education Trust at the campus of A. J. Institute of Medical Sciences and Research Centre, at NH 66, Kunitkana, Mangalore, Karnataka and Trustees are Mr. A J Shetty, Mr. Prashanth Shetty and Mr. Prashanth Marla. During the course of search and seizure, 4591.66 gms was found from the premises of the assessee, jewelry to the extent of 2009.47 gms was seized for want of explanation and supporting documents. Later, assessee was able to explain 526.98 grams of jewellery by way of bills and vouchers and 147.97 grams of jewellery belonged to mother of the assessee. During the course of proceedings before learned CIT(A) he has relied on the CBDT instruction No.1916 dated 11.05.1994. According to the instruction and various other proceedings assessee is also eligible for benefit of 950 grams of jewellery. Accordingly assessee is eligible for relief of 1624.9 grams (526.98 + 147.97 + 950 grams). Further in respect of jewellery as explained by the assessee that he has received 1500 grams of jewellery by way of gift deed which has been relied on by learned CIT(A) for the sake of convenience we are reproducing the same as under:-

On going through the above gift deed, we noted that this gift deed was executed in plain paper. Here we noted one important point that only the donor has signed on the deed. However there is no acceptance by the donee. Even the document is not notorized and there is no witness by anybody. Had this gift deed been available at the time of search assessee would have brought out in his statement under section 132(4) of the Act. For the completeness of gift both donor and donee should sign on the gift deed and the content of the gift item / material should be transferred to the donee and donee should have also accepted. Then the gift deed may be assumed as complete gift deed. But here there is no acceptance by the done and it is made on the plain paper dated 31.03.2018 it could have been drafted later and produced before the revenue authorities. Therefore the gift deed produced before us noted supra cannot be accepted that there was gift of 1500 grams of gold / jewellery. Accordingly difference of 384.57 grams is hereby confirmed and for this balance jewellery the CIT(A) should not have given benefit even considering the size and status

Further we noted that cash seized of Rs.28,00,750/- during the course of search and seizure operation of assessee, his wife and Mr. A J Shetty all were unable to explain that there were any cash and the statement recorded of Mr. A J Shetty noted supra he has specifically stated that cash is not kept anywhere else. Later on in the statement recorded under section 131 of the Act both have accepted which cannot be relied on since it is not a small amount which assessee can be forget. Whatever entry made in the books of accounts of A J Restaurant are all afterthought. If that be so, during the course of search and seizure statement recorded under section 132(4) of the Act of Shri. A J Shetty could have been produced as evidence by way of cash book. In the cash book entry would have been recorded but at the time of search and seizure action nothing was produced. Further regarding cash savings from the previous balance assessee has not produced that how much cash withdrawals were made from his financial statements and in the income tax return there is cash in hand column assessee has also not established with documentary evidence which can be produced to substantiate the previous year’s cash balance. Therefore the entire cash found and seized is treated as unexplained money and the Order of the CIT(A) on this issue is reversed. According we partly allow appeal of the Revenue.