M. KAMALAKANNAN,VELLORE vs. DCIT, CENTRAL CIRCLE-3(4), CHENNAI

Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) confirmed the addition to an extent of ₹.19,31,240/- [₹.44,31,240 – ₹. 25,00,000] by allowing relief of ₹.25,00,000/- to the assessee.

On being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.

The ld. AR M. Nuzhath Khanam, Advocate submits that the addition as confirmed by the ld. CIT(A) is not reasonable as the said amount does not belong to the assessee and therefore, the addition made under section 69A of the Act is not justified. She submits that while referring to chart containing closing cash balance as on 31.03.2019 in respect of two sons of assessee appeared in the assessment order. She submits that the assessee’s family is a joint family and his sons also having their own business under proprietary concern. She referred to one son by name Shri K. Srinivasan who looks after M/s. Kavi Supermarket has admitted to have closing cash balance of ₹.12,50,843/-. Further, she refer to another son by name Shri K. Kumaravel who looks after M/s. Kavi Medicals has admitted to have closing cash balance of rs..11,39,830/-. She argued that the Assessing Officer did not give any consideration to the said closing cash balance as offered during the course of assessment proceedings. The ld. CIT(A), without having any basis, given relief only on the basis of assessment, which is not justified. The ld. AR vehemently argued that the said seized cash does not belonging to the assessee, which is substantiated by evidence, cannot be made addition under section 69A of the Act and drew our attention to the decision of the Hon’ble High Court of Madras in the case of CIT v. A.N. Dyaneswaran 297 ITR 135. She argued that the Hon’ble High was pleased to answer question No. 2 & 7 in favour of the assessee by upholding the order of the Tribunal in holding that the cash found should not be taxed in the hands of the assessee therein as it was belongs to some other assessees.

The ld. DR Shri S, Maruthu Pandian, CIT argued that the assessee has not proved with any books of account or other records to prove that the cash balance with them on the date of search are arising out of business and earlier drawings. He submits that the ld. CIT(A), considering the returns of income and other factors, allowed ₹.10,00,000/- on estimation basis, which is beneficial to the assessee. The ld. DR relied on the order of the Assessing Officer.

Heard both the parties and perused the material available on record. The main contention of the ld. AR is that the cash found in the search at assessee’s residence belongs to joint family of two sons of the assessee who are in the business under proprietary concern. We note that the chart of closing cash balance of assessee and two sons were furnished to the Assessing Officer, but, however, no consideration was given by the Assessing Officer. The ld. CIT(A) at para 7.4 of the impugned order observed that there is no dispute with regard to joint family staying two sons with the assessee and were conducting business independently a medical shop and super market. But, however, the ld. CIT(A) given benefit on estimation basis to an extent of ₹.10,00,000/-. Further, the ld. CIT(A) has given relief to the assessee in respect of sale consideration as received on the sale of immovable property. Further, we note that in the ITR for AY 2020-21 of Mr. Kumaravel, son of the assessee, who conducts business under the name and style of M/s. Kavi Medicals, has shown cash in hand at ₹.11,31,883/-, which is evident from page 28 of the paper book. Further, another son Mr. Srinivasan, who conducts business by name M/s. Kavi Super Market has shown cash in hand at ₹.23,22,733/-, which is evident from his ITR for AY 2020-21 placed at page No. 142 of the paper book. On examination of all the details with the findings of the ld. CIT(A) clearly demonstrate that the cash found in assessee’s residence was of joint family proceeds, but, not belongs to the assessee. When the said amount does not belong to the assessee and when it is claimed by two sons of the assessee in their hands as cash in hand in the returns of income, the addition made by the Assessing Officer and as confirmed to an extent therein by the ld. CIT(A) is not justified.

The Hon’ble High Court of Madras in the case of CIT v. A.N. Dyaneswaran (supra) upheld the order of the Tribunal in holding that addition is not maintainable when the cash belonging to the TNBA having found in the residence of Chairman-cum-Chief Patron. The facts before the Hon’ble High Court is that the cash found during the course of search in assessee’s bed room and official chamber of the assessee therein, stated that the said cash belonging to TNBA for which he is the Chairman-cum-Chief Patron. However, the Assessing Officer added the entire cash found during the search in the hands of the assessee. Before the Tribunal, the assessee stated that the cash belonged to the TNBA of which he was the Chief Patron. The money had been collected from various parties as advance for the construction of a stadium and most of the names were of Basketball Association members. Subsequently, the TNBA filed its return of income and the same had been accepted by the Department. On further appeal by the Department, the Hon’ble High of Madras held that the Tribunal had correctly arrived at the conclusion that these monies should not be included in the hands of the assessee.

Respectfully following the decision of the Hon’ble High Court of Madras in the case of CIT v. A.N. Dyaneswaran (supra), we are of the considered opinion that the addition in the hands of the assessee and as confirmed by the ld. CIT(A) is not justified and deleted. Thus, the grounds raised by the assessee are allowed.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 09th April, 2025 at Chennai.