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Facts
During an interception on 26.08.2020, the assessee was found carrying Rs. 33 lakhs in cash, which was seized. The assessee, engaged in electronic spare parts business, claimed the cash was from business and rental income, filing an income tax return including this amount. The Assessing Officer and CIT(A) treated the cash as unexplained income under Section 115BBE, arguing the declared turnover was disproportionate to the cash found.
Held
The Tribunal found the assessee's explanation regarding the source of cash from business and rental income to be bona fide and acceptable, considering the nature of his business and past returns, and the absence of contradictory evidence from the Assessing Officer. It directed the Assessing Officer to assess the income under 'Income from Business and Profession' at normal tax rates, setting aside the application of Section 115BBE.
Key Issues
Whether Rs. 33 lakhs cash seized from the assessee should be assessed as 'Income from Business and Profession' as claimed by the assessee, or as 'Income from Other Sources' subject to tax under Section 115BBE of the Income Tax Act, 1961.
Sections Cited
143(2), 142(1), 131(1A), 143(3), 153A, 115BBE, 132, 132A, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “B” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
For Assessee : CA, Rajesh Vaishnav For Revenue : Dr. Narendra Kumar Naik, CIT-DR Date of Hearing : 04.09.2025 Date of Pronouncement : 10.09.2025 ORDER PER MANJUNATHA G. : The above appeal has been filed by the assessee against the order of the learned CIT(A), Hyderabad-11, Hyderabad, relating to the assessment year 2021-2022.
Brief facts of the case are that, the assessee is an individual and engaged in the business of electronic spare parts. The assessee had filed his original return of income
2 ITA.No.616/Hyd./2025 for the assessment year 2021-22 on 30.12.2021 admitting total income of Rs.54,37,780/-. On 25.08.2020, an information was received to the Department that, the assessee with the help of close associates is trying to purchase immovable property and is carrying unaccounted cash which could be between Rs.15 lakhs to one crore. On 26.08.2020 at around 12.00 PM, it was noticed that, the assessee arrived at Jewellery shop on Kinetic Honda bearing No. TS 09 EK 6836 and entered the shop with a small bag. On verification it was found that, there are certain loose sheets along with cash of Rs.33,00,000/- inside the bag. When asked about the sources and purpose for carrying cash, assessee could not produce any documentary evidence in support of cash of Rs.33,00,000/- and accordingly entire amount was seized in the hands of assessee. Consequent upon the search and seizure operations, during the financial year 2020-21, this case has been taken up for scrutiny for the assessment year 2021- 2022 being the 'specified year' Accordingly, the Assessing Officer issued notice u/s 143(2) of the Income Tax Act, 1961
3 ITA.No.616/Hyd./2025 [in short "the Act"] on 22.02.2022, which was duly served on the assessee. Further, the Assessing Officer also issued notices u/s 142(1) of the Act on 25.02.2021 calling for relevant information. In response to the notices, the assessee's authorized representative, Sri Pratik Jain, CA appeared from time to time and furnished the information. After verification of the information furnished by the assessee, the Assessing Officer noted that a sworn statement of the assessee was recorded u/sec.131(1A) of the Act on 26.08.2020, in which, the assessee had stated that, the seized cash of Rs.33,00,000/- belongs to himself and with regard to sources of cash, he stated that, the amount is out of his business income and some part of it was of rental income. But, could not produce any documentary evidence in support of cash of Rs.33,00,000/-. The Assessing Officer also issued show cause notice dated 03.02.2022 to explain the source of cash found and seized during the course of search amounting to Rs.33 lakhs with relevant documentary evidence. However, the assessee could not file any documentary evidence in support of his claim.
4 ITA.No.616/Hyd./2025 Therefore, the Assessing Officer noted that, the cash found of Rs.33,00,000/- by the Department was offered to tax under the head "Income from business or Profession". The assessee has failed to furnish explanation for the cash found during search by the Department. Further, the assessee is filing returns with estimated income from business. The income declared by the assessee is very nominal and the assessee has not furnished the details of debtors, creditors, cash in hand, closing stock etc., in the returns of income filed for earlier years. Hence, the claim of the assessee that, the cash found belongs to business cannot be accepted. Therefore, the Assessing Officer made addition of Rs.33 lakhs under the Head ‘Income from other sources’ u/sec.115BBE of the Income Tax Act, 1961 vide order dated 10.03.2022 passed u/sec.143(3) r.w.s.153A of the Income Tax Act, 1961 [in short "the Act"].
Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). before the learned CIT(A), it was the submission of the assessee that, his total business turnover from business during the 5 ITA.No.616/Hyd./2025 impugned assessment year 2021-2022 was Rs.46,46,084/- and it consisted of business-to-business sales of Rs.14,68,107/- and remaining Rs.31,77,977/- business to customer sales. The appellant submitted GST returns in respect of these sales. The assessee further contended before the learned CIT(A) that, Rs.33,00,000/- was admitted as additional business income apart from the income arrived on aforesaid turnover. With these submissions, the appellant argued that, since he had admitted the seized cash as business income, the Assessing Officer should not treat the same as unexplained money and pleaded that the addition be deleted. The learned CIT(A) after considering the submissions of the assessee noted that, in order to generate business income of Rs.33 lakhs, there should be approximately business turnover of Rs.4,12,50,000/-. Whereas, the assessee had not furnished a single piece of evidence that he had made sales to the tune of Rs.4,12,50,000/-. Therefore, the learned CIT(A) observed that the arguments of the assessee are baseless and illogical
6 ITA.No.616/Hyd./2025 and accordingly, sustained the addition made by the Assessing Officer.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
CA, Rajesh Vaisnav, Learned Counsel for the Assessee, referring to the statement recorded during the course of proceedings u/sec.132/132A of the Act submitted that, the Department seized cash of Rs.33 lakhs from the assessee and recorded his statement where the assessee has categorically admitted that, cash found during the course of proceedings is out of his business income and rental income. Learned Counsel for the Assessee further submitted that, the assessee has admitted total income of Rs.54,37,780/- which includes cash found and seized during the course of search for Rs.33 lakhs and under the Head ‘Income from Business and Profession’, whereas, the Assessing Officer has considered the cash found during the course of search under the Head ‘Income from Other Sources’ and brought to tax u/sec.115BBE of the Income
7 ITA.No.616/Hyd./2025 Tax Act, 1961, even though, there is no evidence with the Assessing Officer to allege that the said cash was out of undisclosed income of the assessee warranting addition u/sec.69A of the Income Tax Act, 1961. Therefore, he submitted that, the tax computed by the Assessing Officer u/sec.115BBE of the Act should be deleted.
Dr. Narendra Kumar Naik, learned CIT-DR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, although, the assessee claimed that cash found during the course of search is out of his business income, but, going by the turnover declared for the year under consideration, the cash found during the course of search is disproportionate to the turnover. Therefore, the arguments of the assessee that, cash found is out of business income of the assessee cannot be accepted. The Assessing Officer and the learned CIT(A) after considering the relevant facts, has rightly assessed the cash found during the course of search under the Head ‘Income from Other Sources’ and u/sec.115BBE of the Act.
8 ITA.No.616/Hyd./2025 Therefore, he submitted that, the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that, on 26.08.2020 about 12.00PM the assessee was carrying cash amounting to Rs.33 lakhs on Kinetic Honda bearing No. TS 09 EK 6836 and the same was intercepted by the Department and seized the cash. Accordingly, the proceedings u/sec.132/132A of the Act were initiated and statement u/sec.131(1A) of the Act has been recorded. In response to the specific question, the appellant explained the source of cash found out of his business income and rental income. Further, the assessee had also reported total income of Rs.54,37,780/- for the year under consideration which includes cash found and seized for Rs.33 lakhs during the course of search. The Assessing Officer never disputed these facts. However, assessed cash found amounting to Rs.33 lakhs under the Head ‘Income from Other Sources’ and brought ot tax u/sec.115BBE of the Act.
9 ITA.No.616/Hyd./2025 According to the Assessing Officer, the explanation of assessee with regard to source for cash found during the course of proceedings cannot be accepted going by the turnover declared for the relevant assessment year. We find that, although, the turnover for the year under consideration and cash found during the course of search is disproportionate to each other, but, going by the nature of business of assessee and returns of income for the earlier assessment years, the assessee does not have any other income, except, the income from business and profession and also income from house property. If we consider the statement given during the course of proceedings u/sec.131(1A) coupled with income tax return filed for the earlier assessment years, in our considered view, the explanation of assessee with regard to source for cash found during the course of proceedings, appears to be bonafide and acceptable. Since the Assessing Officer does not have any evidence to contrary, in our considered view, the income admitted by the assessee under the Head ‘Income from Business and Profession’ should be accepted. The learned
10 ITA.No.616/Hyd./2025 CIT(A) without appreciating the relevant facts, has simply sustained the addition made by the Assessing Officer. Thus, we set-aside the order of the learned CIT(A) and direct the Assessing Officer to assess the income declared under the Head ‘Income from Business and Profession’ towards cash found during the course of proceedings at normal rate of tax instead of sec.115BBE of the Income Tax Act, 1961.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 10.09.2025.