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Facts
During a police interception, cash of Rs. 62,99,500/- was seized from the assessee, a practising advocate, on 03.11.2016. This cash was requisitioned by the revenue under Section 132A, leading to the AO treating the entire amount as unexplained money under Section 69A for AY 2017-18 and adding it to the assessee's income. The assessee contended that Rs. 60,00,000/- was a loan from Shri Bandi Penchala Narasa Reddy, and the remaining Rs. 2,99,500/- were personal savings.
Held
The Tribunal found that the assessee had satisfactorily explained the source of the cash, demonstrating the lender's creditworthiness, receipt of land acquisition compensation by the lender, and a clear trail of cash withdrawals and documentary evidence. Despite minor contradictions in oral statements, the documentary evidence proved the genuineness of the transaction. Consequently, the addition of Rs. 62,99,500/- under Section 69A was directed to be deleted.
Key Issues
1. Whether the addition of Rs. 62,99,500/- as unexplained money under Section 69A of the Income Tax Act was justified. 2. Whether the notice issued under Section 153A of the Act was valid, given that no search under Section 132 was conducted.
Sections Cited
143(3), 153A, 69A, 132, 132A
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Jayachandraraju Gangaraju (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”), dated 22.11.2024 for the A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal :
“ 1. The order of the learned Assessing Officer and the Commissioner of Income Tax (Appeals) were contrary to the facts and law and deserves to be dismissed.
The Assessing Officer has done the Assessment u/s. 143 (3) of the Income Tax Act by following the search as contemplated u/s. 153-A of the Income Tax Act. But there are no ingredients of search in this case i.e. Search was not directly conducted by the Assessing Officer. This case was handed over by the Police to the I.T. Department. Therefore, search proceedings under sections 153-A of the I.T. Act are not applicable in this case. At this instance, the Appellant very much relying on the mot following citations, which reveals the essential ingredients of search u/s. 153-A of the I.T. Act 1961. (a) Jindal Stainless Ltd. Vs. ACIT, & 3481 (Del) 2006, 122 TTJ 902. (b) Rajat Trade.com India Pvt. Ltd. Vs. DCIT, 120 ITD 301 Appeal No. IT (SS) A.NO. 182 & 183 / TNI/2007 Indore, ITAT. (c) Regency Mahavir Properties Vs. ACIT Cen. Cir.l, Thane (2018) 89 Taxmann.com 444 (Mumbai Tribunal).
3. The learned Assessing Officer wrongly assessed a sum of Rs.62,99,500/- as unexplained money of the assessee u/s. 69-A of the Act ignoring the fact that, the assessee has only borrowed this amount from Bandi Penchala Narasa Reddy, to purchase Agricultural Land and to run an orphanage on it.
The Assessing Officer failed to appreciate the well instant statement of the assessee before the Police even at the time of seizure, first the Police Department which was consistently maintained before the Jon Assistant (ADIT) Director and Assessing Officer.
The Assessing Officer failed to appreciate the fact that the above said money has flowed from B. Penchala Narasa Reddy to the assessee out raise of the monies withdrawn by the said B. Penchala Narasa Reddy from his Bank Account. The Assessing Officer did not considered the evidences produced by the assessed is not justified.
6. The Assessing Officer did not accepted the documentary evidence of promissory note executed by the appellant in favour of B. Penchala Narasa Reddy and the said B. Penchala Narasa Reddy wrote a letter to Assessing Officer and confirmed that he had lent money of Rs.60,00,000/- to the Appellant and the mode of disbursement of money. But the Assessing Officer did not consider these evidences is not nevip justified.
The Appellant further submit that even before the CIT (Appeals) NFAC, he furnished all the documents relating to loan from B. Penchala noits Narasa Reddy and also stated that the said B. Penchala Narasa Reddy had disclosed the above said loan in his I.T. Returns filed during the Assessment Year 2017-18. The Appellant also uploaded the ledger copies showing the repayment of the above said loan by the Appellant to the said B. Penchala Narasa Reddy. But it was also not considered by the CIT (A) is also gross injustice to the Appellant.
8. The learned Assessing Officer has failed to appreciate that the source of funds for the B. Penchala Narasa Reddy for lending money to the 26 appellant is from the known source i.e. from the amount of compensation received towards the land acquisition from the Government of Andhra Pradesh for his right in land acquired by the Government and credited to his bank account. The same was clearly stated by the said B. Penchala Narasa Reddy, his answer to question No. 10 recorded by the ADIT (IV) on 07.11.2016 and instantly proved through whatsapp message sent by the said B. Penchala Narasa Reddy to the appellant and shown the same by the appellant to the Police. 9. The Assessing Officer and the learned CIT (A) have erroneously given importance to the persons through the cash was disbursed to the appellant, instead of appreciating the facts of payment to the Appellant. 10. The learned AO & the CIT (A) have unduly relied on the denomination of monies withdrawn from the banks and the denomination of cash seized. Ignoring the fact that, the monies were withdrawn on 25- 10-2016 to 26-10-2016 very much before the date of disburse to the appellant. The learned Assessing Officer and CIT (A) ignoring the probabilities of spending some cash by the family members for daily purposes and recouping the same with some other denomination before lending to the appellant.
11. In The Appellant further contends that the denomination need not tally as it was nowhere said by the Appellant that the cash drawn was directly transmitted to the Appellant is exactly in same fashion. It is not a trap case where the tainted currency which contain denomination are planted by the authorities and verified and tallied with the denomination of the currency in the hands of the accused.
12. The learned Assessing Officer and the CIT (A) were completely failed to appreciate that the appellant need not be in know of the seller of the land or details of the land to be purchased, when he embox and travel to purchase the land as much as the appellant is in the course of explanation of the land to be acquired.
The Assessing Officer was failed to summon the seller of land from stones whom the appellant intend to purchase the land. What prevented the Assessing Officer in summoning the said seller and to record his statement in person. The Assessing Officer has simply coloured that to the above said transaction was sham transaction is not justified and could not be sustainable at law. At this instance the Appellant very to be much rely on the citation of the Hon'ble Gowhati High Court in Khandelwal Constructions Vs. CIT. 14. The Assessing Officer and CIT (A) have not appreciated the facts that the appellant has not informed the brokers or sellers about the time and fact of carrying such huge cash only for the safety. 15. The learned Assessing Officer and the CIT (A) unnecessarily giving importance to contradictions of the statements of the witness is due to the time lag between the dates of statements given by them and this will not in any way vitiate the fact of payment made by Sri B.Penchala Narasa Reddy to the appellant out of his legally established source of funds namely the compensation received from the Government of Andhra Pradesh by way of land acquisition compensation. 16. The learned Assessing Officer and the CIT (A) have not taken into account the fact that the sum of Rs. 62,99,500/- requisitioned includes the sum of Rs. 60,00,000/- received from the said B. Penchala Narasa Reddy and the balance of Rs. 2,99,500/- is the Agricultural Income of the Appellant and his wife, out of the Agricultural holding of land to an extent of 18 acres.
The learned CIT (A) appeals have mentioned in his appellate order in page No. 71 under para No. 6.4.1 of 15th line that there is no transfer of money from B. Penchala Narasa Reddy to the Appellant, it is only an after thought and a created version to explain the source of the cash is erroneously and falseful confirmation. Because, the said B. Penchala Narasa Reddy himself wrote a confirmation letter that he lent money to the appellant by executing a promissory note and the money is also from the legally established sources and it was already disclosed duly in the I.T. Returns of B. Penchala Narasa Reddy in the relevant Assessment Year. Hence it is a genuine transaction and there is no chance of after thought. At this point the CIT (A) wrongly came on conclusion and dismissed the appeal is not correct and justified. In view of the above said grounds, and other additional grounds that may be urged at the time of hearing of appeal the appellant prays this Hon'ble Income Tax Appellate Tribunal, Hyderabad, to set-aside the impugned order of the Assessing Officer and CIT (Appeals) NFAC, and delete the Assessment of unexplained money of Rs.62,99,500/- and release the cash seized by the IT Authorities by allowing the appeal in the interest of justice. It is accordingly prayed.”
The brief facts of the case are that, the assessee is a practising advocate. On 03.11.2016, during a routine interception and verification conducted by the police, cash amounting to Rs.62,99,500/- was seized from the possession of the assessee. The said cash was subsequently requisitioned by the revenue under Section 132A of the Income Tax Act, 1961 (“the Act”). Based on the requisition, the Learned Assessing Officer (“Ld. AO”) issued notice under Section 153A of the Act on 22.10.2018 requiring the assessee to furnish his return of income. The assessee filed return of income for Assessment Year 2017–18 declaring total income of Rs.2,91,420/- and agricultural income of Rs.2,90,570/-. The Ld. AO, after considering the submission of the assessee, treated the entire amount of Rs.62,99,500/- as unexplained money under Section 69A of the Act and added the same to the total income of the assessee. Accordingly, assessment was completed under Section 143(3) of the Act on 27.12.2018, assessing total income at Rs.65,90,920/-.
4. Aggrieved by the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), which was dismissed. Aggrieved with the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal.
5. The Learned Authorised Representative (“Ld. AR”) submitted that the sole issue involved in the present appeal is the addition made under Section 69A of the Act, amounting to Rs.62,99,500/-, and the validity of the notice issued under Section 153A.
With respect to the jurisdictional issue, the Ld. AR submitted that no search under Section 132 was conducted in the case of the assessee and hence issuance of notice under Section 153A was not justified. However, he fairly conceded that the cash seized was requisitioned under Section 132A of the Act and in view of the provision contained under section 153A of the Act, such requisition is sufficient for initiating proceedings under Section 153A of the Act. Accordingly, the jurisdictional issue raised by the assessee is dismissed.
7. On merits, the Ld. AR submitted that the entire cash of Rs.62,99,500/- was fully explained before both the revenue authorities. He stated that the assessee had received a cash loan of Rs.60,00,000/- from Shri Bandi Penchala Narasa Reddy (money lender), who had received land acquisition compensation of Rs.1.40 crores shortly before the date of seizure. The balance amount of Rs.2,99,500/- was explained as personal savings. In support, the Ld. AR drew our attention to the promissory note executed between the assessee and the brother of lender (page no. 103 of the paper book), the order of Hon’ble High Court qua land acquisition award indicating that the lender was awarded compensation (page nos. 106 to109 of paper book), the computation of income of the lender showing that the lender had offered Rs.1.40 Crores for tax on account of compensation received (page nos.117 and 118 of paper book), the balance sheet of the lender reflecting the assessee as debtor for Rs.60,00,000/- (page no. 122 of paper book) and the bank statement of the lender showing receipt of compensation and subsequent cash withdrawals (page nos. 94 to102 of paper book). Accordingly, the Ld. AR submitted that, the assessee had explained the source of Rs.62,99,500/- which adequate documentary evidences. Therefore, he prayed for deletion of Rs.62,99,500/- made by the Ld. AO.
The learned Departmental Representative (“Ld. DR”) supported the orders of the Ld. AO and Ld. CIT(A). He submitted that the assessee’s explanation regarding the source of cash lacked consistency and credibility. He pointed out that in the statement dated 04.11.2016 (page no. 148 of the paper book), while giving answer to question no.16, the assessee claimed to have received Rs.62,99,500/- as a cash loan from lender, but failed to specify the rate of interest. In statement dated 07.11.2016 (page no.150 of the paper book), he revised his version qua source of cash to Rs.60,00,000/- as loan received from lender and Rs.2,99,500/- from savings. The Ld. DR further submitted that the money lender, in his own statement dated 07.11.2016 (page no.154 of paper book), stated that the loan was handed over on 03.11.2016 at his brother’s residence, whereas the assessee claimed it was received on 02.11.2016 at his own house from the lender. This contradiction regarding date and place casts doubt on the genuineness of the transaction. He also submitted that the promissory note was not signed by the lender himself but by his brother, which weakens the assessee’s defence. The Ld. DR finally referred to para 20.5 of the assessment order (page no.190 of paper book), where the Ld. AO pointed out that there was a mismatch in the denominations of currency notes seized and those withdrawn by the lender. In view of these inconsistencies, the Ld. DR contended that the explanation offered was not reliable and the addition made under Section 69A was justified.
In rejoinder, the Ld. AR submitted that, the difference in denomiations of notes is due to the reason that the lender had withdrawn cash from bank more than Rs.60 lakhs and given only Rs.60 lakhs to the assessee out of the total cash withdrawn. He also argued that even if there were some contradictions in the oral statements regarding the date or place of loan disbursement, the evidentiary value of the documentary records and the lender’s admission of giving the loan remain unimpeached. He submitted that the assessee had discharged the onus cast upon him under Section 69A, and the addition was unwarranted.
We have considered the rival submissions and gone through the records. The issue to be adjudicated is whether the cash of Rs.62,99,500/- seized from the assessee was satisfactorily explained. In this regard, the assessee has explained the source of cash as a loan of Rs.60,00,000/- received from an identifiable lender with proven creditworthiness, and the balance from personal savings. We have gone through the bank statement of the lender confirming receipt of Rs.1.40 crores on 24.10.2016 and significant cash withdrawals thereafter (page nos. 94 to 102 of paper book). We also found that, the lender has shown the loan transaction in his balance sheet (page no.122 of paper book), shown the amount of compensation received of Rs.1.40 Crores in his computation of income (page nos.117 & 118 of paper book) and has admitted the same in his statement dated 07.11.2016 (page no.154 of paper book). Further, the promissory note, while signed by the lender’s brother, aligns with the overall narrative and documentary trail (page no. 103 of paper book).
While the Ld. DR has raised valid concerns about minor contradictions in dates and location, we are of the view that such discrepancies in oral statements do not outweigh the strength of the documentary evidence placed on record. The Revenue has not been able to bring any material to disprove the financial capacity of the lender or establish that the seized cash belonged to the assessee’s unaccounted income. On perusal of all the documents / evidences produced before us, we find that the assessee has demonstrated the availability of funds in the hands of the lender and the corresponding trail of cash withdrawals. Hence, the primary onus under Section 69A of the Act on the part of the assessee stands discharged. In the totality of circumstances, we find merit in the explanation offered by the assessee. Accordingly, the addition of Rs.62,99,500/- made under Section 69A of the Act is directed to be deleted.
In the result, the appeal of the assessee is allowed.