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Facts
During a search operation, cash of Rs. 74,13,760/- was seized. The assessee initially denied knowledge of the cash but later his brother accepted it belonged to five family members. The Assessing Officer made additions based on this seized cash, which the CIT(A) partially confirmed.
Held
The Tribunal partly allowed the appeal, directing deletion of certain amounts related to cash-in-hand as per ITRs and accepting 50% of cash sales made in the first fortnight of FY 2019-20 as a source of funds.
Key Issues
Whether the addition of seized cash and cash generated from sales in the initial fortnight of the financial year is justified, and whether the CIT(A) erred in partially disallowing the claim.
Sections Cited
143(3), 250, 132A, 131, 142(1)
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Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of assessee pertaining to A.Y. 2020-21 is directed against the order dated 19.03.2024 of ld.CIT(A), Pune-11 Pune passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) which is arising out of Assessment Order dated 30.09.2021 passed u/s.143(3) of the Act.
Assessee has raised following grounds of appeal :
“1. On the facts and circumstances of the case and in law the CIT(A)-11, Pune erred in not accepting the contention of the appellant that the assessment order passed by the Deputy Commissioner of Income Tax Officer, Central Circle, Kolhapur (Hereinafter referred to as the AO) is bad in law and hence need to be quashed, inasmuch as: a. The assessment order having been passed without issuing any show cause as mandated by the CBDT Circular No.20/2015 b. The assessment order having been completed without issue of any notice u/s 142(1) and without giving any opportunity to the appellant.
2. On the facts and circumstances of the case and in law the CIT(A)-11, Pune erred in confirming the addition made by the AO to the extent of Rs.22,02,195 out of Rs.74,13,760 being cash found and seized not accepting the submissions of the appellant in this respect. The appellant craves leave to add to, amend, alter, delete or modify all or any of the above ground of appeal or raise a new ground of appeal before or at the time of hearing.”
Brief facts of the case are that the assessee is an individual engaged in the business of resale of Tobacco products. Income of Rs.7,41,470/- declared in the return for A.Y. 2020-21 furnished on 10.01.2021. On 16.04.2019, search proceedings u/s.132A of the Act carried out by the Flying Squad No.4 of Jaysingpur appointed by the Election Commission of India and cash of Rs.74,13,760/- was seized and it came to know that Gous Mahammad Anwar Gavandi is the concerned person. In the statement given u/s.131 of the Act on 17.04.2019, the assessee stated that he did not know anything about the cash but he mentioned the name of his brother Ganiahemad Anwar Gavandi. During the course of assessment proceedings which was carried out u/s.143(3) of the Act by the ld. Assessing Officer (AO), it is noted that the assessee’s brother has accepted that the cash seized at Rs.74,13,160/- belongs to five members of his family including himself and also stated that cash of Rs.12,85,606/- has been offered by him as additional income in his return for A.Y. 2020-21. For the balance amount of Rs.61,28,154/-, details of family members along with the amounts were filed before the ld. Assessing Officer. However, ld. AO was not satisfied with his submissions. He concluded the assessment proceedings making the addition of total cash seized at Rs.74,13,760/- and assessed the income at Rs.81,55,230/-.
Aggrieved assessee preferred appeal before ld.CIT(A) but partly succeeded. Finding of ld.CIT(A) giving part relief shall be dealt in the subsequent paragraphs.
Now the assessee is in appeal before this Tribunal against the addition of Rs.22,02,195/- sustained by ld.CIT(A).
So far as addition of Rs.8,38,430/- sustained in the hands of assessee, it is claimed by Ld. Counsel for the assessee that the same is from the cash in hand available with the assessee in his books of account as well as cash sales made during the first 15 days of the F.Y. 2019-20. Reference also made to the details of Purchase and Sale Registers and other documents furnished in the paper book running into 89 pages. So far as the remaining additions sustained by ld.CIT(A) is concerned, Ld. Counsel for the assessee referred and relied on the submissions filed before ld.CIT(A).
On the other hand, ld. Departmental Representative supported the order of ld.CIT(A).
We have heard the rival contentions and perused the record placed before us. Apropos to Ground No.1, since no specific contention/submissions have been made by ld. Counsel for the assessee, therefore Ground No.1 is dismissed. Apropos to Ground No.2, assessee is aggrieved with the addition of Rs.22,02,195/- sustained by ld.CIT(A). We observe that cash of Rs.74,13,760/- was seized by the Flying Squad No.4 of Jaysinghpur appointed by Election Commission of India. Out of this sum, Rs.12,85,606/- was admitted as an additional evidence by the assessee’s brother Ganiahemad Gavandi in his return for A.Y. 2020-21. Remaining amount of Rs.61,28,154/- is claimed to be owned by following five family members whose details are given below :
Name Amount/Cash in hand Ganiahmad Gavandi Rs.24,59,720/- Gousmahamad Gavandi Rs.14,38,430/- Vahida W/o. Goudmahamad Gavandi Rs,5,15,876/- Matin Gavandi Rs.95,87,737/- Anjum Gavandi Rs.75,53,391/- Total Rs.61,28,154/-
Out of the total amount of Rs.61,28,154/- which has been added in the hands of assessee representing the amount owned by five family members (Including assessee himself) as stated above. In the proceedings before ld.CIT(A), assessee filed information and relevant details of himself and other family members based on which ld.CIT(A) gave substantial relief and the final amount of additions sustained at Rs.22,02,195/- is bifurcated in the hands of individual family members as under :
Sl.No. Name Amount 1 Vahida Rs.4,02,219/- W/o. Goudmahamad Gavandi 2 Anjum Gavandi Rs.4,02,809/- 3 Matin Gavandi Rs,5,58,737/- 4 Gousmahamad Gavandi Rs.8,38,430/-
The impugned addition of Rs.22,02,195/- has been sustained by ld.CIT(A) observing as follows :
“Cash owned-up by Mrs. Vahida Gavandi 22. I have considered the submission made by the appellant and the documents filed before me and filed before the assessing officer during the remand proceedings. It is seen from the ITR filed by Mrs. Vahida Gavandi for AY 2019-20, that she has declared a turnover of Rs.15,64,552/- during the said year on which cash profit of Rs.6,42,138/- was declared in the ITR. The income declared during A.Y. 2019-20 is much higher than the income declared during A.Y. 2018-19. Further, in case of Mrs. Vahida Gavandi, the cash-in-hand as on 31.03.2019 is claimed to be Rs.1,13,657/- which is much lower than the income of Rs. 6,42,138/- declared for A.Y. 2019-20. In such situation, the explanation of the appellant that Mrs. Vahida Gavandi was having Rs.1,13,657/- as cash-in-hand as on 31/03/2019 cannot be disregarded. Accordingly, the addition corresponding to cash-in-hand as on 31/03/2019 amounting to Rs.1,13,657/- is directed to be deleted.
It is further seen from the cash book filed in the case of Mrs. Vahida Gavandi that a cash of Rs.4,02,219/- (5,15,876 1,13,657) was generated from sale of tobacco in first 15 days of the FY 2019- 20. This claim of the appellant appears to be quite abnormal especially when the total sale for FY 2019-20 is shown at Rs.24,14,874/-. It appears that the books of Mrs. Vahida Gavandi for FY 2019-20 are manipulated to shift sales from the later part of the year to the first fortnight of the year, in order to justify the cash- in-hand as on 15/04/2019. Thus, the claim that Rs.4,02,219/- were generated out of cash sales during the period 01/04/2019 to 15/04/2019 is rejected and the corresponding addition of Rs. 4,02,219/- is upheld.
Cash owned-up by Mrs. Anjum Gavandi
The appellant has further contended that an amount of Rs.7,55,391/-corresponds to cash-in-hand as on 16.04.2019 in the hands of Mrs. Anjum Gavandi. The appellant has submitted that Mrs. Anjum Gavandi is proprietor of M/s Anjum G. Gavandi. The appellant has submitted that cash-in-hand as on 31/03/2019 in the hands of Mrs. Anjum Gavandi was Rs.3,52,582/- which is duly reflected in her ITR filed for AY 2019-20. Further, cash was out of sales made between the period 01.04.2019 to 15.04.2019. In support of this, the appellant has filed the copy of ITR for AY 2019- 20 and 2020-21, copy of cash book for the period 01.04.2018 to 15.04.2019, copies of sales and purchase register of M/s Anjum G. Gavandi.
Regarding the claim of cash-in-hand in the case of 5 family members, the assessing sing officer has given common comments which have already been mentioned earlier in this order. The appellant's rejoinder has also been reproduced and is not being repeated here for the sake of brevity.
I have considered the submission made by the appellant and the documents filed before me and filed before the assessing officer during the remand proceedings. It is seen from the ITR filed by Mrs. Anjum Gavandi for AY 2019-20, that she has declared a turnover of Rs. 16,99,407/- during the said year on which profit of Rs.6,87,354/- was declared in the ITR. Further, in case of Mrs. Anjum Gavandi, the cash-in-hand as on 31.03.2019 is claimed to be Rs. 3,52,582/- which is much lower than the profit of Rs.6,87,354/- declared for AY 2019-20. In such situation, the explanation of the appellant that Mrs. Anjum Gavandi was having Rs.3,52,582/- as cash-in-hand as on 31/03/2019 cannot be disregarded. Accordingly, the addition corresponding to cash-in-hand as on 31/03/2019 amounting to Rs.3,52,582/- is directed to be deleted.
It is further seen from the cash book filed in the case of Mrs. Anjum Gavandi that a cash of Rs.4,02,809/- (7,55,391 3,52,582) was generated from sale of tobacco in first 15 days of the FY 2019- 20. This claim of the appellant appears to be quite abnormal especially when the total sale for FY 2019-20 is shown at Rs.17,76,903/-. Thus, it is claimed that 25% of total sale of the year was made in first fortnight of the financial year. This claim is obviously abnormal. It appears that the books of Mrs. Anjum Gavandi for FY 2019-20 (AY 2020-21) are manipulated to shift sales from the later part of the year to the first fortnight of the year, in order to justify the cash-in-hand as on 15/04/2019. Thus, the claim that Rs.4,02,809/- were generated out of cash sales during the period 01/04/2019 to 15/04/2019 is rejected and the corresponding addition of Rs.4,02,809/- is upheld.
Cash owned-up by Mr. Matin Gavandi
The appellant has further contended that an amount of Rs.9,58,737/-corresponds to cash-in-hand as on 16.04.2019 in the hands of Mr. Matin Gavandi. The appellant has submitted that Mr. Matin Gavandi is proprietor of M/s Matin G. Gavandi. The appellant has submitted that cash-in- hand as on 31/03/2019 in the hands of Mr. Matin Gavandi was Rs.5,17,898/- which is duly reflected in his ITR filed for A.Y. 2019- 20. Further, cash was out of sales made between the period 01.04.2019 to 15.04.2019. In support of this, the appellant has filed the copy of ITR for A.Ys. 2019-20 and 2020-21, copy of cash book for the period 01.04.2018 to 15.04.2019, copies of sales and purchase register of M/s Matin G. Gavandi.
Regarding the claim of cash-in-hand in the case of 5 family members, the assessing officer has given common comments which have already been mentioned earlier in this order. The appellant's rejoinder has also been reproduced and is not being repeated here for the sake of brevity.
I have considered the submission made by the appellant and the documents filed before me and filed before the assessing officer during the remand proceedings. It is seen from the ITR filed by Mr. Matin Gavandi for AY 2019-20, that he has declared a turnover of Rs.13,96,183/- during the said year on which profit of Rs. 5,75,177/- was declared in the ITR. Further, in case of Mr. Matin Gavandi, the cash-in-hand as on 31.03.2019 is claimed to be Rs.5,17,898/- which is almost equal to the profit of Rs.5,75,177/- declared for AY 2019-20. Mr. Matin Gavandi must have incurred some expenditure out of income earned during FY 2018-19 and whole of the profit earned cannot be considered as cash in hand as on the last day of FY 2018-19.In such situation, the explanation of the appellant that Mr. Matin Gavandi was having Rs.5,17,898/- as cash-in-hand as on 31/03/2019 cannot be fully accepted. Thus, in order to be fair to revenue as well as to the appellant, after reducing the estimated expenses of Mr. Matin Gavandi, it is held that Mr. Matin Gavandi could not be having more than Rs.4,00,000/- as cash-in-hand as on 31/03/2019. Accordingly, the amount of cash- in-hand in the case of Shri Matin Gavandi as on 31.03.2019 is considered to be Rs.4,00,000/- and not Rs.5,17,898/- as claimed. Accordingly, the addition corresponding to cash-in-hand as on 31/03/2019 amounting to Rs.4,00,000/- is directed to be deleted.
It is further seen from the cash book filed in the case of Mr. Matin Gavandi that a cash of Rs.4,40,839/- (9,58,737 5,17,898) was generated from sale of tobacco in first 15 days of the FY 2019- 20. This claim of the appellant appears to be quite abnormal especially when the total sale for FY 2019-20 is shown at Rs.12,22,872/-. Thus, it is claimed that more than 30% of total sale of the year was made in first fortnight of the financial year. This claim is obviously abnormal. It appears that the books of Mr. Matin Gavandi for FY 2019-20 (AY 2020-21) are manipulated to shift sales from the later part of the year to the first fortnight of the year, in order to justify the cash-in-hand as on 15/04/2019. Thus, the claim that Rs. 4,40,839/- were generated out of cash sales during the period 01/04/2019 to 15/04/2019 is rejected and the corresponding addition of Rs.4,40,839/- is upheld.
“Cash owned-up by Mr. Gousahamed Gavandi (the appellant)
The appellant has further contended that an amount of Rs.14,38,430/-corresponds to cash-in-hand as on 16.04.2019 as per his own cash book. The appellant has submitted that cash-in- hand as on 31/03/2019 in his own hands was Rs.8,71,258/- which is duly reflected in his ITR filed for AY 2019-20. Further, cash was also generated from sales made between the period 01.04.2019 to 15.04.2019. In support of this, the appellant has filed the copy of ITR for A.Ys. 2019-20 and 2020-21, copy of cash book for the period 01.04.2018 to 15.04.2019, copies of sales and purchase register of M/s Gavandi Tobacco Center, his proprietorship concern.
Regarding the claim of cash-in-hand in the case of 5 family members, the assessing officer has given common comments which have already been mentioned earlier in this order. The appellant's rejoinder has also been reproduced and is not being repeated here for the sake of brevity.
I have considered the submission made by the appellant and the documents filed before me and filed before the assessing officer during the remand proceedings. It is seen from the ITR filed by the appellant for AY 2019-20, that he has declared a turnover of Rs. 50,18,267/- during the said year on which profit of Rs. 8,66,137/- was declared in the ITR. Further, the cash-in-hand as on 31.03.2019 is claimed to be Rs. 8,71,258/- which is higher than the profit of Rs. 8,66,137/- declared for AY 2019-20. The appellant must have incurred some expenditure out of income earned during FY 2018-19 and whole of the profit earned cannot be considered as cash in hand as on the last day of FY 2018-19. In such situation, the explanation of the appellant that he was having Rs.8,71,258/- as cash-in-hand as on 31/03/2019 cannot be fully accepted. Thus, in order to be fair to revenue as well as to the appellant, after reducing the estimated expenses of the appellant, it is held that the appellant could not be having more than Rs.6,00,000/- as cash-in-hand as on 31/03/2019. Accordingly, the amount of cash-in-hand in the case of appellant as on 31.03.2019 is considered to be Rs.6,00,000/- and not Rs.8,71,258/- as claimed. Accordingly, the addition corresponding to cash-in-hand as on 31/03/2019 amounting to Rs. 6,00,000/- is directed to be deleted.
It is further seen from the cash book filed in the case of the appellant that a cash of Rs.5,67,172/- (14,38,430 - 8,71,258) was generated from sale of tobacco in first 15 days of the FY 2019-20. This claim of the appellant appears to be quite abnormal especially when the total sale for FY 2019-20 is shown at Rs.43,64,629/-. Thus, it is claimed that about 15% of total sale of the year was made in first fortnight of the financial year and no cash expenses were incurred during the said fortnight. This claim is obviously abnormal. It appears that the books of the appellant for FY 2019-20 (AY 2020- 21) are manipulated to shift sales from the later part of the year to the first fortnight of the year, in order to justify the cash-in-hand as on 15/04/2019, Thus, the claim that Rs.5,67,172/-were generated out of cash sales during the period 01/04/2019 to 15/04/2019 is rejected and the corresponding addition of Rs.5,67,172/- is upheld.
Now from going through the above finding of ld.CIT(A), we observe that in case of all the four persons the source of cash in hand was the cash available as on 31.03.2019 duly reflected in Income Tax Return and the cash received against sales made from 01.04.2019 to 15.04.2019. Ld.CIT(A) has given partial relief against the cash in hand shown in the income-tax return as on 31.03.2019 and has not accepted the source of cash from sales made during the first two weeks of April, 2019 and the person-wise addition and relief granted by the ld.CIT(A) reads as under :
A. Addition in the name of four persons challenged before ld.CIT(A)
Sl.No. Name Cash shown in Cash sales from ITR as on 01.04.2019 to 31.03.2019 15.04.2019 1 Vahida Rs.1,13,657/- Rs.4,02,219/- W/o. Goudmahamad Gavandi 2 Anjum Gavandi Rs.3,52,582/- Rs.4,02,809/- 3 Matin Gavandi Rs.5,17,898/- Rs.4,40,839/- 4 Gousmahamad Rs.8,71,258/- Rs.5,67,172/- Gavandi Total Rs.18,55,395/- Rs.18,13,039/- B. Relief granted by ld.CIT(A)
Sl.No. Name Relief against Relief against cash shown in cash sales made ITR as on from 01.04.2019 31.03.2019 to 15.04.2019 1 Vahida Rs.1,13,657/- -- W/o. Goudmahamad Gavandi 2 Anjum Gavandi Rs.3,52,582/- -- 3 Matin Gavandi Rs.4,00,000/- -- 4 Gousmahamad Rs.6,00,000/- -- Gavandi Total Rs.14,66,239/-
From going through the above details and the finding of ld.CIT(A), so far as cash in hand appearing in the ITRs as on 31.03.2019, we find that assessee(s) have duly submitted the returns and has shown cash in hand in the particular column of ITR. Ld.CIT(A) in some case has allowed the claim and in some cases not allowed the claim taking the basis of income earned during the year. Ld.CIT(A) has not brought any new fact to disregard the claim of cash in hand appearing in the ITRs. Profits cannot be equated with cash in hand because the source of cash can be from cash sales or advances etc. Under these given circumstances, we find that ld.CIT(A) erred in not giving the relief of cash in hand shown by the respective persons in their income-tax returns as on 31.03.2019 and therefore the same deserves to be allowed. Accordingly, Rs.3,89,156/- is hereby deleted.
Now so far as cash sales from 01.04.2019 to 15.04.2019, ld.CIT(A) has completely disregarded the said source of cash observing that how can the assessee make the sales of almost 30% of the total sales in the first two weeks. Before us, Ld. Counsel for the assessee has submitted that the tobacco business of the assessee and other individuals is on seasonal basis and that in some part of the year the sales are more and in some part no sales are effected. He has given reference to the Sale Register as well as the VAT returns. Though the sales are on much higher side as compared to the past trend but still it cannot be disregarded that there are no cash sales during this period. We therefore in order to end the litigation and being fair to both the parties are of the considered view that 50% of the cash sales claimed deserves to be accepted for the source of alleged addition of unexplained cash made by ld. Assessing Officer. The total of Cash Sales effected by all the four persons namely (i)Vahida W/o. Goudmahamad Gavandi , (ii) Anjum Gavandi (iii) Matin Gavandi and (iv) Gousmahamad Gavandi during the period 01.04.2019 to 15.04.2019 is Rs.18,13,039/-. 50% of the said sum is Rs.9,06,519/-. Accordingly, impugned addition is further deleted by Rs.9,06,519/-. Assessee gets relief of Rs.12,95,675/-. Addition sustained at Rs.9,06,519/-. Ground No.2 is partly allowed.
Other grounds being general and consequential needs no adjudication.
In the result, appeal of the assessee is partly allowed.
Order pronounced on this 12th day of August, 2025.