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Facts
A search was conducted on the assessee's premises, leading to the seizure of cash. The assessee claimed the cash belonged to his joint family. However, the Assessing Officer (AO) added Rs. 4.5 lacs to the assessee's income as unexplained. The CIT(A) confirmed this addition.
Held
The Tribunal found that the search procedures were not entirely compliant with guidelines and that the AO's addition was based on presumptions without adequate evidence. The Tribunal allowed the appeal, directing the deletion of the addition.
Key Issues
Whether the addition of unexplained cash is justified when the search procedure was flawed and the explanation of the assessee was not properly considered.
Sections Cited
139, 143(3), 153A, 132, 69A, 115BBE, 234B
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Income Tax Appellate Tribunal, JAIPUR BENCH “A”, JAIPUR
Before: SHRI GAGAN GOYAL & SHRI NARINDER KUMAR
These two appeals by the assessee are directed against the order of CIT (A), Jaipur-4 dated 25.06.2024 & 08.07.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal vide (A.Y. 2017-18) as under:
1. The impugned assessment order u/s. 143(3) r.w.s 153A dated 21.12.2018 as well as notices are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed.
2 The search action taken u/s. 132 is illegal, bad in law and on the facts of the case for want of jurisdiction and various other reasons, against the provisions and procedure as per law and further contrary to the real facts of the case hence all the consequent notices as well as the subsequent proceedings invalid, illegal and bad in law hence liable to be quashed.
3 The Ld. CIT (A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs .4, 50,000/-made by the Ld. AO u/s. 69A on account of alleged unexplained cash and also erred in not considering the material and evidences available on record in their true perspective and sense and proceeded just on assumption and presumptions. Hence the addition so made by the Ld. AO and sustained by the Ld. CIT (A) on presumption and assumptions is being totally contrary to the provisions of law and facts on the record and hence the same may kindly be deleted in full
4 The Ld. CIT (A) has seriously erred in rejecting the additional evidences without proper appraisal of facts and submission of assessee
5 The Ld. CIT (A) has seriously erred in declaring the retraction affidavit as invalid and without giving opportunity of being heard in this regard.
6. The Ld. AO has grossly erred in law as well as on the facts of the case in charging interest u/s. 234B. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, may kindly be deleted in full.
7. the appellant crave leave to add, alter or amend any grounds of appeal raised above at the time of hearing.”
(2017-18), the assessee has raised the following grounds of appeal:
The impugned assessment order u/s. 143(3) r.w.s 153A dated 21.12.2018 as well as notices are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed.
The search action taken u/s. 132 is illegal, bad in law and on the facts of the case for want of jurisdiction and various other reasons, against the provisions and procedure as per law and further contrary to the real facts of the case hence all the consequent notices as well as the subsequent proceedings invalid, illegal and bad in law hence liable to be quashed.
The Ld. CIT (A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs.4.50,000/- made by the Ld. AO u/s 69A on account of alleged unexplained cash and also erred in not considering the material and evidences available on record in their true perspective and sense and proceeded just on assumption and presumptions. Hence the addition so made by the Ld. AO and sustained by the Id. CIT(A) on presumption and assumptions is being totally contrary to the provisions of law and facts on the record and hence the same may kindly be deleted in full.
4. The Ld. CIT (A) has seriously erred in rejecting the additional evidences without proper appraisal of facts and submission of assessee.
5. The Ld. CIT(A) has seriously erred in not appraising the facts specific to the case of assessee and simply deciding the appeal by stating that the material facts are pari-materia with the facts of appeal in the case of Sh. Gopal Lal Yadav (his brother)
The Ld. AO has grossly erred in law as well as on the facts of the case in charging interest u/s. 234B. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, may kindly be deleted in full.
the appellant crave leave to add, alter or amend any grounds of appeal raised above at the time of hearing.
2. The brief facts of the case are that the assessee individual filed his return of income u/s. 139 of the Act on 25.01.2018 declaring total income at Rs. 11,41,730/-. The assessee has declared income under the head house property, other sources and agricultural income. A search was conducted on 19.11.2016 in the case of Kedia & Yadav Group, Jaipur to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared during the course of search. During the course of search operation cash of Rs. 10, 03,350/- was found out of which Rs. 9, 00,000/- were seized from the residence of the assessee. During the course of search the assessee submitted that he has a joint family with his brother and other members of the family. In view of this the case of the assessee was assessed by making an addition u/s. 69A of the Act r.w.s 115BBE of the Act amounting to Rs. 4.5 lacs. The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT (A) who in turn confirmed the order of the AO. The assessee being further aggrieved with the order of the Ld. CIT (A) preferred the present appeal before us.
3. We have gone through the order of the AO, order of the Ld. CIT (A) appeal and submissions of the assessee along with grounds taken before us. It is observed that search was conducted at the premises of the assessee by virtue of a search warrant issued in joint names of assessee himself and his brother Jai Singh Yadav. Search was conducted by Income Tax Authorities on 19.11.2016 at the premises of assessee by virtue of search warrant issued in joint name of assessee Gopal Lal Yadav and his brother Jai Singh Yadav. The assessee lived with his family as well as family of his brother Jai Singh Yadav in the premises where search was done. Cash amounting to Rs. 1, 00, 3,350/- was found in the premises where assessee lived with his family and family of his brother as well. Out of this cash, Rs. 9, 00,000/- was seized.
The assessee filed affidavit cum retraction dated 19/06/2017 wherein he clarified on the circumstances during search, cash found during search, retracted from alleged surrender of income and anomaly in the statements recorded u/s. 132 of the Act. During assessment proceedings the assessee explained that cash was found from different rooms but inventory of cash was not made for each room and consolidated detail of all cash was made. All the adult members of the family 12 nos. (except mother Chandu Devi), had been filing their Income Tax returns since long and the cash found belonged to all family members. The assessee or his family members are not required to and does not maintain books of accounts.
The assessee has himself submitted in his search statements (reply to Q. Nos. 8) taken on 19/11/2016, that cash amounting to approx Rs. 1 to 1.50 lakhs belonged to him and that he did not have knowledge about cash holding of other members of family. The assessee's cash balance is out of old savings, rental and sale of agro produce. Further new currency notes of Rs. 40,000/- were withdrawn from bank account of Assessee and his brother on 15/11/2016 which were in hand as on date of search. Moreover Cash amounting to approx Rs. 3, 00,000/- related to cash balance of retail shops run by his son and nephew kept by them at home. M/s Mehta Kirana & General Store had turnover of Rs. 55.85 lakhs and M/s Mehta Banth Bhandar had turnover of Rs. 32.57 lakhs in F.Y. 2016-17. They usually deposited sale proceeds received in cash in bank account. Avg. cash sale per day for both shops is approx Rs. 25,000/- per day. Both shop owners did not deposit any cash in current accounts from 08/11/2016 to 18/11/2016 and held the sale proceeds of this period in hand together with brought forward cash of period prior to 08/11/2016. Apart from keeping small floating balance of cash at shops rest amount was kept at home. Thus it can be reasonably deduced that cash of Rs. 3, 00,000/- representing cash balance of shops was lying at home.
6. It is also evident that currency notes of small denomination like 50, 20 and 10 totaling Rs. 1, 88,000/- have been found which essentially represents very old accumulated savings of family members which has been accumulated on various occasions since long. Rest of the cash found belongs to personal savings of all members of family. The assessee also drew attention towards the declaration by Prime Minister during demonetization period that no enquiry will be done from person who deposits up to Rs. 2,50,000/- specified bank notes in his bank account and also towards CBDT instructions in this regard. But the AO proceeded to make addition of Rs. 4, 50,000/- each in income of assessee as well as in case of Jai Singh Yadav u/s. 69A of the Act by observing as follows:
4.1 During the course of assessment proceedings, the assessee was asked vide show- cause notice dated 19.04.2018 to provide the explanation of cash found during the search proceedings. The AR of assessee filed his submission in which he stated that the assessee lives in a joint family and the said cash belongs to all the family members collectively but no supporting evidences were filed. The reply of the assessee is not acceptable for the reasons that the assessee did not maintain regular books of account nor are there any sufficient withdrawals to cover this amount, so the contention of assessee is only an afterthought to justify the source of cash. No cash flow statement to justify the claim has been filed. Similarly no evidence to prove that this cash belonged to family members of the assessee was submitted during the assessment proceedings. The assessee has only given a generic reply stating that the above referred cash belongs to the assessee and his family members. In view of the above discussion, the cash of ₹4,50,000/- (1/2 share in cash seized of 9,00,000/-) is held as unexplained found from the premises of the assessee during the search proceedings is held as unexplained money u/s 69A r.w.s. 1158BE of the IT Act.
7. The assessee preferred an appeal before learned CIT (Appeal) and submitted detailed written submission with cash flow statement of assessee and affidavits of family members and witnesses before him. However the Ld. CIT (A) has confirmed the said addition without rebutting any of the submissions and with clear misunderstanding of facts and on the basis of surmises. Hence this appeal lies before this court:
Submissions of Assessee
1. Room wise inventory not prepared in respect of cash seized from premises: The search officials prepared only one statement of inventory of cash found in respect of whole of the cash found from difference rooms of searched premises. As submitted by assessee in response to Q-2 & 3 of search statement (PB Page No. 1-2), the assessee lived with his family and family of his brother Jai Singh Yadav in the searched premises. The searched premise contained several rooms and the detail of family members (with room occupancy) residing in searched premises is as follows: Mother of assessee Smt. Chandu Devi Room-1
Assessee and his wife Gopali Devi Room-2 Jai Singh Yadav and his wife Prem Devi Room-3 Manoj S/o Gopal Lal with his wife Sajana and children Room-4 Shankar S/o Gopal Lal with his wife Santosh and Room-5 children Rajkumar S/o Jai Singh with his wife Mamta and Room-6 children Kailash S/o Jai Singh with his wife Meenakshi and Room-7 children
In addition to above rooms, there was guest room, store room and kitchen in the searched premises. The search was carried out in whole of the house and cash and jewellery was found from different rooms. The search officials prepared room-wise inventory of jewellery found from different rooms, but prepared a consolidated inventory of cash found from different rooms which is surprising. This is in clear contradiction of the guidelines of search and seizure as laid down in the Search and Seizure Manual-2007 which provides as follows:
3.44 Depending upon the manpower available, search may be conducted either room- by-room or simultaneously in more than one room. Care should be taken that the assets and documents found in different rooms are not mixed up. It may be a good idea to draw a rough map of the house giving numbers to various rooms. It will then be easy to record which room was occupied by which person. 3.45 The entire premises (including, innocuous looking things or places like, waste paper baskets, kitchen lofts and toilets) should be thoroughly searched. Care should be taken to ensure that the search takes place in the presence of the person in-charge of the premises and witnesses and that the process of the search is not only fair and transparent but also appears to be so.
Considering the whole facts of the case, as enumerated (supra) which are not under challenge, we do not see any substance in the order of the AO, which is further confirmed by the Ld. CIT (A). In view of this grounds raised by the assessee are allowed and the order of the Ld. CIT (A) and the AO is set-aside. The AO is further directed to delete the addition of Rs. 4.5 Lacs in the case of the assessee.
In the result appeal of the assessee, i.e. is allowed.
Facts and law applicable to the is similar in all respect. Hence our finding as in is applicable Mutatis- Mutandis to ITA No. 1088/JPR/2024 also.
In the result appeal of the assessee, i.e. is allowed.
Order pronounced in the open court on 19th day of March 2025.