SH. OMPRAKASH GARG,NEW DELHI vs. DCIT, NEW DELHI

The facts of the case, in brief, are that assessee is an individual. A search and seizure operation u/s 132 of the IT Act was conducted at the business premises of M/s. Overseas Carpets Limited as well as the residential premises of Directors on 06.01.2011 alongwith Shiv Vani Group of cases. The assessee filed his return of income

The Assessing Officer during the course of assessment proceedings observed that assessee was asked to give an explanation in respect of income declared u/s 132 (4) amounting to Rs.75 lacs. However, the assessee did not furnish any explanation / details of income declared u/s. 132 (4) of the Act amounting to Rs.75 lacs. He observed that the above income has not been surrendered by the assessee voluntarily but only after being asked to explain the transaction appearing in the documents found and seized during the course of search and seizure operation on 06.01.2011 at the business premises and residential premises of the assessee. He, therefore, treated the income of Rs.75 lacs as income from undisclosed or unexplained source during the year.

Before Ld. CIT(A) assessee submitted that complete explanation / submission was given to the Assessing Officer regarding the cash found during the search. The copy of the submission made alongwith copies of the abstracted cash book of the entities was filed before the CIT(A). It was further argued that the assessee has declared an amount of Rs.75 lakh in the financial year 2010-11 relevant to A. Y. 2011-12 which covers the above discrepancies.

However, the CIT(A) was not fully satisfied with the arguments advanced by the assesee. He observed that assessee had duly submitted an explanation during the assessment proceedings which has been completely ignored by the Assessing Officer. On the basis of the various arguments advanced by the assessee, the Ld. CIT (A) called for the assessment folders and examined it and noted that the assessee in response to the querry raised by the Assessing Officer has submitted the explanation which is available in the assessment folder and in the order sheet entry. Inspite of the above replies/ explanation submitted by the asessee the Assessing Officer mentioned that “the assessee has not furnished any explanation regarding the source of the above cash”. He, therefore, held that the Assessing Officer has not applied his mind on this issue properly. However, he noted that the assessee withdrew cash from his different concerns, the total sum of which was approximately the same as found during the search. However, it was explanation of the assessee that the excess cash is on account of vouchers pending as on the date of search. He observed that the copies of the cash book furnished by the assessee show cash balances in the books of the concerns wherein assessee has interest but it does not show that assessee has withdrew cash. Further if the 3 vouchers are pending that would mean expenditure has already been incurred and therefore, the assessee should not have been left with cash. On the day of search when the assessee was called upon to explain the cash available at his residence, the assessee has explained that part of the cash belongs to the following three entities and remaining part belonging to the members of the family.

He further noted that assessee had explained that the cash was explainable with reference to withdrawals from the banks thus the assessee changing his stand. Rejecting the various explanation given by the assessee, the CIT(A) upheld the action of the Assessing Officer but on different reasonings.

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising following grounds of appeal :-

The Ld. Counsel for the assessee strongly objected to the findings given by the CIT(A). She submitted that the cash found at the residential premises is from the business of the assesee group and explainable from the recorded books of accounts and none of his submissions and claims have been shown to be incorrect. She submitted that the cash in hand as on the date of search in the books of accounts of the four firms and one company operating from the ground floor of the premises searches as under :-

The cash book abstracts of all the five concerns clearly show that the closing cash balance as on the date of search almost tallies with the cash found. Without prejudice to the above she submitted that assessee has declared additional income of Rs.75 lacs to cover any possible discrepancies. Therefore, the above amount will be covered under the amount surrendered in the statement recorded u/s 132 (4) during the course of search. She further submitted that certain vouchers were pending for approval for which the cash was not paid. The Ld. CIT(A) has disbelieved the same on the ground that expenditure has already been incurred if vouchers are pending and therefore, the assessee should not have been left with cash. She submitted that the Assessing Officer has given a wrong factual finding that assessee has not furnished any details whereas the assessee has filed requisite details substantiating the cash found during the course of search. Although the Ld. CIT(A) had appreciated the fact that the assessee has submitted the requisite details however he went in the wrong direction and upheld the addition made by the Assessing Officer which is not correct under the facts and circumstances of the case.

Referring to the decision of the coordinate bench of the Tribunal in the case of Bhagirath Aggarwal Vs. ACIT vide order dated 09.01.2015 she drew the attention of the bench to the following observations :- “With regard to the cash found, he submitted that cash belongs to the business concern. Learned CIT (Appeals) has rejected the contention of assessee on the ground that business cash cannot be 6

She accordingly submitted that the addition sustained by the CIT(A) should be deleted.

The Ld. DR on the other hand heavily relied on the order of the CIT(A). She submitted that despite opportunities granted by the Assessing Officer and the CIT(A) the assessee has not explained properly, regarding the cash found during the course of search. The assessee in his statement recorded u/s.132 (4) has not given the bifurcation of the amounts of Rs. 75 lacs surrendered. Further the statement of the assessee that vouchers are pending and therefore, the cash is available with the assessee cannot be accepted because the cash must have been already spent. She accordingly submitted that the order of the CIT(A) be upheld. She also relied on the following decisions as per her written synopsis which are as under :- 1. Sudhir Kumar Sharma (HUF) Vs. CIT [2016] 69 taxmann.com 219 (SC) / [2016] 239 Taxman 264 (SC) 2. Sudhir Kumar Sharma (HUF) Vs. CIT [2014] 46 taxmann.com 340 (Punjab & Haryana )/ [2014] 224 Taxman 178 (Punjab & Haryana ) (MAG.) 3. Kavita Chandra Vs. CIT [2017] 81 taxmann.com 317 (Punjab & Haryana )/[2017] 248 Taxman 358 (Punjab & Haryana ) 7

We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We have also considered the various decisions cited before us. We find the Assessing Officer made addition of Rs.13,87,700/- being the cash found from residential premises of the assessee on the ground that assessee could not explain the source of the above cash alongwith documentary evidence. We find the Ld. CIT (A) has given a finding that assessee had submitted the detailed explanation regarding the cash found but Assessing Officer has not applied his mind properly. However, the Ld. CIT (A) sustained the addition made by the Assessing Officer on a different reasoning on the ground that the assessee has tried to bring on record possible explanations without pinpointing what were the ground facts in his case. For the sake of clarity we reproduce the findings of the CIT(A) which reads as under :-

M/s. Overseas Carpets Ltd.

From the above its is clear that Ld. CIT(A) rejected the arguments of the assessee that certain vouchers were pending for which cash was available and the statement of the assessee that cash was explainable with reference to the withdrawals from the banks is not properly understood. We find the Ld. CIT(A) has not properly appreciated the facts of the case. When the vouchers are pending for approval it cannot be said that money has already been spent. Further when the different cash books of the assessee are showing availability of sufficient cash balance on the date of search and they were operating from the same premises, it cannot be said that cash was not available. Further it is an admitted fact that assessee has surrendered additional income of Rs.75 lacs in the statement 11 recorded u/s. 132 (4). No doubt the assessee has not surrendered the above amount voluntarily but only after being asked to explain the transactions appearing in the documents found and seized during the course of search operation. However the lower authorities are completely silent regarding the request of the assessee that the cash found amounting to Rs.13,87,700/- will be covered under the amount surrendered during the course of search.

Considering the totality of the facts of the case we find some force in the arguments advanced by Ld. Counsel that the assessee has declared an amount of Rs.75 lacs in the financial year 2010-11 which will cover the discrepancies, if any. We, therefore, set aside the order of the CIT (A) and direct the Assessing Officer to delete the addition of Rs.13,87,700/-made by him on account of unexplained cash.

The grounds of appeal