SANCHAY JAIN,NEW DELHI vs. DCIT, CENTRAL CIRCLE-30, NEW DELHI, NEW DELHI

The only issue involved in this appeal is as regards the CIT(A) erred in sustaining the addition of Rs. 11,57,000/- (out of Rs. 32,00,000/-) made by the AO u/s. 69A r.w.s. 115BBE of the Act as unexplained income on account of cash seized during a search u/s. 132A of the Act on the assessee and that too by recording incorrect fact and also without observing the principles of natural justice.

Brief facts of the case are that assessee filed his return of income u/s. 139(1) of the Act declaring income of Rs. 3,76,780/- on 28.12.2020. A search u/s. 132A of the was initiated on 7.2.2020 by the Investigation Wing, New Delhi SST-2 (Static Surveillance team) and flying squad Team -2 during the routine have found cash of Rs. 32,00,000/- inside the car of the assessee. This case was centralized to Central Circle-30 from ITO, Ward 63(1), New Delhi as per the order u/s. 127 of the Act passed by Pr. CIT-2, New Delhi dated 28.1.2021. Notice u/s. 143(2) of the Act were issued to the assessee on dt. 12.2.2021 and served upon the assessee. Further, notices u/ s 142(1) were issued and served alongwith questionnaire which was duly replied through written pleading whereby the supporting documents, evidences were furnished explaining material facts containing material particulars to the case controversy. Assessee vide letter dt. 17.09.2021 replied that cash seized amounting Rs. 32 Lakhs is from cash sale of new business of Tractor and auto parts and tyres to various number of customers. During the year, assessee has shown turnover of Rs. 37,16,620/- and assessee has shown net profit of Rs. 4,40,625/- at the rate of 11.85 percent of turnover. Assessee purchased the material from various parties on credit and thereafter supplied the same to his customers on credit. Assessees Customers made the payment in cash as assessee and their parties businesses are very small and deals in small tractor and auto parts and tyres. During assessment proceedings, assessee substantiated that the material has been purchased and sold by assessee by submitting the quantitative and qualitative reconciled chart of the purchases with sales for impugned year. Further, documents from purchase to utilization of material were submitted in the form of Purchase Bills, stock register and sales bills. Further, assessee provided copies of bills issued to sale parties containing receipts of cash amount on dt. 07.02.2020. The said receipts had been obtained from sale parties to substantiate that the assessee has received cash from and said parties on dt. 07.02.2020. The sale parties take receipts on sale bills as a normal trade practice. Further, assessee filed ledger account of sale parties and purchase parties along with their confirmations during the assessment proceeding. 2 | P a g e Assessee filed cash ledger explaining that cash seized amounting Rs. 32 lakhs are sale proceeds received on dt. 07.02.2021. Moreover, AO accepted the purchases as well as sales of the assessee. AO alleged that most of the parties had not fled their return of income and in those cases, where ITR has been filed by the parties, the income from business has been shown other than business of spare parts of tractor. AO overlooked the aforesaid documents and without making any enquiries from parties made the addition of cash seized amounting Rs. 32, 00, 000/ - u/s 69A r.w.s. 115BBE of the Act as undisclosed, unexplained and unaccounted income and same is not from business and profession, thus he added the same in the hands of the assessee by assessing the income of the assessee at Rs. 35,76,800/- u/s. 143(3) of the Act. Against the above, assessee appealed before the Ld. CIT(A), who after calling remand report in the case from the AO, vide his order dated 21.5.2025 has partly allowed the appeal of the assessee by holding that the absence of credible evidence results in the corresponding amounts being treated as unexplained and the total cash was Rs. 32,00,000/-, of which Rs. 20,43,000/- is substantiated, leaving Rs. 11,57,000/- as unexplained. Accordingly, he gave the result to the extent of Rs. 20,43,000/- and the AO was directed to adjust the seized cash of Rs. 32,00,000/- against the revised tax demand. Aggrieved, Assessee is in appeal before the Tribunal.

We have heard the rival contentions and perused the records. During the year, assessee has shown turnover of Rs. 37,16,620/- and assessee has shown net profit of Rs. 4,40,625/- at the rate of 11.85 percent of turnover. Assessee purchased the material from various parties on credit and thereafter supplied the same to his customers on credit. Assessees Customers made the payment in cash as assessee and their parties businesses are very small and deals in small tractor and auto parts and tyres. During assessment proceedings, assessee substantiated that the material has been purchased and sold by assessee by submitting the quantitative and qualitative reconciled chart of the purchases with sales for impugned year. Further, documents from purchase to utilization of material were submitted in the form of 3 | P a g e Purchase Bills, stock register and sales bills. Further, assessee provided copies of bills issued to sale parties containing receipts of cash amount on dt. 07.02.2020. The said receipts had been obtained from sale parties to substantiate that the assessee has received cash from and said parties on dt. 07.02.2020. The sale parties take receipts on sale bills as a normal trade practice. Further, assessee filed ledger account of sale parties and purchase parties along with their confirmations during the assessment proceeding. Assessee filed cash ledger explaining that cash seized amounting Rs. 32 lakhs are sale proceeds received on dt. 07.02.2021. Moreover, AO accepted the purchases as well as sales of the assessee. AO alleged that most of the parties had not fled their return of income and in those cases, where ITR has been filed by the parties, the income from business has been shown other than business of spare parts of tractor. AO overlooked the aforesaid documents and without making any enquiries from parties made the addition of cash seized amounting Rs. 32,00,000/ u/s. 69A as undisclosed, unexplained and unaccounted income and same is not from business and profession, thus he added the same in the hands of the assessee. Ld. CIT(A), after calling remand report in the case from the AO, has observed that the absence of credible evidence results in the corresponding amounts being treated as unexplained and the total cash was Rs. 32,00,000/-, of which Rs. 20,43,000/- is substantiated, leaving Rs. 11,57,000/- as unexplained. Accordingly, he gave the relief to the extent of Rs. 20,43,000/- and the AO was directed to adjust the seized cash of Rs. 32,00,000/- against the revised tax demand. We find that Ld. CIT(A) has sustained the addition of Rs. 11,57,000/- in respect of the parties mentioned from serial no. 12 to 18 of his order at page nos. 40 to 42, details thereof are mentioned below:- i) Jagdamba Tyre Puncture Rs. 14,05,500/- ii) Sipahi Lal Auto works Rs. 1,96,350/- iii) Sahej Tyre Puncture Rs. 1,26,100/- iv) Ram Tyre Rs. 1,69,300/- v) Raj Tyre Repairing shop Rs. 1,88,850/- 4 | P a g e vi) Shanu Tyre Puncture Rs. 1,95,500/- vii) Bhola Tyre Puncture Rs. 1,43,200/- 5. Before us, Ld. AR for the assessee has filed a paper Book containing copy of written submission field before the CIT(A) dated 6.7.2022; copy of application under Rule 46A filed before the CIT(A) dated 6.7.2022; copy of reply dated 11.9.2021 filed by the assessee before the AO alongwith the following enclsorues viz. copy of return of income alongwith ITR4 and computation of income of assessee for AY 2020-21, copy of cash book, copy of sales ledger a/c in the books of assessee from 26.12.2019 to 31.3.2019, copy of purchase tractor and auto parts in the books of assessee from 26.12.2019 to 31.3.2020 and copy of sales bills and the copy of reply filed by the assessee on 21.9.2021 before the AO alongwith the following enclosures viz. copy of ITR 4 filed by the assessee on 26.2.2021 for AY 2019-20, copy of confirmation of a/cs from Acheet CT3 (P) Ltd., copy of confirmation from AMS Enterprises and copy of purchase invoices. All the above documents were filed before the CIT(A) and except copy of written submission filed before the CIT(A) dated 6.7.2022 and copy of application under Rule 46A filed before the CIT(A) dated 6.7.2022 were filed before the before the AO. We find that in above cited cases, as per the Remand Report, the AO verified the issue by issuing a notice u/s. 133(6) of the act, which was returned undelivered by the postal department to the address mentioned in the remand report and in some cases single sales bills covered the entire amount but inconsistently references multiple other bill numbers for payment. We have given my thoughtful consideration to the assessee’s contentions before the lower authorities and Ld. CIT(A) contention in support of the impugned additions. We find no reason to accept either parties stand in entirety. This is for the precise reason that neither the assessee has been able to properly explain the source of sustaining amount of Rs. 11,57,000/- nor the department could simply brush aside all the relevant evidence at one go. Be that as it may, the tribunal is of the considered view that in these peculiar 5 | P a g e facts, it is deemed appropriate in the larger interest of justice to confirm the impugned addition of Rs. 5,27,550/- in respect of parties mentioned at serial no. (v) to (vii) as aforesaid and delete the remaining addition of Rs. 6,29,450/- only with a rider that the same shall not be as a precedent. The assessee gets relief of Rs. 6,29,450/- in other words. Necessary computation shall follow as per law.