DCIT-CC-8(4), MUMBAI, MUMBAI vs. AKSHAY JAYANTILAL DOSHI, MUMBAI

The Assessing Officer, however, was not satisfied with the explanation offered. He held that the assessee failed to substantiate, with documentary evidence, that the cash found at the residence belonged to group entities or family members. It was observed that no cash books or proof of withdrawals were produced even during assessment proceedings and that the statements made by the assessee were contradictory and inconsistent. The Assessing Officer treated the explanation as vague and an afterthought.

Accordingly, the Assessing Officer treated the cash of Rs. 1,25,64,000/- found at the residence of the assessee as unexplained money under section 69A of the Act and added the same to the total income of the assessee. The said addition was taxed under section 115BBE of the Act. Penalty proceedings separately.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the CIT(A), the assessee reiterated that the cash found during the search belonged to various entities of Bhoomi Group as well as to himself and his family members. It was submitted that, for security reasons, the cash of group entities and family members was kept with the assessee, who was a key person of the group.The assessee submitted that the cash balance as per the books of accounts of various group entities as on the date of search was Rs. 2,16,68,169/-, whereas the total cash found during search was Rs. 2,15,77,500/-, and therefore the cash found was fully explained. It was further submitted that the books of accounts of the group entities were audited and no defect had been pointed out by the Assessing Officer. Reliance was placed on various judicial precedents to contend that where cash-in-hand as per books exceeds the cash found during search, no addition under section 69A is warranted.Additional written submissions were also filed before the CIT(A), reiterating that detailed cash flow statements and charts were furnished during assessment proceedings and that the Assessing Officer rejected the explanation arbitrarily without pointing out any infirmity in the books of accounts.

The learned CIT(A), after considering the assessment order, submissions of the assessee and the material placed on record, recorded a finding that the cash-in-hand as per the books of accounts of various group entities on the date of search amounted to Rs. 2,16,68,169/-, which was more than the cash found during the search. The CIT(A) further noted that the assessee was a key person of the group and that it was a common business practice for cash of group entities to be kept with key persons for security reasons.It was also observed that the cash- in-hand of the group entities assessed by the same Assessing Officer was not disputed and that no specific defect was pointed out in the audited books of accounts. Relying on judicial precedents, the CIT(A) held that when the cash balance as per books is more than the cash found, the same is to be treated as explained.Accordingly, the learned CIT(A) deleted the addition of Rs. 1,25,64,000/- made under section 69A of the Act and allowed the appeal of the assessee.

Aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us raising following grounds:

The learned CIT(A) deleted the addition of Rs. 1,25,64,000/- primarily on the basis of charts furnished by the assessee indicating that the aggregate cash-in-hand as per the books of of search exceeded the cash found during the course of search. The learned CIT(A) also observed that it is a common practice for cash-in-hand of business entities to be kept with key persons of the group for reasons of security.

During the course of hearing before us, the learned Authorised Representative has now placed on record detailed statements and charts, inter alia, showing: i. Entity-wise cash-in-hand of various Bhoomi Group concerns as on 31.12.2021, aggregating to Rs. 2,16,68,169/-, as per Table „A‟; ii. Cash-in-hand of the assessee and his family members as on 31.12.2021, aggregating to Rs. 28,67,669/-, as per Table „B‟; iii. Cash-in-hand of other individuals of the group, namely Mr. Ajay C. Mehta and Mr. Bhushan C. Mehta and their respective family members, as per Tables „C‟ and „D‟; and iv. A statement indicating the position of the assessee as director, partner, shareholder or key person in the various group entities holding such cash balances.

On a prima facie consideration, the above details indicate that the aggregate cash-in-hand as per the books of accounts of the group entities and individuals was substantially higher than cash found at the residential premises of the assessee.

However, we find that neither the assessment order nor the appellate order records any verification of the above cash balances with the contemporaneous cash books of the respective entities and individuals. The learned CIT(A), while granting relief, appears to have proceeded on the basis of charts and summaries furnished, without undertaking a book-level verification of cash- in-hand as reflected in the regularly maintained cash books as on the date of search.

In our considered view, while the explanation furnished by the assessee is plausible and supported by prima facie material now placed on record, confirmation of such explanation necessarily requires verification with primary records, namely the cash books of the concerned entities and individuals as on 31.12.2021. Such verification goes to the root of the matter and is essential to conclusively determine whether the cash found during the search stands duly explained.

At the same time, we are conscious that the issue before us is narrow and confined only to the addition of Rs. 1,25,64,000/- made under section 69A, and that the scope of proceedings ought not to be enlarged.

Accordingly, in the interest of justice, we deem it appropriate to restore the matter to the file of the Assessing Officer for the limited purpose of verifying the cash balances as per the cash books of the entities and individuals relied upon by the assessee, strictly as on the date of search.

The Assessing Officer shall confine himself only to such verification and shall not expand the scope of inquiry to any other issue or assessment aspect. The assessee shall be afforded reasonable opportunity of being heard and shall place on record the relevant cash books and supporting documents.

If, upon such verification, it is found that the cash-in-hand as per the books of accounts of the concerned entities and individuals as on the date of search is equal to or exceeds the cash found during the course of search, the addition made under section 69A shall stand deleted.

If, however, any shortfall is noticed, the Assessing Officer shall restrict the addition strictly to the extent of such shortfall alone, in accordance with law.

The Assessing Officer shall thereafter pass a reasoned order dealing only with the aforesaid limited verification.

Before parting, we may briefly advert to the grounds raised

In view of the above, the issue is restored to the file of the Assessing Officer for limited verification only, and the order of the learned CIT(A) on this issue is set aside for statistical purposes.