SOMASUNDARAM VIGNESHWARAN,MADURAI vs. ACIT (CENTRAL CIRCLE) -1, MUDARAI, MADURAI

4. The assessee has filed return of income under section 139(1) of the Act on 07.11.2022 for the A.Y. 2022-23 admitting total income of ₹.2,69,59,980/. The case was selected for scrutiny by serving notice under section 143(2) of the Act dated 31.01.2023. Subsequently, notice under section 142(1) of the Act dated 18.08.2023 was issued to the 3 assessee. Since there was no response to various notices issued, the Assessing Officer issued a show cause notice to the assessee on 02.02.2024 and for which the assessee has filed reply on 14.02.2024 and 15.02.2024, which are reproduced under para 5.1 & 6 of the assessment order. After considering the submissions of the assessee and cash flow statement, bills & vouchers generated for foreman fees, sale of jewellery, collie work, etc., by placing screen shot of some of the bills at pages 8, 9, 10 & 11, by recording his detailed observations at page 12 & 13, the Assessing Officer assessed the total income of the assessee at ₹.2,94,00,000/-, inter alia, making addition towards unexplained money under section 69A of the Act at ₹.2,74,19,095/- and completed the assessment under section 143(3) of the Act dated 28.02.2024. Against the addition made under section 69A of the Act, the assessee preferred an appeal before the ld. CIT(A). After considering the submissions of the assessee and in the absence of documentary evidence, etc., the ld. CIT(A) confirmed the addition made under section 69A of the Act.

5. Having heard the ld. DR and perusal of the material available on record, we note that the ld. CIT(A) after recording detailed observations, confirmed the addition made by the Assessing Officer under section 69A of the Act and relevant portion of the impugned order is reproduced herein below: 6.3.6 The undersigned has carefully examined the issue under consideration. Before going to adjudicate the various grounds raised it is essential to bring on record the circumstances that necessitated the AO to contemplate addition in the case of the appellant. The case of the appellant arises from the event that happened on 10.09.2021. The Inspector of Police, Karimedu Police Station, Madurai, reported about the interception of two motorbikes carrying four individuals, namely Shri S. Vigneshwaran (the appellant), Shri P.M. Meeras, Shri V.K. Riyas, and Shri Manikandan. On inspection, the police found four bags containing cash amounting to Rs.2.94 crores. Shri S. Vigneshwaran claimed that the entire amount belonged to him. Following this, the Income Tax Investigation Wing, Madurai, was informed, and summon u/s 131 of the Act, were issued to all four individuals. During the enquiry, sworn statements were recorded. Shri Vigneshwaran in the sworn statement recorded deposed that he was engaged in the gold jewellery & bullion trading business through two partnership firms, namely M/s Shiva Akshayam Jewellers and M/s Akshaya Jewelleries and Bullions. However, he asserted that the seized cash was not related to either firm but was personally his and used in a cash-based bullion trading business. 6.3.7 During the course of the post search proceedings, when asked to provide evidence and supporting books of accounts for the Rs.2.94 crores, Shri Vigneshwaran admitted that no day-to-day accounts were maintained either for his individual business or the firms. Additionally, during the proceedings on 11.09.2021, the partner of M/s Akshaya Jewelleries and Bullions confirmed that the firm had not commenced operations and hence had no books of accounts, further reinforcing that the cash belonged to Shri. Vigneshwaran in his personal capacity. 6.3.8 The sworn statements from the other three individuals namely, Shri. Meeras, Shri. Riyas, and Shri. Manikandan, confirmed that they were employees of Shri Vigneshwaran and had no knowledge of the source of the cash. Based on these findings and the absence of any supporting documentation, the authorities concluded that the cash was unaccounted for. A search warrant u/s 132 was executed and the cash was formally seized on 11.09.2021. 6.3.9 During the course of search, Shri Vigneshwaran reiterated that he had not maintained any books of accounts for either his personal business or the firms for the relevant financial year. When given an additional opportunity to explain the source of the cash, he stated that he had no records or accounts to support the claim. The assessee accepted to treat the entire amount as income for the current financial year and to pay the applicable taxes on it. Shri Vigneshwaran filed his return of income for the AY 2022-23 on 07.11.2022 u/s 139(1) of the Act by declaring a total income of Rs.2,69,59,980/-. The return of the assessee was selected for compulsory scrutiny by issuing a notice u/s 143(2) of the Act dated 31.01.2023. The AO called for details by issuing notice u/s 142(1) of the Act on various dates. In response the assessee made a submission dated 23.01.2024. The AO after considering the submission issued a show cause notice on 02.02.2024. The assessee responded to the show cause notice on 14.02.2024 & 15.02.2024. 6.3.10 The AO after considering the submissions rejected the same. The AO held that the assessee was liable to get their accounts audited u/s 44AB of the Act, for the AY 2022-23, as the gross receipts exceeded the prescribed limit of Rs.1 crore. However, no audit report was filed as required under the Act. During the course of assessment proceedings, the AO on verification of the bills submitted by the assessee for foreman fees, it was observed that such bills were generated only for the period between 01.04.2021 and 28.07.2021, prior to the search conducted on 11.09.2021. No bills or vouchers were generated after the date of search. Furthermore, the submitted bills lacked essential details such as the addresses of the clients and their signatures, raising doubts about their authenticity. As a result, the genuineness of these bills could not be verified. 6.3.11 Similarly, sales bills submitted for gold ornament transactions were found to be questionable. Though these bills were generated between 01.04.2021 and 21.09.2021, none were issued after 21.09.2021. These bills too lacked buyer details, including address and signature. Given these deficiencies, the sales transactions appeared to be fictitious. Additionally, the assessee had reported an opening stock of Rs. 11,65,070/- with no purchases during A.Y. 2022-23, despite having declared zero stock (opening, purchase, or closing) for A.Y. 2021-22. This inconsistency indicated that the opening stock was bogus, and by extension, the reported gold sales were also fabricated. 6.3.12 The assessee also submitted bills related to collie work, which similarly lacked proper identification of the service providers and were unsigned. None of the submitted bills contained GST registration numbers, and the assessee had not paid any GST, further casting doubt on their legitimacy. During the search proceedings on 11.09.2021, the assessee stated under oath that M/s Siva Akshayam Jewellers was jointly run by himself, his brother, and another individual. According to PAN data, the business operates as a firm. The assessee also claimed that all books related to the firm were with his auditor. However, no such records were presented during assessment. Moreover, while the assessee denied that the seized amount of 2.94 crore belonged to M/s Siva Akshayam Jewellers during his statement, he later produced bills from the same firm in an attempt to justify the seized cash. Given this contradictory stance and the firm's separate legal identity, the submitted bills were rejected.

6.3.13 A significant discrepancy was also found in the declared turnover. For A.Y. 2021-22, the assessee declared gross receipts of Rs.7,19,760/- under "other services n.e.c. However, for A.Y. 2022-23, the assessee reported a drastically increased gross receipt of Rs.2,84,50,482/- comprising Rs. 12,16,000/- from goods and Rs.2,72,34,482/- from services. This represents a sudden and unexplained increase of Rs.2,77,30,722, especially when considered in the context of the prior year and the timing of the search operation. This further reinforced the conclusion that the bills and records were fabricated to justify unexplained cash. 6.3.14 The AO concluded that the assessee fabricated bogus bills and vouchers to falsely show cash in hand at the time of the cash seizure. These claims were made without any supporting evidence and are considered an afterthought, lacking credibility. In the return of income filed for A.Y. 2022- 23, the assessee declared gross business receipts of Rs.2,84,50,482/-, including Rs.2,72,34,482/- from services. However, this income, offered under normal tax rates, was rejected by the AO due to the questionable nature of the records and inconsistencies in the assessee's claims. 6.3.15 The AO held that as per Section 69A of the Income Tax Act, any money. bullion, or valuables found in possession of the assessee, which are not recorded in their books and for which no satisfactory explanation is provided, can be treated as unexplained income. Even if no books are maintained, the provision still applies. In this case, the assessee failed to substantiate the source of 2.94 crore in cash seized during the search, and the explanations given were deemed to be bogus and fabricated. Therefore, out of the total seized cash of Rs.2,94,00,000/-, an amount of Rs. 19,80,905/- already assessed protectively u/s 69A of the Act was excluded. The remaining Rs.2,74,19,095/- was treated as unexplained money u/s 69A r.w.s 115BBE of the Act, and added to the assessee's total income for A.Y. 2022- 23. The AO after making the above additions completed the assessment proceedings by passing order u/s 143(3) of the Act on 28.02.2024. 6.3.16 The undersigned has carefully examined the facts of the case, the order of the AO and the detailed submission made by the appellant. As evident in the ground raised, it can be seen that the appellant has challenged the assessment order passed u/s 143(3) of the Act for the AY 2022-23, primarily objecting to the treatment of Rs.2,74,19,095/- as unexplained money u/s 69A read with section 115BBE of the Act, instead of recognizing it as business income. 6.3.17 During the course of appellate proceedings, the appellant submitted that the said amount was received from various business activities such as foreman fees, job work, and cash sales, and was duly declared in the return of income filed u/s 139(1) of the Act. The assessee contended that the income was offered to tax under the head "Income from Business and Profession" and therefore should not have been taxed u/s 69A of the Act.

6.3.18 The events leading to the assessment originated on 10.09.2021 when the police intercepted two motorcycles carrying four individuals, including the assessee, and found Rs.2.94 crores in cash in their possession. The assessee claimed. ownership of the cash, stating that it belonged to him personally and not to the firms M/s Siva Akshayam Jewellers or M/s Akshaya Jewelleries and Bullions, where he was a partner. The Department was informed, and a search u/s 132 of the Act was carried out on 11.09.2021. During the course of the search and subsequent statements recorded under oath, the appellant admitted that he did not maintain any books of account for either his personal business or the firms. Other individuals involved also stated they were employees and had no knowledge about the source of the cash. 6.3.19 Subsequently, the assessee filed his return of income for A.Y. 2022-23 on 07.11.2022 declaring total income of Rs.2,69,59,980/- as business income. The case was selected for compulsory scrutiny, and the AO issued notices u/s 143(2) and 142(1) of the Act. In response, the assessee made written submissions and attempted to justify the source of cash through various bills and vouchers. However, the AO found that the assessee had not complied with provisions of section 44AB of the Act despite having gross receipts exceeding Rs.1 crore, as no audit report was. Turnished. Further, the bills produced for foreman fees and job work were found to be generated only until 28.07.2021, before the date of search, and none were issued. post- search. These bills lacked critical details such as the address and signatures of clients and were not verifiable. 6.3.20 Similarly, the sales bills relating to gold ornament transactions were found to be defective and non-genuine. These bills, although dated from 01.04.2021 to 21.09.2021, were inconsistent and lacked key buyer information. Additionally, the appellant claimed to have had an opening stock of Rs. 11,65,070/- in AY 2022-23, despite having reported zero stock in AY 2021-22. No purchases were declared either, clearly indicating the stock and associated sales were fictitious. Further discrepancies were found in collie work bills, which were unsigned, lacked identity of the parties, and were devoid of GST registration numbers. No GST was paid on any of the transactions, which further cast doubt on their authenticity. 6.3.21 The AO also noted a sharp and unexplained increase in the assessee's gross receipts, from Rs.7,19,760/- in AY. 2021-22 to Rs.2,84,50,482/- in AY, 2022-23. This sudden surge in turnover immediately after the cash seizure indicated an attempt by the assessee to post-facto regularize the unaccounted cash seized by fabricating business receipts. The AO concluded that the bills were bogus and generated only to explain the seized cash, without any credible documentation or supporting books of accounts.

6.3.22 Upon the issue of Rs. 19,80,905/- being taxed twice, the assessee claimed it was the closing cash as on 31.03.2021, already taxed u/s 68 of the Act in A.Y. 2021-22. The AO acknowledged this and assessed the amount protectively u/s 69A of the Act in A.Y. 2022-23, with the balance Rs.2,74,19,095/- (i.e., Rs.2.94 Crores minus Rs. 19.80 lakhs) assessed substantively u/s 69A. Thus, the charge of double taxation does not hold good, 6.3.23 The provisions of section 69A of the Act empowers the AO to treat any unaccounted money or valuable asset found in the possession of the assessee as income, if the assessee fails to satisfactorily explain its source, irrespective of whether books of account are maintained. In the present case, the appellant has not maintained any books and has failed to offer a credible explanation backed by verifiable records. The inconsistencies in stock, turnover, and bill details, along with contradictory statements regarding ownership of the seized cash, support the AO's conclusion that the assessee's submissions are fabricated and an afterthought. 6.3.24 In view of the facts, material on record, and legal position, it is clear that the assessee failed to discharge the burden of proof to explain the source of the seized cash amounting to Rs.2.94 crores. Therefore, the undersigned is of the view that the AO has rightly treated the balance amount of Rs.2,74,19,095/- as unexplained money u/s 69A read with section 115BBE of the Act and made the addition to the assessee's total income. The action of the AO is thus in accordance with law and based on sound reasoning. Accordingly, the ground raised by the appellant upon this issue is hereby treated as dismissed.

6. On careful reading of the above findings of the ld. CIT(A), we note that the ld. CIT(A) elaborately discussed the issue and confirmed the addition made by the Assessing Officer under section 69A of the Act. In ground No. 1 of the grounds of appeal, the contention of the assessee is that the ld. CIT(A) erred in passing an order without verifying the books of accounts viz-a-viz sales register, purchase and kulli (collie) bills issued to the skilled labours. The Assessing Officer as well as the ld. CIT(A) observed that the bills lacked critical details such as the address and 9 signature of clients and moreover, the assessee failed to comply with the provisions of section 44AB of the Act as no audit report filed either before the Assessing Officer or before the ld. CIT(A) or even before this Tribunal. Further, with regard to the sale bills relating to gold ornament transactions, the same are found to be defective and non-genuine, lacking key buyer information. We also note that the assessee did not pay GST as there is no GST registration numbers in bills as could be evident from the screenshot of bills for foreman fees placed in the assessment order.