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Facts
A survey/search operation was conducted on Batra Jewellers (prop. Naveen Batra) on 11.11.2019, revealing excess gold/jewellery stock of Rs. 2,25,53,159/- and excess cash of Rs. 63,87,912/-. The assessee treated the excess stock as business income and declared it in the P&L account for AY 2017-18, also declaring Rs. 58,96,500/- of the cash under the Pradhan Mantri Garib Kalyan Yojana (PMGKY). The Assessing Officer (AO), however, treated both the excess stock and the total excess cash as unexplained income under Section 69A read with Section 115BBE, taxing them as 'income from other sources'. The CIT(A) re-characterized the excess stock as business income and partially deleted the cash addition, sustaining Rs. 4,91,412/- for which the source was unexplained.
Held
The ITAT upheld the CIT(A)'s decision that the excess stock found during the search, being directly linked to the assessee's jewellery business, should be taxed as 'business income' at the normal rate, not as 'income from other sources' under Section 69A read with 115BBE. Regarding the cash, the ITAT confirmed the CIT(A)'s partial deletion, sustaining the addition for the unexplained deficit of Rs. 4,91,412/- in the cash book. It also allowed the assessee's cross-objection regarding interest under Section 234B, ruling that the surplus cash seized (Rs. 29,54,146/-) should be treated as deemed tax payment, and therefore, interest under Section 234B should not be levied on this amount.
Key Issues
1. Whether excess stock found during a search operation in a jewellery business should be taxed as 'business income' or 'income from other sources' under Section 69A read with 115BBE. 2. Whether interest under Section 234B is leviable on seized cash when the assessee had requested its appropriation against tax liability. 3. Validity of cash addition for unexplained deficit in books despite a PMGKY declaration for a portion of the cash.
Sections Cited
Section 250, Section 143(3), Section 133A, Section 132, Section 69A, Section 115BBE, Section 199C, Section 199J, Section 199L, Section 234B, Section 234C, Section 69, Section 69B, Section 131(1A), Section 132(4)
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Income Tax Appellate Tribunal, DELHI BENCH “E” DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI YOGESH KUMAR US
PER PRADIP KUMAR KEDIA - A.M.: The captioned appeal has been filed at the instance of the Revenue against the first appellate order passed by the Commissioner of Income Tax (Appeals)-XVII, New Delhi [‘CIT(A)’ in short], dated 31.10.2019 under s. 250 of the Act arising from assessment order dated 27.12.2018 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2017-18. The Assessee has also filed cross objection memo in the revenue appeal.
Briefly stated, the assessee is engaged in the business of trading in Jewellery. A survey proceedings were initiated by the Income Tax deptt. under section 133A of the Act on Batra Jewellers prop. Navin Batra on 11.11.2019 which was later converted into search action under s. 132 of the Act. Excess stock of Gold and Jewellery worth Rs. 2,25,53,159/- was found at the business premises of the Assessee. The assessee treated such excess stock as ‘business income’ and declared the said business income in the Statement of Profit & Loss and correspondingly, the said stock was included in stock in trade of the assessee for the AY 2017-18 in question. The AO treated the excessive stock of Rs. 2,25,53,159 for the AY 2017-18 as assessable under the head ‘income from other sources’ under the umbrella of s. 69A r.w.s 115BBE of the Act. Simultaneously, the excess cash amounting to Rs. 63,87,912/- found from the business premises of the assessee during search was also treated by the AO as unexplained cash taxable under the head ‘income from other sources’ under s. 69A r.w.s. 115BE of the Act.
Aggrieved, the assessee preferred appeal before CIT(A). It was contended before the CIT(A) that the excessive stock detected from the business premises of the assessee and bears direct nexus to jewelley business run by the assessee. Such excessive stock is offshoot of business being carried out and thus assessable as ‘business income’. Consequently provisions of s. 69A are ousted in the instant case. The CIT(A) took note of submissions and explanations provided by the assessee and found merit in the plea of the assessee. The re-characterization of income by the AO from ‘business income’ offered by the assessee to ‘income from other sources’ was thus set aside and cancelled and stance of the assessee was restored. The relevant para dealing with the issue by the CIT(A) is reproduced hereunder for easy reference:
“I have considered the facts of the case, findings of the AO and submissions of the appellant. The appellant was engaged in the business of jewellery in the name of Batra Jewellers for many years. The search was conducted by the Investigation Wing of the Income Tax Department and a Punchnama dated 11.11.2010 has been drawn. The said punchanama was duly prepared by the ACIT of the investigation team unit-3, New Delhi. As per the said Punchnama the cash amounting to RS. 58,96,500/- has been found along with the stock of Rs. 4,30,50,291/- as per the valuation report. The appellant has a stock in hand as on the date of search Rs. 1,65,11,598/- and excess stock was found at Rs. 2,25,43,233/- The said stock was found at the business premises of the appellant The appellant has treated excess stock as business income and declared the amount of Rs. 2,25,43,233/- of stock while filing ITR for the A.Y. 2017-18. He has filed the copy of P &L duly disclosing the difference of stock under the head other income.
Particulars Amount Particulars Amount To Opening Stock 1,55,70,375 By Sales 2,55,60,726 To Purchase 4,40,41,420 By Closing 3,89,79,930 Stock To Labour Charges 2,73,847 To Gross Profit 49,55,015 6,48,40,656 6,48,40,656 Total To Accounting 34,200 By Gross Profit 49,55,015 Charges To Advertising Exp 12,400 By Other 2,25,43,233 Income To Audit Fees 37,950 To Bank Interest & 14,100 Charges To Business 29,328 Promotion To Car 52,814 Maintenance
To Commission On 1,92,041 Cart To conveyance 1,630 Expenses To Depreciation 1,34,786 To Electricity Exp. 1,04,972 To Insurance 33,088 To Interest on 9,03,895 Unsecured Loan To Misc. Exp. 2,189 To Packaging 66,430 Material4600 To Printi5984ng & 4,600 Statitonery23428 To Rate & 5,984 Taxes609700 To Repair & 23,423 16170Maint To Salary 6,09,700 To Staff Welfare 16,170 To TDS Paid 2,410 To Telephone 28,037 To Water Exps. 3,096 To Net Profit 2,51,85,000 2,74,98,248 2,74,98,248
7.4 The above trading and P&L account clearly depicts the annual accounts of the appellant. The appellant has included excessive stock found during the search of Rs.2,25,43,233/- in purchases, which was finally reflected as part of total purchase amount to Rs. 4,40,41,420/- and the same also found included as part the closing stock in trading and P &L account. In addition to the purchase and closing stock the amount of Rs. 2,25,43,233/- also found credited in the P &L account under the head Other Income. The net effect of this double entry treatment is that, first in un-recording stock of Jewellery has been brought on the books and now form of the recorded stock which can be subsequent sold out and form part to any other normal transaction. The difference in stock found during the search has been recorded in the books of accounts and offer to tax by the crediting the said amount in the P &L account. Therefore, the excess stock was brought to the Tax under the head business income and not under the head income from other sources u/s 69A. The excess stock is found from the business premises of the appellant and on the similar facts Hon'ble Rajasthan High Court in the case of Bajarang Traders 2017(11) TMI 388 DT 12 September 2017hold that Excess stock surrendered during the course of survey has to be brought to be taxed under the head business income not the income from other sources. The finding of the High Court is reproduced as under: "Excess stock surrendered during the course of survey - whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head "business income" or "income from other sources"? - Held that:- ITAT is correct to conclude that in the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs.33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/-in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of Rs.70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss there from would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee's bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future.
In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is CLEARLY IDENTIFIABLE AND RELATED TO THE REGULAR BUSINESS stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (2016 (9) TMI 1354 - ITAT JAIPUR) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources" 7.5 In the case of CIT vs. Bairathi Gems Pvt Ltd. 2017 (8) TMI 721 Dt.8th August 2017, Hon'ble ITAT Jaipur hold that "excess stock offered in survey is part of Bussiness income. The excess stock is determined by valuing the business stock at current price instead of the purchase price. Nothing was brought to suggest that this was not a regular item of the stock dealt by the assessee. 7.6 In the case of Shri Lovishsinghal, Shri Vasu Singhal,ShriPramond Kumar Singhal and shrivinodkumarsinghal Vs. Income Tax Officer, Ward-2 and ACIT, Circle -Sriganganagar, Hon'ble ITAT JODHPUR Bench held that:
“Surrender of income during survey - to be treated as Business income or taxable u/s 69 - AO made the additions u/s 69 while calculating the tax rate as per provisions of Section 115BBE - Held that:- As per decision in the case of Bajrang Traders [2017 (11) TMI 388 - RAJASTHAN HIGH COURT] as observed that the Hon'ble High Court in respect of excess stock found during the course of survey and surrender made thereof was found to be taxable under the head "business and profession'. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, I hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found Ul/s 69. Thus, there is no justification for taxing such income / 115BBE of the Act. 7.7 Considering the evidences furnished by the appellant and decisions of the judicial authorities, AO is not justified in taxing the excess stock surrendered by the appellant and offered as other income in P&L account, as income from undisclosed sources u/s 69A and to brought the said amount to tax u/s 115BBE. Since stock found from the business premises of the appellant and as per the decisions of the judicial authorities as discussed above it is held business income of the appellant. Thus, provisions of section 115BBE is not applicable in the case of the appellant. Hence, addition made by the AO u/s. 69A r.w.s. 115BBE is not sustainable and it is hereby deleted. 7.8 These Grounds of appeal of the appellant are allowed.”
4. The CIT(A) also considered the submissions made with reference to additions on account excess cash and retained additions made partially to the extent of Rs. 4,91,412/-. The remaining additions of Rs. 58,96,500/- was deleted by the CIT(A) in following terms.
“6.3 I have considered the facts of the case, findings of the AO and submissions of the appellant. Excess cash amounting to Rs. 63,87,912/- found at the business premises of the appellant during the search carried out on 11.11.2016. The AO has treated the excessive cash as unexplained money u/s. 69A of the Act subject to be taxed u/s 115BBE. The appellant has submitted that during the appellate proceedings that excess cash has been found in the business premises of the assessee and it should be treated as business income of the assessee and not as any unexplained investment or expenditure. The cash is generated from the sale of gold and jewellery and it is not an unexplained cash. That a cash of Rs. 58,96,500/- was found at the business premises of the assessee during the search conducted by the investigating team. The total cash appearing in the books of account of the assessee is in negative (-) Rs. 63,87,912/- out of which appellant has declared the amount of Rs. 58,96,500/- under the "Pradhan Mantri Garib Kalyan Yojona (PMGKY). 6.4 The Government of India has introduced a scheme in Chapter IXA called Pradhan Mantri Garib Kalyan Yojna 2016 and shall come into in force from 17-12-2016 till 31-12-2017. As per the said scheme, where any person declared any income in the form of cash or deposit in an account maintained by person with a specific entity, chargeable to tax under the Income Tax Act for any A.Y. commencing on or after 01-04-2017. The undisclosed income declared u/s. 199C(1) shall be charged to tax @30% and the same shall be increased by surcharge calculated @33% along with penalty @10%. The person making declaration under sub-section 1 of section 199C shall deposit an amount which shall not be less than 25% of undisclosed income in the PMGKY Deposit Scheme 2016 and the said deposit shall not bear any interest thereof and shall be allowed to be withdrawn after 4 years from the date of deposit.
6.4.1 The section 199(J) state that the declarant under this scheme shall not be entitled, in respect of undisclosed income referred to section 199C, or any amount of tax and surcharge paid thereon, to reopen any assessment or reassessment made under the Income Tax Act or the Wealth Tax Act 1957, or to claim any set off or relief in any appeal, reference or any other proceedings in relation to any assessment or reassessment.
6.4.2 The provision of section 199l state that the amount of undisclosed income declared in accordance with sub-section (1) of section 199C shall not be included in the total income of declarant for any A.Y. under Income Tax Act.
6.4.3 The provision of section 199L state that "Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under sub-section (1) of section 199C shall be admissible in evidence against the declarant for the purpose of any proceeding under any Act other than the Acts mentioned in section 199-0.* The Scheme provides an opportunity to persons having undisclosed income in the form of cash or deposit in an account maintained with a specified entity (which includes banks, post office etc.) to declare such income and pay tax, surcharge and penalty totaling in all to 49.9 per cent of such declared income. Besides, the Scheme provides that a mandatory deposit of not less than 25% of such income shall be made in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 hereinafter 'the PMGKY Deposit Scheme") which has separately been notified by the Department of Economic Affairs. The Scheme has commenced on 17-12-2016 and shall remain open for declarations / deposit upto 31-03-2017. A declaration under the aforesaid Scheme may be made in respect of any income in the form of cash or deposit in an account maintained by the person with a specified entity, chargeable to tax under the Income Tax Act for any A.Y. commencing on or before 01-04-2017. No deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed against the income in respect of which a valid declaration is made under the Scheme.
6.4.4 Central Board of Direct Tax has issued a circular no.2 dt. 18-01-2017 and clarified in question no.5 that "Can a person against whom a search / survey operation has been initiated, file declaration under the Scheme and whether the cash seized during search operation can be declared under the Scheme?
6.4.5 Answer: Yes, a person against whom a search / survey operation has been initiated is eligible to file declaration under the Scheme in respect of undisclosed income represented in the form of cash or deposit in an account maintained with specified entity."
6.5 The appellant has fulfilled all the conditions specified in Pradhan Mantri Garib Kalyan Yojna Scheme and he has enclosed certificate of holding, subscription receipt and certificate from the Pr. CIT-17, New Delhi in Form-2 has been issued in this respect.”
6.6 The above facts clearly reveals that the assessee had declared the said amount under the "PMGKY" and no tax liable is to charge as per the provision of income tax act. The Appellant has already declared the same amount in his balance sheet under the head Capital while filing income tax return for the A.Y. 2017-2018. Considering the above facts, AO is not justified in making addition on account of cash disclosed under the "PMGKY" amounting to Rs.58,96,500/-. Excess cash amounting to Rs. 63,87,912/- found during the course of search on the premises of the appellant, out of which he has disclosed cash under PMGKY at Rs. 58,96,500/- only and not explained the source of remaining cash amounting to Rs.4,91,412/- Thus, addition made by the AO is sustained to the extent of Rs. 4,91,412/- and balance addition made by the AO at Rs.58,96,500/- is not sustainable and it is hereby deleted.
6.7 In the result of this ground is partly allowed.”
Aggrieved by the relief granted by the CIT(A), the revenue has filed the appeal with reference to relief granted on account of excess stock of Rs. 2,25,53,159/-. The Assessee has also filed cross objections with reference to additions retained of Rs. 4,91,412/- out of excess cash by the CIT(A).
With reference to tax treatment of excess stock, the ld. counsel supported the first appellate order and submitted that a survey operation were carried out on the business premises of the assessee on 10th and 11th November, 2016 which was later converted into search under Section 132 of the Act. The warrant of authorization under Section 132 of the Act was issued in the name of M/s. Batra Jewellers, proprietor Naveen Batra-assessee. The ld. counsel referred to the financial statement including Profit & Loss account and the return of income filed to submit that excess stock of gold and jewellery amounting to Rs.2,25,43,233/- was discovered in the course of search of business premises. The excess stock represents ordinary business income and thus the provisions of section 69A was wrongly invoked by the AO which was set right by the CIT(A). The ld. counsel submitted that there is no dispute on the fact that amount has been duly declared in the return of income and offered to taxation as business income susceptible to regular rate of taxation. The AO has, however, invoked the provisions of Section 115BBE r.w. Section 69A of the Act which is not applicable in the context of the case and was therefore contested before the CIT(A). The CIT(A) has appreciated the facts in factual and legal perspective and observed that the unaccounted excessive stock has arisen in the course of normal business activities carried out by the assessee and thus accepted the plea of the assessee for such income to be susceptible to tax at normal rate of tax exclusion to Section 115BBE of the Act. The CIT(A) referred to various judgments. While holding that such excess stock is liable to be taxed as ‘Business Income’ of the assessee and not under 69A of the Act under the head ‘Income from Other Sources’.
6.1 The ld. counsel thereafter adverted to the recent decision delivered by Hon’ble Madhya Pradesh High Court in the case of PCIT vs. Shri Krishna Kumar Verma, 2024 (3) TMI 1018 judgment dated 19.03.2024 to submit that in the similar factual matrix where the assessee before the Hon’ble Madhya Pradesh High Court was also engaged in jewellery business, the Hon’ble High Court endorsed the view that the undisclosed income surrendered in the course of search is derived from regular business activities and therefore, liable to be taxed at normal rate instead of the accelerated tax rate applicable in terms of Section 115BBE of the Act.
6.2 The ld. counsel thereafter adverted to another decision rendered by the Co-ordinate Bench in ITO vs. Ramachandra Setty & Sons in to 1165/Bang/2023 order dated 10.06.2024 to support the action of the CIT(A) and submitted that in the identical fact situation, the Co-ordinate Bench has observed that the stock surrendered is liable to be taxed as business income and not under the head ‘unexplained investment’ under the head ‘income from other sources’ under Section 69B of the Act.
6.3 The ld. counsel thus submitted that the provisions of Section 69 or 69A or 69B etc. would not apply where the undisclosed income has arisen from ordinary business activities. The ld. counsel thus submitted that no fault can be found with the order of the CIT(A) in this regard.
Adverting to the Cross Objection filed by the assessee, the ld. counsel submitted that Grounds No.1, 2, 3 and 4 are not pressed and therefore, may be taken as withdrawn. Adverting to Ground No.5 of the Cross Objection, the ld. counsel submitted that in the course of search on 11.11.2016, an incomplete cash book was found wherein cash balance was reflected at a negative figure of Rs.4,23,842/-. A sum of Rs.58,96,500/- in cash was however detected and seized from the premises of the assessee. The assessee offered the cash found under ongoing scheme in Chapter-IXA qua ‘Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY). As per the scheme, the undisclosed income declared was chargeable to tax at a prescribed rate which was paid out of cash seized by the Department. The ld. counsel submitted that when the cash found amounting to Rs.58.96 lakh has been offered for taxation, the deficit of Rs.4,23,842/- as per cash book should not be separately subjected to taxation separately. The ld. counsel thus sought suitable relief on the issue.
Adverting to Ground No.6 of the Cross Objection, the ld. counsel submitted that as pointed out earlier, cash of Rs.58,96,500/- was seized by the Income Tax Department out of which an amount of Rs.29,42,354/- was appropriated towards taxation on undisclosed cash offered under PMGKY, the remaining amount of Rs.29,54,146/- thus remained in the custody of the Revenue. A letter dated 23rd March, 2017 was filed by the Assessee with the Pr.CIT-17, New Delhi requesting adjustment and appropriation of the remaining amount of Rs.29,54,146/- against the tax liability likely to arise for the assessment year relevant to F.Y. 2016-17. The ld. counsel thus submitted that once a clear mandate has been given to the Department to enable it to adjust the cash deposits against the tax liability, the aforesaid amount of Rs.29.54 lakh should be treated as tax paid by the assessee on that date and consequently the interest liability in terms of Section 234B ought not to have been levied upon the assessee attributable to the remaining cash amount of Rs. 29.54 Lacs available with the Revenue. The ld. counsel thus sought a direction to the Revenue to re-compute the interest liability under Section 234B giving appropriate relief on account of deemed tax payment to the extent of Rs.29,54,146/- lying in the custody of Department. The ld. counsel fairly submitted in the same breath that there will be no change in the tax liability qua Section 234C of the Act. The ld. counsel adverted to the decision of the Co- ordinate Bench in Arun Bansal vs. ACIT, order dated 29th May, 2023 while seeking relief from levy of interest under Section 234B of the Act in the similar circumstances.
The CIT-DR for the Revenue justified the action of the AO to invoke provisions of Section 115BBE in respect of undisclosed excess stock found from the premises of the assessee at the time of search in this regard. The ld. CIT-DR adverted to provisions of Section 69A of the Act and submitted that Section 69A nowhere distinguishes between undisclosed money, bullion, or jewellery not recorded in the books of account, whether it arises in the course of business activities or otherwise. Section 69A gets triggered as soon as money, bullion, jewellery or valuable articles comes to the knowledge of the Department not recorded in the books of account and the assessee fails to offer explanation about nature and source of such assets. The ld. CIT-DR assailed relief given by the CIT(A) and contended that the CIT(A) has misdirected himself in not applying the provisions of the Act in right perspective and in letter and spirit. The ld. CIT-DR thus sought reversal of the first appellate order on the issue for restoration of the action of the AO.
As regards Ground No.6 of the Cross Objection raised on behalf of the assessee, the ld. CIT-DR supported the action of the CIT(A). The ld. CIT-DR pointed out that in terms of s. 132B of the Act, there must be an existing liability subsisting on the records of the Revenue to enable it to adjust the cash amount available at its disposal. The liability, in the present case, has come into existence only after framing the assessment order and therefore, the assessee cannot escape the application of Section 234B for the intervening period.
We have carefully considered the rival submissions and perused the first appellate order and the assessment order. The material referred to and relied upon in the course of hearing as well as the case laws referred have been taken into account.
Three issues are involved for adjudication in the present appeal.
12.1 First issue involves taxability of undisclosed excess stock of gold and jewellery found in the course of search from the business premises of the assessee at Rs.2,25,53,159/-. The questions were put by the Revenue Authorities before the assessee / his representative while recording the statement under Section 131(1A) and Section 132(4) where specific questions were asked to the assessee regarding variation in the stock quantity as per the stock register maintained by the assessee in computer. In response, it was submitted by the assessee before the search team that these excess stock has arisen by way of business transaction in which the assessee was engaged and the excessive stock is attributable to the business of the assessee. It was also pointed out that assessee has only one source of income which is jewellery business carried out in the name and style of Batra jewellers. The assessee has duly declared the excessive stock in the return of income as business income. The AO however taxed the excessive stock under the shelter of Section 69A r.w. Section 115BBE of the Act as income from other sources.
On appraisal of the first appellate order, we notice that the excess stock was found from the business premises of the assessee and offered as business income. The CIT(A) referred to several decisions and came to the conclusion that excess stock found from the business premises are attributable to the business in which the assessee is engaged is required to be considered as off-shoot of business activities and therefore, the income is required to be treated as business income in ordinary course. The conclusion drawn by the CIT(A) is in sync with the factual matrix and stated legal position enunciated by judicial precedents. Hence cannot be faulted in law. Hence, we decline to interfere.
The Appeal of the Revenue is thus dismissed.
Adverting to the other issue raised in the Cross Objection namely additions towards excessive cash to the extent of Rs.4,91,912/-. It is an admitted position that excessive cash of Rs.58,96,500/- was found from the business premises of the assessee. Simultaneously negative cash balance of Rs.4,91,912/- was shown in the books of account on the date of survey / search. The AO made additions towards excessive cash found of Rs.58,96,500/- and also towards negative cash balance of Rs.4,91,912/-. The CIT(A) deleted the addition of Rs.58,96,500/- but declined to give relief on account of negative cash balance.
We are unable to see any error in the action of the CIT(A). The explanation for treating the excessive cash to the extent of Rs.58,96,500/- was found satisfactory by the CIT(A) and remains undisputed by Revenue. However, the Assessee has failed to explain the cash balance deficit in the books of account. Thus, the deficit in cash book cannot be merged with the unaccounted excessive cash found rightly held to taxable separately. The action of the CIT(A) thus cannot be faulted.
Another grievance of the assessee as per the Cross Objection relates to non-applicability of interest under Section 234B of the Act with reference to surplus cash found and seized in the course of search.
17.1 As noted above, in the course of hearing before the Tribunal, the assessee has adverted to a letter dated 17.03.2017 asking the revenue to adjust the surplus unaccounted cash seized to the extent of Rs.29,54,146/- (after meeting tax liability on cash seized) against the regular tax liability for the A.Y. 2017-18 in question. The copy of letter is reproduced hereunder:
“Naveen Batra C/o Batra Jewellers 46, Rani Jhansi Market, Karol Bagh, New Delhi-110005 The Principal Commissioner of Income Tax Range 17, E-2 Block, Civic Centre, New Delhi In Reg: Batra Jewellers 46, Rani Jhansi Market, Karol Bagh, New Delhi-110005. PAN No. AFTPB6995H Sub: Adjustment of balance amount Rs.29,54,146/- in public deposit account towards tax liability Respected Sir, The Director of Investigation, Unit 3, has transferred Rs.58,96,500/- in the public deposit account of Principal Chief Commissioner of Range 17. The Assessee requests your goodself to deposit an amount of R6.29,42,354/-towards Pradhan Mantri Garib Kalyan Yojna 2016 and in this respect the challan and consent to deposit the same has already been provided to you in a letter received by your guva seirs office on 08.03.2017. Ine Assessee requests your goodself to kindly apply the balance amount i.e. Rs. 29,54,146/- against tax liability arising in respect of F.Y.2016-2017 or to meet any tax liability arising in our name. Thanking you, Yours faithfully
Naveen Batra (Prop. – Batra Jewellers Place : New Delhi Date : 17.03.2017”
17.2 The representation made in the impugned letter seeking adjustment has not been disputed by the Revenue. Therefore, the aforesaid amount of 29,54,146/- is required to be treated as payment of tax liability owing to the fact that a categorical mandate was conferred on the revenue by a express letter by the assessee. Thus, the liability under Section 234B attributable to such tax already deemed to have been paid, could not apply in the light of decision rendered by the Co-ordinate Bench in the case of Arun Bansal (supra).
The aforesaid issue thus is adjudicated in favour of the assessee.
Consequently, the other grounds namely Ground No.1 to 4 of Cross Objection are dismissed as not pressed whereas Ground No.5 towards undisclosed cash to the extent of Rs.4,91,412/- is dismissed.
Ground No.6 of the Cross Objection relating to chargeability of interest under Section 234B on deemed tax payment is allowed as noted above.
In the result, the Cross Objection of the assessee is partly allowed.
Resultantly, the appeal of the Revenue is dismissed whereas Cross Objection of the assessee is partly allowed. Order pronounced in the open Court on 14th August, 2024.