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Facts
The assessee, a dealer of livestock and mutton operating under presumptive taxation (Section 44AD), was intercepted with Rs. 7 lakhs in cash. The Assessing Officer and CIT(A) treated this as unexplained cash and made an addition under Section 69A, as the assessee failed to provide bills/vouchers. The assessee contended that the cash was from business, including opening cash balance, advance from a customer (Nazir Ahmad Khosa), and stock sales, and that the income had been accepted in previous years under presumptive taxation.
Held
The Tribunal condoned the delay in filing the appeal due to the counsel's medical condition. It held that the assessee's business activity and presumptive income under Section 44AD had been consistently accepted in prior assessment years. Applying the principle of consistency and considering the available opening cash balance and inventory, the Rs. 7 lakhs seized cash was satisfactorily explained as business proceeds. Therefore, the addition made under Section 69A was deleted.
Key Issues
Whether the delay in filing the appeal should be condoned. Whether the addition of Rs. 7 lakhs under Section 69A for unexplained cash was justified, considering the assessee's presumptive taxation status (Section 44AD) and consistent acceptance of business income in prior years.
Sections Cited
Section 250(6), Section 143(3), Section 132A, Section 69A, Section 44AD, Section 153A, Section 115BBE, Section 44AA, Rule 34(4) of the Income Tax Appellate Tribunal Rules 1963
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: SH. UDAYAN DASGUPTA & SH. BRAJESH KUMAR SINGH
ORDER Per: Udayan Dasgupta, J.M.: This appeal filed by assessee is against the order of Ld. CIT (A)-5, Ludhiana, passed u/s 250 (6) dated 04.01.2024 emanated from the order of the ld. DCIT, Central Circle, Srinagar, dated 09/04/2021, passed u/s 143(3) of the Act 1961.
Condonation of Delay : This appeal is filed belatedly by 163 ( one hundred sixty three ) days . Application for condonation has been filed by the assessee along with an affidavit, that the CIT ( A ) order has been received by the counsel of the assessee on 4th January, 2024, and the period of sixty days has already expired on 4th March, 2024. It is submitted by the Ld AR of the assessee, that the appointed counsel CA Abdul Rashid Dullo , who represented the matter before the first appellate authority and whose email id is also recorded in Form 35 , was entrusted with the responsibility of filing the second appeal before the tribunal, buy unfortunately Mr Dullo , has suffered a multi organ failure and has been admitted to hospital in critical condition and as such the collection of necessary documents from the old counsel, took time . Subsequently, the assessee filed this appeal with the help of new counsel Mr. V.Agarwal , belated by 163 days, and he prays that since the delay was not intentional and there was no wilful neglect on the part of the assessee, the delay may please be condoned and the appeal may please be admitted to be heard on merits.
The Ld. DR has no objection. 3.1 Taking into consideration the medical issue of the CA, as stated in the affidavit, we condone the delay and admit the appeal to be heard on merits.
The grounds of appeal
taken by assessee in form 36 are as follows: “1. The CIT(A); erred in confirming the addition of Rs. 700000/- made by the AO u/s 69A on account of cash found/ seized during the requisition u/s 132A on 03.12.2018. The order passed by the CIT(A)is contrary to the facts and circumstances of the case.
2. That the Ld. CIT(A) erred in confirming the addition made by the AO on account of seized cash without allowing the telescoping benefit of opening cash in hand to the tune of Rs.
618500/- as also evident from the return filed for the Ay 2018-19 on 03.11.2019 i.e. much before the requisition on 03.12.2019.
3. That the CIT(A) erred in confirming the addition made by the AO without appreciating that the cash found during requisition represents receipts from business of sale of life stock. - 4. That the Ld. CIT(A) erred in confirming the addition made by the AO without appreciating that the return was being filed u/s 44AD and the appellant was not required to maintain books of accounts and as such, provisions of section 69A could not be invoked.
That the Ld. CIT(A) erred in confirming the addition made by the AO without considering the affidavit from Nazir Ahmad Khosa furnished during the course of assessment as well as appellate proceedings. That Sh. Nazir Ahmad had duly confirmed .in the affidavit that he had made a business advance of Rs. 1.50L to the appellant.
6. That the Ld. CIT(A) erred in not giving any credence to the affidavit and other documents furnished during the assessment as well as appellate proceedings which is against the judicial precedent.
7. Without prejudice to the aforesaid, the CIT(A) has erred in ignoring that the cash found to the tune of Rs. 700000/- represents business receipts and-the profit element on such receipts stands duly disclosed in the return of income.
8. Without prejudice to the aforesaid, the CIT(A) has erred in confirming the addition of cash found to the tune of Rs. 700000/- without appreciating that the said action tantamount to double addition, since, the income along with the turnover declared in the return of income has been duly accepted by the revenue. The’appellant requests permission to add or amend the 9. grounds of appeal
before the appeal is heard and disposed off.”
5. Brief facts emerging from records are that the assessee individual is a dealer of live stock and mutton dealer ( butcher engaged in the business of preparing and selling meat in a store ) and is a member of “All Kashmir Wholesale Mutton Dealers Union ”, and is certified by the association to have been engaged in this business ( Paper book page 28 ). The assessee was intercepted on 17th September, 2018, by the police 5.1 authorities at Jammu, and was found to be in possession of cash amounting to Rs. 7 lakhs (seven lakhs), and on failure of the assessee to explain its source to the satisfaction of the police, the income tax department was informed and the said amount was seized by the income tax authorities, after following necessary procedure u/s 132A of the Act 61. 5.2 Subsequently, proceedings were initiated u/s 153A of the Act, for the Asst years 2013-14 to AY 2018-19 and the assessee filed returns for all the above assessment years declaring income on presumptive basis from mutton business, under the provisions of section 44AD of the Act 61, which were all assessed in scrutiny proceedings vide orders passed u/s 153A/ 143(3) of the Act ( copies of assessment orders are part of the PB filed page 30 to 45 ).
5.3 Return of income filed for asst year 2019-20 ( year under appeal ) , was filed declaring income on presumptive basis u/s 44AD of the Act, and in course of hearing u/s 143(2) it was explained that the source of cash amounting to Rs. 7,00,000/- ( seven lakhs) on the date of seizure 17.09.2018 are proceeds of the business carried on by the assessee , where on a total turnover of Rs. 28.90 lakhs, business profit was declared at Rs.2.89 lakhs ( covered by section 44AD ) , and in support of running an eligible business he submitted copies of certificate issued by the “All Kashmir Wholesale Mutton Dealers Union ”, certifying the existence of the business along with registration certificate issued under FSSAI 2006 , by the Department of Health and Medical Education ( Govt of Jammu and Kashmir ) issued in favour of the assessee ( vide regd no . XXXXXX00689 ) for carrying on of wholesale business of “ SHEEP and GOAT ” ( page 48 to 50 of pb ) , which were all documents filed before the AO and no adverse inference has been drawn.
The assessee has also filed copies of affidavits from one Mr Nazir Ahmad of Lal bazar , Srinagar, J & K , who has confirmed to have advanced an amount of Rs.1,50,000/- ( Rs. One lakh fifty thousand ) in cash on 6th August, 2018, to the assessee , for goods ( pb page – 15 to 16 ) , and another affidavit from one Mr. Mushtaq Ahmad , of Lohai Thal , Dt Kashmir, who has claimed to be a business man engaged in business of same nature and is the creditor of the assessee amounting to Rs. 4 lakhs , against supply of sheeps and goats made before EID – Ul - ZOHA festival .( page 17 of pb ).
Though the matter was represented by the assessee in course of assessment proceedings with written explanation and documentary evidences , as sated above , the AO concluded that in absence of any regular books of accounts, supported by bills and invoices and acknowledgement of receipts , the availability of cash on the date of seizure is not to his satisfaction , more so , there is no reason as to why the above transactions of cash advance received , was not routed through bank account when the assessee had a bank account with J & K Bank A/c No xxxxxx0049 . 7.1 The assessment was completed u/s 143(3) with an addition of Rs. 7 lakhs u/s 69A of the Act.
The matter was carried in appeal before the first appellate authority and elaborate written submission were filed along with supporting documentary evidences, and remand report was also obtained and the Ld. CIT (A) – 5 Ludhiana, dismissed the appeal due to unavailability of bills, vouchers and documentary evidences, observing as follows: CIT (A) observation reproduced for ready reference: “5.1.3 The submissions of the assesses, documents/affidavits submitted by the AR during the course of appellate proceedings and the report submitted by the AO during remand proceedings have also been considered. It is pertinent to mention here that the assessee was not able to prove that the source of Rs 5,50,000/- was the sale proceeds since the assessee does not maintain books of accounts and the assessee has neither produced any bills/vouchers nor any other documentary evidence to substantiate his claim. Also, regarding the plea of amount of Rs 1,50,000/- was advanced from a customer for sale in future, the assessee had not been able to furnish 'any documentary evidence whatsoever, to substantiate his claim. It is also relevant to mention here that the assessee has failed to furnish any verifiable statement in this regard except relying on his earlier submissions. Thus, the plea of the assessee that the cash of Rs.7,00,000/ found from his possession was his collection of business proceeds from Srinagar/ Kashmir is not true and correct and not based on facts. Further, the submissions/affidavits of the Appellant were sent to the AO in the interest of natural justice. The appellant submitted the affidavits/declaration from the person who gave cash to the assessee and the appellant during remand proceedings also had submitted that he was carrying Rs. 7,00,000/- to Jammu to pay Rs. 4,00,000/- to his creditor, Sh. Mushtaq Ahmad and Rs. 3,00,000/- for procuring live stock. Out of Rs. 3,00,000/-, Rs. 1,50,00.0/- was the advance received from Sh. Nazir Ahmad Khosa and the remaining Rs. 1,50,000/- was his capital in the business represented in the form of sale proceeds of Rs. 5,50,000/-. It is also worthwhile to mention here that the assessee was not able to prove that the source of Rs. 5,50,000/-, was the sale proceeds since the assessee had neither produced any bills / vouchers nor any other documentary evidence to substantiate his claim even during the remand proceedings. Further, the assessee did not furnish any documentary evidence to substantiate his claim that the amount of Rs. 1,50,000/ was received as advance from a customer for sale in future. However, only filing an affidavits/declaration of the persons is not conclusive as the assessee has not maintained proper books of accounts. The appellant also does not submit any documentary evidence which proves that the cash intercepted is of the assessee’s business cash.
The Hon’ble Supreme Court in the cases of Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (SC) and Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1 (SC) held that the law is well-settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. Where the nature and source of a receipt, whether it be of money or other properly, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. Accordingly, the arguments of the AR that the cash intercepted is to be treated as business income of the assessee is not acceptable and the additions made u/s 69A, are to be treated separately and it would not be possible to classify such deemed income falling under Chapter-VI, under any of the heads including 'income from other sources' but they will be aggregated along with the incomes computed under Chapter IV. The AR has not been able to adduce documentary evidence to establish the nexus between the cash found and business. Also bring out a clear legal position that for any income to be treated as business income, the nexus/the source, has to be established. Hence, the action of the AO in applying the rate as prescribed u/s 115BBE on the cash amounting to Rs. 7,00,000/-, treated by the AO as income u/s 69A in the assessment order, is found sustainable. Keeping in view the above facts and discussion, it is held that the amount of Rs. 7,00,000/- on account of cash intercepted and handed over to Income Tax Department is deemed income u/s 69A and has to be taxed as per provisions of Section 115BBE of the Income Tax Act, 1961 and the same is confirmed to the above extent. Further, the plea regarding the return of income has been filed u/s 44AD of the Act on presumptive basis, and the assessee does not maintain books of account, the section does not apply since the section presupposes the existence of books of account. In this ground, it is relevant to mention here that the cash of Rs. 7,00,000/- found and seized from the assessee, remained unexplained during the course of assessment proceedings as the explanation offered by the assessee, was not found satisfactory by the then AO and was, therefore, treated as the unexplained money of the assessee and added to his income u/s 69A of the Act. In this regard, section 69A of the Act, is reproduced below as: "Where in any year the taxpayer is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the taxpayer offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, then the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the taxpayer for such year".
Although, the assessee did not maintain books of accounts for the year under consideration, the explanation offered by the assessee, was not found satisfactory by the then AO, as already discussed above, and was added to his income u/s 69A of the Act. Therefore, the assertion of the assessee, in this ground, is also rejected.”
Now the assessee is before the tribunal on the grounds contained in the memo of appeal. The Ld. AR of the assessee submitted that the source of the seized cash is out of the assessee’s own business of whole sale supply of livestock and as a mutton dealer , and in support he referred to the copies of the assessment orders ( placed in pb page 29- 45 ) for the assessment years 2013-14 to AY 2018- 19 , all orders passed u/s 153A rws 143(3) of the Act , where the AO has accepted the business of the assessee with the following observation “5. The assessee is in the business of retail/wholesale trade of sheep and goats and has filed his Return of Income declaring an income of Rs Rs. 1,62,850/- under the provisions of section 44AD of the Act on presumptive tax basis.
6. After considering the reply filed and information/details provided/furnished by the assessee during the assessment proceedings, the income returned is accepted.”
The observation of the AO for all the assessment years stated above are almost similar, where the disclosed income on presumptive basis u/s 44AD has been accepted as per return, the summary of which are as follows:
Assessment Year Turnover 44AD Profit AY 2018-19 41,2,4000 33000 AY 2017-18 37,26,000 2,98,100 AY 2016-17 30,56,000 24,45,00 AY 2015-16 27,85,640 22,2870 AY 2014-15 22,50,680 1,80,100 AY 2013-14 20,56,000 16,4540 10.1 Thereafter, the Ld. AR referred to the hard copy of the ITR – 4 (presumptive return ) for the Asst year 2018-19 ( placed in pb page 2 to 10 ) and drew attention of the Bench specifically to page – 6 of the pb , where the closing cash balance as on 31st March, 2018, is reflected at Rs. 6,18,500/- ( in serial no – E-22 of the return ) , which supports the contention of the assessee that at the beginning of the year as on 1st April 2018, the assessee had the cash balance , which is also a part of the business cash at the beginning of the year , and the same is accepted by the AO in scrutiny proceedings u/s 143(3) without a noise. 10.2 The Ld. AR also referred to the bank statement ( pb page 25-27 J & K bank A/c no . 0049 ) to submit that the bank account has been newly opened on 11th October, 2018, post seizure, and in absence of any bank account previously, no advance from Mr Nazir Ahmed could be routed through bank. However, subsequently it was pointed out that payments made to the creditor Mustaq Ahmed, through the same bank account has been accepted by the AO and the Ld AR drew out notice to the transaction dated 26th December, 2018 and 3rd January 2019, as reflected in bank statement being payments made to Mustaq through cheques.
10.3 He further referred to the affidavits submitted by one Mr Nazir Ahmed and another by one Mr. Mushtaq Ahmad , ( pb page 15 and 17), to clarify that both the parties have confirmed their respective business dealings on oath, one regarding advance amount of Rs. 1.5 lakhs and another one regarding supply of livestock on credit during EID festival , and he argued that even though both documents with full address , were before the AO , in course of remand , none of the parties has been summoned or cross examined and no inquiry carried out , and in absence of any contrary materials gathered or brought on record to disprove the declaration, the contents of the same cannot be brushed aside has to be accepted as correct as laid down by the Hon’ble Apex court in the case of Mehta Parikh and Co vs CIT [ 30 ITR 181 ( SC ) ] . 10.4 He further relied upon the decision of the jurisdictional High court in the case of CIT vs VP Singh [2013] 40taxmann.com 162 (Punjab and Haryana) [2014] / 220 Taxman 87 [ P & H] , to submit that when cash balance in balance sheet is disclosed and entries in balance sheet are not disputed by the AO , the opening balance cannot be regarded to be undisclosed. 10.5 Some of the other judgments he relied upon in support of his contention for allowing the assessee the benefit of brought forward cash balance and closing stock, which are all recorded in returns of immediately preceding year are as under: i) Smt. Sarabjit Kaur vs. Income-tax Officer [2022] 142 taxmann.com 454 (Chandigarh - Trib.)/[2022] 96 ITR(T) 440 (Chandigarh - Trib.) ii) Commissioner of Income-tax vs. V.P. Singh [2013] 40 taxmann.com 162 (Punjab & Haryana)/[2014] 220 Taxman 87 (Punjab & Haryana) ii) Joginder Kaur vs. Income-tax Officer [2024] 169 taxmann.com 90 (Amritsar - Trib.) iv) Rachit Aggarwal (Prop.), Ashok Kumar Gupta & Co. vs. Income-tax Officer [2024] 162 taxmann.com 49 (Chandigarh - Trib.).
The Ld. AR concluded his arguments by stating that in the instant case the carrying on of an eligible business by the assessee , as per provisions of section 44AD of the Act 61, is proved beyond doubt which is duly supported by registration certificate issued by the Dept of Health and Medical Education, Govt of Jammu and Kashmir under FSSAI Act 2006, dated 20th October, 2018 , in favour of the assessee carrying on business of wholesaler “ Sheep and Goat ” and also evidenced by the certificate issued to the assessee by the “ All Kashmir Wholesale Mutton Dealer Union ” ( pb page 28 ), and declaration of income on presumptive basis has also been accepted by the AO in scrutiny proceedings for all earlier years as evidenced by the copies of the assessment orders ( contained in the paper book ) and the total turnover disclosed by the assessee for the year under appeal in ITR – 4 , being Rs. 28.90 lakhs, accepted by the AO, is also to be considered for determining the availability of cash holding of Rs. 7 lakhs, on the particular day of interception, because the same is also a part of the sale proceeds for the period April to September, declared in the return. 11.1 He further submitted that it is to be understood that this is a case of no books of accounts and section 44AA are not applicable to the assessee and the assessee is covered under presumptive section 44AD, and the said amount of Rs. 7 lakhs, was intercepted, while in movement from one town to another, for payments against outstanding creditors and taking into consideration the availability of the opening cash balance of Rs. 6.18 lakhs, as at the beginning of the year April 2018 and the closing stock of Rs. 1.30 lakhs ( as per ITR – 4 ) being the brought forward balance as on April 2018, both being available to the assessee and also taking into account the turnover for the six months period from April to September, there is no reason as to why the amount of Rs.7 lakhs has been doubted as unexplained, and as such he prays for deleting the addition arbitrarily made.
The Ld. DR relied on the order of the CIT (A) and submitted that in absence of any evidence of purchase invoices and bills, and in absence of cash book, the availability of cash on the date of interception was not proved to the satisfaction of the CIT(A) and as such the order of the first appellate authorities should be upheld.
We have heard the rival submission and considered the materials on record. We find that the assesse is involved or engaged in an eligible business of wholesale trading of live stock and is also engaged in the business of sale of mutton as per the certificates issued by the department of health and medical education, Government of J& K under the FSSAI Act 2006 and the business of the assessee is also evidenced by the certificate issued by the All Kashmir Wholesale Mutton Dealer Union. 13.1 We further observe that the case for the earlier years pertaining to A.Ys. 2013-14 to 2018-19 (6 Years ) has been completed u/s 153A r.w.s. 143(3) of the Act, accepting the returns filed by the assessee on presumptive basis u/s 44AD of the Act as per the income returned with the observation of the AO that the assessee is engaged in the business of retail/ wholesale trade of sheeps and goats and considering the reply filed by the assessee and the information and details produced and furnished, income returned has been accepted in all the years. As such, we are of the opinion that on the principle of consistency, that the income of the assessee has been accepted under the presumptive section of 44AD in earlier years, there is no reason as to why the income declared by the assessee in the year under appeal cannot be accepted u/s 44AD. On this issue we refer to the judgment of the Hon’ble Allahabad High Court in the case of Samsung India Electronics Pvt. Ltd. vs. State of U.P. and [W.T. No. 660/2023] where the Hon’ble High Court has observed that maintaining consistency is very crucial in tax regime, particularly when dealing with similar factual scenario across different tax periods categorically stating that the department should adopt uniform positions in such cases. 13.2 Moreover, it is also observed by us as discussed in the earlier paragraphs that the brought forward cash balance available with the assessee as at the beginning of the year amounting to Rs.6,18,500/- cannot be ignored and considering the fact that the assessee also has the benefit of opening inventories of Rs.1,30,000/- at the beginning of the year, both taken together alongwith the daily sales generated for the period April to 17th September is sufficient to explain the availability of cash of Rs.7 lac on the date of interception on 17th September 2018. 13.3 Moreover, in cases of presumptive taxation, when return is submitted u/s 44AD of the Act, proof of existence of eligible business is mandatory, which is already proved in this case, and it is not incumbent on the part of the assessee to maintain proper books, invoice of purchase and sales, of goods, more so, considering the fact that it is a case, of dealing in livestock in the state of Jammu and Kashmir and availability of authentic invoices for dealing in livestock is not practically feasible. Moreover, respectfully relying on the judgment of Hon’ble Apex Court in the case of Radha Soami Satsang vs. CIT (1992) 60 taxmann 248 and also in 193 ITR 321 where it has been held that the conclusion reached in earlier years is binding on subsequent years and should be followed unless there is a material shift in the facts of the case. In the instant case, before us it is the same business activity of livestock purchase and sale and trading of mutton which is being carried out since last six years which is accepted by the Department in scrutiny proceedings and there is no new evidence which can justify the departure from the previous years accepted position and as such, in the year before us, we are of the opinion that the amount of Rs.7 (seven) lakhs intercepted by the Police Authority on 17th September 2018, is satisfactorily explained out of the available cash balance with the assessee from his normal trading activities of livestock and sale of mutton, which is the accepted business activity of the assessee. 13.4 As such, we have no hesitation in deleting the addition of Rs.7 lacs.
In the result the appeal of the assessee is allowed.
Order pronounced on 30.06.2025 under Rule 34(4) of the Income Tax Appellate Tribunal Rules 1963.