LEGAL HEIRS OF MR. BHUSHAN LAL ARORA,NEW DELHI vs. DCIT, NEW DELHI

PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the legal heir of assessee late Shri Bhushan Lal Arora against the order of the ld CIT(A)-29, New Delhi dated 17.06.2016 raising solitary ground of appeal

by upholding the addition of Rs. 21 lakhs made by the ld AO by way of unexplained cash.

2. The assessee has raised the following grounds of appeal:- “1. That the ld CIT has erred in law as well as in facts in upholding the addition of Rs. 21,00,000/- made by the ld AO by way of unexplained cash.

2. That the ld CIT erred in law as well as facts in not providing the proper opportunity of being heard.

3. That the ld CIT erred in law as well as facts in passing the order without taking into consideration the details and evidences submitted by the appellant.”

3. Brief facts of the case shows that the assessee is an individual who filed his return of income on 11.09.2014 declaring total income of Rs. 1244250/-. The assessee earned income from salary, house property, capital gains and income from other sources. Search and seizure action u/s 132 of the Act Page | 1 was carried on 12.02.2013. During the course of search cash of Rs. 2513450/- and jewellery of Rs. 8592543/- was found and seized from the residence of the assessee. Therefore, notice u/s 143(2) was issued on 25.08.2014. The assessment u/s 143(3) of the Act was passed by ld DCIT, Central Circle-28 (ld AO) on 27.03.2016, wherein, he determined the total income of the assessee at Rs. 6104265/-. The addition of Rs. 2113450/- was made because of unexplained cash found and Rs. 2746565/- was made because unexplained jewellery found. The assessee preferred an appeal before the ld CIT (A), he confirmed the addition of Rs. 21 lakhs found in the hands of the assessee. However, he deleted the addition on account of jewellery of Rs. 2746565/-. Therefore, assessee aggrieved with the order of the ld CIT (A) has preferred this appeal with respect to addition of Rs. 21 lakhs upheld by the ld CIT (A.

4. The ld AR vehemently submitted that cash of Rs. 21 lakhs was belonging to M/s. Prakash Infrastructure and Developers Pvt. Ltd and the same was debited to the impressed account of the assessee. To support his claim the assessee submitted the copy of the balance sheet, copy of the cashbook and cash flow chart of M/s. Prakash Infrastructure and Developers Limited has categorically confirmed that the above amount belongs to that company and is out of regular source of cash as shown in cashbook of that company. It is also disclosed in the audited financial statement enclosed with the return of income of that assessee. He further referred to the statement recorded of the assessee on 12.02.2013 u/s 132(4) of the Act, where in Question No. 18 , it is stated that out of cash of Rs. 2513450/- approximately 20 lakhs belongs to the son of the assessee who is businessman working at three sites and cash was kept at the residence. It was further claimed that assessee was director of Prakash Infrastructure and Developers Pvt Ltd and cash was belonging to that company, which was kept in the room of his son who is residing with the assessee. He therefore submitted that lower authorities have not accepted the explanation of the assessee despite overwhelming evidences. The ld AR vehemently stated that the lower authorities have misconstrued the statement of the assessee during the course of search. He further stated that the assessee has proved with the overwhelming evidence that sum belongs to the company. With respect to the showing of the above sum as income tax advance in the books of the company it was stated that the books of account of the company was closed after the date of search and the above cash was seized by the department and therefore, the company showed the above sum as income tax advance. With respect to the allegation that there was no substantial expenditure made by the company, he submitted that above company was separately assessed and it was disclosed in the books of account as cash seized therefore, there is no reason that out of that amount any expenditure can be incurred. He relied upon the decision of the coordinate bench in case of Rakesh Mahajan Vs. DCIT dated 15.11.2017 where the assessee explained the cash found and the additions were deleted. In view of this, he submitted that the above addition deserved to be deleted. He filed the paper book containing 53 pages to support his contention and referred to page 3 to 18 of the Annual Accounts of Prakash Infrastructure and Developers Limited. He further referred to the copy of the cash flow statement from 01.02.2013 to 12.02.2013, wherein, the above amount of Rs. 21 lakhs was available with the assessee company. In view of this, he submitted that the lower authorities have wrongly confirmed the above addition of Rs. 21 lakhs.

5. The ld DR vehemently supported the order of lower authorities and stated that the sum of Rs. 21 lakhs held by the assessee is a „make believe‟ story and general statement. In view of this, he submitted that the above addition has rightly been made by the ld AO and confirmed by the ld CIT (A).

6. We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly, during the course of search, cash of Rs. 2513450/- was found at the residence of the assessee. The assessee submitted a letter dated 02.02.2015 wherein, he claimed that the cash belonged to two companies of which the assessee is a director and it was kept with him for safe custody. The copies of the balance sheet and the cash book of one company of which Rs. 4 lakhs were lying with the assessee was produced and the ld AO accepted the same. Therefore, out of sum of Rs. 2513450/- the ld AO granted the benefit of Rs. 4 lakhs and made an addition of Rs. 2113450/-. Identically the assessee also submitted that a sum of Rs. 21 lakhs was belonging to the other company where the assessee is a director. He produced similar details such as balance sheet, income tax return etc where the above sum was disclosed. However, the ld AO did not accept the above contention. Before the ld CIT (A), assessee further demonstrated the availability of cash in the books of account of above company by substantiating it by annual accounts of that company cashbook and the cash flow statement. The ld CIT (A) found that the above sum has been shown by the company as being cash seized by income tax department from Mr. Bhushan Lal Arora out of his imprest account and it were shown as advance tax, as the amount of cash was seized. The ld CIT(A) rejected the explanation of the assessee for the only reason that at the time of search the assessee did not say that Rs. 21 lakhs was on account of imprest from Prakash Infrastructure and Developers Ltd and further at the time of search, entry in the books of account of that company was not shown. The ld CIT (A) also noted that there has been constant withdrawal of cash in the hands of that company but there were hardly any expenditure in cash and therefore, the justification of availability of cash in the hands of that company are not explained. It is apparent that assessee has submitted annual accounts of M/s. Prakash Infrastructure and Developers Ltd as on 31.03.2013 wherein, in Schedule 12, it has shown income tax advance of Rs. 21 lakhs. The above amount was shown to be cash seized by the income tax department. The assessee has also substantiated by submitting the cashbook of Prakash Infrastructure & Developers Limited where in as at 01.02.2013 there is an availability of cash of Rs. 2312786/-. The accounting entry dated 14.02.2013 was passed giving narration with cash seized by the income tax department from Bhushan lal Arrora , out of imprest amount of Rs. 21 lakhs. The search took place on 12.02.2013. Therefore, immediately on seizure of the above sum from the residence of Mr. Bhushan Arora, it was shown as advanced tax. Further, the company is also separately assessed to the income tax and no evidence was shown by the revenue that there is any allegation in case of the above company that no cash is existing in the books of account of that company. Contrary to this, assessee submitted that audited accounts, which shows that above amount was available with the company. It is also the fact, which is not disputed that assessee was a director of that company. On perusal of the balance sheet, assessee is found to be one of the signatories to the annual