ASST COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(4), HYDERABAD vs. BHARAT ENGINEERING ENTERPRISES, HYDERABAD

Brief facts of the case are that the assessee is a partnership firm, carrying on the business of trading and manufacture of lifts and elevators. For the assessment year 2019-20, it filed its return of income on 30/20/2018, declaring an income of Rs.20,45,340/ -. During the financial year relevant for the assessment year 2019-20, there was a theft of Rs.75 lakhs from one Jala Bapu Reddy. He filed a complaint before the Station House Officer Pet Basheerabad P.S., Cyberabad on 17/11/2018. In the said complaint, said Bapu Reddy stated before the police that the money was stolen by one Ravi Kumar, driver. Police recovered the amount from such Ravi Kumar.

When Mr. Bapu Reddy was questioned about the source of the said Rs.75 lakhs, he stated that the amount was given by the assessee firm towards sale of property. The Managing Partner of the assessee also agreed that the firm paid an amount of Rs.74,50,000/- to Mr. Bapu Reddy for purchase of property consisting of 4 acres 32 guntas. It was also stated before the authorities that the said amount was drawn from the partnership firm and the same was recorded in the cash book and also was shown in the account of Bapu Reddy.

The Income Tax authorities seized the amount of Rs.75 lakhs from the police authorities and the amount was deposited with the Income Tax Department, perhaps by virtue of proceedings under section 132 of the Income Tax Act, 1961 (‘the Act’). Notice under section 153C of the Act was issued to the assessee on the ground that the assessee admitted that an amount of Rs.74,50,000/- was paid to Mr. Bapu Reddy in cash. In response to the notice under section 153C of the Act, the assessee filed the return of income on 30/08/2021, declaring Rs.28,11,440/-. Learned Assessing Officer by order dated 29/09/2021, determined the total income at Rs. 1,18,51,195/-, by disallowing 20% of the expenses to the tune of Rs. 15,39,755/-; and Rs. 75 lakhs on the ground that the amount of Rs.75 lakhs found with Mr. Bapu Reddy belongs to the assessee and that no explanation was filed.

In the appeal preferred by the assessee, learned CIT(A) deleted the additions. Deletion of the addition of Rs. 75 lakhs is the subject matter of this appeal. Revenue contended that learned CIT(A) erroneously held that the money does not belong to the assessee and missed the fact that the sale deed dated 20/04/2019 clearly shows that the total sale consideration was not Rs. 75 lakhs, but it was Rs. 80 lakhs and the entire amount was paid by way of cheques, clearly establishing that the amount recovered from Mr. Bapu Reddy has nothing to do with the sale and it is a different amount.

Per contra, learned AR submitted that since the entire advance amount of Rs. 74,50,000/- paid by the assessee to Mr. Bapu Reddy was ultimately held up in the possession of the department and in order to get the transaction finalised, the assessee had to make good such amount and seek refund of the same from the department, such amount was paid by way of cheques. Learned AR submitted that the amount paid under compulsion cannot be said to be the excess amount and not related to the sale transaction. He submitted that yet such amount lies with the department and in order to get the deal finalised, the assessee paid the amount to Bapu Reddy by way of cheques and got the deal finalised.

We have gone through the record in the light of the submissions made on either side. On the applicability of section 153C of the Act, learned CIT(A) considered the question as to who is the owner of cash that was stolen. Since it has never been in dispute as to the nature of cash receipt, which was advance received from the assessee towards the sale of land to Mr. Bapu Reddy, under a valid receipt, once the advance amount was received by the seller, learned CIT(A) held that the seller assumes the ownership of the cash with an obligation to transfer the land property to the purchaser subject to the payment of balance consideration agreed between seller and purchaser.

While placing reliance on the decision in the case of Shri Sukh Ram vs. ACIT (2006) 285 ITR 256 (Delhi), wherein Hon’ble Delhi High Court held that the presumption of ownership of an asset is the strongest when the asset involved is cash as the title is transferable by mere delivery of possession and also drawing a similar analogy as to if a business entity got covered under search operation under section 132A of the Act on account of cash found, the customers who purchased goods/services by way of cash from the business entity cannot be covered under the provisions of Section 153C, just because they made transactions with the business entity, learned CIT(A) held that the provisions of Section 153C of the Act are not applicable to the assessee’s case, hence, the assessment order passed under section 153C of the Act is liable to be quashed. Revenue could not contradict any of these findings of the learned CIT(A) with any logic or material.

There is no dispute that both Mr. Bapu Reddy and the assessee admit that and amount of Rs. 74,50,000/- was paid by the assessee to Mr. Bapu Reddy towards advance sale consideration for purchase of land and necessary entries were to be found in the books of the assessee to that effect. It is also not in dispute that the assessee maintained proper books of accounts, they are all audited and the Audit Report was also filed before the Revenue authorities, and the entries relating to the payment of advance amount to Mr. Bapu Reddy are to be found in the books, remain uncontradicted. Further, it is not the case of the Revenue that any information to the contrary is found at the premises of Mr. Bapu Reddy.

Viewing from any angle, we do not find anything illegality or irregularity in the findings of the learned CIT(A) and dismiss the grounds raised by the Revenue.

In the result, appeal of the Revenue is dismissed.