RAJESH KANTILAL PICHA,NASHIK vs. COMMISSIONER OF INCOME TAX (APPEAL), PUNE

ORDER

PER DR. DIPAK P. RIPOTE, AM:

2. Ld.CIT(A) erred in not appreciating that there is sufficient cash balance in audited cash book furnished on record, generated from cash sales of “M/s Best Collection – Prop.Kantilal Picha” (Appellant’s father), in view of undisputed cash sales or cash transactions. The addition of Rs.20,00,000/- u/s 69A may therefore, be deleted.

3. Ld.CIT(A) erred in not appreciating that even otherwise, appellant acting as “Agent” of his father, was carrying cash with a view to place orders with various vendors on his (father’s) behalf and that “Possession of an agent is the possession of principal”. The addition of Rs.20,00,000/- u/s 69A may therefore, be deleted.

4. The appellant craves permission to add to, amend or withdraw any or all of the grounds of appeal at the time of hearing.” Submission of Ld.Authorised Representative :

2. Ld.Authorised Representative(ld.AR) for the assessee filed a paper book containing 92 pages.

2.1 Ld.AR submitted that on 31/07/2018 cash was seized at the Airport from Mr. Rajesh Kantilal Picha, the Assessee. The Assessee is son of Mr.Rupchand Picha who is proprietor of Best Collections. On 31/07/2018 it was submitted by the Assessee that he is employee of Best Collections which is proprietary concern of his father and the cash belongs to Best Collections. Mr.Rupchand Picha assessee’s father also filed confirmation vide letter dated 31/07/2018 which is at page 1-2 of the paper book. Ld.AR invited attention to the copies of the statements of Assessee and his father 2 which was in the Paper book to explain that Cash belongs to the assessee’s father and not to the assessee. Assessee’s father also filed copy of Cash book which is at page 3-15 of the paper book. Ld.AR submitted that since the cash belongs to assessee’s father no addition can be made in the case of the assessee. Ld.AR submitted that the cash stands explained as it is reflected in the Cash Book of the concern Best Collections. Therefore the addition is bad in law Submission of Ld.DR : 3. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of the AO and ld.CIT(A). Ld.DR submitted that it is highly unlikely that assessee was carrying such cash for purchases, the explanation of assessee is beyond human probability. Ld.DR requested to confirm the addition.

Findings and Analysis : 4. We have heard both the parties and perused the record. In the case of the assessee the cash of Rs.20,00,000/- was seized at the Airport on 31/07/2018. In the statement recorded u/s 131(1A) the Assessee submitted that the Assessee is employee of the concern called “m/s Best Collections”. M/s.Best Collection is proprietary 3 concern of Assessee’s father. Assessee in the statement submitted that the Cash belongs to m/s Best Collection and assessee was carrying the cash for purchases for the m/s Best Collection. This statement was recorded on 31/07/2018. We have perused the said statement which is at page 16-21 of the Paper book. The ld.CIT(A) and AO has also referred to the said statement. The assessee repeated the same thing in the statement recorded by the Assistant Director of Income Tax, Investigation on 20/12/2018. On 31/07/2018, assessee’s father filed a reply dated 31/07/2018 stating that the cash belongs to his proprietary concern “M/s.Best Collection”. The said fact was repeated by assessee’s father in his statement recorded u/sec.131 of the Act by Assistant Director of Income Tax(Investigation), Nashik on 26.12.2018. The assessee’s father also produced cash book, copies of Return of Income, details of month wise cash sales before the Assistant Director of Income Tax(Investigation), Nashik, which is appearing in the statement.

4.1 Thus, consistently assessee and his father submitted that cash of Rs.20,00,000/- which was seized at the Airport, belongs to “M/s.Best Collection”. Copies of Audit Report, Income Tax 4 Returns were also produced before the Assistant Director of Income Tax(Investigation), Nashik.

4.2 The Assessing Officer(AO) made addition of Rs.20 lakhs as under : “Moreover, it would also be appropriate to mention here that even if at any stretch of imagination, assessee's contention that the cash of Rs.20 lakh was carried by him for making purchase in cash on behalf of his father’s firm is accepted, then also as per section 40A(3) of the Income Tax Act, 1961, an assessee firm is not allowed to make any expenditure in excess of Rs.10,000/- in cash. Hence, assessee’s plea that the cash of Rs.20 Lakh pertains to his father’s firm and was carried by him holds no water and hence rejected. 05.2.3 Furthermore, it would not be out of place to mention that there were regular cash deposits in the M/s Best Collection's current account No. 12860200031691 maintained with Federal Bank during the month of May, 2018 to 30th July, 2018. However, against the said cash deposits, all the debits (withdrawals) in the said bank account were made through cheques/NEFT/RTGS and other transfer modes but no cash withdrawals were made from the said bank account during the period under consideration. Thus, it is evident, from the above, that the firm had been regularly depositing its cash in hand in bank and payment to parties were being made through cheques or RTGS/NEFT and not in cash as claimed by the assessee. 05.3 In view of the above facts, the claim of the assessee is rejected and addition of Rs.20,00,000/- is made in his hands u/s 69A of the Income Tax Act, 1961. Penalty proceedings are separately initiated u/s 271AAB(1A)(b) of the Act.” 4.3 The ld.CIT(A) in para 5.4 held as under : “5.4 As per the cash book submitted by the appellant, it is seen that the appellant’s father has regularly deposited cash in hand in the bank account. Further, it is also seen that the appellant’s father has made payment to parties through cheques/RTGS/NEFT. In fact, mere reflecting cash withdrawal from bank is also not a sufficient evidence to conclude source of unexplained cash and in the instant case even withdrawal of sufficient cash is also not proved by the appellant. When the cash is found with an appellant, it is the duty of the 5 appellant to prove the source of such cash by providing sufficient evidence to come to a conclusion to satisfy the source of such cash. In the absence of such proof, the Ld. AO is bound to make addition. Mere reflecting the unexplained cash in the books of accounts in absence of any supportive documents cannot be ground for deletion of the addition. In the instant case the appellant has not discharged the onus cast upon him to prove the source of cash. Thus, the Ld. AO has rightly held that the source of cash of Rs. 20 lakhs cannot be held to be from the cash in hand available with the appellant’s father. Ground no. 1 of the appeal is, therefore, dismissed.” 4.4 Thus, both the AO and ld.CIT(A) have confirmed the addition on account that there were no sufficient withdrawals from the bank by the “M/s.Best Collection”. Ld.Assessing Officer also referred to Section 40A(3) of the Act, that “M/s.Best Collection” cannot make purchases in cash more than Rs.20,000/-.