No Addition can be made on the basis of suspicion for cash seized at the time of Assembly Election
In a recent judgment, ITAT Lucknow has deleted addition u/s 69A holding that no Addition can be made on the basis of suspicion for cash seized at the time of Assembly Election.
ABCAUS Case Law Citation:
ABCAUS 4118 (2024) (06) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition made under section 69A of the Income Tax Act, 1961 (the Act) to income of cash seized during Assembly Election.
The assessee was engaged in trading of edible oil, food grains, khandsari, sugar, atta, maida and suji etc. The assessee was intercepted by the Flying Squad and surveillance team during the Assembly Elections. The assessee was found carrying large amount of cash. A warrant u/s 132A of the Act was served on the assessee and cash was seized from the possession of the assessee.
Subsequently, notice u/s. 153A of the Act was issued asking the assessee to furnish his return of income for the relevant assessment year. In response thereto, the assessee submitted a copy of e-filed Income Tax Return which had already been filed in terms of Section 139(1) of the Act. The assessee was asked to provide complete details of cash seized from his possession.
Before the Assessing Officer (AO), it was the assessee’s submission that cash had been received by three parties to whom he had sold goods during the financial year and payment was due from them.
It was further submitted that the assessee had visited the all three parties and had collected the same in cash due to there being a National Holiday on 26th January and closure of Bank on that day. The assessee also submitted that all the cash entries were duly vouched and were entered into books of account of the purchasers. The assessee also enclosed copies of certificates issued by the parties.
However, the Assessing Officer noted that the supply of goods to all the three parties had been made just couple of days before the assessee was intercepted and, therefore, the assessee’s visit to these three parties for the purpose of realization of payment of the outstandings on did not hold any practical ground, as the time gap between the sale to the parties and the realization of cash was too short.
Subsequently, the Assessing Officer rejected the various submissions and contentions of the assessee and noted that the assessee had failed to furnish any document to establish that the amount seized from the assessee pertained to cash out of sale proceeds. The Assessing Officer added the amount of cash seized from the possession of the assessee to the income of the assessee as unexplained cash.
On first appeal, the CIT(A) observed that the facility of NEFT/RTGS or IMPS were available 24 X 7 and, therefore, the assessee’s contention that the amount could not be collected through Banking channel for the reason of being a National Holiday on account of Republic Day on 26th January did not hold good. The CIT(A) further noted that the assessee could not establish any urgency as to why he could not have waited for two more days to get the payments through the banking channel. The assessee’s appeal was accordingly, dismissed
The Tribunal observed that the Income Tax Department had not controverted the invoices of sales made by the assessee to the said three parties. Therefore, the fact of the assessee having made the sales on the said dates was not in dispute.
Further the Tribunal observed that as per the Bank Statement of the assessee, he has mostly been dealing in cash and there were only a few entries in the Bank Statement. Therefore, the observation of the lower authorities that the assessee collected most of his outstandings through banking channels is factually incorrect.
The Tribunal further noted that as per orders of both the lower authorities they harped upon the possibility of cash being carried for the purpose of misuse in elections but had completely ignored the documents produced before them evidencing the sales as well as the Certificates from three parties certifying that they had paid the outstanding amounts in cash to the assessee.
Therefore, the Tribunal opined that the entire case of the Department rested on mere assumptions and presumptions and the same cannot be sustained. Once the assessee had discharged his onus by providing Certificates from the three parties evidencing that they had made cash payments against purchase of sugar, the same cannot be brushed aside on preponderance of probability without producing counter evidence. In fact, the onus was on the Department to establish that the evidence provided by the assessee was fabricated.
The Tribunal further noted that Assessing Officer (AO) did not make any independent enquiry on his own before reaching the conclusion that the seized cash was to be utilized for election purposes. Secondly, the AO or the First Appellate Authority has not doubted that sales had been made corresponding to the seized cash. Thirdly, neither the AO nor the First Appellate Authority gave any reason for discarding the Certificates from the three parties confirming that
they had paid cash to the assessee.
The Tribunal stated that it is settled law where an evidence is of on overwhelming nature, and is conclusive, there can exist no dispute, nor shall there be any doubt. In such a situation, the assessee cannot be condemned on preponderance of probability. The Hon’ble Apex Court also held that it is not enough to show circumstances which might create suspicion because the Court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence.
Accordingly, the Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the addition.
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