Addition u/s 69 for unexplained cash. Tag of another banks on cash bundles not relevant

Addition u/s 69 for unexplained cash deleted by the Tribunal. It was held that tag of another bank found on cash bundles not to be given weightage as it is a common practice amongst banks to issue currency bundles as received by them

ABCAUS Case Law Citation
ABCAUS 3457 (2021) (02) ITAT

In the instant case, two cross appeals were filed by the assessee and revenue against the order of the Commissioner of Income Tax (Appeals) in confirming the addition of Rs. 1 crores on account of undisclosed cash u/s 69 of the Income-tax Act, 1961

[‘The Act’].

On the basis of information received two persons were caught by the police with two bags containing cash of Rs. 1 crore. They informed to the police that they were employees of a company and these bags belonged to the assessee company. 

The Director of the company was called on the spot. Pursuant to this, a survey operation u/s 133A of the Act was carried on to verify the source of cash found and retained by the police authorities.   

The Assessing Officer (AO) observed that no proper books of account were available at the office premises. The Director claimed that cash seized by police was duly recorded in the books of account which were laying at the office of the Chartered Accountant (CA).

During the course of scrutiny assessment proceedings, once again the assessee was asked to furnish details of source of cash found and seized by the police.

The assessee submitted the figures of cash balances as at the Balance Sheet dates for preceding several years and explained that it was an authorised money changer and due to business requirements, it has to maintain substantial cash balance. 

It was further explained that huge amount found by the police was withdrawn from the Bank of the assessee.

However, the AO observed that the cash did not carry tags of the said bank. The AO further observed that cash book so produced was not made available to the survey party.   

The AO further made enquiry from the said CA who informed that the pen drive contained books of account was provided, but the same could not be opened at the time of survey.

However, the AO was not convinced and was of the belief that cash found and seized was never disclosed in the books of account.  The AO further observed that the cash withdrawn from the Bank was short of Rs. 1 cores. The AO further observed that the cash had been withdrawn in tranches. Another reason for disbelieving the assessee’s contention was that the bundles of notes contained the slips of another bank whereas the claim of the assessee was that the cash had been withdrawn from its Bank.   

Therefore, disbelieving all the contentions and submissions made by the assessee, the Assessing Officer made the impugned addition.

Before the Tribunal the assessee stated that the Assessing Officer did not point out any defect in the books of account of the assessee.   It was said that the AO failed to appreciate the nature of business of the assessee in its true perspective.  

The assessee further stated that merely because the cash bundles carry the slip of another bank, would not justify the stand taken by the AO in as much as many a times banks give cash which was received by it from the depositor as it is and, therefore, some cash must have been deposited which carried the tag of another bank and the same cash was given by assessee’s Bank to the assessee.

As money changer is obliged to keep heavy cash

The Tribunal opined that that the line of business, the assessee was in, required availability of cash in huge amount as the persons give foreign currency/dollars to be exchanged in Indian currency.  Therefore, considering the exchange rate, the assessee has to carry heavy cash and to revenue also did not dispute this fact.

Observation that cash bundles carried tag of another bank not to be given weightage

The Tribunal found that the main reason for addition was that the cash bundles carried the tag of another bank. The Tribunal opined that this should not be given weightage in as much as it is a very common practice amongst all banks to issue currency bundles as received by them.  Moreover, once a bundle of currency carried tag of another bank, the issuing bank need not have to count again and again.

There is always a time gap between book entries in cash book

With respect to the reason given by the AO that cash book was not available at the time of survey, the Tribunal stated that it is common practice that though the cash books are written on day to day basis, but in practice, there is always a time gap between the book entries. Further, Books were lying with the CA, which have also been verified by the Assessing Officer and when during the course of assessment proceedings books were produced, not even a single defect had been pointed out.

The Tribunal held that the entire addition had been made on the basis of suspicions and surmises and cannot be sustained.

Accordingly, the Tribunal set aside the findings of the CIT(A) and directed the AO to delete the addition and allowed the grounds and appeal in the favour of the assessee.

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