Large cash seized from State not regular business place held unexplained income

Large cash seized from State not where business is carried is unexplained income

In a recent judgment, the ITAT Pune has held given the facts, that large amount of cash seized from the assessee at State other than where he carried business can not be accepted as business receipts but unexplained income. 

ABCAUS Case Law Citation:
ABCAUS 4036 (2024) (05) ITAT

Important Case Laws relied upon:
Sumati Dayal vs CIT [1995] 214 ITR 801 (SC)
CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC)

In the instant case, the assessee had challenged the order passed by the CIT(A) in upholding addition under section 69A to the sized cash despite it being reflected in the cash book.

seized cash

The appellant assessee was intercepted by Police authorities at Hyderabad with cash of Rs.50 lakhs found in his possession. A statement u/s 131 of the Income Tax Act, 1961 (the Act) was recorded wherein he claimed to have realized the cash as regular business receipts from customer(s) in Mumbai.

In the Statement recorded the assessee replying to the question about the source of cash stated that he was in the business of selling eggs in Mumbai at wholesales after purchasing them from Hyderabad and nearby areas. It was stated that he had collected cash from one customer at Mumbai and was carrying cash for payment to farmers whom he had purchased eggs one week ago. However, he could not furnish details of customers and persons to whom payment was to be made.

Thereafter, the assessee was examined by Investigation Wing. The assessee stated that cash represented sales of eggs to 2000 customers in last four week. He stated that he was doing a petty business where he deals in only cash sales. He also stated that the closing cash balance in the books of his wife and himself was more than Rs. 50 lakhs. However, he also declared an additional income of Rs. 10 lakhs.

The assessee further stated that he had office in Hyderabad to facilitate his business and due to holidays cash collected from customers could not be kept in his small office at Mumbai to avoid the risk and was carrying cash for payment to farmers in Hyderabad. He stated that since the cash was already recorded in books of account, it should not be considered as unexplained.

However, the Assessing Officer (AO) added the amount of cash seized as unexplained money and completed the assessment u/s 143(3) of the Act.

The Tribunal observed that the assessee failed to produce list of the alleged customers from whom the cash was received. Also the CIT(A) on perusal of the cash book gave a clearing finding that cash balance found in the cash book in preceding four week does not match with his version that source of cash was sales of eggs to 2000 customers in last four week.

The Tribunal also observed that the assessee did not produce any purchase bills or sale bill of the egg purchased or sold despite he claimed a gross sale of Rs. 32 crores

In the peculiar facts of the case, the Tribunal opined that the assessee’s sole argument does not deserve to be accepted without any corroboratory evidence.

The Tribunal observed that the Hon’ble Supreme Court in its landmark judgment already settled the issue long back that any explanation/evidence filed in income tax proceedings has to be considered in light of the human probabilities thereby removing all blinkers.

The Tribunal highlighted the fact that assessee allegedly carried his business in Mumbai, assessed at Kolhapur and was found with the impugned cash in his possession in Telangana, which he failed to explain in the facts and circumstances. Therefore, there was no merit in his arguments.

Accordingly, the  impugned addition was confirmed. 

Download Full Judgment Click Here >>

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