Mulchand Sejmal Jain Vs DCIT (ITAT Hyderabad)
Seized Cash Explained from Past Records: ITAT Grants Major Relief, Sustains Only Unproved Portion
In this case, cash of ₹1.10 crore was seized from a vehicle, out of which ₹1 crore belonged to one assessee and ₹10.73 lakh to another. The Assessing Officer treated the amounts as unexplained under Section 69A due to lack of supporting evidence, and the CIT(A) upheld the additions.
Before the ITAT, the assessees argued that the cash represented accumulated funds, supported by past disclosures of cash-in-hand in their income tax returns. The Tribunal noted that substantial cash balances had already been disclosed in earlier years and accepted in scrutiny assessments, and therefore carried strong evidentiary value. Relying on settled law, it held that past disclosed cash can constitute a valid source unless disproved by the Revenue.
Accordingly, the ITAT accepted the explanation to the extent supported by records-₹95 lakh (approx.) in one case and ₹2 lakh in the other-and held that the balance amounts, lacking documentary support, could not be explained. The additions were therefore restricted only to the unexplained portions, and both appeals were partly allowed
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeals filed by the respective assessee’s are directed against the orders passed by the CIT(Appeals), dated 26.02.2025, which in turn arises from the orders passed by the AO under Section 143(3) of the Income-tax Act, 1961 (for short, “Act”), dated 26.02.2025 and 17.06.2025, in their respective cases for the Assessment Year 2023-24, which in turn arises from the respective orders passed u/s 143(3) of the Income-tax Act, 1961 (for short, “Act”) both dated 26.02.2025. We shall first take up the appeal in ITA No. 1499/Hyd/2025. The assessee has assailed the impugned order of the CIT(Appeals) on the following grounds of appeal before us:
“1. The order passed by the Learned Commissioner of Income Tax (Appeals) is erroneous both on facts and in law, and therefore unsustainable.
2. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition oft 1,00,00,000 seized during search, without appreciating that the Appellant had duly explained that the said cash represented accumulated funds specifically kept aside for purchase of new machinery, including amounts generated from the sale of old machinery.
3. The Learned Commissioner of Income Tax (Appeals) failed to appreciate the explanations and supporting records furnished by the Appellant. The rejection of such evidence as self-serving, without any contrary material or cogent evidence brought on record by the Revenue, is erroneous and contrary to settled principles of law.
4. The Learned Commissioner of Income Tax (Appeals) erred in sustaining the addition under section 69A of the Income-tax Act, 1961 and further taxation under section 115BBE, even though the explanation offered by the Appellant was proper, reasonable, and consistent with his disclosed financial position.
5. The Appellant craves leave to add, alter, amend, or withdraw any ground/grounds of appeal at the time of hearing.”
2. Succinctly stated, the assessee is an individual deriving income from business and other sources and had filed his return of income for AY 2023-24, declaring an income of Rs. 4,89,950/-. Subsequently, the case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Act, dated 20/06/2024, was served upon him.
