Section 69A Addition Upheld Because Assessee Failed to Explain Source of ₹7.5 Cr Cash: ITAT Delhi

ACIT Vs Shiv Shakti Traders (ITAT Delhi)

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed the Revenue’s appeal and restored an addition of ₹7.50 crore under Section 69A of the Income Tax Act, 1961 after holding that the assessee failed to satisfactorily explain the source and movement of the seized cash.

The case arose after local police authorities intercepted a Toyota Innova car on 6 May 2017 at Daliganj crossing, Lucknow, and recovered ₹7.50 crore in new currency notes kept in four boxes. The cash was found in possession of a cash courier boy associated with the assessee, an Association of Persons engaged in the retail liquor business. Statements recorded under Section 132(4) indicated that the cash had been handed over by another courier boy connected with the assessee.

The assessee claimed that the cash represented sale proceeds from its liquor business and was being transported from Lucknow to Haldwani for deposit into a bank account. Later, the assessee also contended that the money related to cash earlier received from the Haldwani branch during the demonetization period and was being returned. The Assessing Officer rejected these explanations after examining sales records, bank statements, and other material.

The Assessing Officer observed that there was no functional office at the address from where the cash was allegedly collected and no books of account were found there. Comparative analysis of cash sales for different periods showed irregular trends. According to the Assessing Officer, average cash sales for the period from 6 May 2017 to 30 June 2017 were substantially lower than earlier periods and lower than the corresponding period in the previous year, suggesting that sales entries had been backdated to inflate cash availability as on 5 May 2017.

The Assessing Officer further noted that the assessee was regularly depositing large amounts of cash into its ICICI Bank account in Lucknow and also deposited ₹2.77 crore in cash on 6 May 2017 even after the seizure of ₹7.50 crore earlier that morning. The officer held that the average daily sales shown by the assessee did not justify possession of ₹7.50 crore in cash at one time. It was also noted that the seized amount consisted entirely of new ₹500 and ₹2,000 currency notes without smaller denominations ordinarily expected in retail liquor sales collections.

The Assessing Officer questioned why such a large amount was being physically transported over approximately 400 kilometres from Lucknow to Haldwani despite both branches maintaining bank accounts and the assessee already having a cash pickup facility from ICICI Bank. The assessee failed to produce branch ledger balances, evidence regarding earlier cash transfers from Haldwani to Lucknow, or details of any similar previous transactions. The Assessing Officer therefore treated the amount as unexplained money under Section 69A and added ₹7.50 crore to the assessee’s income.

The CIT(A) had deleted the addition after observing that the assessee maintained sufficient cash-in-hand in its books and regularly transferred cash between branches. The CIT(A) also noted that the liquor business operated in a regulated environment with purchases subject to TCS and excise controls, and held that mere suspicion could not justify the addition in the absence of evidence disproving the books of account.

However, the Tribunal disagreed with the CIT(A). It held that the assessee’s explanations regarding the source of the cash and its transfer between branches were unsupported by corroborative evidence and appeared to be afterthoughts. The Tribunal observed that no detailed shop-wise records, separate books of account of the individual licensed vends, or evidence of prior cash transfers had been produced. It also found the transportation of ₹7.50 crore in cash through an ordinary car despite available banking channels and cash pickup facilities to be unjustified and illogical.

The Tribunal concluded that the source of the seized cash and the manner of its transportation had not been satisfactorily explained. It held that the Assessing Officer’s findings were justified and that the CIT(A)’s order suffered from erroneous appreciation of facts and law. The addition of ₹7.50 crore under Section 69A was accordingly restored and the Revenue’s appeal was allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

The instant appeal filed by the Revenue is directed against the order dated 18.08.2022 passed by the Ld. Commissioner of Income-tax (Appeals)-30, New Delhi [hereinafter referred to as the Ld. CIT(A)] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the assessment order dated 18.12.2019 passed by the ACIT, Central Circle-29, New Delhi (hereinafter referred to as ‘the ld. AO’) under Section 143(3) of the Act for Assessment Year 2018-19.

2. The appeal is barred by limitation in support of which the Revenue has filed an application for condonation of delay the contents whereof are as follows:-

2.1 Having regard to the reasons mentioned in the application which seems to be genuine and, therefore, the delay is condoned.

3. The addition of Rs.7,50,00,000/- crores under Section 69A of the Act is the subject matter before us which was added in the hands of the assessee and subsequently deleted in appeal preferred by the assessee by the Ld. CIT(A)-30, New Delhi by and under its order dated 18.08.2022.

4. On the basis of the information received from the SSI, Thana, Hasanganj, Lucknow on 06.05.2017 that during checking by the local Police authorities on Daliganj crossing over bridge on the same day, a sum of Rs.7.5 crores of new currency was found in cash in a car being Toyota Innova No.UP 32 GV 4413; the said cash was kept in four boxes in possession of Shiv Kumar Tiwari a cash courier boy belonged to the assessee before us M/s Shiv Shakti Traders having its office at C-6, 6596, Vasant Kunj, New Delhi. As per statement recorded under Section 132(4) of the Act of Shri Shiv Kumar Tiwari such cash was handed over to him by one Shri Atul Bhatia who is also another cash courier boy of Shiv Shakti Traders.

5. A search operation thereafter was conducted by the Department in the name of the assessee wherefrom a letter was seized with wrong information written that the assessee AOP is assessed with Range-(38)1, New Delhi. Meanwhile, the AOP is assessed with Central Circle-29, New Delhi. Panchnama was drawn by the authorities and proceedings recorded under Section 132A of the Act a copy whereof is reproduced at page 3 of the assessment order on record. The assessee is engaged in the business of retail trade of liquor and the year under consideration received income chargeable to tax under the head ‘income from business or profession’ and ‘income from other sources.’ The original return was e-filed by the assessee for AY 2018-19 on 31.10.2018 declaring an income of Rs.12,16,54,740/- and notice under Section 143(2) dated 27.09.2019 was issued through e-proceeding portal of ITBA followed by notices under Section 142(1) with detailed questionnaire on several occasions on 01.10.2019, 19.10.2019, 31.10.2019, 16.11.2019, 19.11.2019, 23.11.2019 and 03.12.2019 which were duly served upon the assessee through ITBA portal.

6. The case of the assessee is that the cash was being taken to be deposited in the HDFC Bank Account of the assessee in Haldwani. Initially it is the further case of the assessee that the cash intercepted and seized of Rs.7.50 crores represents the sale proceeds of the assessee. In fact, the statements recorded of Shri Shiv Kumar Tiwari and Shri Atul Bhatia claimed cash was sought to be brought from Lucknow to Haldwani for depositing the same in the current account with HDFC Bank belonging to the assessee. It is the case of the assessee that all the documents relating to source of such cash was duly produced before the AO which was not taken into consideration in its proper perspective and, hence, the addition was made.

7. The Ld. AO while making addition of Rs.7.50 crores observed as follows:-

“14.5 The enquiries on 06-05-2017 have revealed that there was no functional office of M/s Shiv Shakti Traders at Plot no. 08, 4-Shahnazaf Road, Lucknow nor was any books of accounts were found at the said office in respect of sales made at various palaces in Lucknow, though the persons from whom the cash was recorded claimed to have received the cash from various sales man at the said office only. Hence, it cannot be accepted at this stage that the cash of Rs. 7.5 crore seized on 06-05-2017 was out of the cash sales made during 01-04-2017 to 05-05-2017. Although the assessee has submitted that he has cash pick up facility for the same address of Plot no. 08, 4-Shahnazaf Road, Lucknow. It is accepted that for this address he has functional office and cash pick up van facility from ICICI Bank. Then why he has given money to cash courier boys in Toyota Innova No. UP 32 GV-4413 and not to cash pick up van. It is clearly unexplained money which he wants transfer somewhere else for any reason.

14.6 Further, on perusal of Table-1, II, III, IV, V & VI, it is revealed that the average per day sale in cash as per sale book furnished by the assessee is as under

Table-VII

14.7 From the above Table-VII it is revealed that the maximum average per day sale made in cash of the assessee during the period 01-04-2016 to 05-05-2016 was Rs. 36,89,859/- as against the average sale during same period in F.Y. 2017-18 i.e. from 01-04-2017 to 05-05-2017 was 34,96,269. So even if it is presumed that the accumulated cash balance was for 2 to 3 days, then also it does not explain the source of Rs. 7.5 crore cash at a single point of time.

14.8 The above Table-VII reveals that the average sale of the assessee for the period 01-04-2016 to 05-05-2016 and 06-05-2016 to 30-06-2016 was respectively Rs. 36,89,859/- and Rs. 3 1,10, 723/-. This figure reveals that the trend of average per day sale in cash of the assessee from 01-4-2016 to 05-05-2016 and from 06-05-2016 to 30-06-2016 was on the same lines. However, the per day sale of the assessee for the period 01-04-2017 to 05-05-2017 and 06-05-2017 to 30-06-2017 is respectively Rs. 34,96,269/- and Rs. 17,81,898/-. The per day average sale figure for this period show as irregular trend of sale in cash, which does not match with sale figure for this period show a irregular trend of sale in cash, which does not match with sales pattern of the assessee as discussed above. It is also seen that the average per day sale made (as per sale bills produced by the assessee) for the period 06-05-2017 to 30-06-2017 is very lesser than average per day sale made by the assessee during the same period in previous year i.e. 06-05-2016 to 30-06-2016, which is Rs. 17,81,898/- and Rs. 3 1,10,723/-respectively.

14.9 Above discussion reveals that the assessee has backdated its sales for the period 06-05- | 2017 to 30-06-2017 into the period of 01-04-2017 to 05-05-2017, so that sufficient cash in hand can be shown in the books of accounts on 05-05-2017 of the M/s Shiv Shakti Traders as regard to the source of seized cash of Rs. 7.50 crore.

14.10 The bank statement of the assessee for A/c No. 125805000001 at ICICI Bank reveals that following amount in cash was deposited by the assessee before the date of interception i.e. 06-05-2017.

Table-VIII

14.11 The above table clearly reveals that the assessee has regularly kept on depositing substantial cash in Lucknow at bank account at ICICI Bank, Lucknow since 01-04-2017. There was no cash deposited on 05-05-2017. Therefore, even if sale of 05-05-2017 is considered to be available as cash in hand, that was too less to explain the possession of Rs. 7.5 crore. Therefore, no cash can be available in hands of assessee in respect of sales made prior to 05-05-2017. Moreover, it is also revealed that despite interception on 06-05-2017 of Rs. 7.50 crore in cash, the assessee has still deposited a sum of Rs. 2,77,70,500/- in cash in its bank account at ICICI Bank on 06-05-2017, which itself appears to be unrealistic considering the average daily sales of approx. Rs. 35 lacs only being shown by assessee in its books. Hence, there was hardly any cash available with assessee out of cash sales made prior to 06-052017 and the cash of Rs. 2.77 crore deposited on 06-05-2017 after seizure of Rs. 7.5 crore at 4 A.M. on 06-05-2017 is itself very suspicious. Hence, there is no way to believe that the cash of Rs. 7.5 crore seized in early morning at 4 A.M. of 06-05-2017 was out of cash sales made in earlier periods. Therefore, it reveals that the intercepted cash amount has no logical relation with sale proceeds of M/s Shiv Shakti Traders for its sale in Lucknow at various places.

14.12 The assessee vide written submission dated 15-05-2017 had stated that the cash amounting to Rs. 7.50 crore found from the possession of Sh. Atul Bhatia and Sh. Shiv Kumar Tiwari represented the cash of the firm, which was being sent to Haldwani Branch of the firm as the cash from the said branch was received earlier in previous year to be deposited in the bank I accounts at Lucknow. But the assessee did not produce any evidence / details as to when and for’ what purposes the Haldwani Branch of the firm had earlier given the cash to Lucknow Branch of the assessee.

14.13 The Ledger balances of Haldwani and Lucknow branch were not produced. The assessee also failed to provide the mode of sending of cash by Haldwani Branch to Lucknow. It also failed to explain that when both branches are maintaining bank accounts, why the money was being remitted between the branches located in different cities by cash rather than faster and safe method of RTGS / Cheques / DDs etc?. It is very illogical that a firm can carry business related cash (amount collected by sale) amounting to Rs. 7.50 crore from Lucknow to Haldwani, which is almost 400 kilometers away, despite having several bank accounts of the assessee at Lucknow and in neighboring districts, that too without proper documentations / evidences of sources in carrying cars with concerned persons. Moreover, when all the branches of the assessee are receiving cash regularly, then carrying such a huge amount in cash to give another branch is completely devoid of any valid logic. No evidence of similar transfer of cash on earlier occasion could be given. Hence the contention that the money was meant to be transferred to Haldwani Branch is entirely unsubstantiated and is only an afterthought and a self cooked story to only give the colour of its unexplained income of Rs. 7.50 crore into the sales of M/s Shiv Shakti Traders. It is also worthwhile to mention that the seized money of Rs. 7.5 crore comprises of Rs. 2000/- and Rs. 500 in new currency only. If it has been the sale proceeds from various shops in & around Lucknow there is fact that the collection must have been in currencies like Rs. 100/-, Rs. 50/-, Rs. 20/-, Rs. 10/- but no single such currency have been found in total seizure of Rs. 7.5 crore.

14.14 It is further noted that the assessee already has a cash pickup facility from IC1C! Bank Branch, M.G. Marg, Hazratganj, Lucknow. Hence there was no need for assessee to have accumulated the cash received out of sales for a longer period of more than 2-3 days. The cash pickup facility agreement of M/s Shiv Shakti Traders with the ICICI Bank was obtained from the ICICI Bank branch, M.G. Marg, Hazratganj, Lucknow, which revealed that the limit for cash pick up by bank from M/s Shiv Shakti Traders was upto Rs.50.0 lakhs-Rs.1.0 crore per day.

14.15 The statement of the bank reveals that the bank was collecting the cash from the assessee on daily basis regularly. Hence, there was no chance of cash accumulating to Rs. 7.50 crore, if it were from cash sales, as the bank was regularly collecting the cash.

14.16 in view of the above analysis, it is clear that the assessee couid not satisfactorily substantiate the source of the cash of Rs. 7.50 crore found and seized on 08-05-2017. The logic given by the assessee about the source of cash of Rs. 7.50 crore is merely a self cooked story. Therefore, the sum of Rs. 7.50 crore seized in cash remains unexplained income of the assessee M/s Shiv Shakti Traders for A.Y. 2018-19.

15. Further, the bank statement of the assessee also analyzed. On perusal of bank statement, it is seen that the cash has been deposited twice and trice in a day. The scanned copy of bank details regarding cash picked up from the assessee during the period 01-04-2017 to 30-06-2017 is as under:-

15.1 The above details reveals that a sum of Rs. 25.0 lakhs, Rs. 15.0 lakhs and Rs. 25.0 lakhs has been picked up and deposited by the bank in the account of the assessee on 01-05-2017, 03-05-2017 and 04-05-2017 respectively. The bank picked up cash thrice in a day amounting to Rs. 50.20 lakhs, Rs. 74.50 lakhs and Rs. 1.53 crore on 06-05-201/ i.e. the day when the cash of Rs. 7.50 crore was intercepted in the morning by the police. Therefore, the statement of the assessee that the seized cash belonged to amount received ori account of sale made by 41 vends / shops of the assessee firm has no logic and substance to reply upon.

15.2 The DDIT-Lucknow has given opportunity to the assessee by issuing a notice dated 30-01-2018 u/s 131(1A) of the Income Tax Act, 1961 fixing date of compliance on 02-02-2018 but no compliance was made. The scanned copy of notice dated 30-01-2018 u/s 131(1A) of the Act to the assessee is as under:-

15.3 In response to said notice, no one appeared only a written submission was given in dak in the office of the DDIT-Lucknow.

15.4 The assessee was asked to furnish the vends-wise /shop wise break up of seized cash details like name of the dealer / owner of vends / shop, address of the vends / shop, PAN and details of last 11 R filed by these vendors / shop owners. But instead of providing complete break up of shop wise / vend wise break up of seized cash collected alongwith its documentary evidence, the assessee merely stated that the firm is having 41 vends / shops operating in the city of Lucknow. Apart from this the assessee in the submission once again reiterated the modus operandi of cash collection by the assessee firm from its various shops/vends. The assessee has already given same reply in earlier submissions also, which already have been incorporated in the Appraisal Report. This show that the firm has deliberately avoided furnishing of break-up of shop wise / vend wise break up of seized cash, as the firm was lacking substance in its statement.

15.5 The assessee was asked to provide the books of accounts like cash book, bank book etc of the dealers / owners of the shops / vends of the assessee firm for F.Y. 2016-17 and the copy of monthly / annual VAT return for the period 01-04-2016 till 31-07-2017. But instead of furnishing the books of accounts of vends / shops of various dealer / shops of the firm merely stated the firm is having on registration number and the product is exempted from VAT. Therefore, we are not required to file separate returns for each city. Each shop is a separate entity having separate license holder and therefore, it should maintain its books of accounts separately. The consolidated books of accounts may be of the AOP but each shop should maintain separate books of accounts.

15.6 The assessee was also asked to provide the audited and verified balance sheet of Haldwani Branch alongwith details of payment made by Haldwani Branch to Lucknow Branch, so as to verify that Haldwani Branch had given Rs. 7.50 crore in cash or by other mode to Lucknow branch, in this regard, the assessee was specifically required to provide the date of payment made by Haldwani branch, amount paid by Haldwani branch to Lucknow branch, modes of payment by the Haldwani branch to Lucknow branch, name of the person who received the said amount and account in which the said amount deposited. So that the same could be verified further from Lucknow branch’s balance sheet that whether any such loan or amount was transferred by Haldwani branch in cash or any other modes. But instead of substantiating its earlier statement that the cash of Rs. 7.50 crore was given by Haldwani Branch to Lucknow Branch alongwith supporting documents, the asgessee merely stated that the transfer of cash from Haldwani Branch to Lucknow Branch was done in the interest of the business as the same could not be deposited into the bank accounts of one branch. The assessee did not furnish such details, which reveal that the firm did not have anything in this regard.

15.7 The assessee firm did not establish as to how such huge sum in cash was carried out in an Innova car was in interest of the business. When the country is already emphasizing towards digital revolution to bring the bank in palm of consumer by mobile banking / net banking for the purpose of convenience and interest of the business. Then how the assessee is stating that a huge cash of Rs. 7.50 crores is travelled in Innova car for Haldwani which is in Uttarakhand state, which is 400 kilometer away from Lucknow, Uttar Pradesh. Therefore, when online banking is available at the Lucknow then its beyond any logic as why the assessee was carrying such a huge amount in cash to Haldwani were also online banking services are available with full efficiency and effectiveness.

15.8 In view of the above facts, it is clear that the logic given by the assessee about the source of cash of Rs. 7.50 crore is merely a self-cooked story for trying to given colour to the unexplained income of Rs. 7.50 crore into sale proceeds in cash from various vends in Lucknow of the assessee. Therefore, the sum of Rs. 7.50 crore seized in cash remain unexplained income of the assessee for A.Y. 2018-19.

16. A final show cause notice has been issued to the assessee vide online letter F.No. ITBA/AST/F/143(3)(SCN)/20/2019-20/1021830259(1) dated 06-12-2019, which is reproduced as:-

17. The reply of the assessee is duly considered and not found tenable.

17.1 No satisfactory evidence was given by AR except stating that Haldwani branch was of same assessee and there is no restriction on carrying cash. And it was in the interest of business.

17.2 Assessee just stated that all the cash seized during the search collected from different vends / shops but audited books of accounts was not produced of all vends / shops to substantiate its claim.

17.3 The assessee has not produced major persons of AOP before Assessing Officer and conducting Deputy Director of Income Tax.

17.4 Statements of cash courier boys also revealed the same facts.

17.5 No satisfactory reply was given by the assessee about carrying huge cash in Innova Car meanwhile it has ICICI Bank cash pick up van facility.

17.6 On the nearly dates of intercepting cash, regular cash was deposited by the assessee in bank accounts. So not accepting of cash payment by the bank is not acceptable.

17.7 Assessee has just produced a self cooked story just to give a colour to its unexplained money.

18. As per the provisions of Section-69A of the Income Tax Act that

“Section 69A of the Act:-Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or value article is not recorded in the books of account, if any maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. ”

19. As the assessee has failed to furnish any satisfactory explanation of the source of cash to Rs. 7,50,00,000/- is treated as unexplained money made by the assessee and added to the total income of the assessee u/s 69A of the Income tax Act.

(Addition Rs. 7,50,00,000/-)

In view of the above, I am satisfied that assessee has misreported and under-reported its income, therefore, penalty proceedings u/s 270A(9)(a) of the I.T. Act, 1961 are being initiated separately.

20. With the above remarks, total income of the assessee is computed as under:-

21. Assessed at an income of Rs. 19,66,54,740/-. Give credit for prepaid taxes as per challans available on record. Penalty proceedings u/s 270A(9)(a) of the I.T. Act, 1961 are being initiated separately. Issue demand notice and ITNS 150 as part of order. Issue a copy of this order to the assessee. Upload order on ITBA and generate DIN.

This order passes with the prior approval of the Addl. CIT, Central Range-8, New Delhi as conveyed vide his office letter F.No. Addl. CIT/CR-8/2019-20/50 dated 18-12-2019 pursuant to discussions held during assessment proceedings time to time.”

8. On the other hand, the Ld.CIT(A) granted full relief to the assessee by deleting the impugned addition of Rs.7.50 crores cash seized on 06.05.2017 with the following observations:-

“9. I have carefully perused observations of Ld. AO and the written submissions of the appellant. As regards to Ld. AO’s observation, in respect of sales pattern and manipulation of cash book, it is observed that the average daily cash sales of FY 2016-17 and 2017-18 in the three group periods as bundled by the AO can be tabulated as below:

9.1 From the above table, it can be noted that there are substantial variations in the average daily sales figures of both the years across the group periods, which show that the daily sale are highly dynamic. The average sales in the 2^nd group period in both the years are highest which may be due to seasonal demands but at the same time this period shows least variation. Thus the Ld. AO’s observation that the sales invoices post action 132A were backdated to show higher sales and cash availability in books does not find support from the sales pattern. The average daily sales from 13.04 to 05.05 in the both the years are comparable. Further, the appellant had submitted cash book of Lucknow branch, shop wise sales along with stock register and copy of purchase bills to the Investigation Wing on 15.05.2017 and no mistake/ anomaly was pointed out by the AO in the submissions made by the appellant on 15.05.2017 and those made during the assessment proceedings. No mismatch in the purchase bills or stock inventory was pointed out. Further once details were submitted on -15:05.2017, any manipulation if made thereafter, would have been easily detected. It is also important to mention that all the purchases of the appellant are subject to TCS u/s 206C of the Act and state Excise Duty. The purchases and stocks are also regulated by the State Excise Department. Therefore, the allegation of manipulation of purchases or sales in such a regulated environment cannot be accepted in absence of any credible evidence.

9.2 As regards the observation of Ld AO with respect to availability of cash on 05.05.2017 in Para 14.10 and 14.11 of the order, it is noted that the appellant has shown closing cash-in-hand of Rs. 8.05 crore in its cash book on 05.05.2017. Therefore, adequate cash was available in the books as on 05.05.2017. Regarding the deposit of cash of Rs. 2.775 crore in the bank on 06.05.2017 post seizure, it is noted that the appellant has credited receipt of cash from Varanasi Branch amounting to Rs. 2.275 crore on 06.05.2017 in the cash book. I have perused the cash book and the bank statement of Lucknow Branch for the month of May submitted by the appellant and observed that cash of Rs.2.275 crores was shown to be received from Varanasi branch on 06.05.2017. It has been also noted that the appellant has shown receipt of cash of Rs 85 lakhs and Rs 1.60 crores from Kanpur branch on 08.05.2017 and 21.05.2017 respectively, from which it appears that appellant regularly transfers cash from one branch to another branch to meet out its business needs. In view of above discussion, I am of the opinion that the appellant had sufficient cash available in its books to explain the source of Rs 7.5 cr. cash intercepted and seized by the Department. It is also pertinent to mention here that the appellant is an Association of Persons of licensees of liquor shops and has no other business except selling of liquor. Therefore, unless some evidence showing out of books sale is brought on record, it cannot be presumed that the cash seized was from undisclosed sources when cash was available in the books on the date. It is a trite law that that mere suspicion, howsoever strong and probable it may be, cannot be substitute of the legal proof/evidence. Reliance is placed on the decision of Hon’ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs CIT 37 ITR 288 (SC).

9.3 The AO has further observed that there was no logic/ rationale in transferring cash from Lucknow to Haldwani for depositing in bank account, instead of utilizing faster and safer mode of bank transfer. The appellant submitted that it had received cash from Haldwani in November 2016 in demonetized currency to deposit the same in Lucknow. The appellant had submitted copy of account of Lucknow Branch in the books of Haldwani branch and vice versa before the AO on 18.12.2019 during the assessment proceeding in response to query no 5 and 9 of the notice issued by the AO dated 06.12.2019. The appellant has submitted that these transactions pertain to previous assessment year and were examined and assessed by the AO u/s 153A, and no adverse inference has been drawn. The appellant had stated that the reason for the transfer of cash from Haldwani to Lucknow was difficulty in deposit of huge cash during the demonetization period and the same was being returned back in the impugned year. I find that the transfer of money in cash from one place to another may though seem illogical and risky affair, but it’s the decision of the assessee, and it cannot be the basis of making addition.

9.4 Regarding the non-submission of books of account of individual shops, the appellant has submitted that each shops are licensed vends by the State Government in the names of individuals, who come together to form AOP. These shops work selling points and maintain records of stock, purchases and sales. Only small expenses are met at the shop level all other records are maintained at the branch and head office level. This pattern is followed year after year and the same has been accepted by the Department in other assessment years assessed u/s 153A/143(3) without any adverse remarks. I find that the appellant has maintained and submitted shop wise record of sales, purchases and stock etc along with invoices to the Wing and Ld AO during the relevant proceedings for verification. Books are audited at consolidated (AOP) level which were accepted by the Department from year after year. Further Ld. AO did not find any fault in the audited books of the appellant and has also not rejected them.

9.5 In view of above facts and discussions, I find that the Ld. AO failed to bring on record any evidence/material to show that the cash seized was not part of the books. The variation in sales pattern identified by the Ld. AO can at the max create suspicion in the mind, but cannot be reason for making the addition without further enquiry and marshalling of evidence. It is noted that no incriminating material/ information was found, seized or collected during or post requisition inquiries or assessment proceedings to disprove the claims/ stand/ books of the appellant. No mistakes were pointed out by the Ld.AO in the books of account of the appellant or the statement of employees to reject the submissions made by it. The appellant on the other hand submitted details showing that it had sufficient cash in hand on the day and also that the cash was being transferred from Lucknow to Haldwani as same was received last year during demonetization in the AY 2017-18 which was also assessed u/s 153A. Morcover, the appellant is operating in a regulated environment, and the purchases are subjected to TCS u/s 206C and levy of excise duty by the State Government. In view of these facts, I am not in agreement with the findings of the Ld AO and addition made by him u/s 69A is held to be legally not sustainable and is hence deleted.”

9. We have heard the respective parties and perused the record. Under the facts and circumstances of the matter, we have carefully perused the orders passed by the authorities below. From pages 34 to 39 the details of daily cash sales commencing from 01.04.2017 to 30.06.2017 have been recorded by the Ld. AO. The Ld. AO further made a comparative analysis of sales of the assessee made during three periods commencing from 01.04.2017 to 12.04.2017, 13.04.2017 to 05.05.2017 and 06.05.2017 to 30.06.2017 wherein the average sale for the first period was found to be Rs.18,24,524/- which was increased to Rs.43,68,474/- during the second period and again restored back to Rs.17,81,898/-. In that view of the matter, the cash seized represented sale proceeds of the assessee was found to be baseless by the Ld. AO. Moreover, upon inquiry made on 06.05.2017, it was found that there was no functional office of the assessee at Plot no. 08, 4-Shahnazaf Road, Lucknow. Neither any books of account were found in the said office regarding sales made at various places of Lucknow though the persons from whom cash was recovered claimed to have received the cash from various salesmen at the said office only. The statement that the cash of Rs.7.50 crores was collection of the assessee from liquor business which was being carried to deposit in the current account with the HDFC Bank, Nainital Road, Haldwani branch was not found to be satisfactory by the Ld. AO on the count that the comparative analysis as appeared at page 36 does not justify the source of such cash being only sale proceeds of the business of the assessee. In this regard, we have further considered the observations made by the Ld. AO in para 14.8 which has already been reproduced hereinabove. The per day average sale figure from 06.05.2017 to 30.06.2017 shows as irregular trends of sale in cash which does not match the sale for the period as discussed therein particularly in view of the fact that as per sale bills produced by the assessee before the Ld. AO for the period 06.05.2017 to 30.06.2017 is very lesser than the average from per day sale made by the assessee during the same period in previous year i.e., 06.05.2016 to 30.06.2016 which is only Rs.17,81,898/- and Rs.31,10,723/- respectively which justifies back dated sales record for the period 06.05.2017 to 30.06.2017 into the period of 01.04.2017 to 05.05.2017 in order to show sufficient cash in hand in the books of account as on 05.05.2017 of the assessee which further sought to be justified as the source of seized cash of Rs.7.50 crores. Further, it appears from the entire sales recorded that the assessee was regularly depositing substantial cash in Lucknow at Bank account of ICICI bank since 01.04.2017 and there was no cash deposit on 05.05.2017. Thus, even if sale on 05.05.2017 is considered to be available as cash in hand, the same could not justify deposit of cash of Rs.7.50 crores. Practically therefore, such cash was never available in the hands of the assessee which sought to be justified as out of the cash sales made by the assessee prior to 05.05.2017. We have further found that the assessee subsequently changed its stand by saying that the impugned cash of Rs.7.50 crores which was being carried by the courier boy in the Innova car from Lucknow to Haldwani the said sum was received earlier in the previous year for depositing in the bank account at Lucknow meaning thereby that the cash of Rs.7.50 crores was not out of the sales of Lucknow office of the assessee and the cash transferred earlier from Haldwani to Lucknow during demonetization period for depositing the same in the bank account. We note that no such evidence as to when and for what purpose the Haldwani branch of the firm had earlier given this particular cash of Rs.7.50 crores to Lucknow branch of the assessee has ever been produced by the assessee either before the Ld. AO or before the Ld. CIT(A). No iota of document has been found showing the details of such cash transferred from Lucknow to Haldwani to Lucknow during demonetization; neither specific period of initial transfer of cash was ever submitted before the authorities below. We note that this plea was taken by the assessee only before the Ld.CIT(A). In that view of the matter, the contention that the money was sent to be transferred to Haldwani branch is unsubstantiated and is only an afterthought and self cooked in order to give the colour of unexplained income of Rs.7.50 crores into the sale of the assessee as observed by the Ld. AO is found to be acceptable.

10. Moreso, when the assessee at Lucknow having its facility of pick up van from ICICI bank, that too several times a day, the cash carrier Van of Toyota Innova cannot be the supplement for carrying huge sum of cash from Lucknow to Haldwani. Therefore, the observation that unexplained money sought to be transferred from somewhere to elsewhere as observed by the Ld. AO seems to be acceptable. We also concur with the view of the Ld. AO made in para 15.1 of the order.

11. Even the cash balance of 223 days is not sufficient enough to explain the source of Rs.7.5 crores at any single point of time as also observed by the Ld. AO. Paras 14.8 and 14.9 of the order passed by the Ld. AO also is found to be acceptable. The Table III as reproduced by the Ld. AO reflects substantial cash deposit in the bank account at ICICI Bank Lucknow since 01.04.2017. Though there was no cash deposit on 05.05.2017 and even if the cash sales of 05.05.2017 is considered as the source of cash deposit, the same is too less to explain the position of Rs.7.5 crores. It further reveals that despite interception on 06.05.2017 of Rs.7.50 crores cash the assessee still deposited a sum of Rs.2,77,70,500/- in cash in its bank account lying with ICICI Bank on 06.05.2017 which appears to be unrealistic considering the average daily sales of Rs.35 lakhs only as shown by the assessee in its books of account. Therefore, there was hardly any cash available with the assessee out of cash sales made prior to 06.05.2017 and the cash of Rs.2.77 crores deposited on 06.05.2017 even after the seizure of Rs.7.5 crores at 4 AM on 06.05.2017.

12. The Ld. CIT(A) joins issue here to this effect that the Ld. AO built up a case based on suspicious inference and rejection of the assessee’s business practices as illegal which is found to be not acceptable by us in view of the explanation in regard to the source of cash, cash in hand at the end of the Financial Year 2016-17 qua the cash interception of Rs.7.5 crores. Further cash deposit of Rs.2.77 crore on the same date of 06.05.2017 strengthens such belief of the Ld. AO and negates the dubious claim of the assessee.

13. Moreso, the ledger balances of Haldwani and Lucknow branches were not produced. The assessee failed to produce the mode of sending the cash by Haldwani Branch to Lucknow and further failed to explain as to why the money was being remitted between the Branches located in different cities 400 kms. away by cash when both the branches are claimed to have maintained bank accounts through which cash could be deposited faster in a safe method of RTGS, cheques, DDs, etc.

14. Instead of following the mechanism as above rather as pointed out by the Ld. AO, transportation of cash of Rs.7.50 crores in an ordinary car from Lucknow to Haldwani with a distance of almost 400 Kms. cannot be claimed to be justified as this can’t be a wise decision in administrative parlance, rather, no businessman would take such a risky step to transport the large sum of money being an AOP and particularly when answerable to the other 159 shop owners/members even on financial aspect.

15. In the final show cause, as it appears from the record, that the assessee was directed to furnish the shop-wise details of seized cash details like name of the dealer, owner of vends/shops, address of the vends/shops, PAN and details of last ITR filed by these vendors/shop owners but, in spite of that no complete break-up of the details as sought for particularly from 41 vendors/shops operating in the city of Lucknow was furnished; rather mere statement that the cash transported from Lucknow to Haldwani was the sale proceeds of the liquor business of the assessee was made. When each shop is a separate entity having separate licence holder who is supposed to maintain separate books of account, the consolidated books of account of the AOP cannot justify the sales of each and every shop’s accumulation which was claimed to be total source of Rs.7.50 crores cash intercepted and seized from the Innova car on 06.05.2017. We find that the Ld.CIT(A) without going into the details of the matter has passed order admittedly ambiguously accepting the plea of the assessee and no deliberation has been made by the Ld.CIT(A) on non production of separate books of accounts by the separate shops particularly sales made by the separate shops at Lucknow which claimed to be the entire source of impugned cash seized of Rs.7.50 crores.

16. Therefore, neither the source of cash of Rs.7.50 crores intercepted and seized nor the modus operandi of carrying cash can be said to be justified. The plea of transferring the cash from Lucknow to Haldwani which was received by the assessee during demonetization from Haldwani office in the absence of any corroborative evidence is also found to be frivolous and also an after thought and, thus, not sustainable which was one of the core reasons in allowing the appeal preferred by the assessee by the Ld.CIT(A). Thus, under these facts and circumstances of the matter, the plea taken by the assessee as aforesaid is not only found to be acceptable, the modus operandi of carrying cash as aforesaid is found to be ridiculous in the present facts and circumstances of the matter having regard to the business of the assessee being an AOP as discussed hereinabove and, therefore, the order passed by the Ld. AO in making addition of impugned cash of Rs.7.50 crores as unexplained is found to be accurate acceptable and, thus, confirmed. The Ld.CIT(A)’s order is to be based on erroneous finding of facts and law and, thus, quashed.

17. In the result, the appeal filed by the Revenue is allowed.

Order pronounced in the open court on 24.04.2026.