Almech Enterprises Vs ACIT (ITAT Mumbai)
Introduction: The case of Almech Enterprises Vs. ACIT (Income Tax Appellate Tribunal, Mumbai) revolves around a fundamental issue – whether a shortfall in cash found during a survey, compared to the cash recorded in the books of account, justifies an addition under section 69C of the Income Tax Act. In this article, we delve into the details of the case, the arguments presented, and the ultimate decision.
Background of the Case: The appellant, Almech Enterprises, challenged an addition of Rs. 17,88,512 to its total income under section 69C of the Income Tax Act. The addition was based on the apparent shortfall of cash discovered during a survey compared to the cash shown in the books of account. The appellant failed to provide sufficient evidence to explain this difference.
Legal Rationale: The core question addressed in this case is whether such a shortfall justifies an addition under section 69C of the Act. The appellant argued that this situation does not warrant the application of section 69C. They cited the case of CIT vs. Kesarwani Sheetalaya, where a similar issue was considered by the Hon’ble Allahabad High Court. In that case, it was held that a mere difference between the cash in hand in the books of account and actual cash found during a search is not enough to justify an addition under section 69 or section 69A of the Act. This judgment supported the appellant’s position.
Precedent and Tribunal Decision: The case of Sarang & Associates vs. DCIT was also cited, where the Tribunal did not approve of making an addition under section 69C in a similar context. In the present case, the Tribunal ruled in favor of the appellant, emphasizing that section 69C is not applicable under the circumstances. Given the specific facts and the legal precedents, the addition of Rs. 17,88,512 was deemed unwarranted and was consequently deleted.
Conclusion: The case of Almech Enterprises Vs. ACIT highlights an important aspect of tax law. When there is a shortfall in cash found during a survey compared to the cash recorded in the books of account, it may not automatically lead to an addition under section 69C of the Income Tax Act. Legal precedents, as cited in the case, suggest that such differences are not sufficient grounds for making such additions. This decision provides clarity on this matter and sets a precedent for similar cases in the future.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The Assessee/Appellant herein has preferred this appeal against the order dated 02.05.2023 impugned herein passed by Ld. Commissioner of Income Tax (Appeals)-48, Mumbai {in short ‘Ld. Commissioner’} u/s 143(3) of the Income Tax Act 1961 (in short ‘the Act’).
2. In the instant case, as per revenue case, during the course of survey proceedings in the premises of the Assessee, actual cash of Rs. 11,800/- was found as against the cash in hand of Rs. 18,00,312/- which was shown in the books of account and therefore, there was a short fall to the tune of Rs. 17,88,512/-. Consequently the Assessee was show- caused, as to why such short fall should not be treated as unexplained expenditure within the meaning of the provisions of section 69C of the Act. The Assessee not only failed to reconcile the difference but also failed to provide the requisite details asked for by the AO and therefore, the sum of Rs. 17,88,512/- was treated as unexplained expenditure and consequently added to the total income of Assessee under section 69C of the Act.
3. The Assessee being aggrieved challenged the said addition before the Ld. Commissioner and filed its written submissions challenging the legality of the addition. The Ld. Commissioner upheld the addition of Rs. 17,88,512/- under section 69C of the Act by observing that no evidences were furnished by the Assessee during the assessment order and the appellate proceedings. The onus was on the Assessee to furnish the details/documentary evidences expenses, which the Assessee failed to do so, hence, the addition of Rs. 17,88,512/- under section 69C of the Act is upheld .
4. The question emerge, as to whether on the basis of difference/shortfall between the actual cash found during the course of survey proceedings and the cash shown in the books of account, the addition u/s 69C of the Act is warranted, as made in this case. K. Shivaram Ld. Senior Advocate emphasized that Hon’ble Allahabad High Court of in the case of CIT vs. Kesarwani Sheetalaya, Allahabad (2019) 110 taxmann.com415 (All.) also dealt the identical issue, wherein cash in hand in the books of account was found to be more than the actual cash found during the course of search. The Hon’ble High Court affirmed the decision of the Tribunal in holding that would not suffice to make addition under any of the provision under section 69 or section 69A of the Act. The Hon’ble Co-ordinate Bench of the Tribunal in the case of Sarang & Associates vs. DCIT (ITA No. 1227 to 1229/Mum/2012 decided on 21.03.2018, also dealt with the identical issue and did not approve the making of addition under section 69C of the Act. The Ld. DR Sh. Raghuveer Madanappa, did not refute the said factual aspect. Hence, respectfully following the judgments referred to above, and considering the peculiar facts and circumstances of the case as the provisions of 69C of the Act are not attracted in this case, in our considered view, the addition is not warranted. Resultantly the same is deleted.
5. In the result, appeal filed by the Assessee stands allowed.
Orders pronounced in the open court on 27-09-2023.
