Addition to be made for unexplained cash found during search proceedings

R. Muthukumar Vs DCIT (ITAT Chennai)

The ITAT, Chennai in R. Muthukumar v. Deputy Commissioner of Income Tax [ITA No.: 3090/Chny/2019 dated February 15, 2023 has upheld the findings of the Appellate Authority and held that, there is no error in the reasons given by the Appellate Authority to sustain the additions towards the cash seized during the course of search proceedings as unexplained money, under Section 69A of the Income Tax Act, 1961 (“the IT Act”), when the assessee could not establish the source for amount found.

Facts:

A search was conducted under Section 132 of the IT Act for the Assessment Year (“A.Y”) 2017-18, in the R. Muthukumar’s (“the Appellant”) residence and the possession of cash amounting to INR 10,39,460/- (“the cash”) was found. Subsequently, the cash was seized and deposited into the PD account as the Appellant was unable to provide a satisfactory explanation for it.  Consequently, the matter was taken for an assessment, and during the assessment proceedings, the Appellant could not explain the source of the cash. However, he claimed that he had received the amount from his wife, amounting to INR 7,75,000/- and also received a sum of INR 3,00,000 from his father, Ramalingam. The Revenue Department (“the Respondent”) made additions towards the cash seized during the course of search proceedings as unexplained money under Section 69A of the IT Act.

The Appellant preferred an appeal and explained that the cash source found during the search was out of gifts received from his wife and father. The Appellate Authority opined that, the Appellant was able to explain the source to the extent of INR 1 lakh and, thus, allowed relief to the extent of INR 1 lakh, and the balance amount of INR 9,39,460/- was confirmed vide the order dated August 28, 2019 (“the Impugned Order”).

Being aggrieved, this appeal has been filed.

Issue:

Whether the addition made by the Respondent towards the cash found during the search proceedings is sustainable?

Held:

The ITAT, Chennai in ITA No.: 3090/Chny/2019 held as under:

• Noted that, the Appellant could not substantiate the claim that he had received the gift from his wife except by stating that some amount was withdrawn from its bank account.
• Observed that, the Appellant could not establish the source for the amount claimed to have been received from its father.
• Held that, there is no error in the reasons given by the Appellate Authority to sustain additions made towards the cash found during the search.
• Upheld the findings of the Appellant Authority.

Relevant Provisions

Section 69 A of the IT Act:

“Unexplained money, etc.

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 valuable 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.”

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-19, Chennai, dated 28.08.2019 and pertains to assessment year 2017-18.

2. The assessee has raised the following grounds of appeal:

“1. The CIT(A) is erred in upholding the assessment order which is against law, facts and circumstances of the case.

2. The CIT(A) is not correct in upholding the order in making addition of Rs. 9,39,460/-, without considering the affidavits filed by the assessee and his family members,

3. The CIT(A) is not correct in upholding the levy of interests u/s. 234A, 234B and 234C.

4. Your appellant reserves his right to adduce any additional or alternate ground at the time of hearing.

5. In the circumstances it is prayed to set aside the assessment order or to delete the addition of Rs. 9,39,460/-and to delete the interests levied u/s. 234A, 234B and 234C of the I.T. Act and render justice.”

3. The brief facts of the case are that, a search was conducted u/s. 132 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), in the group case of M/s. Kirtilal Kalidas Jewellers Pvt. Ltd on 12.09.2016. The appellant was working as Assistant Vice-President, Retail Operations in the company. During the course of search, the assessee’s residence was also covered and found that he had in possession of cash amounting to Rs. 10,39,460/-. The assessee was called upon to explain source, for which he did not given any satisfactory explanation. Hence, cash found amounting to Rs. 10 lakhs was seized and deposited into PD Account. Consequent to search, the case was taken up for assessment and during the course of assessment proceedings, the assessee could not explain source for cash found to be in possession, although, he claims that he had received gift from his wife amounting to Rs. 7,75,000/- and also received a sum of Rs. 3 lakhs from his father Shri. Ramalingam. The AO, made additions towards cash seized during the course of search proceedings as unexplained money u/s. 69A of the Act. The assessee carried the matter in appeal before the first appellant authority. During the course of appellant proceedings, the assessee explained that source for cash found during the course of search was, out of gift received from his wife Smt. Hanspriya and also amount received from his father Shri. Ramalingam. The Ld. CIT(A), after considering relevant submissions of the assessee opined that, the assessee could able to explain source to the extent of Rs. 1 lakh and thus, allowed relief to the extent of Rs. 1 lakh and balance amount of Rs. 9,39,460/- has been confirmed. Aggrieved by the CIT(A) order, the assessee is in appeal before us.

4. None appeared for the assessee. We have heard the Ld. DR and perused relevant material available on record. We find that during the search in the residential premises of the assessee, a sum of Rs. 10,39,460/- cash was found and seized. The assessee could not explain source for cash deposits. However, during the course of assessment proceedings, the assessee has took a different stand and argued that his wife derives income from tuition fee and agricultural income and out of said source, she had given a sum of Rs. 7,75,000/- gift on 25.08.2016. The assessee, further claimed that he had received a sum of Rs. 3 lakhs from his father Shri. Ramalingam. Although, the assessee claims to have received gift from his wife, but he could not substantiate his claim with necessary evidence, except stating that she had withdrawn some amount from her bank account. The Ld. CIT(A), after considering withdrawal from bank and subsequent deposits opined that assessee could able to explain source from his wife Smt. Hanspriya to the extent of Rs. 1 lakh only. Therefore, allowed relief to the assessee to that extent. In respect of amount received from his father Shri. Ramalingam, the assessee could not establish source for amount claimed to have been received from his father. Even before us, assessee could not file any evidence to justify source for cash found and seized during the course of search. Therefore, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to sustain additions made towards cash found during the search and thus, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss appeal filed by the assessee.

5. In the result, appeal filed by the assessee is dismissed.

Order pronounced in the court on 15^th February, 2023 at Chennai.

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