Cash recorded in books of accounts as an eyewash have to be added as unexplained money u/s 69A: ITAT

Gardenia Aims Developers Pvt Ltd Vs DCIT (ITAT Delhi)

Conclusion: The Hon’ble Tribunal while allowing Revenue Appeal have held that when the amounts received in cash against the sale of flats which have not been recorded in the books of account of the assessee at the time of search and seizure operation and subsequently recorded in the books as advance from customers is nothing but an eye wash to supplement the explanation of the assessee regarding the cash receipts. Therefore the addition made by the AO deserves to be confirmed in the hands of the assessee u/s 69A of the Act.

Facts: In present facts of the case, in the assessment order it has been stated that the AO has made addition of Rs. 38,78,388/- on account of cash seized during the search and seizure operation. On being asked by the AO the assessee stated that these receipts have been received on account of advance received from the customers and as no sale has been booked. The assessee explained before the AO that the amount of advance would be included when the sale is recognized. However, the AO did not agree with the said explanation of the assessee and made addition by observing that it is only due to search that these cash receipts have been noticed and found that the same have not been recorded in the books of account. Accordingly, the AO made addition u/s 69A of the Act treating the same as unexplained money received by the assessee during the relevant financial year.

The ld CIT(A) noted that no doubt the amount may have been entered into books of account of the appellant as advance from customers but the facts remain that these amounts were on money received in cash against the sale of flats and never intended to be accounted for or included in the books of account of the assessee. The ld CIT(A) also noted that the regular business activities have been duly accounted regularly in the books of account and the business transactions which have not been recorded in the books of account equated or treated on the equal footing. The ld CIT(A) concluded that the income from regular business transaction has to be taxed under the business head income from unaccounted/ undisclosed business transactions are not mandated by the law and are to be treated differently and taxed under the head income from other sources.

In view of the above the Hon’ble Tribunal observed that undisputedly the assessee entered the amounts of cash receipts in the books of account as advance from customers but in fact these amounts were on money receipt in cash against the sale of flats and never intended to be accounted for by the assessee in its books of account. Therefore, when the transactions of sale of flats have attained finality then it is obvious that all the amounts receipt by the assessee and recorded in the books of account of the assessee as advance from customers has to be set off and included in the turnover of the assessee. At the same time when the amounts received in cash against the same transaction of sale of flats which have not been recorded in the books of account of the assessee at the time of search and seizure operation and subsequently recorded in the books as advance from customers is nothing but an eye wash to supplement the explanation of the assessee regarding the cash receipts. Therefore the addition made by the AO deserves to be confirmed in the hands of the assessee u/s 69A of the Act.

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