If assessee did not produce any material to prove that amount seized during the search, did not belong to it but belonged to some other person, addition made


If assessee did not produce any material to prove that amount seized during the search, did not belong to it but belonged to some other person, addition made





Blue Lines v. Asstt. CIT

I.T.A. No. 674 of 2016

6 November, 2020

Appellant by: Balachandran B.S., Advocate

Respondent by: Aravind K.V., Advocate


Alok Aradhe, J.

This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee.  The subject matter of the appeal pertains to the assessment year 2004-05. The appeal was admitted by a bench of this Court vide Order, dated 20-2-2020 on the following substantial questions of law :–

(i) Whether in law the findings of the tribunal is perverse inasmuch as the tribunal ignored the plea that the book was open as on the date of search and the cash was reconciled later, as on the date of the balance sheet?

(ii) Whether in law, the tribunal was correct in ignoring that the balance sheet was audited which had reconciled the cash seized during search?

(iii) Whether in law, was it correct for the tribunal to sustain the addition even when the appellant had reconciled the difference by explaining the cash found and seized?

  1. Facts leading to filing of this appeal briefly stated are that assessee is an individual and is a transporter. A search was conducted under Section 132 of the Act in case of one L.Sambasiva Reddy and his associate concern viz., M/s Sarvana Constructions Pvt. Ltd. On 08-10-2003 and as a consequence, a search was also conducted on the same day in the case of the assessee as well. The assessing officer found certain incriminating material during the search in the premises of aforesaid L.Sambasiva Reddy which included entries relating to payment of interest to the assessee. During the course of the assessment, the assessee was required to answer various queries and after considering the explanation of the assessee, the assessing officer passed an order of assessment under Section 143(3) and Section 153A of the Act on 31-3-2006 and added a sum of Rs. 20,03,680, which was found at the time of search.
  2. The assessee thereupon filed an appeal before the Commissioner (Appeals). It was inter alia pleaded in the appeal that the cash which was seized belonged to M/s Tours and Travels. The Commissioner (Appeals) by an Order, dated 12-9-2007partly allowed the appeal preferred by the assessee but sustained the addition of Rs. 20,03,680 made by the assessing officer. The assessee as well as the revenue approached Income Tax Appellate Tribunal (hereinafter referred to as ‘the tribunal’ for short) by filing the appeals. The tribunal by an Order, dated 7-3-2008 inter alia held that books of accounts were not updated on the date of the search but updated book was produced at the time of assessment proceeding and before the Commissioner (Appeals) and with proper reconciliation supported by books of accounts, relevant documentary evidence and audited statement of accounts, which was subject to audit under Section 44AB of the Act. It was further held that no discrepancies were found.
  3. The revenue thereupon filed an appeal before this court, viz., I.T.A.No.769/2008on the issue of deletion of amount of cash seized during the course of the search. A bench of this court by judgment dated 02-8-2014 passed in I.T.A.No.760/2008 and other connected matters inter alia held that tribunal has recorded any finding with regard to the cash found at the time of search and therefore, without setting aside the aforesaid finding, the appeal preferred by the assessee could not have been allowed. The matter was therefore remitted for decision afresh to the tribunal. The tribunal thereafter, vide Order, dated 26-5-2016 dismissed the appeal preferred by the revenue as well as by the assessee. In the aforesaid factual background, the assessee has approached this court.
  4. Learned counsel for the assessee submitted that on 08-1-2003 during the search, the amount of Rs. 20,03,680 was found and the aforesaid cash belongs to M/s S.S.Tours and Travels, on which tax has already been paid by M/s S.S.Tours and Travels and again taxing the aforesaid amount at the hands of the assessee  amounts to double taxation. In this connection, our attention has been invited to paragraph 13 of the findings recorded by the tribunal.
  5. On the other hand, learned counsel for the revenue has invited our attention to para 11 of the order passed by the tribunal and has submitted that the assessee has failed to produce any material to show that the cash seized during the course of search belonged to M/s S.S.Tours and Travels.  It is further submitted that in any case, the aforesaid issue is a finding of fact in which no perversity could be pointed out by the learned counsel for the assessee, therefore, no case for interference is made out. It is also pointed out that no perversity has been alleged in the memorandum of appeal.
  6. We have considered the submissions made by learned counsel for the parties and have perused the record.  A bench of this court vide judgment dated 02.08.2014 passed in I.T.A.No.760/2008 and connected matters had remitted the matter to the tribunal in the following terms:

In so far as the cash found at the time of search, Rs. 20.03.680, the third claim is concerned, the First Appellate Authority has affirmed the finding recorded by the tribunal. The assessee was in appeal. The tribunal has recorded any finding on this aspect of the matter. Again, the operative portion of the order, states that the appeal is allowed, it cannot be construed as setting aside the order of the appellate authority as no reasons are given. Therefore, that aspect also requires to be considered by the tribunal afresh.

  1. After the remand, the tribunal examined the issue and put a query to the assessee whether the income was offered to tax twice and if it is so, the income cannot be assessed to tax at the hands of the assessee as the same would amount to double taxation. The relevant extract of para 11 of the order passed by the tribunal reads as under :–

The bench wanted to know whether that income was offered in those 2 hands and tax had been paid thereon because in that event, the amount cannot be added again in the hands of the assessee because it will amount to double taxation. But if that is not done then addition made by the assessing officer is justified because as per the assessee’s own submissions before the assessing officer, there was negative cash balance of Rs. 26.56 Lakhs in the case of SS Tours and Travel which means that firm was having more physical cash as compared to book cash of that firm and therefore, book cash of that firm cannot be considered as explanation for the cash founding the nads of the present assessee. In reply, the learned AR of the assessee had nothing to say except reiterating that the cash found in the present case is belonging to M/s S.S.Tours and Travels.

  1. Thus, it is evident that even before the tribunal, the assessee did not produce any material despite opportunity being afforded to show that the amount seized during the search belonged to M/s S.S.Tours and Travels.  Even otherwise, the aforesaid finding is a pure finding of fact, which does not suffer from any perversity. It is well settled that this court in exercise of powers under Section 260A of the Act cannot interfere with the finding of fact until and unless the same is demonstrated to be perverse. [See: Syeda Rahimunnisa v. Malan Bi By L.Rs. And Ors. (2016)10 SCC 315 & PCIT & Ors. v. Softbrands India Pvt. Ltd., (2018) 406 ITR 513 (Karn) : 2018 TaxPub(DT) 3520 (Karn-HC)]

In view of preceding analysis, the substantial questions of law framed by a bench of this court are answered against the assessee and in favour of the revenue. In the result, the appeal fails and is hereby dismissed



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