2025 (7) TMI 1429 - AT - Income Tax

Addition on account of unaccounted cash sales - HELD THAT - Admittedly requisite details were submitted before the investigation wing along with reconciliation of cash with concerned sale invoices. During the appellate proceedings the assessee has furnished details sought in this regard along with supporting evidences. We are of the view that the decision of CIT(A) to delete the addition on account of cash sales is justified and no interference is called for on this issue. This ground of appeal is therefore dismissed. Unexplained cash u/s. 69A - Addition on the basis of a loose paper found during the course of search proceedings from the assessee s premises - HELD THAT - The assessee s explanation that the document may have been received from some customer while giving the jewellery for repair which is wrapped in paper does not appear convincing. The screenshot of the documents reproduced in the assessment order does not look like that of a crumped paper used for wrapping of jewellery received for repair. We are therefore of the view that CIT(A) has erroneously accepted the explanation of the assessee which is prima facia not convincing. Since the document has been found from the premises of the assessee and at the time of the recording of statement no such claim was made by the partner this explanation of the assessee clearly is an afterthought. Moreover in the statement recorded u/s.132(4) of the Act Shri. Nakshatra Singh partner of the assessee firm had agreed that paper had been found in his premises in respect of which he offered to give explanation in 10 days on he could not recollect the details at that time. AO has rightly invoked the provisions of section 292C of the Act to hold that the onus to explain the document is on the assessee which has not been adequately discharged. In the interest of justice we therefore deem it appropriate to restore this issue to the file of CIT(A) for fresh adjudication after giving due opportunity to the assessee to explain the same. Ground allowed for statistical purposes.

Summary

ISSUES:

Whether addition under Section 69A of the Income-tax Act, 1961 can be sustained on unexplained cash found during search proceedings when reconciliation and supporting invoices are furnished by the assessee.Whether a loose paper found during search proceedings, indicating receipt of cash from an unknown person, can be treated as admissible evidence to make addition under Section 69A of the Income-tax Act, 1961.Whether the presumption under Section 132(4A) read with Section 292C of the Income-tax Act applies to a loose paper not forming part of regular books of accounts and lacking independent corroborative evidence.

RULINGS / HOLDINGS:

The addition of Rs. 30,01,923/- under Section 69A on account of unexplained cash sales is deleted as the assessee has provided reconciliation of cash found along with concerned sales invoices and stock registers, and the cash sales were disclosed and offered to tax in the return of income; thus, further addition would result in double taxation.The loose paper evidencing receipt of Rs. 75,00,000/- cash from an unknown person is held to be a "dumb" document lacking evidentiary value because it is not part of regular books of accounts, is unsigned by the assessee, is not corroborated by any transaction in the books, and there is no independent evidence supporting its authenticity; therefore, the addition under Section 69A based solely on this document cannot be sustained.The presumption under Section 292C applies only to books of account or documents regularly maintained and supported by independent evidence; since the loose paper fails these criteria, it cannot be used as conclusive evidence against the assessee.However, since the assessee failed to provide a satisfactory explanation regarding the loose paper during search proceedings, the matter is remitted to the Commissioner of Income Tax (Appeals) for fresh adjudication after giving the assessee an opportunity to explain and, if necessary, obtain forensic examination of the document.

RATIONALE:

The Court applied the statutory provisions of Section 69A (Unexplained money, etc.) and Section 292C (Presumption as to books of account and other documents found during search) of the Income-tax Act, 1961.The Court relied on the principle that for making an addition under Section 69A, the assessee must be found owner of unexplained money or valuables, and the explanation offered must be unsatisfactory in the opinion of the Assessing Officer.The Court emphasized the evidentiary requirements from the Supreme Court ruling in CBI Vs. V. C. Shukla, holding that entries must be in regularly kept books of account or supported by independent evidence to fix liability.The decision distinguishes between "dumb documents" (random loose papers without corroboration) and admissible evidence, underscoring that mere discovery of a loose paper without authenticity or corroboration cannot conclusively establish unexplained income.The Court recognized the statutory presumption under Section 292C but noted its limited applicability where documents are neither part of regular books nor supported by independent evidence.The remand for fresh adjudication reflects a procedural safeguard ensuring the assessee is given a fair opportunity to explain the seized document, including possible forensic verification, before any addition is confirmed.