The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) set aside an addition of ₹ 62 Lakhs on the assessee based on alleged dissimilarities in the amount of cash recorded in the audit books and cash found during scrutiny.
The assessee, Taiyab Khan, is a medical professional and, In a survey conducted under Section 133A of the Income Tax Act, physical cash of ₹13 Lakhs was found. In contrast, the cash balance as per books of accounts showed negative cash of ₹11 lakhs. Similarly, the audited books of accounts showed a cash balance of ₹75 Lakhs from all his four businesses.
The Assessing Officer (AO) treated the cash found during the survey as unexplained cash and added ₹13Lakhs to the taxable income as per Section 68. Aggrieved by the AO’s order, the assessee filed an appeal to the CIT(A).
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The Commissioner of Income Tax (Appeals) [CIT(A)], on observation, revised the addition to ₹62 Lakhs, considering the difference between the cash found and the cash balance in the audited books. The CIT(A) also invoked Sections 68 and 69A and Section 115BBE to justify the addition.
Aggrieved by the order pronounced by the CIT(A), the assessee appealed to the ITAT, where the tribunal observed that the assessee’s books of accounts were audited and presented during the assessment and that the revenue authorities failed to identify any discrepancies or defects in the books. The tribunal held that the difference between the physical cash found and the cash found in audited books was related to incomplete records at the time of the survey, which was later rectified in the final audit.
The Tribunal further upheld that Section 68 applies to unexplained credits and Section 69A applies to unexplained money, and neither provision was applicable, as the cash balance was shown in the books and was explained and derived from well-recorded transactions. It was observed that taxing the difference as unexplained cash would result in double taxation since the income generating the cash balance had already been accounted for and taxed.
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The ITAT consisting of Dr S. Seetalakshmi ( Judicial Member ) and Rathod Kamlesh Jayanthbhai ( Accountant Member ) held that statements recorded during the survey under Section 133A lack evidentiary value unless they can be verified by concrete evidence. The CIT(A) relied on these statements without supporting them with substantial proof. The ITAT further held that the addition made by the CIT(A) lacked factual and legal basis and quashed such an addition. As a result, the appeal filed by the assessee was allowed.
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