ITAT upholds Deletion of Addition u/s 69A upon Cash Found during Search after Demonetisation in Fiduciary Status as Director of Company [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has upheld the deletion of addition under Section 69A of the Income Tax Act 1961 upon cash found during search after demonetisation in fiduciary status as director.

The original return was filed by the assessee, Atul (Kumar) Gupta for AY 2017- 18 on 01.08.2017 declaring income. After demonetization, a search and seizure operation were carried out by the Income Tax department on 21.03.2017 at Agson Global Group and others including the assessee. During the course of search operation in the assessee's premises, cash amount and foreign currency total value were found.

The assessee submitted that the cash found during the course of search belonged to Sigma Supply Chain Solutions Pvt. Ltd wherein, the assessee was one of the Directors and that said company had withdrawn cash from its 11 bank accounts and the assessee had retained the cash in hand only in the fiduciary status in the capacity of Director of the said company.

The assessee also explained the reasons for the company withdrawing huge cash by stating that the company had to meet huge expenses and pursuant to announcement of demonetisation by Govt and restriction on cash withdrawal limit imposed initially, there was fear and anticipation that some more drastic restrictions may be imposed on cash withdrawals after March 2017. Accordingly, company i.e. Sigma Supply Chain Solutions Pvt. Ltd had to make cash withdrawals from various bank accounts of the company to take care of fund contingencies in the business of the company.

The AO however did not agree to this contention of the assessee and observed that nothing had been brought on record as to why huge cash was withdrawn when there was restriction of making payment in cash over. Further, as per the past history of the company they were not holding huge cash in hand. Further, there were other directors in the said company and in that scenario how the cash belonging to the company would remain only in the custody of the assessee.

The AO treated the cash and foreign currency found during the course of search to be unexplained under Section 69A of the Income Tax Act. The AO also proceeded to tax the same under Section 115BBE of the Income Tax Act.

Ajay Wadhwa, appeared on behalf of the assessee and P. Praveen Sidharth, appeared on behalf of the revenue relied on the provisions of section 132(4A) of the Income Tax Act and Section 292C of the Income Tax Act, which stated that any asset which was found in the premises of the searched person during the course of search was presumed to be belonging to him.

The two-member Bench of M. Balaganesh, (Accountant Member) and Anubhav Sharma, (Judicial Member) dismissed this ground of appeal filed by the revenue observing that, “We find that the company had come forward give details of various cash withdrawals made by them and details of cash expenses incurred by them from 08.11.2016 to 20.03.2017 which was evident from the details furnished in pages 31 to 41 of the Paper Book.”

The Bench further observed that in the instant case, the assessee had duly rebutted this presumption by giving proper explanation for the cash found in his custody. Hence, the recourse taken to the provisions of Section 132(4A) read with Section 292C of the Income Tax Act would not come to the rescue of the revenue.

To Read the full text of the Order CLICK HERE

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