HIREMATH SIDDHARTHA,BANGALORE V. DCIT CENTRAL CIRCLE 1(1) BANGALORE, BANGALORE

ITA 1403/BANG/2024

AI Insights

The case revolves around the seizure of Rs. 1.97 crore in cash from the vehicle of Hiremath Siddhartha, a practicing advocate, by the Vidhan Soudha Police, which was later handed over to the Income Tax Department. The assessee declared this amount as professional receipts in his income tax return for AY 2017-18. However, the Assessing Officer (AO) treated this amount as unexplained money under section 69A and made additions under section 68, leading to the filing of an appeal by the assessee. The Tribunal examined the legality of these additions, considering the provisions of the Income Tax Act and various judicial precedents, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 25115 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-10-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 25-07-2024
• Other Referred Cases: D.C. Rastogi vs CIT, AgsonGlobal (P.) Ltd vs CIT, CIT vs. M.B. Patel, Mr. Atish Singla vs ITO, Sunny Kapoor vs. ITO, Dev Sharda Developers vs. ITO, DCIT vs. Shiv Sai Developers, ACIT vs. Vikas Gutgutia
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SIDDESH N. GADDI
• Keywords: Set aside; Retrospective amendment; Depreciation; Rejection of books of accounts; Income from undisclosed sources; Bogus purchase; Tax effect; Retraction; CHAPTER IV; Bogus
• Section: 142(1); 153A; 139(1); 68; 131; 22; 69; 133(6); 13; 69A; 234B; 28; 139(4); 44AB; 145(3); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No.1403/Bang/2024 Assessment year : 2017-18 Hiremath Siddhartha, 1044, 10th Main, Judicial Layout, Bangalore North – 560 065. PAN : BIXPS 0329G Vs. The Deputy Commissioner of Income Tax, Central Circle 1(1), Bangalore. APPELLANT RESPONDENT Appellant by : Shri Siddesh N. Gaddi, CA Respondent by : Shri Subramanian S., Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 09.10.2024 Date of Pronouncement : 12.11.2024 O R D E R Per Laxmi Prasad Sahu, Accountant Member This appeal is filed by the assessee against the order dated 31.05.2024 of the CIT(Appeals)-11, Bangalore for the AY 2017-18 on the following grounds:- “ 1. The Order of the Learned AO and CIT(A), in so far as it is prejudicial to the interest of the Appellant, is wrong, perverse, illegal and against the provisions of law, liable to be set aside. 2. The Learned AO and CIT(A) have erred in law and on facts in passing the impugned order without jurisdiction. ITA No.1403/Bang/2024 Page 2 of 24 3. The Learned AO and CIT(A) have erred in law and on facts in making an addition of Rs.1,97,00,000/-. 4. Having admitted that the Appellant is engaged in law profession and is practicing as advocate before various courts, the Learned AO has erred in law and on facts in not appreciating income is derived therefrom. 5. The Learned AO and CIT(A) have erred in law and on facts in making an addition under section 69A of the Act. 6. The Learned AO and CIT(A) have erred in law and on facts in not appreciating that income has already been offered under the head Profits and gains from business or profession' and therefore there is no question of invoking provisions of section 69A of the Act. 7. The provisions of section 69A are not applicable to the facts in the present case as the Appellant has discharged the primary onus which is cast upon him. 8. The Learned AO and CIT(A) have erred in law and on facts in not appreciating that there is no mandate to prove source of sources. 9. The learned AO and CIT(A) have erred in law on fact in insisting on certain documents/information which is not required to be maintained under the provisions of the Act, thereby leading to the impossibility of performance; 10. The Learned AO and CIT have erred in law and on facts in not appreciating that there is no requirement to provide creditworthiness for the transactions covered under section 28 of the Act. 11. The learned AO and CIT(A) have erred in law and on facts in sustaining the addition under section 68 without drawing any adverse inference on the books of accounts duly audited as per the requirements of section 44AB of the Act. 12. The requirement to prove a source of source has been introduced into the provision of section 68 only from the AY ITA No.1403/Bang/2024 Page 3 of 24 23-24 and it is prospective in nature. The CIT(A) has erred in law and facts in invoking the same by giving retrospective effect. 13. Merely because the clients have not responded to 133(6) of the Act, the same should not lead to an addition in the hands of the Appellant. The learned AO/CIT(A) have erred in making the addition primarily on this count. 14. The Learned AO and CIT(A) have erred in law and on facts in not following the order of the Hon'ble High Court in CRL.P No. 140&2960 of 2017. 15. The Learned AO and CIT(A) have erred in law and on facts in making the addition of Rs.11,54,928/- which represents 50% of Rs.23,09,856/- as profession receipts under section 44ADA of the Act. 16. The Learned AO and CIT(A) have erred in law and on facts in making perverse comments. 17. The Learned AO and CIT(A) have erred in law in invoking the provisions of section 115BBE to the subject transaction which is already disclosed in the books of accounts and offered to tax. 18. The impugned adjustments being merely based on presumption and surmises, is to be deleted. 19. On the basis of above additions, the Learned AO/ CIT(A) has erred in law and on facts in initiating penalty proceedings and in issuing notice of demand under section156 of the Act. 20. The Learned AO and CIT(A) have erred in law and on facts in computing interest under sections 234A, 234B and 234C of the Act. 21. The Learned AO and CIT(A) is not justified in invoking penalty under sections 271AAC of the Act. (Total tax effect: Rs. 1,38,98,393/-) On the basis of the above grounds and other grounds which may be urged at the time of hearing with the consent of the Honorable ITA No.1403/Bang/2024 Page 4 of 24 Tribunal, it is prayed that the order passed under section 250, to the extent it is against the Appellant, be quashed and the relief sought to be granted.” 2. Briefly stated the facts of the case are that the assessee is a law professional as an Advocate in different courts. It was also noticed that he was also into real estate business. The assessee has filed return of income on 30.01.2018 declaring total income of Rs.1,85,22,450/-. 3. Information was received from Vidhan Soudha Police Station, Bangalore City on 21.10.2016 in the office of Pr. Director of Income Tax (Inv.), Bangalore that there was a cash seizure of Rs.1.97 crore from a vehicle belonging to the assessee. Accordingly warrant issued u/s. 132A of the Act was executed on Police Authorities. After centralization of the case, AO issued notice u/s. 153A of the Act on 26.09.2019. In response assessee filed return of income on 27.11.2019 declaring total income of Rs.1,85,22,450. Subsequently notice u/s. 143(2), 142(1) and later show cause notice was issued on 29.02.2021. ISSUE OF CASH SEIZED 4. The assessee was found with cash of Rs.1.97 crores on 22.10.2016 at Vidhan Soudha and seized by Vidhan Soudha Police and handed over to Addl. Chief Metropolitan Magistrate (ACMM) court. The information was passed on to Income Tax Department. A sworn statement u/s. 131 was recorded regarding source and nature of cash and the assessee stated that the cash seized was cash loan from his clients and relatives to be utilised for purchase of immovable property. He stated that Rs.1 crore was received from his client, Shri Gaffer ITA No.1403/Bang/2024 Page 5 of 24 Baig. To verify the genuineness, a sworn statement was recorded from Shri Gaffer Baig in which he denied giving cash loan of Rs.1 crore to the assessee. On confronting this statement, the assessee stated that earlier statement was given under mental stress and could not recall the cash received from his clients and friends correctly and stated that the entire cash was received as professional fees from his clients during FY 2016-17 and offered the same as income in the return filed for AY 2017-18. 5. During the post search proceedings the assessee furnished list of clients from whom he received professional fee. Summons u/s. 131 were issued to such clients to verify the genuineness. Out of 25 summons, only 3 persons appeared and gave sworn statement about the cash given to the assessee which was not found satisfactory by the AO and issued show cause notice to the assessee. The assessee did not reply and the other clients did not appear before the DDIT, therefore the AO observed that claim of assessee of professional receipts is not genuine. Further notice u/s. 142(1) was issued on 06.04.2021 to furnish the list of clients who have given professional receipts along with PAN, complete address and nature of professional services undertaken. In this regard, the assessee furnished the reply as under:- \" I wish to reiterate that I am practicing advocate deriving income from profession towards, opinions, drafting and representing litigations in the courts of Bangalore including High Court. I have no other source of income or any business under my ownership. As such, my income majorly is only out of professional receipts from clients for whom I have rendered services. Further, as already stated, the Hon'ble Court has clearly stated that the cash ITA No.1403/Bang/2024 Page 6 of 24 found in my possession belongs to me and there are no claimants on the said cash found in which case it cannot be treated as loan. During the course of investigation in CCB, Bangalore and as well as the Investigation Wing of the Income tax department, the clients who have paid fees in cash have rendered their statement with documentary evidence for having paid the fees in cash for the professional services rendered. Hence, the cash found can never be attributed as unexplained and the same may be taken as professional fees as admitted and filed in the return of income\". 6. The AO noted that the explanation submitted by the assessee is not satisfactory as per provisions of section 69A of the Act. The nature and source of cash, genuineness and creditworthiness have to be proved by the assessee as per provisions of section 69A and assessee has not fulfilled the three conditions for justifying the income from professional receipts of Rs.1.97 crore. He also noted that jurisdictional High Court has decided the issue on different aspect about the legality of seizure of cash by the police and not pertain to the source of cash as found from the assessee. The assessee has not fulfilled the conditions in terms of section 69A. 7. During the assessment proceedings the assessee submitted the documents with list of persons, name and fees received among other details and some confirmations which are unreliable and incomplete and reproduced the confirmations in his order. There was no detail about person, work undertaken or service rendered in elaborative manner. The AO noted that income of assessee has increased manifold in AY 2017-18 and not in proportion compared to previous 4 AYs and succeeding AY 2018-19. Accordingly he treated the entire cash seized of Rs. 1.97 Crore as unexplained money u/s. 69A applying 115BBE of ITA No.1403/Bang/2024 Page 7 of 24 the Act. Further, he noted that out of the total professional receipts the balance professional receipts of Rs.23,09,856 the AO applied s. 44ADA, 50% of the same amounting to Rs.11,54,928 was assessed as income from profession. Aggrieved from the above order, the assessee filed appeal before the First Appellate Authority (FAA). 8. The ld. FAA dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the ITAT. 9. The ld. AR reiterated the submissions made before lower authorities and has filed written synopsis as under:- “1. The Appellant is a law professional and practices as an advocate in different courts. There was a cash seizure of Rs. 1.97 Crore from his vehicle. 2. The return u.s 139(4) and 153A of the Act has been filed declaring a total income of Rs.1,85,22,450/- that includes the fees received as represented in the form of cash that has been seized. Additionally, the books of accounts and the TAR have been complied with. 3. The AO has recharacterized the income, as already offered u.s 28 of the Act, by making additions to the extent of Rs.1.97 crore as unexplained money u.s 69A of the Act and Rs.11,54,928/- representing 50% of Rs.23,09,856/- as profession receipts u.s 44ADA. 4. With respect to the inconsistencies in the statements recorded u.s 131, the Appellant had initially claimed that the cash represented a loan from clients. The retraction is backed by an immediate sec.131-sworn statement as acknowledged in the orders, the same is to the effect that the cash represented professional receipts. In addition to the above, the Appellant has also provided the details of all the clients from whom he has received professional fees. All the clients have deposed before ITA No.1403/Bang/2024 Page 8 of 24 CCB with respect to the above claims as noted in the order of the High Court (annxd). 5. The initial sec.131-statements have been retracted within a reasonable time by providing cogent and sufficient explanation which is backed by documentary evidence that has not been refuted. The lender has denied providing a cash loan in sec.131- statement before the same authority that had initially recorded the statements, which would alone be sufficient to prove that the initial statement was made under coercion and pressure. 6. With respect to the second allegation that the return of income has been filed belatedly and non-payment of advance tax: The cash was seized on 22.10.2016 and the Appellant filed a return on 30.01.2018. The CIT(A) cites the delay by considering the original due date being 31.10.2016. The CIT(A) has not appreciated the fact that as per section 139(4) the due date to file a belated return was 31.03.2018 and the return has been filed within the timelines provided u.s 139. There is no difference, except consequential interest, fee and penalty, in the return filed u.s 139(1) vis a vis 139(4)-return. Erred in giving stepmotherly treatment to the belated return as validly filed as per the provisions. 7. The delay, if any, in filing the return within the original due date and non-payment of advance tax is due to cash seizure by the authorities that precluded him from payment of the above taxes. 8. With respect to the source of source (payment from the clients): The appellant is offering income from the above source over the years even before the seizure of cash, which has been accepted by the department. Income has been returned under this source even for the subsequent years. The summary of the filings is anned. 9. The appellant, before the revenue authorities has furnished complete list of clients, including their identity, and details of work undertaken incl reference to the case citations etc with respect to the professional income offered in the return of income. ITA No.1403/Bang/2024 Page 9 of 24 10. The DDIT/Ld.AO claims to have summoned the parties (3 have replied) or sought confirmation (an additional three parties confirmations filed) from them which has been taken on record. Out of 25 clients, the responses from six clients are on the records. 11. The revenue authorities have erred in seeking an explanation of the source of the source which is against the mandate of section 28 (also 68/69A). U.s 28, there is no obligation on the Assessee to provide a source of source, it is enough if the Assessee is engaged in business/profession and has a profit-making apparatus (law degree in the present case). Though the same has been done before CCB to prove the genuineness of the professional receipts as noted in the HC order. 12. The Officers have not appreciated that the professional communications between a client and their advocate are protected under the Indian Evidence Act 1872, the Advocates Act 1961 and the Bar Council of India. This is without prejudice to the fact that the nature of work undertaken has been provided by the respective clients in the confirmation letters/sales register/books of accounts. 13. No doubt cast on the books of accounts, and various other compliances undertaken by the Appellant under the statute (tax audit report, sales register, etc): The Appellant has been offering income under this source even before the seizure and has also done the same after the seizure of cash in the subsequent years. Having accepted the same, no doubts can be cast with respect to the existence of the said source only during the subject year that too due to the cash seizure. Seizure will not automatically lead to addition under sections 68 and 69A of the Act. 14. The Appellant has maintained books of accounts and also furnished a tax audit report (by an independent CA). No adverse inference or no whisper with respect to the correctness of the said records. 15. The addition without rejecting the books of account/Tax audit report frustrates the provisions of the Act as diligently compiled and is also in gross violation of the procedure laid down u.s 145(3) and 144 of the Act. ITA No.1403/Bang/2024 Page 10 of 24 16. He has offered total receipts of Rs. 2,20,09,856 in the returns. Having accepted the difference (Rs. 2,20,09,856 – 1,97,00,000) as income from profession, the Ld.AO has blown hot and cold over the same issue. There is no reason whatsoever for such bifurcation. The same amounts to cherry-picking the clients/sources from whom the revenue could be derived. 17. Held in D.C. Rastogi vs CIT 359 ITR 513: However, in the case of section 68, there cannot be any estimate even if for the rest of the accounts, such an exercise is validly undertaken. This is for the simple reason that the expression \"any sum\" refers to any specific amount and nothing more. 18. AgsonGlobal (P.) Ltd 115 taxmann.com 342 (upheld High Court 441 ITR 550) the Tribunal deleted addition on account of cash deposits during demonetization by holding that when pre- demonetization sales (receipts other than cash seized, in the present case) are not doubted, only demonetization sales (sales representing cash seized in the present case) cannot be doubted. It was also noted that there was no evidence of bogus sales, evidence of bogus purchases, and non-existing cash. Even the underlying records / documents were not doubted. We wish to place heavy reliance on the above case as the same is applicable to the facts in the present case. 19. Gujarat High Court [CIT vs. M.B. Patel 221 Taxman 143] wherein it has been held that any additions to assessee's income as undisclosed income was not warranted where audited accounts were produced before AO and accounts had been duly explained with substantial evidence. 20. With respect to invoking section 68 to the facts in the present case: The ld.AO had invoked section 69A, which was upheld by the CIT(A) u.s 68. Section 68 deems the amount credited in the books of accounts, as income. 21. As he has already offered receipts as income and therefore there is no question of treating it as income once again (double taxation). Section 68 is a deeming provision to treat the amount which is disguised as loan, share capital, etc in the books of accounts. The same has to be invoked only if there is such a violation/commission, it cannot be invoked to reclassify the ITA No.1403/Bang/2024 Page 11 of 24 returned income only to attract higher tax rates u.s 115BBE of the Act. It is well accepted that legal fiction created for a definite purpose should be limited for that purpose and cannot be extended beyond their legitimate needs [case laws relied – refer written submissions]. 22. Where the assessee is carrying on business/professional regularly, the natural inference is that all the receipts relate to business and the cash generated in the banks have emanated from such activities. [case laws relied] 23. As the Appellant has no other source of income, the natural presumption is that he has derived this from his regular course of profession and therefore only the profit element has to be brought to tax and not the entire balance. He has not carried out any transaction in the nature of the sale of property or other capital transactions to generate unaccounted income. [case laws relied] 24. Reliance placed on the jurisdictional High Court (Annxd); held that the amount so seized belongs to the assessee. The above ruling has been rendered after considering reports of various investigation authorities. 25. Reliance on the fact that the investigation proceedings before CCB have been concluded on the basis of witnesses from all the parties involved, including the parties from whom professional fees have been received (cash seized, leading to the impugned addition). HC order annxd/extracted. 26. Though he has disclosed details of all the parties from whom professional receipts have been earned during the year, the AO has invoked section 131/133(6). The officer has cited that only a few parties have responded. It cannot be the basis for rejection of the claims as he cannot be bound by the actions of third parties who are independent and unrelated. There cannot be any dispute that he has no control over his clients once the services are rendered (or even during the courses of rendering services). Relied on R.B. Jessaram Fatehchand v. CIT, High Court: ITA No.1403/Bang/2024 Page 12 of 24 \"In the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser.\" \"Since, having regard to the nature of the transaction and the manner in which they had been effected, there was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for cannot be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. .. 27. This basis of rejection is redundant in the view of extensive investigation done by CCB wherein all the parties have deposed. The AO, instead of undertaking the verification once again, could have obtained the report from CCB. 28. Case laws relied on; non-reply to the notices issued u/s 133(6) cannot be the sole basis of making an addition. 29. In cases where the responses have been furnished, the officer has examined the source of source which is not the requirement of the law. The Assessee cannot be expected to enquire about the source of the source while receiving the professional fees. There is no obligation under section 28 to obtain the details as requested by the AO. 30. The AO has also stated that some of the confirmations have not been signed. In making it a basis for rejection, the officer should have issued another notice seeking assessee to furnish signed copies as there was an error in uploading the correct files initially. The AO has erred in taking advantage of the inadvertent error, as well as the ignorance. The Assessee has annexed a signed copy before CIT(A). 31. If the income is already disclosed, no addition can be made again u/s 68 of the Act. [case laws relied] 32. With respect to the the comparative analysis, it is submitted that the same is without any logic and without appreciating the growth or degrowth that usually takes place in any activity. Though, the assessee has got his books of accounts ITA No.1403/Bang/2024 Page 13 of 24 audited as per the provisions and has furnished all the records, the Ld.AO having accepted all the transactions including income from profession, has erred in law and on facts and doubting only the cash receipts. In this regard, the reference is made to 2nd addition which is based on the disclosures made by the assessee and is in excess of the income earned during the preceding years. Having accepted all the above transactions, the Officer has erred in doubting only the cash receipts on a selective basis. 33. Thus Learned AO has not brought any material on record to establish that the transactions are bogus nor any evidence indicating that such incomes were bogus. Merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed is not tenable in the eye of the law. [case laws relied] 34. Suspicion however strong cannot partake the character of evidence. [case laws relied]. 35. The provisions of section 269ST, barring/penalizing transactions in excess of Rs. 2 lakhs, are applicable from 01.04.2017 and are not applicable to the present case. 36. With respect to invoking sec.44ADA for the remaining professional receipts: This ground is consequential to the previous grounds. The assessee is not required to follow the provisions of section 44ADA if the total income/gross receipts from the profession exceeds an amount of ₹50,00,000. The AO erred in selectively applying the provisions, without appreciating that the Appellant has maintained books of account and has got them audited under 44AB.” 10. The ld. AR further submitted that there is no doubt in the ownership of money. The Hon’ble High Court has held that money belongs to assessee and not to any other person and nobody has come for claim. So, it is clear that the ownership belongs to assessee. The CIT(Appeals) has wrongly decided the issue on the basis of section 68 of the Act and the AO has decided the issue on the basis of section ITA No.1403/Bang/2024 Page 14 of 24 69A. He further submitted that transactions are recorded in the books of account and AO has not rejected the books of accounts and merely he is picking and choosing method applied. During the proceedings before CCB, CCB issued notices to the payer of professional fee to the assessee and recorded their statement and no any adverse finding was observed. Section 69A will not apply here also if the transactions are recorded in books of accounts. The ld. AR relied on the following judgments:- - Parmod Singla v. ACIT [2023] 154 taxmann.com 347 (Chandigarh Trib) dated 24.7.2023 - Mr. Atish Singla v. ITO, ITA No.1185/Del/2021 AY 2017-18 - Bawa Jewellers P. Ltd., ITA No.352/Del/2021 AY 2017-18. 11. On the other hand, the ld. DR strongly relied on the order of the lower authorities and submitted that while recording statement assessee explained that amount was received as cash loan for purchase of immovable property. Later on the assessee changed his statement. He further submitted that the confirmation submitted by the assessee is also incomplete. In the sworn statement, assessee has stated that Rs.1 crore is received from his client, Shri Gaffer Baig, who denied giving any cash loan to assessee and it was confronted to the assessee. The assessee stated that statement was given under mental stress and he could not recall the cash received from his clients and friends correctly. The AO has examined the details given by the assessee of 3 clients, which did not explain the source of payment of fee to the assessee. He further submitted that the income shown by the assessee for the year is unusually manifold compared to previous and subsequent years. He ITA No.1403/Bang/2024 Page 15 of 24 further referred to para 5.7 of the CIT(A)’s order and submitted that assessee has disclosed the impugned amount in the return of income / books of account and income will be sustained u/s. 68 on a sum of Rs.1.97 crore credit in the books of account had not been explained under the provisions of section 68 & 69A of the Act. He also referred to para 5.7.1 & 5.7.2 of the CIT(A)’s order which reliance is placed on judgment of coordinate Bench of Tribunal in the case of Shri Arif v. ACIT in ITA No.976/Bang/2022 and judgment of Hon’ble Jharkhand High Court in the case of Rajmeet Singh v. ITO [2024] 160 taxmann.com 83 (Jharkhand) in which it has been held that no prejudice will be caused to the assessee as he will be called upon to explain the same requirements, whether it is under section 68 or 69 of the Act. 12. Further in the rejoinder, the ld. AR submitted that the ownership test has been upheld by the High Court in favour of the assessee, therefore the provision of section 69A will apply only. He further submitted that section 68 is applicable for cash credit found in the books of account of the assessee. But here in this case, the assessee is in legal profession for many years and he is receiving fee and details of fees were submitted to the AO and he has verified on random basis. The CCB have also recorded statements and there was no any adverse statement found by the CCB. He further submitted that the turnover reported by the assessee and the AO has wrongly considered professional receipt of only Rs.23,09,856 without specifying details submitted regard fee received. He has just reduced Rs.1.97 crore from ITA No.1403/Bang/2024 Page 16 of 24 the total turnover disclosed by the assessee. He has to specify how he has considered Rs.23,09,856 as professional receipt and considered income u/s. 44ADA which is also not correct. 13. He further submitted that in the P&L account the assessee has professional receipt of Rs.2,20,09,856 and shown profit for the year of Rs.1,86,16,324 and the rest amount is claimed as expenditure. On one side, the AO has not doubted the expenditure incurred by the assessee which means that he has allowed entire expenditure of Rs.33,93,531 including depreciation of Rs.2,88,024. These expenditure are more than the professional fee computed by the AO of Rs.23,09,856. Once the expendtiure is accepted towards earning of professional fee, the receipts credited by the assessee cannot be denied under the head ‘profits & gains of business or profession (Chapter IV-D). 14. Considering the rival submissions, we note that on 21.10.2016 the Vidhana Soudha Police seized cash of Rs.1.97 crore from vehicle belonging to the appellant and information was passed to Income-tax department. Accordingly warrant u/s. 132A was issued and notice was issued to the appellant on 26.09.2019 u/s. 153A During the course of statement recorded at the first instance, the assessee had stated that amount was received from his clients and relatives and to be utilised for purchase of immovable property and later on it was changed that assessee received fee from his clients and due to pressure, in the first statement he could not explain property. During the proceedings, statement of Mr. Gaffer Baig was also recorded, but he denied giving ITA No.1403/Bang/2024 Page 17 of 24 any money to the assessee. The case was also registered under Cr.PC at Vidhana Soudha Police Station, Bangalore and FIR was also lodged u/s. 102 & 41D of Cr.PC. After Chargesheet Crl.P. No.2960/2017 was subsequently filed and the case was decided by Hon’ble High Court in Crl.P. No.2960/2017 & Crl.P No.140/2017. The High Court after examining the details and CCB report found that money belongs to the assessee and no other person has come forward to claim the cash found with the petitioner. For the sake convenience, we are reproducing para Nos.10, 17 & 18 of the judgment:- “ 10. The ingredients that are required to attract the said provision is “a person dishonestly mis-appropriates or converts to his own use any movable property.” Therefore, to impute the allegations against the petitioner that he has mis-appropriated the said amount, the respondent-Investigating Officer was required to ascertain that the cash found with the petitioner did not belong to him and it belongs to some other person. On a plain reading of the contents of the First Information Report and the final report, it does not disclose that the Investigating Officer is of the opinion that the cash found with the petitioner belonged to some other person. No other person has come forward to claim that the cash found with the petitioner was either his or hers. ….. 17. In the opinion of this Court, the established legal position and the decisions rendered by this Court and more so by the Division Bench regarding the requirement under Section 98 of the Karnataka Police Act, 1963 is sufficient to allow the petition. This opinion is further fortified by the fact that even as on date, it is not the case of the respondent that the property seized from the hands of the petitioner belonged to some one else. No person has come forward to claim that the property belongs to him or her. 18. For the reasons stated above, the petitions are allowed. Consequently, First Information Report, the final report and the ITA No.1403/Bang/2024 Page 18 of 24 entire proceedings in Crime No.66/2016 and C.C. No.8560/2017 on the file of the I Additional Chief Metropolitan Magistrate, Bengaluru are hereby quashed and set aside.” 15. From the above, it is clear that the Hon’ble High Court has held that money belongs to the assessee. The AO while completing the assessment, issued notice to three persons out of the list provided for professional fees received which is placed at page 120 of PB, but the AO was not satisfied from the reply received. The AO after considering the entire documents submitted by the assessee and information received, examined the issue in the light of section 68 for proving the genuineness of the transaction, identity of receiving services and creditworthiness of the payer, but he was not satisfied and applied section 69A observing that the assessee is unable to give explanation to the satisfaction of the AO. During the proceedings by CCB statement of around 50 persons were recorded, but there was no any adverse remarks observed by them. The verification done by the AO from the recipient of the services, they could not prove the source of source. As per section 69A source of source is not to be proved by the assessee. The addition is made by the AO u/s. 69A, whereas the ld. CIT(Appeals) has confirmed the addition in the light of section 68 of the Act. After going through the judgment passed by the Hon’ble High Court it is clear that the money belongs to the assessee, therefore provisions of section 68 will not apply and section 69A will apply in the case of assessee which reads as under:- ITA No.1403/Bang/2024 Page 19 of 24 “69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.” 16. Some necessary tests are required to be fulfilled for invoking section 69A of the Act. The Hon’ble Apex Court has held that for invoking section 69A of the Act :- (a) The assessee must be found to be the owner of any money, bullion or other valuable article; (b) The said article is not recorded in the books of account; & (c) The assessee is unable to offer any explanation regarding nature and source of article. 17. In the case on hand, the assessee has satisfied the tests (a) & (b), but (c) is not satisfied since the entire fee received by the assessee is recorded in the books of account which are audited by the CA and tax audit report was filed by the tax auditor. The AO and the CIT(Appeals) have not rejected the books of account and there is no deficiency noted in the books of account. Similar issue has been decided by the coordinate Bench of the Tribunal in ITA Nos.1383 & 1384/Bang/2019 for AY 2011-12 & 2012-13 order dated 28.8.2019 as under :- ITA No.1403/Bang/2024 Page 20 of 24 “7.3.3 On a reading of section 69A (supra), it is clear that the onus is upon the AO to find the assessee to be the owner of any money, bullion, jewellery or valuable article and such money, bullion, jewellery or valuable article was not recorded in the books of account, if any, maintained by the assessee for any source of income. In these circumstances, the AO can resort to making an addition under section 69A of the Act only in respect of such monies / assets / articles or things which are not recorded in the assessee’s books of account. In the case on hand, the cash deposits are recorded in the books of account and are reportedly made on the receipt from a creditor. Further, the PAN and address of the creditor as well as ledger account copies of the creditor in the assessee’s books of account have also been field before the AO. In these circumstances, it is evident that the AO has not made out a case calling for an addition under section 69A of the Act. Probably, an addition under section 68 of the Act could have been considered; but then that is not the case of the AO. The assessee, apart from raising several other grounds, has challenged the legality of the addition being made under section 69A of the Act. In support of the assessee’s contentions, the learned AR placed reliance on the decision of the ITAT – Mumbai Bench in the case of DCIT Vs. Karthik Construction Co. in ITA No.2292/Mum/2016 dated 23.02.2018, wherein the Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets / monies / entries which are recorded in the assessee’s books of account. In my considered view, the aforesaid decision of the ITAT – Mumbai Bench (supra) is squarely applicable to the facts of the case on hand, where the entries are recorded in the assessee’s books of account. In this view of the matter, I am of the opinion that the addition of Rs.6,30,000/- made under section 69A of the Act is bad in law in the facts and circumstances of the case on hand and therefore delete the addition of Rs.6,30,000/- made thereunder. The AO is accordingly directed. …….. 14.3.3 On a reading of section 69A (supra), it is clear that the onus is upon the AO to find the assessee to be the owner of any money, bullion, jewellery or valuable article and such money, bullion, jewellery or valuable article was not recorded in the ITA No.1403/Bang/2024 Page 21 of 24 books of account, if any, maintained by the assessee for any source of income. In these circumstances, the AO can resort to making an addition under section 69A of the Act only in respect of such monies / assets / articles or things which are not recorded int eh assessee’s books of account. In the case on hand, the cash deposits are recorded in the books of account and are reportedly made on the receipt from a creditor. Further, the PAN and address of the creditor as well as ledger account copies of the creditor in the assessee’s books of account have also been field before the AO. In these circumstances, it is evident that the AO has not made out a case calling for an addition under section 69A of the Act. Probably, an addition under section 68 of the Act could have been considered; but then that is not the case of the AO. The assessee, apart from raising several other grounds, has challenged the legality of the addition being made under section 69A of the Act. In support of the assessee’s contentions, the learned AR placed reliance on the decision of the ITAT – Mumbai Bench in the case of DCIT Vs. Karthik Construction Co. in ITA No.2292/Mum/2016 dated 23.02.2018, wherein the Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets / monies / entries which are recorded in the assessee’s books of account. In my considered view, the aforesaid decision of the ITAT – Mumbai Bench (supra) is squarely applicable to the facts of the case on hand, where the entries are recorded in the assessee’s books of account. In this view of the matter, I am of the opinion that the addition of Rs.33,23,425/- made under section 69A of the Act is bad in law in the facts and circumstances of the case on hand and therefore delete the addition of Rs. 33,23,425/- made thereunder. The AO is accordingly directed.” 18. The coordinate Bench of Tribunal in the case of CIT v. Smt. Sadhana Jain Commissioner of Income-tax, Meerut vs. Smt. Sadhana Jain [2014] 45 taxmann.com 432 (Allahabad)[13-12-2013] has held as under:- “4. We have considered the submissions made by Shri Dhananjay Awasthy, learned counsel appearing for the Revenue. No one has appeared on behalf of the assessee. ITA No.1403/Bang/2024 Page 22 of 24 The provisions of section 69A of the Income Tax Act read as under: \"69A. Unexplained money, etc.— Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.\" 5. The provisions of Section 69-A are explicit and come into play when in a particular assessment year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money bullion, jewellery and other article is not recorded in the books of account and the assessee is unable to give any explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable articles. 6. In the present case the finding of fact are clearly against the Revenue that the details and other evidences in the nature of cheques, their dates, amounts, particulars of banks and addresses of the persons who are stated to have sold the shares, which have also been transferred by the Company in the name of the assessee and, therefore, the burden which initially lay upon the assessee stood effectively discharged and, therefore no addition ought to have been made.” 19. The coordinate Bench of Tribunal in the case of Sunny Kapoor v. ITO [2022] 142 taxmann.com 577 (Lucknow Trib) has held as under:- “6. I have heard the rival parties and have gone through the material placed on record. First of all, I would take the additional ground of appeal where Learned counsel for the assessee has taken a ground that section 69A was not applicable as the assessee had duly recorded the transaction in the books of account and section 69A applies only to those unaccounted assets which are not recorded in the books of account. In this respect it is important to first visit the provisions of section 69A, which for the sake of completeness are reproduced below: ITA No.1403/Bang/2024 Page 23 of 24 \"SECTION 69A. Unexplained money, etc. [Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee of such financial year.\" 6.1 The bare reading of above section states that where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the money and the value of the bullion, jewellery or other valuable article will be deemed to be the income of the assessee of such financial year. There is no dispute that the assessee is maintaining books of account and such sales has been recorded in the books of account and from the books of account itself the CIT(A) has observed that the sales recorded by the assessee during the demonetization period was with the illegal currency therefore, section 69A could not have been invoked as section 69A clearly states that such income will be deemed to be income of the assessee where the assessee is found to be owner for a valuable not recorded in the books of account. In view of the above, the additional ground of the assessee is accepted and the assessment order passed by the Assessing Officer is quashed. In view of my allowing additional ground of appeal, the regular grounds taken by the assessee in this appeal has become infructuous and are therefore, dismissed.” ITA No.1403/Bang/2024 Page 24 of 24 20. This issue regarding addition u/s 69A is also decided by the coordinate Bench in the following cases:- - Dev Sharda Developers [2023] 156 taxmann.com 124 (Mum. Trib.) - DCIT v. Shiv Sai Developers [2011] 16 taxmann.com 256 (Mum. Trib.) - ACIT v. Vikas Gutgutia [2017] 77 taxmann.com 268 21. In the case on hand, the assessee recorded transactions in his books of account, therefore the AO made addition of cash found by Vidhana Soudha Police of Rs.1.97 crore belongs to the assessee which cannot be considered as income u/s. 69A of the Act because the taxing u/s 69A the Act has not been satisfied. Respectfully following the above judgments we allow the appeal of the assessee 22. In the result, the appeal of the assessee is allowed. Pronounced in the open court on this 12th day of November, 2024. Sd/- Sd/- ( SOUNDARARAJAN K.) (LAXMI PRASAD SAHU ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore, Dated, the 12th November, 2024. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr.CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. "