Appeal details
Counselvise Citation
[2022] 103 COUNSELVISE.COM (IT) 9758 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
11 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-10-2022
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB-B
Next Hearing Date
11-09-2022
Assessment Year
2019-2020
Appeal Filed On
11-11-2021
Judgement Text
आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 465/Hyd/2021 (निर्धारण वर्ा / Assessment Year: 2019-20) M/s. Nanesh Finance Corporation, Hyderabad [PAN No. AAIFN2856M] Vs. The Asst. Commissioner of Income Tax, Central Circle-1(2), Hyderabad अपीलधर्थी / Appellant प्रत् यर्थी / Respondent निर्धाररती द्वधरध/Assessee by: Shri K.C.Devdas, AR रधजस् व द्वधरध/Revenue by: Ms. M.Narmada, CIT-DR स ु िवधई की तधरीख/Date of hearing: 12/09/2022 घोर्णध की तधरीख/Pronouncement on: 26/10/2022 आदेश / ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the order dated 06/09/2021 passed by the learned Commissioner of Income Tax(Appeals)-11, Hyderabad (“Ld.CIT(A)”) in the case of Nanesh Finance Corporation (“the assessee”) for the assessment year 2019-20, assessee preferred this appeal. ITA No. 465/Hyd/2021 Page 2 of 7 2. Brief facts of the case are that the assessee is a partnership firm and is engaged in the finance business of providing loans to the borrowers who wish to buy four wheelers and two wheelers. Assessee charges interest on loans as per the terms and conditions of the loan agreement with borrowers. A search and seizure operation was conducted at the premises of the assessee on 30/1/2019 during the course of which an amount of Rs. 95,23,000/- was found in the head office situated in Somajiguda and another sum of Rs. 78,17,790/- was found in the branch office in SR Nagar Hyderabad. Total amount seized was Rs. 1,73,40,790/-. Consequently proceedings under section 153A of the Income Tax Act, 1961 (for short “the Act”) were initiated. 3. Assessee filed the return of income on 21/10/2019 for the assessment year 2019-20 declaring a total income of Rs. 3,54,07,140/-. During the course of assessment proceedings the assessee stated that the source of cash found in the search and seizure operation was out of repayment of principal as well as interest from the customers, and generated during the regular course of business activities. Learned Assessing Officer, however, found that the assessee had shown the additional income of Rs. 1,73,40,790/- in the P&L Account under the head additional income (as accepted under section 132 proceedings of IT Act), but in the Balance Sheet the cash of Rs. 1,73,40,790/- seized by the Department was shown under the “assets” as “cash seized by IT”. 4. Further on a perusal of the cash books learned Assessing Officer found that the assessee had shown cash balance of Rs. 96,00,678/- in respect of the main branch at Somajiguda and Rs. 79,14,968/- in respect of the SR Nagar branch, totalling Rs. 1,75,15,646/- on the day before the search. Further after the cash of Rs. 1,73,40,790/- was seized by the Department, the cash book again continued with the cash balance of Rs. 1,75,21,286/-, namely, the balance which was shown on the day before the date of search by the Department, thereby meaning that the assessee has continued to show the same cash balance as “cash on hand” even after ITA No. 465/Hyd/2021 Page 3 of 7 the cash was seized by the Department. Learned Assessing Officer, therefore, drew an inference that the assessee had introduced physical cash in the cash book to the extent of the cash seized by the Department and such cash introduced into the books of account represents unexplained money under section 69A of the Act. Learned Assessing Officer accordingly brought this amount to tax and applied the provisions under section 115 BBE of the Act for taxing the same. 5. Aggrieved by such an action of the learned Assessing Officer, assessee preferred appeal before the Ld. CIT(A) and submitted that when the gross receipts from the business amounting to Rs. 23,58,46,195/-, additional income as accepted under section 132 of the Act to the tune of Rs. 1,73,40,790/- and net profit of Rs. 3,54,07,323/- were duly accepted by the learned Assessing Officer, in the absence of any adverse finding regarding the gross receipts from the business, additional income and net profit from such business declared by the assessee, the source of cash is duly explained in terms of receipt of interest and principal portion loans received from the customer. He further submitted that there are sufficient cash balance in the cash book prior to the date of search and seizure, the cash balance as on 29/1/2019 in both the branches of the assessee was to the tune of Rs. 1,75,15,646/-, the cash seized is duly explained from the entries recorded in the cash books which form part of its books of account and the surrender amount was in relation to business activities and there is direct nexus with business and accordingly treated the same as business income. According to the assessee, since the learned Assessing Officer did not bring on record any evidence or material to establish that the assessee was involved in any other activities, as such the income disclosed as business income by the assessee is in accordance with law and, therefore, the addition and application of section 115 BBE of the Act are not justified. 6. On a perusal of record, Ld. CIT(A), as a matter of fact, observed that the cash found on the date of search was Rs. 1,73,40,790/- and according to the assessee in their books the cash on hand was Rs. 1,75,15,649/-, cash ITA No. 465/Hyd/2021 Page 4 of 7 of Rs. 1,73,40,790/- was taken away by the Department leaving only the balance in the hands of the assessee, but the assessee introduced and identical sum equivalent to the cash seized in the books and enhanced its cash balance to the quantum before the seizure. Ld. CIT(A) further observed that there are two entries of cash which belonged to the assessee, namely, one which was seized by the Department and the other is the one introduced in the cash book subsequent to the seizure, out of which the assessee offered the subsequent entry made to the effect of Rs. 1,73,40,790/- as additional income. 7. Ld. CIT(A) found that the learned Assessing Officer on examination of the books accepted the contention of the assessee that the cash seized by the Department as on the date of search is part of books of accounts and duly accounted as no addition was made on account of the seizure in the assessment order. Learned Assessing Officer, however, added only that sum which is introduced by the assessee to the tune of Rs. 1,73,40,790/- as unexplained money under section 69A of the Act and taxed the same under section 115 BBE of the Act. Basing on the submissions made by the assessee, Ld. CIT(A) found that the assessee effectively accepts the introduction of cash, but is confusing and incorrect in stating that the seized cash was considered unaccounted, but as a matter of fact, it is not the seized cash that was found unaccounted but it is the cash that was reintroduced that was held to be unaccounted money. According to the Ld. CIT(A) the assessee failed to establish any nexus between the unaccounted reintroduced amount and the business except making a statement. 8. Ld. CIT(A) observed that to stop the menace of introduction of black money to be masked as business income and to offer tax at lower rates, the legislature had introduced to section 115 BBE of the Act and since the reintroduced money stands unexplained, the same is liable for taxation under section 115 BBE of the Act whether the addition of money made in section 68 or 69A of the Act, the taxability lies under section 115 BBE of ITA No. 465/Hyd/2021 Page 5 of 7 the Act. Ld. CIT(A) accordingly confirmed the addition and application of section 115 BBE of the Act in the case of the assessee. 9. Aggrieved by the impugned order assessee preferred this appeal before us stating that the cash found was not unexplained money within the meaning of section 69A of the Act and the same is forming part of business receipts only. Learned AR argued that after the search, the assessee reduced the cash balance to the extent of Rs. 1,73,40,790/- but in order to give a quietus to the issue and to buy peace, the assessee offered the said amount as its income and therefore, increased the cash balance by Rs. 1,73,40,790/-. He therefore submits that the cash book of the assessee was continued with a balance of Rs. 1,75,15,646/- even after the cash seized by the Department, and the assessee paid the taxes by recording the same in the cash books. He submits that since the assessee had shown the additional amount in the cash book only to the extent of the money seized by the Department, since they declared the same, it cannot be said that the assessee had introduced the physical cash into the business to tax it at a higher rate. Lastly he submits that since the assessee had already disclosed the income of Rs. 1,73,40,790/- in order to give a quietus to the litigation and to buy peace from the Department and to avoid penalty and prosecution proceedings, there cannot be any higher rate of tax under section 115BBE of the Act in this case. 10. Per contra, Ld. DR submits that insofar as the amount that was seized by the Department, there is no dispute and the learned Assessing Officer made no addition in respect of the same. Such a cash represents the cash balance to the tune of Rs. 1,75,15,646/- to be found in the books of accounts one day prior to the date of search. Even according to the Ld. CIT(A) also the addition is only in respect of the amount of Rs. 1,73,40,790/- introduced by the assessee in the books on 29/1/2010 in the cash book before making the entry on 30/1/2019 ‘in respect of the cash seized by the IT department’. According to the authorities it’s not the cash that was seized on 30/1/2019 that is considered to be the unexplained ITA No. 465/Hyd/2021 Page 6 of 7 money. They took it as the cash generated by the business. However, the entire issue revolves around the cash that was introduced on 29/1/2019, namely, the date of survey. Except the statement of the assessee that the cash that was introduced on 29/1/2019 is business receipt, the authorities did not find any material to support that statement. Even before us also no material is produced. The cash seized by the Department is supported by the entries in the cash book by way of closing balance on 29/1/2019, but the source of the additional income introduced on 29/1/2019 is not established. Assessee says that except this business they do not have any other source of income. If that be so, its not known where from this additional income of Rs. 95,23,000/- in respect of the main branch and Rs. 78,17,790/- in respect of branch SR Nagar is generated to show in the cash book. Authorities found that this particular amount that was introduced by way of additional income is not business income since the business income is subsumed into the amount that was seized. We too have no material to take a different view. 11. In these circumstances, we find it difficult to hold that the view taken by the authorities below is either illegal or improper. We accordingly do not find any reasons to interfere with the considered findings of the authorities below. With this view of the matter, we dismiss the grounds of appeal. 12. In the result appeal of the assessee is dismissed. Order pronounced in the open court on this the 26 th day of October, 2022 Sd/- Sd/- (RAMA KANTA PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 26/10/2022 TNMM ITA No. 465/Hyd/2021 Page 7 of 7 Copy forwarded to: 1. M/s. Nanesh Finance Corporation, C/o. B. Narsing Rao & Co., Chartered Accountants, Plot No. 554, Road No. 92, Jubilee Hills, Hyderabad. 2. The ACIT, Central Circle-1(2), Hyderabad. 3. CIT(A)-11, Hyderabad. 4. Pr.CIT(Central)-Hyderabad. 5. DR, ITAT, Hyderabad. 6. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD
