SHAILENDRA RAMESHCHANDRA RATHI,PUNE V. ACIT CIRCLE-6(1), MUMBAI, NARIMAN POINT

ITA 2321/MUM/2025

AI Insights

The case revolves around an appeal by Shailendra Rameshchandra Rathi against the order of the Commissioner of Income Tax (Appeals) which sustained an addition of \\u20b911,14,117 under section 69A of the Income Tax Act, 1961, due to alleged unexplained cash found during a search. The Tribunal examined the explanations and documentation provided by the assessee, which included income tax returns and cash books of family members, and found them satisfactory. The Tribunal noted discrepancies in the CIT(A)'s acceptance of explanations for some family members while rejecting others without rational distinction. The Tribunal's decision emphasized the need for consistent application of legal principles and factual accuracy in tax assessments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785545 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2022-2023
• Appeal Filed On: 01-04-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A DHYANI
• Assessee Lawyers: NISHIT GANDHI AW
• Keywords: Gift; Search and seizure
• Section: 142(1); 132

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.2321/Mum/2025 (Assessment Year :2022-23) Shailendra Rameshchandra Rathi 203 Kumar Parisar B-3 Near Mahesh Vidhyala Kothrud, Pune- 411 038 Vs. ACIT Circle-6(1) Mumbai PAN/GIR No.AIJPR1004J (Appellant) .. (Respondent) Assessee by Shri Nishit Gandhi a/w Ms. Adnya Bhandari Revenue by Shri R A Dhyani, CIT DR Date of Hearing 11/09/2025 Date of Pronouncement 28/10/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The present appeal has been filed by the assessee against the order dated 28.03.2024 passed by the learned Commissioner of Income Tax (Appeals)–54, Mumbai [“CIT(A)”], arising out of the assessment framed by the Assistant Commissioner of Income Tax, Central Circle–6(1), Mumbai [“the AO”] for the assessment year 2022–23. By the impugned order, the learned CIT(A) partly allowed the appeal of the assessee and sustained an addition of ₹11,14,117/– Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 2 out of ₹14,99,617/– made under section 69A of the Act on account of alleged unexplained cash found during the course of search. 2. The assessee, being aggrieved by the partial confirmation, has come up in appeal before us, challenging the findings of the learned CIT(A) on the following grounds: (i) That the learned CIT(A) erred in confirming the addition of ₹11,14,117/– under section 69A of the Act out of ₹15,01,150/– being cash on hand found during the search; (ii) That the learned CIT(A) erred in refusing to grant credit of the cash balances of the assessee’s family members residing with him merely because his father and wife were not filing their returns of income; and (iii) That the appellant craves leave to add, alter or amend any of the grounds of appeal. 3. Both these grounds arise from a common issue namely, the addition made under section 69A for the alleged unexplained cash and are therefore being adjudicated together for the sake of convenience. 4. The relevant facts, as briefly recounted, are that the assessee is an individual engaged in consultancy business and deriving income from house property and other sources. He filed his return of income for the relevant year on Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 3 31.07.2022 declaring total income of ₹31,75,280/–. On 23.09.2021, a search and seizure action under section 132 of the Income Tax Act, 1961 was conducted in the “Middleman / Businessmen Group” of cases, and the assessee’s premises were also covered. Consequent thereto, the case was centralised and selected for compulsory scrutiny after obtaining prior approval from the Principal Commissioner of Income Tax (Central)–3, Mumbai. Statutory notices under sections 143(2) and 142(1) were duly issued and complied with. 5. During the course of search, cash aggregating to ₹15,01,150/– was found from locker No. 6114 maintained with Axis Bank, Kothrud Branch, Pune, of which ₹10,00,000/– was seized. When called upon to explain the source, the assessee submitted that the cash represented the cumulative household savings and cash balances available with himself and his family members, including his wife, his father, his mother, his sister-in-law, and also the partnership firm M/s Allegiance Developers LLP. The assessee further explained that a small portion of the cash was out of customary gifts received by him and his family members over several years from friends and relatives on various family and religious occasions. 5.1. The Assessing Officer, however, disregarded the explanation and considered only a nominal sum of ₹1,533/– Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 4 as the cash balance available in the hands of the assessee as per his books as on 22.09.2021, treating the remaining ₹14,99,471/– as unexplained cash and adding it under section 69A. 6. The assessee carried the matter in appeal before the learned CIT(A). Before him, the assessee reiterated his explanation and submitted a detailed reconciliation statement along with the cash books and returns of the family members. The chart furnished before the learned CIT(A) which is an integral part of the record demonstrated that the total cash available with the family members tallied with the amount found at the time of search. For ready reference, the chart as reproduced in the impugned order shall be incorporated below at the appropriate stage: Name Relation Cash balance as on 01.04.2021 per ROI for AY 2021-22 Balance of cash available as on date of search i.e. 23.09.2021 Credit for cash balance available is sought for Cash book enclosed at page no. of Appeal Paperbook Shailendra Rathi Self 1,99,533 1,533 1,533 Page 68 & 69 Gunjan Rathi Wife 1,02,689 3,67,589 3,67,589 Page 77 Allegiance Developers LLP Firm in which 35,500 35,500 35,500 Page 90 Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 5 assessee is a partner Geetadevi Rathi Mother 1,09,267 1,16,165 1,00,000 Page 106 Rameshchandra Rathi Father 4,02,763 4,77,601 4,00,000 Page 115 – 118 Jayshri Rathi Sister-in- law 3,11,410 2,71,554 2,50,000 Page 133 Total 11,61,181 12,69,942 11,54,622 Balance out of gift received by assessee, his wife and children on various occasions from relatives 3,46,528 Total cash on hand on date of search 15,01,150 7. After considering the submissions, the learned CIT(A) accepted part of the explanation to the extent of ₹3,85,500/– being the cash belonging to Smt. Geetadevi Rathi (mother – ₹1,00,000/–), Smt. Jayshri Rathi (sister-in-law – ₹2,50,000/–) and M/s Allegiance Developers LLP (₹35,500/–). However, he declined to accept the explanation regarding cash balances belonging to the assessee’s father, Shri Rameshchandra Rathi (₹4,00,000/–) and his wife, Smt. Gunjan Rathi (₹3,67,589/–) on the sole ground that they were not filing returns of Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 6 income. The learned CIT(A) also remained silent on the assessee’s submission that ₹3,46,528/– represented small gifts accumulated over time. Thus, the addition of ₹11,14,117/– came to be sustained. 8. Before us, the learned Authorised Representative of the assessee assailed the order of the learned CIT(A) as being factually erroneous and legally untenable. It was pointed out that both the father and the wife of the assessee were indeed filing their returns of income and that copies of such returns for A.Ys. 2021–22 and 2022–23, along with their balance sheets, cash books, and computations of income, had been produced before both the authorities. These clearly reflected the cash balances that were now being disbelieved. It was further contended that all the family members reside together in a common household, and that merely because the cash was found in one locker cannot lead to the inference that the entire amount belonged exclusively to the assessee. If any doubt persisted, the AO could have independently verified the explanation by summoning the father and wife, which was not done. Thus, the explanation remained unrebutted. 8.1. The learned counsel further contended that section 69A is a deeming provision and its application is contingent upon the AO recording dissatisfaction with the explanation offered by the assessee. In the present case, there is neither such dissatisfaction recorded nor any contrary material brought on Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 7 record. Therefore, the addition, it was urged, cannot stand in law. 9. The learned Departmental Representative, on the other hand, relied on the orders of the lower authorities and submitted that the cash was found in the locker maintained in the name of the assessee and, therefore, the onus was on him to prove the source to the satisfaction of the AO, which according to him was not discharged. 10. We have carefully considered the rival submissions and perused the record. On a close scrutiny of the documents placed before us, we find that the learned CIT(A)’s conclusion that the father and wife of the assessee were not income-tax filers is factually incorrect. The paper book contains copies of their income-tax returns for A.Ys. 2021–22 and 2022–23 along with balance sheets, profit and loss accounts, and cash books reflecting cash in hand of ₹4,77,601/– in the case of the father and ₹3,67,589/– in the case of the wife as on the date of search. These figures correspond precisely to those mentioned by the assessee in his explanation before the lower authorities. It is, therefore, beyond doubt that the explanation was fully supported by contemporaneous records, and the denial of credit for such cash was based on a factual misconception. Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 8 11. Once it is accepted that the family members were residing together and their books of account duly reflected such cash balances, there remains no reason to treat the same as unexplained in the hands of the assessee. The Revenue has not shown any material to demonstrate that the said cash was generated out of undisclosed income of the assessee or that the family members in whose names the balances appear were fictitious. It is also pertinent that the learned CIT(A) himself accepted similar explanations in respect of other family members and the firm on the same evidentiary basis. Such selective acceptance of part of the explanation while rejecting the rest, without any rational distinction, is inherently contradictory and unsustainable. 12. The concept of “unexplained money” under section 69A presupposes an ownership and possession of the asset coupled with a failure to satisfactorily explain its source. Here, the possession was joint and the explanation was detailed, documented and consistent with human probability. In the absence of any cogent rebuttal by the Department, the burden stands discharged. We, therefore, direct deletion of the addition of ₹4,00,000/– representing the cash of the assessee’s father and ₹3,67,589/– representing the cash of his wife. 13. Coming to the balance amount of ₹3,46,528/– which was claimed to be out of accumulated gifts received over the Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 9 years from friends and relatives, we find that both the authorities below have not recorded any adverse finding nor even adverted to this explanation. The assessee had stated that the gifts were small, customary and spread over time, a claim that accords with ordinary Indian family practice. In the absence of any material disproving it, and there being no dissatisfaction recorded as mandated by law, the addition on this count cannot survive. The discretion under section 69A has to be exercised judiciously, and such explanation, being natural and reasonable, ought to have been accepted. 14. Considering the totality of the circumstances, the nature of evidence adduced, and the absence of any contrary material, we find that the learned CIT(A) erred in sustaining the addition of ₹11,14,117/–. Each component of the sustained addition has been satisfactorily explained and supported by documentary evidence. Consequently, the entire addition sustained by the learned CIT(A) is hereby directed to be deleted in toto. 15. In the result, the appeal of the assessee is allowed. Order pronounced on 28th October, 2025. Sd/- (ARUN KHODPIA) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 28/10/2025 KARUNA, sr.ps Printed from counselvise.com ITA No.2321/Mum/2025 Shailendra Rameshchandra Rathi 10 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "