Income Tax Appellate Tribunal decides on unexplained cash addition in M/s Creamy Foods Ltd case

Case Name:

ITA No. 2179/DEL/2022 [A.Y. 2018-19] - The Dy. C.I.T Vs. M/s Creamy Foods Ltd

Key Takeaways:

1. The addition of unexplained cash found during a search and seizure operation was the main issue in this case. The assessee argued that the cash found belonged to various companies/concerns of the SMC group and was available in their cash books.
2. The Commissioner of Income Tax (Appeals) accepted the assessee’s explanation and directed the Assessing Officer to restrict the addition.
3. The Income Tax Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and sustained the addition to a reduced extent.
4. The Tribunal noted that certain cash found from different premises could not be considered as found from the same premises and excluded it from the addition.

Case Synopsis:

This is an order from the Income Tax Appellate Tribunal, Delhi ‘B’ Bench, New Delhi, in the case of ITA No. 2179/DEL/2022 [A.Y. 2018-19] between The Dy. C.I.T and M/s Creamy Foods Ltd. The order was pronounced on 6th December 2023.

The main issue in this case relates to the addition of unexplained cash found during a search and seizure operation conducted on 21st November 2017 in the SMC group of cases. During the search, cash amounting to Rs. 2,65,31,500/- was found from the premises, out of which cash of Rs. 2,09,99,150/- was seized.

The Assessing Officer treated the cash of Rs. 2,65,31,500/- as unexplained money and added it under section 69A (of Income Tax Act, 1961) of the Income Tax Act. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)] and explained that the cash found belonged to various companies/concerns of the SMC group and was available in the cash book of those companies/concerns. The assessee provided necessary details and cash account statements of the respective companies/concerns to the CIT(A).

After considering the facts and submissions, the CIT(A) observed that the sole ground for making the addition by the Assessing Officer was that the Accountant, Shri Pradeep Mishra, could not explain the entire cash found. The CIT(A) also noted that there were other concerns operating from the same premises, and the cash balance in those concerns was not taken into account while making the addition.

The CIT(A) verified the availability of cash with different companies/ concerns of the SMC group and concluded that cash belonging to Triaksh Education Pvt Ltd and Bharat Bhushan Infratech Pvt Ltd, which were found from different premises, cannot be considered as cash found from the premises belonging to the group concerns. The CIT(A) directed the Assessing Officer to sustain the addition to the extent of Rs. 12,79,368/- and deleted the balance.

Both the revenue and the assessee appealed to the Income Tax Appellate Tribunal. The Tribunal carefully perused the orders of the authorities below and agreed with the CIT(A) that the cash belonging to Triaksh Education Pvt Ltd and Bharat Bhushan Infratech Pvt Ltd cannot be considered as found from the same premises. Therefore, the Tribunal sustained the addition to the extent of Rs. 2,45,262/- and directed the Assessing Officer to restrict the addition to that amount.

The Tribunal also noted that the total availability of cash in the hands of the group concerns, after reducing the addition, was Rs. 2,64,09,136/-. The Assessing Officer had made an addition of Rs. 2,65,31,500/-, leaving a deficit of Rs. 1,22,364/-. However, it was also accepted that Rs. 5,71,500/- belonged to SMC Foods. Therefore, the Tribunal concluded that the availability of cash with the different companies/concerns was sufficient to explain the cash found during the search.

In conclusion, the appeal of the assessee was partly allowed, and the appeal of the revenue was dismissed. The Tribunal did not find any merit in the contention of the revenue that the issue should be restored to the file of the Assessing Officer for verification, as the details and documents were already before the Assessing Officer during the assessment proceedings.

FAQ:

Q1: What was the main issue in the case?

A1: The main issue was the addition of unexplained cash found during a search and seizure operation.

Q2: What was the decision of the Commissioner of Income Tax (Appeals)?

A2: The Commissioner of Income Tax (Appeals) accepted the assessee’s explanation and directed the Assessing Officer to restrict the addition.

Q3: What was the decision of the Income Tax Appellate Tribunal?

A3: The Income Tax Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and sustained the addition to a reduced extent.

Q4: What was the reason for reducing the addition?

A4: The Tribunal concluded that certain cash found from different premises could not be considered as found from the same premises and excluded it from the addition.