Commissioner of Income Tax vs Mohd. Shahid

The Revenue has filed this appeal u/s 260A of the Income Tax Act, 1961 (Act) against the order dated 15th May, 2007 passed by the Income Tax Appellate Tribunal, Delhi Bench H, New Delhi (Tribunal) in I.T.(S.S.) 219/Del/2005 for the block period ending 5th May, 2002. On 5th May, 2002 the residential premises of the assessee were searched and cash of Rs. 1,41,94,600/- was recovered. A notice u/s 158BC of the Act was sent to the assessee seeking an explanation for the Cash found. The assessee''s explanation for some of the amounts was accepted but the explanation in regard to Rs. 16,75,000/- which according to the assessee belonged to the proprietary firm of Jama Cloth House was rejected by the Assessing Officer (AO). The amount was directed to be added to the undisclosed income of the assessee for the block period.

Allowing the assessee s appeal against the assessment order, the Commissioner of Income Tax (Appeals) CIT(A) deleted the addition after concluding that the explanation given by the assessee was convincing and further that the AO had not found any discrepancy in the books of accounts maintained by the assessee or in the books of accounts of the creditors of M/s. Jama Cloth House.

The Revenue''s appeal was dismissed by the Tribunal by observing that the assessee had produced the books of accounts which explained the availability of cash. It was held that the mere fact that the balance sheets of the assessee for the period ending 31st March 1999, 31st March 2000 and 31st March 2001 showed small amounts of cash and no trade creditors could not, ipso facto, be used to doubt the genuineness of the explanation offered by the assessee. In fact the assessee offered Rs. 1,24,26,000/- for tax which had been accepted by the Revenue without dispute. Accordingly, the Tribunal confirmed the order of the CIT(A) and dismissed the appeal preferred by the Revenue.

It is contended by Ms. Prem Lata Bansal, learned Senior Standing Counsel for the Revenue that the AO had listed out the reasons for making the addition of Rs. 16,75,000/- as undisclosed income of the assessee and, that the orders of the CIT(A) and Tribunal were unsustainable in law.

are unable to accept the submission of learned counsel for the Revenue. The view taken by the CIT(A) as regards the reasonableness of the explanation offered by the assessee, was in the facts and circumstances of the case, a possible one. The fact remains that Jama Cloth House is a separate entity and the assessee itself did not have cash in hand of more than Rs. 10,000/- as per any of the balance sheets produced by it. The AO could not have rejected the explanation in toto particularly where the assessee had himself declared an income of Rs. 1,24,26,000/- for the period under consideration. For the AO to reject the explanation of the Assessee, the Revenue had to show that the amount of Rs. 16.75 lakhs in fact constituted the undisclosed income of the assessee. The Revenue has been unable to do so before the CIT(A) or the Tribunal or even before us.

So substantial question of law arises. Dismissed.