ITAT Grants Partial Relief on Cash Seized from Locker; Addition Restricted to Rs. 20 Lakhs

ITAT Grants Partial Relief on Cash Seized from Locker; Addition Restricted to Rs. 20 Lakhs

Issue

Whether the addition of Rs. 27,50,000/- made under Section 69A (unexplained money) for cash found in the assessee’s locker during a search operation should be upheld, or if the assessee’s explanation of past business savings merits partial acceptance, especially when the CIT(A) has already granted a minor relief.

Facts

• Search: A search and seizure operation was conducted on 11.12.2018 in the Faquir Chand Lockers group. The assessee’s locker (No. 186) was searched, and cash amounting to Rs. 27,50,000/- was seized.

• Assessment: The assessee did not file a return under Section 139 for the search year (AY 2019-20) initially. In response to notices, a return declaring income of Rs. 2,74,610/- was filed.

• Assessee’s Explanation: The assessee claimed to be a petty trader of dry fruits in Khari Baoli, Delhi, and stated the cash represented “life time savings” from this business.

• AO’s Addition: The AO rejected the explanation, noting:

  • The assessee was a non-filer throughout his life.

  • No documentary evidence of business (purchase/sales/godown) was produced.

  • The seized cash was in new currency notes, which contradicted the claim of old accumulated savings (given demonetization in 2016).

  • The AO treated the entire Rs. 27.50 lakhs as unexplained money under Section 69A read with Section 115BBE.

• CIT(A)’s Relief: The CIT(A) upheld the AO’s reasoning but granted a small benefit of Rs. 2,50,000/- for past savings considering the assessee’s age, sustaining an addition of Rs. 25,00,000/-.

Decision

• The Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeal.

• Ex-Parte Proceedings: The Tribunal noted the assessee’s non-appearance but proceeded to decide the case on merits based on the records.

• Partial Merit Found: The Tribunal acknowledged that since the assessee was admittedly engaged in the dry fruit business, the possibility of “past accumulated business profits” and “cash turnover” could not be completely ruled out.

• Further Relief: To balance the lack of concrete proof with the probability of business savings, the Tribunal granted a further relief of Rs. 5,00,000/- (in addition to the CIT(A)’s relief).

• Final Addition: The addition was restricted to Rs. 20,00,000/-. The Tribunal clarified that this decision was based on “peculiar facts” and should not set a precedent.

Key Takeaways

• Unexplained Money (Sec 69A): Cash found in possession (locker) not recorded in books is deemed income if the explanation is unsatisfactory. The burden is on the assessee to prove the source.

• New Currency Notes: The presence of new currency notes post-demonetization weakens the argument of “life-time savings” accumulated over decades, unless the conversion from old to new notes is explained.

• Estimation in Absence of Proof: Even when documentary evidence is weak, appellate authorities may grant partial relief based on human probabilities (age, occupation) to estimate reasonable savings.

• Ex-Parte Decision: Tribunals can decide appeals ex-parte on merits if the appellant fails to appear despite notice.

INCOME TAX APPELLATE TRIBUNAL,
DELHI BENCH: ‘G’ NEW DELHI
Sh. Satya Narain Bari,
J324B, J Block 4, Pusta
Kartar Nagar, Jagjit Nagar
S.O., East Delhi,Delhi
Vs. DCIT,
Central Circle-20,New Delhi
ITA No.296/Del/2024
Date of pronouncement 03.11.2025