ITAT Delhi Quashes Section 69A Addition on Seized Cash Claimed by Family Members

During search and seizure operations at joint family residences, the discovery of cash and valuables often leads to complex attribution disputes. The assessing authorities frequently resort to apportioning the seized assets among the family members on an estimated or fractional basis. However, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has recently clarified that such mechanical division is legally unsustainable when specific ownership is established through corroborative evidence.

In the judicial pronouncement of Rishabh Agarwal Vs DCIT, the Tribunal held that cash recovered from a shared residential premises cannot be automatically assessed in the hands of one individual under Section 69A of the Income Tax Act 1961, provided other family members have explicitly claimed ownership of their respective shares and substantiated the same with sworn affidavits and personal books of account.

Background of the Search and Seizure Operations

The factual matrix of the case stems from a search and seizure action executed on 08.03.2022 at the premises belonging to the Sharda Group of Family and the Agarwal Family. During the course of these proceedings, the investigation wing discovered and seized unaccounted currency and jewellery.

Specifically, from the residential premises occupied by the Agarwal family, the search party found total cash amounting to ₹23,69,500.

When the matter reached the assessment stage for the Assessment Year 2022-23, the Assessing Officer (AO) adopted a fractional approach. The AO treated exactly one-half of the total seized cash, which amounted to ₹11,84,750, as the unexplained money of the assessee. Consequently, an addition was made under Section 69A of the Income Tax Act 1961. In addition to the cash component, the AO also made a separate addition of ₹8,03,469 on account of alleged unexplained jewellery. The final assessment order was passed under Section 143(3) of the Act on 26.03.2024.

Appellate Proceedings Before the CIT(A)

Aggrieved by the additions made in the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The first appellate authority undertook a detailed review of the explanations provided by the assessee and granted substantial relief.

Firstly, the CIT(A) completely deleted the addition of ₹8,03,469 pertaining to the alleged unexplained jewellery.