The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that income tax addition not maintainable in the hands of the employee when the employee was merely handling the cash on behalf of the employer.

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that income tax addition not maintainable in the hands of the employee when the employee was merely handling the cash on behalf of the employer.

During the course of the search, cash to the tune of ₹.4,66,73,200/- was found in the premises of the assessee, Shri Mukesh Gupta. When questioned about the source of the said cash, the assessee stated that the cash lying in his residence was given to him by Shri Premchand Ashok Kamble (Mr. PAK), and Mr. PAK is the Proprietor of M/s. Unique Finance. Further, it was stated by the assessee that Mr. PAK was involved in various business activities but the exact details of the business activity from which the cash had come from were not known to him.

However, the department treated the unexplained payments as income of the assessee and made an addition.

The assessee also provided the office details of M/s. Unique Finance. Further, it was stated that his nature of duties includes looking after the cash and bank transactions of M/s. Unique Finance under the instructions of Mr. PAK.

After considering the arguments from both sides, a two-Member bench comprising Shri Kuldip Singh (Judicial Member) and Shri S. Rifaur Rahman, (Accountant Member) observed that it is fact on record that assessee is only an employee of M/s. Unique Finance and having no established source of income, except that he has handled the cash on behalf of Mr. PAK and it is also fact on record by the investigating authority as well as assessing authority that assessee has handled all the cash on behalf of Mr. PAK and he is one of the trusted employee of Mr. PAK.

Granting relief to the assessee, the ITAT held that “Therefore, it clearly indicates that assessee has no means to make such undisclosed payments and any addition has to be made only in the hands of his employer or the Assessing Officer has to bring on record a cogent material in support of making the addition that assessee has direct relationship with above said parties. Considering the fact on record it can only be presumed that assessee has acted on the behest of Mr. PAK only, therefore these payments are also to be added in the hands of the employer not in the hands of the employee, who does not have any means.”

Mukesh Gupta Vs ACIT – Central Circle – 1 Thane

Case Number:   ITA NOs. 883, 884, 885 & 886/MUM/2022

Date of Judgement:   28.11.2022