Ramachandra Kanu Mendadkar v. CIT(A)

Case snapshot

Sections / provisions: 69A; 44AB; 131(1A)

Questions before the Court / Tribunal

• Section 69A cash seizure from a practising advocate: books, bank withdrawals, professional receipts and impermissible demand to prove source of source.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

Ramchandra Kanu Mendadkar Vs. CIT(Appeals) 38/A OM Vedant, Kamgar Nagar, Mumbai. S.G. Barve Marg, Kulra, Mumbai. PAN/GIR No. AGAPM 6825 B (Appellant) .. (Respondent)

Assessee by Shri Dipesh Poptani Revenue by Smt. Mahita Nair, (Sr. AR-CIT)

2. The assessee has raised following grounds of appeal:- “1. Ld. CIT(A) has decided appeal with a closed mind & without considering facts and circumstances of the case. 2. Ld. CIT(A) has erred to disbelieve the confirmation of Appellants’ client, Mr. Sagun Naik having deposited cash of Rs. 6,00,000/- with Appellant for his matter in Supreme Court. 3. Ld. CIT(A) cannot demand explanation of source of the amount received from Mr. Sagun Naik.

4. Ld. CIT(A) has disbelieved receipt of Rs. 16,90,000/- during July, 2018 in comparison to total receipts of Rs. 50,40,000/- during FY 2018-19 only on the basis of surmises. 5. Ld. CIT(A) has erred to disbelieve the possession of Cash of Rs. 16,00,000/- in July 2018 in cash summary & raised objections of not transferring it digitally only due to assumptions and surmises. 6. Appellant’s explanation for possessing cash and evidences in support of attending matters in Supreme Court have been ignored and glossed over without considering the merit in the case. 7. The amount received by the Appellant from Mr. Biren Limbachiya Rs. 140 Lacs was duly accounted for in the audited books of account and hence, section 69A cannot be invoked for the same. 8. Appellant craves leave to add, order and deleted any or all the grounds of Appeal.”

3. The assessee is a practicing Advocate appearing in various Courts in and around Mumbai representing his clients in various streams of litigation for more than 35 years. The assessee has maintained regular books of accounts which are audited u/s 44AB of the Income Tax Act (‘Act’). The assessee filed the return of income for assessment year 2019-20 on 30.09.2019 declaring income of Rs. 41,26,500/-. The assessee on 16.07.2018 was travelling by Vistara Airlines from Mumbai to Delhi to attend two matters in Hon’ble Supreme Court listed on 17.07.2018. At the airport, the assessee was intercepted and was searched. During the search proceedings the Officer found currency of note of Rs. 16,00,000/- and the same was recorded punchnamma. The summons U/s 131(A) of the Act was issued to the assessee for reccording statement in respect of seizure of cash of Rs. 16,00,000/-. The assessee submitted that on instruction from his client Shri Biren Limbachiya and Shri Sagun Naik the assessee was to engage the senior counsel with the help of Advocate on records of the Hon’ble Supreme Court Mr. Sudhanshu Choudhari. There was a requirement by above mentioned Advocate on record that the assessee shall…

Appellant / assessee submissions

3. The assessee is a practicing Advocate appearing in various Courts in and around Mumbai representing his clients in various streams of litigation for more than 35 years. The assessee has maintained regular books of accounts which are audited u/s 44AB of the Income Tax Act (‘Act’). The assessee filed the return of income for assessment year 2019-20 on 30.09.2019 declaring income of Rs. 41,26,500/-. The assessee on 16.07.2018 was travelling by Vistara Airlines from Mumbai to Delhi to attend two matters in Hon’ble Supreme Court listed on 17.07.2018. At the airport, the assessee was intercepted and was searched. During the search proceedings the Officer found currency of note of Rs. 16,00,000/- and the same was recorded punchnamma. The summons U/s 131(A) of the Act was issued to the assessee for reccording statement in respect of seizure of cash of Rs. 16,00,000/-. The assessee submitted that on instruction from his client Shri Biren Limbachiya and Shri Sagun Naik the assessee was to engage the senior counsel with the help of Advocate on records of the Hon’ble Supreme Court Mr. Sudhanshu Choudhari. There was a requirement by above mentioned Advocate on record that the assessee shall…

to argue the cases of the assessee client. The assessee further submitted that the amount of Rs. 16,00,000/- included fees of Rs. 10,00,000/- paid by his client Mr. Biren Limbachiya through various cheques from time to time and Rs. 6,00,000/- fees were paid by Shri Sagun Naik of which Rs. 25,000/- Is through cheque and Rs. 5,75,000/- by cash on various dates. The assessee submitted before the authorities that all these transactions were properly recorded in his books of accounts regularly maintained which are subject to statutory audited u/s 44AB of the Act. It was further submitted that the amounts were received during the course of his profession and see relate to any undisclosed income. A notice u/s 143(2) of the Act was issued and the assessee reiterated the submission made before the ADIT-Investigation to the Assessing Officer.

7. The ld. AR submitted that with regard to amount received from Shri Sagun Naik the assessee has given the date wise breakup of receipt of fees in cash which would tie up with the cash book and the ledger accounts of professional fees. The ld. AR further submitted that Mr. Sagun Naik has confirmed having made this payment and the same along with his PAN Number and other details were already submitted before the lower authorities. With regard to amount received from Shri Biren Limbachiya the ld. AR submitted entire amount of fees is received in cheque and has been properly accountant in the books of accounts. The ld. AR further submitted that the assessee had withdrawn cash on various dates prior to travel Delhi which can be evidenced from the bank statement and the cash books that are submitted before the lower authorities. The ld. AR also submitted that both these amounts have been included in the professional fee income of the assessee and have been included in the taxable income. It is therefore, submitted that the same cannot be treated as undisclosed income.

8. The ld. DR on the other hand submitted that the assessee has carried the cash balance of Rs. 16,00,000/- which could not be reconciled with the cash withdrawals and receipt of professional fee in cash book and therefore the lower authorities are correct in treating the same undisclosed.

Revenue / respondent submissions

The packaged judgment does not separately label the respondent's submissions in an independently extractable passage. No contention is inferred; read the full order.

Court / Tribunal analysis and reasoning

9. We have heard both the parties and perused the material available on record. To recapitulate the fact that the submission of the assessee is that he carried a cash balance of Rs. 16,00,000/- in order to pay the Senior Counsel in Delhi where the case of his clients are listed before the Hon’ble Supreme Court. The assessee further submitted that the source for the cash is from the professional fees which have been counted in the books of accounts. On perusal of records we notice that the assessee has submitted the cash book, bank statement and ledger copy of professional fees etc. before the lower authorities. It is also noticed the date wise breakup of fee received in cash from Mr. Sagun Naik and the receipt of professional fee in cheque from Mr.Biren Limbachiya have also been submitted before the lower authorities. The details submitted by the assessee before the lower authorities is extracted herein below:- Fees from Mr. Sagun Naik Date Cash receipt 03-Apr-18 65,000 05-Jun-18 1,00,000 02-Jul-18 50,000 05-Jul-18 1,00,000 08-Jul-18 1,00,000 10-Jul-18 50,000 14-Jul-18 1,00,000 15-Jul-18 10,000 Total 5,75,000

Operative decision and relief

11. In the result, the appeal of the assessee is allowed.

Ratio and legal principle

• Where cash is reconciled to audited books and disclosed professional receipts with the immediate source identified, section 69A cannot be sustained merely by demanding proof of the source of the source without contrary material.
• The evidentiary force of contemporaneous audited books and disclosed receipts must be evaluated before labelling seized cash unexplained.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with section 69a cash seizure from a practising advocate: books, bank withdrawals, professional receipts and impermissible demand to prove source of source. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• 69A - apply the exact version considered in the judgment.
• 44AB - apply the exact version considered in the judgment.
• 131(1A) - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• SANJAY VRAJLAL KOTHARI V ITO 25(2)(3), MUMBAI - ITAT Mumbai - G Bench
• ACIT v Ramlal Jewellers Pvt. Ltd. - ITAT Mumbai - D Bench
• Krishna D. Pawar v. ITO - ITAT Mumbai

Different outcome / possible distinction

• No source-reviewed contrasting case is linked yet.

Full judgment and source control

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