Tax Raid Uncovers Rs 1.12 Crore in Cash and Rs 4.34 Lakh in Foreign Currency at Delhi Residence
An income tax raid in Delhi uncovered Rs 1.12 crore in Indian currency and Rs 4.34 lakh in foreign currency at a man’s residence. The Income Tax Department conducted the search a few months after demonetisation, leading to the man’s questioning by tax authorities. He claimed the cash was withdrawn by his company from multiple bank accounts due to concerns over further actions following demonetisation.
Case Background
The man, a company director, explained that the large cash holding was a precautionary measure. His advocates informed the Income Tax Investigation Officers that the foreign currency belonged to his sister-in-law, who worked for an airline and lived in the same house. She provided a written statement confirming that she had entrusted the foreign currency to him for safekeeping after her travels. The investigation team accepted her explanation and chose not to seize the foreign currency.
However, the Assessing Officer (AO) at Jhandewalan Central Circle disagreed, classifying both the Indian cash and foreign currency as unexplained money under Section 69A and subjecting it to tax under Section 115BBE. The man later appealed this decision before the ITAT Delhi.
Legal Proceedings
The Income Tax Commissioner of Appeals (CIT(A)) found that the company had accurately recorded the cash amount in its books. Consequently, the CIT(A) removed the Rs 1.12 crore from the man’s taxable income. In 2023, the ITAT Delhi upheld this decision but did not accept the explanation regarding the foreign currency, citing a lack of evidence proving ownership by the sister-in-law. The tribunal directed that the foreign currency be added to the man’s income for tax purposes.
In a subsequent appeal in 2026, the ITAT Delhi ruled in favor of the man, stating that the AO had not adequately countered his arguments regarding the foreign currency’s ownership. The tribunal noted that the sister-in-law’s employment and her written confirmation supported the man’s case. Ultimately, the man received favorable rulings in both matters: the cash dispute in 2023 and the foreign currency case in 2026.
Shourya Garg, an advocate at Garg & Garg Tax Associates, stated that the man succeeded because he provided a credible explanation backed by evidence. The investigation officers’ acceptance of the sister-in-law’s explanation during the raid further bolstered his position. Garg emphasized that possession alone does not establish ownership when credible documentation exists.
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