The Income Tax Appellate Tribunal's ruling in Shahzeb Khan v. ACIT establishes a critical boundary on the Revenue's power to attribute unexplained cash to an assessee based solely on familial relationships. This judgment reinforces that mere proximity of ownership - such as a spouse holding a locker - is insufficient to trigger Section 69A of the Income Tax Act. The decision provides much-needed clarity for taxpayers and practitioners navigating search and seizure proceedings.
Background & Facts
The Dispute
The dispute arose from a search operation conducted under Section 132 of the Income Tax Act on 10.01.2023 at premises linked to the Goyal Gas Group. During the search, cash aggregating Rs. 25,00,000 was seized from two bank lockers: one jointly held by the assessee and his wife, and another held solely in the name of his wife. The Assessing Officer treated the entire amount as unexplained income in the assessee’s hands under Section 69A, despite no direct evidence linking the cash to the assessee’s undisclosed sources.
Procedural History
- 10.01.2023: Search conducted under Section 132; cash seized from two lockers
- 23.07.2023: Assessee filed return declaring income of Rs. 19,01,380
- 30.08.2025: Ld. CIT(A) upheld addition of Rs. 25,00,000 under Section 69A
- 18.02.2026: ITAT Delhi allowed the appeal and deleted the addition
Relief Sought
The assessee sought deletion of the addition of Rs. 25,00,000 under Section 69A, arguing that: (1) the locker in his wife’s name (No. 85) could not be attributed to him without proof of ownership, and (2) the cash in the jointly held locker (No. 883) had not been operated since 2020, making it impossible to treat it as income of AY 2023-24.
The Legal Issue
The central question was whether Section 69A permits the attribution of cash found in a bank locker held solely or jointly by a spouse to the assessee in the absence of independent evidence establishing the assessee’s ownership, possession, or control over the cash.
Arguments Presented
For the Appellant
The assessee’s counsel argued that: (1) Section 132(4A) applies only to the actual owner or custodian of the locker, and since Locker No. 85 was in the sole name of the wife, no presumption could be raised against the assessee; (2) the last operation of Locker No. 883 was on 29.02.2020, well before the assessment year, negating any link to AY 2023-24; (3) the Revenue failed to discharge its burden to prove the cash belonged to the assessee, relying instead on conjecture; and (4) precedents like Pushpa Vadra v. ITO and DCIT v. Ashok Kumar Gupta supported the position that ownership must be independently established.
For the Respondent
The Revenue contended that the wife’s statement during the search, wherein she admitted the cash in her locker was kept at the assessee’s behest, was sufficient to establish constructive ownership. It further argued that the assessee’s failure to provide documentary proof of the source rendered the explanation unacceptable, and that the joint nature of Locker No. 883 justified attribution.
The Court's Analysis
The Tribunal rejected the Revenue’s reliance on spousal relationship as a proxy for ownership. It emphasized that Section 69A requires proof that the unexplained cash "belongs to" the assessee - not merely that it was found in proximity to him. The Court noted that the Revenue’s burden under Section 69A is not discharged by mere suspicion or third-party statements.
"In the absence of any independent material showing that the cash found therein 'belongs to' the assessee, no addition can be made in the hands of the assessee merely because the locker-holder is the spouse."
Regarding Locker No. 883, the Tribunal gave decisive weight to the bank’s official record showing the last operation was on 29.02.2020. This contemporaneous evidence, the Court held, effectively severed any nexus between the cash and the assessment year 2023-24. The mere fact that the locker was jointly held did not override the temporal disconnect.
The Tribunal also distinguished between possession and ownership. While the wife’s statement may have indicated the cash was kept at the assessee’s direction, this alone did not establish legal ownership. The Revenue failed to produce any ledger entries, corporate resolutions, or financial records linking the cash to the assessee’s income or assets.
The Court affirmed the principle from Pushpa Vadra and Ashok Kumar Gupta: Section 132(4A) cannot be invoked against a person who is neither the name-holder nor the custodian of the seized assets. The burden remains on the Revenue to prove ownership, not on the assessee to disprove it.
The Verdict
The assessee won. The Tribunal held that Section 69A cannot be applied to attribute cash found in a spouse’s individual locker without independent evidence of ownership, and that cash in a jointly held locker cannot be treated as income of the current year if the locker had not been operated for over three years. The addition of Rs. 25,00,000 was deleted in full.
What This Means For Similar Cases
Ownership Must Be Proven, Not Presumed
- Practitioners must challenge any addition under Section 69A based solely on spousal or familial ties
- The Revenue must produce documentary evidence - bank statements, corporate records, or transaction trails - linking the cash to the assessee
- Oral statements by third parties, even spouses, are insufficient without corroboration
Temporal Disconnection Defeats Presumption
- If bank records show a locker was inactive for multiple years prior to search, the cash cannot be presumed to be income of the current assessment year
- Practitioners should immediately obtain bank operation records during search proceedings to establish this critical timeline
- This creates a strong ground for appeal in cases involving long-dormant lockers
Section 132(4A) Is Not a Blanket Tool
- The presumption under Section 132(4A) applies only to the person whose name is on the locker or who is shown to be its custodian
- Assessing Officers cannot extend this presumption to non-holders, even if they are family members
- This limits the Revenue’s ability to use search operations to cast a wide net of liability
