income tax
The Income Tax Appellate Tribunal (ITAT) Ahmedabad has ruled in favor of Hitesh Jaysingbhai Purohit, quashing an addition of ₹10,09,750 made by the Assessing Officer (AO) under Section 69A of the Income Tax Act for the Assessment Year 2017-18. The AO initially included this amount, resulting from cash deposits during the demonetization period, as unexplained cash credits. Purohit, who reported a professional income of ₹3,04,500, stated that these deposits originated from his regular tuition income, accrued in the current and previous years, as well as ₹3.5 lakhs received as gifts during his marriage. Purohit also substantiated his position with an opening cash balance of ₹5,16,400, which went unchallenged by the revenue authorities.
Upon reviewing the evidence submitted by Purohit, which included detailed accounts and an affidavit, the ITAT concluded that the sources of the cash deposits were sufficiently explained. The tribunal confirmed the legitimacy of the opening cash balance, tuition income, and marriage gifts, thereby nullifying the need for any addition under Section 69A. Additionally, the ITAT addressed the AO's reference to Section 115BBE, which imposes a higher tax rate on unexplained income, noting the absence of a specific show cause notice related to this provision.
As a result, the ITAT upheld Purohit’s appeal and removed the disputed addition made by the AO and confirmed by the NFAC. This decision underscores the essential role of thorough evidence examination and procedural fairness in tax assessments, particularly concerning cash deposits linked to major financial events like demonetization.
This appeal has been filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeal)/National Faceless Appeal Centre (NFAC), Delhi, dated 30.03.2024, relating to the Assessment Year 2017-18.
The order issued under Section 250 on 30.03.2024 for AY 2017-18 by CIT(A) – NFAC, Delhi, upholding the additions of ₹10,09,750 is claimed to be wholly illegal, unlawful, and against the principles of natural justice.
The Ld. CIT(A) has severely erred in law and fact by neglecting to fully consider the unique circumstances and evidence concerning the disputed additions.
The Ld. CIT(A) failed to conduct any inquiry regarding the applicability of Income Tax Act provisions, thereby violating principles of natural justice. Thus, the appellant should be allowed the opportunity to present additional evidence.
The Ld. CIT(A) has erred in upholding the addition of ₹10,09,750 under Section 69A and should not have confirmed this addition.
Furthermore, the Ld. CIT(A) has wrongly supported the application of Section 115BBE, which imposes a higher tax rate on the unexplained income, despite the AO not issuing a specific show cause notice regarding this section.
Consequently, the appellant requests the deletion of the addition/disallowances made by the Ld. AO and affirmed by the CIT(A), in the interests of natural justice and considering the unique facts of the case.
The appellant, an individual with professional income, submitted a return of income amounting to ₹3,04,500 on 03.08.2017 for AY 2017-18. During assessment, the AO observed cash deposits of ₹10,09,750 in the Indusind Bank account during the demonetization period. In the absence of a response, the AO added the entire amount in the order dated 25.11.2019.
Aggrieved, the appellant appealed to the First Appellate Authority. During this process, the appellant clarified that the cash deposits stemmed from regular tuition income earned during the relevant year and in prior years, as well as marriage gifts totaling ₹3.5 lakhs. The appellant submitted detailed accounts and an affidavit to validate this claim. The opening cash balance of ₹5,16,400 was acknowledged without dispute.
Considering the opening balance, tuition income, and wedding gifts, the ITAT found no justification for any addition under Section 69A.