Failure to Establish Source of Income: ITAT restricts Addition of Income to 25% [Read Order]

The Chennai bench of Income Tax Appellate Tribunal (ITAT) has recently restricted the addition of unestablished income to 25% noting that the assessee failed to establish the source of the said income amounting to ₹13.39 lacs.

Read more: Condition of Proving ‘Source of Source of Funds’ under 68 not applicable to Non-Residents: ITAT deletes Income Tax Addition

The assessee, Sundarrajan Venkatesh Kumar, who used to work as a contractor filed an income tax appeal against the order passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi confirming the addition of income of ₹13.39 lacs by the Assessing Officer (AO).

The factual matrix of the case follows events that occurred during the demonetization period in India. The Appellant-assessee had deposited cash of ₹13.39 lacs in his bank account during the said period.

Read more:Assessee has Sufficient Source of Income beyond Doubt for Investment in Immovable Property: ITAT deletes Addition for Unexplained Source of Income

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When the matter was scrutinized by the Assessing Officer (AO) it was noted that the assessee failed to establish the source of the said cash deposits. Hence the AO proceeded to add the disputed amount towards the income of the assessee. Furthermore, the assessee offered to pay income tax on presumptive basis @8% of total turnover of Rs.74.26 Lacs.

The assessee filed an appeal before the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi who affirmed the findings of the AO. Hence, the present appeal was filed by the assessee.     

The Authorised Representative of the assessee, T.S. Lakshmi Venkatraman pleaded for reasonable estimation of income on cash deposit which was opposed by the Departmental Representative T.M. Suganthamala.

The bench comprising Manoj Kumar Aggarwal (Accountant Member) and Manu Kumar Giri (Judicial Member) observed that though the assessee contended that the deposits were sourced out of contractual receipts, the same was not established by him. Hence, the income was estimated at 25% of ₹13.39 lacs amounting to ₹3,34,750/-.

Thus, the appeal was partly allowed. The Assessing Officer was directed to consider the assessee’s eligibility for deduction under Chapter VIA. 

To Read the full text of the Order CLICK HERE

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