S. 68 of Income Tax Act not Invokable in absence of unexplained Amount in Bank Statement: Gujarat HC [Read Order]

In a recent case, the Gujarat High Court stated that there cannot be any income escapement by the assessee if there is no unexplained amount in the bank statement on record. The Court found that the reason given by the Assessing Officer for alleged escapement of Rs.3,25,00,000/- is not sustainable since there is no unexplained amount in the bank statement on record.

Amee Mahasukhlal Parekh , the assessee/petitioner is the legal heir of the late Mahasukhlal Navnidhlal Parekh, who filed an income tax return for the year 2015-16 on 31.08.2015. Mahasukhlal passed away on 30.09.2019. A reassessment notice under Section 148 of the Income Tax Act was issued for the 2015-16 tax year.

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The authorities issued an order and notice in July 2022, claiming that Rs. 3.25 crore was unaccounted for from a loan his late father had given in 2015, leading to the reassessment.The assessee has challenged the notice issued under Section 148 of the Income Tax Act, 1961 before the High Court. It was contended that the loan was given on 04.09.2014 and it was repaid on 21.09.2015 and therefore there cannot be any escapement of income for the year under consideration.

Section 148 of the Income Tax Act, 1961 gives the Assessing Officer the power to reassess tax returns if income is inaccurately reported. Notice is sent under Section 148 or 148A for reassessment. Section 68 of the Income Tax Act, 1961 requires taxpayers to provide explanations for any cash credits that can raise concerns about their authenticity or source.

The division bench of Justice Bhargav D. Karia and Mauna M. Bhatt observed that there is no escapement of income since the amount was received by the late father of the assessee on 04.09.2014 from Mr. Hardik Parekh and was paid by NEFT to Ms. Darshana Doshi on the same day. Similarly, the amount was received back on 19.09.2015 from Ms. Darshana Doshi and returned to Mr. Hardik Parekh. In such circumstances, there is no escapement of income of the late father of the assessee is concerned.

While allowing the appeal, the court held that the reason given by the Assessing Officer for alleged escapement of Rs.3,25,00,000/- is therefore not sustainable since there is no unexplained amount in the bank statement on record since the assessee did not retain the amount of Rs.3,25,00,000/- and as such the ingredients of Section 68 are not attracted.

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SN Divatia appeared for the petitioner and Karan G Sanghani appeared for the respondent.

To Read the full text of the Order CLICK HERE

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