The Pune Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition of ₹21.69 lakh treating credit card payments as unexplained investment under section 69C of Income Tax Act,1961.

Mahendra Prakash Pawar,appellant-assessee,was a salaried employee of M.S. Agri Marketing Board, Pune, and declared an income of Rs.7,93,910/- for A.Y. 2017-18, filing the return on 20.05.2017. His case was selected for limited scrutiny under CASS due to credit card payments. Notices under sections 143(2) and 142(1) were issued and served.

The Assessing Officer(AO) noted that the appellant had made total credit card payments of Rs.21,69,933/- to IndusInd Bank (Rs.9,73,444/-), Syndicate Bank (Rs.10,49,989/-), and ICICI Bank (Rs.14,65,500/-).

The AO noted that the outstanding credit card payments to IndusInd Bank and Syndicate Bank had been made in cash and asked the assessee to explain the source of the funds. The assessee stated that his brother, Mr. Sachin Prakash Pawar, used the cards for his transportation business, mainly for fuel purchases, and had sufficient funds as he filed regular income-tax returns.

The AO, however, was not satisfied and questioned the source of the cash used for the payments. He completed the assessment by treating the total credit card payments of Rs.21,69,933/- as unexplained investment under section 69C of the Act. The assessee’s appeal before the Commissioner of Income Tax (Appeals)[CIT(A)] was dismissed, leading to the current appeal before the tribunal.

The assessee counsel repeated the earlier submissions and referred to a 105-page paper book showing credit card statements of IndusInd Bank and Syndicate Bank, indicating that the cards were used to purchase petrol and diesel.

He also referred to the income-tax return and financial statements of the appellant’s brother, Mr. Sachin Prakash Pawar, and stated that payments for IndusInd Bank and Syndicate Bank cards were made from the brother’s funds. The ICICI Bank card payment of Rs.1,46,500/- was paid by the appellant from his own funds.

The Departmental counsel supported the lower authorities’ orders.

A single member bench Manish Borad (Accountant Member) heard the rival contentions and reviewed the records. The assessee was aggrieved by the addition of Rs.21,69,933/- confirmed by the CIT(A), which had been made by the AO under section 69C for unexplained investment relating to credit card payments to IndusInd Bank (Rs.9,73,444/-), Syndicate Bank (Rs.10,49,989/-), and ICICI Bank (Rs.1,46,500/-).

On examining the details, the appellate tribunal found that the IndusInd Bank credit card had been used to purchase petrol and diesel worth Rs.9,73,444/-. The assessee’s brother, Mr. Sachin Prakash Pawar, carried on a transportation business and declared gross receipts of Rs.55,85,811/- and net profit of Rs.5,24,632/- for the relevant year.

He had claimed power and fuel expenses of Rs.27,07,690/-, and the credit cards were used by his employees for fuel purchases. The cash used to pay the IndusInd Bank dues came from the brother’s business funds, with Axis Bank cash withdrawals totaling Rs.40,20,900/-.

A similar situation was observed for the Syndicate Bank credit card, with Rs.10,01,452/- spent on fuel. Considering the cash withdrawals and the genuineness of the business expenses, the tribunal held that the assessee had adequately explained the source of Rs.20,23,433/- used for IndusInd and Syndicate Bank credit card payments.

As for the ICICI Bank credit card, the payment of Rs.1,46,500/- was made by the assessee from his own funds. The tribunal noted that the assessee had sufficient income of Rs.7,93,910/- for that year to cover the payment.

The appellate tribunal concluded that the assessee had successfully explained the source of all credit card payments totaling Rs.21,69,933/-. Consequently, the impugned addition was deleted, the CIT(A) order was set aside, and the appeal was allowed.

Accordingly,the appeal was allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates