Disclosure alone Insufficient to Escape Applicability of Section 69A: ITAT [Read Order]
“Just disclosing and paying tax does not protect the assessee from the clutches of Section 69A of the Act unless the source is satisfactorily explained and backed by evidence”, the bench noted.
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In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has held that mere disclosure of undisclosed income in tax returns is not sufficient to shield an assessee from the provisions of Section 69A of the Income Tax Act, 1961. The Tribunal upheld the revisionary action taken by the Principal Commissioner of Income Tax (PCIT) under Section 263 in the case of...
In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has held that mere disclosure of undisclosed income in tax returns is not sufficient to shield an assessee from the provisions of Section 69A of the Income Tax Act, 1961. The Tribunal upheld the revisionary action taken by the Principal Commissioner of Income Tax (PCIT) under Section 263 in the case of M/s. Shreeji Infratech and M/s. Shreeji Infra for the Assessment Year 2017–18.
The crux of the case revolved around the assessee's declaration of ₹1.01 crore as "Other Income" in its return, which was admitted as undisclosed cash receipts during a survey under Section 133A of the Income Tax Act. The Assessing Officer (AO) accepted the return under scrutiny assessment without making further inquiries into the nature and source of the cash, taxing it at normal rates instead of treating it as unexplained money under Section 69A read with Section 115BBE.
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The PCIT, finding the AO’s assessment order to be both erroneous and prejudicial to the interests of the Revenue, invoked Section 263 of the Income Tax Act and directed the AO to re-examine the case. The assessee challenged this direction, asserting that proper disclosure was made and that no contrary evidence had surfaced during the assessment proceedings.
However, the ITAT rejected this defense, emphasizing that disclosure alone does not fulfill the statutory requirement of satisfactorily explaining the source of unexplained income. The Tribunal noted that while the assessee had admitted to receiving cash and filed returns accordingly, it had failed to produce supporting evidence such as confirmations from parties involved.
Quoting Section 69A of the Income Tax Act, the Tribunal underlined that the law mandates an explanation for unrecorded cash or valuables, and a lack of due inquiry from the AO made the assessment unsustainable. Referring to precedents including DG Housing Projects Ltd. and Gee Vee Enterprises, the ITAT reaffirmed that failure to conduct proper verification renders an order erroneous under Section 263 of the Income Tax Act.
The Tribunal concluded that the PCIT acted within his jurisdiction and upheld the revisionary order, thereby dismissing the appeals filed by both Shreeji entities.
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