Taxpayer's Non-Compliance Does Not Justify Treating all Bank Credits As Income: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the Assessing Officer’s action of treating entire bank credit entries as income of the assessee could not be accepted without proper examination.

Arvind Mevalal Panchal, the appellant, had filed his return of income for Assessment Year 2018-19 on August 31, 2018 declaring total income of Rs. 2,98,810. He declared turnover of Rs. 34,33,781 and disclosed profit at 8% under Section 44AD of the Income Tax Act.

The department later found that the assessee had made deposits of Rs. 1,37,54,800 in his bank account. The turnover difference of Rs. 1,00,55,112 was treated as unaccounted. The case was reopened by issuing notice under Section 148.

The assessment was completed under Section 147 read with Section 144 on March 20, 2024. The AO assessed total income at Rs. 1,40,53,610 and made an addition of Rs. 1,37,54,800 as unexplained money.

The assessee filed an appeal before the CIT(A), but the appeal was dismissed. Before the ITAT, the assessee’s authorised representative Divyang Shah argued that no compliance could be made before the CIT(A) because the notice was sent to a different email ID than the one mentioned in Form 35. The assessee requested another opportunity of hearing.

Read More: Taxpayer Filed ITR u/s 44AE By Mistake Although 44AD Applicable:ITAT Directs Fresh Verification of Transport Business Receipts [Read Order]

The revenue, represented by Rameshwar P Meena (Senior Departmental Representative) argued that the assessee had sought adjournment twice before the CIT(A). Hence, the claim that notices were not received could not be accepted. However, the revenue had no objection if the matter was restored to the CIT(A).

The two-member bench comprising T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member) observed that the assessee was aware of the proceedings and had failed to comply before the AO as well as the CIT(A). The Tribunal imposed a cost of Rs. 10,000, payable to the Prime Minister National Relief Fund.

At the same time, the tribunal observed that treating the entire bank credits as income was also not correct. It restored the matter to the CIT(A) to give the assessee another opportunity to explain the source of bank credits. The appeal was allowed for statistical purposes, subject to payment of cost.

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