Undisclosed Foreign Credit Card Expenses: ITAT sustains Income Tax Additions towards Lalit Modi [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Delhi, recently confirmed income tax additions made by an Assessing Officer on prominent business personality Lalit Kumar Modi, alleging undisclosed foreign credit card expenses.

The ITAT rendered the decision while jointly disposing of two Income Tax Appeals - one filed by Lalit Kumar Modi against the Deputy Commissioner of Income Tax, Circle 11 (1), New Delhi ( DCIT ) and vice versa.

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The background of the case follows the Assessee’s filing of their Income Tax Returns for the Assessment Year (A.Y.) 2008-09 on 11.08.2008 declaring total income of Rs.33,99,804/-. The Assessee was subject to survey action under Section 133A of the Income Tax Act, 1961 for the financials of the relevant A.Y., and issued notices under Section 148 and 143(2) of the Income Tax Act, 1961 therein.

The AO averred that data extracted from the mobile phone of the Assessee pointed towards his possession of multiple foreign credit card details, including card number and type, none of which belonged to him. The Revenue upon information received from the U.K. and U.S.A. Tax Authorities were made aware that a total amount of US $ 661572.12 and UK Pound 181700.34 in credit card bills had been incurred by the Assessee, which were not disclosed in his Returns.

It was contended by the AO during Assessment, that when apprehended, the onus to prove that the incriminating allegations are not related to the party on whom survey was carried out lies on the assessee themselves. The Assessing Officer ( AO ) invoked Section 69C of the Act, treating such expenditures to be unexplained. Additionally, Rs.14.14 crore was added on a protective basis concerning investments in Ananda Heritage Hotels Pvt. Ltd., claimed to have been routed through offshore entities.

Vijay B Vasanta, appearing for the Revenue contended that Modi had sole possession of all the credit card details and failed to substantiate with evidence that the expenses were borne by others; reinforcing their claim of applicability of Section 69C of the Income Tax Act, 1961.

Sachit Jolly and Devansh Jain, appearing for Lalit Kumar Modi submitted that the Revenue’s stand that the AO had undertaken actions on information from the Directorate of Income Tax (Investigation) and had failed to conduct their own investigation, illegitimately attributing unexplained income and protective addition towards the Assessee.

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The two-member Bench of the ITAT, Delhi constituted by Saktijit Dey, Vice President and S. Rifaur Rahman, Accountant Member observed that the Assessee had been unequivocally found to be in possession of information pertaining to several UK and US credit cards belonging to him, his wife, friends and relatives and that he had the opportunity to use the same without the presence of their owners.

Since the Assessee had been unable to adduce any supporting explanation when called for, it indicates that he had utilized the funds through the credit cards for his personal use and that none of the actual owners had brought on record any proof or documents to claim ownership over the same.

In light of the observations, the ITAT aligned with the decision of the CIT(A), upholding the additions made by the AO.

To Read the full text of the Order CLICK HERE

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