ITAT Sends Back ₹52.3 Lakh Tax Addition for Fresh Review

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has sent back a case involving an income tax addition of ₹52,34,050 under Section 69A for fresh review. The Tribunal noted that while the assessee had not fully complied with the notices, it could not be considered grossly non-compliant, and therefore deserved a fair chance to present evidence.

Case Overview

The assessee, Genius Money Changer, a partnership firm dealing in currency exchange, did not file its income tax return for Assessment Year 2017–18 within the due date under Section 139(1). Later, the firm responded to a notice under Section 142(1) and filed a return declaring ₹81,603 as income.

However, the Assessing Officer (AO) considered the return invalid due to delayed compliance and carried out a best judgment assessment under Section 144, adding ₹52.3 lakh as unexplained money under Section 69A.

Why Was the Addition Made?

The AO believed that the declared income was incomplete and treated the additional amount as unexplained income. The assessee argued that this amount was already taxed, resulting in double taxation.

CIT(A) Decision

The assessee appealed to the Commissioner of Income Tax (Appeals), but the CIT(A) upheld the AO’s order, citing incomplete compliance.

ITAT’s Key Observations

The Tribunal, comprising Pradip Kumar Kedia (Accountant Member) and Vimal Kumar (Judicial Member), disagreed with the rigid approach and made the following points:

• The assessee had partially complied, so it was not a case of gross negligence.
• A fair chance must be given to the assessee to explain and submit documents.
• Tax assessments must be guided by fairness and justice, avoiding double taxation.

ITAT’s Decision

The ITAT set aside the addition and directed the AO to:

• Give the assessee another opportunity to submit evidence.
• Re-examine the case and ensure fair treatment.
• Avoid double taxation if the amount is proven to be already taxed.

FAQs

1. What is Section 69A?
It deals with unexplained money or assets found during assessment. If the assessee cannot explain the source, the amount can be taxed as income.

2. Why was the case sent back?
The ITAT found that the assessee was not given a proper opportunity to explain the source of money.

3. What should the assessee do now?
The firm must submit clear evidence and explanations to the AO during the fresh inquiry.

4. What is a Section 144 assessment?
It is a best judgment assessment made by the AO when the assessee fails to file returns or comply with notices on time.

Conclusion

The ruling shows that while non-compliance can lead to heavy additions, taxpayers still have a chance to prove their case if they can provide proper explanations. The ITAT’s decision ensures a fresh review and stresses that tax proceedings must be fair, transparent, and free from double taxation.

Published on: 23 July 2025
Author: CS Chhavi Goyal