1 week Ago By Rashida
Sign In Sign Up Top Stories The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench , has upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] deleting an addition of Rs. 2.65 crore made under Section 69A of the Income Tax Act, 1961, in the case of K.
Mart. The Tribunal ruled that the Assessing Officer (AO) failed to provide corroborative evidence or allow cross-examination of a third party whose survey led to the addition. The Revenue had challenged the CIT(A)’s decision to delete the addition, which was made based on information from a survey conducted on Pravin S.
Shah, proprietor of Manibhadra, who was allegedly involved in providing cash loans through hundis. The AO had reopened the assessment under Section 147 and passed an ex-parte order under Section 144, treating the alleged cash loan as unexplained money under Section 69A. However, the assessee denied any such transaction and argued that the AO did not furnish any documentary proof or allow cross-examination.
Know How to Investigate Books of Accounts and Other Documents, Click Here The CIT(A) had observed that the addition was made solely on third-party information without any independent verification. The assessee, a small business with a turnover of Rs. 36.
30 lakhs, argued that it had no commercial need for a Rs. 2.65 crore cash loan.
The CIT(A) held that the AO failed to establish ownership or possession of the alleged unexplained money, a prerequisite for invoking Section 69A. The appellate authority also noted that the AO did not provide the assessee with copies of alleged hundis or the statement of Shri Pravin S. Shah, violating principles of natural justice.
Before the ITAT, the Revenue contended that the CIT(A) erred in deleting the addition without giving the AO an opportunity to verify the assessee’s reply. The Departmental Representative argued that the assessee’s response was filed late and should have been treated as additional evidence under Rule 46A. However, the assessee’s counsel countered that the reply was filed before the assessment was finalized and thus could not be considered additional evidence.
The Tribunal agreed with the CIT(A)’s findings, emphasizing that the AO had not brought any tangible evidence to prove the alleged cash loan. The ITAT noted that third-party documents cannot be used against an assessee without corroboration and cross-examination, as held by the Gujarat High Court in Kaushik Nanubhai Majithia . The Tribunal also referred to CBDT Circular No.
20, which clarifies that Section 69A requires clear proof of ownership of unexplained money. Know How to Investigate Books of Accounts and Other Documents, Click Here Since the AO failed to meet these legal requirements and proceeded on mere suspicion, the ITAT dismissed the Revenue’s appeal. The bench comprising Suchitra Kamble (Judicial Member) and Makarand V.
Mahadeokar(Accountant Member) upheld the CIT(A)’s order, reinforcing that additions under Section 69A cannot be sustained without concrete evidence and due process. Support our journalism by subscribing to Taxscan premium . Follow us on Telegram for quick updates Topics © 2025 Taxscan © 2025 Taxscan.
