Case Number: ITA 1625/DEL/2019
Appellant: Ratna Talwar, Delhi
Respondent: ACIT, Central Circle-4, New Delhi
Assessment Year: 2014-15
Date of Filing: 2019-02-27
Order Type: Final Tribunal Order
Date of Order: 2021-01-19
Pronounced On: 2021-01-19
In this case, Ratna Talwar filed an appeal against the order passed by the ACIT, Central Circle-4, New Delhi. The assessment pertained to the assessment year 2014-15. The primary issue revolved around unexplained deposits in bank accounts and whether these could be considered as unaccounted income under Section 68 of the Income Tax Act, 1961.
A search and seizure operation was conducted on 29.12.2015 against Shri Rajnish Talwar, an ex-General Manager (Sales) of M/s. Jagatjit Industries Ltd. (JIL), and Shri Sanjay Duggal, an ex-DGM (Sales) of JIL. The operation targeted their family members and the MAPSKO Group. The investigation uncovered substantial unaccounted money routed through various bank accounts maintained by the Talwar and Duggal families.
During the investigation, it was discovered that several bank accounts were used to route the unaccounted money. These accounts included:
The funds transferred to these accounts were primarily from M/s. Alfa India, which received large value cheques from liquor distributors like M/s. Sohan Lal Singla AOP and M/s. Om Prakash Singla AOP, both part of the MAPSKO Group.
During the search, Rajnish Talwar and Sanjay Duggal admitted to using M/s. Alfa India as a conduit to route unaccounted money generated through rebates and discounts from liquor sales. They explained that M/s. Alfa India was used to deposit cheques received from liquor distributors, which were then transferred to their personal accounts and those of their family members.
They also admitted that the money transferred to M/s. Alfa India was not for any legitimate business transactions but was a means to hide unaccounted income. They claimed the funds were used for sales promotion activities, including incentivizing key managerial persons in the liquor trade, although no concrete evidence was provided to substantiate these claims.
The Assessing Officer (AO) scrutinized the bank accounts and found large value transactions that were not backed by any legitimate business activities. The AO noted discrepancies in the statements given by Rajnish Talwar and Sanjay Duggal during the search and post-search inquiries. The AO concluded that the amounts deposited in these accounts were unaccounted income and made additions under Section 68 of the Income Tax Act.
The ITAT upheld the AO’s findings, stating that the appellant failed to provide satisfactory explanations for the source of the deposits. The Tribunal noted that the appellant’s arguments about the funds being used for sales promotion activities were not substantiated with credible evidence. Consequently, the ITAT confirmed the additions made by the AO.
The case of Ratna Talwar vs ACIT, Central Circle-4, Delhi, highlights the importance of providing concrete evidence to substantiate claims of legitimate business transactions. The use of conduits to route unaccounted income can lead to significant tax liabilities under Section 68 of the Income Tax Act. The ITAT’s decision reinforces the need for transparency and accountability in financial transactions to avoid adverse legal consequences.
This judgment serves as a crucial reminder for taxpayers to maintain proper records and provide clear explanations for all financial transactions to ensure compliance with tax laws.
Case Analysis: Ratna Talwar vs ACIT, Central Circle-4, Delhi (ITA 1625/DEL/2019)
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