Income Tax Appeal Decision: ITA No.766/Del/2022

Introduction

This document provides a comprehensive analysis of the Income Tax Appellate Tribunal’s decision on the appeal filed by Padam Sain Gupta against the Assistant Commissioner of Income Tax, Central Circle, Karnal, concerning the assessment year 2018-19. This appeal, marked under case number ITA 766/DEL/2022, was carefully deliberated in the Delhi Bench ‘F’ of the Income Tax Appellate Tribunal, composed of Judicial Member Sh. Chandra Mohan Garg and Accountant Member Shri M. Balaganesh.

Background

The crux of this case lies in the dispute arising from the addition of Rs.3,00,000 under Section 68 of the Income Tax Act by the Assessing Officer. The appellant, Padam Sain Gupta, contended that this addition was unjustified, given the large withdrawals totaling Rs.26,50,000 immediately before a search and seizure operation at his premises. Supporting this, Gupta’s legal counsel argued that the Assessing Officer’s decision ignored significant financial activities that provided a clear explanation for the seized amount.

Proceedings and Arguments

During the proceedings, both parties presented their arguments. The Department’s representative, CIT-DR Shri Mukesh Kumar Jha, defended the assessment officer’s decision, emphasizing the necessity of the addition under scrutiny. On the other hand, the appellant, represented by Shri Ved Jain and Shri Aman Garg, meticulously challenged the basis of the addition, providing evidence of substantial cash withdrawals prior to the search operation.

Judgement and Analysis

The Tribunal, after reviewing the submissions and evidence presented, provided a detailed analysis. It was noted that the appellant had made significant cash withdrawals amounting to Rs.26,50,000 immediately before the search operation. This action clearly explained the source of the cash found during the search. Consequently, the Tribunal found that the addition of Rs.3,00,000 under Section 68 was not justified, considering the appellant’s ability to substantiate the source of the funds.

Moreover, the Tribunal highlighted the appellant’s statement during the search, where he revealed the withdrawals for renovation works at his factory, further supporting his claim. Thus, the Tribunal directed the Assessing Officer to delete the addition, effectively siding with the appellant, Padam Sain Gupta.

Conclusion

The appeal by Padam Sain Gupta against the decision of the Commissioner of Income Tax (Appeals)-3, Gurgaon, was allowed, marking a significant victory for the appellant. This case sets a precedent on the importance of providing a substantive explanation for cash transactions and withdrawals, particularly in search and seizure operations conducted by the Income Tax Department. It underscores the necessity for taxpayers to maintain clear records of their financial dealings to avoid unjust additions under Section 68 of the Income Tax Act.

The decision, pronounced on September 6, 2023, not only provided relief to Padam Sain Gupta but also offered insight into the procedural aspects and evidentiary requirements vital to disputes of this nature.