Rajan Aggarwal vs. DCIT, Central Circle, Karnal

Rajan Aggarwal vs. DCIT, Central Circle, Karnal (ITA No. 920/DEL/2022)

In an intriguing turn of events, the Income Tax Appellate Tribunal (ITAT, Delhi Bench) delivered a verdict on November 2, 2022, regarding the appeal ITA No. 920/DEL/2022, which has garnered significant attention within the taxation community. This case involved the appellant, Rajan Aggarwal from Haryana, contesting the assessment made by the Deputy Commissioner of Income Tax (DCIT), Central Circle, Karnal for the assessment year 2017-18.

The crux of the matter revolved around the misapplication of Section 69A of the Income Tax Act, 1961 by the assessing officer. Section 69A concerns the discovery of unrecorded investments in assets or undisclosed income not accounted for in the books, which if unexplained by the assessee, is deemed as income of the financial year in question. The tribunal meticulously analyzed whether the amounts deposited in Rajan Aggarwal’s bank account, which were declared under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016, could justifiably be subjected to taxation under section 69A.

The judgment was in favor of the Aggarwal, with the tribunal delineating the essence of the PMGKY 2016. It highlighted the scheme’s purpose in allowing declaration of undisclosed income with adherence to stipulated conditions, such as payment of taxes, surcharge, and penalty associated with the declaration, and making requisite deposits under the scheme. The tribunal emphasized that Aggarwal complied with all the requisite conditions under PMGKY, paid the necessary taxes, and made declarations accordingly.

Furthermore, the tribunal pointed out that for invoking Section 69A, there must be an unexplained investment or cash found during the financial year, which wasn’t the case here since Aggarwal had declared the income voluntarily under PMGKY, hence negating the application of Section 69A. The verdict underscored the principle that the legal framework of a tax evasion relief scheme should be adhered to in letter and spirit, providing a fair avenue for taxpayers to declare previously undisclosed income without the fear of punitive repercussions under certain IT Act sections.

The decision of the tribunal in ITA No. 920/DEL/2022 sets an important precedent on the interpretation and application of tax evasion schemes and sections pertaining to undisclosed income. It affirms the tribunal’s role in ensuring that the intents of such schemes are not thwarted by misinterpretation or mechanical application of tax laws. The judgment is a testament to the tribunal’s commitment to upholding the principles of justice and fairness in tax administration.

In conclusion, the case of Rajan Aggarwal vs. DCIT, Central Circle, Karnal brings forward critical insights into the intricacies of tax law, particularly concerning undisclosed income and the avenues available for its declaration. The verdict not only benefits the appellant but also serves as a guiding beacon for both taxpayers and the tax authorities moving forward.

Rajan Aggarwal vs. DCIT, Central Circle, Karnal