Addition Is Unsustainable When Investment Sources Are Properly Verified Despite ITR Reporting Error: ITAT

The ITAT Delhi has ruled in favour of a taxpayer named Nischint A. Kanoudia by upholding an addition of Rs 15.41 crore made by the tax authorities under Section 69 of the Income Tax Act. The case pertained to the Assessment Year 2022-23

Originally, the assessee had declared its total income of Rs 44.23 lakh in the income tax return (ITR) for the year in consideration. As per the assessee, he had generated this income from salary, capital gain, etc. The case was selected for investigation by the income tax authorities, where they discovered that the assessee had declared investments of about Rs 3.41 crore in unlisted shares in the ITR. However, he declared an investment of about Rs 3.4 crores from the earlier year, and in the subsequent year, there was a credit forward of an investment of Rs 18.82 crores. This created a difference of about Rs 15.41 crore.

The assessee explained that the incorrect figures were reported due to an unintentional error while filing the ITR using pre-filled data. He also submitted relevant documents proving that the funds in question were sourced from bank loans, gifts from family members, HUF contributions, sale proceeds of properties, and loans from relatives.

However, the tax authorities denied the assessee’s aforesaid explanation and treated the difference as an unexplained investment, entirely adding it to his taxable income. When the aggrieved assessee filed an appeal before the Commissioner of Income Tax (Appeals), his explanation was accepted, and the impugned addition of 15.41 crore was deleted. Thereafter, the tax authorities filed the present appeal before the ITAT Delhi.

When the tribunal analysed the case, it noted that all details and supporting documents had already been submitted before the tax authorities, and no defects were pointed out in those records. It further held that the addition was made only because the taxpayer had not filed a revised return showing the corrected investment figure. Since the source of investments had been properly explained, the ITAT found no reason to interfere with the appellate order and dismissed the Revenue’s appeal.