ITAT Ahmedabad Deletes Rs 28.92 Lakh Section 68 Addition, Upholds Household and TDS Disallowances

The ITAT Ahmedabad partly allowed it in favour of appellant Pallavi Nileshbhai Shah for the Assessment Year 2022-23.

The present case involved three separate additions made by the Income Tax Department. The first issue related to low household withdrawals. The Assessing Officer noticed that the assessee had shown household expenses of only Rs 98,325 during the year, whereas in the previous year the withdrawals were more than Rs 4.43 lakh. The assessee claimed that household expenses were borne by her spouse, but no supporting evidence was submitted. Since no evidence was provided, the Tribunal endorsed the tax authorities and sustained the addition of Rs 3.21 lakh.

The second issue involved an addition of Rs 28.92 lakh under Section 68 relating to outstanding sundry creditors. The assessee had explained that these amounts were payable to suppliers and legal service providers and were later cleared through banking transactions. The tribunal, when it analysed this issue, noted that tax authorities had accepted part of the transactions as genuine but treated only the year-end outstanding balances as unexplained without proper reasoning. The ITAT also noted that the payments were made in later years through banks, and this fact was not disputed by the department. Therefore, the Tribunal deleted the entire addition of Rs 28.92 lakh.

The third issue concerned freight and transportation expenses, where tax was not deducted at source (TDS). The assessee relied on declarations under Section 194C(6); however, the forms were incomplete and did not include the key details. Consequently, the tribunal held that the declarations appeared unreliable and upheld the disallowance of Rs 1.47 lakh under Section 40(a)(ia) of the Income Tax Act. Overall, the appeal was partly allowed in favour of the assessee.

The ITAT ruled that, “We, therefore, concur with the authorities below that the declaration appears to be after thought and the assessee having not deducted tax at source on the freight payment of Rs.4.92 Lakhs. The disallowance u/s.40(a)(ia) of the Act of 30% of the said expense was warranted. The disallowance, therefore, made of Rs.1.47 lakhs u/s.40(a)(ia) of the Act is confirmed”.