ITAT Ahmedabad Remands Addition of Rs. 1.70 Crore as Unexplained Investment for Fresh Verification

The assessee, Bhavin Girishbhai Shah, filed his return for A.Y. 2022-23, declaring an income of Rs. 58.62 lakh. During scrutiny, the Assessing Officer examined his bank records and noted that he had advanced short-term loans aggregating to Rs. 1.70 crore to three parties. The AO concluded that these advances were funded out of sweep-in credits received from Sumeru Buildcon and Lucky Steel, which he believed were not recorded in the assessee’s books. After rejecting the assessee’s explanation, the AO treated the amount of Rs. 1.70 crore as an unexplained investment under section 69.

Appeal to CIT(A): The CIT(A) upheld this addition, holding that detailed matching of the bank entries showed a nexus between sweep-in credits and the outgoing loans, and that the assessee could not rebut these findings.

Issue Before Tribunal: Whether the loans of Rs. 1.70 crore were sourced from unexplained funds, or whether the sweep-account entries, now produced, establish that they were recorded in the regular books and came from explained sources.

ITAT’s Decision: The Tribunal observed that the AO’s entire addition rested on his presumption that sweep-in receipts from Sumeru Buildcon and Lucky Steel were not recorded in the assessee’s books.  Since the new document may materially change the factual position, the ITAT held that the matter required limited verification.

The Tribunal restored the issue to the AO to reconcile the Auto-Sweep account with the assessee’s ledger entries and bank statements. The AO was directed to confine himself strictly to this factual reconciliation, provide due opportunity to the assessee, and pass a speaking order. The appeal was therefore allowed.

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