Bookkeeping is Required To Invoke Section 69A Of Income Tax Act: Delhi High Court

Section 69A of the income tax act could merely be invoked in which the books of accounts are been maintained, Delhi High Court mentioned.

The bench consisting of Justice Rajiv Shakdher and Justice Girish Kathpalia noted that the individual in question, a non-resident Indian, derives income in India from bank interest and income tax refunds without the obligation to maintain any local accounting records. The phrase “if any” in Section 69A specifies that the absence of such records precludes the application of this provision.

Delhi tax addition Section 69A pertains to undisclosed income and its inclusion in the overall income assessment under Chapter VI of the Act. It stipulates that if, during a financial year, the assessee is found to possess money, precious metals, jewellery, or other valuables not recorded in their maintained records, and if there’s no satisfactory explanation or none provided by the assessee regarding its source, it may be considered as their income for that fiscal year.

The respondent, a non-resident individual in the UAE, disclosed an income of Rs. 1,02,288, which included interest from savings accounts and income tax refunds in the Assessment Year 2017-18. Through scrutiny, the Assessing Officer made additions under Section 69A: Rs. 1,40,09,733 for unexplained bank credits, Rs. 1,64,219 for under-reported interest, and Rs. 4,69,335 as a deemed dividend under Section 2(22)(e).

The assessee appealed, contesting the Section 69A addition. The Commissioner of Income Tax (Appeals) partially granted relief by excluding the inter-bank transfer of Rs. 5,00,000 and the income tax refund of Rs. 2,84,200 from the Rs. 1,40,09,733 addition.

The assessee, dissatisfied with the CIT(A)’s decision, proceeded to lodge a second appeal before the Income Tax Appellate Tribunal, resulting in the complete deletion of the addition made under Section 69A as per the tribunal’s order.

The Tribunal reasoned that Section 69A doesn’t apply to the non-resident assessee, whose sole income sources in India are bank interest and income tax refunds. As one of the Section 69A conditions remains unmet, the invoked addition isn’t sustainable.

The department argued that accepting the Tribunal’s stance would exempt any non-resident Indian from the strictures of Section 69A and endorse their non-maintenance of account books.

The court determined that the money couldn’t be categorized as unexplained since the assessee provided a detailed breakdown of its origin. The Tribunal extensively scrutinized and discussed the documentary evidence supporting the money’s entry into the assessee’s bank account in the challenged order.

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Absent departmental allegations of irregularity, under Section 260A, the court refrains from delving into fact-based assessments and document analysis.