ITAT Surat Slashes Section 69A Tax Addition from ₹72.8 Lakh to ₹2 Lakh, Citing Home Loan Credit & Cash Balance

The ITAT Bench in Surat, Gujarat reduced an individual’s additional tax assessment from ₹72,81,674 to just ₹2,00,000. This decision was made after recognizing the taxpayer’s home loan and the cash they had available.

Jayeshbhai Becharbhai Chovatiya, a taxpayer, deposited Rs. 72,81,674 into three different bank accounts when certain high-denomination currency notes were no longer valid. He made these deposits at Corporation Bank, Varachha Co-Op Bank, and HDFC Bank.

The notices have been issued to the assessing officer (AO) to prepare the precise income tax returns. The taxpayer was unable to provide a response to the notices issued via the AO. The AO considered the whole sum as unexplained income and incurred an addition u/s 69A of the Income Tax Act.

The taxpayer, dissatisfied with the AO’s order, submitted a plea to the commissioner of the income tax (appeals). The taxpayer furnished a detailed submission along with supporting documents like the home loan sanction letter, ITR of the previous year, and cash book.

The AO’s addition has been confirmed by the CIT(A) without addressing the proof provided by the taxpayer. The CIT(A) holds the opinion that the taxpayer does not provide any response to the notices. Hence, it was marked by the CIT(A) that no reason was there to interrupt the additions made by the AO.

The taxpayer, dissatisfied with the CIT(A) order, submitted a plea before the ITAT. The taxpayers’ counsel argued that the home loan of Rs 44,01,180 was disbursed, which was incorrectly regarded as unexplained credit.

The counsel claimed that the taxpayer has a cash balance of Rs 9,92,080 as of 31.03.2016, which was duly revealed in the Income tax return for the AY 2016-17. The counsel cited that the addition incurred via the AO overlooked these facts and resulted in excessive taxation.

The two-member bench, including Pawan Singh ( Judicial Member ) and Bijayananda Pruseth (Accountant Member), noted that the AO overlooked the home loan of Rs. 44,01,180 disbursed during the year, which was reflected in the bank statement.

The tribunal noted that the cash-in-hand of Rs. 9,92,080 was verified through the ITR filed for AY 2016-17. It emphasized that the allowable deduction of Rs. 2,042 under Section 80TTA of the Income Tax Act was not permitted.

It was marked by the tribunal that the taxpayer is in the business income, which is approximated @ 10%, which shall be Rs. 1,86,650 and rounded off to Rs 2 lakhs. The addition of Rs. 2,00,000 has been confined by the tribunal and removed the balance amount. The taxpayer’s plea was permitted partly.