Income Tax Tribunal Upholds Rs 42 Lakh Disallowance for Kailash Gahlot as Unexplained Expenditure

Income Tax Inquiry: Kailash Gahlot’s Alleged Unexplained Expenditure of Rs 42 Lakh

The Income Tax Appellate Tribunal (ITAT) has rejected an appeal from former AAP minister Kailash Gahlot, confirming an addition of Rs 42.98 lakh to his income as unexplained expenditure.

Currently serving as a BJP MLA representing the Bijwasan area in Delhi, Gahlot faces scrutiny stemming from a case initiated during his tenure as Transport Minister in Delhi’s Aam Aadmi Party (AAP) Government.

ITAT member Satbir Singh Godara delivered the ruling against Gahlot, indicating that he had not sufficiently clarified the origins of the funds.

“We hereby reject the assertion that the expenditure of Rs. 42,98,086/- should not be taxable under Section 69C of the Act concerning the appellant (Gahlot),” remarked Mr. Godara in his ruling.

The Income Tax Department commenced action against Gahlot following a search operation in 2018, during which he was serving as Transport Minister. This operation targeted both Gahlot’s premises and those of Corporate International Financial Services Ltd, a private firm linked to him.

In the course of this search, officials uncovered incriminating documentation, including a diary filled with unrecorded expenditures associated with Gahlot’s electoral campaign for the Delhi legislature.

The tax authorities confiscated this diary from Kailash Gahlot’s office, revealing expenditures that appeared to contravene income tax regulations.

The Assessing Officer (AO), along with the Commissioner of Income Tax (Appeals), subsequently categorized the total amount of Rs 42,98,086 noted in the diary as unexplained expenditure under Section 69C of the Income Tax Act, citing Gahlot’s inability to provide a satisfactory explanation for the funds.

Challenging this finding at the ITAT, Gahlot claimed that the diary belonged to a party volunteer, Rohit Sharma, rather than himself. He also argued that the assessment order was flawed due to a lack of thorough review in the approval process.

However, Satbir Singh Godara, referencing various Supreme Court rulings alongside the evidence gathered by the Income Tax Department, determined that the Rs 42.98 lakh in question derived from unaccounted sources related to Gahlot.

The tribunal pointed out that the diary was in Gahlot’s possession and contained numerous indications pertaining to him (“KG Sir”), his brother, his website (www.kailashgahlot.in), and his family trust. The bench found Rohit Sharma’s affidavit—claiming ownership of only part of the expenses—lacking credibility and inadequate to account for the overall content and source of the funds.