Relief Against ₹2.28 Crore Income Tax Notice; ITAT Ahmedabad Reduces Amount to Just ₹63,000
Relief Against ₹2.28 Crore Income Tax Notice; ITAT Ahmedabad Reduces Amount to Just ₹63,000

Taxpayer Secures Significant Relief Against ₹2.28 Crore Income Tax Notice; ITAT Ahmedabad Reduces Amount to Just ₹63,000

Mr. Bandopadhaya (name withheld) faced a major shock when the income tax department issued a draft assessment order that added ₹2.28 crore (₹2,28,14,293) to his income. As a non-resident Indian citizen, Bandopadhaya had not submitted any income tax return (ITR) for the relevant financial year.

After reviewing various financial transactions, the tax officer determined that the taxpayer had not reported his income correctly. A tax notice under Section 148 was subsequently issued, prompting Bandopadhaya to file his ITR on June 1, 2022, reporting a total income of ₹3.83 lakh (₹3,86,620).

On March 17, 2023, the tax officer issued a draft assessment order under Section 144C of the Income Tax Act, 1961, adding ₹2.28 crore (₹2,28,14,293) as unexplained income under Section 69A, in conjunction with Section 115BBE, and suggesting a total income assessment amounting to ₹2.32 crore (₹2,32,00,913).

Dissatisfied with the draft assessment, Bandopadhaya filed his objections with the Dispute Resolution Panel (DRP) on April 13, 2023. The DRP requested a remand report, which the Assessing Officer provided on November 30, 2023, followed by a second report on December 21, 2023.

After examining the remand reports, the DRP concluded that the nature and source of funds in Bandopadhaya’s bank deposits were not adequately explained, leading to the dismissal of his application on December 29, 2023. Consequently, an assessment order was issued by the Assessing Officer on January 19, 2024, which included the previous addition of ₹2.28 crore (₹2,28,14,293) as unexplained income under Section 69A together with Section 115BBE.

Unhappy with the DRP’s decision, Bandopadhaya appealed to the Income Tax Appellate Tribunal (ITAT) Ahmedabad. The ITAT Ahmedabad partially upheld his appeal, reducing the unexplained income to merely ₹63,133.

ITAT Ahmedabad’s Findings

In its ruling (ITA No. 458/Ahd/2024), ITAT Ahmedabad stated that both parties were heard, and all relevant materials were reviewed.

The tribunal noted that between pages 13 and 23 of the DRP’s directions dated December 29, 2023, the Assessing Officer acknowledged that Bandopadhaya had submitted various documents, including copies of fixed deposit summaries, bank account statements from HDFC and SBI, and details of investments in time deposits with HDFC and SBI Life Insurance. The first remand report also recorded the sources related to the transactions explained by the taxpayer.

The sources that remained unaccounted for had been addressed by Bandopadhaya, as detailed in the second remand report dated December 21, 2023. This report was referenced on pages 35 to 40 of the DRP’s directions.

ITAT Ahmedabad asserted: “From the remarks in the report, it appears that only one entry of ₹63,133 was not satisfactorily explained; however, all other income sources and transactions were thoroughly validated by the Assessing Officer. This is evident from paragraph 4 of the remand report on page 39 of the DRP’s directions.”

Judgment: “Once the taxpayer (Bandopadhaya) submitted all credit and debit entries, along with employment verification documentation, doubting the authenticity of these documents without a valid basis is unjustifiable on part of the Assessing Officer and the DRP. Consequently, aside from the ₹63,133 entry, no further additions under Section 69A should have been made as unexplained income, given that Bandopadhaya sufficiently explained all other entries. Thus, the appeal is partially allowed, excluding the amount of ₹63,133.”