Rs 10L investment, different explanations: why ITAT deleted tax addition & penalty
The dispute arose after the income tax department received information about an investment of Rs 11.25 lakh made by a man with a wealth management firm. The assessing officer accepted that Rs 1.25 lakh had been paid by cheque, but the source of the remaining Rs 10 lakh, was questioned. Before considering the tax dispute, the tribunal had to address the delay in filing the appeals
A man made an investment of Rs 11.25 lakh through a wealth management company, facing a tax addition and penalty from the Income Tax Department due to unexplained sources. The ITAT, Nagpur bench, has now deleted the Rs 10 lakh addition and associated penalty after accepting the taxpayer's explanation.
The dispute began when the income tax department received information about the investment and questioned the source of the remaining Rs 10 lakh after accepting Rs 1.25 lakh paid in cash. The man initially claimed to have borrowed Rs 10 lakh against a mortgage but faced rejection of this explanation by the assessing officer. The officer treated the Rs 10 lakh as an unexplained investment.
At the appeal stage, the man provided a different explanation, stating he had withdrawn Rs 8 lakh from one bank account and Rs 3.75 lakh from another to fund the investment. This explanation was rejected by the first appellate authority, which upheld the addition. The man then appealed to the ITAT, presenting bank account details to support his claim and challenging the separate penalty.
Before considering the tax dispute, the tribunal addressed the delay in filing the appeals, which were 606 and 602 days late, respectively. The man filed condonation applications supported by affidavits, and the tribunal found the delays were unintentional. The tribunal examined the bank records, noting a withdrawal of Rs 8 lakh and Rs 3.75 lakh from the respective accounts.
The balance in the first account on April 1, 2012, was Rs 9,70,491, supporting the man's claim that sufficient cash was available before the investment.
The tribunal found merit in the man's revised explanation after considering the bank statements and disclosed accounts. It deleted the Rs 10 lakh addition and cancelled the Rs 2,11,710 penalty imposed for alleged income concealment. Both appeals were allowed.
Written by urgent.news from Times of India's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
