ITAT Holds Entire Deposit Cannot Be Taxed Without Evidence; Restricts Rs 9.83 Crore Addition to 8% of Deposits
ITAT Surat ruled that in cases where deposits are made during the relevant year and the same have not been reflected in the return, taxing the full deposit will be unjustified without strong evidence. Hence, the tribunal restricted the addition to 8% of deposits, dismissing the Revenue’s appeal.
The Investigation Wing of the tax authorities had discovered that the assessee had made a deposit amounting to Rs 9.83 crore in his bank account with IDBI Bank, Surat Branch, during the financial year 2008-09 but did not show the same in his income tax return (ITR) filed for the relevant period.
During the hearing, he claimed that the source of the impugned deposit was from his cheque-discounting business; however, he failed to furnish the relevant documents proving the source. In conclusion, the tax authorities reopened the assessee’s case under section 147 of the Income Tax Act, 1961 and issued a notice dated March 31, 2016, under section 148 of the Act. Due to the assessee’s non-response during the assessment, the tax authorities made an addition of the entire amount to the assessee’s income on the grounds of unexplained income under Section 69A and raised a huge tax demand.
When the assessee approached the ITAT Surat, the tribunal endorsed the ruling of the Commissioner of Income Tax (Appeals) [CIT(A)] and held that since the tax authorities could not submit valid/strong evidence to justify taxing the full amount, making an addition of the entire bank deposit would be unjustified; instead, the demand should be limited to 8% of the total deposits. As a result, the Revenue’s appeal was dismissed.
Citation: ITO Vs Sureshbhai Vashrambhai Khunt (ITAT Surat); I.T.A. No.379/SRT/2024; 15/04/2026; 2009-10
