Additions Cannot Be Made on Mere Suspicion Without Proper Reasons: ITAT
In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Ahmedabad, ruled that the AO cannot make an addition based on suspicion when the proper reasons are not given.
The case of the assessee, Bindu Dharmesh Bhatt, was reopened based on the information that the assessee traded on the NMCE platform and purchased the commodity scrips amounting to Rs 5,99,250 from Darpan Commodities via Kalkut Tie Up Private Limited. It was alleged that the assessee had also earned interest income, which was not disclosed in the Income Tax Return (ITR).
However, in the final assessment order, the AO disallowed the alleged bogus loss of Rs 82,67,778. The assessee filed an appeal before the CIT(A), but did not succeed. Therefore, he filed an appeal before the ITAT.
The main contention of the assessee was that the reopening was done on mere suspicion, and the addition was not made for the reasons recorded while reopening. The assessee submitted that the reason for reopening was “investment in commodities” and “interest income.” However, while framing the assessment, the AO had made an addition towards the loss rather than the issues due to which the case was reopened.
The Tribunal agreed with the assessee’s contentions, observing that the addition made by the AO was not based on the reasons recorded during the reopening of assessment, and such reopening was not justified. The ITAT allowed the assessee’s appeal, holding that an addition cannot be made merely on suspicion when the proper reasons are not mentioned.
Case Citation: Bindu Dharmesh Bhatt Vs ACIT (ITAT Ahmedabad); ITA No. 618/Ahd/2023; 29/01/2026; 2011-12
