S. 69A Of Income Tax Act Can Only Be Invoked Where Books Of Account Are Maintained: Delhi High Court

The Delhi High Court has held that Section 69A of the Income Tax Act can only be invoked where books of account are maintained.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the assessee is a non-resident Indian, and his source of income in India is interest on bank accounts and interest on income tax refunds. He is not obliged to maintain any books of account in India. The expression “if any” specifically used in Section 69A amplifies that if books of account are not maintained, it would not be possible to invoke this provision.

The provision under Section 69A basically deals with unexplained money, etc., to be considered in the exercise of aggregation of income under Chapter VI of the Act. Section 69A lays down that if, in any financial year, the assessee is found to be the owner of any money, bullion, jewellery, or another valuable article, and such money, etc., is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the said money, etc., or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the money may be deemed to be the income of the assessee for the financial year.

The respondent/assessee, being a non-resident individual residing in the United Arab Emirates (UAE), filed his Return of Income for Assessment Year 2017-18 by declaring his income as Rs. 1,02,288, which included savings bank interest and interest on the income tax refund. By way of scrutiny proceedings, the Assessing Officer made additions under Section 69A to the tune of Rs. 1,40,09,733 on account of unexplained credit entries in the bank accounts, a sum of Rs. 1,64,219 on account of under-reporting of interest, and an amount of Rs. 4,69,335 towards a deemed dividend under Section 2(22)(e).

The assessee filed an appeal to the limited extent of assailing the addition made under Section 69A. The appeal of the assessee was partly allowed by the Commissioner of Income Tax (Appeals) by deleting out of the addition of Rs. 1,40,09,733 the inter-bank transfer of Rs. 5,00,000 and the income tax refund of Rs. 2,84,200.

Against the order of CIT(A), the assessee filed a second appeal before the Income Tax Appellate Tribunal, which appeal was allowed by way of the order by deleting completely the addition made under Section 69A.

The Tribunal took the view that the provision under Section 69A does not apply since the assessee is a non-resident, whose only source of income in India is interest on bank accounts and interest on income tax refunds. One of the conditions of Section 69A is not satisfied; consequently, the addition made by invoking Section 69A is not sustainable.

The department contended that if the view of the Tribunal is accepted, the rigours of Section 69A would not apply to the case of any non-resident Indian and would sanctify the non-maintenance of account books by such an assessee.

The court held that the money cannot be treated as unexplained money insofar as the assessee gave a specific explanation of the split-up of the money. In the impugned order, the Tribunal meticulously examined and elaborately discussed the documentary record in support of the explanation of money ingress in the bank account of the assessee. In the absence of a stand taken by the department alleging perversity, the court, while acting under Section 260A, cannot enter into the arena of appreciation of facts and documents.

Counsel For Petitioner: Puneet Rai

Counsel For Respondent: Ajay Vohra

Case Title: CIT Versus Hersh Washesher Chadha

Citation: 2023 LiveLaw (Del) 1305

Case No.: ITA 676/2023

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