ITO Vs MisarYar Khan (ITAT Lucknow)
The ITAT Lucknow upheld the view that large bank deposits of ₹2.69 crore could not be taxed as unexplained income under Section 69A, and instead represented business turnover from the assessee’s Zari & Zardozi business. Accordingly, invocation of Section 69A read with Section 115BBE was rejected.
While the CIT(A) had already granted relief by treating the deposits as turnover and estimating income at 10%, the Tribunal found this rate to be arbitrary and excessive. Relying on the assessee’s past accepted profit margins (around 1.65%-2.14%), the ITAT held that estimation must be reasonable and based on past history.
The Tribunal therefore directed that income be estimated at 2% of turnover, significantly reducing the taxable income.
As a result:
- Revenue’s appeal was dismissed.
- Assessee’s cross objection was partly allowed.
- Addition u/s 69A was effectively replaced with reasonable business income estimation.
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
The appeal filed by the Revenue and the Cross Objection filed by the assessee are against the impugned appellate order dated 28.08.2025 of National Faceless Centre (NFAC), Delhi/ of learned Commissioner of Income Tax (Appeals).The grounds taken by the Revenue and the assessee in the appeal, and cross objection respectively, are as under:
