Credit Card Payments Explained – Addition u/s 69C Deleted in Absence of Unexplained Source

Prateek Rahul Mehta Vs ITO (ITAT Mumbai)

Mumbai ITAT deleted an addition of ₹16.61 lakh made u/s 69C towards alleged unexplained credit card payments.

The Tribunal observed:

• The case was reopened based on AIR information of high credit card usage
• The assessee explained that the card was used by relatives and associated entities, who directly made payments
• Detailed documentary evidence was furnished, including:
  • Confirmations
  • Bank statements
  • ITRs and financials of contributors
  • Affidavits supporting transactions

The ITAT held:

• The assessee had fully explained the source of payments
• Payments were partly personal and largely made by identifiable third parties
• Once supporting evidence is furnished and unrebutted, no further burden lies on the assessee

Accordingly, the addition was held unsustainable, deleted in full, and the appeal was allowed, with legal grounds kept open.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2013-14, date of order 16.01.2026. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax Circle 19(2)(4), Mumbai (for brevity the ‘Ld. AO’) order passed under section 147 r.w.s. 144of the Act date of order 29.05.2023.

2. The brief facts of the case are that the assessee is a non-filer of income tax return for the impugned assessment order the Ld. AO had received information from the annual information return (AIR) data available on NMS Module that the assessee had made credit card payment aggregating of Rs.50,51,387/- to City Bank Credit Card. On verification on income tax database it is found that the assessee had paid total amount to Rs.16,61,087/- related to his credit card payment. Accordingly, the notice u/sec. 148 was issued for reopening the assessee’s case. The Ld. AO completed the assessment with an addition amount to Rs.16,61,087/- u/sec. 69C of the Act. Aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) uphold the impugned assessment order. Being aggrieved assessee filed an appeal before us.

3. The Ld. AR argued and filed paper book which is containing page 1 to 54 which has been placed on record. The Ld. AR stated that during the assessment proceeding and in appeal proceeding the assessee has submitted all the supporting evidence related to the payment to the credit card account. The assessee’s credit card was duly used by his relatives and the partnership firm. The said relatives & the partnership firm had directly incurred payment to the credit card account. The relevant documents related to confirmation, bank statement, financials of the partnership firm and the relatives are duly submitted before both the revenue authorities. But the Ld. AO had noted the observation in the assessment order related to the evidence complied by the assessee in support of his claim. The said observation of the Ld. AO is contended in paragraph no.6 is duly reproduced as below:

“6. The assessee being a non-filer of Income tax returns, information was received that the assessee has made credit card payments of Rs. 50,51,387/-. The assessee during this assessment proceedings were required to explain the source and nature of the payment with documentary evidences. The assessee in response to the same vide submission dated 24.05.2023 stated as below:

“Under instructions from our above-mentioned client we acknowledge the receipt of your letter No ITBA/AST/F/144 (SCN)/2023-24/1053046550(1) dated 22/05/2023 requiring to reply electronically in the response to letter for the Assessment Year 2013-14 under the PAN AFWPM5910L. In this regard we state under

During the ongoing re-assessment proceedings for A. Y. 2013-14, as per your reply dated 16.05.2023, it is seen that you have made the total credit card payments amounting to Rs 16,61,087/- during the F.Y. 2012-13 relevant to A.Y. 2013-14. Further, as per your reply these payments were made by the The Apple tree (Partnership Firm), Shri Prateek Mehta (Self), Aditya Enterprises, Prateek International, Shri Rahul Mehta and Shri Aditya Mehta however you have not submitted any corroborative/supporting details such as the source and purpose of these credit card payments made by these different persons/entities. Further you are requested to furnish the bank statements of these persons/entities highlighting these credit card payments

– Totals payments for the credit card of Rs. 16,61,087 during FY 2012-2013 by the assesse. whose details are provided below:

Declaration by The Apply Tree for credit card payment made by assessee on their behalf bank statements of The Apple tree highlighting the amount reimbursed by them and ITR acknowledgement for AY 2013-14 is attached as Annexure A.

Declaration by Aditya Enterprises for credit card payment made by assessee on their behalf bank statements of Aditya Enterprises highlighting the amount reimbursed by them and ITR acknowledgement for AY 2013-14 is attached as Annexure B

Declaration by Rahul Mehta, Karta of Rahul Mehta HUF (Proprietary concern- Prateek International) for credit card payment made by assesse on their behalf, bank statements of Prateek International highlighting the amount reimbursed by them and ITR acknowledgement for AY 2013-14 is attached as Annexure C.

Declaration by Rahul Mehta for credit card payment made by assesse on his behalf, bank statements of Rahul Mehta highlighting the amount reimbursed by him and ITR acknowledgement for AY 2013-14 is attached as Annexure D.

Declaration by Aditya Mehta for credit card payment made by assesse on his behalf bank statements of Aditya Mehta highlighting the amount reimbursed by him and ITRacknowledgement for AY 2013-14 is attached as Annexure E.

Since the assessee has not created any login for PAN AFWPM5910L we are submitting the details as requested by you physically and also submitting the response on your email id Mumbai.ito.19.2.4@incometax gov.in”.

4. The Ld. AR further contended that the assessee had furnished copies of the income-tax returns, balance sheets, and profit and loss accounts of the concerned parties, along with the partners’ capital account of the firm M/s. Aditya Enterprises. The assessee also submitted supporting documents in respect of Rahul Mehta (HUF), Mr. Rahul Mehta, and Mr. Aditya Rahul Mehta. In addition, affidavits were placed on record in support of the impugned transactions. The Ld. AR, therefore, prayed for deletion of the entire addition.

5. The Ld. DR, on the other hand, relied upon and supported the orders of the revenue authorities. It was contended that the source and purpose of the payments made by the concerned parties had not been satisfactorily explained. The Ld. DR, accordingly, prayed that the addition made by the Ld. AO be sustained.

6. We have heard the rival submissions and perused the material available on record. The assessee is a non-filer of income-tax return. The case of the assessee was reopened under section 148 of the Act on account of credit card payments aggregating to Rs. 50,51,387/-. The Ld. AO issued notice under section 148 and, upon verification, observed that the total payments made towards the credit card amounted to Rs. 16,61,087/-. Out of the said amount, a sum of Rs. 2,84,201/- was incurred by the assessee for personal use, whereas the balance amount of Rs. 13,76,886/- was paid by other users. The Ld. AR contended that the issuance of notice under section 148 beyond a period of three years is barred by limitation. However, on merits, we find that the credit card in question was also utilized by the assessee’s relatives and associated firm, and the corresponding payments were directly made by such users to the credit card account. The assessee furnished supporting documentary evidence before the Ld. AO vide letter dated 04.12.2019, filed on 05.12.2019, which is placed at APB page 54. The Ld. AR has also produced before us copies of balance sheets, confirmations, affidavits, and income-tax returns of the concerned parties, as detailed below:

7. Upon perusal of the record, we find that the assessee has duly explained the source of the payments. The payments were made in two parts, i.e., partly by the assessee himself and partly by other users who directly remitted amounts to the credit card account. All relevant documentary evidences were furnished before both the revenue authorities. In such circumstances, nothing further could reasonably be expected from the assessee to substantiate the source.

Accordingly, we hold that the source of the credit card payments stands satisfactorily explained. We, therefore, set aside the impugned appellate order and direct deletion of the addition of Rs. 16,61,087/- made by the Ld. AO. Since the appeal has been decided on merits in favour of the assessee, the legal grounds raised are rendered academic and are kept open.

8. In the net result, the appeal of the assessee bearing ITA No.1716/Mum/2026 is allowed.

Order pronounced in the open court on 21^st day of April 2026.