Ashwin Kumar Rath Vs DCIT (ITAT Pune)
Own-Account Transfers Are Not Income; Unreported Rent Still Gets 30% Deduction
The controversy
Two issues arose before the Pune Tribunal: whether transfers between the assessee’s own bank accounts could be treated as unexplained money, and whether rental income brought to tax in reassessment remained eligible for the 30% standard deduction under section 24.
The Tribunal deleted an addition of ₹4 lakh under section 69A, after verifying that the credits represented transfers of salary-funded money between accounts belonging to the assessee.
It also allowed the statutory deduction against previously unreported rental income. Consequently, the disputed additions of ₹6,50,470 were reduced to ₹1,75,329, and the appeal was partly allowed.
Assessment and the surviving additions
The assessee was a salaried individual. During the relevant financial year, he worked with Acconia Cube Pvt. Ltd. from April to December 2018 and with Brands International Pvt. Ltd. from January 2019 onwards.
He had not originally filed his return. Following a notice under section 148, he furnished a return declaring income of ₹17,77,660.
The Assessing Officer completed reassessment on 26 March 2024 under section 147 read with section 144B, determining income at ₹32,41,957.
The additions comprised ₹8,13,827 towards salary, ₹4 lakh as unexplained money under section 69A, and ₹2,50,470 towards rental income, assessed under the head “Income from other sources”.
The CIT(A) deleted the salary addition but sustained the other two additions. The assessee therefore approached the Tribunal against the remaining ₹6,50,470.
₹50,000 credits mistaken for unexplained money
The Assessing Officer had identified eight NEFT credits of ₹50,000 each in the assessee’s ICICI Bank account and treated the aggregate ₹4 lakh as unexplained money.
The assessee explained that these were transfers from his Deutsche Bank account to his ICICI Bank account. Both accounts belonged to him.
Counsel further submitted that the relevant records contained 14 transfers of ₹50,000 each, rather than only the eight entries considered by the Assessing Officer. The transactions occurred on 21 August 2018 and 22 January 2019.
The substantive explanation was that the money had already been received as salary and was merely moved from one personal bank account to another.
Bank statements established the source
The Tribunal verified the entries from the bank statements furnished in the paper book.
It found that the source account showed salary credits, and transfers had been made from that account into another account held in the same assessee’s name.
The transactions were therefore satisfactorily explained. The Tribunal also noted that tax had been deducted at source on the salary income.
Accordingly, there was no basis to sustain the addition under section 69A. The CIT(A)’s finding was reversed, and the entire ₹4 lakh addition was deleted.
The relief rested on the verified source and transfer trail. It was not simply an inference drawn from the fact that the transactions used banking channels.
Rental income admitted, deduction sought
On the second issue, the assessee accepted that he had earned rental income of ₹2,50,470, reflected through monthly credits in his bank account.
Counsel fairly acknowledged that the rent should have been disclosed in the return. However, the Assessing Officer had brought the gross amount to tax without allowing the 30% standard deduction under section 24.
The assessee sought that deduction rather than disputing receipt of the rent.
The Tribunal held that non-filing of the original return did not, by itself, bar the assessee from claiming the statutory deduction against rental income.
Gross rent reduced to taxable amount
The Tribunal calculated the deduction at ₹75,141, being 30% of ₹2,50,470.
It deleted the rental-income addition to that extent and sustained the balance of ₹1,75,329.
Thus, the assessee obtained complete relief on the own-account transfers and partial relief on the rental income. The appeal was partly allowed.
Although the order initially describes the rent as having been assessed under “Income from other sources”, its operative finding allows the deduction under section 24. The decision should therefore be understood in the context of the rental income considered eligible for that deduction.
Author’s comments
The first issue illustrates a basic but frequently overlooked distinction: a bank credit may represent movement of existing money rather than fresh income. A reconciliation identifying the debit in one account and corresponding credit in another can establish that distinction.
Salary TDS supported the explanation here, but the decisive evidence was the bank trail showing where the money originated and where it moved.
The rental-income finding is equally practical. Failure to disclose income does not mean that its computation must disregard an otherwise available statutory deduction. The Tribunal taxed the rent after allowing the 30% deduction, rather than treating gross collection as taxable income.
However, the ruling does not extend section 24 to every receipt described as rent. Its application remains connected to the nature of the rental income and the applicable head of income.
An own-account transfer does not create income, and bringing omitted rent to tax does not justify ignoring the statutory deduction.
FULL TEXT OF THE ORDER OF ITAT PUNE
1. The captioned appeal at the instance of assessee pertaining to A.Y. 2019-20 is directed against the order dated 26.12.2025 of NFAC, Delhi emanating out of Assessment Order dated 26.03.2024 passed u/s.147 r.w.s.144B of the Income Tax Act, 1961 (in short ‘the Act’).
2. The grievance of the assessee is against the addition u/s.69A of the Act at Rs.4.00 lakh and addition for rental income assessed under the head income from other sources at Rs.2,50,470/-.
3. I have heard the rival submissions and perused the records placed before me. I observe that the assessee is an individual and employed with Acconia Cube Pvt. Ltd. from April 2018 to December 2018 and that Brands International Pvt. Ltd. from January, 2019 onwards. The assessee has not filed the return of income for the impugned assessment year 2018-19. Ld. Assessing Officer thereafter issued valid notice u/s.148 of the Act and in compliance assessee has furnished the return of income declaring income at Rs.17,77,660/-. Ld. Assessing Officer however completed the assessment making addition of Rs.14,64,297/- which included the addition under the head salary at Rs.8,13,827/- addition u/s.69A of the Act at Rs.4.00 lakh and addition for rental income at Rs.2,50,470/-. Income assessed at Rs.32,41,957/-.
4. Thereafter, assessee preferred appeal before ld.CIT(A) and partly succeeded as the addition of Rs.8,13,827/- was deleted. Now the assessee is in appeal before this Tribunal against the remaining addition of Rs.6,50,470/-.
5. Before me, Ld. Counsel for the assessee submitted that addition of Rs.4.00 lakh is uncalled for because the same is a merely a transfer by the assessee from one bank account into another account held with ICICI bank. So far as the addition for rental income is concerned, he fairly accepted that assessee has earned rental income and should have offered it as income from rent in the Income Tax Return. However, ld. Assessing Officer has not allowed the standard deduction @30% u/s.24 of the Act which may please be allowed to the assessee.
6. So far as the first addition of Rs.4.00 lakh is concerned, I have gone through the record and observe that the assesssee is having bank account with ICICI as well as Deutsche Bank. Ld. Assessing Officer took up 8 entries which were bank transfer through NEFT of Rs.50,000/- each reflected in the bank account held with ICICI bank. Assessee submitted that they were not 8 entries but 14 entries of Rs.50,000/- each which took place between Deutsche bank and ICICI bank on 21.8.2018 and 22.01.2019. I have verified these entries from the bank statement in the paper book and find merit in the contention of the ld. Counsel for the assessee and since the source of credits in the bank account is the salary income of the assessee and that from the very same bank account showing credit from salary, transfer have been made in another bank account held in the name of assessee and therefore since the transactions have been duly explained and tax at source deducted on salary income, no addition u/s.69A of the Act is called for. Finding of ld.CIT(A) is reversed and addition of Rs.4.00 lakh is deleted.
7. As regards the issue of rental income of Rs.2,50,470/- is concerned, assessee has fairly accepted that it has earned rental income which is reflected in the bank account on monthly basis which totals upto Rs.2,50,470/-. Though the assessee has not furnished the return of income but under the Income Tax Act, there is no provision which bars the asesessee from claiming the 30% standard deduction from rental income if the return of income is not filed. Therefore, since it has been clearly admitted that assessee has earned rental income, assessee is eligible for claiming 30% standard deduction which works out to Rs.75,141/- and to this extent addition is deleted and remaining amount of addition at Rs.1,75,329/- is sustained. Grounds of appeal raised by the assessee are partly allowed.
8. In the result, the appeal of the assessee is partly allowed.
Order pronounced on this 05th day of October, 2026.
