Case Law Details
Dharmesh Dinesh Shah Vs ACIT (ITAT Mumbai)
ITAT Pulls Up AO for Ignoring Evidence – ₹31.61 Lakh Credit Card Addition Sent Back for Fresh Verification
In a relief to the assessee, the Mumbai ITAT set aside an addition of ₹31.61 lakh made u/s 68 towards alleged unexplained credit card payments after observing that the AO and CIT(A) failed to properly examine the evidences furnished by the assessee. The Tribunal restored the matter back to the AO for fresh verification.
The assessee, who was the Managing Director of a travel company engaged in air ticketing, visa and travel-related services, was subjected to reassessment proceedings based on information relating to credit card transactions aggregating to ₹31.61 lakh. The AO treated the payments as unexplained cash credits u/s 68 and taxed them under section 115BBE, alleging that the assessee failed to prove the source of payment.
Before the Tribunal, the assessee explained that the credit cards were used predominantly for official business expenses of the company, including booking of domestic and international air tickets, visa charges and travel-related payments. Monthly credit card statements were submitted to the company, and the company directly made payments to the banks. Personal expenses, wherever incurred, were separately borne by the assessee from his own account.
The assessee further demonstrated that copies of bank statements, credit card statements, and certified ledger account titled “Credit Card (Dharmesh)” in the books of the company had already been furnished during assessment proceedings to establish that the impugned payments were made by the company itself.
The ITAT observed that the dispute essentially required only a factual verification of records and reconciliation of payments from the bank statements and company books. It found that the evidences filed by the assessee were not properly appreciated either by the AO or by the CIT(A).
Accordingly, in the interest of justice and fair play, the Tribunal restored the entire matter back to the AO for fresh examination after granting adequate opportunity to the assessee to furnish supporting documents. The appeal was thus allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal is preferred by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 147r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 30.03.2022 for the Assessment Year [A.Y.] 2016-17.
2. The grounds of appeal are as under:
1) The Ld. Assessing Officer, National Faceless Assessment Centre, Delhi (Ld.AO) The after passing order u/s 147 read with section 144B did not serve the order on your appellant either by email or physically by post and therefore the impugned order is liable to be quashed.
Without prejudice, your appellant submit following grounds of appeal on merits of the case.
2) On the facts of the case and in law the ld. AO has erred in adding Rs. 31,61,318/-as unexplained cash credit u/s 68 of the Act to the returned income of your appellant without considering the submission made in its proper perspective.
3) The learned Comm. of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in confirming the said addition without considering the written submission made by your appellant in its proper perspective.
3. The assessee has mainly contested the addition of Rs. 31,61,318/- and the arguments put forth before us by the ld.AR revolve around this issue only. Therefore, we take up ground no.2 and 3 for adjudication first.
4. Facts of the case are that the assessee, an individual, derives income from Salaries and Income from Other Sources. He is the Managing Director of M/s Dadyson Travels Pvt. Ltd.(„DTPL‟) having business of Travel related services such as Air Ticketing, Passport & Visa services, Travel Insurance, Hotel Booking etc. For the year under consideration, he had filed his return of income declaring income of Rs. 22,12,510/-. His case was reopened u/s 148 of the Act on the basis of information received by the AO regarding credit card transactions of Rs. 31,61,318/- through Citibank N.A. The assessee was asked by the AO about source of payment / deposit in respect of credit card. It was stated that he made payment on behalf of DTPL. However, as observed by the AO that no documentary evidence was submitted by him or any other director of company that credit card payment in the above cards belonged to this concern. Moreover, the assessee failed to submit any evidence to prove that payments for credits cards in his name were paid by the company. Therefore, the AO concluded that above credit card payments were made out of unaccounted income of the assessee and added to his income under section 68 of the Act liable to higher tax rate as provided 115BBE of the Act.
5. Aggrieved by the order, the assessee filed appeal before the first appellate authority contesting the addition who however, upheld the addition.
6. Before us, the ld.AR has contended that the company DTPL was having two Directors. For ease of doing above business, both the Directors were holding Credit Cards of various Banks. The assessee was having eight credit cards issued by four Banks. Major expenses incurred through these credit cards were for purchase of Domestic & International Air Tickets, payments for Visa Charges and other travels related expenses on behalf the company. The assessee used to submit monthly Credit Cards statements to the Company which made payments directly to the banks for respective expenses incurred through these credit cards. The expenses in the nature of personal expenses were being paid by the assessee from his personal accounts. The expenses incurred by the assessee, on behalf of the Company, were credited in the account namely “Credit Card (Dharmesh)” account in the books of the company. Same way, payments made to various banks for credit card expenses were debited to the above account.
6.1 It is further submitted that during the assessment proceeding, the copies of credit card statements of Citi Bank along with Bank statements of the company were submitted, highlighting the payments made to Citi Bank during the year. Total expenses incurred for each month were stated at the end of Credit Card statement and the said payment made on due date was highlighted in the bank statement of the company. Also as proof of the entries made in the books of the company, he had submitted duly certified copy of ledger of “Credit Card (Dharmesh) a/c”, where the credits and debits entries were posted. The onus in this regard was sufficiently discharged as all supporting evidences were submitted during the e-assessment proceeding. Without considering the detailed submission made, the AO has passed the assessment order making the impugned addition to the returned income. It is also stated that the ld.CIT(A), confirmed the order without considering the written submission made in its proper perspective. The ld.AR has also contended that as the assessee has filed the bank statements of DTPL along with ledger account of the assessee in the books of the company showing payment to Citibank, may be deleted. Without prejudice, as neither the AO nor the CIT(A) had appreciated the facts in the proper perspective, it was requested that the issue may be set aside to the AO to re-examine the same considering the evidences filed by the assessee.
7. The ld.DR relied on the order of the authorities below claiming that necessary evidences were not furnished.
8. We have carefully considered all relevant facts of the case. The only dispute in the instant appeal concerns addition of Rs. 31,61,318/-and confirmed by CIT(A). It appears from the above stated facts that both the authorities have not examined this sole issue of payment for credit card in correct perspective and taking into account the submissions made by the assessee in this regard. The issue in hand only required a factual verification of the submissions from the bank statements of the assessee and the company in which he was working as a director. We find that various details submitted by the assessee have not been appreciated. It is seen that the assessee filed copies of ledger account of the company as also certified copy thereof to support the claim that the impugned payments were made by the company. Therefore, in the interest of justice and fairplay, we deem it proper that entire issue is sent to the AO for fresh consideration and for passing of de novo order so as to make due verification of the records and reconciliation thereof. Needless to state, he would allow sufficient opportunity to the assessee of hearing who, in turn, would at liberty to file any supporting evidence before the AO in support of his contentions. Therefore, both the grounds stated above are allowed for statistical purposes.
9. Ground no.1 being general in nature does not require any adjudication.
10. In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open court on 04/05/2026.
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