Satyanarayana Murthy Kancharla Vs ITO (ITAT Hyderabad)
The case involved an addition of ₹75.29 lakh u/s 69C on account of credit card payments, which the AO treated as unexplained expenditure.
The assessee contended:
- Credit cards were handed over to a third party (Mr. G. Nageswararao) for use on commission basis
- Transactions did not belong to him
- Due to dispute, the said person had absconded, making it impossible to obtain confirmation
- FIR was filed, evidencing dispute (noted on record)
The lower authorities rejected the claim due to:
- No written agreement or confirmation
- Lack of documentary evidence
However, the ITAT observed:
- FIR indicates existence of dispute, supporting assessee’s difficulty
- AO failed to conduct proper verification, despite having:
- PAN
- Email details of third party
- AO could have invoked section 133(6) to obtain:
- Bank statements
- Transaction trail
Accordingly, the ITAT held:
- Addition was made without adequate enquiry
- Matter requires proper factual verification
Directions issued:
- Entire issue restored to AO for de novo adjudication
- AO to:
- Issue notices u/s 133(6) to third party and banks
- Verify linkage between bank accounts and credit card transactions
- Assessee directed to fully cooperate and furnish details
Result:
Appeal allowed for statistical purposes
Key takeaway:
- Burden on assessee is not absolute where facts suggest third-party involvement,
- AO must exercise investigative powers before invoking section 69C.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
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