Man Declared Rs 1.79 Lakh Income Tax; ITAT Gives Him One Last Chance

A taxpayer who declared income of just Rs 1.79 lakh found himself facing additions of more than Rs 11.22 crore after the Income Tax Department (ITD) questioned a series of transactions in his accounts.

The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT), however, has given him one final opportunity to place his evidence before the Assessing Officer (AO). The relief comes with an unusual condition: he must plant 500 trees or pay the required plantation cost to a specified non-government organisation.

The case relates to Ranbir Singh, a resident of Haryana, and assessment year 2017-18. He had declared taxable income of Rs 1,79,160 along with agricultural income of Rs 3 lakh.

How Rs 11.22 Crore Was Added To His Income

The return was selected for scrutiny. During assessment, the AO noticed cash deposits of Rs 85.93 lakh in the taxpayer’s bank accounts during the demonetisation period.

The tax officer also found unsecured loans of about Rs 9.26 crore and sundry creditors of roughly Rs 1.07 crore. According to the assessment findings, the taxpayer did not furnish adequate confirmations and supporting documents to establish these transactions.  He had also shown agricultural income of Rs 3 lakh, but could not produce documents to substantiate it, according to a recent report by Financial Express.

The AO then added around Rs 11.22 crore to his income, taking the assessed total to about Rs 11.24 crore under Section 143(3) of the Income Tax Act, 1961.

The taxpayer took the matter to the CIT(A), but did not get relief, as the additions made by the AO were upheld. The matter then reached the ITAT.

Why The ITAT Sent The Case Back

Before the tribunal, the taxpayer did not ask for the additions to be deleted straightaway. Instead, he sought another chance to produce documents and establish the source and genuineness of the disputed amounts.

As part of the request, his representative offered to plant 500 trees at a Yamuna Bank site in the Panipat-Samalakha area, with responsibility for their plantation, protection and maintenance. Alternatively, the taxpayer could deposit the required cost with the specified NGO.

The ITAT accepted the request and restored the matter to the AO for verification, subject to compliance with this condition within one month.

The order does not mean the Rs 11.22 crore addition has disappeared. The AO will reconsider the disputed amounts only after examining the supporting evidence.

If the taxpayer fails to fulfil the tree-planting condition or pay the required amount within the stipulated period, the CIT(A)’s order will stand restored, and his appeal will be treated as dismissed.

For taxpayers, the case is also a reminder that cash deposits, loans, creditors and even exempt income such as agricultural income may need to be backed by records when questioned during scrutiny.

FAQs

Has the ITAT cancelled the Rs 11.22 crore tax addition?
No. The tribunal has sent the matter back to the Assessing Officer, who will reconsider the additions after examining the taxpayer’s evidence.

Why was more than Rs 11.22 crore added to the taxpayer’s income?
The additions related mainly to cash deposits, unsecured loans, sundry creditors and agricultural income that the taxpayer allegedly failed to substantiate with adequate documents.

What happens if the taxpayer does not plant 500 trees?
He can alternatively pay the required plantation cost to the specified NGO. If he fails to comply within one month, his appeal will be treated as dismissed.