2 weeks ago
ITAT finds error in Surat trader's Rs 5.09 crore assessment
A fruit seller in Surat used a special tax plan for small businesses called Section 44AD.
Under this plan, he said he earned about 14.5 lakh rupees.
But tax officers saw big amounts of money going into his bank account.
They said he really earned over 5 crore rupees and owed a huge amount of tax.
That is more than 34 times what he said he earned.
The tax officers did not use the correct numbers from the bank.
The judges at the tax court, called ITAT, spotted the mistake.
They sent the case back to the tax office to check the numbers again carefully.
The judges said tax officers must look at real facts before saying all bank money is income.
This is why keeping clear records of where money comes from matters so much.
Surat fruit trader Zakir Yakubbhai Patel declared Rs 14.57 lakh income under Section 44AD but faced a tax assessment of Rs 5.09 crore, over 34 times his reported income.
The tax department added Rs 2.43 crore for bank deposits and credits, Rs 71.87 lakh for unsecured loans, and Rs 1.79 crore for loans and advances.
The taxpayer argued the officer's figures were wrong and that his actual cash deposits were only about Rs 89.16 lakh.
The ITAT found discrepancies between the officer's cash deposit numbers and bank records, and restored the matter to the assessing officer for fresh verification.
The tribunal held that opting for Section 44AD does not let the tax department treat all bank credits as income automatically, but it also does not stop the department from examining suspicious deposits.
- Who
- Zakir Yakubbhai Patel, a fruit trader from Surat, and the Income Tax Appellate Tribunal (ITAT)
- What
- The ITAT found errors in the tax department's figures and restored the Rs 5.09 crore assessment to the assessing officer for fresh verification
- Where
- Surat, India
- When
- Assessment year 2017-18, relating to cash deposits during the demonetisation period; case decided under ITA No. 1113/Srt/2024
- Why
- Because the officer's cash deposit figures did not match bank records, and bank credits cannot automatically be treated as income without examining their nature and source
Key facts
- Case
- Zakir Yakubbhai Patel v. ITO, Ward-2(2)(5), Surat (ITA No. 1113/Srt/2024)
- Assessment year
- 2017-18
- Declared income
- Rs 14.57 lakh
- Assessed income
- Rs 5.09 crore (over 34 times reported income)
- Deposits added by assessing officer
- Rs 2.43 crore
- Taxpayer's claimed actual deposits
- Rs 89.16 lakh
- Other additions
- Rs 71.87 lakh (unsecured loans), Rs 1.79 crore (loans and advances)
- Outcome
- Matter restored to assessing officer for fresh verification
Quotes
Rajat Sharma
Advocate at Jotwani Associates
“"There have been cases where this played out badly for the taxpayer. In one such matter, a person had declared presumptive income of around Rs 7 lakh on a turnover of about Rs 92 lakh, but the bank showed total credits of more than Rs 8 crore during the year. The Tribunal upheld the addition in that case, making it clear that opting for Section 44AD does not give a free pass when deposits are far beyond what has been declared."”
financialexpress.com
Sources
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