Section 69A cannot be Invoked if Books of Accounts are not Maintained: Delhi High Court
In a significant ruling on December 12, 2023, the Delhi High Court delivered a landmark judgement on Section 69A invocation criteria, in the case of Hersh Washesher Chadha vs CIT (International Taxation), Case No- ITA 676/2023. The court emphasized that Section 69A of the Income Tax Act can only be invoked when proper books of accounts are maintained.
Background of Case:
The case involved a non-resident individual residing in the United Arab Emirates (UAE) who declared his income for Assessment Year 2017-18. The Assessing Officer made additions under Section 69A, alleging unexplained credit entries, underreporting of interest, and deemed dividend. The Commissioner Income Tax (Appeals) partly allowed the appeal, and the Income Tax Appellate Tribunal further ruled in favor of the assessee, ultimately deleting the entire addition under Section 69A.
Court’s Decision:
The Tribunal argued that Section 69A did not apply in this case as one of its conditions, relating to the assessee being a non-resident with income solely from interest, was not met. The Tribunal also examined the case on its merits, accepting the explanation provided by the assessee regarding the questioned transactions.
Key Points from the Ruling:
Non-Resident Status Matters: The court highlighted that, being a non-resident, the assessee was not obligated to maintain books of account in India, a crucial factor in invoking Section 69A.
Prima Facie Observation: The court made a prima facie observation that the use of “if any” in Section 69A suggests that the provision cannot be invoked if books of account are not maintained. However, this aspect was left open for future consideration.
Explanation of Transactions: The court acknowledged the detailed explanation provided by the assessee, breaking down the questioned amount into specific sources, as a valid defence against the claim of unexplained money.
No Substantial Question of Law: The court dismissed the appeal, stating that the appellant/revenue failed to raise any substantial question of law for consideration.
Conclusion:
This ruling establishes that the provisions of Section 69A cannot be applied in cases where a non-resident individual, with income sources limited to interest, is not maintaining books of account in India. The court emphasized the importance of a factual basis and a satisfactory explanation in such matters, ultimately highlighting the specific circumstances under which Section 69A can be invoked.
To Know About Potential relief for Salaried Class Taxpayers in Budget 2024 CLICK HERE
READ MORE