2024 (11) TMI 318 - AT - Income Tax

Undisclosed foreign credit card expenses upheld under sections 69C and 68 after survey proceedings

Lalit Kumar Modi, C/o L.N. Malik & Co., CA Versus DCIT, Circle 11 (1), New Delhi. And (Vice-Versa)

Lalit Kumar Modi, C/o L.N. Malik & Co., CA Versus DCIT, Circle 11 (1), New Delhi. And (Vice-Versa) - TMI Issues Involved:1. Reopening of assessment under Section 147 of the Income Tax Act.2. Addition under Section 69C and 68 regarding unexplained expenditures incurred through credit cards.3. Addition of unexplained money received through Ananda Heritage Hotels P. Ltd. on a protective basis.Detailed Analysis:1. Reopening of Assessment under Section 147:The assessee challenged the reopening of the assessment under Section 147, arguing that the reasons to believe were not properly formed and were based on borrowed satisfaction from the Mumbai Income-tax Department. The assessee contended that the Assessing Officer (AO) did not independently verify the information received before reopening the assessment. The CIT (A) rejected the assessee's objections, affirming that the information from the Investigation Wing constituted tangible material justifying the reopening. The Tribunal upheld the CIT (A)'s decision, noting that the survey conducted on the assessee revealed the possession of various credit cards, which warranted further investigation by the AO.2. Addition under Section 69C and 68:The AO made additions under Sections 69C and 68 for unexplained expenditures incurred through credit cards found in the assessee's possession. The assessee argued that most of the credit cards did not belong to him and that payments for two cards were made by his NRI wife. The CIT (A) sustained the additions, emphasizing that the assessee failed to provide documentary evidence or produce individuals who could confirm ownership and usage of the credit cards. The Tribunal concurred with the CIT (A), highlighting that the assessee could not substantiate his claims with evidence, and the credit card expenditures were rightly treated as unexplained.3. Addition of Unexplained Money through Ananda Heritage Hotels P. Ltd.:The AO made a protective addition for unexplained money received through Ananda Heritage Hotels P. Ltd., owned by the assessee. The CIT (A) deleted this addition, observing that the investment was made through Wilton Investment Ltd. as share application money, and substantive addition was made in the hands of Ananda Heritage Hotels P. Ltd. The Tribunal agreed with the CIT (A), finding no reason to disturb the deletion of the protective addition in the assessee's hands, as the transaction was appropriately addressed in the hands of the company.Conclusion:The Tribunal dismissed both the appeals filed by the assessee and the Revenue. It upheld the reopening of the assessment and the additions made under Sections 69C and 68, while agreeing with the CIT (A) on deleting the protective addition related to Ananda Heritage Hotels P. Ltd. The judgment emphasized the importance of substantiating claims with evidence in tax proceedings and the necessity for the AO to rely on tangible material for reopening assessments.