SMIT NAVNITLAL SONI,AHMEDABAD ,GUJARAT vs. ITO WARD-5(3)(1),AHMEDABAD, AHMEDABAD , GUJARAT

ITA 1434/AHD/2026Status: DisposedITAT Ahmedabad16 October 2026AY 2021-228 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Smit Navnitlal Soni, filed an appeal against the order of the CIT(A), NFAC, Delhi, for Assessment Year 2021-22. The appeal challenges additions made by the Assessing Officer (AO) and confirmed by the CIT(A). These include an addition of Rs. 8,78,972/- for an alleged difference between bank account credits and trading account credits, treated as undisclosed business income. Another addition of Rs. 52,25,000/- was made under Section 69 as unexplained investments, attributed to capital introduced in the business from the assessee's personal bank account. A third addition of Rs. 30,400/- for GST late fees, treated as a penalty, is also under challenge. The assessee contended that the AO misunderstood the distinction between business and personal bank accounts and that the capital introduction was from personal savings, loan repayments, LIC maturity, and FD/OD withdrawals.

What did the Tribunal hold?

The Tribunal set aside the orders of the CIT(A) and restored the case to the Jurisdictional Assessing Officer for issues covered in grounds of appeal no. 1 and 2. The Tribunal directed the AO to provide an opportunity to the assessee to produce relevant details and clearly explain the entries in the different bank accounts. If the AO is satisfied that the assessee's contention regarding loan repayment and relevant bank entries is correct, the additions under Section 69 and the Rs. 8,78,972/- difference will not survive. Grounds 1 and 2 are allowed for statistical purposes. For Ground of Appeal No. 3, the Tribunal held that GST late fees are statutory payments incurred due to delay in payment and not an expenditure for an offence or prohibited by law. Explanation 1 to Section 37(1) disallows expenses only when the purpose of incurring the expenditure is itself an offence or prohibited by law. Therefore, the disallowance of Rs. 30,400/- for GST late fees was deleted. The assessee's Ground of Appeal No. 3 is allowed. The overall result is that the appeal of the assessee is partly allowed.

What were the issues?

1. Whether the addition of Rs. 8,78,972/- as undisclosed business income, arising from the difference between total bank credits and trading account credits, is justified, considering the assessee's claim of confusion between personal and business accounts and lack of reconciliation opportunity? (Question of law and fact, concerning Section 69A of the Income Tax Act, 1961). 2. Whether the addition of Rs. 52,25,000/- as unexplained investments under Section 69 of the Act is valid, when the assessee claims the capital introduced was from personal savings, including repayment of a loan to Palm Electric Co., LIC maturity, and FD/OD withdrawals, and argues the AO erred in not verifying from the personal bank account? (Question of law and fact, concerning Section 69 of the Income Tax Act, 1961). 3. Whether the addition of Rs. 30,400/- for GST late fees, treated as a penalty, is sustainable, when the assessee contends it is a statutory payment and not an expenditure for an offence or prohibited by law? (Question of law, concerning Section 37(1) of the Income Tax Act, 1961). Assessee's Contentions: - Grounds 1 & 2: The AO misunderstood the bank accounts; capital introduction was from personal savings, including loan repayment from Palm Electric Co., LIC maturity, and FD/OD withdrawals. Interest income from the loan was offered to tax in earlier years. Clause 31(b) of Form 3CD was inapplicable. The AO erred in verifying from the business balance sheet instead of the personal bank account. - Ground 3: GST late fees are statutory payments and not penalties for offences or prohibited acts. Revenue's Contentions: - Not explicitly recorded for Ground 1 & 2, but the AO confirmed the addition under Section 69, and the CIT(A) found the assessee failed to discharge the onus under Section 69 due to lack of documentary evidence and a satisfactory explanation. The CIT(A) relied on CIT v. P. Mohanakala (291 ITR 278). - For Ground 3, the AO treated GST late fees as a penalty.

Which sections of the Income-tax Act were involved?

Section 69,Section 37(1),Section 250,Section 142(1),Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH

Before: DR. BRR Kumar & Shri Tapas Ram Misra

For Appellant: Shri Aseem L. Thakkar, A.R
For Respondent: Shri Amit Pratap Singh, Sr. DR

PER TAPAS RAM MISRA, JUDICIAL MEMBER:

The present appeal has been filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 23.02.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2021-22. I.T.A No. 1434/Ahd/2026

2.

The assessee has raised the following Grounds of

The order continues below.

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