ABDUL RAHIM AMEERUL HUSSAIN,CHENNAI vs. ACIT, NON CORPORATE CIRCLE-7(1), CHENNAI

ITA 2757/CHNY/2026Status: DisposedITAT Chennai09 October 2026AY 2017-1817 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged his initial burden of proving the identity, creditworthiness, and genuineness of the transaction. It reasoned that the AO's verification of Ms. Parveen's capacity based solely on her AY 2015-16 return and her proprietary concern's balance sheet was not proper. The Tribunal noted Ms. Parveen's significant immovable properties and her proprietary business, and that the source of her earlier payments comprised gifts from her father, which the Revenue had not doubted. Regarding Ms. Parveen's non-filing of returns for AYs 2016-17 and 2017-18, the Tribunal viewed this in the context of the divorce, stating that any default in her tax compliance was a matter between her and the Revenue. The Tribunal found the explanation of the assessee probable and consistent with documentary evidence, considering the transfer as a component of the mutual settlement of financial affairs upon divorce. The timing of the journal entry coinciding with the divorce agreement lent credence to its bonafides. The Tribunal also noted the AO's failure to conduct independent inquiries despite having the power to do so. Therefore, the addition of Rs. 6,33,75,822/- was set aside, and the AO was directed to delete it.

What were the facts?

The assessee, Abdul Rahim Ameerul Hussain, an individual engaged in wholesale fruit trading, filed his return for AY 2017-18. His case was selected for limited scrutiny concerning capital. The Assessing Officer (AO) noted an increase of Rs. 6,34,07,824/- in the assessee's capital account, attributed to a transfer from his former spouse, Ms. Fowmitha Parveen. The assessee explained this as a settlement of her credit balance as of March 31, 2016, in his proprietary concern's books, following their divorce. The AO, finding the explanation unsatisfactory, particularly due to Ms. Parveen's non-filing of returns for AY 2016-17, added Rs. 6,33,75,822/- to the assessee's income under Section 68. The CIT(A) confirmed this addition. The assessee appealed to the ITAT.

What were the issues?

1. Whether the Tribunal had to decide if the credit balance of Rs. 6,33,75,822/- transferred from the assessee's former spouse to his capital account constituted unexplained income under Section 68 of the Income Tax Act, 1961, given the divorce settlement and the spouse's prior financial dealings with the assessee's business. Assessee's contentions: - The amount was not fresh money but an accumulated balance built over years through banking channels, reflected in audited books and Ms. Parveen's individual trial balances. - The balance was an outstanding loan liability as of March 31, 2016, and was identified as 'Sundry Loan Creditors' from AY 2012-13 onwards. - The divorce agreement on April 1, 2016, settled all mutual claims, and the transfer was a consequence of this settlement. - Ms. Parveen was a regular income-tax assessee with significant income and assets. Revenue's contentions: - The AO noted Ms. Parveen's income for AY 2015-16 and her capital in her proprietary concern but found the investment in the assessee's firm unconfirmed. - Ms. Parveen had not filed a return for AY 2016-17, leading the AO to conclude the credit's genuineness remained unproved. - The CIT(A) confirmed the addition, stating the assessee failed to prove the capacity, identity, and creditworthiness of the creditor and the genuineness of the transaction.

Which sections of the Income-tax Act were involved?

Section 68,Section 250,Section 143(2),Section 142(1),Section 131,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY. S

Hearing: 19.08.2026Pronounced: 09.10.2026

PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld. CIT(A)’), Delhi, dated 21.04.2026 for AY 2017-18 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act).

ITA 2757 /Chny/2026 (AY 2017-18) ABDUL RAHIM AMEERUL HUSSAIN 2. Though several grounds have been raised, the solitary and substantive grievance

The order continues below.

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