SALIM ABUBAKAR NAGANI,MUMBAI vs. ASSESSING OFFICER, MUMBAI

This appeal filed by the assessee arises out of the order dated 05.01.2026 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter “CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter “the Act”], arising from the assessment order dated 11.11.2025 passed under section 147 read with sections 144 and 144B of the Act for A.Y. 2018-19.

The assessee has raised the following grounds of appeal:

Brief facts of the case are that the assessee is an individual carrying on trading business in the name and style of Universal Traders. The assessee had not filed his return of income for the year under consideration. On the basis of information regarding cash deposits and credit-card payments, proceedings under section 147 were initiated and notice under section 148 was issued on 30.08.2024. During the assessment proceedings, the AO examined the current account maintained with Kokan Mercantile Co-operative Bank Ltd. and considered total credits of Rs.1,91,76,338/-. After accepting the assessee’s explanation regarding deposit of opening cash balance of Rs.19,09,663/-, the AO treated Rs.1,72,66,675/- as business turnover and estimated income at 8% thereof, amounting to Rs.13,81,334/-. The AO further noted payments of Rs.19,85,500/- towards the Citi Bank credit card and Rs.22,37,074/- towards the IndusInd Bank credit card. Holding that the source of these payments had not been explained, the AO added the aggregate amount of Rs.42,22,574/- under section 69A of the Act and applied section 115BBE.

Aggrieved, the assessee preferred appeal before the Ld. CIT(A) and submitted that the credit-card payments had been made from his own bank accounts, principally from the business current account, the credits in which had already been considered for estimating business income. The Ld. CIT(A) confirmed the addition on the ground that the assessee had not furnished a proper reconciliation establishing the source of the payments. The Ld. CIT(A) further observed that estimation of business income and addition under section 69A operated in different fields. Aggrieved, the assessee is in appeal before us.

Before us, the Ld. AR submitted that the payments towards the credit cards were made through the assessee’s bank accounts. The receipts credited to the business bank account had already been treated by the AO as turnover and income had been estimated at 8% thereof. It was submitted that payments made out of the same receipts could not again be treated as unexplained money merely because they were utilised for discharging credit- card dues. The Ld. AR contended that the AO had not examined the relevant bank entries and the source of the credit-card payments before making the separate addition.

Per contra, the Ld. DR relied on the orders of the lower authorities. 3

We have heard the rival submissions and perused the material available on record. We find that the AO has treated the credits in the business current account, after excluding the opening cash balance accepted by him, as business receipts and estimated income at 8% thereof. The assessee’s specific contention is that these very receipts were utilised for payment of credit-card dues. However, the assessment order does not contain an examination of the corresponding debits in the bank accounts and their linkage with the credit- card payments. The Ld. CIT(A) has also confirmed the addition without verifying this factual aspect. For the purpose of section 69A, the explanation regarding the nature and source of the money has to be examined. If the payments have been made out of receipts already accepted by the AO as business turnover, the source of such payments stands explained to that extent. In such circumstances, a separate addition cannot be sustained merely on account of utilisation of those receipts for payment of credit-card dues. The general observation that the two additions operate in different fields does not answer the assessee’s contention regarding the common source of funds.

Since the complete facts have not been examined, we set aside the order of the Ld. CIT(A) in respect of the addition of Rs.42,22,574/- and restore this issue to the file of the AO for fresh examination. The AO shall verify the bank statements and credit-card statements and ascertain whether the payments towards the credit cards were made from the bank accounts, the credits in which had been treated as business receipts for estimating income at 8%. If, on verification, the payments are found to have been made out of such receipts, no separate addition shall be made under section 69A in respect of those payments. The explanation regarding any payments made from the savings account shall also be examined with reference to the source of funds. The assessee shall furnish the relevant statements and a reconciliation showing the dates, amounts and corresponding bank entries for the credit- card payments. Any amount whose source remains unexplained after such verification shall be considered by the AO in accordance with law. The AO shall provide reasonable opportunity of being heard to the assessee, and the assessee shall cooperate and furnish the requisite details.

In view of the restoration of the issue for fresh examination after providing reasonable opportunity, the grounds relating to lack of opportunity do not require separate consideration.

In the result, the appeal filed by the assessee is allowed for statistical purposes.