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Facts
The assessee, an individual, did not file a return of income. The Assessing Officer reopened the assessment and found unexplained credits of Rs. 1,18,23,222 based on information regarding salary income and credit card payments. The assessee claimed these were for a friend's medical expenses and involved circular credit card transactions to settle dues.
Held
The CIT(A) upheld the additions, finding the assessee's submissions unsubstantiated. The Tribunal, noting the unique facts, decided to grant the assessee one more opportunity to present their case properly before the lower authorities.
Key Issues
Whether the credit card transactions and related bank credits constitute unexplained income, and if the assessee's explanation for these transactions is valid.
Sections Cited
148A(b), 148A(d), 148, 250
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S
आदेश / O R D E R
PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 09.09.2025 for Assessment Year (AY) 2020-21.
The assessee is an individual and did not file the return of income for the year under consideration. The assessing officer received information that the assessee has salary income and has also made payments towards credit cards. Since the assessee did not file the return of income the assessing officer reopened the assessment by issue of notice under section 148A(b). Subsequently the assessing officer passed in order under section 148A(d) and reopened the assessment by issue of notice under section 148. The assessing officer called on the assessee to furnish the source for the credit card payments and also to submit the details of the credits in the HDFC bank account. Further the assessing officer also noticed that the assessee has not disclosed the salary income on which tax has been deducted at source. Accordingly the assessing officer concluded the assessment assessing the income of the assessee at Rs.1,18,23,222. Aggrieved, the assessee filed further appeal before the CIT(A). Before the CIT(A), the assessee submitted that the assessee has used the credit card for the financial requirements of his friend and that the assessee has entered into circular transaction of settling the credit card dues by using other credit cards. The assessee therefore submitted that the credits in the bank account reflect the circular transaction of settling the credit card use and therefore cannot be treated as unexplained credits. With regard to spending through credit card the assessee submitted that he has used the credit card for the financial requirements towards medical treatment of a friend and that the credit card has not been used for any personal spending pertaining to the assessee. The CIT(A) did not accept the submissions of the assessee for the reason that the assessee has not substantiated the various submissions with respect to use of credit card and the circular credit card transactions towards settling the dues. The CIT(A) thus confirmed the additions made by the assessing officer. The assessee is in appeal before the tribunal against the order of the CIT(A).
Subhashchandrabose Vijayakanth :- 3 -:
We heard the parties and perused the material on record. The Ld. AR submitted that the assessee does not have any income other than the salary income on which tax is deducted at source. The Ld. AR reiterated the submissions made before the CIT(A) stating that the credit card transactions were carried out by the assessee to meet financial emergency of friend and that the assessee has used another credit card to settle the dues. The Ld. AR also submitted that the impugned transactions entered into by the assessee are towards rotation of funds and repayment between credit cards is a temporary financial arrangement to fund the requirements of a friend. The Ld. AR prayed that if one more opportunity is given to the assessee to represent the case properly before the lower authorities the assessee undertakes to furnish the necessary evidences to substantiate the claim. From the perusal of the orders of the lower authorities, we notice that the impugned addition is have been made is the assessee did not furnish any evidences in support of the claim that the credit cards have been used in circular transactions to meet the financial requirements of a friend. Considering the facts and circumstances unique to the present case, we are inclined to give one more opportunity to the assessee to represent the case properly before the lower authorities. Accordingly we remit the appeal back to the assessing officer to consider the impugned addition is on merits by calling for the necessary details as may be required to decide the claim of the assessee in accordance with law. The assessee is directed to file the relevant details in support of the submissions made with regard to the use of credit card and rotation of funds using credit card. The assessee is further directed to submit the details as may be called for without seeking unnecessary adjournments and cooperate with assessment proceedings. It is ordered accordingly.
Subhashchandrabose Vijayakanth :- 4 -:
In result the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 25th day of February, 2026 at Chennai.