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Facts
The assessee, a non-resident Indian, failed to file an ITR for AY 2018-19. Based on information from Koinex Exchange indicating crypto purchases of Rs. 1,31,31,481/-, the AO initiated reassessment proceedings and added Rs. 1,20,31,481/- as unexplained investment under section 69. The assessee claimed only Rs. 11 Lacs in transactions, stating the Koinex app was closed and relevant data was unavailable, but the DRP upheld the AO's addition.
Held
The Tribunal observed that crypto transactions must occur through bank accounts and the Department had not identified accounts supporting the higher alleged transactions. It ruled that the Department's evidence from Koinex must be provided to the assessee for confrontation and rebuttal. Therefore, the matter was restored to the AO to pass a fresh order after furnishing all details to the assessee and considering their response.
Key Issues
Whether additions for unexplained crypto investments based on third-party information without confrontation to the assessee are justified, and the burden of proof when the assessee denies the extent of transactions and the source of information is unavailable.
Sections Cited
147, 144C(13), 148, 271AAC, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
A.Y. 2018-19 Anurodh Sahu, vs. ITO (FT and TP), 3173, Tulsi Nagar Ranjhi, Jabalpur, Bhopal Madhya Pradesh PAN: BKTPS9371L (Appellant) (Respondent) Assessee by: Sh. Anil Agrawal, C.A. Revenue by: Sh. Alok Bhura, Sr. DR Date of hearing: 17.09.2025 Date of pronouncement: 28.11.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the Income Tax Officer (IT & TP), Bhopal at Jabalpur dated 16.01.2024 under section 147 r.w.s. 144C(13) of the Income Tax Act for the A.Y. 2018-19. The grounds of appeal are as under: -
1. That the assessment order issued by the Learned Assessing Officer on the basis of directions of DRP is unjustified and base less on the basis of information and documents submitted.
2. That the Learned Assessing Officer has never countered or produced before the assessee the source of information/ documents on basis of which the said addition appealed against is made during whole assessment proceedings.
3. That the Learned Assessing Officer never questioned the relevant sources of income produced and submitted by the assessee during the assessment proceedings and brought nothing on record to prove or justify the assessee having some other source or hidden source of income.
4. That the Learned Assessing Officer has made the additions on the basis of incomplete information having no evidence and based on surmises on the directions given by DRP.
Anurodh Sahu A.Y. 2018-19 5. That the direction given by DRP has not appreciated the replies, proofs and documents submitted by the assessee and ignored it without any justification solely based on information provided by the Assessing Officer having no justified source and never presented before the assessee.
That the Kionex App from which the transaction was done has been closed and the assessee has produced all his bank accounts for the relevant transactions which were ignored by the Learned Assessing Officer and even the Assessing Officer done not have any confirmation from any credible source.
That it is utmost importance to find out the correctness of figures mentioned by the Learned Assessing Officer and to produce before the Assessee the documentary evidences of the said figures and information.
That the Learned Assessing Officer has duly mentioned and accepted that the assessee has made purchase of Rs. 13131481/- and has made sale of Rs. 12858585/- during FY 2017-18 (AY 2018-19) towards transaction related to crypto currency from Kionex App, there by incurring loss of Rs. 272896/- and therefore making addition of the gross amount of purchases is totally unjustified and baseless specially when the assessee has submitted all his bank accounts and clarified that there exists no other source of transaction/ income for him and the same was duly accepted too by the AO as he was not able to justify or produce before assessee any of its other source.
That the assessee hereby request to Hon'ble Tribunal to stay the demand proceeding against him as it will cause undue hardship and harassment to him being high pitched and based on incomplete information.
That the proceeding initiated for penalty U/s 271 AAC should also be kept in abeyance till the disposal of appeal before the Hon'ble Tribunal.”
The facts of the case are that the assessee had not filed a return of income for the assessment year 2018-19. As per information in the possession of the Department, the assessee had sold crypto currencies for a sum of Rs.1,28,58,585/- Proceedings under section 148 were initiated under the new procedure and a notice was issued on 31.03.2022. The assessee filed a return in response to this notice. The assessee was a non-resident Indian working with a foreign company namely Chevron Transport Corporation Ltd, Hamilton, Bermuda during the year. In the return of income filed, in response to notice under section 148, he declared a total income of Rs. 81,510/-. The assessee submitted that he had purchased Bitcoins during the year from his SBI NRO account as under:-
Anurodh Sahu A.Y. 2018-19 Dated Amount (in Rs.) 20.10.2017 100002.38 23.10.2017 400005.90 23.10.2017 300005.90 03.11.2017 100002.36 27.11.2017 100002.36 Total 1000018.90 It was submitted that investment during the said financial year was out of his foreign income sources. A sum of Rs. 8 Lacs have been transferred to secure Bitcoin Traders Private Limited and Rs. 2 Lacs have been transferred to Discidium Internet Labs Private Limited through the Koinex Platform Mobile App. However this app had later been closed down on Government instructions and removed from google playstore therefore, the assessee was not able to furnish transaction related documents from the site of Koinex app except the bank accounts i.e. the SBI NRO account and the SBI NRE account which clearly indicated the quantum of total transaction done by the assessee during the said financial year. Thus, it was submitted that the assessee began dealing in crypto currency with an initial investment of Rs. 1 Lac and a total investment of Rs. 10 Lacs only. All payments received out of sale from crypto currency was through his bank accounts and normal sale of only Rs. 1962 was made during the said year. The ld. AO went through the statement of the NRO account with SBI and tabulated the crypto related transaction. He concluded from the same that the assessee had invested Rs. 11 Lacs in crypto currencies during the year and received Rs. 1,07,590/- from crypto transactions, which was against his claim of Rs. 1963/- only. He, therefore, asked the assessee to furnish details of transactions made with Discidium Internet Labs Private Limited, ZEB IT Service Limited and Secure Bit Coin Trader Pvt. Ltd. In response, it was submitted that all the transactions done for the purchase and sale of crypto currency had been done through the Koinex Platform but the Koinex app had been closed during the F.Y. 2018-19 and the stock of crypto currency had been transferred to B & S portal to be sold later in future financial years. A statement of trading of crypto currency done by the assessee through Koinex Platform for the F.Y. 2017-18 through his SBI NRO A/c No. 3477740067 was 3 Anurodh Sahu A.Y. 2018-19 furnished. Ongoing through statement submitted by the assessee, the ld. AO noted that the currency wise balance as on 31.03.2018 had been given but the quantity of sale and purchase had not been submitted; the assessee had taken the price of Bitcoin at Rs. 34,37,000/- as on 31.03.2018, of Litecoin at Rs. 14,750/- on 31.03.2018 whereas it had been ascertained from the historical price of crypto currencies that the average price of those coins were Rs. 4,56,046/- and Rs. 7,832/-. The AO also wondered how the assessee had calculated profit of Rs. 1963/- without quantity wise details of purchase and sale. Thus, in view of the same and in view of the information of quantum of transaction done by assessee provided by the Koinex crypto exchange, the source of purchase value amounting to Rs. 1,20,31,481/- remained unexplained. Therefore, he decided to add back a sum of Rs. 1,20,31,481/- on this account. Furthermore, since no detailed transaction statement had been received from Discidium Internet Labs Private Limited, ZEB IT Service Limited, Secure Bit Coin Trader Pvt. Ltd., and the assessee had also not provided any information by the transactions done, therefore, the capital gain was computed on the basis of summary transactions provided by the Koinex exchange. As per the same, assessee had made purchases of the value of Rs. 1,31,31,481/- and sales of Rs. 1,28,58,585/-. Thus, prima facie, the assessee had incurred a loss of Rs. 2,72,896/-. Accordingly, the AO decided to allow a capital loss of this amount. He forwarded a copy of this draft assessment order to the assessee and advised the assessee to either file his acceptance or prefer an appeal before the Dispute Resolution Panel.
The assessee filed an objection before the Dispute Resolution Panel (DRP). Before the DRP, it was submitted that no such quantum of transaction of sale and purchase had been done by the assessee. That to justify his stand, the assessee had submitted Koinex wallet ID through the AO and mentioned that since the same had been shut down therefore, no such transaction details could be restored or retrieved from the said platform. The only transaction in crypto currency was to the extent of Rs. 11 Lacs which was being reflected in the SBI NRO account of the Anurodh Sahu A.Y. 2018-19 assessee. The assessee submitted that transaction in crypto currency done on any platform could not be done in cash but only through the banks and the assessee had produced all bank accounts linked to his PAN and Aadhar for which the information had been demanded by the AO. From the transaction reflected in such accounts, there was clear evidence that the transactions had been done in crypto currency to the extent of only Rs. 11 Lacs. Thus, the assessee submitted an affidavit denying transactions stated to have been indulged in by him by the AO on the basis of information received from the Koinex platform. The ld. DRP observed that the AO had based his findings on information provided by Koinex which had provided that the assessee had purchased crypto currency amounting to Rs. 1,31,31,481/-. Hence, there was credible information on the basis of which the additions have been made. Now it was incumbent upon the assessee to furnish the complete information regarding the Bitcoin transactions on the Koinex app. Since, the assessee did not have any satisfactory explanation for the investment appearing in his name as per authentic sources; since the onus of disproving the investment had not been satisfactorily carried out through confirmations from different stakeholders therefore, the explanations of the assessee was not acceptable. The ld. DRP cited the ratio of the cases of Sumati Dayal vs. CIT 214 ITR 801 and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC). The ld. DRP held that the assessee had failed to discharge the onus of explaining how the crypto currencies had been purchased from the explained sources and therefore, was of the view that the additions made by the AO deserve to be sustained. On the basis of these directions, the ld. AO passed the order under section 147 r.w.s. 144C(13) on 16.01.2024.
The assessee is aggrieved by this order passed by the ld. ITO / ld. AO and has accordingly come in appeal before us. Sh. Anil Agrawal, C.A. appearing on behalf of the assessee submitted that in the first place, the information available with the Department that the assessee had transacted in crypto currencies amounting to Rs. Rs. 1,31,31,481/- was completely incorrect. The Department did not have any documentary evidence to justify its claim that transactions in crypto currencies to the extent of Rs. 1,31,31,481/- had taken place. It was submitted that 5 Anurodh Sahu A.Y. 2018-19 transactions in crypto currency could not take place in cash. They could only take place through banking channels and the assessee had provided copies of all his bank accounts that were linked to his PAN and Aadhar. As per these bank accounts, the assessee had incurred transactions (according to the Assessing Officer) to the extent of Rs. 11 Lacs only, therefore, unless the Department could show that the assessee had entered into transactions of a greater value, no reliance could be placed upon the information in its possession that the assessee had entered into the transactions to the extent of Rs. Rs. 1,31,31,481/-. It was further submitted that the assessee had not been provided any details of the information / documents in soft or hard copy to justify the amount of investment that he is stated to have made. Accordingly, it was requested that before an adverse decision could be taken in the matter, the assessee must be furnished with the details of the transaction on the basis of which the ld. AO had based his assumption of the extent of transactions. The ld. AR further submitted that the assessee was earning salary as a Crew member of a ship and was an NRI during the period. The salary earned by him had been deposited in his NRE, SBI A/c No. 35002283351 and this account was the only source from where the fund was being transferred to his NRO A/c No. 30777400637 with SBI, for crypto currency transaction and saving bank A/c No. 914010056602361 maintained with Axis Bank for personal domestic transaction. It was submitted that since the assessee had no source of income other than the income earned from foreign sources, which were fully explained, therefore, there was no occasion to make any addition in the hands of the assessee for the investment made in crypto currency, which according to the assessee amounted to only Rs. 11 Lacs.
On the other hand, Sh. Alok Bhura, Sr. DR submitted that the Department had received information from the Koinex Exchange platform that the assessee had made purchase transactions to the extent of Rs. 1,31,31,481/- and sale transactions to the extent of Rs. 1,28,58,585/- during the financial year 2017-18 and since only Rs. 11 Lacs of these purchases had been explained, the remainder was unexplained investment under section 69 which deserved to be confirmed. 6