AO cannot infer the assessee’s income from the children’s school entrance forms: ITAT

Bharatbhai Manubhai Baldha v. DCIT – [2023] (Surat-Trib.)

The assessee was a person who submitted a tax return and stated an income of Rs. 2.64 lakh. The assessee’s home was the subject of a search action. The assessee indicated that his younger brother is responsible for paying Rs 14 lakhs towards his domestic expenditures and the education of two children in the statement recorded under section 132(4).

The AO sent a notice to G D Goenka School under section 133(6) requesting admission forms, fees paid by the assessee, and a breakdown of those fees in order to verify this allegation. Upon reading the school form, the AO observed that the assessee had stated his monthly salary as Rs. 4.00 lakhs on the admission form.

Additionally, the assessee and his wife signed a declaration attesting that the information provided on the admission form was accurate to the best of their knowledge and belief because providing false information on the admission form jeopardized enrollment and selection.

Because of this, the AO decided to make additions in accordance with section 69A based on his belief that the assessee had an annual income of Rs. 48.00 lakhs.

The CIT(A) upheld the AO’s additions on appeal. An angry assessee presented the Tribunal with the current appeal.

The Tribunal determined that the AO’s estimation of the assessee’s income was based only on the children’s school enrollment forms, on which the assessee declared a monthly income of Rs. 4.00 lakhs. According to the assessee, the entry on the school admission form was made solely to ensure his children’s admission.

There was no tangible evidence of the assessee’s undeclared revenue discovered during the search procedures. The only information obtained from the school under section 133(6), which was also obtained from the assessee, was the basis on which AO made additions.

According to the law, there is no room for any presumption; only actual income that an individual has collected or earned may be subject to taxation.

The appeal was therefore returned to the file of the AO with the instruction to provide the assessee the chance to explain the nature and relevance of the school admission form and to lead any other evidence, if the assessee so desires, to refute the contents of such school admission form.