Ahmedabad ITAT: Misuse of Credit Cards by Friends Not Considered Personal Expenditure

It was ruled by the Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT), that the misuse of credit cards via a friend could not be regarded as personal expenditure.

The taxpayer, Abdulmannan Mohammedkasad Bastawala, was a salaried employee.

It was noted by the assessing officer that the taxpayer has merely cited the salary from M/s Blue Dart Express Ltd. in the Income Tax Returns (ITR) and did not cite anything for the credit card payments incurred via the taxpayer of Rs 19,96,363. AO seeks taxpayers to elaborate on these transactions via the notices issued u/s 142(1) of the Income Tax Act,1961.

Filing of Appeals Law and Procedure

It was mentioned by the taxpayer that the transactions had been incurred via him and that his friend had misused his credit cards and after that escaped, leaving him unaware of the charges. He outlined that he had not repaid these expenses to the credit card companies and had gained no personal advantage. The AO rejected the taxpayer’s submissions and made an addition of Rs. 20 lakhs as unexplained income and assessed penalties.

The penalties were carried by the Commissioner of Income Tax (Appeals) and the taxpayer has appealed before ITAT for relief. The counsel of the taxpayer claimed that he had mentioned the circumstances and answered the notices.

The taxpayer had neither benefitted from the transactions nor shown any intent to evade taxes, the bench observed.

It was carried by the bench Dr BRR Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member) that the credit card of the taxpayer was misused via a friend of his, who has escaped now. Under Section 271(1)(b) of the Income Tax Act, 1961 the bench quashed the penalty.