ITAT Mumbai Verdict: Engineer Cleared In Rs 69 Lakh Unexplained Income Case

Last Updated:November 15, 2025, 17:10 IST

The ITAT’s ruling highlighted complications faced by taxpayers in high-value financial transactions after an engineer argued against an Assessing Officer.

The Income Tax Appellate Tribunal (ITAT) in Mumbai recently deleted a major addition made by the tax authorities against an Indian engineer. The bone of contention was the engineer’s alleged under-reporting of income while making substantial financial investments.

The verdict by the authorities underpinned the increasing tax complications faced in high-value financial transactions. With their order, ITAT Mumbai not only brought to an end the six-year-long stand-off and provided the taxpayer relief, but also shed light on the digital monitoring tools currently deployed by the Income Tax Department.

Tax Advisory Platform Explains The Case

Tax Buddy, a tax advisory platform, provided a detailed insight into the case at hand via a social media post. The case concerned an engineer who reportedly declared only minimal income in his Income Tax Returns but was found to have purchased a residential flat worth Rs 39 lakh and made fixed deposits worth Rs 30 lakh. It took his total investments to Rs 69 lakh.

An Indian engineer showed minimal income in India

but bought a ₹39L flat and made ₹30L FDs (₹69L total).

Tax officer taxed it as unexplained income; 6 yrs later ITAT Mumbai deleted it

Here’s how the Tax Dept tracks 8 such transactions through the SFT system:

In response, the Assessing Officer (AO) classified the sum as unexplained income as per Section 69 of the Income Tax Act. The Assessing Officer also raised a tax demand against the engineer. While the AO concluded that the declared income doesn’t justify the scale of investments made, the taxpayer argued that their funds came from past savings, family support and verifiable banking channels. The argument unsurprisingly didn’t satisfy the AO. The additions were upheld in earlier stages of appeal before the matter finally reached the ITAT Mumbai.

How The Decision Went In The Taxpayer’s Favour

Despite facing objections, the taxpayer ultimately won the dispute after the Tribunal felt that the AO had not adequately considered the explanations and supporting documents issued by the engineer. In their order, the ITAT mentioned that the source of the funds had been reasonably demonstrated and that the additions couldn’t be sustained on mere assumptions under unexplained income provisions. The Tribunal also emphasised the importance of fair evaluation of cases in which investments stretch over several years and are made through non-taxable flows.

The case reinforced how financial compliance is increasingly data-driven. The Income Tax Department’s surveillance capabilities have only grown rapidly in the last decade through the Statement of Financial Transactions (SFT) system. Integrated with PAN, AIS and several reporting entities, this mechanism allows the department to automatically identify unusual or disproportionate financial activities.

The SFT system monitors transactions based on eight different categories, including cash deposits in savings accounts, cash in current accounts, credit card bills, property purchases or sales of Rs 30 Lakh or more, fixed Deposits of Rs 10 lakh or more and other investment transactions. But even as the system increases transparency, the engineer’s case reminds us why it is equally important for legitimate taxpayers to receive fair and balanced assessments by authorities.

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