Income Tax questions Kailash Gahlot’s ‘unexplained’ expenditure of Rs 42 lakh

The Income Tax Appellate Tribunal (ITAT) has dismissed an appeal by former AAP minister Kailash Gahlot, and upheld an addition of Rs 42.98 lakh to his income as unexplained expenditure.

Gahlot is currently a BJP MLA from Delhi’s Bijwasan area, while the action has been taken against him in a case lodged when he was the Transport Minister in Delhi’s Aam Aadmi Party Government.

Advertisement

Satbir Singh Godara, the member of ITAT, passed the order against Gahlot. Mr. Godara said that Gahlot had failed to explain the source of the money.

“We, therefore, dismiss the ground challenging the taxability of expenditure of Rs.42,98,086/- under section 69C of the Act in the hands of the appellant assessee (Gahlot),” Mr. Godara noted in the order.

The Income Tax Department initiated proceedings against Gahlot based on the findings of a search operation which was conducted in 2018 (at a time when he was holding the portfolio of Transport Minister of the AAP Government) at the premises belonging to Gahlot and a private firm, Corporate International Financial Services Ltd, a group of firms reportedly owned by him.

During this search operation, incriminating documents, including a diary containing various unaccounted expenditures, were found related to the Delhi legislature election contested by Gahlot.

The Income Tax officials seized a diary from the office premises of Kailash Gahlot. This diary revealed that Gahlot had incurred expenses for his election campaign in violation of income tax provisions.

The Assessing Officer (AO) and later the Commissioner of Income Tax (Appeals) treated the total amount of Rs 42,98,086 mentioned in the diary as unexplained expenditure under Section 69C of the Income-tax Act, stating that Gahlot could not satisfactorily explain the source of these funds.

Gahlot challenged this before the Income Tax Appellate Tribunal, arguing that the diary belonged to a party volunteer, Rohit Sharma, and not to him. He also contended that the assessment order was invalid due to a mechanical approval process.

But Satbir Singh Godara of the ITAT, referring to various Supreme Court decisions and facts and evidence found by the IT Department, held that the said money of Rs 42.98 lakh had come from unexplained sources to Gahlot.

The tribunal noted that the diary was found in Gahlot’s possession and contained numerous references to him (“KG Sir”), his brother, his website (www.kailashgahlot.in), and his family trust. The bench found the affidavit from Rohit Sharma, who attempted to claim ownership of only a portion of the expenses, to be unreliable and insufficient to explain the entire contents and source of the funds.