Facts of the Case

The assessee did not file a return of income for Assessment Year 2015-16. The Income Tax Department received information that the assessee had made cash and cheque/RTGS deposits aggregating to ₹34,76,500 in his ICICI Bank account during the year. The assessee was required to explain the source of these deposits.

During the assessment proceedings, the assessee submitted replies, computation of income, and bank statements. However, the Assessing Officer found that no satisfactory explanation was furnished regarding the source of cash deposits of ₹26,71,000 and cheque/RTGS deposits of ₹8,05,500. Accordingly, the said amount was treated as unexplained money and added to income under section 69A of the Income-tax Act.

The Assessing Officer further noted that the assessee had sold a residential property on 09.05.2014 for ₹9,00,000 and claimed indexed cost of acquisition at ₹92,751. As the assessee failed to substantiate the indexed cost to the satisfaction of the Assessing Officer, long-term capital gain of ₹3,46,906 was computed and added. The assessment was completed under section 147 read with section 144B, determining total income at ₹39,99,466.

 Issues Involved

  1. Whether the addition of ₹34,76,500 under section 69A for alleged unexplained cash and cheque deposits was justified.
  2. Whether the Assessing Officer was justified in computing long-term capital gain without accepting the indexed cost claimed by the assessee.
  3. Whether the assessee was denied adequate opportunity to substantiate his explanations during faceless assessment and appellate proceedings.

 Petitioner’s (Assessee’s) Arguments

The assessee contended that the additions were made without properly appreciating the facts and circumstances of the case. It was submitted that the cash deposits were out of past savings, NRI income earned while working in Kuwait, unsecured loans, and income from taxi business. The assessee further argued that the indexed cost of the property included purchase cost and construction expenses incurred over several years, partly funded through bank withdrawals and past savings. It was also alleged that the reassessment proceedings were initiated and completed without proper application of mind and in violation of principles of natural justice.

 Respondent’s (Revenue’s) Arguments

The Department relied upon the assessment order and the NFAC order, contending that the assessee had failed to furnish documentary evidence to substantiate the source of deposits and the indexed cost of acquisition, and therefore the additions were correctly made.

Court Order / Findings

The Tribunal observed that the additions under section 69A and the computation of long-term capital gain were made primarily due to lack of supporting evidence furnished by the assessee. However, considering the overall facts and circumstances, the Tribunal held that the assessee deserved one more opportunity to explain the source of cash deposits and to justify the indexed cost of acquisition with supporting evidence.

Accordingly, the matter was restored to the file of the Assessing Officer with a direction to provide one final opportunity to the assessee. The appeal was allowed for statistical purposes.

Important Clarification

The Tribunal expressly cautioned that the assessee must fully comply with the directions of the Assessing Officer in the set-aside proceedings. Failure to do so would empower the Assessing Officer to pass an order in accordance with law on the basis of material available on record, even on an ex-parte basis.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770627730_MOHDUBAIDANSARIALLAHABADVS.ITOALLAHABADALLAHABAD.pdf 

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