Facts of the Case

The appeal arose from an order passed under Section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals), NFAC, dated 16.11.2023 for Assessment Year 2011-12.

Reassessment proceedings under Section 147 were initiated due to cash deposits amounting to ₹45,42,005 in the assessee’s savings bank account with ICICI Bank, Mirzapur during Financial Year 2010-11. Accordingly, a notice under Section 148 dated 26.03.2018 was issued.

The proceedings before the Assessing Officer were conducted ex parte as the assessee failed to comply with notices issued from time to time. Similarly, before the CIT(A), the assessee did not respond to hearing notices despite multiple opportunities.

 Issues Involved

  1. Whether reassessment based on unexplained cash deposits was justified in the absence of assessee’s participation.
  2. Whether the assessee should be granted another opportunity to explain the source of deposits, particularly in view of allegations of fraudulent bank activity.
  3. Whether principles of natural justice warranted remand of the matter.

 Petitioner’s Arguments (Assessee)

Before the Tribunal, the assessee submitted a paper book containing an affidavit stating ignorance regarding the source of the deposits. The affidavit asserted that the assessee had neither deposited the amounts nor authorized anyone to do so and claimed that fraudulent activities had occurred in the bank account.

Additionally, letters addressed to the Branch Manager of ICICI Bank, Laxa Branch, Varanasi were submitted, alleging unauthorized transactions in the account.

The affidavit reproduced on page 3 of the record (on a non-judicial stamp paper) specifically disclaimed responsibility for deposits and alleged misuse of the bank account.

 Respondent’s Arguments (Revenue)

The Departmental Representative contended that the assessee had repeatedly failed to comply with notices issued by both the Assessing Officer and the appellate authority. Therefore, an assessee who does not participate in proceedings should not ordinarily be granted relief.

 Court Order / Findings (ITAT Allahabad)

After examining the orders of the lower authorities and the documents submitted, the Tribunal observed that, given the facts and circumstances, the assessee should be afforded an opportunity to establish the bona fides of the claim regarding fraudulent activity in the bank account.

Accordingly, granting the benefit of doubt to the assessee, the Tribunal remanded the matter to the file of the Assessing Officer for fresh adjudication after providing a proper opportunity of hearing.

The Tribunal emphasized that the assessee must present all relevant facts to enable determination of the correct taxable income.

 Important Clarification

The appeal was allowed for statistical purposes only. The Tribunal did not adjudicate on the merits of the additions but merely restored the matter for reconsideration by the Assessing Officer. The assessee is expected to cooperate and substantiate the claims during the remand proceedings.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771060804_NITRANGANSINGHGWALCHUNARMIRZAPURVS.INCOMETAXOFFICER32MIRZAPUR.pdf

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