Facts of the Case

The appeal arose from an order dated 22.12.2023 passed by the Commissioner of Income Tax (Appeals), NFAC, for Assessment Year 2009-10.

The Assessing Officer had reopened the assessment under Section 147 based on information suggesting income escaping assessment and issued notice under Section 148. The assessee did not file a return in response and compliance with notices under Section 142(1) was inadequate, leading to a best judgment assessment under Sections 147 read with 144.

The Assessing Officer made three additions:

  • Capital gains: ₹36,21,000
  • Donation receipt: ₹2,00,000
  • Unexplained cash deposit: ₹10,50,000

On appeal, the CIT(A) directed recomputation of capital gains by considering purchase cost but upheld the additions relating to the alleged donation and cash deposits.

 Issues Involved

  1. Whether additions for unexplained cash deposits and donation receipts were justified.
  2. Whether the best judgment assessment was passed without proper application of mind.
  3. Whether the assessee should be granted another opportunity to substantiate the source of funds.
  4. Consequential issues relating to interest under Section 234B and initiation of penalty under Section 271(1)(c).

 Petitioner’s Arguments (Assessee)

The Authorized Representative submitted that the assessee belonged to a financially well-off family, with her husband being a high net worth individual, and therefore her salary income was largely saved rather than spent on household expenses.

It was further contended that the assessee was a social worker and sometimes received money from individuals for charitable or social causes; the sum of ₹2,00,000 should be viewed in that context. Reliance was also placed on certain judicial precedents.

The assessee challenged the additions as unjustified and argued that the assessment order lacked proper consideration of facts.

 Respondent’s Arguments (Revenue)

The Departmental Representative argued that the assessee failed to establish the source of the impugned amounts to the satisfaction of the Assessing Officer. Therefore, the findings of the lower authorities deserved to be upheld.

 Court Order / Findings (ITAT Allahabad)

After considering the submissions and records, the Tribunal observed that the assessee had not adequately demonstrated the source and nature of the impugned amounts before the lower authorities.

The Tribunal rejected the contention that Section 68 could not apply merely because no books of account were maintained, noting that the Assessing Officer had not specifically invoked that provision.

However, in the interest of substantive justice, the Tribunal held that the assessee should be granted another opportunity to present her case. Accordingly, the matter was remanded to the Assessing Officer for fresh adjudication after providing adequate opportunity of hearing.

The Tribunal specifically directed that:

  • The assessee should submit a detailed cash flow statement to demonstrate availability of ₹10,50,000 for bank deposits.
  • The assessee should clearly establish that the ₹2,00,000 received was for social or charitable purposes and was actually utilized accordingly.
  • The time gap between multiple deposits supported the need for further verification.

 Important Clarification

Issues relating to interest under Section 234B and initiation of penalty proceedings were treated as consequential and were not adjudicated at this stage.

The appeal was allowed for statistical purposes only, meaning that the Tribunal did not decide the merits of the additions but restored the matter for fresh examination by the Assessing Officer.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771061283_SMT.RANJANABAJPAIALLAHABADVS.DCITACITCIRCLE11ALLAHABAD.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.