the assistance Facts of the Case

The assessee society did not file a return of income for Assessment Year 2015-16. The Income Tax Department received information that the assessee had made time deposits amounting to ₹2,43,75,000 with Punjab National Bank and had earned interest income. Accordingly, notice was issued on 31.03.2022 initiating reassessment proceedings.

Despite issuance of several notices and communications, no compliance was made by the assessee. Consequently, the Assessing Officer completed the assessment under sections 144 read with 147/144B of the Income Tax Act, determining total income at ₹2,45,71,147 by making additions of ₹2,43,75,000 as unexplained investment under section 69 and ₹1,97,147 towards interest income. Penalty proceedings under section 271(1)(c) were also initiated.

On appeal, the CIT(A), NFAC dismissed the appeal ex-parte due to non-compliance by the assessee. The assessee contended that the deposits represented amounts transferred through an auto-sweep facility from maturity proceeds of earlier fixed deposits and not fresh investments.

 Issues Involved

  1. Whether reassessment proceedings initiated under section 147 were valid.
  2. Whether additions under section 69 for unexplained investment in fixed deposits were justified.
  3. Whether ex-parte disposal by the lower authorities without considering the assessee’s explanation violated principles of natural justice.

 Petitioner’s Arguments

The assessee submitted that no fresh investments were made in fixed deposits. The amounts reflected as deposits were merely transfers from the current account through an auto-sweep mechanism funded by maturity proceeds of earlier deposits.

It was argued that the deposits were repeatedly created and broken under the auto-sweep facility, resulting in rotation of the same funds rather than new investments. The assessee also contended that adequate opportunity was not provided during assessment proceedings and sought relief on that basis.

 Respondent’s Arguments

The Revenue argued that the assessee neither filed a return of income nor complied with notices issued by the Assessing Officer and the appellate authority. In the absence of any explanation or evidence, the authorities were justified in making additions based on available information.

It was further submitted that if the Tribunal deemed it appropriate to remand the matter, the assessee should be directed to cooperate fully and furnish necessary details.

 Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the assessee had failed to comply with statutory notices, and the additions were primarily made due to such non-compliance. However, the explanations now presented—regarding rotation of funds through auto-sweep facilities—required verification, which had not been possible earlier.

In the interest of justice, the Tribunal restored the matter to the file of the Assessing Officer for a de novo assessment, directing that the assessee’s claim that deposits arose from maturity proceeds of earlier fixed deposits be examined on the basis of evidence.

The Tribunal emphasized that the Assessing Officer must determine correctly whether any income had actually escaped assessment. The appeal was accordingly allowed for statistical purposes.

 Important Clarification

The Tribunal did not adjudicate on the merits of the additions but remanded the case solely for fresh examination. The assessee is required to produce documentary evidence substantiating that the deposits represented recycled funds from matured fixed deposits through an auto-sweep facility and not unexplained investments.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771061390_ALFALAHEDUCATIONALWELFARESOCIETYFAIZABADVS.ASSESSMENTUNITITDDELHI.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 withof AI tools.