Facts of the Case

The assessee, Awadhesh Kant Tripathi, was found through AIR information and departmental database to have made cash deposits of ₹12,93,300 in his bank account during Financial Year 2011-12 (relevant to AY 2012-13), despite not having filed any return of income for that year.

Notices seeking explanation of the source of deposits were issued, but there was initially no compliance. Consequently, reassessment proceedings were initiated under Section 147 by issuing notice under Section 148. Subsequent notices under Section 142(1) were also issued requiring details of the source of cash deposits.

The assessee later submitted bank statements, return of income, computation, and land records (Khatauni), explaining that:

  • He lived in a joint family engaged in agricultural activities,
  • He managed agricultural income belonging to himself and family members, and
  • He also received gifts from his brother and mother, which were deposited in his bank account.

The Assessing Officer held that adequate documentary evidence was not furnished to substantiate the explanation and treated the deposits as unexplained income under Section 69A. Assessment was completed under Sections 147/143(3) determining total income at ₹14,71,350.

On appeal, the NFAC partly allowed relief but sustained addition equivalent to the cash deposits (₹12,93,300). The order was passed ex parte.

 Issues Involved

  1. Whether cash deposits in the bank account could be treated as unexplained income under Section 69A.
  2. Whether reassessment proceedings initiated under Section 147/148 were valid when reasons were allegedly not provided.
  3. Whether agricultural income and gifts from family members constituted valid sources of deposits.
  4. Whether lower authorities erred by considering only credits in the bank account without examining withdrawals and other sources.
  5. Whether the ex parte appellate order required reconsideration.

 Petitioner’s Arguments (Assessee)

  • The reassessment proceedings were invalid as reasons recorded for issuing notice under Section 148 were not supplied.
  • Cash deposits had identifiable sources, including agricultural income of the joint family and financial support from relatives.
  • The authorities ignored withdrawals, earlier balances, and other income sources reflected in the bank account.
  • Addition was made solely on the credit side without holistic analysis of transactions.
  • The assessee requested restoration of the matter so that additional evidences could be produced.

 Respondent’s Arguments (Revenue)

  • The assessee initially failed to respond to notices and did not substantiate claims with documentary evidence.
  • Cash deposits remained unexplained, justifying addition under Section 69A.
  • The assessment order was based on available material and statutory powers under reassessment provisions.

Court Order / Findings (ITAT Allahabad)

  • The assessee sought an opportunity to produce supporting evidence regarding the source of deposits.
  • In the interest of substantial justice, the matter deserved fresh examination by the Assessing Officer.
  • Both parties agreed that restoration would be appropriate.

Accordingly, the Tribunal set aside the impugned orders and restored the matter to the Assessing Officer with directions to provide the assessee a reasonable opportunity to present evidence.

The Tribunal also cautioned that failure to cooperate in the set-aside proceedings would allow the Assessing Officer to decide the matter based on available material, even ex parte.

 Important Clarification

  • Additions under Section 69A must be examined in light of complete evidence regarding sources of funds.
  • Principles of natural justice require granting an adequate opportunity to substantiate explanations.
  • Ex parte appellate orders may be reconsidered where the assessee demonstrates willingness to produce evidence.
  • Restoration for fresh adjudication does not imply acceptance of the assessee’s explanation but ensures fair assessment.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771063771_AWADHESHKANTTRIPATHIALLAHABADVS.ITOWARD11ALLAHABAD.pdf

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