Facts of the Case

The assessee’s case had originally been scrutinized under section 143(3). Subsequently, the Assessing Officer observed that total deposits in the bank account during the relevant financial year exceeded reported sales, indicating a difference of ₹26,29,224. After adjusting for realization of sundry debtors, the Assessing Officer concluded that ₹25,25,415 represented undisclosed income and initiated reassessment proceedings under section 147.

Due to non-compliance during the reassessment proceedings, the Assessing Officer passed an ex parte order adding ₹25,25,415 as unexplained money under section 69A. The CIT(A) dismissed the appeal for non-prosecution.

 Issues Involved

  1. Whether reassessment based on alleged excess bank deposits was valid when the account had been examined in original scrutiny.
  2. Whether addition under section 69A can be sustained without proper reconciliation of deposits.
  3. Whether dismissal of appeal for non-prosecution without examining merits violates principles of natural justice.

 Petitioner’s Arguments

The assessee contended that the bank account had already been disclosed and examined during the original assessment, and therefore reopening constituted a mere change of opinion.

It was argued that the deposits arose from explained sources and had been verified earlier. The assessee also submitted that inability to comply during proceedings was due to exceptional circumstances and that he was ready to furnish reconciliation if granted an opportunity.

 Respondent’s Arguments

The Revenue maintained that the addition resulted from the assessee’s failure to respond to notices and provide documentary evidence. It was submitted that if the matter were remanded, the assessee should be directed to cooperate fully and furnish necessary details.

 Court Order / Findings (ITAT Allahabad)

The Tribunal noted that the alleged discrepancy arose because the assessee had not furnished a reconciliation explaining the deposits during reassessment proceedings. Although the assessee claimed that the bank account had been examined earlier, no supporting material was produced at that stage.

In the interest of justice, the Tribunal restored the matter to the Assessing Officer for a de novo assessment, directing the assessee to submit a reconciliation demonstrating that the deposits were not unexplained. The Assessing Officer was instructed to consider such evidence and frame the assessment in accordance with law.

 Important Clarification

The Tribunal did not rule on the merits of the addition but emphasized that unexplained deposit cases require proper reconciliation and verification. Additions based solely on non-compliance without examining underlying facts cannot be sustained.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771062134_SHYAMBABUKESARWANIKAUSHAMBIVS.ITOWARD25KAUSHAMBI.pdf

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