Facts of the Case

 The Assessing Officer observed that the assessee had deposited ₹46,18,300 in bank accounts and initiated reassessment proceedings under section 147. Due to non-compliance with notices, a best judgment assessment under section 144 was completed, adding ₹35,05,580 as unexplained deposits and ₹68,300 as interest income.

 The CIT(A) dismissed the appeal ex parte for failure to respond to notices. The assessee contended that the deposits were from definite sources and that only the credit side of the bank accounts had been considered without examining withdrawals or utilization.

 Issues Involved

Whether additions for bank deposits can be sustained under section 68 without establishing that credits appear in the assessee’s books of account.

 Whether ex-parte assessments without examination of underlying facts violate principles of natural justice.

 Whether entire bank deposits can be treated as income without considering corresponding debits.

 Petitioner’s Arguments

 The assessee maintained that he was a practicing professional and that the deposits originated from identifiable sources. He argued that the authorities erred in taxing gross deposits without accounting for withdrawals and business transactions reflected in the accounts.

 It was also contended that adequate opportunity had not been effectively utilized due to circumstances beyond his control and that the matter required reconsideration on merits.

 Respondent’s Arguments

The Revenue submitted that multiple opportunities had been provided at both assessment and appellate stages, but the assessee failed to comply. In the absence of explanations or evidence, the additions were justified.

Court Order / Findings (ITAT Allahabad)

The Tribunal noted that although opportunities had been granted, there was no substantive finding regarding the actual nature and source of the deposits. Importantly, it observed that the Assessing Officer invoked section 68 without establishing that the credits were recorded in the assessee’s books, which is a prerequisite for applying that provision.

 Recognizing the assessee’s consistent claim that deposits were from definite sources and that debits had not been considered, the Tribunal held that the matter required proper factual examination. Accordingly, the assessment was set aside and remanded to the Assessing Officer for a de novo assessment after giving the assessee an opportunity to substantiate the source of deposits.

Important Clarification

The Tribunal clarified that mere non-compliance cannot justify additions without verifying statutory conditions for invoking provisions such as section 68. Determination of income must be based on proper examination of facts, including both credits and corresponding transactions.

 Link to download the order - https://www.mytaxexpert.co.in/uploads/1771062292_SUSHILKUMARMISHRAALLAHABADVS.DEPUTYCOMMISSIONEROFINCOMETAXCIRCLE1ALLAHABAD.pdf

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