Facts of the Case

The assessee, an individual deriving salary income, had not originally filed a return for the relevant year as his income was below the taxable threshold. Information was received regarding deposits in an account linked to an educational society where the assessee had earlier served as Secretary. The assessee clarified that the deposits in that account represented student fee collections of the society and that the bank had erroneously linked the transactions to his PAN.

The Assessing Officer accepted this explanation regarding the society’s account but identified deposits of ₹6,45,000 in two personal bank accounts of the assessee. The assessee stated that ₹4,20,000 represented a loan received from the college (society) and also furnished supporting financial documents. He also provided a computation showing professional income under section 44ADA.

The Assessing Officer rejected these explanations for lack of proof and treated the entire amount of ₹6,45,000 as unexplained money under section 69A. The CIT(A) dismissed the appeal ex parte for non-compliance.

Issues Involved

  1. Whether cash deposits in personal or joint accounts can be taxed without verifying ownership and source.
  2. Whether amounts belonging to another person (e.g., spouse or institution) can be assessed in the assessee’s hands merely because the account is in his name.
  3. Whether dismissal of appeal for non-prosecution without examining merits violates principles of natural justice.

 Petitioner’s Arguments

The assessee contended that the deposits were from definite sources and partly related to funds belonging to his wife and loans from the educational institution. He argued that relevant details had been submitted but were not properly considered.

It was further submitted that the appellate authority dismissed the appeal ex parte without granting adequate opportunity, thereby depriving him of the chance to substantiate his claims with evidence.

 Respondent’s Arguments

The Revenue submitted that the assessee had failed to provide consistent explanations and supporting documents despite multiple opportunities. Therefore, the additions under section 69A were justified.

 Court Order / Findings (ITAT Allahabad)

The Tribunal observed that although the assessee had not furnished sufficient evidence before the lower authorities, the dismissal of the appeal solely for non-compliance prevented adjudication on merits.

It emphasized that the burden lies on the assessee to establish why deposits should not be taxed in his hands, particularly when the account is in his name. However, in the interest of justice, the Tribunal considered it appropriate to grant one more opportunity to present evidence.

Accordingly, the Tribunal restored the matter to the file of the CIT(A) for fresh adjudication after providing the assessee a reasonable opportunity to submit documentary proof regarding the ownership and source of the deposits. The appeal was allowed for statistical purposes.

 Important Clarification

The Tribunal did not decide the taxability of the deposits on merits. It clarified that additions under section 69A depend on proper determination of ownership and source, which must be established through evidence. Fresh proceedings must evaluate whether the funds belonged to the assessee or to another person.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771062337_VIJAYSINGHALLAHABADVS.ITO15ALLAHABAD.pdf

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