Facts of the Case

Information was received that the assessee had deposited cash of ₹32,22,490 in a savings bank account during the financial year 2010-11. Based on this information, proceedings under section 147 were initiated and notices under sections 148 and 142(1) were issued.

Due to non-compliance, the Assessing Officer completed a best-judgment assessment under section 144, treating the entire deposits as unexplained income and initiating penalty proceedings.

Before the appellate authority, the assessee contended that notices had not been received and that deposits were from definite sources. However, the CIT(A), NFAC dismissed the appeal for non-prosecution after noting repeated non-compliance.

Issues Involved

  1. Whether ex-parte assessment for bank deposits is sustainable when the assessee claims non-receipt of notices.
  2. Whether deposits can be treated as unexplained without examining debit entries and overall bank transactions.
  3. Whether dismissal of appeal without considering practical difficulties faced by the assessee violates natural justice.

Petitioner’s Arguments

The assessee submitted that he had filed a return in response to notice under section 148 declaring modest income, but it was not considered. He further contended that he resided in a remote rural area approximately 80 km from Mirzapur town, which prevented timely receipt of communications and compliance.

It was also argued that the deposits were from identifiable sources and that the Assessing Officer had considered only the credit side of the bank account while ignoring withdrawals and other transactions.

Respondent’s Arguments

The Revenue contended that the assessee had been consistently non-compliant and had not provided any concrete explanation for the deposits. However, it did not oppose remand if the Tribunal deemed it appropriate, provided strict directions for cooperation were issued.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the assessee’s failure to comply appeared to stem from his remote location and lack of familiarity with tax procedures rather than deliberate non-cooperation. It also noted that the Assessing Officer had not recorded any findings regarding the actual nature and source of the deposits.

In the interest of justice, the Tribunal restored the matter to the Assessing Officer for fresh examination of the sources of cash deposits. The assessee was directed to fully cooperate and furnish necessary evidence, failing which the deposits could be presumed unexplained.

Important Clarification

The Tribunal did not adjudicate the merits of the addition but emphasized that unexplained deposit cases must be decided after proper enquiry and opportunity. Non-compliance alone cannot substitute for factual determination of income.

Link to download the order -           https://www.mytaxexpert.co.in/uploads/1771063506_PANKAJKUMARCHOUBEYMIRZAPURVS.ITOMIRZAPUR.pdf

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