Facts of the Case

The assessee filed his return declaring income of ₹2,10,140 under the head “Income from Other Sources.” He was working as a Business Correspondent (BC) for the State Bank of India, Gopiganj Branch. During scrutiny, the Assessing Officer obtained bank statements under section 133(6) and noticed credit entries in the assessee’s account.

After considering the assessee’s reply, the Assessing Officer completed assessment under section 143(3), making an addition of ₹4,62,220 under section 69 and invoking section 115BBE, thereby determining taxable income at ₹6,72,360. Penalty proceedings under section 271AAC were also initiated.

Issues Involved

  1. Whether bank deposits representing transactions of customers handled by a Business Correspondent can be taxed as unexplained income.
  2. Whether addition under section 69 is sustainable without verifying ownership of funds.
  3. Whether appellate orders passed ex parte without adequate opportunity are valid.
  4. Whether section 115BBE can be invoked in such circumstances.

Petitioner’s Arguments

The assessee contended that the deposits in his bank account pertained to funds of various customers handled in his capacity as a Business Correspondent for the bank. Both lower authorities failed to appreciate that the amounts did not belong to him personally.

It was further submitted that the appellate order was passed ex parte and that the assessee should be granted another opportunity to present supporting evidence demonstrating the nature of deposits.

Respondent’s Arguments

The Departmental Representative did not object to restoration of the matter to the Assessing Officer for fresh examination, subject to the assessee’s cooperation.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the assessee had claimed the deposits represented customer transactions handled as part of his duties as a Business Correspondent. Since this explanation had not been fully examined and the appellate order was passed ex parte, the assessee deserved one more opportunity.

In the interest of substantial justice, the Tribunal restored the matter to the Assessing Officer with directions to provide adequate opportunity to produce evidence supporting the nature of bank deposits. The assessee was cautioned to comply fully during the proceedings, failing which the Assessing Officer would be free to decide the matter on the basis of available material, even ex parte.

Important Clarification

The Tribunal did not decide the merits of the addition but emphasized that funds belonging to customers or third parties cannot be treated as the assessee’s income without proper verification of ownership and nature of transactions. Principles of natural justice require meaningful opportunity before sustaining additions under sections 69 and 115BBE.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771066860_SURAJKUMARTIWARIBHADOHIVS.ITOWARD15BHADOHI.pdf

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