Facts of the Case

The assessee, an individual, had not filed a return of income for the relevant assessment year. Based on AIR information regarding cash deposits of ₹19,01,000 in his savings bank account, the Assessing Officer initiated reassessment proceedings under Section 147 by issuing notice under Section 148.

Due to non-response from the assessee, the assessment was completed ex parte under Section 144 read with Section 147, resulting in an addition of ₹16,51,000 after granting partial credit for sale consideration of agricultural land detected during inquiry.

Before the CIT(A), the assessee produced additional evidence in the form of a Will executed by his deceased father, claiming that the deposited cash represented inheritance received after his father’s death. The CIT(A), after obtaining a remand report, rejected the explanation and confirmed the addition. 

Issues Involved

  1. Whether the addition for unexplained cash deposits was justified.
  2. Whether the Will produced by the assessee could explain the source of funds.
  3. Whether authorities erred in rejecting the Will without proper verification.

Petitioner’s (Assessee’s) Arguments

  • The cash deposits represented money inherited from his deceased father under a Will.
  • The Will was supported by affidavit of an attesting witness.
  • The authorities rejected the Will without conducting any inquiry into its genuineness.
  • Legal requirements for proof of Will were satisfied.

Respondent’s (Revenue’s) Arguments

  • During inquiry, the assessee had stated that deposits were proceeds from sale of land.
  • The Will explanation was an afterthought to avoid tax liability.
  • The sale deed showed much lower consideration than claimed.
  • Surrounding circumstances and human probabilities indicated that the Will was not genuine. 

Court Order / Findings (ITAT)

  • The addition depended entirely on the genuineness of the Will.
  • The assessee produced a Will and affidavit of an attesting witness.
  • Authorities rejected the Will without proper verification or examination.
  • Proper inquiry was necessary, including verification of signatures and examination of witnesses.

Important Clarification

  • Additions based on unexplained cash deposits must be supported by proper investigation.
  • Documentary evidence such as a Will cannot be rejected without verification.
  • Principles of natural justice require opportunity to substantiate evidence.
  • When factual verification is lacking, remand to the Assessing Officer is appropriate.

Link to download the order - https://itat.gov.in/public/files/upload/1659697561-ITA%20104%20A%202020.pdf

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