Facts of the Case

The assessee, an individual from Amethi, was subjected to assessment proceedings in which certain cash deposits/financial transactions were treated as unexplained income. The Assessing Officer completed the assessment, reportedly under best-judgment provisions, and made additions on the ground that the assessee failed to satisfactorily explain the source of funds. The assessee challenged the additions before appellate authorities, contending that the assessment was completed without granting adequate opportunity and without proper examination of evidence.

Issues Involved

  1. Whether additions under Sections 68/69A for alleged unexplained cash deposits were justified.
  2. Whether assessment framed without adequate opportunity to the assessee is sustainable.
  3. Whether best-judgment assessment can be upheld without proper verification of facts and documents.

Petitioner’s (Revenue’s) Arguments

  • The assessee failed to produce satisfactory evidence regarding the source of deposits.
  • The Assessing Officer acted within statutory powers to make additions based on available information.
  • The order was passed in accordance with provisions governing unexplained income and non-compliance.

Respondent’s (Assessee’s) Arguments

  • The assessment was completed ex-parte without providing sufficient opportunity to present evidence.
  • The deposits were explainable and required proper verification.
  • Additions were made mechanically without examining supporting documents.
  • Principles of natural justice were violated.

Court Order / Findings (ITAT Allahabad)

  • Additions relating to unexplained income require proper factual inquiry.
  • Assessment made without granting reasonable opportunity cannot be sustained.
  • Best-judgment assessments must still be fair, reasonable, and based on evidence.
  • The matter warranted reconsideration after allowing the assessee to produce supporting material.

Important Clarification

  • Even in cases of non-compliance, authorities must follow principles of natural justice.
  • Additions under Sections 68 or 69A cannot be based solely on presumptions.
  • Proper verification of explanations and documents is mandatory before making tax demands.

Link to download the order –

https://itat.gov.in/public/files/upload/1608266996-ita%20no.%2061%20ALLD%202019.pdf

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This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.