ITAT Upholds Fresh Assessment in Rs. 43.50 Lakh Gift Case:

The case arose when the assessee, an individual, did not file her income tax return for Assessment Year 2015-16. Based on information regarding the purchase of an immovable property worth Rs. 56,43,500, the AO initiated reassessment proceedings by issuing a notice under Section 148 of the Income Tax Act on 08/04/2022. The assessee did not file a return in response to the notice but furnished explanations during the assessment proceedings.

The assessee explained that the property purchase was funded through a housing loan of Rs. 15 lakh obtained from HDFC Bank and a gift of Rs. 43.50 lakh received from her mother, Smt. Nilofar Herekar. However, the AO considered the supporting documents insufficient to establish the genuineness of the gift and the creditworthiness of the donor. Accordingly, the AO treated the gift amount as unexplained money and made an addition of Rs. 43.50 lakh under Section 69A read with Section 115BBE of the Act. The total assessed income was determined at Rs. 47,62,597, including professional income of Rs. 4.10 lakh and income from other sources of Rs. 2,597.

Aggrieved by the assessment order dated 04.03.2024, the assessee approached the CIT(A) which invoked the proviso to Section 251(1)(a), set aside the assessment and restored the matter to the AO for fresh examination. 

After considering the rival submissions and examining the assessment order, the Tribunal observed that the assessment had expressly been completed under Section 147 read with Sections 144 and 144B of the Act. Although the assessee had furnished replies during the assessment proceedings, she had not filed a return either under Section 139 or in response to the notice issued under Section 148.

The Tribunal held that merely furnishing replies and a computation of income could not convert an assessment completed under Section 144 into an assessment under Section 143(3). Therefore, the assessee's participation in the assessment proceedings did not take away the CIT(A)'s power to set aside the assessment.

Importantly, the Tribunal clarified that since the assessment had been set aside in its entirety, the assessee's objections regarding limitation under Section 149, validity of reopening under Section 148, approval under Section 151 and applicability of Section 69A, along with the explanation and supporting evidence concerning the gift received from her mother, remained open for consideration in accordance with law.

Accordingly, the Tribunal upheld the order of the CIT(A) and dismissed the assessee's appeal.