Natural Justice Prevails: ITAT Remands Unverified Additions for Re-examination

The assessee had acquired immovable property valued at Rs. 71.72 lakh. On learning this information, a reassessment notice under Section 148 for AY 2018–19. The assessee filed a NIL income return in response. During the assessment, the AO found the source of funds unexplained and made an addition under Section 69. The AO also identified credit entries in HDFC bank accounts totalling Rs. 221,204 that were unexplained under Section 69A, and another investment of Rs. 21,586 in a Mutual Fund, also unexplained. The assessment proceedings verified all three additions.

CIT(A) Upheld: A home loan of Rs. 5 lakh and an investment of Rs. 13 lakh from AY 2016–17 made up the partial relief that was granted before the CIT(A), leaving Rs. 3,72,077 disallowed. The complete Rs. 221,204 and Rs. 21,586 additions were upheld by the CIT(A) in the appeal. Aggrieved, the assessee filed this appeal before the ITAT.

Main Contention Before ITAT: Whether the additions under Sections 69 and 69A were justified when the assessee submitted confirmations for gifts and claimed joint ownership and spousal fund transfers that were not fully verified by the AO.

ITAT’s Decision: The ITAT observed that the assessee had provided confirmation from her mother for a cash gift of Rs. 2 lakh and claimed joint ownership of the immovable property with her husband. On the unexplained bank credits and mutual fund investments, the assessee argued that the amounts were received from her husband’s account, and bank statements were submitted to support the claim.

The Tribunal in view of natural justice, remanded all three issues namely, Rs. 3.72 lakh unexplained investment, Rs. 2.21 lakh bank credits, and Rs. 21,586 mutual fund entry, to the AO for de novo assessment as these explanations and evidence were not thoroughly verified by the AO. The appeal was allowed for statistical purposes.

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