AO Failed to specify Transaction Details: ITAT Remands Rs. 50.5 Lakh Unexplained Money Matter for Reconsideration [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving an addition of Rs. 50.5 lakh, treated as unexplained money, back to the Assessing Officer (AO) for fresh adjudication, citing the AO’s failure to specify transaction details.

Dr. Anbu Selvan (assessee), an individual, filed his return of income for the Assessment Year (AY) 2016-17 on 07.11.2016, declaring a total income of Rs. 1,58,680. The AO, based on information available with the Department, noted that the assessee had purchased property and the amount paid of Rs. 50,50,000 required verification. The AO issued a notice seeking clarifications.

The assessee submitted that the property was purchased jointly with three others—Dr. Arun Prakash, Dr. Nirupa Arun, and Shrinivasan for the partnership firm M/s. Murugan Hospital. The assessee submitted that property was declared in the firm’s balance sheet.

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The assessee also submitted that the purchase was funded through a loan of Rs. 8.5 crore from Indian Bank and additional loans from family associates, in which the assessee was a partner. The assessee provided the loan sanction letter and a purchase agreement, indicating the property’s purchase price as Rs. 8 crore with detailed payment information.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The AO observed that the assessee did not explain the source of the Rs. 50,50,000 payment and treated it as unexplained money under Section 69 of the Act. Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the AO’s order due to the assessee’s non-compliance with hearing notices.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the best judgement assessment was incorrect, as the assessee had fully cooperated by furnishing all details in response to the AO’s notices.

The counsel contended that the AO failed to provide specific details about the Rs. 50.5 lakh transaction and did not seek further explanation. The assessee also claimed that link failures prevented representation before the AO and CIT(A).

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The two-member bench comprising S.S. Viswanethra Ravi (Judicial Member) and S.R. Raghunatha (Accountant Member) observed that the assessee had provided the loan sanction letter and purchase agreement, which were not disputed by the AO.

The tribunal observed that the AO’s sole objection was the lack of explanation for the Rs. 50.5 lakh payment. The tribunal further observed that the assessment order failed to record specific details about the transaction’s mode, which was necessary to seek clarification from the assessee.

The tribunal remanded the matter to the AO for fresh adjudication. The tribunal directed the assessee to explain the Rs. 50.5 lakh transaction. The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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