Recently in a case, The Income Tax Appellate Tribunal (ITAT) of Ahmedabad remanded a matter back to the Assessing Officer for re adjudication noting that Assessing Officer did not sufficiently verify the assessee’s explanation regarding the source of the cash deposits labeled as unexplained during the assessment.
The assessee/appellant, Bhavanji Jugaji Thakor, an individual taxpayer, filed his income tax return for the financial year 2016-17, declaring an income of ₹1,80,270.
The return was processed under Section 143(1) of the Income Tax Act 1961 (ITA), and the case was selected for scrutiny.
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The scrutiny was to verify whether the assessee correctly reported capital gains, accurately disclosed sources for cash deposits, and properly accounted for any gains or losses from the sale of property.
Accordingly, notice under Section 143(2) of the Act was issued on 18.09.2017 which was served upon the assessee. Notice under Section 142(1) of the Act was issued along with a questionnaire on 26.07.2018, 10.10.2018 and 14.11.2018.
As per the information mentioned in the individual transaction statement, the assessee had engaged in significant property transactions, including purchasing property for ₹49,50,000 and selling another for ₹1,80,00,000. On top of that, a cash deposit of ₹34,30,000 in his Bank of Baroda account was flagged for explanation.
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Notices were issued to the assessee regarding the same, but since there was no sufficient responses, the Assessing Officer (AO) proceeded with the assessment, leading to additions totaling ₹2,65,60,270 to the assessee income, including ₹49,50,000 as unexplained investment, ₹34,30,000 as unexplained cash credit under Section 68 of ITA, and the entire sale amount as Short Term Capital Gain (STCG).
Aggrieved, the assessee appealed the AO’s order to the Commissioner of Income Tax (Appeals) [CIT(A)], who partly allowed the appeal but upheld the addition related to the unexplained cash credit.
Aggrieved again, the assessee appealed before ITAT.
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Before the ITAT, the assessee submitted that the AO didn’t adequately verify the sources of the cash deposits and that the bank statement provided by the assessee should be treated as a substitute for formal books of accounts in this case.
After examining the facts of the case, The ITAT, comprising Ms Suchitra Kamble (Judicial Member) and Mr Narendra Prasad Sinha (Accountant Member), ruled that Section 68 was applicable even in the absence of formal books of accounts since the bank statement served as a record of the transaction.
However, the Tribunal found that the Assessing Officer did not sufficiently verify the assessee’s explanation regarding the source of the cash deposits.
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In light of this observation, the Tribunal remanded the case back to the AO for a detailed verification of the sources of the ₹34,30,000 cash deposit, considering the assessee’s claims of income from house property, other sources, and agricultural activities.
It was said that the assessee be given opportunity of hearing by following principles of natural justice.
Thus, the appeal was partially allowed, specifically for statistical purposes, to ensure a thorough re-examination.
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