ITAT directs Reassessment of ₹10.3 Lakh Deposit after Original Appeal dismissed without full review [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal ( ITAT ) in Delhi directed a reassessment of a disputed ₹10.3 lakh deposit made during India’s 2016 demonetization period, following an appeal that was previously dismissed without a full review.

The case involves the assessee/appellant, Shiv Kumar, who had initially challenged the assessment by the Income Tax Department, which deemed his deposit of ₹10.3 lakh as unexplained income under Section 69A of the Income Tax Act 1961 (ITA) for the 2017-18 financial year.

Boost Your Business with SME IPO Funding Strategies - Enroll Now

Represented by counsel Ms. Sanju Kumari, the assessee argued that his total income for the year was well below the taxable threshold and thus did not warrant a tax return. His declared gross income, combining business earnings and interest from savings, amounted to just ₹1,47,030. Despite this, the Assessing Officer (AO) added ₹10.3 lakh to his income, based on cash deposits made in his bank account between November 12 and December 13, 2016, the peak of the demonetization period. The assessee had reportedly deposited a total of ₹12.3 lakh during this period, of which the AO provided relief of ₹2 lakh but retained the remaining ₹10.3 lakh as unexplained cash, citing it under the unexplained income clause of Section 69A.

The Income Tax Department’s counsel, Shri Sanjay Kumar, defended the earlier dismissal by the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre. He argued that under Section 249(4)(b) of the Income Tax Act, the assessee’s appeal should not have been entertained due to his non-compliance with advance tax payment requirements, a procedural mandate that the appellant had failed to meet.

Boost Your Business with SME IPO Funding Strategies - Enroll Now

In reviewing the case, the ITAT’s Judicial Member, Shri Vikas Awasthy, acknowledged that while Kumar had attempted to clarify the source of his deposits, his explanations during the original assessment had been deemed insufficient, resulting in the AO’s completion of assessment under Section 144 of the tax legislature, commonly known as “Best Judgment Assessment.” Despite these challenges, the assessee’s counsel asserted that if granted an opportunity, he could substantiate the source of his deposits.

After considering the arguments from both sides, the ITAT found that the appeal had been dismissed without a thorough examination of the evidence. The tribunal concluded that a fresh review would be appropriate to ensure that all relevant details were fully assessed. Consequently, the ITAT set aside the earlier dismissal and instructed the AO to re-evaluate the case.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates