Unexplained Bank Deposits and PMGKY Non-Consideration: ITAT Remands Matter for Final Evidence Submission and Verification [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) remanded the matter to the Assessing Officer (AO) for fresh examination, directing the assessee to submit final evidence regarding unexplained bank deposits and income declared under the Pradhan Mantri Garib Kalyan Yojana (PMGKY).

Vishal Vasudevbhai Modi,appellant-assessee, was picked for scrutiny because of large cash deposits during demonetization. The AO sent several notices asking for an explanation, but the assessee did not respond. So, the AO completed the assessment under Section 144.

The AO collected information from banks and found total deposits of around Rs.92.70 crore, including cash deposits of Rs.3.18 crore in SBI, Bank of Baroda, and Dena Bank. The assessee later appeared and submitted a charge sheet from a criminal case but did not give any books of account or explanation.

The AO treated the total bank deposits as business turnover and added 8% as estimated profit, which came to Rs.7.16 crore. The cash deposits were treated as unexplained under Section 69A and taxed at a higher rate. The total income was assessed at Rs.10.34 crore, and a tax demand of Rs.8.06 crore was raised.

The assessee filed an appeal before the Commissioner of Income Tax(Appeals)[CIT(A)] but did not respond to any of the notices. The appeal was dismissed based on available records.The assessee then appealed before the tribunal.

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The two member bench comprising Siddhartha Nautiyal (Judicial Member) and Makarand V.Mahadeokar(Accountant Member) set aside the order of the CIT(A) and sent the case back to the AO for fresh examination. It noted that the assessment was done ex-parte under Section 144 because the assessee did not respond to notices. The assessee claimed he couldn’t comply due to arrest and legal issues, but the dates didn’t match the notices, raising doubts.

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The assessee had not given any proof to show that the cash deposits were from business activities, except for a Form 2 under the PMGKY scheme. The tribunal observed that the AO and CIT(A) had not checked whether any income was declared under PMGKY, and this needed to be verified.

The appellate tribunal directed the AO to give the assessee one final chance to submit documents explaining the deposits, transfers, and any income declared under PMGKY. The AO was also told to ensure that the same income was not taxed twice and to check if the Section 69A addition caused double taxation, since business income was already estimated at 8%.

If the assessee failed to respond again, the AO was allowed to complete the assessment based on the available records.

In short,the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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