LAXMI CHANDRAHAS NONDA,GULMOHAR GARDEN,YARI ROAD, VERSOVA, ANDHERI(W) vs. A.C.I.T., CIRCLE 24(2), MUMBAI., OFFICE OF THE A.C.I.T. FOURTH FLOOR MUMBAI

The brief facts of the case are that the assessee, an individual, had not filed her return of income for A.Y. 2012-13. On the basis of information available in the NMS/ITS data that the assessee had carried out share transactions, received salary income and had credits in her bank account, the Assessing Officer reopened the assessment by issuing notice under section 148 of the Act on 29.03.2019. The assessee did not file a return in response to the notice. The Assessing Officer issued a reminder on 22.08.2019 and another notice on 20.12.2019 asking the assessee to produce the relevant details. As there was no compliance by the assessee, the Assessing Officer completed the assessment under section 144 read with section 147 of the Act.

During the assessment proceedings, the Assessing Officer obtained the bank statement of the assessee directly from New India Co-operative Bank Ltd. under section 133(6) of the Act. He noticed four credits of ₹50,000/-, ₹48,030/-, ₹3,50,000/- and ₹8,84,652/-, aggregating to ₹13,32,682/-. Since the assessee had not furnished any explanation regarding the source of these credits, the Assessing Officer treated the entire amount of ₹13,32,682/- as unexplained money under section 69A of the Act. The Assessing Officer further computed short-term capital gain of ₹19,131/- from the share transactions and also taxed the salary income of ₹1,59,360/- on the basis of Form 26AS. The Assessing Officer accordingly assessed the total income at ₹15,11,170/-.

The assessee carried the matter in appeal before the learned CIT(Appeals). During the appellate proceedings, CIT(Appeals) issued several notices of hearing and the assessee also filed written submissions and certain documents. The learned CIT(Appeals), however, observed that the assessee had not furnished satisfactory evidence explaining the bank credits of ₹13,32,682/-. He held that, in the absence of compliance before the Assessing Officer, the Assessing Officer was justified in completing the assessment to the best of his judgment under section 144 of the Act. The learned CIT(Appeals) accordingly confirmed the addition of ₹13,32,682/- under section 69A of the Act. He also confirmed the addition of ₹19,131/- towards short-term capital gain and ₹1,59,360/- towards salary income.

The assessee is in appeal before us against the order passed by the learned CIT(Appeals) dismissing the appeal of the assessee.

At the outset, the learned Counsel for the assessee submitted that the assessee does not wish to press the legal grounds challenging the validity of the reopening under sections 147/148 of the Act and the validity of the assessment order passed under section 144 read with section 147 of the Act. In view of the statement made by the learned Counsel, the said legal grounds are dismissed as “Not Pressed”.

Coming to the merits, the learned Counsel confined his submissions to the addition of ₹13,32,682/- made under section 69A of the Act. He submitted that the Assessing Officer had treated the entire bank credits as unexplained without examining the individual nature and source of the credits. It was submitted that, out of the total credits of ₹13,32,682/-, a sum of ₹8,84,652/- was PF receipt and a further sum of ₹3,50,000/- was towards Gratuity (as evident from Form 16). Thus, according to the assessee, credits aggregating to ₹12,34,652/- were clearly explained by the assessee and could not have been treated as unexplained money merely because the assessee had failed to furnish the explanation during the assessment proceedings.

We have considered the submissions. The bank account itself shows four separate credits aggregating to ₹13,32,682/-. The explanation now offered by the assessee specifically relates to the credit of ₹8,84,652/- and the credit of ₹3,50,000/-, aggregating to ₹12,34,652/-. In our view, the nature and source of these two credits require verification before they can be treated as unexplained money under section 69A of the Act. The fact that the amounts were subsequently withdrawn in cash, by itself, cannot make an explained receipt unexplained. At the same time, the necessary supporting evidence regarding the nature and source of these two credits requires examination by the Assessing Officer.

We, therefore, restore this limited issue to the file of the Assessing Officer. The Assessing Officer shall verify the assessee's claim that the credit of ₹8,84,652/- was PF receipt and shall also verify the nature and source of the credit of ₹3,50,000/- on the basis of the supporting documents produced by the assessee. If the explanation is found to be supported by the record, the Assessing Officer shall delete the addition to that extent. Needless to say, the assessee shall be given a reasonable opportunity to produce the relevant evidence.

For the balance additions, no specific argument was put forth before us. However, since the matter is getting remanded for factual verification, the assessee is given liberty to produce supporting documents with respect to the balance additions as well, in the interest of justice .

In the result, the appeal of the assessee is allowed for statistical purposes.