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Facts
The assessee did not file a return of income. The Assessing Officer reopened the case upon receiving information about large fixed deposits. During assessment, the assessee failed to explain the source of the principal amount invested in fixed deposits, with a significant difference between bank records and the balance sheet.
Held
The Tribunal held that the addition made by the AO on account of unexplained investment could not be sustained as the fixed deposits arose from earlier years and were reinvested. However, the Tribunal restored the limited issue of ₹47,34,431 shown in the balance sheet to the AO for verification.
Key Issues
Whether the addition of unexplained investment under section 69 is sustainable when the fixed deposits were reinvested from maturity proceeds of earlier years, and if the discrepancy in the balance sheet requires verification.
Sections Cited
69, 115BBE, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI RAHUL CHAUDHARY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi vide order dated 24/04/2025 in DIN No. ITBA/NFAC/ S/250/2025-26/1075793352(1) for the assessment year 2018-19.
The issue raised by the assessee in ground Nos. 3 and 4 is that the learned CIT-A erred in confirming the addition of ₹ 5,43,57,921 on account of undisclosed investment under section 69 read with section 115 BBE of the Act.
The Assessing Officer reopened the case after receiving information that the assessee made large fixed deposits with VDCC Bank. The AO noticed that the assessee did not file a return of income before the notice under section 148 of the Act was issued.
3.1 During assessment, the AO asked the assessee many times to explain the source of the fixed deposits and to provide evidence. The assessee filed the bank statement and stated that interest on the deposits was offered to tax in the return filed in response to section 148 of the Act.
3.2 However, the assessee did not give any explanation for the source of the principal amount invested in the fixed deposits. The AO examined the bank statement and found that, as on 31.03.2018, the assessee had fixed deposits of ₹5,90,92,352. But in the audited balance sheet, the assessee disclosed only ₹47,34,431 as fixed deposits. Thus, the AO held that the difference of ₹5,43,57,921 was unexplained. No supporting material was filed to show the source of the same. Therefore, he added this amount under section 69 of the Act as unexplained investment and taxed it under section 115BBE of the Act.
The learned CIT(A) agreed with the AO. He held that the reopening was valid because the assessee had not filed a return earlier, and the AO had credible information about the deposits.
4.1 The ld. CIT(A) noted that the assessee was given several opportunities during assessment and also during appellate proceedings. The assessee was even offered a virtual hearing. But the assessee did . not appear and did not give any supporting documents to explain the source of the deposits.
4.2 The assessee produced the bank statement, ITR, and audit report. But the assessee did not reconcile the large deposits shown in the bank with the much smaller figure shown in the books. The ld. CIT(A) held that the assessee failed to justify the fixed deposits and failed to prove the genuineness of the transactions. Thus, the CIT(A) confirmed the addition of ₹5,43,57,921 as unexplained investment.
Being aggrieved by the order of learned CIT-A, the assessee is in appeal before us.
The learned AR filed a paper book from page 1 to 131. He raised many points on both the legality of the assessment and the merits. The ld. AR submitted a Chart dated 27.11.2025, supported by the bank statements and fixed deposit statements. He stated that all the fixed deposits were made in earlier years, especially the year ending 31.03.2017 relevant to AY 2017–18. These deposits matured during the year under appeal. On maturity, the assessee only reinvested the maturity proceeds.
6.1 The ld. AR argued that no fresh deposits were made during the assessment year. There was only a “ploughing back” of earlier matured deposits. Therefore, the Revenue’s assumption that the assessee made new fixed deposits of ₹5,90,92,352 during the year was wrong. He submitted that no addition should be made.
6.2 The ld. AR also stated that the assessee has a strong case on merits and requested that the technical grounds be kept open.
On the other hand, the learned DR stated that the chart filed by the assessee shows that all fixed deposits matured in the year under dispute. But the assessee has still shown fixed deposits of ₹47,34,431 in the balance sheet as on 31.03.2018. The DR submitted that the assessee must explain this amount. According to him, this part requires verification.
In rejoinder, the ld. AR could not give a satisfactory reply to this point. He accepted that the observation of the ld. DR was correct. The AR agreed that this limited issue of ₹47,34,431 may be sent back to the AO for necessary verification as per law.
We considered the submissions of both sides. We examined the chart and bank statements submitted by the assessee. The chart furnished by the assessee is self-explanatory. It is supported by the bank statements. We make it a part of this order as Annexure-1. From the chart, we note that the total fixed deposits made by the assessee over the years stand at ₹5,44,50,528. It is not clear how the Revenue has picked the figure of ₹5,90,92,352. Even during the hearing, the learned DR could not reconcile this difference.
9.1 We also find that the fixed deposits arose from earlier years. The maturity proceeds were reinvested. There is no evidence of fresh deposits during the year under appeal. Therefore, the addition made by . the AO on this ground cannot be sustained. We decide this issue in favour of the assessee.
9.2 However, we agree that the amount of ₹47,34,431 shown in the balance sheet needs verification. The assessee also agreed to this. Hence, we restore this limited issue to the file of the AO. The AO shall verify the matter as per law after giving proper opportunity to the assessee.
9.3 As the assessee has succeeded on merits, we do not decide the technical grounds. They are kept open.