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Facts
The assessee, a doctor, failed to declare professional income and made investments in LIC policies under section 69. The AO initiated reassessment proceedings under section 147, adding certain sums as unexplained investment.
Held
The Tribunal upheld the order of the CIT(A), finding that the assessee's explanations for the sources of investment were not satisfactorily explained. The grounds of appeal were dismissed.
Key Issues
Whether the CIT(A) correctly upheld the additions made by the AO as unexplained investment under section 69, and whether the assessee's explanations regarding the sources of investment were acceptable.
Sections Cited
147, 143(3), 143(2), 148, 142(1), 144, 194J, 270A, 69, 115BBE, 234A, 234B, 234C, 234D, 250, 139
AI-generated summary — verify with the full judgment below
This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) [in short, the ld. CIT(A)] dated 07/11/2023 for the Assessment Year (AY) 2017-18 by raising following grounds of appeal:
“1. The orders of the learned Assessing Officer, National Faceless Assessment Centre ('Learned AO') and Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, New Delhi ['CIT(A)'] are erroneous & bad in law and contrary to the provisions of the Income Tax Act, 1961 ('the Act') to the extent it is prejudicial to the interest of the Appellant.
Ground 2 to 8 Treatment of cash deposit of Rs. 69,56,295 as unexplained investment under section 69 of the Act. 2. That the Learned CIT(A) has erred in upholding the action of the Learned AO by treating the sum of Rs. 69,56,295 as unexplained investment under section 69 of the Act.
2 ITA2056/Chny/2024 Shri Shanmugaundaram Venkatachalapathy Vs ITO
3. That the Learned CIT(A) has erred in upholding the order of the Learned AO in treating the sum of Rs. 69,56,295 as unexplained investment without appreciating the fact that the Appellant has made such investments out of his drawings, retained earnings and gifts from relatives.
4. That the Learned CIT(A) has erred in upholding the order of the Learned AO without appreciating the fact that a sum of Rs. 29,68,909 has been deposited out of the retained earnings and cash balance available with the Appellant.
5. That the Learned CIT(A) has erred in upholding the order of the Learned AO without appreciating the fact that a sum of Rs. 16,95,000 has been deposited out of the contribution received from his spouse out of her income and retained earnings.
6. That the Learned CIT(A) has erred in upholding the order of the Learned AO without appreciating the fact that a sum of Rs. 19,22,500 has been deposited out of the gifts from relatives as defined in section 56(2)(vii) of the Act. 7. That the Learned CIT(A) has erred in upholding the order of the Learned AO without appreciating the fact that a sum of Rs. 3,69,886 has been deposited out of the contribution received from his spouse out of her retained earnings. 8. Without prejudice to the above grounds, the Learned AO has erred in computing tax liability by adding a sum of Rs. 85,96,295 as unexplained investment under section 69 of the Act read with section 115BBE whereas the amount of addition as per the assessment order amounts to Rs. 69,56,295.
Ground 9-Addition of Rs. 2,20,722 to the income of the Appellant.
9. That the Learned CIT(A) has erred in upholding the order of the Learned AO by treating the sum of Rs. 220,722 as income of the Appellant without appreciating the fact that the said amount has already been included in the turnover/ gross receipts of the Appellant reported in the return of income.
Ground 10-Erred in upholding the additions made by the Learned AO without providing an opportunity of being heard. 10. That the Learned CIT(A) has erred in passing an order under section 250 of the Act without providing an opportunity of being heard by way of a virtual hearing/ video conference.
Ground No. 5 Levy of interest under section 234A, 234B, 234C and 234D of the Act
11. The learned AO has erred in levying interest under section 234A, 234B, 234C and 234D of the Act which is consequential. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal
, before commencement of during proceedings before the Hon'ble Tribunal.”
2. The assessee has also filed additional grounds of appeal which reads as under:
3 ITA2056/Chny/2024 Shri Shanmugaundaram Venkatachalapathy Vs ITO “12. The Learned CIT(A) ought to have cancelled the assessment passed U/s 143(3) read with 147 of the Act for the failure to issue a valid notice under section 143(2) of the Act.
That the Learned CIT(A) ought to have appreciated that the underlying re- assessment proceedings initiated under section 147 of the Act are liable to be quashed on the ground that the addition that forms the subject matter of such re-assessment does not sustain on merits in the first place.
That the Learned AO and CIT(A) ought to have appreciated that deposits made in the name of Appellant's son shall not be subject to tax in the hands of the Appellant under section 69 of the Act.”
At the outset of hearing, we found from perusal of record that there is a delay of 209 days in filing this appeal before the Tribunal for which, the assessee has filed an application for the condonation of delay by mentioning the facts as under:
“In this regard, I submit before your Honours that I am a medical practitioner based out of Ambasamudram, a semi-urban locality in Tirunelveli, having very limited knowledge on taxation matters. I hereby furnish the sequence of events as tabulated below: S No. Event Date 4th August 2017 1 Date of filing income tax return 30th March 2022 2 Date of assessment order 7th November 2023 3 Date of order of CIT(A) 26th April 2024 4 Date of issue of reminder letter by the jurisdictional Assessing Officer following up for the tax demand. 5 Filing of response to the notice issued by the May 2024 jurisdictional Assessing Officer 6 Time spent on engaging a tax consultant from June-July 2024 Chennai. 2nd August 2024. 7 Filing of appeal before the Hon’ble ITAT
I am a medical professional employed by the State Government of Tamilnadu, with my place of work situated in Ambasamudram, Tirunelveli District. In addition to my government service, I am operating a small clinic during evening hours. Having dedicated nearly 35 years to my profession, and there was no tax litigation in my case, based on the feedback from my consultant, I was under the bonafide belief that the subject addition would get annulled at the first appellate
4 ITA2056/Chny/2024 Shri Shanmugaundaram Venkatachalapathy Vs ITO stage itself. However, upon becoming aware of the actual outcome in May 2024, I commenced the process of identifying a new tax consultant. Given my limited knowledge of taxation and related compliances, the process required additional time, which consequently delayed the filing of the subject appeal. Therefore, due to lack of professional advise, I missed to file an appeal before the Hon'ble Income Tax Appellate Tribunal within due date. In this regard, I have attached an affidavit as a part of the appeal documents itself. Given the above reasons, I hereby pray to your Honours to condone the delay and admit the subject appeal.”
On the other hand, the ld. Sr.DR submitted that the Bench may take an appropriate view as per law.
We have considered the rival submissions. On the issue of condonation of delay, we find that the assessee stated in the condonation application that he is a medical professional employed by the State Government of Tamilnadu and based on the feedback from his consultant, he was under the bonafide belief that the subject addition would get annulled at the first appellate stage itself. The assessee stated that due to lack of professional advise, he filed the appeal before the Tribunal belatedly. He stated that delay was not deliberate and occurred due to lack of proper guidance as mentioned in the condonation application. Thus, considering the facts and circumstances of the case and the contention made by the assessee, we condone the delay of 209 days in filing this appeal before the Tribunal and admit the same for hearing.
Now coming to the additional grounds raised by the assessee before us, it was found that the assessee has questioned the validity of assessment order passed
5 ITA2056/Chny/2024 Shri Shanmugaundaram Venkatachalapathy Vs ITO under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, the Act) on the ground that the notice under Section 143(2) of the Act was not received by the assessee. However, we have examined the same and it is found from the assessment record that the notice under Section 143(2) was issued on 06/05/2021 and was served on the assessee through speed post by the verification unit of the Income Tax Department by Speed Post under bearing tracking no. ET740951136IN which was found to have been delivered to the assessee as per India Post record. Thus, there is no merit in the additional ground raised by the assessee and therefore, the same is rejected.
Now coming to the merit of the case, the brief facts of the case are that the assessee is employed with Tamil Nadu State Government as a Doctor and filed return of income under Section 139 of the Act for the A.Y. 2017-18 showing a total income of Rs. 21,80,960/-. The assessee is also engaged in running an independent private clinic. The Assessing Officer, on perusal of 26AS details viz-a- viz ITR of the assessee, noticed that the assessee has not declared his professional income of Rs. 2.21 lacs in his return of income. Based on this information, case of assessee was reopened under Section 147 of the Act after obtaining necessary approval from the competent authority. Accordingly, notice under Section 148 of the Act dated 30/03/2021 was issued to the assessee to file fresh return of income. The assessee, thereafter, filed a return of income on 30/04/2021 declaring total income of Rs. 21,80,960/-. Statutory notices under Section 143(2) and 142(1) of the Act were issued from time to time, however, the assessee did not respond to the said notices. Since, there was no response from the assessee, a reference was made to the verification unit of the IT department
6 ITA2056/Chny/2024 Shri Shanmugaundaram Venkatachalapathy Vs ITO to serve the notices dated 8/12/2021 and 04/02/2022. The notices were sent through speed post which was found to be delivered to the assessee after tracking it from the India Post Site. Again there was no response from the assessee. Thereafter, a show cause notice under Section 144 of the Act was issued to the assessee fixing the date of compliance on 23/02/2022 then only the assessee has filed his reply and it was stated by the assessee that it has asked for personal hearing through video conferencing on 28/03/2022 at 5.00 PM. The assessee appeared along with his accountant at the schedule date and time and made the same submissions which was already made during the assessment proceedings. It was noticed from Form No. 26AS of the assessee for the assessment year under consideration that the assessee had received payments of Rs. 2,20,722/- from certain pharmaceuticals companies including M/s USV Pvt.
Ltd., M/s Unichem Laboratories Ltd. etc. on which TDS has also been deducted by the respective companies under Section 194J of the Act, whereas in the ITR filed by the assessee, it was found that the gross receipts of Rs. 16,52,000/- and net profit of Rs. 8,26,000/- only were declared claiming it as ‘no account case’. The Assessing Officer, therefore, added a sum of Rs. 2,20,722/- as the assessee’s professional income and taxed it accordingly. Penalty proceedings under Section 270A of the Act was also initiated against the assesee for under-reporting of his income. Further, the Assessing Officer received information from the Investigation Wing of the department that during the assessment year under consideration, the assessee has invested a sum of Rs. 40,01,250/- and Rs. 45,95,045/- in LIC policy bearing policy number 324016189 and 324016190 respectively in the name of his son Shri V. Karthick. The total investment in the LIC policies comes to 7 ITA2056/Chny/2024 Shri Shanmugaundaram Venkatachalapathy Vs ITO Rs.85,96,295/-. The Assessing Officer, after considering the explanations offered by the assessee, added a sum of Rs.69,56,295/- out of Rs.85,96,295/- under Section 69 of the Act and taxed the same at the rate prescribed under Section 115BBE of the Act.
Aggrieved by the order of Assessing Officer, the assessee preferred appeal before the ld. CIT (A), who vide the impugned order, dismissed the appeal of the assessee and confirmed the additions made by the Assessing Officer on the ground that the assessee has failed to explain satisfactorily the source of cash deposits made in the bank account and also in the investment made in LIC. The Ld. CIT (A) didn’t accept the explanations of the assessee that sources are from his drawings from salary and gifts and loans taken from the close relatives.
Further aggrieved by the order of ld. CIT (A), the assessee has filed this appeal.
During the appellate proceedings before us, the ld. AR of the assessee again referred to the same source of investments as shown before the Ld. CIT (A) in the purchase of said insurance policies in the name of his son and claimed that the gifts/loans taken from the close relatives and drawings from the salary clearly explains the source and, therefore, there is no reason to sustain the addition made by the Assessing Officer.
The ld. Sr. DR, on the other hand, supported the orders of the lower authorities.
We have considered the rival submissions and it is found from the impugned order that the assesesee has tried to explain the source of investment from the close relatives of the assessee, his spouse, mother and sister of the assessee and few other relatives. Though, it was claimed by the assessee that they are having definite source of income and they have given the loan/gift out of their savings
8 ITA2056/Chny/2024 Shri Shanmugaundaram Venkatachalapathy Vs ITO and retirement benefits but the same was not accepted by the ld. CIT(A) and accordingly, the order of the Ld. CIT (A) should be set aside. We have considered the impugned order and we find that the ld. CIT(A) has discussed all the explanations offered by the assessee in detail in the body of the impugned order and has given reasons why he hasn’t accepted the explanations offered by the assessee. Thus, we do not find any reason to interfere with the order passed by the ld. CIT (A) and we uphold the same. In the result, grounds of appeal raised by the assessee are dismissed.
In the result, this appeal of the assessee is dismissed.
Order pronounced in the open court on 26/09/2025.