Loading judgment…
Facts
The assessee, a retired bank employee, deposited a substantial amount in his savings bank account. The Assessing Officer (AO) made an addition of Rs. 10,20,740/- under Section 69A as unexplained money. The assessee claimed the amount was out of savings from agricultural income and salary of earlier years. The CIT(A) upheld the addition.
Held
The Tribunal found that the assessee had substantial agricultural income and pensionary benefits, supporting the claim of sufficient opening cash balance. Considering the AO himself accepted a significant portion of agricultural income, the Tribunal deemed it appropriate to set aside the order and direct the deletion of the addition.
Key Issues
Whether the addition of Rs. 10,20,740/- under Section 69A as unexplained money is justified, given the assessee's agricultural income and savings from earlier years. Also, the validity of the assessment proceedings initiated without issuing a fresh notice to the legal heir of the deceased assessee.
Sections Cited
69A, 148, 143(3), 147, 142(1), 159, 292B, 246A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 31.03.2025 passed by Ld. Addl./JCIT(A)-2, Gurugram [‘Ld. CIT(A)’] for the assessment year 2013-14.
The appellant has raised the following grounds of appeal :-
1. On the facts and in the circumstances of the case, Learned Assessing Officer and The CIT(A) is not justified in making/confirming additions of Rs. 1020740/- to returned income u/s.69A of the act, as said section is applicable only when in any financial year the assessee is found to be owner of any money, bullion, jewellery or any other valuable article and the assessee offers no explanation about the source of acquisition of such money, bullion, jewellery or other valuable article or the explanation offered by him is not satisfactory in the opinion of the ITO. In this case, appellant offered explanation of the source of credits to bank account. No any unexplained money, bullion or jewellery etc is in fact found by Ld. ITO as well as The CIT(A). So, in the absence of fulfillment of basic condition for applicability of section 69A, additions may please be deleted. Relevant Section:- 69A Issue:- Applicability of section 69A Without prejudice to the above 2. On the facts and in the circumstances of the case, Learned Assessing Officer and CTT(A) are not justified in making/confirming additions of Rs. 1020740/- to returned income u/s.69A of the act by accepting only Rs.662000- as savings & agricultural income of previous year instead of opening balance of Rs.1541310/- claimed by Appellant in cash flow statement. When Assessee had sufficient agricultural land & earnings of previous years to justify opening balance of Rs. 1541310/- and when AO himself accepted Rs. 951160/- to be net agricultural income of A.Y.2013-14 only, The Id. ITO is not justified in rejecting claim of Appellant that Rs 1541310/-is out of savings and agricultural income of past many years & additions may please be deleted. Relevant Section:- General Issue:- Additions unjustified Without prejudice to the above 3. On the facts and in the circumstances of the case, The Learned Assessing Officer and The CIT(A) are not justified in making/confirming additions of Rs. 1020740/- to returned income u/s.69A of the act by allowing only Rs.662000/- as savings out of salary and agricultural income of many past years instead of claimed Rs.1541310/- in the absence of any findings on part of them about any other source of income to deceased Assessee other than salary from his employer and agricultural income declared by Appellant. The Learned AO and Hon. CIT(A) has also not explained how they worked out said savings of Rs.662000/ In the absence of any findings by Ld ITO, it is requested to allow claim of Appellant that Rs.1541310/- are out of savings and agricultural income of earlier years and additions may please be deleted. Relevant Section:-69A Issue:- Additions without findings & evidence Without prejudice to the above 4. On the facts and in the circumstances of the case, The Learned Assessing Officer and The CIT(A) are not justified in making/confirming additions of Rs. 1020740/- to returned income u/s.69A of the act when the Assessee is expired and his legal heir is not having detailed knowledge of financial transactions of deceased Assessee and affidavit of legal heir is filed to that effect. In the absence of any finding by Ld ITO/CIT(A) of any material evidencing the other source of income to deceased Assessee, the additions are requested to be deleted. Relevant Section:-69A Issue:- Additions unjustified and without findings & evidence Without prejudice to the above 5. On the facts and in the circumstances of the case, The Learned Assessing Officer and The CIT(A) are not justified in making/confirming additions of Rs. 1020740/- to returned income u/s.69A when assessment is bad in law as initial notice u/s. 148 was served on legal heir of assessee on 23.05.2018 i.e. after lapse of 04 years from end of relevant assessment year. In the absence of any conclusive evidence in possession of Ld ITO regarding concealment of income exceeding Rs. 1 Lakh, the extended period of 6 years cannot be allowed to Ld. ITO and entire assessment proceedings be quashed and additions are requested to be deleted. Relevant Section:- 148 Issue:- Validity of notice u/s.148 and assessment. Without prejudice to the above 6. On the facts and in the circumstances of the case, The Learned Assessing Officer and The CIT(A) are not justified in making/confirming additions of Rs. 1020740/- to returned income u/s.69A as section 69A says that unexplained money can be brought to tax if it is not recorded in books of accounts and assessee offers no explanation about nature and source of acquisition of money. Deposits were made in disclosed bank account of assessee as nowhere in assessment order it is mentioned that concerned bank account of assessee was not disclosed/considered while filing return of income. The additions are requested to be deleted. Relevant Section:- 69A Issue:- Source of money disclosed and additions unjustified Without prejudice to the above 7. The appellant craves leave to add, alter, amend or withdraw any of the ground of appeal. Relevant Section:-246A Issue:- Addition, alteration or deletion of any ground of appeal
.”
3. The appellant has also raised following additional ground of appeal :-
(BEFORE ITAT) “8. On the facts and in the circumstances of the case, the Learned Assessing Officer and The CIT(A) is not justified in making/confirming additions of Rs. 1020740/- to returned income u/s.69A of the act, when the entire assessment under section 143(3) r.w.s. 147 of the act is invalid as no any fresh notice u/s.148 was issued on legal heir of deceased assessee. So, when the original notice u/s.148 dated 22.03.2018 was issued in name of deceased assessee and when legal heir of assessee submitted death certificate of deceased assessee evidencing death of assessee before initiation of proceedings, it was obligatory on part of learned AO to issue fresh notice u/s.148 of the act in name of legal heir of deceased assessee within allowable time limit. In the absence of fresh notice u/s.148 of the act issued on legal heir of deceased assessee, the additions of Rs. 1020740/- are bad in law and hence additions are requested to be deleted. Relevant Section:- 147, 148, 143(3) Issue:- Assessment invalid and additions unjustified in the absence of notice u/s.148 issued to legal heir of deceased assessee. Explanation: Honorable Sir, the learned Assessing Officer issued initial Notice u/s.148 of the act in name of deceased assessee Mr. Ambalal Chaudhari on 22.03.2018 on ITD portal which was duly served upon the assessee on 23.05.2018 by RPD. In response to said notice, Appellant submitted letter dated 10.09.2018 to Ld. ITO raising objections towards initiating assessment proceedings as initial notice was issued after death of Assessee Mr. Ambalal Gorakh Chaudhari(on 12.10.2014) and requested to drop the assessment proceedings. The Id. ITO rejected claim of Appellant vide letter dated 25.09.2018 and continued the proceedings against legal heir Mrs. Anita Ambalal Chaudhari. But again the Id.AO issued notice u/s.142(1) of the act in name of legal heir on 01.11.2018 and required legal heir to file return of income as per notice u/s.148 issued dated 22.03.2018. It is to be explained that Section 159 addresses the liability of legal representatives of a deceased taxpayer in so far as it empowers legal representatives to act on behalf of the deceased, ensuring the continuity of tax proceedings and compliance However, the present case is not that of continuity in the assessment proceedings already initiated, but that of initiation of the assessment post the death of the assessee. Under such circumstances, section 159 has no application to the facts of the case. Where the legal representatives do not waive their right to a notice under Section 148 of the Act, it cannot be said that the notice issued against the dead person is in conformity with and with intent and purpose of the Act. The legal heir has not received any fresh notice u/s.148 of the act which was must for validity of assessment proceedings. Even in assessment order in para 1 the Id. AO has referred only to notice u/s.148 of the act issued on 22.03.2018 which was issued in name of deceased assessee. Also, no such fresh notice was issued through ITD portal. So, when after intimation about death of assessee, no any fresh notice u/s.148 of the act was issued to legal heir of assessee, the assessment proceedings are invalid in law and hence the additions of Rs. 1020740/- u/s.69A of the act are invalid & unjustified and so requested to be deleted and entire assessment proceedings should be held as invalid in law. Honorable Sir, we request your kind attention towards following court judgments:- (i) Chandreshbhai Jayantibhai Patel Officer (2019) 101 taxmann.com 362 (Gujarat). The High Court of Gujarat ruled that a notice issued under section 148 of the Income-tax Act, 1961, against a deceased person is invalid unless the legal representative submits to the jurisdiction of the Assessing Officer without raising any objection. The original assessee, 'JHP', had passed away, and the Assessing Officer issued a notice in their name to reopen the assessment. The petitioner, as the heir and legal representative of 'JHP', informed the Assessing Officer about the death and submitted the death certificate. However, the Assessing Officer considered the objections raised by the petitioner as participation in the proceedings, citing the provisions of section 292B, and continued with the reassessment. The court held that the petitioner's communication about the death of the assessee cannot be considered as participation in the proceedings, and thus, the notice issued under section 148 was deemed invalid. (ii) Vipin Walia v. Income-tax Officer [2016] 67 taxmanın.com
56. (Delhi) The High Court of Delhi dealt with a situation where a notice under section 148 of the Income-tax Act, 1961, was issued to the original assessee who had already passed away. The department continued with the proceedings under section 147 in the name of the petitioner, who was the legal heir of the original assessee. The petitioner argued that the proceedings initiated were barred by limitation. The court held that if the Department intended to proceed under section 147, they should have done so within the period of limitation by issuing a notice to the legal representative of the deceased assessée. Beyond that date, the department could not proceed by issuing a notice to the legal representatives of the assessee. Therefore, the Α.Υ. 2017-18 Page No 5. DCIT Vs.
Anilkumar Ochhavlal Desai subsequent proceedings under section 147 against the petitioner were deemed to be misconceived and were quashed. (iii) Aemala Venkateswara Rao, v. Income-tax Officer, Ward-2(1) Guntur [2019] 105 taxmann.com 14 (Visakhapatriam Trib.). The Income Tax Appellate Tribunal (ITAT) Visakhapatnam Bench addressed the issue of a notice issued to a deceased assessee. The tribunal ruled that when proceedings are initiated against a deceased assessee, a notice issued in the name of the deceased person cannot bind the legal heirs unless a proper notice is issued to them. Therefore, any notice issued in the name of a deceased person is considered invalid and cannot be enforced in law. So, we request your honor to call the evidence of fresh notice u/s.148 issued in name of legal heir of assessee from record of assessment proceedings and in the absence of same, the entire proceedings are requested to be dropped as being null and void and the additions are requested to be deleted.”
Facts of the case, in brief, are that the assessee is a retired bank employee and on the basis of AIR information that he has deposited cash of more than Rs.10,00,000/- in his savings bank account and has not furnished his return of income. The case was reopened and notice u/s 148 was issued on 22.03.2018. In response to the said notice, wife of the assessee Anita Ambala Choudhari being legal heir furnished the return of income and informed that the assessee Ambalal Gorakh Choudhari has already expired on 12.10.2014. The Assessing Officer enquired about the sources of cash deposit of Rs.34,00,500/- in savings bank account maintained with State Bank of India. The AR of the assessee submitted the cash flow statement and claimed that the assessee was retired in the year 2013 and received pension, leave encashment and gratuity to the extent of Rs.7,66,600/-. It was also claimed that the assessee owned 20.81 acres of agricultural land in his name and also in the name of family members and accordingly for the period under consideration agricultural income of Rs.11,98,950/- was disclosed. Apart from this, the legal heir of the assessee also claimed an amount of Rs.6,62,000/- out of savings of her late husband and also claimed savings of earlier year’s agricultural income. Not being satisfied with the explanation of the legal heir of the assessee, the Assessing Officer accepted only Rs.23,79,760/- and determined deficit of Rs.10,20,740/- and accordingly added this amount to the income of the assessee u/s 69A of the IT Act as unexplained money. Accordingly, the assessment was completed u/s 143(3) r.w.s. 147 of the IT Act by determining total income at Rs.11,33,970/- as against the income returned by the assessee at Rs.1,13,230/-. The above assessed income includes addition u/s 69A of the IT Act of Rs.10,20,740/- as unexplained money. The Assessing Officer also accepted the agricultural income of Rs.9,51,160/- as against the agricultural income shown by the assessee at Rs.11,98,950/-.
5. Aggrieved with the above assessment order, the assessee filed first appeal before Ld. CIT(A). After considering the reply of the assessee, Ld. CIT(A) vide impugned order dated 31.03.2025 dismissed the appeal filed by the assessee and confirmed the addition of Rs.10,20,740/- made by the Assessing Officer.
It is this order against which the assessee is in appeal before this Tribunal.
Ld. AR appearing from side of the assessee submitted before us that the order passed by Ld. CIT(A) is unjustified. Ld. AR submitted before us that the assessee was a bank employee and was also in possession of 20.81 acres of irrigated agricultural land. The assessee served as a bank employee for more than 30 years and the agricultural land was also owned since last many years. Ld. AR submitted that in the family of late assessee only wife and younger son is there and they do not have much details available with them regarding the financial affairs of the assessee, however they have collected most of the information and furnished the same before the Assessing Officer. Ld. AR submitted before us that the Assessing Officer has not denied the agricultural land holdings by the late assessee and also accepted agricultural income of Rs.9,51,160/- for the period under consideration which itself proves that the assessee was having substantial agricultural income since last many years. Accordingly, Ld. AR requested before us to accept the contention of legal heir (widow of the assessee) that the assessee was having sufficient opening cash balance with him generated out of savings of agricultural income and salary of earlier years which was utilized for depositing in the bank account.
Ld. DR appearing from side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the assessee expired way back in the year 2014 leaving behind his wife and younger son. The assessee was a full time bank employee retired in the year 2013 received gratuity, pension and leave encashment amounting to Rs.7,66,600/-. Admittedly, the assessee was also in possession of 20.81 acres of irrigated agricultural land and the Assessing Officer accepted the fact and considered agricultural income of Rs.9,51,160/- for the period under consideration. It was the claim of the legal heir of the assessee that the impugned amount of Rs.10,20,740/- was deposited out of opening cash balance which was savings of the assessee from agricultural income of earlier years. We further find that the assessee was having two sources of income i.e. one from salary and another agricultural income and the family size of the assessee was small, therefore, the claim of the legal heir of the assessee appears to be genuine that enough amount was available with the assessee which was utilized for depositing the same in the impugned bank account. Considering the totality of the facts of the case and in the light of the fact that the Assessing Officer himself has accepted agricultural income of Rs.9,51,160/- for the period under consideration, we find force in the arguments of Ld. Counsel of the assessee that sufficient opening cash balance was available with the assessee. Therefore, we deem it appropriate to set-aside the order passed by Ld. CIT(A) and direct the Assessing Officer to delete the addition of Rs.10,20,740/- made u/s 69A of the IT Act. Thus, the grounds of appeal raised by the assessee are allowed.