KANCHAN LALWANI,VIZIANAGARAM vs. INCOME TAX OFFICER, WARD-1, VIZIANAGARAM

Facts

For Assessment Year 2021-22, the assessee's case was selected for scrutiny due to cash deposits and property transactions. The Assessing Officer made additions of Rs. 65 lakhs u/s 68 for unexplained cash deposits based on bank passbook entries, and Rs. 45,40,750/- u/s 56(2)(x)(b) for the difference between property sale consideration and fair market value without DVO reference. The CIT(A) sustained both additions, leading to the assessee's appeal before the Tribunal.

Held

The Tribunal allowed the appeal, deleting both additions. It ruled that Section 68 additions require 'books of account' as defined u/s 2(12A), which a bank passbook is not, especially for an assessee not engaged in business or profession. For the Section 56(2)(x)(b) addition, the Tribunal found a violation of natural justice as the AO changed the basis of addition without proper opportunity, and failed to refer the property valuation to a DVO despite the assessee's challenge supported by a valuer's report.

Key Issues

1. Whether unexplained cash deposits in a bank account can be added u/s 68 when the assessee does not maintain books of account for business or profession, and a bank passbook is not considered a 'book of account' under the Income Tax Act. 2. Whether an addition under Section 56(2)(x)(b) for property valuation difference is valid if the Assessing Officer fails to provide proper opportunity, changes the basis of addition without notice, or does not refer the valuation dispute to a Departmental Valuation Officer (DVO).