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2025 Supreme(Online)(ITAT) 5585
INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
Siddhartha Nautiyal, J, Narendra Prasad Sinha, ACJ
UPENKUMAR AMRUTJI VIHOL VADODARA – Appellant
Versus
THE ITO WARD-3(1)(2) VADODARA – Respondent
I.T.A. Nos.554 to 556/Ahd/2025
For the Appellants/Petitioners: Shri Manan Agrawal, A.R.
For the Respondents: Shri Sher Singh, CIT-DR, Shri Hargovind Singh, Sr.-DR
Tax authorities must conduct thorough inquiries to substantiate claims of unexplained income before imposing penalties.
Headnote:(A) Income Tax Act, 1961 - Sections 69A, 271(1)(c), 271F, 147 and 142(1) - Appeals against assessment order with respect to unexplained income due to unverified bank deposits - Noted that the taxpayer claimed misuse of PAN and lack of inquiry by authorities during assessment - The appeals were restored to the Assessing Officer for de-novo consideration due to evident inquiry deficiencies. (Paras 8, 9, 10)
(B) Penalty - Legality of penalties imposed - Noteworthy was the assessee's status during the relevant period, asserting non-filing and a claim of a misused identification - The fine line between accurate risk assessment and unjust penalties was demonstrated through case developments. (Paras 11, 12, 13)
Facts of the case:
The appeals involved a substantial cash deposit registered in a minor’s name, wherein the Assessing Officer failed to demonstrate adequate inquiry to validate claims about the source of these deposits, notably the assertion that the PAN was misused to open the account.
Findings of Court:
The absence of a thorough investigation into bank correspondences undermined the government’s position regarding the taxing of the described deposits as a part of unexplained income.
Issues: Central questions revolved around sources of income and responsibilities concerning management of apparent financial discrepancies during crucial tax compliance years.
Ratio Decidendi: The court emphasized the significance of thorough inquiry in tax assessments, particularly in cases involving potential identity misuse, and concluded that tax authorities must ensure sufficient evidence before advancing penalties linked to income concealment.
Result: Appeals allowed for statistical purposes.
| Table of Content |
|---|
| 1. questions raised due to unexplained income from large bank deposits. (Para 1 , 2 , 3 , 5 , 10) |
| 2. insufficient inquiry from tax authorities regarding income verification. (Para 4 , 6 , 8) |
| 3. guidance on appropriate standards for tax assessments and penalty confirmations. (Para 9 , 12) |
| 4. penalty proceedings initiated without substantiated evidence. (Para 11 , 14) |
ORDER
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
These are appeals filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 13.01.2025 & 22.01.2025 passed for A.Y. 2016-17. ITA No. 554/Ahd/2024 relates to appeal filed by the assessee against quantum additions sustained by Ld. CIT(A), while ITA Nos. 555/Ahd/2025 and 556/Ahd/2025 are appeals filed by the assessee against levy of penalty under Section 271 (1)(c) of the Act towards concealment of income and under Section 271 F of the Act on account of non-filing of return of income by the assessee, for the impugned assessment year. Since the facts and issues for consideration are common for all the appeals before us, all the appeals filed by the assessee are being disposed of by way of a common order.
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First we take up the assesseee’s appeal against the quantum addition confirmed by Ld. CIT(A) ( ITA No. 554/Ahd/2025 for A.Y. 2016-17)
2. The assessee has taken the following Grounds of Appeal:
ITA No. 554/Ahd/2025(A.Y. 2016-17)
“1. The Ld. AO has erred in law in issuing notice U/s. 148 of the Act.
2. The Ld. CIT(A) and the Ld. AO erred in law and in fact in making addition of Rs. 8,55,18,650/- U/s. 69A of the Act.
3. The Ld. CIT(A) and the Ld. AO have erred in law and in fact in confirming the levy of penalty U/s. 271F of the Act.
4. The Ld. CIT(A) and the Ld. AO have erred in law and in fact in confirming the levy of penalty U/s. 271(1)(c) of the Act.
5. The appellant reserves the right to add, alter, amend, modify, delete all or any of the grounds of appeal either partially or completely.”
3. The brief facts of the case are that based on information available with the Assessing Officer, a search and seizure action under Section 132 of the Act was carried out in the case of M/s. Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. During the course of search, it was found that huge money was deposited in the bank account maintained with the said society and that the aforesaid society had allowed huge cash deposits in the bank accounts of it’s account holders, whose creditworthiness were doubtful. The Assessing Officer had received information that assessee had deposited a large sum of Rs. 8,55,18,650/- with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd. during the impugned assessment year, however, the assessee had not filed his return of income for the said assessment year. Accordingly, the case of the assessee was reopened under Section 147 of the Act, after taking necessary approvals. In response to notice issued by the Assessing Officer, the assessee vide response dated 29.11.2021 submitted that the assessee had not opened any bank account with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd. and that the assessee had opened his first bank with Central Bank of India on 27.11.2017. The assessee submitted that apparently his PAN Card was misused by some other person and that the assessee was a minor during the impugned year and having a weak financial position and did not have the capacity to deposit such a huge sum with M/s. Renuka Mata Multi State Urban Cooperative Credit Society. However, the Assessing Officer was of the view that the assessee has not been able to explain the source of deposits amounting to Rs. 8,55,18,650/- and accordingly, the aforesaid sum was added as unexplained income of the assessee, under Section 69A of the Act. Further, the Assessing Officer also initiated proceedings under Section 271 (1)(c) of the
