Case Law Details
Rachna Ashokbhai Desai Vs National Faceless Assessment Centre (ITAT Surat)
Summary: The ITAT Surat partly allowed the assessee’s appeal relating to an addition of ₹15.90 lakh made under Section 69 read with Section 115BBE in respect of investments in mutual funds and insurance policies. The assessee had not originally filed a return for AY 2013-14, and reassessment proceedings were initiated after information indicated investments aggregating ₹47.59 lakh. The assessee explained that the investments were funded through agricultural income, gifts received on engagement and marriage, and other disclosed sources, and submitted supporting documents including balance sheets, capital accounts, agricultural land records, and crop sale bills. The Assessing Officer and CIT(A) rejected the explanation, observing that certain crucial evidences were either not produced or were insufficient to establish the source of investments. The Tribunal noted that substantial documentary evidence had been furnished, although some documents were self-serving in nature. Holding that taxation is on income and not gross receipts, the Tribunal granted partial relief and directed that only ₹79,549, being 5% of ₹15.90 lakh, be added and taxed under normal provisions instead of Section 115BBE.
Core Issue: Whether investments in Mutual Funds and Bajaj Allianz Insurance Policies could be treated as wholly unexplained investments taxable as deemed income under section 69 read with section 115BBE, despite the assessee furnishing documentary evidence regarding agricultural income, gifts, capital account, balance sheet, land records and investment sources; and whether only an estimated addition could be sustained where the explanation was partly substantiated but certain inconsistencies remained.
Facts: The assessee, an individual, had not originally filed her return of income for AY 2013-14. Information received from the Investigation Wing revealed that she had made investments aggregating to ₹47,59,234 in Mutual Funds and Bajaj Allianz Insurance Policies. Since no return had been filed and the source of investment was not available on record, reassessment proceedings under section 147 were initiated and notice under section 148 was issued on 31.03.2021.
In response, the assessee filed her return of income on 30.04.2021 declaring total income of ₹2,04,480 along with agricultural income of ₹13,03,560. During the reassessment proceedings, the assessee explained that the investments were sourced from agricultural income, gifts received on the occasion of engagement and marriage, and other disclosed funds. She furnished a copy of the balance sheet, capital account, investment statements, copies of agricultural land records (7/12 and 8-A extracts), crop sale bills and other supporting documents. The assessee also submitted that she was residing in Delhi, was under medical treatment during pregnancy and was facing difficulties due to the COVID-19 pandemic and lockdown restrictions, but nevertheless had submitted all relevant records electronically before the Department.
AO’s Findings: The AO was not satisfied with the explanation furnished by the assessee. According to him, the documents produced were largely self-serving and insufficient to establish the source of investments. The AO examined the material and held that the assessee had failed to satisfactorily explain a portion of the investments. Consequently, an amount of ₹15,90,986 was treated as unexplained investment under section 69 and taxed as deemed income under section 115BBE.
CIT(A)’s Findings: The CIT(A) confirmed the addition. It was observed that although the assessee had claimed agricultural income and gifts aggregating to ₹8.20 lakh, the supporting evidence was not adequate. The CIT(A) noted that the AO had examined the agricultural income, landholdings, gifts and bank transactions in detail and found deficiencies in the supporting records. Particular emphasis was placed on the absence of complete crop records (Khatauni) and other corroborative evidence. Accordingly, the addition of ₹15,90,986 under section 69 read with section 115BBE was sustained.
ITAT Findings: The Tribunal found substantial merit in the assessee’s contention that documentary evidence had in fact been furnished during the assessment proceedings. The record showed that the assessee had submitted a balance sheet, capital account, investment statements, agricultural land records, crop sale bills and other supporting material explaining the source of investments. Therefore, the Tribunal held that the entire investment could not be treated as wholly unexplained. However, it also observed that some of the documents relied upon by the assessee were self-serving in nature and certain inconsistencies remained unresolved. Consequently, complete acceptance of the assessee’s explanation was also not justified.
The Tribunal relied on the decision of the Supreme Court in CIT vs. Williamson Financial Services, wherein it was held that the levy under section 4 is on the total income of an assessee computed in accordance with the provisions of the Act and that what is chargeable to tax is income and not gross receipts. Applying this principle, the Tribunal held that taxing the entire amount of ₹15,90,986 as deemed income would be excessive, particularly when the assessee had furnished documentary evidence explaining the source of investments, though not to the extent of complete satisfaction of the Revenue.
Balancing the evidentiary shortcomings with the material available on record, the Tribunal held that the ends of justice would be met by estimating taxable income at 5% of ₹15,90,986, which worked out to ₹79,549. The Tribunal directed that this estimated addition be taxed under the normal provisions of the Act and not under section 115BBE. It was also clarified that the decision was rendered on the peculiar facts of the case and should not be treated as a precedent for any other assessment year.
FULL TEXT OF THE ORDER OF ITAT SURAT
Captioned appeal filed by the assessee, pertaining to Assessment Year 2013-14, is directed against the order under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Assessment Centre, Delhi (hereinafter referred to as “NFAC”), dated 30.06.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s. 147 r.w.s. 144 of the Act, on 27.03.2022.
2. Solitary grievance of the assessee in the grounds of appeal, mentioned in Form No. 36 are that Ld.CIT(A)/ NFAC erred in law and on facts in making addition on account of disclosed investment in Mutual Fund and Insurance Policies to be deemed income u/s.69 r.w.s. 115BBE at Rs. 15,90,986/-.
3. Learned Counsel for the assessee informs the Bench that assessee does not wish to press additional legal grounds raised by the assessee, therefore, I dismiss the additional grounds/ legal grounds raised by the assessee, as not pressed.
4. Succinctly, the factual panorama of the case is that assessee before me is an Individual and had not filed her return of income for the assessment year (A.Y.) 2013-14. As per information received from the Dy. Director of Income (Inv.) Valsad, the assessee had made investment in Mutual Funds and Insurance Policies of Bajaj Alliaz totalling to Rs. 47,59,234/-. Since, the assessee has not filed her return of income for the year under consideration, the source of investment in the mutual fund and insurance policies remained unexplained, hence proceedings under section 147 were initiated and notice u/s 148 of the Income Tax Act, 1961 was issued on 31-032021, after recording satisfaction and obtaining approval from the competent authority. In response to the issuance of notice u/s 148 of the I.T. Act, 1961, the assessee filed its return of income on 30.04.2021, declaring total income at 2,04,480/-. The assessee has shown income from business or profession, income from capital gains, income from other sources besides net agricultural income of Rs. 13,03,560/-. Accordingly, notice u/s 143(2) was issued to the assessee on 25.06.2021. The assessee raised objections on 17.02.2022, regarding the issuance of notice u/s 148 dated 31.03.2021 which has been duly disposed of by a speaking order on 22.03.2022. Subsequently, notices u/s 142(1) of the Act were issued to the assessee from time to time through ITBA portal and served on the assessee. In response thereto, the assessee furnished complete relevant details/information before the assessing officer. The assessee had replied to the assessing officer that She was married and just now living in Delhi and under medical treatment of pregnancy. At that time there are lockdown everywhere in India as well as in the world, due to COVID-19 pandemic, therefore it was impossible to attend office, but she had submitted all the supporting evidences, like copy of balance sheet, capital account, statement for investment and copy of 7-12 & 8-A for holding agricultural land, Source of investments like Agriculture income (crops sales bills) etc, by e-mail to the Income-tax Officer, Ward-3, Valsad, as on dated 24.03.2020.
5. However, the assessing officer rejected the above contention of the assessee and held that as per the information available in the system, the notice u/s 148 has been duly been served upon the assessee on 31.03.2021. Hence, the plea taken by the assessee that the same is received after 31.03.2021 carries no force. It was also noticed that the submissions of the assessee are only self-serving without bringing any documentary evidence. Considering these facts and circumstances of the case, the assessing officer made addition of Rs.15,90,986/- in the hands of the assessee.
6. Aggrieved by the order of the assessing officer, the assesses carried the matter in appeal before the Ld.CIT(A), who has confirmed the action of the assessing officer. The ld.CIT(A) observed that assessee has stated that she had received income from agriculture and also the fact that she had received gifts worth Rs. 8,20,000/- on account of engagement and marriage ceremony. The assessment order on page 31 of the assessment order has analyzed that the Returns, showing agriculture income was filed by the assessee. The assessing officer has examined the details of agriculture income, the land holding of the assessee, the gifts received from the relatives and correlated it with the bank statements from pages 3 to 30 of the assessment order. The assessing officer also analyzed the various evidences submitted by the assessee and came to the conclusion that the most important record, copy of khatauni (crop record of the State Gov.) was not produced during the assessment proceedings. Hence due to lack of evidences furnished by the assessee in support of the grounds of appeal, the addition made by assessing officer was confirmed by ld.CIT(A).
7. Being aggrieved by the said order of the ld.CIT(A), the assessee is left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.
8. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel submitted that assessee being agriculturalist, submitted during the assessment proceedings, entire documentary evidences to prove his claim such as, copy of balance sheet, capital account, statement for investment and copy of 7-12 & 8-A for holding agricultural land. The assessee also submitted source of investments like agriculture income (crops sales bills) etc, by e-mail to the Income-tax Officer. Therefore, addition made by the assessing officer, may be deleted. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. I have considered submissions of both the parties and find merit in the submissions of learned Counsel for the assessee to the effect that since entire documentary evidences to prove the claim were submitted by the assessee during the assessment proceedings, such as, copy of balance sheet, capital account, statement for investment and copy of 7-12 & 8-A for holding agricultural land. The assessee also submitted source of investments like agriculture income (crops sales bills) etc, by e-mail to the Income-tax Officer. However, at the same time, I find that some of the documents and evidences submitted by the assessee, before the assessing officer, are self -servicing documents. I also note that taxing the receipts only has never been the motto of the Income-tax Act. In this regard, the observation of the Supreme Court in CIT v. Williamson Financial Services [2007] 165 Taxman 638 (SC) is reproduced below:
“It is important to bear in mind that u/s 4, the levy is on total income of the assessee computed in accordance with and subject to the provisions of the Income Tax Act. What is chargeable to tax under the Income Tax Act is not the gross receipt but the income under the Income Tax Act. The tax is on income but not on gross receipts.”
9. Hence, I find that while the case of the assessee merits some relief, at the same time entire relief cannot be permitted to the assessee. In my view the ends of justice would be met, if a net profit rate of @ 5% of Rs.15,90,986/-, which comes to Rs. 79549/-, is adopted, since the same would take care of the inconsistencies, in the various documents and evidences submitted before the lower authorities. Therefore, in order to plug the leakage of revenue, I direct the assessing officer to make addition of Rs. 79,549/-, by applying the normal rate of income tax ( not under section 115BBE of the Act). It is also made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
10. In the result, appeal filed by the assessee in ITA No.837/SRT/2025, is partly allowed.
Order is pronounced in the open court on 02/06/2026.
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