Case Law Details
Dilipsinh Laxmansinh Rathod Vs ITO (ITAT Ahmedabad)
Summary: The ITAT Ahmedabad allowed the assessee’s appeal and deleted additions of Rs. 1,25,000 comprising Rs. 1,00,000 towards estimated marriage expenses and Rs. 25,000 towards investment in an FDR in the name of the assessee’s daughter. The Tribunal noted that in an earlier round it had directed the Assessing Officer (AO) to reconsider the matter in light of the order of the Special Judge, ACB, who had acquitted the assessee of charges under the Prevention of Corruption Act and held that allegations regarding investments in the names of family members were unsupported by oral or documentary evidence. The Tribunal found that the AO merely repeated the earlier additions based on information received from the ACB without conducting any independent inquiry or bringing evidence on record. It also observed that the assessee’s explanations regarding the source of marriage expenses and the daughter’s FDR remained uncontroverted. Accordingly, the Tribunal held that the additions were unjustified and deleted them.
Core Issue: The principal issue before the Tribunal was whether additions towards estimated marriage expenditure and investment in an FDR standing in the name of the assessee’s daughter could be sustained merely on the basis of information received from the Anti-Corruption Bureau (ACB), without any independent investigation by the Assessing Officer, particularly when the assessee had already been acquitted by the Special Judge, ACB on identical allegations. The Tribunal also examined the evidentiary value of third-party information in the absence of corroborative material.
Facts: The assessee filed his return declaring total income of Rs.1,11,430. Pursuant to a search conducted by the Anti-Corruption Bureau (ACB), Ahmedabad, proceedings under section 147 were initiated on the basis of information received from the ACB alleging disproportionate assets. In the original reassessment, the AO made an addition of Rs.1,25,000 towards unexplained investments and expenditure relating to the assessee and his family members. In the first round, the Tribunal restored the matter to the AO with a specific direction to reconsider the additions in light of the judgment of the Special Judge, ACB. Thereafter, the AO again made an addition of Rs.1,00,000 towards estimated marriage expenses. Subsequently, the Principal CIT invoked section 263 on the ground that the AO had failed to examine investments standing in the names of family members. Pursuant thereto, the AO framed a fresh assessment under sections 144 read with 263, making an additional addition of Rs.25,000 towards an FDR standing in the name of the assessee’s daughter. The CIT(A) affirmed both additions.
Findings of the ITAT: The Tribunal observed that its earlier remand order specifically required the Assessing Officer to decide the matter after considering the findings recorded by the Special Judge, ACB. The criminal court had categorically acquitted the assessee and held that the allegation that investments standing in the names of family members actually belonged to the assessee was based merely on conjectures and surmises, unsupported by either oral or documentary evidence. The burden of proving that the family members were merely benamidars of the assessee had not been discharged by the prosecution.
The Tribunal found that despite these categorical findings, the Assessing Officer simply relied upon the information received from the ACB and failed to undertake any independent inquiry to establish that the assessee had actually incurred unexplained marriage expenditure or that the FDR standing in the daughter’s name represented the assessee’s undisclosed investment. No evidence whatsoever was brought on record regarding actual expenditure incurred on the marriage, nor was any investigation conducted regarding the ownership or source of the FDR.
The Tribunal further noted that the assessee had furnished a plausible explanation that the marriage expenses were met out of maturity proceeds of Kisan Vikas Patra (KVP) amounting to Rs.55,000, originally invested in 1997, while the FDR in the daughter’s name had been created from gifts received by her at the time of marriage. These explanations were neither disproved nor controverted by the Assessing Officer through any material or investigation. In the absence of any contrary evidence, the Revenue could not reject the explanation merely on suspicion arising from third-party information.
The Tribunal held that information received from another agency may constitute a basis for initiating proceedings, but additions under the Income-tax Act cannot ultimately rest solely upon such information. The Assessing Officer is duty-bound to independently verify the facts and collect cogent evidence before drawing adverse conclusions. Since the additions were founded exclusively on unverified ACB information and lacked any corroborative evidence, they were unsustainable in law. The acquittal by the Special Judge, ACB, though not conclusive for income-tax proceedings, substantially weakened the Revenue’s case where no independent material had been brought on record.
Decision: The Tribunal deleted the entire addition of Rs.1,25,000, comprising Rs.1,00,000 towards estimated marriage expenditure and Rs.25,000 towards investment in the daughter’s FDR. It held that, in the absence of independent inquiry, corroborative evidence or rebuttal of the assessee’s explanation, additions based merely on ACB information could not be sustained. Accordingly, the appeal of the assessee was allowed in full
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the order of Commissioner of Income Tax, Appeal, Addl/JCIT (A)-4, Mumbai [hereinafter referred to as ” Addl. CIT(A)”] dated 22.11.2025 for the Assessment Year (A.Y.) 2004-05 in the proceeding u/s 144 r.w.s 263 of the Income Tax Act [hereinafter referred as “The Act”].
2. The brief facts of the case are that the assessee had filed his return of income for A.Y. 2004-05 o 27.09.2005 declaring total income of Rs.1,11,430/-. A search was conducted by the Anti-Corruption Bureau (ACB), Ahmedabad, in the case of the assessee on 28.03.2005. On the basis of intimation received from (ACB), proceeding u/s. 147 of the Act was initiated and the assessment was completed u/s. 143(3) r.w.s. 147 of the Act on 22.12.2006 determining income at Rs.2,36,430/-; wherein an addition of Rs.1,25,000/- was made on account of unaccounted investment made in assesses’s own names and also in the name of his family members. The assessee had preferred an appeal against the said order and the matter was set aside by the Tribunal to the file of the AO, with a direction to re-adjudicate the issue keeping in view the decision of the Special Judge, ACB. The AO, in pursuance to the direction of the Tribunal, had passed an order u/s. 143(3) r.w.s 254 of the Act on 31.10.2017 at total income of Rs. 2,11,430/-, wherein addition of Rs.1,00,000/- was made on account of estimated marriage expense. This order was, thereafter, set aside by the Ld. PCIT on the ground that the AO did not make inquiry regarding the investment in the name of the family members. In pursuance to order u/s. 263 of the Act, the AO had completed the assessment u/s. 144 r.w.s. 263 of the Act on 30.12.2019 at total income of Rs. 2,36,430/- wherein further addition of Rs. 25,000/- was made in respect of investment in FDRs in the name of daughter of the assessee.
3. Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. Addl. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
4. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
1. The Ld CIT(Appeals)-[ ADDL./JCIT (APPEAL)-4 MUMBAI ] had grievously erred both in law and on facts in dismissing the appeal of the appellant by not properly considering the grounds, facts and submissions of the evidences before him The order passed in violation of principles of natural justice deserves to be cancelled. It be so held now.
2. Without prejudice to the above ground, the Ld.ADDL/JCIT(Appeals)-4 Mumbai also erred in law and on facts in confirming the additions of Rs. 1,25,000/- for which the evidences were already furnished at lower levels as submitted before him vide various letters with Annexures. The Sources of investment and expenses were duly explained and hence the additions made deeming the amount of Rs. 1,25,000/- as the appellants income is patently wrong and contrary to facts. It be so held now and addition of Rs. 1,25,000/- be deleted now.
3. The Ld ADD L/JCIT(Appeals) further erred both in law and on facts in not appreciating that the addition of Rs. 1,00,000/- and Rs. 25,000/- towards alleged unexplained investment/ expenditure could not have been made for the year under consideration as the source of original investment were not only explained but also were evident from the copies of the relevant documents and hence invoking such deeming provisions for the year under consideration is patently against the sanction of law. It be so held now and there being neither unexplained investment nor unexplained expenditure, the entire addition of Rs. 1,25,000/- be deleted.
4. The Id ADDL.JCIT (Appeals) also grievously erred both in law and on facts in not appreciating that once the appellant was discharged from the allegation of disproportionate assets by the ACB Court/ High Court after considering explanations and evidences, the very initiation u/s 147 made on him was illegal and without jurisdiction and hence the proceedings initiated in consequence of such report/reasons ought to be quashed as bad in law. It be so held now.
5. The Ld ADDLJJCIT (Appeals) also erred in law and on facts in not appreciating that once the assessment order dated 31.10.2017 was set aside wholly [though not justifiably), there was no justification on the part of the AO to compute income taking figure of Rs. 2,11,430/ which included erroneous addition of Rs 1,00,000/- and hence the order so passed ought to have been cancelled by him. It be so held now.
6. On the facts and in the circumstances of the appellants case and considering the grounds against affording inadequate opportunity of hearing by the Ld AO and also, considering the documentary evidences, the appeal of the appellant ought to have been allowed in toto and directed the Ld AO to accept the returned income of Rs. 1,1,430/ It be so held now.
7. The Id ADDLJCIT(Appeals)-4 Mumabi Ought to have held that the orders passed making additions of Rs. 1,25,000/- for the year under appeal were illegal, invalid and bad in law. It be so held now.
8. The appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing.
5. Shri Divyakant Parikh, the Ld. AR of the assessee submitted that the Tribunal vide order dated 08.12.2016 had set aside the matter to the file of the AO with a direction to decide the issues in accordance with the decision of the Special Judge, ACB. The Ld. AR submitted that the AO had merely repeated the additions made in the original assessment without considering the findings of the Ld. Special Judge, ACB. He explained that the Special Judge, ACB vide order dated 02.03.2015 had acquitted the assessee from the charges levelled against him. Therefore, no addition was called for in the hands of the assessee.
6. Per Contra, Shri Rajeev Garg, the Ld. SR-DR, supported the order of the lower authorities.
7. We have considered the rival submissions. In the original assessment completed u/s. 143(3) r.w.s. 147 of the Act on 22.12.2006, an addition of Rs.1,25,000/- was made by the AO which pertained to estimated expense of marriage (Rs.1,00,000/-) and unexplained investment in FDR in the name of daughter (Rs. 25,000/-). The Tribunal vide order dated 08.02.2016 had set aside the matter to the file of the AO with a direction to decide the issues keeping in view the decision of the Special Judge, ACB. It is found that the Ld. Special Judge, ACB vide order dated 02.03.2015, a copy of which has been brought on record in the paper-book filed by the assessee, had acquitted the assessee from the charges levelled against him. On the issue of investment in the name of family members, the Ld. Special Judge had given the following finding:
“Thus, the allegation levelled by the prosecution that the investments in the name of the family members of the accused are in fact, investments made by the accused appears to be baseless, lacking corroborative evidence either oral or documentary and it is made only on the basis of conjecture and surmises and not backed by legal evidence, hence cannot be accepted.”
8. The Ld. Special Judge, ACB had also held that when the FDR/KVP stood in the name of the family members of the accused, the burden was on the prosecution to show that the family members were the benamidars of the accused. In the absence of any such evidence, the assesse was acquitted of the charges levelled against him under the provisions of Prevention of Corruption Act. In the present case, the AO had made the addition only on the basis of information received from ACB, Ahmedabad. No independent inquiry was carried out by the AO to establish that the assessee had incurred any marriage expense and no evidence for such expense was brought on record. Similarly, the investment of Rs. 25,000/-in FDR in the name of the daughter was also based on mere presumption and without considering the explanation of the assessee. The assessee had submitted before the AO that the marriage expense was made out of maturity proceeds of KVP of Rs. 55,000/- invested in 1997 and that the source of FDR of Rs. 25,000/- in the name of the daughter was out of the gifts received by her at the time of her marriage. These findings of the assessee were not controverted by the AO. Considering the explanation of the assessee and also the fact that the Ld. Special Judge, ACB had acquitted the assessee from the charges levelled under the Prevention of Corruption Act, we do not find any justification for the additions as made by the AO. Accordingly, the addition of Rs.1,25,000/- on account of estimated marriage expense and investment in KVP in the name of the daughter, is deleted. The grounds taken by the assessee are allowed.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 29/06/2026 at Ahmedabad.
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