Amar Devi Vs ITO (ITAT Jaipur)
Jaipur ITAT Deletes Additions for FDR Maturity Proceeds and Cash Redeposit; Best-Judgment Assessment Cannot Be Based on Arbitrary Estimates
Summary: The assessee, an 83-year-old widow receiving family pension, had not filed her return of income or responded to reassessment notices. For Assessment Year 2010-11, the Assessing Officer completed a best-judgment assessment under Section 144 read with Section 147 of the Income Tax Act, 1961 and determined total income at ₹5,15,447, comprising ₹1,50,000 estimated regular income, ₹1,06,000 cash deposits, ₹2,42,507 deposit through transfer and ₹16,940 interest income. The CIT(A) upheld the additions.
The Jaipur ITAT found that the disputed transfer credit of ₹2,41,642 represented maturity proceeds of an FDR of ₹2,00,000 made on 14.05.2007 and matured on 14.05.2009. The FDR receipt and bank passbook established a direct nexus between the maturity proceeds and the credit. The Tribunal therefore held that the amount represented the assessee’s own funds and directed deletion of the addition.
For the ₹1,06,000 cash deposits, the bank passbook reflected earlier cash withdrawals aggregating ₹2,45,000 from the same account. In the absence of material showing that the withdrawn amounts had been spent or otherwise utilised, the Tribunal held that the cash deposits were explained from the earlier withdrawals. As the assessee had explained the source and the AO brought no contrary evidence, the addition was directed to be deleted.
The Tribunal also deleted the ₹1,50,000 ad hoc addition described as regular income. The assessment order did not identify any business, profession or vocation generating such income or provide any working for the estimate. The ITAT held that even a best-judgment assessment under Section 144 must be honest and fair and bear a reasonable nexus to the material available on record; it does not authorise arbitrary additions based on conjectures and surmises.
Accordingly, the Tribunal allowed grounds 1 and 2 and allowed the assessee’s appeal, deleting all three disputed additions. Ground 3 did not require adjudication. The order was pronounced on 21.08.2026.
The assessee, an 83-year-old widow receiving family pension, had not filed her return or responded to reassessment notices. The AO consequently completed a best-judgment assessment under Section 144, determining income at ₹5.15 lakh, including:
- ₹2.42 lakh credited through bank transfer;
- ₹1.06 lakh in cash deposits;
- ₹1.50 lakh estimated as “regular income”; and
- ₹16,940 as interest income.
The Jaipur ITAT found that the transfer credit of ₹2.42 lakh represented maturity proceeds of an FDR of ₹2 lakh made two years earlier. The FDR receipt and bank passbook established a direct nexus between the maturity proceeds and the bank credit. It represented the assessee’s own funds and not undisclosed income.
Regarding cash deposits of ₹1.06 lakh, the bank records showed earlier cash withdrawals aggregating ₹2.45 lakh from the same account. In the absence of evidence that the withdrawn cash had been spent or otherwise utilised, the deposits were reasonably explainable from the preceding withdrawals. Once the assessee established the source, the burden shifted to the AO, who produced no contrary evidence.
The Tribunal also deleted the ad hoc addition of ₹1.50 lakh described as “regular income.” The AO had neither identified any business, profession or other income-generating activity nor provided any basis or computation for the estimate.
The ITAT emphasised that even in a best-judgment assessment under Section 144, the estimate must be honest, fair and reasonably connected to available material. The provision does not authorise arbitrary additions based on conjectures and surmises.
Accordingly, all three additions were deleted and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
1. This appeal by the assessee is directed against the order of the Additional/Joint Commissioner of Income Tax (Appeals), Kochi [hereinafter referred to as “the Addl./JCIT(A)”] dated 26.03.2025 for the Assessment Year 2010-11, arising out of the assessment order dated 05.12.2017 passed by the Assessing Officer (hereinafter referred to as “the AO”) under section 147 read with section 144 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. There is a delay of 62 days in filing this appeal. The assessee has filed an application for condonation of the delay, supported by an affidavit explaining the reasons for the delay. Considering the age of the assessee, who is 83 years old, and the explanation furnished in the application, we are of the view that the delay was caused by sufficient reasons. Accordingly, the delay is condoned.
3. The grounds of appeal raised by the assessee in the memorandum of appeal in Form No. 36 read as under:
“1. The Addl. CIT(A) erred in confirming the additions made by the AO, who had ignored the self explanatory details in the bank statement, procured by him and did not appreciate that the deposit of Rs. 2,41,642/- on 29.05.2009 was out of the maturity proceeds of Rs. 2.46 Lakhs, of FDR of Rs. 2 Lakhs purchased on 14.05.2007 and the cash deposit in the bank totaling Rs. 1,06,000/- represented the savings from the family pension of the appellant.
2. The ITO, erred in making addition of Rs. 1,50,000/- estimated by him as “Regular Income’ without explaining its meaning/contents and ignoring that in any case it was below the threshold of taxable income.
3. The appellant craves your indulgence to add/delete/amend any one or all of the grounds of appeal before/during the course of hearing.”
4. Briefly stated, the facts of the case are that the assessee is a senior citizen and a widow. She did not file her return of income under section 139 of the Act. Since the Assessing Officer was in receipt of information that the assessee had made an investment in a fixed deposit, a notice under section 148 of the Act was issued on 29.03.2017. The assessee did not respond to any of the notices issued by the AO. The AO therefore completed the assessment under section 144 of the Act and determined the total income at Rs. 5,15,447 as under:
| Sl. No. | Particulars | Amount (Rs) |
|---|---|---|
| A | An estimated regular income | 1,50,000 |
| B | Cash deposit into the bank account | 1,06,000 |
| C | Deposit through transfer | 2,42,507 |
| D | Interest income | 16,940 |
| Total | 5,15,447 |
5. The assessee carried the issues in appeal before the learned Addl./JCIT(A). However, the learned Addl./JCIT(A) did not receive any reply or written submission in response to the hearing notices issued by him. The learned Addl./JCIT(A) called for a remand report from the AO. The AO submitted the remand report justifying the additions made. After considering the remand report and the merits of the case, the learned Addl./JCIT(A) upheld the assessment order and dismissed the appeal of the assessee.
6. The learned Authorized Representative (hereinafter referred to as “the AR”) for the assessee submits before us that the source of the deposit of Rs. 2,41,642 stands explained from the bank pass book of the assessee, which records, on 29.05.2009, the closure of fixed deposit No. 303024. A copy of the pass book of the Bank of Rajasthan Ltd. is placed at page no. 4 of the paper book. The fixed deposit receipt dated 14.05.2007 issued by the Bank of Rajasthan Ltd. in the name of the assessee for a sum of Rs. 2,00,000, with a maturity date of 14.05.2009 and a maturity value of Rs. 2,46,068, is placed at page no. 3 of the paper book.
7. The learned AR further draws our attention to the various cash withdrawals made by the assessee, as can be seen from the bank pass book, which total Rs. 2,45,000, as against the cash deposits of Rs. 1,06,000. He submits that the cash deposits were made out of the earlier cash withdrawals from the same bank account and are therefore well explained. For the above reasons, he submits that the additions of Rs. 2,41,642 and Rs. 1,06,000 be deleted. He further submits that the addition of Rs. 1,50,000 estimated by the AO as regular income is without any basis and be deleted.
8. The learned Departmental Representative (hereinafter referred to as “the DR”) relies on the orders of the lower authorities.
9. We have heard both the parties and perused the material available on record. It is clear that the assessee received the maturity proceeds of the fixed deposit made by her two years before the year under dispute, and this triggered the initiation of the assessment proceedings. The fixed deposit receipt placed at page no. 3 of the paper book shows that the assessee had made a fixed deposit of Rs. 2,00,000 on 14.05.2007, which matured on 14.05.2009 for Rs. 2,46,068. The bank pass book placed at page no. 4 of the paper book records the closure of the said fixed deposit No. 303024 and the corresponding credit of Rs. 2,41,642 on 29.05.2009. There is thus a direct nexus between the maturity proceeds of the fixed deposit and the impugned deposit, and the amount so credited represents the assessee’s own funds and not her income for the year under consideration. The addition has been made solely because the assessee, an aged widow, had neither filed her return nor responded to the notices, and not on account of any material to show that the deposit was from an undisclosed source. Since the source of the deposit of Rs. 2,41,642 stands fully proved from the pass book and the fixed deposit receipt, we direct the AO to delete this addition.
10. As regards the cash deposits of Rs. 1,06,000, we find from the bank statement that these deposits were made after cash withdrawals of a higher amount from the very same bank account in the immediately preceding months. The pass book reflects cash withdrawals aggregating Rs. 2,45,000, which is more than twice the amount of the cash deposits of Rs. 1,06,000. In the absence of any material to show that the amounts so withdrawn were spent or otherwise utilised, it is reasonable to hold that the cash deposits were made out of those earlier withdrawals, more so in the case of an aged widow subsisting on family pension whose requirements and savings would ordinarily be modest. The assessee having thus explained the source, the onus shifted to the AO, and the AO has not brought any evidence on record to support the addition or to raise even a suspicion about the source of the funds. We therefore hold that the cash deposits are well explained and direct the AO to delete the addition on this account.
11. Further, the AO made an ad hoc addition of Rs. 1,50,000 in the name of regular income without explaining either its meaning or the basis on which it was arrived at. The assessment order does not disclose any material to indicate that the assessee carried on any business, profession or vocation from which regular income could be said to have accrued, nor does it set out any working for adopting the figure of Rs. 1,50,000. The learned Addl./JCIT(A) upheld this addition without addressing this infirmity. Even a best judgment assessment made under section 144 of the Act does not clothe the AO with a power to make an arbitrary addition; the estimate must be honest and fair and must bear a reasonable nexus to the material available on record. Additions or disallowances based on mere conjectures and surmises are not permissible in law, as has been laid down by the Hon’ble Supreme Court time and again. As the addition rests on no material whatsoever and the law does not permit the taxation of an ad hoc amount arrived at purely on surmise, we direct that the said addition be deleted.
12. Accordingly, grounds no. 1 and 2 raised by the assessee are allowed.
13. Ground no. 3 does not require any adjudication.
14. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 21 -08-2026
