Sanjitha Reddy Vs ITO (ITAT Bangalore)
Affidavits Trigger AO’s Duty to Verify — Bangalore ITAT Remands ₹71.23 Lakh 69A Addition in Cash Property Purchase Case
The Bangalore ITAT (B Bench) allowed the appeal of Ms. Sanjitha Reddy for statistical purposes and remanded the matter to the AO, holding that once the Assessee furnishes affidavits explaining source of cash, the AO cannot make an addition u/s 69A without first conducting proper verification of the donors.
The case related to AY 2016-17, where the AO reopened assessment u/s 148 on the basis of information that the Assessee had purchased a property by paying the entire consideration in cash. The AO treated the amount of ₹71.23 lakh (purchase price plus registration charges) as unexplained money u/s 69A, on the ground that no satisfactory source was established. The CIT(A), NFAC, confirmed the addition.
Before the Tribunal, the Assessee contended that the cash was received as gifts from relatives, supported by sworn affidavits, and that the AO rejected the explanation without issuing summons or making enquiries to test the creditworthiness or genuineness of the donors.
The Tribunal observed that the Assessee had prima facie discharged the initial onus by furnishing affidavits. If the AO doubted the explanation, it was incumbent upon him to invoke powers u/s 133(6) and verify the donors before drawing an adverse inference. Failure to do so rendered the addition unsustainable at this stage.
Accordingly, the ITAT set aside the orders of the lower authorities and remitted the issue to the AO for fresh examination, directing that proper enquiry be conducted and reasonable opportunity of hearing be granted to the Assessee before passing any adverse order. The appeal was thus allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 13/05/2025 in respect of the A.Y. 2016-17 and raised the following grounds:
| Grounds of Appeal | Tax effect relating to each Ground of appeal (see note below) | |
|---|---|---|
| 1. | The impugned Order u/s. 250 of the Act dated: 13-05-2025 passed by the Ld. CIT(A), NFAC, Delhi is opposed to law, facts and circumstances of the case. |
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| 2. | The Ld.CIT(A) NFAC has erred in confirming the Addition made by the AO u/s 69A of the Act amounting to Rs.71,23,875/- without appreciating the facts and circumstances of the Case. | Rs.63,17,522/- |
| 3. | The Ld. CIT(A) NFAC has erred in holding that the Appellant has not produced any documentary evidence in support of the source of Cash deposit without appreciating the facts and circumstances of the Case that the assessee has furnished the explanation supported by the Affidavits of the persons who contributed the money to the assessee as mentioned in para 11 of the appellate order. | Rs.63,17,522/- |
| 4. | The Ld. CIT(A) NFAC has erred in not considering the explanation and the affidavits filed before the AO from whom report was not received as called for by the Ld. CIT(A) as mentioned in para 3 of the appellate order in support of cash of Rs. 71,23,875/- |
Rs.63,17,522/- |
| 5. | Without prejudice to the ground no. 2 to 4 it is urged that the Ld. CIT(A) has not appreciated the fact that the Assessment proceedings initiated were challenged on the ground of Jurisdiction. | Rs.63,17,522/- |
| 6. | The Ld. CIT(A) has erred in holding that the AO has issued a Notice u/s 148 of the Act dated 24-03-2023 without appreciating the fact that the said notice was invalid and without jurisdiction in view of Faceless Assessment Scheme u/s 144B of the Act. | Rs.63,17,522/- |
| 7. | The Ld. CIT(A) has erred in dismissing the Ground no. 2 urged relating to the invalidity of Notice u/s 148 of the Act, merely on the ground that approval was obtained from the competent authority without appreciating the Fact that the approval by itself was not justifiable in view of Faceless Assessment Scheme u/s 144B of the Act. |
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| 9. | The Ld. CIT(A) ought to have set aside the ex parte assessment order dated 25-03-2024 which was completed to save the limitation of time, without invoking amended provision of Sec 251(1) of the Act. | – |
| 10. | The Appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing. | – |
| Total Tax Effect | Rs. 63,17,522/- | |
2. The brief facts of the case are that the assessee is an individual and she had not filed her return of income and the AO based on the information received that she had purchased a property, had issued a notice u/s. 148. The assessee had not filed any return of income pursuant to the notice issued u/s. 148 of the act and therefore notices u/s. 142(1) were issued. The assessee had not furnished her response but only sought for time to furnish her response. The AO by issuing notice u/s. 133(6) of the Act to the seller, got the sale deed copy and on that basis, the purchase consideration was arrived at Rs. 66,82,500/- and the registration charges of Rs. 4,41,375/-. The AO also found that the entire sale consideration was paid in cash and since no explanations were offered by the assessee, the AO had treated the said amount as unexplained investment u/s. 69A of the Act and to that effect, a show cause notice was issued. Finally, the assessee filed her reply to the said show cause notice and gave the source for the said purchase consideration and also enclosed the affidavits obtained from her relatives that most of the amounts were received by her as gifts from her relatives. The assessee also relied on the first proviso to section 56(2)(x)(c) of the Act and objected that the gifts received from the relatives could not be treated as income. The AO had not accepted the affidavits filed by the assessee since their creditworthiness were not proved. As against the said order, the assessee filed an appeal before the Ld.CIT(A) and contended that the 148A notice issued by the JAO is not correct, after the introduction of the faceless assessment scheme. The assessee also contended that the source for the said purchases were explained by filing affidavits from the relatives who had given the amount for purchasing the property but the AO had not considered the same and also not verified the said facts and therefore the addition made u/s. 69A is not correct. The Ld.CIT(A) had not accepted the legal grounds raised by the assessee and confirmed the addition made u/s. 69A of the Act.
