2023 (7) TMI 4 - AT - Income Tax

Unexplained investment - case of the Revenue that the investments in fixed deposits have not been explained by the assessee and therefore the same were added as income - contention of the assessee that the fixed deposits made by the assessee with Kotak Mahindra Bank are out of the savings and salary income - HELD THAT - AR has pointed to the bank statements of the bank and from those bank statement he has demonstrated the receipt of salary and has also co-related the making of fixed deposits to be out of the salary received by him. Assessee has also demonstrated that the fixed deposits made are out of the salary income earned by the assessee. The copy of the bank statement filed by the assessee reveals that there are sweep in and sweep out of the deposits and the making of the fixed deposits from the saving bank account has also been certified by the bank. Before us Revenue has not pointed that the submissions of the assessee are false or incorrect - We are of the view that the AO was not justified in making the addition as unexplained investment. We therefore direct the AO to delete the addition made. Thus the grounds of the assessee are allowed.

Summary

Issues involved:
The issues involved in this case are the addition of Rs.73,10,000 as unexplained investment and the validity of the assessment under section 144 and the violation of the principle of natural justice.

Issue 1: Addition of Rs.73,10,000 as unexplained investment:
The assessee, an individual employed in a bank, filed a return of income for A.Y. 2011-12, declaring total income. The Assessing Officer (AO) made an addition of Rs.73,10,000 on account of unexplained investments in fixed deposits in the bank account. The CIT(A) upheld the AO's order. However, before the Tribunal, the assessee argued that the fixed deposits were made out of savings and salary income. The Tribunal observed that the deposits were indeed related to the salary income, as evidenced by bank statements and the sweep in/sweep out facility utilized by the assessee. The Tribunal concluded that the AO was unjustified in making the addition and directed the deletion of the same.

Issue 2: Invalid assessment under section 144 and violation of the principle of natural justice:
The CIT(A) did not address the jurisdictional aspect of the ex parte order passed by the AO under section 144. The assessee contended that the order passed by the AO was void ab initio due to a violation of the principle of natural justice, as proper opportunities for hearing were not provided, and the appellant's submissions were not considered. The Tribunal held that the entire proceeding before the AO and CIT(A) was void ab initio and should be quashed, as the principles of natural justice were not adhered to. The appeal of the assessee was allowed on this ground.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the deletion of the addition of Rs.73,10,000 as unexplained investment. Additionally, the Tribunal held that the assessment under section 144 was invalid and in violation of the principle of natural justice, leading to the quashing of the entire proceeding before the AO and CIT(A).