Facts of the Case

The assessee, Shri Ummaid Mal Singhvi, was subjected to assessment proceedings for Assessment Year 2008-09 pursuant to search-related proceedings. The Assessing Officer made an addition of ₹5,66,600 under Section 69 of the Income-tax Act, treating the amount as undisclosed investment, being the difference between undisclosed investment and the amount declared in the return of income. The addition was confirmed by the CIT(A).

Subsequently, the assessee filed a miscellaneous application, and the Tribunal recalled its earlier order limited to adjudication of Ground No. 5 relating to the confirmation of addition of ₹5,66,600. The matter thus came up before the Tribunal for fresh consideration.

Issues Involved

Whether the addition of ₹5,66,600 under Section 69 could be sustained when the assessee claimed that the source of the amount was fully explained through rotation of funds based on seized annexures, and whether the issue required fresh verification by the Assessing Officer.

Petitioner’s Arguments

The assessee submitted that a detailed statement of rotation of funds for the period from 01.04.2007 to 31.03.2008 had been prepared strictly on the basis of seized annexures, demonstrating the source and utilisation of funds. It was argued that the difference of ₹5,66,600 stood explained through such rotation of funds. The assessee prayed that the matter be restored to the file of the Assessing Officer for fresh examination and verification of the statement of rotation of funds, undertaking full cooperation in the proceedings.

Respondent’s Arguments

The Revenue did not object to the request of the assessee and fairly agreed that the matter could be restored to the file of the Assessing Officer for the limited purpose of examining and verifying the statement of rotation of funds claimed to be prepared on the basis of seized material.

Court Order / Findings

The ITAT Jodhpur observed that the assessee had claimed explanation of the disputed amount of ₹5,66,600 through a statement of rotation of funds prepared from seized annexures. Considering the factual matrix and in the interest of natural justice, the Tribunal held that the matter required fresh examination. Accordingly, the Tribunal restored the issue to the file of the Assessing Officer with a direction to examine the statement of rotation of funds for the period from 01.04.2007 to 31.03.2008 and to verify the source and utilisation of funds to explain the difference of ₹5,66,600. The Assessing Officer was directed to pass a fresh order in accordance with law after granting due opportunity of being heard to the assessee.

Important Clarification

The Tribunal clarified that where an assessee claims explanation of an addition under Section 69 through rotation of funds supported by seized material, the Assessing Officer is duty-bound to examine such explanation objectively. Matters involving factual verification of seized records should be decided after proper enquiry rather than on presumptions.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The issue relating to the addition of ₹5,66,600 under Section 69 was set aside and restored to the file of the Assessing Officer for fresh examination and verification in accordance with law after providing adequate opportunity of being heard to the assessee.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1768994109_SHRIUMMAIDMALSINGHVIJODHPURVS.ACITJODHPUR.pdf

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