Limited scrutiny and unexplained bank credit: addition deleted after prima facie banking evidence and lack of proper verification.

A bank credit treated as unexplained money under section 69A was deleted where the assessee produced a bank statement, confirmation and PAN details showing that the entry was a banking-channel transfer representing repayment of an earlier cheque advance. The Tribunal also noted that the assessment had been selected under limited scrutiny for cash deposits during demonetisation, but no prior approval was shown for enlarging that mandate to the impugned credit entry. Because the first appellate authority did not undertake verification under section 250(4) or call for a remand report, and the ingredients of unexplained money were not established, the addition was unsustainable.

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Issues: Whether the addition of Rs. 5,00,000 under section 69A of the Income-tax Act, 1961, arising from a bank credit entry, was sustainable when the assessment was selected under limited scrutiny for cash deposits during the demonetisation period.

Analysis: The assessee produced the bank statement, a confirmation from the concerned concern, and the proprietor's PAN details to show that the impugned credit was a transfer received through banking channel as return of an earlier amount advanced by cheque. The appellate record also showed that the assessee had placed these materials before the first appellate authority, but no verification was undertaken under section 250(4) of the Income-tax Act, 1961, and no remand report was called for. The assessment was originally confined to cash deposits during demonetisation, and no material was shown to establish that prior approval was obtained for enlarging the limited-scrutiny mandate to cover the impugned credit entry. On the facts, the ingredients necessary to sustain an addition as unexplained money were not made out.

Conclusion: The addition of Rs. 5,00,000 was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The Tribunal held that the impugned credit could not be sustained as an unexplained addition and that the assessment could not be expanded beyond the limited-scrutiny issue without the requisite approval and verification.

Ratio Decidendi: An addition cannot be sustained where the assessee furnishes prima facie evidence of a banked transaction and the assessment is impermissibly enlarged beyond the limited-scrutiny purpose without proper approval and verification.

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