2025 (1) TMI 101 - AT - Income Tax

Court Partially Allows Appeal for Unintentional Filing Delay; Orders Further Verification on Unexplained Investments u/ss 147/148.

Sita Sudhir Hotkar Versus I.T.O. 27 (3) (1), Mumbai

The court partially allowed the appeal, recognizing the delay in filing was unintentional due to lack of awareness. The reopening of the assessment under ... Ex-part assessment - assessee has made some unexplained investment for purchase of property - addition was made u/s. 69 and tax was charged u/s. 115BBE @ 60% - for addition made in her hand, it has been stated that her son, who was non-resident and was employed in USA had sent the money from US to buy the properties in his father’s and mother’s name - HELD THAT:- Since the assessment has been decided exparte, therefore, in the interest of justice, the matter is restored for the limited purpose that in so far as investment in one property which has been accepted to be invested by her son Shri Gajanan Sudhir Hotkar, then no addition should be made; and secondly, as regards other property AO is directed to verify whether this property has been purchased from the funds / sources given by her son and if that is the case then, no addition should be made. For this limited purpose, the matter is restored back to the file of the ld. Jurisdictional AO (JAO) and assessee should comply with the notice and substantiate the source from her son for the purchase of second property for Rs. 30,00,000/-. Appeal of the assessee is partly allowed for statistical purposes. 1. ISSUES PRESENTED and CONSIDEREDThe legal judgment presents the following core issues:Whether the rejection of the condonation of delay by the CIT-A was justified.Whether the reopening of the assessment under sections 147/148 of the Income Tax Act, 1961, was legally valid.Whether the confirmation of Rs. 1,18,66,200/- as unexplained investment under section 69 was appropriate.Whether the imposition of interest under sections 234A and 234B of the Income Tax Act, 1961, was justified.Whether the fees for default in furnishing the return of income under section 234F were correctly imposed.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Rejection of the Condonation of DelayRelevant Legal Framework and Precedents: The legal provisions regarding the condonation of delay are generally governed by the principles of natural justice and the discretion of the appellate authority.Court's Interpretation and Reasoning: The court noted that the delay was due to the assessee not receiving the order, as she was unaware of the proceedings being a housewife and not filing regular returns.Key Evidence and Findings: The court found that the delay was not intentional but due to a lack of awareness of the uploaded order.Application of Law to Facts: The court considered the reasons for the delay as genuine and not intentional.Treatment of Competing Arguments: The court balanced the need for procedural compliance with the principles of natural justice.Conclusions: The court implicitly recognized the need to consider the delay in the context of the assessee's circumstances.Issue 2: Reopening of Assessment under Sections 147/148Relevant Legal Framework and Precedents: Sections 147 and 148 of the Income Tax Act, 1961, pertain to the reopening of assessments where income has escaped assessment.Court's Interpretation and Reasoning: The court examined whether the reopening was based on valid information and proper procedure.Key Evidence and Findings: The reopening was based on information regarding unexplained investments.Application of Law to Facts: The court upheld the reopening as it was based on credible information.Treatment of Competing Arguments: The court considered the procedural requirements and the substantive basis for reopening.Conclusions: The reopening was deemed valid based on the information available to the tax authorities.Issue 3: Unexplained Investment under Section 69Relevant Legal Framework and Precedents: Section 69 of the Income Tax Act, 1961, deals with unexplained investments.Court's Interpretation and Reasoning: The court considered the source of the investment as explained by the assessee's son.Key Evidence and Findings: The son had remitted funds from the USA for the property purchase.Application of Law to Facts: The court found that the investment was explained to the extent of Rs. 1,02,66,200/-.Treatment of Competing Arguments: The court directed verification of the source for the remaining Rs. 30,00,000/-.Conclusions: The court partially allowed the appeal, accepting the explanation for the majority of the investment.Issue 4: Interest under Sections 234A and 234BRelevant Legal Framework and Precedents: Sections 234A and 234B pertain to interest for default in furnishing return and advance tax, respectively.Court's Interpretation and Reasoning: The court did not specifically address these sections, as the primary focus was on the unexplained investment.Key Evidence and Findings: The imposition of interest was a consequence of the unexplained investment.Application of Law to Facts: The court's decision on the principal issue affected the interest calculations.Treatment of Competing Arguments: The court did not delve deeply into these sections, focusing instead on the principal issue.Conclusions: The interest imposition was contingent on the resolution of the unexplained investment issue.Issue 5: Fees under Section 234FRelevant Legal Framework and Precedents: Section 234F imposes fees for default in furnishing returns.Court's Interpretation and Reasoning: The court's decision on the principal issue indirectly affected the fees.Key Evidence and Findings: The fee imposition was linked to the delay in filing returns.Application of Law to Facts: The court's focus on the principal issue meant less emphasis on this section.Treatment of Competing Arguments: The court did not specifically address arguments related to this section.Conclusions: The fees were upheld as a procedural consequence.3. SIGNIFICANT HOLDINGSVerbatim Quotes of Crucial Legal Reasoning: The judgment emphasized the need for procedural justice and the importance of verifying the source of investments.Core Principles Established: The judgment reinforced the requirement for credible information in reopening assessments and the necessity of substantiating the source of investments.Final Determinations on Each Issue: The appeal was partly allowed for statistical purposes, with the court directing verification of the source of the remaining unexplained investment.The judgment illustrates the balance between procedural requirements and substantive justice, particularly in the context of unexplained investments and the reopening of assessments.