Income tax reassessment reopening and additions for bank deposits, multiple-property rent, and LTCG-s.151 sanction upheld; issues remanded

Reassessment under s.147 was challenged for want of proper sanction under s.151. The ITAT held that for AY 2016-17, where reopening was within four years, sanction by the Addl. CIT was legally sufficient under the then-prevailing s.151; the post-01.04.2021 amendment requiring PCIT approval was inapplicable. The challenge to assumption of jurisdiction was rejected and the grounds were dismissed. Additions treating bank deposits as unexplained money u/s 69 were remanded because the authorities failed to verify the claim that deposits comprised professional receipts, earlier withdrawals, third-party funds, and loans; the issue was restored to the AO for fresh decision. Notional rent on multiple properties was remanded: sold/self-used properties and those already yielding disclosed rent could not be further loaded, and for remaining properties ALV was to be computed on municipal circle rates with s.24 deduction. LTCG computation was remanded for verification of acquisition/improvement costs and evidence.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether reassessment proceedings were validly initiated when approval under section 151 was granted by the Additional Commissioner (and not by the Principal Commissioner) for reopening within four years from the end of the relevant assessment year.

(ii) Whether additions for bank deposits treated as unexplained money under section 69A could be sustained without verification of the assessee's explanations regarding source (professional receipts, prior cash withdrawals, loans) and the claim that certain deposits related to a third party's account.

(iii) Whether notional rental income from multiple house properties was correctly computed, including (a) exclusion of properties claimed as sold or used for professional purposes, (b) non-duplication where rental income was already offered to tax, and (c) determination of property value for notional rent on an estimated basis versus circle rate/municipal valuation.

(iv) Whether addition on account of long-term capital gain could be sustained where the assessee claimed cost of acquisition, registration charges, and cost of improvement without furnishing supporting details, and whether remand for verification was warranted.

(v) Whether levy of interest under sections 234A, 234B and 234C required independent adjudication.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of reassessment approval under section 151 (within four years)

Legal framework (as discussed by the Court): The Court considered the provisions of section 151 "as prevailing at the relevant time" and noted an amendment effective 01.04.2021 requiring approval from the Principal Commissioner for reopening within four years.

Interpretation and reasoning: The Court found that the reopening was initiated on 30.03.2021 and was within four years from the end of the relevant assessment year. For that period, approval from the Additional Commissioner was the applicable requirement. The later amendment effective 01.04.2021 was held not to govern approvals granted prior to that date.

Conclusion: Approval by the Additional Commissioner was held valid; reassessment initiation was upheld and the jurisdictional challenge was rejected for all years on identical facts.

Issue (ii): Bank deposits treated as unexplained money under section 69A-necessity of verification

Interpretation and reasoning: The Court recorded that the assessee consistently explained that deposits were sourced from professional receipts, earlier cash withdrawals redeposited, and loans, and further asserted that certain deposits were wrongly linked to the assessee though relating to a third party/proprietorship concern. The Court held that the lower authorities had not verified these contentions despite the assessee's claims and supporting material (including loan-related documents placed in the paper book).

Conclusion: The additions under section 69A were not finally sustained; the matter was remanded to the assessing authority for verification of the assessee's explanations and for fresh decision after providing reasonable opportunity of hearing. The same remand approach was applied for subsequent years where identical additions were made on similar facts, including directions that withdrawal/deposit linkage (telescoping) be examined as per the Court's directions in the earlier year.

Issue (iii): Notional house property income-scope of properties includible and basis of valuation

Interpretation and reasoning: The Court examined the assessee's claim that several properties considered for notional rent were either (a) used for professional purposes and/or (b) already sold in earlier years, and that for two properties rental income had already been disclosed in the return and acknowledged in the assessment order. The Court accepted that properties stated to be sold or used for professional purposes could not be considered for computing fair rental income, and further held that where rental income was already disclosed for particular properties, no further notional rent addition could be made for those properties.

Legal framework (as applied by the Court): While addressing valuation methodology, the Court directed that market value for remaining properties be determined based on circle rate/municipal valuation rather than an estimated fair market value adopted by the assessing authority, and then 5% thereof be taken as notional rental value with standard deduction applied.

Conclusion: The notional rent computation was set aside to the extent it included properties that should be excluded and to the extent it relied on estimated valuation; the issue was remanded with directions to (i) exclude properties found sold/used for professional purposes, (ii) avoid double addition where rent was already offered, and (iii) compute value using municipal/circle rate for specified properties and then recompute notional rent accordingly. Identical directions were applied for later years with similar facts.

Issue (iv): Long-term capital gain-verification of cost claims

Interpretation and reasoning: The Court noted findings that the assessee claimed cost of acquisition, registration charges, and cost of improvement but had not filed details supporting these claims before the lower authorities. Considering this absence of evidence, the Court held that verification was necessary.

Conclusion: The long-term capital gain issue was remanded to the assessing authority for verification, with a direction to the assessee to furnish necessary evidence regarding cost of acquisition and cost of improvement; the ground was allowed for statistical purposes.

Issue (v): Interest under sections 234A, 234B, 234C

Interpretation and reasoning: The Court treated the charging of interest as consequential to the final computation of income after giving effect to the adjudication/remand directions on substantive additions.

Conclusion: No independent relief was granted on interest; it was held to be consequential in nature.

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