Unexplained cash deposits in a disputed bank account: appellate remand ordered to permit taxpayer to prove lack of connection and rebut attribution

Appellate consideration of unexplained cash deposits in a disputed savings account requires that the adjudicative officer permit the taxpayer an opportunity to adduce relevant evidence to rebut attribution of the account; where the taxpayer first raises non-connection with the account on appeal after non-participation in assessment, the appellate authority should nonetheless enable production of material and remand for fresh consideration if necessary, with the operative effect that the matter is returned to the appellate stage to allow the taxpayer to establish lack of connection and for reconsideration of the unexplained income determination.

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Issues: Whether the appellate order should be set aside and the matter remitted to the Appellate Commissioner for fresh adjudication after affording the assessee an opportunity to establish that disputed bank account No. 27006111130014324 did not belong to him.

Analysis: Assessment was reopened under section 147 on the ground of escapement of income and additions were made under section 69A for cash deposits totaling Rs. 76,31,100/-. The assessee did not participate in assessment proceedings but raised, for the first time on appeal, a claim disowning one disputed bank account and sought exclusion of deposits credited to that account from his income. The appellate authority recorded that the claim was supported only by an unverifiable photocopy and observed that the account was traced via PAN linkage. Notwithstanding the assessee's failure to adduce evidence during assessment, the appellate records lacked steps that would have enabled the assessee to place corroborative material before the authority to substantiate the denial of connection with the disputed account. Given the seriousness of the factual contention and the absence of an opportunity to produce or verify evidence relevant to account ownership, it was appropriate to permit the assessee a further opportunity to be heard and for the appellate authority to undertake fresh consideration.

Conclusion: The matter is remitted to the Appellate Commissioner for fresh decision after providing the assessee an opportunity to establish that the disputed bank account did not belong to him; this disposal is in favour of the assessee to the extent of granting a fresh hearing and remand.

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