Verification of bank deposits: remit for source reconciliation and fresh adjudication after affording opportunity to explain.

Remand for verification of large cash deposits, bank credits and unsecured loans where AO's additions as unexplained income rested on unreconciled figures and inadequate opportunity to the taxpayer. The note prescribes that AO must verify sources, reconcile bank statements with depositor records, examine supporting evidence and afford hearing before making conclusive additions or invoking penal consequences; if the assessee fails to produce evidence on remand, the AO may proceed on available material. Operative effect: set aside the impugned findings and remit the matter for fresh adjudication with directions to complete verification and afford opportunity of hearing.

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Issues: Whether the additions made by the Assessing Officer treating cash bank deposits and loans/advances as unexplained income for assessment year 2017-18 were sustainable, and whether the matter should be remitted to the Assessing Officer for verification and fresh consideration.

Analysis: The assessment was completed under Section 143(3) of the Income-tax Act, 1961 in which large cash deposits and credits in bank accounts and certain unsecured loans and advances were treated as unexplained and added to income. The assessee declared income under Section 44AD of the Income-tax Act, 1961 and did not maintain regular books; discrepancies exist between the cash deposit figures relied upon by the Assessing Officer and the amounts the assessee says were actually deposited. The record does not clearly show how the Assessing Officer arrived at the figures for unsecured loans and advances. Given these discrepancies and absence of full opportunity/compliance, the matter requires verification of source, reconciliation of bank figures, and examination of supporting evidence before any conclusive additions or penal consequences are sustained. Remanding the matter permits the Assessing Officer to allow the assessee to produce explanations and evidence and to complete the assessment afresh; if the assessee fails to comply, the Assessing Officer may proceed on available material.

Conclusion: The appeal is allowed in favour of the assessee by setting aside the impugned order and remitting the matter to the Assessing Officer for fresh verification and adjudication with directions to afford the assessee an opportunity of hearing; appeal allowed for statistical purposes.

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