ITAT Remands Section 69A Addition for De Novo Assessment: Assessee Given One Last Opportunity to Explain Cash Deposits

COURT: Income Tax Appellate Tribunal, Ahmedabad, SMC Bench

CASE NAME: Nitiben Nayaneshkumar Trivedi vs. Income Tax Officer, Ward-1(1)(1), Ahmedabad

DATE OF JUDGMENT: 09 July 2026

KEY SECTIONS: Section 69A, Section 147, Section 148, Section 144, Section 250, Income Tax Act, 1961; Section 115BBE

Table of Contents

1. Introduction

The principle that no one should be condemned unheard is a cornerstone of natural justice. Yet, when an assessee repeatedly ignores statutory notices and fails to produce evidence, the tax authorities are left with no choice but to pass an ex parte order. The Income Tax Appellate Tribunal (ITAT) Ahmedabad, in a recent order dated 9 July 2026 in the case of Nitiben Nayaneshkumar Trivedi vs. ITO (ITA No. 2499/AHD/2025), was confronted with precisely such a scenario. The assessee had made high-value time deposits of ₹14,00,000 and earned interest of ₹2,65,812 but neither filed her return nor responded to notices. The Assessing Officer (AO) made an addition of ₹16,65,812 under Section 69A of the Income Tax Act, 1961, treating the entire amount as unexplained money. The Commissioner (Appeals) confirmed the addition.

However, the ITAT, in a balanced move, set aside the orders below and remanded the matter to the AO for a de novo assessment. While doing so, the Tribunal issued a strong warning to the assessee: comply strictly with all future notices and refrain from seeking unnecessary adjournments. This case offers critical lessons on the interplay between procedural compliance and substantive justice in reassessment proceedings.

2. Factual Background

The assessee, an individual taxpayer with PAN AMEPT4781B, had not filed a return of income for Assessment Year 2018-19. The Income Tax Department received information about high-value financial transactions undertaken by her during Financial Year 2017-18. These transactions comprised:

  • Time deposits aggregating to ₹14,00,000 with HDFC Bank Ltd.; and
  • Interest income (other than interest on securities) of ₹2,65,812 from HDFC Bank Ltd.

Based on this information, the AO reopened the assessment under Section 147 of the Act after recording reasons and obtaining approval from the competent authority. A notice under Section 148 was issued to the assessee. However, the assessee failed to file a valid return of income in response to the notice. During the reassessment proceedings, the AO verified the bank statements and confirmed the deposits and interest receipts. Notices and a show cause notice dated 11 February 2023 were issued, but the assessee remained non-compliant. No explanation was furnished regarding the nature and source of the investment or interest income. Consequently, the AO completed the assessment ex parte under Section 144 read with Section 147, adding the entire sum of ₹16,65,812 as unexplained money under Section 69A read with Section 115BBE.

The assessee appealed to the Commissioner of Income Tax (Appeals), NFAC, Delhi. The CIT(A) dismissed the appeal after granting four opportunities of hearing (on 1 April 2023, 13 January 2025, 14 February 2025, and 6 March 2025). The assessee sought adjournments but did not furnish the requisite details. Aggrieved, the assessee approached the ITAT.

3. Petitioner’s Evidence and Non-Compliance

The entire record reveals a pattern of complete non-compliance by the assessee at both the assessment stage and the appellate stage before the CIT(A). The assessee’s counsel argued before the ITAT that given an opportunity, the assessee would furnish all necessary details, clarifications, and explanations. No substantive evidence was ever placed on record. The bank statements that formed the basis of the addition were, however, part of the departmental records. The assessee did not challenge the factual accuracy of the deposits or the interest income; she only sought an opportunity to explain the source.

This is a classic case of “no evidence, no explanation.” The AO had no option but to treat the money as unexplained. The material on record only showed the fact of deposits, not the source. Under Section 69A, where the assessee is found to be the owner of any money but offers no explanation about the nature and source of acquisition, the money may be deemed to be the income of the assessee.

4. Discrepancies & Issues in Dispute

The core dispute revolves around these questions:

  • Whether the addition under Section 69A was justified when the assessee failed to furnish any explanation regarding the source of the time deposits and interest income.
  • Whether the CIT(A) erred in confirming the addition without granting a further opportunity to the assessee.
  • Whether the ITAT should remand the matter for a fresh adjudication to allow the assessee to present her case.

The Department argued that multiple opportunities were provided across two tiers, and the assessee chose to remain silent. The law does not require the taxman to chase the taxpayer indefinitely. The AO and CIT(A) acted within their powers under Section 144 and Section 250. The addition, therefore, was legally sound. The assessee, on the other hand, pleaded for one more chance, stressing that denial would result in substantial injustice.

Before delving into the Tribunal’s reasoning, it is essential to understand the legal framework:

5.1 Section 69A – Unexplained Money

Section 69A is a deeming provision. If the assessee is found to be the owner of any money, bullion, jewellery, or other valuable article, and the assessee offers no explanation about the nature and source of acquisition, or the explanation offered is unsatisfactory, the money or article may be deemed to be the income of the assessee for the relevant financial year. The burden of proof shifts to the assessee once the fact of ownership is established by the revenue.

5.2 Ex parte Assessment under Section 144

When an assessee fails to comply with a notice under Section 142(1) or Section 143(2), or fails to file a return, the AO may proceed to assess the total income to the best of his judgment. The power of best judgment assessment is not arbitrary; it must be based on material on record. In this case, the material clearly showed the deposits and interest, and the assessee offered nothing.

5.3 Power of Remand by ITAT

The ITAT has the power to remand a matter to the lower authorities for fresh adjudication when the ends of justice so require. This power is often exercised when there has been a violation of natural justice or when the parties have not had a fair opportunity. However, repeated non-compliance does not automatically entitle the assessee to a remand. The Tribunal must weigh the conduct of the assessee against the need for substantial justice.

5.4 The Tribunal’s Approach

The ITAT observed that the assessee was granted four opportunities before the CIT(A) but remained non-compliant. Even before the AO, the assessee did not respond. Normally, such persistent disregard would not warrant a remand. However, the Tribunal took a pragmatic view: “Considering the totality of the facts and in the interest of justice, we deem it appropriate to remand the matter to the file of the Assessing Officer for conducting the assessment de novo.”

This decision appears to be driven by two factors. First, the assessee’s counsel appeared and sought an opportunity, suggesting that the assessee might now be willing to cooperate. Second, the addition involved a significant sum (₹16.65 lakh), and a denial of opportunity would foreclose any chance for the assessee to explain the source – which could be legitimate (e.g., savings, gifts, or agricultural income). By remanding, the Tribunal avoided a potential challenge on the ground of denial of natural justice.

Importantly, the Tribunal imposed a strict condition: “The assessee is directed to submit all relevant bank statements, documents and explanations before the Assessing Officer and to strictly comply with the notices issued by the revenue authorities without seeking any unnecessary adjournments.” This is not a free pass; it is a final opportunity with an implicit threat of confirmation if the assessee fails again.

6. Final Decision

The ITAT allowed the appeal of the assessee for statistical purposes. This means the appeal is disposed of without a final decision on merits. The matter is restored to the file of the Assessing Officer for a fresh assessment (de novo). The assessee is to be given an opportunity to present evidence, but the AO is to complete the assessment after considering all submissions. The order was pronounced in open court on 9 July 2026.

7. Practical Takeaways for Practitioners

This case offers several actionable insights for chartered accountants, tax advocates, and corporate tax teams:

  • Respond to Notices Promptly: Many assessees underestimate the importance of filing returns and responding to notices. Non-compliance leads to ex parte additions that are difficult to reverse. Even if the assessee has legitimate explanations, silence is lethal.
  • Remand Is Not a Right: The ITAT’s decision to remand is an act of grace, not a legal entitlement. The Tribunal could have easily dismissed the appeal, especially given the multiple opportunities already granted. Future litigants cannot assume they will get another chance.
  • Preparation of Evidence: In remand proceedings, the assessee must compile bank statements, source documents (e.g., sale deeds, gift deeds, loan agreements), and a clear explanation. Haphazard submissions will likely result in the addition being restored.
  • Role of Counsel: The counsel’s plea for one last opportunity was pivotal. A well-argued submission showing readiness to cooperate can sway the Tribunal. However, if the assessee fails to comply after the remand, the order will be nearly impossible to challenge.
  • Implications of Section 115BBE: If the addition under Section 69A is finally sustained, the income is subject to tax at a flat rate of 60% plus surcharge and cess (new rate effective from certain assessments). This makes it vital to avoid such additions.

8. Why It Matters

The Nitiben Trivedi case underscores the tension between the need for efficient tax administration and the right of an assessee to be heard. In an era where technology-driven data mining is leading to numerous reassessment notices, many taxpayers find themselves in similar situations – a deposit in a bank account for which the source is not on record. The Department acts on information, and if the assessee does not engage in the process, hefty additions under Section 69A become almost automatic.

This judgment sends a clear signal: the ITAT is willing to give one last chance to non-compliant assessees, but only with strict conditions. It is a reminder that the natural justice principle is not absolute; it can be exhausted. For practitioners, the takeaway is to advise clients to treat every notice with utmost seriousness. Filing returns on time, responding to Section 148 notices, and maintaining proper documentation are not mere formalities – they are strategic imperatives.

Finally, the decision also highlights the role of the ITAT in balancing procedural discipline and substantive fairness. The remand is not a criticism of the AO or CIT(A); it is an acknowledgment that the assessee’s present stance makes a fresh adjudication meaningful. The burden now shifts to the assessee to make good on her promise. Whether she succeeds or not will depend on the quality of evidence she can muster. That remains to be seen.

Disclaimer: This article is for informational and educational purposes only and does not constitute legal advice. The views expressed are those of the author and not of Taxpundit.org. Please consult a qualified tax professional for advice tailored to your specific situation.

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