The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has granted an assessee one final opportunity to substantiate his case against additions aggregating to ₹11.22 crore, while imposing an unusual environmental condition requiring the plantation of 500 trees within one month.
The Division Bench comprising Judicial Member Laliet Kumar and Accountant Member Vijay Varma remanded the matter to the Assessing Officer for limited verification, making it clear that the relief would stand withdrawn if the assessee failed to comply with the plantation-related condition within the stipulated period.
The assessee had filed his return for AY 2017-18 declaring total income of ₹1,79,160, along with agricultural income of ₹3 lakh. The return was selected for scrutiny and statutory notices were issued by the Assessing Officer.
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According to the assessment order, the assessee failed to furnish the requisite details and supporting documentary evidence during the assessment proceedings. The Assessing Officer subsequently identified substantial financial transactions that remained unexplained.
The principal issue arose from cash deposits of ₹85.93 lakh made in the assessee’s bank accounts during the demonetisation period. The assessee was unable to satisfactorily explain the source of these deposits.
The Assessing Officer also noticed unsecured loans amounting to ₹9.25 crore and sundry creditors of ₹1.07 crore. According to the assessment order, the assessee failed to provide confirmations and other documentary material necessary to establish the identity, creditworthiness and genuineness of the concerned lenders and creditors.
The declared agricultural income of ₹3 lakh was also not substantiated with supporting evidence. On this basis, the Assessing Officer treated the amounts as unexplained credits/income and made aggregate additions of ₹11,22,08,506, resulting in assessed total income of ₹11,23,87,670 under Section 143(3) of the Income-tax Act, 1961.
The assessee challenged the assessment before the Commissioner of Income Tax (Appeals), Gurgaon.
However, the CIT(A) dismissed the appeal and confirmed the additions relating to the cash deposits, unsecured loans, sundry creditors and agricultural income. The assessee thereafter approached the Chandigarh Bench of the ITAT.
Before the Tribunal, the assessee’s authorised representative did not seek an unconditional deletion of the additions at this stage. Instead, he requested one final opportunity to substantiate the claims and place the necessary documentary evidence before the Assessing Officer.
The assessee sought restoration of the matter to the assessment stage so that the relevant documents and evidence could be properly examined.
A distinctive feature of the proceedings was the undertaking furnished by the assessee.
As part of the request for another opportunity, the assessee expressed willingness to undertake the plantation of 500 treeswith assistance from Hari Yamuna Sehyog Samiti, an NGO identified in the Tribunal’s order.
The proposed plantation was to take place at the Yamuna Bank, Panipat, Samalkha Site. The undertaking extended beyond merely planting the trees and included their installation, protection and maintenance.
The assessee also agreed to pay ₹30 per plant per year as maintenance cost for one year.
The authorised representative further undertook that documentary evidence relating to the plantation, or payment of the requisite cost to the NGO, would be furnished before the Assessing Officer.
The department relied upon the order of the CIT(A) and maintained that the findings of the first appellate authority were justified on the basis of the material available on record.
However, the Departmental Representative stated that if the Tribunal decided to grant the assessee another opportunity subject to a condition, compliance should be made strictly within the period prescribed by the Tribunal.
After considering the rival submissions and the material available on record, the Tribunal decided to provide the assessee one final opportunity in the interest of justice.
Importantly, the Tribunal did not straightaway delete the disputed additions. Instead, it remanded the matter to the Assessing Officer for the limited purpose of verifying compliance with the condition imposed by the Tribunal.
The assessee was directed to plant 500 trees within one month from the date of the order at the specified Yamuna Bank location. The Tribunal also required the assessee to ensure plantation, installation, protection and maintenance of the trees.
If the assessee was unable to undertake the plantation directly, an alternative was provided. He could, within the same one-month period, deposit or pay the requisite cost towards plantation, installation, protection and maintenance of the 500 trees with the specified NGO.
The Assessing Officer was directed to verify compliance on the basis of appropriate documentary evidence and thereafter give consequential effect to the Tribunal’s order in accordance with law.
The Tribunal expressly clarified that the relief granted was conditional.
If the assessee failed either to plant the 500 trees or to deposit/pay the requisite cost towards plantation, installation, protection and maintenance within the prescribed one-month period, the order of the CIT(A) would stand restored and the assessee’s appeal would stand dismissed.
Subject to compliance with the condition, the appeal was allowed for statistical purposes and the matter was restored to the Assessing Officer for verification and consequential action.
The Tribunal has chosen not to conclusively adjudicate the disputed additions at this stage. Instead, it has provided the assessee a final procedural opportunity to substantiate the substantial financial transactions and claims that had remained unsupported during the assessment proceedings.
The Tribunal’s direction also demonstrates that the opportunity granted to the assessee is not unconditional. Compliance with the environmental undertaking has been expressly linked to the continuation of the relief granted by the Tribunal.
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