Allahabad High Court on Invalid Section 69A Addition When Transactions Fall in Subsequent Financial Year

1. Background of the Dispute

In Vipin Tiwari Vs PCIT (Allahabad High Court), the Allahabad High Court examined whether an assessment framed for Assessment Year 2022-23 could legally include alleged unexplained money under Section 69A arising from bank entries that actually related to the subsequent financial year.

The assessment for AY 2022-23 (corresponding to Financial Year 2021-22, i.e. 01.04.2021 to 31.03.2022) included addition of Rs. 1,63,23,000 under Section 69A on the basis of bank transfers made between 04.05.2022 and 21.05.2022. These dates clearly fell in FY 2022-23, relevant to AY 2023-24, and not in FY 2021-22.

The core controversy before the Court was:

Whether cash deposits and transfer entries that undisputedly pertain to FY 2022-23 can be used to make an addition under Section 69A in an assessment for AY 2022-23, and whether non-consideration of this objection by the revisional authority under Section 264 vitiates both the assessment and revision orders.

The High Court eventually set aside:

  • The assessment order dated 23.01.2024 passed under Section 144 read with Section 144B for AY 2022-23, and
  • The revisional order dated 18.02.2026 passed under Section 264,

and remitted the matter back to the Assessing Authority for a fresh assessment.

2. Key Facts and Chronology

2.1 Profile of the assessee and proceedings

  • The assessee, Vipin Tiwari, is an individual stamp vendor
  • He holds a valid licence No. 14/2011-12 dated 23.12.2011 issued by the Additional District Magistrate (Finance / Revenue), Mathura.
  • Return of income for AY 2022-23 was filed on 01.07.2022, declaring returned income of Rs. 4,18,150.
  • The return was processed under Section 143(1)(a) on **01.07.2022`.
  • Notice under Section 143(2) was issued on **02.06.2023`.
  • Notices under Section 142(1) were issued on 10.08.2023 and **13.09.2023`.
  • Ultimately, an ex-parte assessment under Section 144 read with Section 144B was completed on **23.01.2024`.

2.2 The Section 69A addition

In the assessment order for AY 2022-23:

  • The Assessing Officer (AO) examined bank account No. 08211100000309 with Punjab and Sind Bank, Mathura Cantt.
  • It was noted that the total credits in the account were Rs. 24,91,67,760/-.
  • Out of these, the AO focused on an amount of Rs. 1,63,23,000/-, which, as per the order, had been transferred during 04.05.2022 to 21.05.2022 to one Ritu Tiwari, described as “who appears to be wife of assessee”.

According to the assessment order (extracted portions):

  • The AO formed a view that the cash deposited corresponding to this amount was not explained as arising from sale of stamp papers/affidavits.
  • The assessee did not respond to the show cause notice regarding these credits and transfers.
  • Consequently, the AO treated Rs. 1,63,23,000/- as unexplained money under Section 69A, taxable as per Section 115BBE.
  • Penalty proceedings under Section 271AAC(1) were also initiated in respect of this addition.

Crucially, the period 04.05.2022 to 21.05.2022 relates to FY 2022-23, whereas the assessment year under consideration (AY 2022-23) relates to FY 2021-22 (01.04.2021 to 31.03.2022).

3. Challenge Under Section 264 and Grounds Taken

3.1 Revision application

Aggrieved by the ex-parte assessment order dated 23.01.2024, the assessee filed a revision petition under Section 264 on 29.04.2024 before the Principal Commissioner of Income Tax, Agra – I.

The central contention in the revision was that the AO had wrongly relied upon bank transactions belonging to a different financial year.

3.2 Specific plea on year-mismatch

In the revision memo, particularly para 5, the assessee clearly pleaded: