ITAT Deletes Addition as AO Ignored “Glaring Facts” Available on Record.

ITAT Deletes Addition as AO Ignored “Glaring Facts” Available on Record.

Issue

Whether an ex-parte addition for unexplained investment under Section 69 can be sustained when the primary evidence on the Assessing Officer’s (AO) own record—the sale deed—clearly contradicts the basis of the addition?

Facts

• The assessee’s case was reopened for Assessment Year 2018-19 based on information from the Sub-Registrar that she had purchased an immovable property for ₹51.92 lakhs.
• The assessee, a non-filer, did not respond to the notices, and the AO passed an ex-parte assessment order, adding the entire ₹51.92 lakhs as an unexplained investment under Section 69.
• The CIT(A) also upheld this addition in an ex-parte order.
• Before the ITAT, the assessee argued that while the proceedings were ex-parte, the addition was unsustainable based on the facts already on the AO’s record.
• The AO possessed the sale deed, which itself revealed three “glaring facts”:
  1. The property was purchased jointly by the assessee and her husband.
  2. The payments were all made by cheque in the preceding financial year (AY 2017-18), not the current year.
  3. The payments were made by the husband, which was further corroborated by his bank statements.

Decision

• The ITAT ruled decisively in favour of the assessee.
• The Tribunal held that revenue authorities are bound to decide an issue based on the facts available on their own record and “could not have shut their eyes to the glaring facts” present in the very document that triggered the reopening.
• The facts on record (the sale deed) clearly showed that the investment was not made in the impugned assessment year and, in any case, was made by the assessee’s husband, the co-owner.
• The Tribunal rejected the Revenue’s request to remand the case, finding the evidence on record sufficient to merit a complete deletion of the addition. The AO was directed to delete the addition in its entirety.

Key Takeaways

• AO Cannot Ignore Evidence on Record: An Assessing Officer has a quasi-judicial duty to pass an order based on all materials on file. They cannot ignore “glaring facts” from a primary document, even if the assessee fails to appear.
• Ex-Parte Order is Not an Arbitrary Power: An ex-parte assessment does not give the AO a license to make an addition that is directly contradicted by their own records.
• Burden of Proof: The reopening was based on the sale deed. That same deed disproved the AO’s assumption that the assessee made the investment in the current year. The addition was therefore made without any valid basis.
• No Unnecessary Remand: The Tribunal will not remand a case for re-verification when the facts on record are unambiguous and sufficient to delete the addition entirely.