ITAT rules that unexplained asset from a past assessment year cannot be taxed again under Section 69 or 69A in a later year. Assessment is time-barred and violates principles of res judicata.
ITAT Bars Recapture of Unexplained Assets from Prior Years
The Income Tax Appellate Tribunal (ITAT) has held that an unexplained investment scrutinised and finalised in a previous assessment year cannot be re-examined as unexplained capital in a subsequent year under Sections 69 or 69A of the Income Tax Act. The specific assessment year governs the taxability of transactions.
The bench observed that the department had already completed assessments for earlier years without raising any additions for the asset in question. Reopening it years later would violate the time limits under Section 153 and principles of finality in tax proceedings. The tribunal stated:
“Once a block of years is closed, the revenue cannot pick and choose individual assets for fresh scrutiny under colour of unexplained capital.”
This decision provides clarity for taxpayers and advisers. Assessments must be challenged or finalised within the statutory framework; otherwise, they attain finality. The ruling is particularly relevant for cases involving long-standing assets or inherited wealth where past audits may not have fully probed sourcing.
Citations
- CIT v. Rajinder Kumar Jhunjhunwala (2017) 394 ITR 486 (Del)
- ACIT v. Sunita Devi (2022) 139 taxmann.com 1 (ITAT-Kol)
