Top Stories Faulty Income Tax Assessment: ITAT Quashes Addition and Penalty against 82 Years Old Senior Citizen [Read Order] ITAT quashes tax addition and penalty against 82-year-old senior citizen citing faulty assessment and health-related non-compliance.

By Kavi Priya - On March 17, 2025 8:45 am - 2 mins read The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) quashed the tax addition and penalty imposed on an 82-year-old senior citizen citing faulty assessment and failure to consider health related non-compliance. Sarla Bhargava, the assessee, was a senior citizen suffering from Parkinson’s and Hyperthyroidism. The tax authorities reopened her assessment under Section 147 of the Income Tax Act, 1961, citing unexplained investments of Rs. 17,52,694 in mutual funds. Despite receiving notices under Section 148, the assessee did not respond, leading the AO to complete the assessment under Section 144 (best judgment assessment) and add the amount as “income from other sources.”

The assessee, represented by her legal heir, appealed before the CIT(A) explaining that the investment was sourced from the sale of property in Ajmer. Supporting documents, including sale deeds, bank statements, and medical prescriptions, were submitted. The CIT(A) upheld the AO’s order and also confirmed the penalty under Sections 271 & 271F, stating that the taxpayer had failed to justify the transactions in a timely manner.

On appeal before the ITAT, the assessee argued that the authorities ignored key evidence and failed to acknowledge her health condition, which caused non-compliance with tax notices.

The ITAT bench, comprising Dr. S. Seethalakshmi (Judicial Member) and Gagan Goyal (Accountant Member) found that the AO’s remand report was factually incorrect and failed to consider the assessee’s valid explanations and supporting documents.

The tribunal explained that only real income can be taxed, and in this case, the sale proceeds of property were a legitimate source of investment and observed that the assessee’s taxable capital gains were below the threshold, and she had already paid excess tax on the transaction.

The tribunal criticized that the CIT(A) had the authority under Section 251 to reassess the case fairly but failed to exercise due diligence. Considering this, the tribunal quashed both the tax addition and penalties. The tribunal further ordered reimbursement of the appeal fees paid by the assessee and directed superior authorities to take action against the concerned AO and CIT(A) for procedural lapses. The appeal was allowed.