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Judgment
Per Kavitha Rajagopal, J M:
This appeal is filed by the assessee, challenging the order of the Learned Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act', for short), pertaining to the Assessment Year (‘A.Y.s’ for short) 2016-17.
The assessee has raised the following grounds of appeal:-
“1.That the assessment order dated 29.01.2025 and the order of the CIT(A) dated 05.03.2026 are in the facts and circumstances of the case, bad in law, contrary to the provisions of the Act, contrary to judicial precedents, and are liable to be quashed/set aside.
2: The Learned AO erred in invoking Section 69C to treat cash purchases of Rs.1,92,90,886/- as unexplained expenditure, despite the Appellant having duly explained the nature, source, and purpose of such expenditure. The amount represents bona fide business purchases omitted from the books due to non-receipt of invoices, and not expenditure from undisclosed sources; hence, Section 69C is inapplicable where a clear nexus with regular business activity is established.
3: The Learned AO erred in holding the explanation for cash purchases of Rs. 1,92,90,886/- as unsatisfactory, despite the Appellant consistently demonstrating that the transactions were genuine business purchases duly disclosed, with resultant profits already offered to tax. The identity and existence of the supplier, M/s BAT, being established and verified by the AO, the essential condition of ‘unexplained source’ under Section 69C is not satisfied.
4: The Learned AO erred in applying Section 115BBE to tax the addition at a punitive rate, despite the impugned amount not constituting ‘unexplained expenditure’ under Section 69C. As the income is in the nature of business income arising from regular trading activities, it ought to be taxed at normal applicable rates.
5.The Learned AO erred in initiating and completing reassessment under Section 147 solely on the basis of unverified third-party material obtained from a survey at BAT’s premises, without any independent inquiry or corroboration from the Appellant’s records. Reliance on reconstructed documents, pen drive data, and statements without cross-examination renders the proceedings vitiated in law.
6.The Learned AO erred in making an addition of Rs. 1,92,90,886/- without first rejecting the books of account under Section 145(3). In the absence of any finding that the books were incorrect or unreliable, no ad hoc addition could be made without invoking the said provision and following due process of law.
7.The Learned AO erred in completing the assessment without granting a meaningful opportunity of being heard, particularly considering the Appellant’s advanced age and inability to comply with extensive queries. The rejection of submissions as “not point-wise” reflects an unduly technical approach, contrary to principles of natural justice, as the Appellant’s substantive explanations were not duly considered.
8.Without prejudice to the foregoing, and assuming (without admitting) that any addition is warranted, the same ought to be restricted to the profit element on alleged unrecorded transactions and not the gross purchase value. The Appellant has already offered the entire profit of Rs.16,28,459/-to tax any further addition would impermissibly tax the cost component, contrary to settled principles that tax is levied on income, not gross receipts.
9.That the applicant craves that the demand and penalty proceedings may he kept in abeyance till the adjudication of the appeal.
10.That the appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal at any time before or at the time of hearing of the appeal with the permission of this Hon’ble Tribunal.”
Brief facts of the case are that the Assessee is an Individual and had filed his return of income for the A.Y. 2016-17 u/s 139(1) of the Act on 16.09.2016 declaring total income of Rs.4,73,920/-. Subsequently, the assessee’s case was reopened based on the information in the Insight Portal under the category ‘High Risk CRIU/VRU cases’ in accordance with the risk management strategy formulated by the CBDT, New Delhi. Pursuant to a survey action undertaken in the case of M/s. Bait-Al-Tamur (Proprietor Shri Narendra Jamnadas Ashar), certain torn papers were found in a shredder kept in the cabin of Shri Rajal Narendra Ashar - key person of M/s. Bait-AlTamur and son of the proprietor. These torn papers were reconstructed which revealed details of a number of parties along with figures mentioned against their names. Further investigation of the afore-mentioned torn papers revealed that these papers were the handwriting of M/s. Bait-Al-Tamur’s accountant - Shri Paresh Shah. When Shri Paresh Shah was confronted regarding the nature and purpose of writing these papers, during the course of recording of his statement u/s. 131 of the Income Tax Act, 1961, he stated that these papers shows sales made to various parties in cash or cheque/RTGS. Those parties to whom cash sales were made were written on a piece of paper and handed over to Shri Rajal Narendra Ashar. Thus, it was apparent that a part of the assessee’s business transactions were in the nature of unaccounted transactions, which were not recorded in the assessee’s regular books of accounts.
Further, during the course of the survey action, a pen drive was found and seized as Annexure A-3 from the premises of M/s Bait-Al-Tamur. The said pen drive contained the data of sales in a software named ‘Rojmel’. From the analysis of the data, it was found that for an individual party, data of both the RTGS/Cheque (accounted) sales as well as the cash (unaccounted) sales was maintained in the said pen drive. Thus, the difference between the sales figures for a particular party as obtained from the pen drive and those from the assessee’s regular books of accounts was the unaccounted cash sales to such party. When the above facts and evidences were confronted to Shri Rajal Narendra Ashar during the course of the survey action, he admitted that the pen drive contained a list of out of books sale parties showing accounted sales, unaccounted sales and total sales, in his statement recorded on oath u/s 131 of the Act. The assessee being one of the beneficiaries has made unaccounted purchase transactions in cash with M/s. Bait-Al-Tamur (Proprietor - Shri Narendra Jamnadas Ashar) of Rs.1,92,90,886/-during the year under consideration. In view of the above information and own analysis, proceedings u/s 148A of the Income-tax Act was initiated in this case. Thereafter, after providing due opportunity to the assessee an order u/s 148A(d) of the Act was passed on 17.04.2023 and notice u/s 148 of the Act was issued on 17.04.2023 to the assesse. Thereafter, this reassessment proceeding u/s 147 is received to the Faceless Assessment Unit. In response to the notice u/s 148 of the Act, the assesse has filed his return of income on 30.11.2024 declaring total income of Rs. 21,02,380/-.
During the Faceless assessment proceeding, notices/letters were issued and duly served to the assessee providing opportunities to explain its case. The AO in his order held that the assessee has not offered explanation regarding the source of cash purchase made from M/s Bait-Al-Taimur Company and made an addition of Rs.1,92,90,886/- u/s 69C of the Act.
Aggrieved, the assessee filed an appeal before the Ld.CIT(A), who dismissed the appeal on the ground in the impugned assessment order the Assessing Officer has invoked section 69Ç of the IT Act,1961 to hold the unexplained expenditure to be the appellant's deemed income from undisclosed sources whereas in the grounds of appeal in the form No.35, under consideration, the assessee was taking entirely different ground. While the Assessing officer has held Rs.1.92 cores to be the assessee's deemed income within the meaning of section 69C of the IT Act,1961, the assessee has contended that the AO has held Rs.1.92 crores to be the cash deposited during the demonetization period and added it to be the total income of the assessee, holding it to be cash deposited from unexplained sources. Thus, the grounds of appeal raised by the assessee had no synchronization with the conclusions drawn by the AO in the impugned assessment order. It was further noted that the assessment order had been completed u/s 147 read with section 144B of the IT Act,1961 whereas the assessee, in the form no. 35, showed the assessment order to have been passed u/s 147 read with section 144 of the IT Act,1961. Thus, the assessee's appeal was found to be totally misdirected and misplaced, and self-defeating. It had no coherence with the issues raised, discussed and decided in the impugned assessment order. The Ld. CIT(A), therefore, dismissed the appeal of the assessee confirming the order of the Ld. AO.
We have heard the rival submissions and perused the material available on record. The ld. AR for the assessee submitted that while preparing the grounds of appeal, Shri Vinod K. Dhawan, Advocate, the then, counsel of the assessee had inadvertently and on account of bona fide error, drafted and uploaded the grounds relating to alleged unexplained cash deposits during the demonetization period, whereas the actual addition made in the case of the assessee was Rs.1,92,90,886/-under Section 69C of the Act treating certain cash purchases of dates made from M/s Bait-Al-Tamur, Navi Mumbai, as explained expenditure and this error led to the dismissal of the appeal of the assessee by the Ld. CIT(A). The said error was entirely attributable to the former AR of the assessee and the assessee had no role, knowledge or concurrence in the same. An affidavit to this effect was filed by the assessee. The Ld. AR for the assessee, therefore, prayed that the assessee may be afforded another opportunity before the AO to present its case afresh.
It is observed that the Ld. CIT(A) has dismissed the appeal on the ground that the assessee has taken a different ground from the ground on which the assessee is aggrieved with the order of the AO. Before us, the Ld. AR for the assessee prayed that the assessee be given one more opportunity to present its case before the Ld. AO stating that the assessee has got a good case on the merits.
The Ld. DR vehemently opposed to granting the assessee another opportunity.
On the above facts of the case, we deem it fit to extend the assessee with one more opportunity to present his case before the Ld.AO by adhering to the principles of natural justice and in the interest of justice dispensation. The assessee is directed to strictly comply with the proceedings before the Ld.AO who is to adjudicate all the grounds raised by the assessee, both legal as well as on the merits, in accordance with the provisions of law and on the merits of the case. The grounds of appeal raised by the assessee are hereby allowed for statistical purposes
In the result, the appeal filed by the assessee is allowed for statistical purpose as per the above observations.