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Judgment
PER RAMIT KOCHAR, AM:
This appeal in ITA No. 2397/Del/2026 for Assessment Year: 2017-18 has arisen form the learned CIT(A) appellate order u/s 250 dated 30.01.2026 in DIN & Order No: ITBA/APL/S/250/2025-26/1085365274(1), which in turn has arisen from the assessment order dated 18.11.2019 passed by the AO u/s 144 of the Income Tax Act, 1961 (hereinafter called “the Act”), for Assessment Year 2017-18 in DIN ITBA/AST/S/144/2019-20/1020605628(1).
Brief facts of the case are that the notice u/s 142(1) was issued by the AO on 09.03.2018 calling the assessee to prepare a true and correct return of his income for the impugned assessment year . The assessee has not filed return of income for the impugned assessment year. As per the information with the AO,the assessee has deposited cash of Rs. 10,50,500/- in his bank accounts maintained with Allahabad Bank, Hansi, Hissar, during demonetization period(i.e. 09.11.2016 to 31.12.2016). The assessee did not file any return of income , neither u/s 139(1) nor in response to notice u/s 142(1). The assessee in the course of proceedings u/s 142(1) submitted bank statements, final accounts i.e. Balance Sheet and Profit & Loss Account, Cash book and list of debtors and purchases. The contentions submitted by the assessee were duly considered by the AO , and the AO proceeded to frame best judgment assessment against the assessee u/s 144 of the 1961 Act. So far as cash deposits in bank accounts were concerned, the assessee submitted before the AO that these cash deposits were on account of sale and service of the vehicles , and further that Rs. 2,55,000/- was received as gift from family members viz. wife and mother of the assessee.The assessee submitted before the AO , affidavits of the family members. The AO rejected the claim of gift received by the assessee, as the assessee could not prove the paying capacity, ITR and bank accounts of the donor. Thus, the AO rejected the contentions of the assessee wrt alleged gift received from mother and wife in aggregate to the tune of Rs. 2,55,000/- .With respect to claim of the assessee to have generated cash from his business activity of sale and services of vehicles, the AO observed that the assessee failed to substantiate the same with documentary evidences. The AO held cash book to be self serving. The AO observed that even if it is accepted that the whole receipt of Rs. 5,52,000/- including repairing has been introduced in the bank account, remaining Rs. 4,98,500/- is assessee’s income from undisclosed income. The said amount of Rs. 4,98,500/- is treated by the AO as assessee’s income from undisclosed sources. The said amount was treated as unexplained income u/s 69A and added to the income of the assessee. The said income was assessed at taxed u/s 115BBE.
The assessee being aggrieved filed first appeal with ld. CIT(A). During appellate proceedings, the assessee participated in appellate proceedings and submitted replies. The assessee challenged the additions on merits . The assessee submitted that Rs. 2,55,000/-was given as gift in cash by his mother and wife . The wife and mother of the assessee were not having bank account but they were holding the cash out of their past savings. The CBDT circular No. 3/2017 was brought to the notice of the ld. CIT(A). Further the assessee relied upon the decision of ITAT, Surat Bench in ITA no. 726/SRT/2023. The assessee on merit also contended that the assessee is sub-dealer of Mahendra two wheelers. Certificate from main dealer Malik Automobiles was submitted. The assessee also relied upon cash book, sale ledger, bank ledger , purchase ledger and sundry debtor accounts submitted before the AO. It was submitted that the books of accounts were not rejected by the AO. Further, the assessee contended that no notice u/s 142(1) dated 09.03.2018 was issued by the AO. The assessee also submitted that before passing assessment order u/s 144 , the AO never issued SCN to the assessee. The assessee referred to CBDT instruction no. 20/2015 dated 29.12.2015 . The assessee also challenged the applicability of Section 115BBE of the 1961 Act. The ld. CIT(A) dismissed the appeal of the assessee wherein assessment order was upheld. The ld. CIT(A) passed a cryptic non speaking non reasoned order by holding as under :
“7. Decision:-
After considering all the facts, submissions and records of the case, it is held that the assessment order passed under section 144 of the Income Tax Act Act is valid and proper. The addition of Rs. 4,98,500/- made under section 69A , addition of Rs. 1,50,879/- and tax charged under section 115BBE are upheld. Interest charged under sections 234A, 234B is consequential and does not need separate adjudication. Ground realting to penalty proceedings are dismissed as premature. Accordingly, the appeal filed by the appellant is dismissed.”
It is observed that ld. CIT(A) has not made any independent enquiry as is contemplated u/s 250(4) before upholding assessment order. It is also observed that ld. CIT(A) has not even called for assessment records. There is no independent application of mind by the ld. CIT(A). The ld.CIT(A) is required and obligated to pass appellate order in compliance with the provisions of section 250(6), as ld. CIT(A) is required to pass reasoned and speaking order on merits in accordance with law. Reference is drawn to provisions of Section 250(6), wherein ld. CIT(A) has to state point for determination, his decision and reasons thereof. The principles of natural justice are breached . The ld. CIT(A) is not toothless as his powers are co-terminus with the powers of the AO, which even includes power of enhancement. Proceedings before ld. CIT(A) are merely extension of assessment. Thus, the order passed by ld. CIT(A) is not sustainable in the eyes of law. Keeping in view the entire factual matrix as culled out above in this order, it will be fair that the appellate order passed by ld. CIT(Appeals) be set aside and the matter be remanded back to the file of ld. CIT(Appeals) for fresh adjudication after giving proper opportunity of being heard to both the parties. I clarify that I have not commented on merits of the issues. Thus, the appellate order passed by ld. CIT(A) is set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication. The appeal of the assessee is allowed for statistical purposes. It is directed that ld. CIT(A) shall decide the appeal of the assessee expeditiously by adjudicating on all the grounds raised by the assessee within a period of three months from the date of service of this order, and the assessee shall duly comply with the notices. The assessee shall be permitted by ld. CIT(A) to file necessary evidences to substantiate its claims. I order accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.