ZAHID ABDULLAH LAKHANI,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

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ITA 5238/MUM/2025Status: DisposedITAT Mumbai31 October 2025AY 2014-155 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal, after hearing both the assessee's counsel (AR) and the revenue's representative (DR), inclined to grant the assessee's request for remanding the cases back to the Assessing Officer (AO). The Tribunal acknowledged the assessee's submission that the assessment and appellate proceedings were completed ex-parte without a reasonable opportunity to furnish requisite evidence. Therefore, in the interest of justice, all three assessments were restored to the AO for fresh adjudication. The assessee was directed to provide necessary compliance before the AO without fail. The specific additions made by the AO and confirmed by the CIT(A) were not adjudicated on merits, as the appeals were allowed for statistical purposes to provide the assessee with an opportunity to present their case. No issue was expressly left undecided, as the matter was remitted.

What were the facts?

The assessee, Zahid Abdullah Lakhani, filed appeals against the orders of the CIT(A) dated 14.02.2025 and 20.02.2025, which upheld the assessment orders passed under section 144 read with section 147 of the Income Tax Act, 1961, for Assessment Years 2014-15, 2015-16, and 2016-17. The Income Tax Officer was the respondent. A survey under section 133A was conducted on the assessee's business premises on 02.03.2017, revealing substantial cash sales not reflected in the books. The assessee initially admitted to not maintaining cash sales and purchase registers but later retracted his statement. Assessments were completed ex-parte, with additions made for estimated profit on undisclosed sales. The CIT(A) dismissed the assessee's appeals, confirming the additions. The total disputed amounts are not explicitly stated for all years, but specific additions are mentioned in the grounds of appeal.

What were the issues?

1. Whether the ex-parte assessment orders, passed under section 144 read with section 147 of the Income Tax Act, 1961, were in violation of the principles of natural justice, as argued by the assessee, who contended they were not afforded a reasonable opportunity to present evidence. The revenue relied on the orders of the lower authorities. 2. Whether the additions made by the Assessing Officer and confirmed by the CIT(A) on account of alleged cash sales and cash deposits were justified, considering the assessee's claim that the survey statement was obtained under coercive circumstances, retracted, and lacked corroborating evidence, and that bank deposits were out of explained business receipts. The revenue relied on the orders of the lower authorities. 3. Whether the reopening of assessment under section 147 of the Income Tax Act, 1961, was valid without proper satisfaction and tangible material, as argued by the assessee. The revenue relied on the orders of the lower authorities. 4. Whether the estimation of profit on alleged cash sales was arbitrary and excessive, as argued by the assessee, who claimed that even if accepted, these were gross receipts and not pure income, requiring verification of expenses and profit margins. The revenue relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 133A,Section 144,Section 147,Section 250,Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Before: SHRI RAHUL CHAUDHARY & SMT.RENU JAUHRI

For Appellant: Mr. Vaseem Ahmad
For Respondent: Shri Sandeep Jumale- Sr. DR
Hearing: 16.10.2025Pronounced: 31.10.2025

Date of Hearing 16.10.2025 Date of Pronouncement 31.10.2025 आदेश / O R D E R PER BENCH :-

These appeals are filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 14.02.2025 & 20.02.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Years [A.Y.] 2014-15, 2015-16 & 2016-17 respectively.

P a g e | 2 ITA NO. 5239,5240/mum/2025.

2.

The grounds of appeal are as follows:

1. That the Learned Commissioner of Income-tax (Appeals) erred in law and on facts in upholding the assessment order passed under section 144 r.w.s. 147 of the Income Tax Act, 1961, without appreciating that the ex-parte assessment was completed in violation of the principles of natural justice.

2. That the Learned CIT(A) failed to appreciate that the appellant had duly filed the return of income for A.Y. 2014-15 on 20.11.2014 declaring total income of ₹2,26,380/-, and there was no concealment or furnishing of inaccurate particulars.

3. That the Learned CIT(A) erred in confirming the addition of ₹1,86,64,479/- merely on the basis of alleged cash sales recorded in the survey statement without properly appreciating that the said statement was obtained under coercive circumstances and without corroborating documentary evidence.

4. That the Learned CIT(A) erred in law and on facts in ignoring the fact that the alleged cash deposits of 214,32,300/- in the bank account were out of explained business receipts and duly recorded in the regular books of account.

5. That the Learned CIT(A) failed to consider that the appellant was prevented by sufficient cause from producing necessary details during the assessment proceedings, and hence the ex-parte order under section 144 is bad in law.

6. That the additions made are excessive, arbitrary, and based on surmises and conjectures, without proper appreciation of facts and evidence. That the appellant craves leave to add, alter, amend, or withdraw any of the above grounds of appeal at the time of hearing.

1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of 23,42,920/- being 10% of alleged cash sales of 2,34,29,200/-, without appreciating the facts, circumstances, and evidence on record.

2. The learned CIT(A) has erred in sustaining the addition solely on the basis of a statement recorded during survey proceedings u/s 133A, without corroborating evidence and without considering that the statement was retracted and that no incriminating documents were found to substantiate such addition.

3. The learned authorities have erred in law and on facts in passing the order u/s 144 r.w.s. 147 without providing adequate and reasonable opportunity of being heard, thereby violating the principles of natural justice.

4. The learned CIT(A) failed to appreciate that the alleged cash sales, even if accepted, are gross receipts and not pure income, and hence estimation of 10% without verification of expenses and actual profit margin is arbitrary and excessive.

P a g e | 3 ITA NO. 5239,5240/mum/2025.

5. The reopening of assessment u/s 147 is bad in law, without proper satisfaction and without tangible material to believe that income has escaped assessment. “6. The appellant craves leave to add, amend, alter, or withdraw any of the above grounds of appeal

at the time of hearing

1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of 19,15,594/- being 5% of cash sales of 3,83,11,879/- made by the Assessing Officer without bringing on record any material evidence to justify such addition. The addition is arbitrary, excessive, and without basis and therefore deserves to be deleted.

2. The learned CIT(A) has erred in dismissing the appeal ex-parte without appreciating that the appellant was prevented by sufficient cause from responding to the notices and producing the evidence, and without affording a proper and effective opportunity of hearing. The Ld CIT(A) issued single notice before passing the order.

3. The authorities below failed to consider that cash sales are part of the regular course of business duly recorded in the books of account and no adverse material was found to prove suppression or inflation.

4. The learned CIT(A) has erred in confirming the levy of interest under sections 234A. 234B, and 234C without appreciating the facts of the case.

5. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds before or at the time of hearing.”

3.

As common issues are involved in all these appeals these are being disposed off by a common order.

4.

Brief facts of the case are that the assessee is running a proprietary business in wholesale and retail trading of soaps, oil, shampoo and other toileteries. A survey action u/s. 133A was conducted on the assessee’s business premises on 02.03.2017 by the department. During the survey, it was noticed that there were huge cash sales across different years which were not reflected in the regular books of accounts. The assessee admitted in the statement recorded on oath during survey that he was not maintaining cash sales register and purchase and sale registers.

Accordingly, post survey revised purchase and sale statements were P a g e | 4 ITA NO. 5239,5240/mum/2025. drawn for the years under consideration and cases for A.Y. 2014-15 and 2015-16 were reopened while A.Y. 2016-17 was selected for compulsory scrutiny. However, the assessee subsequently retracted his statement and also did not comply with the notices issued by the ld. AO. The assessments were accordingly completed ex-parte after making additions on account of estimated profit on undisclosed sales for all the three years.

Aggrieved, the assessee preferred appeals before ld. CIT(A). Ld. CIT(A) dismissed the assessee’s appeals and confirmed the addition made by the ld. AO in each of the three A.Ys. 2014-15, 2015-16 & 2016-17. Further aggrieved, the assessee has filed appeals before the Tribunal.

5.

Before us ld. AR has submitted that the assessment as well as appellate proceeding were completed ex-parte and the assessee was not afforded reasonable opportunity to furnish requisite evidences. He has, therefore, requested for remanding back the cases to ld. AO for giving one more opportunity to the assessee.

Ld. DR, on the other hand, has strongly relied on the orders of the lower authorities.

6.

After hearing the rival submissions, we are inclined to grant the request of the assessee, in the interest of justice, for giving an opportunity to the assessee. Accordingly all the three assessments are restored back to ld. AO for fresh adjudication after providing requisite opportunity to the assessee, who is also directed to be vigilant and make requisite compliance before the AO without fail.

P a g e | 5 ITA NO. 5239,5240/mum/2025.

7.

In the result, all the three appeals of the assessee are allowed for statistical purposes.

Order Pronounced in Open Court on 31.10.2025

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