GANESAN RAMASAMY,TRICHY vs. ITO, WARD-2(1), TRICHY

The Assessee raised the following grounds of appeal :

The NFAC, Delhi erred in impliedly confirming the assumption of jurisdiction under Section 147 of the Act and consequently erred in impliedly confirming the passing of the order of re-assessment without assigning proper reasons and justification.

The NFAC, Delhi failed to appreciate that the assumption of jurisdiction u/s 147 of the Act was without sanction of law and ought to have appreciated that the consequential re-assessment order was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.

The NFAC, Delhi failed to appreciate that having not followed the prescription of law/procedure for framing the re-assessment, the consequential re-assessment order passed should be reckoned as nullity in law for want of jurisdiction.

The NFAC, Delhi failed to appreciate that the passing of the order under Section 148A(d) of the Act by the JAO would completely defiance the prescription of law / procedure in relation there to and hence ought to have appreciated that in the absence of valid foundation for issuance of notice under Section 148 of the Act, the consequential re-assessment should be considered as nullity in law.

The NFAC, Delhi failed to appreciate that the amendment brought in by Finance Act, 2026 by way of insertion of Section 147A of the Act would still not cure the inconsistency of the jurisdiction with respect to 2 different Assessing Officers exercising jurisdiction with respect to the same assessment, which is impermissible in law.

The NFAC, Delhi failed to appreciate that the said issue as well as the amendment has not attained finality in view of the same being the subject matter of pending proceedings in consequence to the recent judgement of the Hon'ble Apex Court, there by vitiating the assumption of jurisdiction under Section 147 of the Act leading to the passing of the consequential impugned order.

The NFAC, Delhi erred in sustaining the addition of Rs. 1,77,65,781/- being the total cash deposits/credits made by the appellant during the assessment year under consideration as unexplained money in terms of Section 69A of the Act in the computation of taxable total income without assigning proper reasons and justification.

The NFAC, Delhi erred in sustaining the addition of Rs. 75,61,260/- being the value of immovable property purchased by the appellant during the assessment year under consideration as unexplained investment in terms of Section 69 of the Act in the computation of taxable total income without assigning proper reasons and justification.

The NFAC, Delhi failed to appreciate that the provisions of Section 69 /69A r.w.s 115BBE of the Act had no application to the present facts and in circumstances of the case and ought to have appreciated that the pre- requisite conditions required for making an addition in terms of Section 69 /69A r.w.s 115BBE of the Act were absent in the present case and in circumstances, there by negating the findings in relation there to.

The NFAC, Delhi failed to appreciate that having placed on record the details of cash deposits made during the ordinary course of retail trade of FMCG in the name and style of M/s Gayathri Agencies and other withdrawals constituting the source for such cash deposits made, the sustenance of the disputed addition as unexplained money in terms of Section 69A of the Act should be reckoned as bad in law.

The NFAC, Delhi erred in not admitting the additional evidences filed in terms of Rule 46A of the Income Tax Rules, 1962 in support of the support for the purchase of the disputed immovable property erroneously added as unexplained investment in terms of Section 69 of the Act forming part of the scrutiny assessment order without assigning proper reasons and justification.

The NFAC, Delhi failed to appreciate that having demonstrated the fact of the appellant's inability in furnishing the said additional evidences during the scrutiny assessment proceedings, there by satisfying the conditions envisaged for admission of such additional evidences by the First Appellate Authority, the action in rejecting / not admitting such additional evidences during the appellate proceedings should be reckoned as bad in law.

The NFAC, Delhi failed to appreciate that having placed on record the details of housing loan received from DCB Bank, Memorandum of Deposit of Title Deeds duly created in favour of the bank on 12.04.2019 in substantiating the source for such purchase of immovable property, the sustenance of the disputed addition made as unexplained investment should accordingly be reckoned as bad in law.

The NFAC, Delhi erred in sustaining the addition of Rs. 6,26,876/-being 8% of the total sales reported at Rs. 78,35,950/- as business income of the appellant in the computation of taxable total income without assigning proper reasons and justification.

The NFAC, Delhi failed to appreciate that having demonstrated the fact of the appellant engaged in the retail trade business of FMCG and further having made an addition on the total cash deposits made during the assessment year under consideration, the assessment of business income on such deposits (which was considered as part of total turnover) would vitiate the impugned order passed on gross defiance of principles of fairness in taxation.

The NFAC, Delhi failed to appreciate that in any event having not brought on record any valid reasons/justification for computing the business at 8% of such turnover for assessing income earned from retail trade of FMCG, the income arbitrarily re-quantified in this regard was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.

The NFAC, Delhi failed to appreciate that in any event, having not independently examined the nature and source of the cash deposits / credits / business income earned during the assessment year under consideration, the assessment of the entire value of transactions as income of the appellant was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.

The NFAC, Delhi failed to appreciate that having not adhered to the prescription of faceless regime, the consequential re-assessment order and appellate order passed should be reckoned as bad in law.

The NFAC, Delhi failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.

The Appellant craves leave to file additional grounds/arguments at the time of hearing.”

Briefly the facts of the case are that the appellant is an Individual engaged in the business of dealing in consumer products. The appellant filed the return of income under the provisions of section 139 of the Act for the Assessment Year 2020-21. Based on the information that the appellant made cash deposits of Rs.75,00,900/- in the account maintained with State Bank of India and also made withdrawals from the same account and also cash deposits of Rs.17,90,600/- in the account maintained with City Union Bank, the Jurisdictional Assessing Officer formed an opinion that income got escaped assessment from tax, accordingly a notice u/s.148 of the Act was issued on 28.02.2024 after duly complying with the procedure laid down u/s.148A of the Act. The appellant neither complied with the notice u/s.148 of the Act nor the notice u/s.142(1) of the Act and the show cause notice u/s.144 of the Income Tax Act, 1961. In the circumstances, Assessment Unit of the Department (hereinafter called ÁO’) had proceeded with framing best judgment assessment vide order dated 15.01.2025 passed u/s.147 r.w.s 144 read with section 144B of the Act at a total income of Rs.2,59,53,917/-. While doing so, the Assessing Officer made addition of the cash deposits made in the accounts maintained with City Union Bank and State Bank of India aggregating to Rs.1,77,65,781/- as unexplained money of the appellant for the failure of the appellant to explain the source of the cash deposits. The Assessing Officer also made addition of Rs.75,61,260/- being the investment made on the purchase of immovable property as unexplained investment of the appellant for the failure of the appellant to offer explanation as to the source of investment. The Assessing Officer also made addition under head “business income” of Rs.6,26,876/- by estimating profit at 8% on the turnover disclosed sales of Rs.78,35,950/-.

Being aggrieved by the assessment order, the appellant filed an appeal before the Learned CIT(A) contending that when the Assessing Officer estimated the business income, it is not open to the Assessing Officer to consider deposit made in the bank account as unexplained income of the appellant placing reliance on the decision of Hon’ble Punjab and Haryana High Court in the case of CIT vs. Agarwal Engineering Company 302 ITR 246. It is further contended that estimation of profit at 8% of undisclosed sales is excessive and unreasonable. The appellant also filed additional evidence under rule 46A of Income Tax Rules seeking admission of additional evidence in support of Grounds of Appeal. However, the Learned CIT(A) had refused to admit the additional evidence solely on the ground that the appellant had failed to respond to the notices issued under 148 of the Act and 144 of the Act, accordingly the Learned CIT(A) dismissed the appeal.

Being aggrieved by the order of the Learned CIT(A), appellant preferred an appeal before the Tribunal. The Learned Counsel submits that the very initiation of reassessment proceedings are bad in law and he further submitted that the cash deposits were made out of the proceeds of retail trade in FMCG and cash withdrawals were also utilized for the purpose of making deposits. The Learned CIT(A) ought to have admitted the additional evidence and decided the issues in appeal on merits.

On the other hand, the Learned Sr.DR vehemently opposed the above submissions and submitted that the appellant neither complied with the notice u/s.148 of the Act nor the notice u/s.142(1) of the Act. Therefore, the Assessing Officer was justified in passing the ex-parte assessment order. The Learned CIT(A) had passed a very reasoned order and dismissed the appeal filed by the assessee and therefore, no interference is called-for by this Tribunal.

We heard rival submissions and perused the material available on record. The assessment order was passed ex-parte as the appellant had failed to comply with the notice u/s.142(1) of the Act. However, during the course of proceedings before the Learned CIT(A), the appellant in an attempt to prove the source of investment on immovable property and also to explain the source of cash deposits, filed an application seeking admission of additional evidence under rule 46A of Income Tax Rules. However, the Learned CIT(A) had refused to admit the additional evidence by citing that the appellant had not complied with the notice issued u/s.148 of the Act u/s.142(1) of the Act and 144 of the Act. The approach adopted by the Learned CIT(A) is illegal and unreasonable and does not fall within the parameters laid down under rule 46A of the Income Tax Rules. The Learned CIT(A) can only refuse to admit the additional evidence only under the circumstances envisaged under the provisions of rule 46A of the Income Tax Rules. Therefore, the reasoning of the Learned CIT(A) cannot be sustained in the eyes of law. Therefore, we are of the considered opinion that the ends of justice would be met if the matter is restored to the file of the Learned CIT(A) for de novo disposal of the appeal in accordance with law after affording an opportunity of being heard to the appellant.

In the result, appeal filed by the assessee stands partly allowed for statistical purpose. Order pronounced in the open Court on 10th September, 2026.