ITO 41 4 1, MUMBAI vs. DELNAZ HOMI SUKHESHWALLA, MUMBAI

Brief facts relevant for adjudication of the instant appeal are that the Assessee, for one reason or the other, failed to furnish the relevant documents before the AO. Consequently, the AO, vide assessment order dated 24.01.2025, passed under section 147 read with section 144B of the Act, assessed the total income at Rs. 1,28,43,810/-, after making an addition of Rs. 1,26,00,000/- under section 69 of the Act on account of unexplained investment.

The Assessee challenged the assessment order before the Ld. Commissioner, who dismissed the legal grounds concerning the validity of the notice issued under section 148 and the approval granted under section 151 of the Act. However, on merits, the Ld. Commissioner deleted the addition of Rs. 1,26,00,000/-, inter alia, by observing that the AO neither considered the explanation of the Assessee nor identified the unexplained component of the investment. The Ld. Commissioner, therefore, held that the addition of the entire purchase value, without examining the evidentiary basis, amounted to taxation of a capital asset

As observed above, the Assessee failed to furnish the relevant submissions and documents before the AO. Consequently, the AO had no opportunity to examine the explanation and documents subsequently produced by the Assessee.

The Assessee, vide C.O. No. 229/M/2026, has also challenged the legality of the order passed under section 148A(d) and the notice issued under section 148 of the Act. However, during the course of hearing, the Assessee agreed to the adjudication of the matter on merits and/or restoration thereof for factual verification by the Ld. Commissioner.

Considering the peculiar facts and circumstances of the case in totality, we observe that the issue requires examination in its proper perspective. Further, the Ld. Commissioner considered the additional evidence furnished for the first time before him without following the procedure prescribed under rule 46A of the Income Tax Rules, 1962. We, therefore, deem it appropriate to restore the matter to the file of the Ld. Commissioner for decision afresh in accordance with law. Suffice to say, the Ld. Commissioner shall afford a reasonable opportunity of being heard to the Assessee and, if required, may call for a remand report from the AO and/or afford an opportunity to the AO to examine the additional evidence.

We clarify that the exercise shall remain confined to the necessary factual verification and shall not extend to a roving enquiry.

The Assessee shall be at liberty to raise any other ground in accordance with law.

In the result, the Revenue’s appeal and the Assessee’s Cross Objection are allowed for statistical purposes.