SHAMBHUSINGH BHANWARSINGH DEVDA,MUMBAI vs. ITO, WARD-41(4)(4), MUMBAI, MUMBAI

This appeal by the assessee is directed against the order dated 19.12.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“the learned CIT(A)”], under section 250 of the Income-tax Act, 1961 [“the Act”], for the assessment year 2021-22. The impugned appellate order arises from the assessment order dated 23.12.2022 passed under section 143(3) read with section 144B of the Act.

The assessee has raised the following grounds of appeal:

Brief facts of the case are that the assessee is an individual engaged in the business of trading in stainless-steel scrap through his proprietary concern, M/s Dharamraj Metal Corporation. The assessee filed his return of income on 13.01.2022 declaring total income of Rs. 18,35,330/-. The case was selected for scrutiny. In the assessment completed under section 143(3) read with section 144B of the Act, the Assessing Officer noticed differences between the entries in the books 2 and the narration appearing in the bank statement. He consequently made an addition of Rs. 9,24,000/- in respect of unsecured loans and a further addition of Rs. 40,19,998/- in respect of payments to sundry creditors. The assessed income was determined at Rs. 67,79,328/-.

In appeal, the assessee filed additional evidence under Rule 46A of the Income-tax Rules, 1962. The additional evidence comprised, inter alia, party-wise reconciliation charts, confirmations, income-tax return acknowledgements and bank statements of the concerned lenders and creditors. The assessee explained that the adverse inference in the assessment order was founded principally on the narration in his bank statement showing the name of his proprietary concern and that this precise objection was communicated for the first time in the assessment order. The learned CIT(A), however, declined to admit the additional evidence and confirmed both additions. Aggrieved, the assessee is in appeal before the Tribunal.

The learned Authorised Representative submitted that the Assessing Officer treated repayments aggregating to Rs. 5,00,000/- to Shri Bharat V. Shah and Smt. Jagruti B. Shah as self-withdrawals merely because the bank narration referred to Dharamraj Metal Corporation. As regards Rs. 4,24,000/-, it was submitted that the amount represented a fresh loan received from Shri Ajaysingh Devda but was inadvertently posted in the name of Smt. Kailashkuwar Shambhusingh Devda. It was further submitted that similar narration-based differences led to the addition of Rs. 40,19,998/- relating to five sundry creditors. According to the learned Authorised Representative, the confirmations and the lenders’ and creditors’ bank statements establish the corresponding receipt or payment and reconcile the transactions. These documents were placed before the learned CIT(A), but were rejected without examination by the Assessing Officer. He therefore prayed that the additions be deleted or, in the alternative, that the matter be restored to the Assessing Officer for verification of the corresponding transactions appearing in the parties’ bank statements.

The learned Departmental Representative supported the orders of the authorities below. He submitted that sufficient opportunities were granted during assessment proceedings and that the assessee had failed to furnish complete supporting evidence before the Assessing Officer. He, however, left the issue of restoration for verification of the additional evidence to the discretion of the Bench.

We have heard the rival submissions and perused the material placed before us. The limited controversy before us is whether the additions ought to have been confirmed without a proper examination of the additional evidence filed before the learned CIT(A). The assessment order shows that the additions arose substantially from the Assessing Officer’s understanding of the narration appearing in the assessee’s bank statement. In appeal, the assessee furnished confirmations, income-tax particulars and bank statements of the counterparties with the object of demonstrating the actual movement of funds and reconciling the entries. These documents have a direct bearing on the very basis on which the additions were made.

The learned CIT(A) has referred to the additional evidence, but declined its admission on the ground that the assessee had sufficient opportunity during assessment proceedings. At the same time, observations on the evidentiary value of the documents and on the merits of the transactions have been made without calling for their verification by the Assessing Officer. We also find substance in the assessee’s grievance that certain observations in the appellate order do not arise 4 from the assessment record. The learned CIT(A) referred to non- compliance with notices under section 133(6), whereas no such foundation is recorded by the Assessing Officer for the impugned additions. The appellate order also refers to health issues and lack of technical literacy as the cause pleaded for admission of additional evidence, while the assessee states that the application under Rule 46A was founded on want of adequate opportunity to answer the specific bank-narration objection. In these circumstances, the additional evidence could not have been discarded without a proper factual verification.

The additional evidence is relevant and goes to the root of the matter. Its verification requires examination of the books of account, bank statements, confirmations and the corresponding entries in the bank accounts of the lenders and creditors. Such an exercise is appropriately carried out by the Assessing Officer. We therefore set aside the impugned order on the issues of additions of Rs. 9,24,000/- and Rs. 40,19,998/- and restore these issues to the file of the Assessing Officer for fresh adjudication. The additional evidence filed by the assessee shall be admitted and examined on its merits. The Assessing Officer shall verify the party-wise reconciliation and the corresponding entries in the bank statements and may make such further enquiry as is considered necessary. The assessee shall furnish all documents and explanations called for and shall cooperate in the proceedings. Needless to say, a reasonable opportunity of being heard shall be granted to the assessee before passing a speaking order in accordance with law. We have not expressed any opinion on the merits of the additions.

Ground Nos. 2 to 5 are accordingly allowed for statistical purposes. Ground No. 1, being general and not requiring separate adjudication in view of the restoration ordered above, is left open. Ground No. 6, relating to initiation of penalty proceedings under section 270A of the Act, is premature and does not call for adjudication at this stage.

In the result, the appeal filed by the assessee is allowed for statistical purposes.