HEETALBHAI JAISUKHBHAI KANTAWALA,SURAT vs. DCIT, CENTRAL CIRCLE-2(3), SURAT

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ITA 1071/SRT/2025Status: DisposedITAT Surat16 July 2026AY 2014-155 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) had passed an ex-parte order without discussing the merits and that the assessee's inability to provide details was due to the alleged fraudulent actions of their former Chartered Accountant. The matter was remanded to the AO for fresh assessment.

What were the facts?

The assessee's appeals for AY 2013-14 and 2014-15 were against additions made by the AO on account of capital introduced, unsecured loans, and provisions, treated as unexplained cash credits and fictitious liabilities. The CIT(A) had dismissed the assessee's appeals ex-parte.

What were the issues?

Whether additions made by the AO on account of unexplained cash credits and fictitious liabilities were justified, and whether the CIT(A) erred in passing an ex-parte order without considering the assessee's contentions regarding the fraudulent actions of their former CA.

Which sections of the Income-tax Act were involved?

Section 68,Section 41,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

For Appellant: Shri P.M. Jagasheth, CA
For Respondent: Shri Ashish Kumar, Sr. DR
Hearing: 11.06.2026Pronounced: 16.07.2026

PER : SUCHITRA KAMBLE, J M: These appeals filed by the assessee are against the orders passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 10.03.2025 & 25.03.2025 for the Assessment Year (in short “AY”) 2013-14 & 2014-15 respectively.

2.

Firstly, we are taking the appeal for A.Y. 2013-14.

ITA Nos.1070 & 1071/SRT/2025 Mr. Heetalbhai Jaisukhbhai Kantawala 3. The assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.47,24,878/- on account of capital introduced treated as alleged unexplained cash credits u/s. 68 of the IT Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.63,87,286/- on account of unsecured loans shown as payable in the audited balance sheet as on 31.03.2013 treated as alleged unexplained cash credit u/s. 68 of the IT Act, 1961. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.24,93,426/- on account of current liability and provisions shown in balance sheet treated as alleged unverifiable and fictitious liability u/s. 41 of the unexplained cash credits u/s. 68 of the Act, 1961. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.41,35,002/- on account of estimation of net profit @15% of turnover, which works out at Rs.61,50,377/-less net profit of Rs.20,15,375/- shown by the assessee, remaining amount of Rs. 41,35,002/- (Rs.61,50,377 - Rs.20,15,475/-) added to the total income of the assessee. 5. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed ex-parte order, hence the case may please be set aside and restored back to the CIT(A) or AO for sake of interest of natural justice. 6. On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in initiating penalty proceedings u/s 271(1)(C) of the of the Income Tax Act, 1961. 7. It is therefore prayed that the above penalty may please be deleted as learned members of the tribunal may deem it proper. 8. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 4. The assessee has filed return of income on 24.03.2015 declaring total income of Rs.20,15,380/- for the A.Y. 2013-14. The case was selected for scrutiny and statutory notices were served upon the assessee along with

ITA Nos.1070 & 1071/SRT/2025 Mr. Heetalbhai Jaisukhbhai Kantawala questionnaire dated 28.12.2015. The assessee did not make any written submission and has not filed any details before the Assessing Officer (in short “the AO”). Therefore, the AO made addition of Rs.47,24,878/- as unexplained cash credits u/s 68 of the Act. The AO further made addition of Rs.63,87,286/- in respect of loans and treated the same as unexplained cash credits u/s 68 of the Act. Further, the AO made addition of Rs.24,93,426/- in respect of expenses of sundry creditors for goods and expenses for other provisions. The AO observed that the excess and false liability created by the assessee to the extent of Rs.24,93,426/- is cessation of liability u/s 41 of the Act. The AO further made addition of Rs.41,35,000/- towards the estimated net profit of assessee at 15%.

5.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

6.

The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the assessee has filed return of income in the A.Y. 2013-14 & 2014-15 only. The assessee was not required to file return of income and hence not filed prior to 2013-14 or after 2014-15 the return of income. The Ld. AR further submitted that the addition made by the assessee is not justifiable and does not have any means or business to substantiate such a huge income. The assessee was not aware about the parties being non existent capital, loans and creditors for which the assessee has filed the complaint against the Chartered Accountant (in short “CA”) at that time in the year 2015 and through settlement commission dated 27.09.2019 the assessee has taken precautionary measures after knowing that the said earlier CA has fraudulently made the unexplained cash deposits. Therefore, the Ld. AR submitted that the additions made by the AO be deleted as the CIT(A) has also passed ex-parte order without discussing the merits.

7.

The Ld. Departmental Representative (in short “Ld. DR”) relied upon the assessment order and the order of the Ld. CIT(A).

ITA Nos.1070 & 1071/SRT/2025 Mr. Heetalbhai Jaisukhbhai Kantawala 8. We have heard both the parties and perused all the relevant materials available on record. There is a delay of 135 days in filing the appeal for which the assessee has filed detailed affidavit along with condonation of delay application. The reason for delay appears to be genuine. Hence, the delay is condoned.

9.

As regards the order of the CIT(A), the CIT(A) has passed ex-parte order without discussing the merits of the case and has also not given details as to whether the notices were served to the assessee or not. Besides this, as per the contentions of the assessee, the details could not be filed within the stipulated time either before the AO as well as before the CIT(A) due to the fact that the concerned earlier CA has not taken care of the assessee’s case and in fact fraudulently made cash credits in the name of the assessee. Thus, these aspects along with the criminal compliant filed by the assessee against the said CA which entered into settlement agreement dated 27.09.2019 and more particularly page 24, para 3 of the said settlement agreement which categorically mentions that the said settlement document is in respect of income tax and when the demand in the relevant assessment year is cancelled then the said settlement duly will be cancelled without any consideration. These aspects need to be verified. Therefore, we are remanding back the matter to the file of the AO for assessing the assessee’s actual income as per the Income Tax Act/Income Tax Rules. Needless to say, the assessee be given opportunity of hearing and following principles of natural justice, the AO is directed to verify the details and adjudicate the issue as per Income Tax Act. Thus, ITA No.1070/SRT/2025 for A.Y. 2013-14 is partly allowed for statistical purpose.

10.

As regards ITA No.1071/SRT/2025 for A.Y. 2014-15 is concerned, the same is identical to the A.Y. 2013-14 and hence the same is also remanded back to the file of the AO with the similar direction given herein above for A.Y. 2013-14.

ITA Nos.1070 & 1071/SRT/2025 Mr. Heetalbhai Jaisukhbhai Kantawala 11. In result, both the appeals of the assessee are partly allowed for statistical purpose.

Order pronounced in the open court on 16.07.2026

Sd/- Sd/- (B.M. BIYANI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 16.07.2026 * Kishore, Sr. P.S.

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order,

Assistant Registrar/Sr.PS/PS ITAT, Surat Bench

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