SAI NINAD ENTERPRISES ,MUMBAI vs. ITO WARD 2(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER 1. ITA No. 13/Mum/2026 (Assessment Year: 2014-15) 2. ITA No. 12/Mum/2026 (Assessment Year: 2017-18) Sai Ninad ITO Ward 2(1) Enterprises Qureshi Mansion, Vs. A-305, Pawan CHS, Gokhule Road, Thane, Pawan Nagar, Shukla Maharashtra. Compound, Dahisar East, Mumbai-400068 PAN/GIR No. ABNFS0870L (Applicant) (Respondent) Assessee by Shri Santosh Nare, Ld. AR Revenue by Shree Kumar C., Ld. DR Date of Hearing 24.06.2026 Date of Pronouncement 03.07.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: These two appeals filed by the assessee are directed against the separate orders, both dated 04.11.2025, passed by the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as "CIT(A)"] for Assessment Years 2014-15 and 2017-

2 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises 18, arising out of the assessment orders passed by the Assessing Officer under sections 143(3) and 144 respectively. Since common issues arise out of the peculiar facts and circumstances of the case and both the appeals were heard together, they are disposed of by this consolidated order for the sake of convenience.

Assessment Year: 2014-15

Assessment Year: 2017-18

3 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises 1. Based on facts and circumstances of the case the learned assessing officer erred in making addition under Section 69A of the income tax act of Rs. 90,36,000 being the entire amount of cash deposits in the bank accounts with Axis Bank and HDFC Bank without considering the cash withdrawn from the very same bank accounts during the year. 2. Based on facts and circumstances of the case the learned assessing officer erred in estimating the business income of the appellant at Rs. 7,91,707 being one percent of the other credit entries appearing the bank statements of Axis Bank and HDFC Bank as income for the year under consideration, ignoring the fact that such credits included non-income items such as loan transactions, transfers, and other capital or financial receipts. 3. Your Appellant craves leave to add, amend or delete any ground of appeal. Facts of the case

4 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises functional and the business activities as well as statutory compliances came to a standstill. 4. The assessee has further explained that the entire affairs of the partnership firm, including income-tax matters, were being looked after exclusively by the managing partner, Shri Amit Palshetkar, who held 95% share in the firm. It has also been brought to our notice that Shri Amit Palshetkar expired on 17.07.2022 due to Covid, which further aggravated the difficulties faced by the assessee in pursuing the pending tax proceedings. 5. For Assessment Year 2014-15, the assessee filed its return of income declaring total income of Rs.9,74,563/-. The case was selected for scrutiny and assessment proceedings were completed by the Assessing Officer. During the assessment proceedings, the Assessing Officer examined unsecured loans received by the assessee. Although the assessee furnished confirmations, PAN details, addresses of the creditors and bank statements evidencing the receipt of the loans through banking channels, the Assessing Officer held that the assessee had failed to establish the identity, genuineness and creditworthiness of the creditors and consequently made an addition of Rs.4,03,44,277/- under section 68 of the Act. The Assessing Officer further disallowed petty balances written off amounting to Rs.6,64,993/- and also initiated penalty proceedings under section 271(1)(c). 6. The learned CIT(A) dismissed the appeal on account of non- prosecution without adjudicating the issues on merits.

5 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises 7. For Assessment Year 2017-18, the Assessing Officer received information through the ITS system regarding cash deposits aggregating to Rs.90,36,000/- made in the assessee's bank accounts maintained with Axis Bank and HDFC Bank. Since no return of income had been filed, notice under section 142(1) dated 29.11.2017 was issued. Thereafter, further notices under section 142(1), summons under section 131, notices under section 133(6) to the banks and a final opportunity vide notice dated 16.09.2019 were issued. As there was no compliance, the Assessing Officer completed the assessment ex parte under section 144 vide order dated 21.11.2019. 8. The Assessing Officer treated cash deposits of Rs.90,36,000/- as unexplained money under section 69A of the Act and further estimated business income at Rs.7,91,707/- being 1% of other credit entries aggregating to Rs.7,91,70,777/- appearing in the bank accounts. The total income was assessed at Rs.98,27,710/-. 9. The learned CIT(A) also dismissed the appeal for want of prosecution without examining the additions on merits. 10. Before us, the learned Authorised Representative (AR) submitted that the non-compliance before both the Assessing Officer as well as the learned CIT(A) was neither intentional nor deliberate. He reiterated the factual circumstances leading to closure of the business, failure of the real estate project, recovery proceedings by financial institutions, auction of the residential property of the managing partner, closure of the office premises,

6 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises multiple legal proceedings and eventual demise of the managing partner, Shri Amit Palshetkar, who was solely handling the affairs of the firm. 11. With respect to Assessment Year 2014-15, it was submitted that complete documentary evidence in support of the unsecured loans including confirmations, PAN details, addresses and bank statements had been furnished during the assessment proceedings and the additions deserved to be deleted after proper appreciation of the evidence. 12. In respect of Assessment Year 2017-18, it was submitted that the cash deposits represented redeposit of cash withdrawn from the same bank accounts and therefore could not be treated as unexplained money under section 69A. It was further submitted that the other credit entries represented transfers, loan transactions and other capital or financial receipts and estimation of business income at 1% thereof was wholly arbitrary. 13. The learned AR submitted that the learned CIT(A) had dismissed both the appeals without adjudicating the issues on merits and, therefore, considering the peculiar facts of the case, the entire matters may be restored to the file of the Jurisdictional Assessing Officer to enable the assessee to produce all supporting documentary evidence. 14. The learned Departmental Representative relied upon the orders of the lower authorities.

7 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises 15. We have heard the rival submissions and carefully perused the material available on record. We find that the appeals before us arise out of an unusual factual background. The assessee has placed before us material explaining the circumstances leading to repeated non-compliance before the tax authorities. According to the assessee, the failure of its only real estate project, recovery proceedings initiated by financial institutions, auction of the residential property of the managing partner, closure of office premises, multiple legal proceedings and the subsequent demise of the managing partner resulted in complete disruption of its business and statutory compliances. 16. We further find that the learned CIT(A) has dismissed both the appeals solely on account of non-prosecution without adjudicating the grounds raised by the assessee on merits. Thus, the assessee has not had the benefit of a decision on merits from the first appellate authority. 17. In so far as Assessment Year 2017-18 is concerned, the assessment itself has admittedly been completed ex parte under section 144. The additions involve factual verification regarding the source of cash deposits, availability of cash, nexus between withdrawals and redeposits and the nature of other credit entries reflected in the bank accounts. 18. Likewise, in Assessment Year 2014-15, the additions under section 68 and on account of petty balances written off also require examination of the documentary evidence which the

8 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises assessee claims to have furnished and proposes to substantiate further before the Assessing Officer. 19. The settled principle of law is that litigation should ordinarily be decided on merits rather than on technical defaults. Where sufficient cause is shown and the issues require proper factual verification, the matter deserves to be restored so that substantial justice is advanced. 20. Having regard to the totality of the facts and circumstances of the case, particularly the fact that the appellate authority has not examined the issues on merits in either of the years and that Assessment Year 2017-18 itself was framed ex parte under section 144, we are of the considered opinion that the ends of justice would be adequately served by restoring both the appeals to the file of the Jurisdictional Assessing Officer. 21. Accordingly, we set aside the impugned orders of the learned CIT(A). The assessment for Assessment Year 2017-18 framed under section 144 and the assessment for Assessment Year 2014-15 to the extent challenged before us are restored to the file of the Jurisdictional Assessing Officer for adjudication afresh after granting the assessee adequate and effective opportunity of being heard. The assessee shall cooperate in the proceedings and furnish all books of account, confirmations, bank statements, cash flow statements and other documentary evidence as may be required by the Assessing Officer. The Assessing Officer shall thereafter pass speaking orders in

9 ITA No. 12 and 13 /Mum/2026 Sai Ninad Enterprises accordance with law without being influenced by the observations contained in the earlier assessment orders.

Order pronounced in the open court on 03.07.2026.

Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND VASANT MAHADEOKAR) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 03/07/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. संबंधधत आयकर आयुक्त / The CIT(A) 3. आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai