JAYARAMAN MARIA GORETTI,VILLIVAKKAM vs. INCOME TAX OFFICER, NON-CORPORATE WARD-10(3), CHENNAI

The Assessee raised the following grounds of appeal :

The learned CIT(A) erred in law and on facts in confirming the action of the Assessing Officer in invoking section 154 of the Act. The learned CIT(A) failed to appreciate that the issue involved was not a mistake apparent on record but involved detailed examination of facts, evidences, and interpretation of law. The rectification proceedings were wrongly invoked to impose tax liability under section 115BBE, which cannot be treated as a mere correction of computational error and is beyond the scope of section 154 of the Act.

The learned CIT(A) failed to appreciate that the original assessment order passed under section 147 read with section 144 dated 01.03.2023 reflected nil tax liability. Since the original assessment order did not create any tax demand or cause any tax prejudice to the Appellant, the Appellant had no occasion or necessity to prefer an appeal against the said assessment order. The Appellant was under a bona fide belief that no adverse civil consequence arose from the said order. The subsequent rectification order passed under section 154 imposing tax liability of Rs. 46,22,158 for the first time gave rise to a cause of action, and therefore the Appellant preferred appeal against the rectification order. The learned CIT(A) failed to appreciate this crucial fact and erred in holding that the Appellant cannot challenge the addition or underlying issues in appeal against the rectification order.

The learned CIT(A) failed to appreciate that the rectification order passed by the Assessing Officer resulted in fresh tax liability of Rs. 46,22,158, which substantially prejudiced the Appellant. The action of the Assessing Officer amounts to review and modification of the original assessment order under the guise of rectification, which is impermissible in law. The provisions of section 154 are limited in scope and cannot be used to impose fresh tax liability involving debatable issues.

The learned CIT(A) failed to appreciate that the addition of Rs. 52,12,000 under section 69A itself was disputed and fully explained by the Appellant during the assessment proceedings. The Appellant had submitted detailed explanation along with documentary evidence to establish that the deposits represented genuine funds and not unexplained income. When the very basis of addition is disputed and supported by evidence, rectification proceedings cannot be invoked to impose tax liability under section 115BBE.

The learned CIT(A) failed to appreciate that the Appellant had furnished complete documentary evidence including sale deed, bank statements, death certificate, identity documents, and detailed explanation regarding the source of funds. The Assessing Officer did not bring any material evidence on record to disprove the Appellant's explanation. The addition was made merely on suspicion, conjectures, and presumptions, which is unsustainable in law.

The learned CIT(A) failed to appreciate that rectification proceedings under section 154 can be invoked only for correcting patent and obvious mistakes apparent on record and cannot be used for deciding debatable issues involving investigation of facts and application of law. The question whether deposits represent unexplained income or explained funds is a debatable issue and cannot be rectified under section 154.

The learned CIT(A) erred in confirming the application of section 115BBE without independently examining whether the addition under section 69A was justified. The provisions of section 115BBE are consequential in nature and cannot be applied automatically without establishing that the amount represents unexplained income.

The learned CIT(A) failed to exercise appellate jurisdiction properly and erred in holding that the merits of addition could not be examined in appeal against rectification order. The learned CIT(A) ought to have examined the legality and correctness of the rectification order in light of the factual explanation and evidences submitted by the Appellant, particularly when the rectification order created tax liability for the first time.

The learned CIT(A) failed to appreciate that the Assessing Officer did not properly consider the explanation and evidences submitted by the Appellant and passed the rectification order mechanically without proper application of mind. The confirmation of such order is arbitrary and violative of the principles of natural justice.

The learned CIT(A) failed to appreciate that the Appellant is a senior citizen with limited income and that the transactions in question were genuine and supported by documentary evidence. The addition and consequential tax demand imposed on the Appellant are unjustified and liable to be deleted.

The Appellant submits that the orders passed by the Assessing Officer and confirmed by the learned CIT(A) are arbitrary, illegal, unjustified, and liable to be set aside. The Appellant craves leave to add, amend, alter, or withdraw any of the above grounds at the time of hearing.”

Briefly, the facts of the case are that the appellant is an Individual. No regular Return of Income for the Assessment Year 2015-16 u/s.139(1) of the Act was filed by the appellant. However, based on the information that the appellant made cash deposits of Rs.52,12,000/- in the bank account maintained with State Bank of India, 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 30.03.2022. In response to notice u/s.148 of the Act, appellant filed Return of Income on 28.04.2022 disclosing a total income of Rs.2,36,500/-. Against the said Return of Income, the assessment was completed by the Faceless Assessment Unit of the Department (hereinafter called ‘AO’) vide order dated 01.03.2023 passed u/s.147 r.w.s 144 read with section 144B of the Act at a total income of Rs.52,12,000/-. While doing so, the Assessing Officer made addition of cash deposits of Rs.52,12,000/- made in the bank account maintained with State Bank of India as unexplained money of the appellant for the failure of the appellant to substantiate explanation in support of source of the cash deposits that the cash deposits are made out of sale proceeds of property sold out of the money received towards loan.

While matte stood thus, the Assessing Officer issued a notice u/s.25.06.2024 u/s.154 of the Act proposing to compute the correct tax liability. IN response to show cause notice, the appellant filed an explanation on 05.07.2024, thereafter, the Assessing Officer passed an order u/s.154 of the Act on 26.11.2024 computing tax liability at Rs.46,22,158/-.

Being aggrieved by the order u/s.154 of the Act, an appeal was filed before the ld.CIT(A) challenging the addition of cash deposits of Rs.52,12,000/-. However, the ld.CIT(A) has dismissed the appeal by holding that no additions are made in the proceedings u/s.154 of the Act, therefore, the addition of cash deposit cannot be challenged. Accordingly, the appeal filed by the assessee was dismissed.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal.

We heard rival submissions and perused the material available on record. The appellant challenged the addition of cash deposits of Rs.52,12,000/- made by the Assessing Officer by impugning the order passed u/s.154 of the Act. We had carefully perused order passed by Lower Authorities. We find that the Assessing Officer had not made any fresh additions in the proceedings u/s.154 of the Act. The Assessing Officer merely corrected the mistake in the calculation of tax liability, the appellant had no grievance against the correction of the tax liability. Therefore, the issue of addition made in the order passed u/s.143(3) cannot be challenged by impugning the order passed u/s.154 of the Act. The order of ld.CIT(A) is a well reasoned one and in consonance with the correct legal position. We do not find any merit in the appeal filed by the assessee.

In the result, appeal filed by the Assessee stands dismissed. Order pronounced in the open Court on 3rd July, 2026.