DILIPSINH LAXMANSINH RATHOD,AHMEDABAD vs. THE ITO, WARD-7(2)(3), AHMEDABAD

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ITA 207/AHD/2026Status: DisposedITAT Ahmedabad29 June 2026AY 2004-056 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the assessee was acquitted by the ACB Court and had provided explanations for the investments and expenses, the additions made by the Assessing Officer were unjustified. The additions were deleted.

What were the facts?

Following a search by the ACB, the assessee's income was assessed with additions for unaccounted investment and estimated marriage expenses. The Tribunal had previously set aside the matter for re-adjudication in light of the ACB Court's decision. The assessee was subsequently acquitted by the ACB Court.

What were the issues?

Whether additions made by the AO are justified when the assessee has been acquitted by the ACB Court and has provided explanations for the investments and expenses.

Which sections of the Income-tax Act were involved?

Section 144,Section 263,Section 147,Section 143(3),Section 254

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: MS SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Divyakant Parikh, AR
For Respondent: Shri Rajesh Garg, SR-DR
Hearing: 19.05.2026Pronounced: 29.06.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order of Commissioner of Income Tax, Appeal, Addl/JCIT (A)-4, Mumbai [hereinafter referred to as “ Addl. CIT(A)”] dated 22.11.2025 for the Assessment Year (A.Y.) 2004-05 in the proceeding u/s 144 r.w.s 263 of the Income Tax Act [hereinafter referred as “The Act”].

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2004-05 o 27.09.2005 declaring total income of

ITA No. 207/Ahd/2026 Dilipsinh Laxmansinh Rathod Vs ITO, AY- 2004-05 2 Rs.1,11,430/-. A search was conducted by the Anti-Corruption Bureau (ACB), Ahmedabad, in the case of the assessee on 28.03.2005. On the basis of intimation received from (ACB), proceeding u/s. 147 of the Act was initiated and the assessment was completed u/s. 143(3) r.w.s. 147 of the Act on 22.12.2006 determining income at Rs.2,36,430/-; wherein an addition of Rs.1,25,000/- was made on account of unaccounted investment made in assesses’s own names and also in the name of his family members. The assessee had preferred an appeal against the said order and the matter was set aside by the Tribunal to the file of the AO, with a direction to re-adjudicate the issue keeping in view the decision of the Special Judge, ACB. The AO, in pursuance to the direction of the Tribunal, had passed an order u/s. 143(3) r.w.s 254 of the Act on 31.10.2017 at total income of Rs. 2,11,430/-, wherein addition of Rs.1,00,000/- was made on account of estimated marriage expense. This order was, thereafter, set aside by the Ld. PCIT on the ground that the AO did not make inquiry regarding the investment in the name of the family members. In pursuance to order u/s. 263 of the Act, the AO had completed the assessment u/s. 144 r.w.s. 263 of the Act on 30.12.2019 at total income of Rs. 2,36,430/- wherein further addition of Rs. 25,000/- was made in respect of investment in FDRs in the name of daughter of the assessee.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. Addl. CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th

ITA No. 207/Ahd/2026 Dilipsinh Laxmansinh Rathod Vs ITO, AY- 2004-05 3

4.

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

1.

The Ld CIT(Appeals)-[ ADDL./JCIT (APPEAL)-4 MUMBAI ] had grievously erred both in law and on facts in dismissing the appeal of the appellant by not properly considering the grounds, facts and submissions of the evidences before him The order passed in violation of principles of natural justice deserves to be cancelled. It be so held now. 2. Without prejudice to the above ground, the Ld.ADDL/JCIT(Appeals)-4 Mumbai also erred in law and on facts in confirming the additions of Rs. 1,25,000/- for which the evidences were already furnished at lower levels as submitted before him vide various letters with Annexures. The Sources of investment and expenses were duly explained and hence the additions made deeming the amount of Rs. 1,25,000/- as the appellants income is patently wrong and contrary to facts. It be so held now and addition of Rs. 1,25,000/- be deleted now. 3. The Ld ADDL/JCIT(Appeals) further erred both in law and on facts in not appreciating that the addition of Rs. 1,00,000/- and Rs. 25,000/- towards alleged unexplained investment/ expenditure could not have been made for the year under consideration as the source of original investment were not only explained but also were evident from the copies of the relevant documents and hence invoking such deeming provisions for the year under consideration is patently against the sanction of law. It be so held now and there being neither unexplained investment nor unexplained expenditure, the entire addition of Rs. 1,25,000/- be deleted. 4. The Id ADDL.JCIT (Appeals) also grievously erred both in law and on facts in not appreciating that once the appellant was discharged from the allegation of disproportionate assets by the ACB Court/ High Court after considering explanations and evidences, the very initiation u/s 147 made on him was illegal and without jurisdiction and hence the proceedings initiated in consequence of such report/reasons ought to be quashed as bad in law. It be so held now. 5. The Ld ADDL/JCIT (Appeals) also erred in law and on facts in not appreciating that once the assessment order dated 31.10.2017 was set aside wholly [though not justifiably), there was no justification on the part of the AO to compute income taking figure of Rs. 2,11,430/ which included erroneous addition of Rs 1,00,000/- and hence the order so passed ought to have been cancelled by him. It be so held now. 6. On the facts and in the circumstances of the appellants case and considering the grounds against affording inadequate opportunity of hearing by the Ld AO and also, considering the documentary evidences, the appeal of the appellant ought to have been allowed in toto and directed the Ld AO to accept the returned income of Rs. 1,1,430/ It be so held now.

ITA No. 207/Ahd/2026 Dilipsinh Laxmansinh Rathod Vs ITO, AY- 2004-05 4 7 The Id ADDLJCIT(Appeals)-4 Mumabi Ought to have held that the orders passed making additions of Rs. 1,25,000/- for the year under appeal were illegal, invalid and bad in law. It be so held now.

8.

The appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing. 5. Shri Divyakant Parikh, the Ld. AR of the assessee submitted that the Tribunal vide order dated 08.12.2016 had set aside the matter to the file of the AO with a direction to decide the issues in accordance with the decision of the Special Judge, ACB. The Ld. AR submitted that the AO had merely repeated the additions made in the original assessment without considering the findings of the Ld. Special Judge, ACB. He explained that the Special Judge, ACB vide order dated 02.03.2015 had acquitted the assessee from the charges levelled against him. Therefore, no addition was called for in the hands of the assessee.

6.

Per Contra, Shri Rajeev Garg, the Ld. SR-DR, supported the order of the lower authorities.

7.

We have considered the rival submissions. In the original assessment completed u/s. 143(3) r.w.s. 147 of the Act on 22.12.2006, an addition of Rs.1,25,000/- was made by the AO which pertained to estimated expense of marriage (Rs.1,00,000/-) and unexplained investment in FDR in the name of daughter (Rs. 25,000/-). The Tribunal vide order dated 08.02.2016 had set aside the matter to the file of the AO with a direction to decide the issues keeping in view the decision of the Special Judge, ACB. It is found that the Ld. Special Judge, ACB vide order dated 02.03.2015, a copy of which has been brought on record in the paper-book filed by the assessee, had acquitted the assessee from the

ITA No. 207/Ahd/2026 Dilipsinh Laxmansinh Rathod Vs ITO, AY- 2004-05 5 charges levelled against him. On the issue of investment in the name of family members, the Ld. Special Judge had given the following finding:

“Thus, the allegation levelled by the prosecution that the investments in the name of the family members of the accused are in fact, investments made by the accused appears to be baseless, lacking corroborative evidence either oral or documentary and it is made only on the basis of conjecture and surmises and not backed by legal evidence, hence cannot be accepted.”

8.

The Ld. Special Judge, ACB had also held that when the FDR/KVP stood in the name of the family members of the accused, the burden was on the prosecution to show that the family members were the benamidars of the accused. In the absence of any such evidence, the assesse was acquitted of the charges levelled against him under the provisions of Prevention of Corruption Act. In the present case, the AO had made the addition only on the basis of information received from ACB, Ahmedabad. No independent inquiry was carried out by the AO to establish that the assessee had incurred any marriage expense and no evidence for such expense was brought on record. Similarly, the investment of Rs. 25,000/- in FDR in the name of the daughter was also based on mere presumption and without considering the explanation of the assessee. The assessee had submitted before the AO that the marriage expense was made out of maturity proceeds of KVP of Rs. 55,000/- invested in 1997 and that the source of FDR of Rs. 25,000/- in the name of the daughter was out of the gifts received by her at the time of her marriage. These findings of the assessee were not controverted by the AO. Considering the explanation of the assessee and also the fact that the Ld. Special Judge, ACB had acquitted the assessee from the charges levelled under the Prevention of

ITA No. 207/Ahd/2026 Dilipsinh Laxmansinh Rathod Vs ITO, AY- 2004-05 6

Corruption Act, we do not find any justification for the additions as made by the AO. Accordingly, the addition of Rs.1,25,000/- on account of estimated marriage expense and investment in KVP in the name of the daughter, is deleted. The grounds taken by the assessee are allowed.

9.

In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 29/06/2026 at Ahmedabad.

Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 29th June, 2026 Neelesh, Sr. PS (True Copy) आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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