NAAGAL GARMENT INDUSTRIEZ PRIVATE LIMITED,MUMBAI vs. DY COMMISSIONER OF INCOME TAX CIIRCLE 2(3)(1), MUMBAI

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ITA 726/MUM/2026Status: DisposedITAT Mumbai15 May 2026AY 2010-117 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the assessee had a bona fide belief that the CIT(A) would defer adjudication pending the Supreme Court's decision on the Section 263 validity. The assessee claims to possess all necessary evidence for adjudication.

What were the facts?

The assessee's appeal concerns an addition of Rs. 1,67,83,152/- made under Section 69C for unexplained expenditure. This addition was made pursuant to a revisionary order under Section 263, which was upheld by higher authorities.

What were the issues?

Whether the CIT(A) erred in dismissing the appeal ex parte without affording an effective opportunity to the assessee, and whether the matter should be restored for fresh adjudication on merits.

Which sections of the Income-tax Act were involved?

Section 69C,Section 263,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH

For Appellant: Shri Jay Bhansali
For Respondent: Shri Ganesh Sudhakar Bare
Hearing: 14/05/2026Pronounced: 15/05/2026

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against the order dated 05.12.2025 passed by the learned Commissioner of Income Tax (Appeals), NFAC, Delhi, arising out of assessment framed under section 143(3) r.w.s. 263 of the Income-tax Act, 1961 for the assessment year 2010-11.

2 ITA No.726/Mum/2026 Naagal Garment Industries Private Limited The principal grievance raised by the assessee is against the addition of Rs.1,67,83,152/- made under section 69C of the Act on account of alleged discrepancies and unexplained expenditure appearing in the books of various vendors vis-à- vis the expenses claimed by the assessee.

2.

Briefly stated, the facts borne out from the record are that the assessee company is engaged in the business of production and trading of garments through consignee agents, distributors and trade partners. The original assessment was completed under section 143(3) vide order dated 30.03.2013 determining the income after making certain additions/disallowances. Subsequently, the learned CIT invoked revisional jurisdiction under section 263 of the Act observing that the Assessing Officer had allegedly failed to properly verify and examine various expenses claimed by the assessee. The revisionary order under section 263 dated 27.03.2015 was challenged before the Tribunal and thereafter before the Hon’ble Madhya Pradesh High Court, however, the same was upheld and the assessee is stated to have preferred an SLP before the Hon’ble Supreme Court, which is stated to be pending.

3.

Pursuant to the directions issued under section 263, the Assessing Officer initiated fresh assessment proceedings and issued notices under section 142(1) and notices under section

3 ITA No.726/Mum/2026 Naagal Garment Industries Private Limited 133(6) to various parties. Based upon certain replies and alleged discrepancies noticed between the expenditure claimed by the assessee and the confirmations received from some of the vendors, the Assessing Officer proceeded to make addition under section 69C aggregating to Rs.1,67,83,152/- holding that the assessee could not satisfactorily explain the differences appearing in the vendors’ books and certain confirmations were either not received or were not found acceptable by the Assessing Officer. Consequently, assessment was completed under section 143(3) r.w.s. 263 vide order dated 30.12.2017.

4.

Aggrieved by the said assessment order, the assessee preferred appeal before the learned CIT(A). It has been submitted before us that during the appellate proceedings the assessee had requested the learned CIT(A) to keep the matter in abeyance in view of the pendency of the SLP before the Hon’ble Supreme Court challenging the validity of the order passed under section 263. It has further been contended that the learned CIT(A), without properly considering the explanations and evidences available with the assessee and without affording effective opportunity to contest the additions on merits, proceeded to dismiss the appeal ex parte vide impugned order dated 05.12.2025.

4 ITA No.726/Mum/2026 Naagal Garment Industries Private Limited 5. Before us, the learned counsel submitted that the assessee is in possession of complete documentary evidences, confirmations and supporting materials to explain the discrepancies pointed out by the Assessing Officer and also to substantiate the genuineness of the expenditure claimed in the books of account. It was vehemently contended that many of the observations made by the Assessing Officer regarding alleged unauthenticated confirmations or discrepancies were never specifically confronted to the assessee in the manner now forming part of the assessment order. It was further submitted that the assessee was under a bona fide belief that since the issue relating to validity of the proceedings under section 263 was pending before the Hon’ble Supreme Court, the learned CIT(A) would defer adjudication of the appeal on merits till the outcome of the said proceedings. It was thus pleaded that the ex parte disposal of the appeal has caused serious prejudice to the assessee and therefore, in the interest of substantial justice, the matter should be restored back to the file of the learned CIT(A) for fresh adjudication after granting proper and effective opportunity of hearing.

6.

On the other hand, the learned Departmental Representative relied upon the orders of the authorities below. However, he fairly left the issue to the discretion of the Bench if the matter was to be restored for fresh adjudication.

5 ITA No.726/Mum/2026 Naagal Garment Industries Private Limited 7. After considering the rival submissions and perusing the material placed on record, we find that the assessee had proceeded under a bona fide belief that since the challenge to the order passed under section 263 of the Act was pending consideration before the Hon’ble Supreme Court, the appeal before the learned CIT(A) would also be taken up and adjudicated after the outcome of the said proceedings. However, now before us, the learned counsel has categorically submitted that the assessee is in possession of all relevant documentary evidences, confirmations, reconciliations and supporting materials which are necessary for proper adjudication of the additions made under section 69C of the Act and the same deserve examination in accordance with law. Considering the entirety of the facts and circumstances of the case, we are of the opinion that the issues involved require fresh examination at the end of the learned CIT(A) after considering the assessee’s explanations and evidences on merits.

8.

Accordingly, the impugned order passed by the learned CIT(A) is set aside and the matter is restored back to his file for adjudication afresh in accordance with law after considering the assessee’s submissions, documentary evidences, confirmations, explanations and reconciliation statements which may be filed before him. The learned CIT(A) shall afford due and effective opportunity of hearing to the

6 ITA No.726/Mum/2026 Naagal Garment Industries Private Limited assessee and thereafter pass a reasoned and speaking order dealing with all the issues raised before him. The assessee is also directed to extend full cooperation and furnish all requisite details and evidences as may be called for during the appellate proceedings.

9.

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

Order pronounced on 15th May, 2026.

Sd/- Sd/- (PRABHASH SHANKAR) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 15/05/2026 KARUNA, sr.ps

7 ITA No.726/Mum/2026 Naagal Garment Industries Private Limited Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy//

(Asstt. Registrar) ITAT, Mumbai

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