VINIT KANNAIYALAL GANDHI,DOMBIWALI vs. INCOME TAX OFFICER, KALYAN

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J(SMC)” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 2568/MUM/2026 Assessment Year: 2019-20

Vinit Kannaiyalal Gandhi, Income Tax Officer, Ward 3(2), 308, 3rd Floor, Rajaram Kalyan 2nd Floor, Rani Mansion, Smruti, Manpada Road near Vs. Kalyan – Murbad Road, above express mall, Tilak Nagar, Canara bank, Syndicate, Kalyan, Dombiwali (E), Thane, Kalyan- Maharashtra. Dombivali. PAN NO. AMYPG 3498 A Appellant Respondent

Assessee by : Ms. Akansha Shinde Revenue by : Dr. Sumit Jha (SR. DR)

: 23/06/2026 Date of Hearing : 30/06/2026 Date of pronouncement ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against the order dated 31.07.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi ["the Ld. CIT(A)"] for the Assessment Year 2019-20. The assessee has raised various grounds challenging the validity of the reassessment proceedings under sections 147/148 of the Income-tax Act, 1961 ("the Act"), the

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assessment framed under section 144 read with section 147, and the addition of ₹45,25,000/- made under section 68 of the Act together with the consequential invocation of section 115BBE and initiation of penalty proceedings. The grounds raised are reproduced as under:

“01. Invalid assumption of jurisdiction u/s 147

On the facts and in the circumstances of the case and in law, the learned CTT(A) has erred in upholding the action of the learned Assessing Officer in assuming jurisdiction under section 147 of the Income-tax Act, 1961 without satisfying the mandatory conditions prescribed under the Act. The reopening has been initiated merely on the basis of general information received from the Insight Portal, without any independent application of mind and without any tangible material establishing escapement of income in the hands of the Appellant 02. Invalid Issuance of Notice under Section 148-Lack of Jurisdiction

The learned CIT(A) has further erred in not appreciating that the impugned notice issued under section 148 is without jurisdiction and liable to be quashed, as the same was required to be issued by the Faceless Assessing Officer (FAO) but was instead issued by the Jurisdiction Assessing Officer (JAO) without valid authority of law. The assumption of jurisdiction by the FAO, being contrary to the provisions of the Income-tax Act, 1961, renders the assessment order void ab initio and liable to be annulled. 03. Invalid Approval - Non-mention of DIN

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned Assessing Officer in making and relying upon the alleged approval of the learned Principal Commissioner of Income Tax (PCIT) without communicating a valid Document Identification Number (DIN), as mandatorily required under the CBDT Circulars issued under section 119 of the Income-tax Act, 1961. The Appellant submits that any communication issued without a valid DIN is non-est in the eyes of law and deemed to have never been issued. Consequently, the assessment order passed on the basis of such invalid approval is bad in law and liable to be quashed. 04. Assessment framed u/s 144 without justification

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On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned Assessing Officer in completing the assessment under section 144 of the Income-tax Act, 1961 despite substantial compliance made by the Appellant during the course of proceedings. The assessment framed under section 144 is bad in law, as there was no deliberate or wilful non-compliance on the part of the Appellant so as to warrant invocation of the provisions relating to best judgment assessment. The impugned order therefore deserves to be quashed. 05. Addition u/s 68 - Repayment of Loan wrongly treated as Cash Credit

On the facts and in the circumstances of the case and in law, the learned CTT(A) has erred in upholding the action of the learned Assessing Officer in making an addition of ₹38,50,000/-under section 68 of the Income-tax Act, 1961, being amounts received back from five different parties towards repayment of loans earlier advanced by the Appellant. The learned authorities below failed to appreciate that amounts representing repayment of loans cannot be treated as unexplained cash credits in the year of receipt. The Appellant had duly furnished supporting evidence, including bank statements substantiating the earlier advances and subsequent repayments, which have been arbitrarily disregarded. The addition so made is contrary to facts and law and is liable to be deleted. 06. Loans received - Identity, genuineness and creditworthiness proved

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned Assessing Officer in making the addition of 26,75,000/-towards loans received (from 2 different parties), which is unjustified as the appellant discharged the primary onus under section 68 by furnishing:  PAN of lenders  Confirmation letters  ITR acknowledgements  Bank statements

The AO failed to conduct proper enquiry or bring any adverse material on record.

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition made by the learned Assessing Officer despite the fact that all transactions were carried out through regular banking channels. Merely because the transactions were undertaken with parties alleged to be suspicious

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cannot justify the addition in the absence of any material establishing that the monies belonged to the Appellant. The addition made on mere suspicion, conjecture or presumption is unsustainable in law and liable to be deleted. 08. Incorrect invocation of section 115BBE

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned Assessing Officer in invoking section 115BBE of the Income-tax Act, 1961 automatically and mechanically, without recording any independent finding that the essential conditions for invoking section 68 were duly satisfied in accordance with law. The application of section 115BBE, being consequential in nature, is unsustainable in the absence of a legally valid addition under section 68 and is therefore liable to be deleted. 09. Addition based on suspicion, not evidence On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the entire addition of ₹45,25,000/- made by the learned Assessing Officer, which is based merely on suspicion, conjecture and surmises without bringing any cogent or credible evidence on record. It is a settled principle of law that suspicion, however strong, cannot take the place of proof. The impugned addition, being unsupported by substantive material evidence, is arbitrary, unsustainable in law and liable to be deleted. 10. Violation of Principles of Natural Justice

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the assessment order passed by the learned Assessing Officer without properly confronting the Appellant with the alleged adverse material relied upon and without granting adequate and effective opportunity to rebut the same. The impugned order, having been passed in violation of the principles of natural justice, is bad in law and liable to be quashed. 11. Addition beyond the scope of reasons recorded - Change of foundation of reopening On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned Assessing Officer in making addition of 245,25,000/- on account of alleged unexplained cash credits, which was never the basis of reopening. The reassessment proceedings were initiated on the specific allegation that the appellant was beneficiary of accommodation entries from Consultshah Financial Services Pvt. Ltd. amounting to 25,00,000/-. However, in the final assessment order, no addition was made in respect of the alleged transaction with Consultshah and instead the AO shifted focus to other unrelated bank entries and parties not forming part of the recorded reasons.

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The AO has thus travelled beyond the scope of reasons recorded and changed the very foundation of reassessment, which is impermissible in law. 12. Reassessment invalid where original reason fails

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the learned Assessing Officer in sustaining the reassessment proceedings despite the fact that the very basis of reopening (i.e., alleged accommodation entry of ₹5,00,000/- from Consultshah Financial Services Pvt. Ltd.) did not survive and no addition was ultimately made on that issue. It is settled law that where no addition is made on the issue for which reopening was initiated, the Assessing Officer cannot independently assess other issues unless jurisdiction is validly assumed in accordance with law. The reassessment proceedings are therefore liable to be quashed. 13. Lack of nexus between recorded reasons and final addition

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the reassessment order wherein the final addition of 245,25,000/- under section 68 of the Income-tax Act, 1961 has no live nexus with the reasons recorded for reopening. In the absence of any direct and proximate connection between the recorded reasons and the ultimate addition made, the reassessment order lacks jurisdictional foundation and is therefore bad in law and liable to be quashed 14. Penalty initiation u/s 271AAC(1)

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the initiation of penalty proceedings under section 271AAC(1) of the Income-tax Act, 1961. The initiation of penalty is bad in law, as the very addition on which the penalty is proposed is unsustainable and there is neither any concealment of income nor any unexplained income within the meaning of the Act. The penalty proceedings therefore deserve to be quashed.” 2. At the outset, the learned Departmental Representative submitted that despite repeated opportunities afforded by the learned CIT(A), the assessee failed to participate in the appellate proceedings or furnish any material in support of the grounds raised. It was, therefore, contended that the learned CIT(A) was

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justified in deciding the appeal ex-parte on the basis of the material available on record.

“4. Finding and Decision of CIT(A)

I Have gone through the assessment order and grounds of appeal. The assessing officer has carried out addition on account of bogus share capital, unsecured loans. Aggrieved by the said assessment order the appellant had filed appeal which is adjudicated as under. In order to adjudicate the appeal on merits, the appellant was provided multiple opportunities. However, the appellant has not exercised this option to file the submission and documentary evidences in support of claim raised in the grounds of appeal despite multiple reminders. The table below indicates the dates and the compliance status of the various notices issued

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Date of Notice Compliance Date Remarks 12.06.2025 19.06.2025 No details furnished nor any petition for adjournment was received. 20.06.2025 26.06.2025 No details furnished nor any petition for adjournment was received. 27.06.2025 03.07.2025 No details furnished nor any petition for adjournment was received The conduct of the Appellant, as inferred from the aforesaid table, evidences that the Appellant is not interested in prosecuting the Appeal. The law aids those who vigilant, not those who sleep upon their rights. This principle is embodied in the well-known Latin dictum, "VIGILANTIBUS ET NON DORMIENTIBUS JURA SUB VENIUNT. The conduct of the Appellant, as inferred from the aforesaid table, evidences that the Appellant fails this principle of equity. Even the Hon'ble Courts, in various pronouncements, have frowned upon the Appellants who file appeals but thereafter do not take any further interest in prosecuting those appeals. The Hon'ble Income Tax Appellate Tribunal Kolkata in the case of Pradeep Kumar Jhawar Kolkata vs. DCIT CCXXI (15 March, 2016) (ITA Nos. 450/Kol/2013 for Asstt. Year: 2006-07) dismissed the appeal of the Appellant for non-prosecution. The Hon'ble Madhya Pradesh High Court in the case of Estate of Late Tukojirao Holkar vs. CWT (223 ITR 480) held as under. "If the party, at whose instance the reference is made, fails to appear at the hearing, or fails in taking steps for preparation of the paper books so as to enable hearing of the reference, the court is not bound to answer the reference." Similarly, the Hon'ble Punjab & Haryana High Court in the case of New Diwan Oil Mills CIT ((2008) 296 ITR 495] returned the reference unanswered since the appellant remained absent and there was no assistance from the appellant. Based on the above trail of opportunities provided to the appellant, it appears that the appellant is not keen on pursuing the appeal. However, in light of principle of natural justice the appeal is adjudicated on merits of case based on information available on record.

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This is an appeal filed by the appellant, against the assessment order passed under section 147 read with section 144B of the Income-tax Act, 1961, dated 18.03.2024, for the assessment year 2019-20. In the said order, the Assessing Officer (AO) assessed the total income of the appellant at Rs.48,31,250/- as against the returned income of Rs.3,06,250/-The AO made an addition of Rs.45,25,000/-on account of unexplained cash credit under section 68 of the Act, based information regarding accommodation entries and lack of satisfactory explanation from the appellant. The case was selected for reassessment on the basis of specific information received through the Insight Portal from the Investigation Wing of the Income Tax Department. It was alleged that the appellant had engaged in transactions involving bogus share capital, unsecured loans, and repayments linked to entities managed by one Mr. Sanjay Shah, who was identified as an entry provider in several search and survey actions conducted by the Department. Based on this credible information, a notice under section 148 was issued and served on the appellant. During the course of assessment proceedings, the AO issued several statutory notices including those under sections 143(2), 142(1), and also a show cause notice. While the appellant initially responded to a few of the notices, the responses were either partial, vague, or failed to address the key concerns raised by the Department. Crucial information such as complete bank statements, confirmations, PAN details, and source of funds regarding the was found to be parties involved in the loan transactions was either not submitted unreliable upon verification. The AO noted that the appellant failed to prove the identity. creditworthiness of creditors, and genuineness of the transactions. Accordingly, the credit entries of Rs.45,25,000/- were treated as unexplained under section 68 and added to the total income. In the course of appellate proceedings before the undersigned, several opportunities were afforded to the appellant to present his case and file submissions in support of the grounds raised. Notices for hearing were issued on multiple occasions; however, the appellant has chosen not to respond or participate in the proceedings. There is no representation from the appellant either in writing or in person. In the absence of any effective prosecution of the appeal, and considering the detailed findings given by the Assessing Officer in the assessment order, the appeal is being adjudicated on the basis of available material on record. On perusal of the assessment order, it is evident that the AO has given detailed reasons supported by facts, third-party confirmations, and the appellant's own submissions which were found insufficient and contradictory. The addition under section 68 is well supported by material evidence and legal reasoning. In the absence of any fresh submission or contrary evidence brought on record by the appellant during appellate proceedings, I find no infirmity in the action of the AO.

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In view of the above, the appeal is dismissed due to non-prosecution. The order of the AO is hereby upheld as the addition made under section 68 is found to be justified based on facts and in accordance with the law ME TAX DEPARTMENT Accordingly, the appeal of the appellant is Dismissed.” 4.1 It is evident from the impugned order that the learned CIT(A) issued notices of hearing on three occasions within a short span of approximately fifteen days. Since there was no compliance on the part of the assessee, the learned CIT(A.), after recording that the assessee was not interested in prosecuting the appeal, proceeded to dispose of the appeal ex parte by upholding the assessment order substantially on the basis of the reasoning recorded by the Assessing Officer.

4.2 It is true that an appellant who invokes the appellate jurisdiction is expected to diligently prosecute the proceedings. Equally, it is the obligation of the appellate authority, being the final fact-finding authority under the Act, to adjudicate the issues raised after affording a fair and effective opportunity of hearing. The principles of natural justice constitute an integral part of every adjudicatory process and require that a litigant be afforded a meaningful opportunity to place his case before an adverse order is sustained. 4.3 In the present case, the assessee has explained the circumstances leading to the non-compliance before the learned CIT(A.) and has placed on record a categorical undertaking expressing regret for the lapse and assuring full cooperation in the

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remanded proceedings. Having regard to the explanation furnished, the short interval within which the notices were issued, the nature of the disputes involved—which include jurisdictional challenges to the reassessment proceedings as well as additions under section 68—and the fact that the appeal has been disposed of without the benefit of the assessee's submissions on merits, we are of the considered view that one effective opportunity deserves to be afforded to the assessee in the larger interest of substantial justice. It is a settled principle that procedural rules are intended to advance the cause of justice and not to defeat it. Ordinarily, disputes should be adjudicated on their merits rather than being concluded on account of technical or procedural defaults, provided the conduct of the litigant does not disclose deliberate or contumacious disregard of the process of law. In the facts of the present case, we are satisfied that the ends of justice would be adequately served by restoring the matter to the file of the learned CIT(A.) for fresh adjudication. Accordingly, without expressing any opinion on the merits of the various grounds raised by the assessee, we set aside the impugned order of the learned CIT(A.) and restore the entire matter to his file for adjudication afresh in accordance with law. The learned CIT(A.) shall afford the assessee adequate and effective opportunity of hearing, permit the filing of such documentary evidence and written submissions as may be permissible in law, consider all the grounds raised in the memorandum of appeal by passing a reasoned and

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speaking order, and thereafter dispose of the appeal strictly in accordance with law. The assessee is directed to extend full cooperation in the appellate proceedings and shall ensure timely compliance with all notices, directions and hearing schedules issued by the learned CIT(A.). It is made clear that no unnecessary adjournment shall be sought and, in the event of any failure to cooperate without sufficient cause, the learned CIT(A.) shall be at liberty to proceed in accordance with law.

Order pronounced in the open Court on 30/06/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/06/2026 M. Ranganath Vittal , Sr. P.S. 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// (Assistant Registrar) ITAT, Mumbai