EYE FOCUS ENTERTAINMENT,MUMBAI vs. ITO WARD 16(1)(1), MUMBAI

ITA 8283/MUM/2025Status: DisposedITAT Mumbai30 September 2026AY 2022-2313 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed Ground No. 2, holding that the CIT(A) erred in sustaining the addition under Section 69A of the Act without issuing a specific notice of enhancement under Section 251(2) and without affording the assessee a reasonable opportunity to explain why the amount should not be treated as unexplained money under Section 69A. The Tribunal noted that the CIT(A) first held the addition under Section 68 unsustainable and then, without following the statutory requirement of Section 251(2), sustained the same amount under Section 69A. This action was considered beyond jurisdiction and contrary to appellate powers. The Tribunal also observed that the distinction between Section 68 and Section 69A was material, and once the CIT(A) accepted the assessee's objection regarding the applicability of Section 68 (due to no books of account), the assessee was entitled to an opportunity to address the applicability of Section 69A. Consequently, the addition of Rs. 1,14,25,29,008/- made by the AO under Section 68 and sustained by the CIT(A) under Section 69A was directed to be deleted. Ground No. 1 was not adjudicated as Ground No. 2 was allowed, leading to the deletion of the addition.

What were the facts?

The assessee, Eye Focus Entertainment, filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2022-23. The assessee had opted for presumptive taxation under Section 44AD and declared gross receipts of Rs. 1,04,27,333/-. The Assessing Officer (AO) made an addition of Rs. 1,14,25,29,008/- under Section 68 of the Income-tax Act, 1961, treating credits in the assessee's bank account as unexplained cash credits, without considering corresponding debits. The CIT(A) found the addition under Section 68 unsustainable but sustained the same amount by invoking Section 69A of the Act. The assessee's appeal before the ITAT concerned the validity of these actions.

What were the issues?

1. Whether the addition under Section 68 of the Income-tax Act, 1961, was validly made when the assessee had opted for presumptive taxation under Section 44AD and had not maintained books of account, which is a mandatory pre-condition for Section 68's applicability. 2. Whether the CIT(A) erred in law by changing the section of addition from Section 68 to Section 69A suo motu, without issuing a separate notice, confronting the assessee, or granting an opportunity to rebut the proposed change, thereby acting beyond jurisdiction and violating Section 250(6). Assessee's Contentions: - For Issue 1: Section 68 can only be invoked if a sum is credited in the 'books of an assessee maintained for any previous year.' Since the assessee opted for Section 44AD and did not maintain books of account, the basic condition for Section 68 was not met. Reliance was placed on CIT v. Bhaichand N. Gandhi, Manasi Mahendra Pitkar v. ITO, and Mehul V. Vyas v. ITO, holding that bank passbooks are not the assessee's books of account. - For Issue 2: Sections 68 and 69A operate in different fields with different requirements. The CIT(A) could not substitute Section 69A for Section 68 without issuing a notice of enhancement under Section 251(2) and providing an opportunity to be heard. Reliance was placed on Prashant Pitti v. ACIT, Toffee Agricultural Farms (P.) Ltd. v. ITO, and The Abhinandan Cooperative Group Housing Society Ltd. v. ITO. Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 44AD,Section 68,Section 69A,Section 250(6),Section 251(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SHRI SANDEEP GOSAIN & SHRI BIJAYANANDA PRUSETH

For Respondent: Shri Ankush Kapoor CIT DR
Pronounced: 30.09.2026

PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. NFAC, Delhi, dated 08-Sep-2025 for the Assessment Year 2022-23. The Assessee has raised the following grounds of appeal:

1.

In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) (through National Faceless Appeal Center] has erred in upholding the action of Ld. Assessing

The order continues below.

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