PRASHANT KUMAR BASSI,LUCKNOW vs. ITO-1(1),LUCKNOW-NEW, PRATYAKSH KAR BHAWAN

ITA 517/LKW/2026Status: DisposedITAT Lucknow21 September 2026AY 2016-177 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that additions to income cannot be sustained on surmises, conjectures, or misinterpretation of financial statements. The AO was not justified in treating the closing stock of Rs. 42,16,426, which was duly reflected as a current asset in the audited books of accounts, as taxable revenue solely due to an electronic data-entry mismatch in the return. The Tribunal noted that the record indicated no sales or purchase transactions during the year, implying the inventory value naturally rolled over from the preceding year. Treating stock-in-hand valuation as sales revenue without any concrete findings or corroborative material indicating suppressed sales or untraced commercial operations is impermissible. The Tribunal concluded that such an ad-hoc addition, devoid of statutory backing or factual foundation, cannot survive judicial scrutiny. Therefore, the addition of Rs. 42,16,426 made by the AO and sustained by the CIT(A) was deemed unjustified and legally unsustainable. The Tribunal ordered the deletion of the entire addition.

What were the facts?

The assessee, Prashant Kumar Bassi, engaged in the business of spices, filed a return for Assessment Year 2016-17 declaring an income of Rs. 3,64,370. The Assessing Officer (AO) noticed a discrepancy in the balance sheet, which showed closing stock of Rs. 42,16,426, while the return of income indicated no stock. The AO treated this closing stock amount as income and added it to the assessee's total income, completing the assessment under section 143(3) at Rs. 45,80,800. The assessee appealed to the CIT(A), who dismissed the appeal ex-parte. The assessee then filed an appeal before the ITAT, challenging the CIT(A)'s order.

What were the issues?

1. Whether the CIT(A) was justified in upholding the assessment order and dismissing the assessee's appeal, considering the grounds raised by the assessee? Assessee's Contentions: - The amount of Rs. 42,16,426 was inadvertently entered in the sales column due to a clerical mistake while filing the electronic return, and it actually represented the closing stock as on March 31, 2016. - The closing stock was duly reflected in the audited balance sheet under 'Current Assets, Loan & Advances'. - The closing stock, being an asset, cannot be treated as income. - There were no sales or purchases during the Assessment Year 2016-17, meaning the closing stock was the same as the opening stock. - The AO and CIT(A) were unjustified in treating the stock shown in the balance sheet as income. Revenue's Contentions: - The revenue requested that the appeal be restored to the file of the First Appellate Authority with a direction to decide the appeal after affording a reasonable opportunity of hearing, as there was no representative for the assessee before the CIT(A).

Which sections of the Income-tax Act were involved?

Section 143(3),Section 250,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW

Before: SHRI. SUDHANSHU SRIVASTAVA

For Appellant: Shri Dinesh Agarwal, Advocate
For Respondent: Smt. Pratibha Singh, D.R

This appeal has been preferred by the Assessee against the order dated 29.09.2025, passed by the Addl/JCIT(A)-1, Chandigarh for Assessment Year 2016-17. 2.0 The brief facts of the case are that the assessee was doing the business of spices, etc. in the name and style “M/s Prashita Enterprises” (a proprietorship firm). The assessee e-filed his return of income for the year under consideration on 31.03.2017, declaring a total income of Rs.3,64,370/-. The case of the assessee was selected for scrutiny under Computer- Assisted Scrutiny Selection (CASS). The Assessing Officer (AO) issued statutory notices, requiring the assessee to furnish the details of various transactions entered into by the assessee during the year under consideration. The assessee filed online

ITA N

The order continues below.

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