ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), VADODARA, VADODARA vs. PRADEEP RAVICHANDRA KOTHARI, AHMEDABAD

Accordingly, the assessment was completed at a total income of ₹7,37,66,633/- after making additions under sections 41(1) and 68 of the Act and estimating income from house property, along with initiation of penalty proceedings.

Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). Before the CIT(Appeals), the assessee challenged all the additions on both legal and

The CIT(Appeals), after considering the submissions, partly accepted the contentions of the assessee. In respect of liability relating to RR Agency, the CIT(Appeals) noted that payments were made in subsequent years through banking channels and therefore such liability could not be treated as ceased; accordingly, this addition was deleted. In respect of liability relating to Infinito Pvt. Ltd., the CIT(Appeals) observed that the matter was under dispute and the assessee claimed to have written back the liability in a subsequent year. The CIT(Appeals) directed the Assessing Officer to verify whether the amount was offered to tax in the subsequent year and, subject to such verification, the addition may be deleted.

With regard to addition on account of capital introduction, the CIT(Appeals) examined detailed reconciliation and supporting documents submitted by the assessee and observed that the funds were largely sourced from sale of properties, sale of shares and past savings, and transactions

Similarly, in respect of unsecured loans from ChemiCarb, the CIT(Appeals) accepted the contention of the assessee that the addition resulted in duplication and that the transactions were already considered while examining capital introduction. Accordingly, this addition was also deleted.

However, with regard to addition under the head income from house property, the CIT(Appeals) upheld the action of the Assessing Officer by observing that as per section 23(4) of the Act, only one property can be treated as self-occupied and the remaining properties are required to be assessed on notional basis. In absence of proper details from the assessee, the estimation made by the Assessing Officer was held to be reasonable and the addition was sustained.

Thus, the CIT(Appeals) granted substantial relief to the assessee by deleting major additions under sections 41(1) and 68 of the Act, but upheld the addition relating to house property income and dismissed other general grounds including those relating to penalty and interest.

The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee.

On careful consideration of the facts, we find merit in the contention of the learned Departmental Representative that the learned CIT(Appeals) has granted relief on certain issues without proper and detailed examination of facts and evidences. In particular, with regard to unsecured loans from Chemi Carb amounting to ₹82,50,000/-, the CIT(Appeals) has deleted the addition primarily on the premise that the same resulted in duplication of addition with capital introduction. However, from the material placed on record and as pointed out by the learned DR, it appears that the amounts relating to capital introduction and unsecured loans are reflected as separate and distinct entries in the books of account. The learned DR has also referred to the balance sheet to demonstrate that fresh loans were indeed taken from ChemiCarb during the year under consideration, which required independent examination under section 68 of the Act. Therefore, the finding of the CIT(Appeals) that there was double addition appears to have been recorded without proper verification of facts.

Further, it is also noticed that no confirmation or supporting documentary evidence in respect of such fresh unsecured loans from ChemiCarb was furnished before the Assessing Officer during the

Similarly, with regard to deletion of addition on account of unexplained capital introduction, we observe that the learned CIT(Appeals) has accepted the explanation of the assessee by broadly referring to reconciliation and banking transactions, but has not discussed the facts, evidences and specific sources of funds in a detailed and reasoned manner. The order of the CIT(Appeals) on this issue is found to be cryptic and lacking proper analysis of each component of capital introduction and the corresponding evidences required under section 68 of the Act.

In our considered view, the issues relating to unsecured loans from ChemiCarb and unexplained capital introduction require fresh examination at the level of the Assessing Officer after considering all relevant evidences and affording adequate opportunity of being heard to the assessee. The Assessing Officer shall specifically examine whether the loans from ChemiCarb and capital introduction represent distinct transactions, verify the balance sheet entries, call for confirmations, bank statements, income tax returns and other supporting evidences, and thereafter decide the issue in accordance with law.

However, with respect to issues raised in Grounds (i) and (ii), we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.

Accordingly, in the interest of justice, we set aside the impugned order of the CIT(Appeals) on issues raised in Grounds (iii) and (iv) and restore the matter to the file of the Assessing Officer for de novo consideration with directions to carry out necessary verification and pass a speaking order after providing reasonable opportunity to the assessee.

In the result, the appeal of the Department is partly allowed for statistical purposes. This Order is pronounced in the Open Court on 21/04/2026