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Facts
The assessee failed to file a return of income for AY 2017-18, despite receiving significant cash transactions. The Assessing Officer (AO) made additions based on information from Form 26AS and bank statements, treating cash deposits as unexplained income. The AO's assessment order was later challenged and set aside by the Principal Commissioner of Income Tax (PCIT) under Section 263 for being erroneous.
Held
The Tribunal noted that the original assessment order was passed without due application of mind and contained contradictions. The Tribunal also observed that the assessee faced technical glitches in uploading documents. Considering these factors and the PCIT's direction for a de novo assessment, the Tribunal set aside the impugned orders and restored the appeals to the file of the AO for fresh assessment.
Key Issues
Whether the assessment order passed by the AO, which was later set aside by the PCIT, was erroneous and prejudicial to the interest of the revenue, and whether the assessee should be granted another opportunity for a de novo assessment.
Sections Cited
139(1), 148, 147, 143(3), 69A, 194A, 263, 144, 144B, 115BBE, 69
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI S.R.RAGHUNATHA
आदेश / O R D E R PER ABY T. VARKEY, JM:
1. has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, dated & 2230/Chny/2025 (AY 2017-18) Gokuldass Srinivasan :: 2 ::
25.06.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) against revisional order passed u/s.263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) passed by the Learned Principal Commissioner of Income Tax (hereinafter referred to as ‘Ld.PCIT‘) dated 05.01.2024 for AY 2017-18.
2. At the outset, the Ld.AR of the assessee submitted that the impugned first appellate order of the Ld.CIT(A)/NFAC [in has been passed without considering the relevant documentary evidences [which couldn’t be uploaded due to technical glitches] and therefore, the impugned order is vitiated being perverse; and also he brought to our notice that the AO has also passed the assessment order dated 31.03.2022 u/s.147 of the Act without hearing assessee which action violates natural justice; and hence the assessee pleads for one more opportunity before the AO as held by the Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 filed against Pr.CIT order u/s.263 of the Act, the Ld.AR brought to our notice that there is a delay of ‘381’ days in filing of appeal. In order to condone the delay, the assessee is noted to have filed affidavit along with application for condonation of delay. Having gone through the contents of the same and considering the overall facts of the case, in the interest of & 2230/Chny/2025 (AY 2017-18) Gokuldass Srinivasan justice and fair play, we are inclined to condone the delay. Coming to the impugned revisional order, according to the Ld.AR, the Ld.PCIT has found certain mistakes in the assessment order dated 31.03.2022 passed by the AO and set aside the same back to the file of the AO for de novo assessment. Therefore, according to the Ld AR, considering the fact that the Ld.PCIT has also set aside the order back to the file of the AO for de novo assessment, he prayed for one more opportunity for the assessee to place before the AO relevant facts, for framing of assessment order afresh after hearing the assessee for AY 2017-18.
The brief facts are that the assessee didn’t file any return of income (RoI) u/s.139(1) of the Act for AY 2017-18 and claimed to be a trader in yarn at the relevant time. The AO received information that the assessee has made cash transaction to the tune of ₹7,34,60,785/- during the FY 2016-17 and didn’t file any RoI and so, the AO was of the view that income has escaped to the tune of ₹7,34,60,785/- and pursuant to it, he issued notice u/s.148 of the Act on 29.03.2021 and pursuant to it, the assessee filed RoI, but mistakenly initially noted that assessee didn’t file any RoI despite notice u/s.148 of the Act was issued. Whereas the AO himself has stated in Para No.4 of assessment order that the assessee has declared total income of ₹8,09,570/- when he had filed RoI on 15.03.2022. Further, the AO noted in the assessment order that the assessee pursuant to his show cause notice (SCN) u/s.144 of the Act & 2230/Chny/2025 (AY 2017-18) Gokuldass Srinivasan dated 12.03.2022 responded by filing certain details viz., bank statement, Form 26AS, etc. Then the AO by his order dated 31.03.2022 made certain addition as under:
On verification of 26AS it is found that the assessee had received interest u/s.194A of Rs.12,265/-. As per Specified financial transaction(SFT) of 26AS the cash deposit in the bank account of IDBI bank and Canara Bank is Rs.87,79,600/- and Rs.92,11,700/-. Total cash deposit as per 26AS is Rs.1,79,91,300/-. As verified from the bank statement of canara bank furnished by the assessee the cash deposit is Rs. 97,97,460/-. The assessee has filed the return of income on 15.03.2022 in response to the notice u/s 148. Whereas the assessee had declared total income of Rs. 8,09,570/- and cash deposit is not declared in the return. Therefore the cash deposit of Rs. 3,59,82,600/- not offered to tax as per reasons for reopening the assessment proceedings is treated as unexplained money u/s 69A of the Income tax Act, 1961. The assessment proceeding is completed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961. The draft assessment order was sent as SCN to the assessee on 24.03.2022. The assessee did not respond to the SCN. Therefore it is presumed that the assessee did not have any objections to above additions made. The computation of income is as under:
Returned income as per the ITR filed Not filed Addition u/s 69A as per this order 3,59,82,600/- Addition of interest received u/s 194A as per this order 12,265/- Assessed income 3,59,94,865/-
The assessment proceeding is completed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 at an assessed income of Rs.3,59,94,865/-.
4. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) on 20.06.2022 against the assessment order dated 31.03.2022 (supra) and while the first appeal was pending before the Ld.CIT(A), the Ld.PCIT is noted to have exercised his revisional jurisdiction u/s.263 of the Act and issued show cause notice (SCN) dated 17.04.2023 and taking note that the assessee didn’t respond to his notices, held that the assessment order to be erroneous and prejudicial to the interest of the Revenue. And was pleased to set aside the assessment order and directed by impugned & 2230/Chny/2025 (AY 2017-18) Gokuldass Srinivasan order dated 05.01.2024, the AO to frame de novo assessment for AY 2017-18 by holding as under:
For the instant case, the assessee had not filed his return of income for the A.Y.2017-18. Information was available with the Department that the assessee had made cash transactions to the tune of Rs.7,34,60,785/- during the F.Y.2016-17 and have not filed any return of income for the A.Y.2017-18. Notice u/s 148 of the Act was issued and in response the assessee had filed return of Income on 15-03- 2022 admitting a total income of Rs.8,09,570/-. The assessment was completed u/s 147 r.w.s.144 r.w.s.144B of the IT Act, 1961 by assessing a total income of 3,59,94,865/- vide order dated 31/03/2022.
Subsequently, on an examination of the assessment records, it was noticed that the Assessment order passed supra, was found of consisting certain errors which was prima facie prejudicial to the interest of revenue. Therefore, it was decided to invoke provisions of the Sec.263 of the Act, to remedy the loss to the revenue. A notice of show cause dated 17/04/2023 was issued through ITBA to the assessee for objections if any to the proposed revision. The reason for considering the order of assessment as erroneous and prejudicial to the interest of revenue was also furnished to the assessee.
On verification of records, it is seen that the assessing officer considered the returned income as NIL instead of Rs.8,09,570/- while computing the assessed income during the assessment proceedings. Further, the addition of Rs.3,59,82,600/- was made u/s 69A of the IT Act and tax was levied @30% instead of 60% by virtue of section 115BBE of the It Act. The entire cash deposits of Rs.3,59,82,600/- needs to be assessed under section 69 of I.T.Act as Unexplained Cash Credit and taxable u/s115BBE.
3. Vide the show cause notice dated 17/04/2023, the case was posted for hearing on 24/04/2023. The assessee was given opportunity to appear in person or through their authorized representative or to file written submissions. In the absence of response from the assessee, another hearing letter was issued on 15/12/2023, posting the case for hearing on 29/12/2023. The assessee did not respond to the notice. Since there is no response from the assessee, the present proceedings u/s 263 of the Act is disposed off ex parte based on the material available on record.
As narrated earlier, the reopened scrutiny assessment proceedings in the assessee's case was handled by the National Faceless Assessment Centre based on the information available with the Department in the form of SFT. Though the assessee responded to the notice u/s 148 of the Act by filing a return of income, there was only & 2230/Chny/2025 (AY 2017-18) Gokuldass Srinivasan :: 6 ::
partial compliance or no compliance to the remaining of notices issued by the FAO, as could be seen from the narration in the impugned assessment order. The Faceless Assessing Officer had analyzed the bank statements vis a vis 26AS Form and noticed that there were cash deposits to the tune of Rs.87,79,600 with IDBI Bank and Rs.92,11,700 with Canara Bank, thus totaling to Rs.1,79,91,300/There is yet another figure of Rs.97,97,460 mentioned as cash deposit from Canara Bank in the impugned assessment order. Thereafter, the FAO concluded that the cash deposit of Rs.3,59,82,600 was not declared in the income declared of Rs.8,09,570. After issue of draft show cause notice for which there was no response from the assessee, the FAO concluded the reopened scrutiny assessment order by adopting the figure of "NIL" as returned income and to this, the addition u/s 69A of the Act amounting to Rs.3,59,82,600 and addition on interest received of Rs.12,265 u/s 194A/of the Act, was made, thus arriving at a total assessed income of Rs.3,59,94,865,/It is appalling to note here that in the first para of the impugned assessment order, the SFT amount mentioned was Rs.7,34,60,785, whereas, the addition u/s 69A of the Act was Rs.3,59,82,600 and to compound the miseries further, in the body of the assessment order, the cash deposits in two banks were mentioned as Rs.87,79,600 and Rs.92,11,700 and another figure of Rs.97.97,460 was shown as cash deposit derived from bank statement of Canara Bank furnished by the assessee. There is no cogent reasoning given by the FAO in the assessment order about the adoption of the figures nor the reasoning behind taking the income returned as NIL, when the same FAD had mentioned Rs.8,09,570 as declared by the assessee. The entire assessment order is thus, held as erroneous in so far as the same is prejudicial to the interest of revenue.
In order to remedy the said error in the order of assessment in the instant case made on 31/03/2022 for the assessment year 2017-18, the recourse would be to resort to provisions of Section 263 of the Act. Accordingly, the order of the AD dated 31/03/2022 for the assessment year 2017-18 in the case of the captioned assessee is, sel aside, in exercise of the powers vested in me u/s.263 of the Act.
The Assessing Officer is hereby, directed to re-do the assessment denovo. The assessment order is thus set aside to consider the above issue and the AO may satisfy himself in accordance with law and come to a logical conclusion and pass appropriate orders in the assessee's case. The Assessing Officer shall give adequate opportunity of being heard to the assessee in this regard before passing the fresh assessment order. The assessee is also given yet another opportunity to present its case and shall provide the relevant details with material evidence, so as to facilitate the Assessing Officer to arrive at a logical conclusions in accordance with law.
5. Thereafter, it is noted that the Ld.CIT(A)/NFAC has passed the impugned first appellate order on 25.06.2025 confirming the action of the & 2230/Chny/2025 (AY 2017-18) Gokuldass Srinivasan :: 7 ::
AO dated 31.03.2022. In the light of the facts discussed in Para No.2(supra), the assessee pleads that one more opportunity may be granted to the assessee so that the AO can frame de novo assessment.
6. The Ld.DR didn’t oppose the plea of the assessee to restore the assessment back to the file of the AO for de novo assessment.
Having heard both the parties and after perusal of the records, we note that the AO’s order dated 31.03.2022, is riddled with contradictions and inconsistence and so we are of the view that the AO has passed the assessment order without due application of mind; and without examining the relevant documents had taken adverse view against the assessee.
The Ld.AR has undertaken to file all relevant documents and written submissions to substantiate the nature and source of the cash deposits/transaction found in the account of the assessee. In this context, we note that the Ld.PCIT has passed order u/s.263 of the Act directing the AO to pass de novo assessment; and considering the fact that the Ld.CIT(A) has passed the impugned first appellate order confirming the assessment order because the assessee couldn’t file the relevant documentary evidence [due to technical glitches, the assessee asserts that he couldn’t upload the same], so we set aside the impugned orders and restore the assessment back to the file of AO for framing de- novo assessment and thus give one more opportunity to the assessee to & 2230/Chny/2025 (AY 2017-18) Gokuldass Srinivasan substantiate the nature and source of the cash deposits/transaction and the AO is directed to frame de novo assessment for AY 2017-18 in accordance to law after hearing the assessee.
In the result, appeals filed by the assessee are allowed for statistical purposes.
Order pronounced on the 28th day of October, 2025, in Chennai.