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Facts
The assessee filed an original return for AY 2015-16 which was found invalid. A revised return was filed after a notice u/s 147, declaring a lower income. The AO made additions for unexplained capital investment and difference in income declared.
Held
The Tribunal held that the addition on account of the difference in income was justified due to a technical glitch in filing the return. However, the issue of unexplained capital investment was restored to the AO for fresh adjudication after considering additional evidence.
Key Issues
Whether the addition on account of income mismatch due to a technical glitch is justified, and whether the unexplained capital investment needs fresh adjudication with additional evidence.
Sections Cited
147, 144B, 143(2), 142(1), 69, 271(1)(c), 148, 46(A), 29
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 04.06.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 12.05.2023 passed by learned Assessment Unit of Income-tax Department [“AO”] u/s 147 r.w.s. 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal.
Page 1 of 13 that the assessee-individual filed original return of AY 2015-16 on 14.03.2017 declaring a total income of Rs. 7,18,790/-. The return so filed was found to be invalid. Thereafter, on the basis of certain observations made by AO while dealing assessment of assessee of subsequent AY 2016- 17, the case of AY 2015-16 under consideration was subjected to assessment u/s 147 through a notice u/s 148. In response to such notice, the assessee filed return declaring a total income of Rs. 3,17,170/- on 24.01.2023. Thereafter, the AO issued notices u/s 143(2)/142(1) and scrutinized case of assessee. Finally, the AO passed following order assessing total income at Rs. 1,11,13,790/-:
“4.6 Conclusion drawn:- Considering the above facts, as the various notice was issued to the assessee to file his reply on investment made of capital of Rs. 1,03,95,000/- in Sai Drishti Developers as per Audit report for the A.Y. 2016-17. The assessee vide his reply dated 24-01-2023 has submitted that he is a proprietor of M/s Sunil Timber and partner in the firm M/s Royal Construction & Developers (PAN: AAPFR4798D) and he engaged in trading of timber and construction of Residential house. The assessee has also mentioned that he is an Income Tax payee from last 20 years and filed his IT return vide Ack No. 932927920240123 dated 24-01-2023. The assessee has maintained Bank Account in following Banks:
Sl. Name of Bank Account no. Type of Whether held No. Bank Address A/c (single/joint) 1 Bank of Guru 883210100005999 Saving Single India Nanak a/c Timber Market 2 Bank of Guru 883230110000023 Current Single India Nanak Timber Market
Shri Candrakant Bajaj AY 2015-16 The assessee has also mentioned that he is a partner in the firm M/s Sai Drishti Developers and invested amounting to Rs. 1,03,95,000/- in the firm as Capital. Again on 30-03-2023, the assessee has submitted the copy of ledger account of Sai Drishit Developers. The source of the investment remained unverified therefore, it is found that the assessee has nothing brought on record to substantiate their claim. Therefore, a total addition of Rs. 1,03,95,000/- on investment made of capital of Rs. 1,03,95,000/- in Sai Drishti Developers as per Audit report for the A.Y. 2016-17 u/s 69 of Income Tax Act 1961 for which no reply or submission has been furnished by the assessee despite several opportunities. Further, an amount of Rs. 4,01,620/- is added to the taxable income on account of difference in income declared suo motto as per original ITR and ITR filed in response to notice u/s 148. Therefore, total addition in this case comes to Rs. 1,07,96,620/-. Penalty proceedings u/s 271(1)(c) of the IT Act have been initiated separately for concealment of particulars of income.
5. Final computation of taxable income:-
Sr. No. Description Amount (in INR) 1 Income as per Return of income filed 3,17,170 2 Income as computed u/s 143(1)(a) 3,17,170 3 Variation in respect of issue discussed in para 1,07,96,620 4.6 above 4 Total income/loss determined as per the above 1,11,13,790 proposal 2.1 Thus, the AO made an overall addition of Rs. 1,07,96,620/- which has two components, viz. (i) unexplained capital investment of Rs. 1,03,95,000/- made by assessee in partnership firm M/s Sai Drishti Developers and (ii) difference of Rs. 4,01,620/- in the total income declared in original return and return filed in response to notice u/s 148 [i.e. Rs. 7,18,790 (-) Rs.
3,17,170].
2.2 Aggrieved, assessee carried matter in first-appeal but did not get any relief. Now, the assessee has come in next appeal before us challenging the orders of lower-authorities.
The grounds raised by assessee are as under:
“1. That the learned 1st Appellate Authority has erred both in Law and in facts in Passing the 1st Appeal Order without considering the facts and documents.
That the 1st Appellate Authority has also erred in confirming the Addition of Rs. 401620/- of mismatch in original and Revised Return due to the technical glitch on IT Portal.
3. That the learned 1st Appellate Authority has further erred in confirming the addition of Rs. 10796620/- invested in M/s Sai Drishti Developers as Capital without Considered the Facts and Documents.
4. That thus the 1st Appeal Order so passed is quite illegal and unjust unwarranted contrary to facts and deserve to be set aside.
That the appellant further craves have to add alter and or amend any of the forgoing grounds as and when necessary.”
Ground No. 1, 4 and 5:
These grounds are general in nature and no specific submission is made during hearing qua these grounds. Accordingly, these grounds do not require a separate adjudication from us.
Ground No. 2:
5. This ground challenges the addition of Rs. 4,01,620/- made by AO on account of mis-match/difference in the total income declared by assessee in original return filed and the return filed in response to notice issued u/s 148.
Page 4 of 13 original return but declared total income of Rs. 3,17,170/- in the return filed in response to notice u/s 148. Therefore, the AO has made addition of Rs. 4,01,620/- on account of lesser income declared in the return filed u/s 148.
In the ground raised, the assessee has mentioned that the mis-match in original return and revised return had occurred due to a technical glitch.
Before CIT(A), the assessee made following submission as noted by CIT(A) in Para 5.4 of impugned order:
“….He has simply stated that due to technical glitch a lesser income was shown in the return of income filed subsequently.” Before us, the assessee has made following submission in a sheet titled “Facts of Case”:
“In response to the notice, the Appellant has filed the Return, and the Income shown of Rs. 317170/- with a technical glitch whereas the Appellant paid the tax on income of Rs. 718790/-.” During hearing before us also, Ld. AR accepted the very same submission.
Thus, from the submission of assessee/Ld. AR, it is clear that the lesser income of Rs. 3,17,170/- got reported in the return filed in response to notice u/s 148 due to technical glitch although the assessee had paid tax on correct income of Rs. 7,18,790/-. Thus, the assessee is himself accepting the correct taxable income of Rs. 7,18,790/- which is same as was reported by assessee in original return. When it is so, the addition of Rs. 4,01,620/- [i.e. Rs. 7,18,790 (-) Rs. 3,17,170] made by AO (forming part of overall
Page 5 of 13 grievance against the action of AO. Hence, the Ground No. 2 raised by assessee is found meritless and rejected.
Ground No. 3:
This ground challenges the addition of Rs. 1,03,95,000/- (the assessee has wrongly mentioned the overall addition of Rs. 1,07,96,620/- in ground) made by AO on account of unexplained capital investment in M/s Sai Dristhi Developers.
Ld. AR filed following Written-Submission explaining the sources available to assessee for making impugned investment:
Page 6 of 13 Page 7 of 13 Page 8 of 13 Page 9 of 13
Ld. AR also moved assessee’s Application under Rule 29 of Income-tax (Appellate Tribunal) Rules, 1963, the same is scanned and re-produced below:
Page 11 of 13 Application and a prayer is made to accept the same.
Ld. DR for revenue does not have any objection if the Application of assessee is accepted but he requests that since the assessee has produced additional evidences by means of this Application, this issue should go back to the file of AO for factual examination of documents being filed by assessee and thereafter adjudication afresh. Ld. AR also prays to direct the assessee to ensure adequate participation before AO.
After a careful consideration and in the interest of justice, we admit assessee’s Application and also agree to the proposal made by Ld. DR for revenue to restore this issue back to the file of AO. The AO shall adjudicate this issue afresh after giving necessary opportunities to assessee and after considering assessee’s all submissions including the evidences filed as above.
In doing so, the AO shall not be influenced by his previous order in any manner. The assessee is also directed to ensure adequate participation before AO failing which the AO shall be entitled to pass order as he thinks fit in accordance with law. Ground No. 3 is allowed in terms of these directions.
Order pronounced in open court on 08/05/2025