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Facts
The assessee filed an appeal challenging the order of the CIT(A) for AY 2018-19. The Assessing Officer (AO) made additions of Rs. 10,06,30,085/- under section 69C read with section 115BBE of the Income Tax Act, 1961, which were upheld by the CIT(A). The assessee contended that the CIT(A) erred in not quashing the assessment order and in confirming the additions made by the AO.
Held
The Tribunal observed that the CIT(A)'s order was not a speaking order and did not provide adequate reasons for its decision. It was noted that the assessee had relied on documentary evidence and revised financial statements. The Tribunal restored the matter back to the CIT(A) for a fresh adjudication.
Key Issues
Whether the CIT(A) erred in confirming additions made by the AO without properly considering the assessee's submissions and evidence, and whether the CIT(A)'s order was a speaking order.
Sections Cited
143(3), 69C, 115BBE
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI BIJAYANANDA PRUSHETH
Date of Hearing 07.01.2026 Date of Pronouncement 20.01.2026 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.:
The present appeal has been filed by the assessee challenging the impugned order dt. 12.08.2024 passed by National Faceless Appeal Centre, Delhi (NFAC) / CIT(A) for the A.Y 2018-19. The assessee has raised the following grounds of appeal:
1. On the facts and the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in not quashing the assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961.
2. On the facts and the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) failed to give credence to the documents/details filed during the course of assessment proceedings and erred in confirming the alleged additions made by the Assessing Officer to the tune of Rs 10,06,30,085/- u/s 69C r.w.s 115BBE of the Income Tax Act, 1961.
3. On the facts and the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in adhering to incorrect figures of capital in the return and ignoring the revised figures of closing balance of the appellant's capital account as on 31st March, 2017 viz-a-viz the closing balance as on 31st March, 2018 despite the fact the appellant had furnished its restated capital account balances during assessment proceedings and therefore, both the lower authorities erred in ignoring the ratio of judgment of Hon'ble Supreme Court in Pullangode Rubber Produce Co Ltd vs. State of Kerala [1973] 91 ITR 18 [SC], wherein, the Apex Court held that it is open to the assessee, who made an erroneous admission earlier to show that it is incorrect and the assessee should be given proper opportunity to do so.
4. On the facts and circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) ignored the fact that the appellant did not have proper assistance of an accountant to maintain books of accounts during the Assessment Year/s 2017-18 and 2018-19, leading to the erroneous figures of 'Assets & Liabilities Schedule' declared in the return of income for AY 2017-18 and 2018-19, wherein, the respective capital balances of Rs 2,69,53,800/- and Rs 14,28,86,529/- was derived as a balancing figure ic., after netting off the assets and liabilities, erroneously mentioned in the accounts and hence the lower authorities, without disputing factual legitimacy of assets and liabilities included in the revised statement and duly supported by evidences to prove that they were brought forward from carlier years, ought to have considered the revised figures submitted during the assessment proceedings.
5. On the facts and circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) failed to consider the fact that the alleged increase in the capital account as per the restated capital account (being balancing figure of revised assets and liabilities) during the relevant assessment year was only to the tune of Rs 50,05,366/- duly supported by income disclosed for the year instead of the alleged additions to the tune of Rs 10,06,30,085/- based on erroneous opening balance of capital as per the return of income.
6. On the facts and circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appcals) failed to invoke any specific provision of the Act that could allow the revenue to tax difference between closing and opening balance of capital without identifying specific undisclosed assets or understated liabilities that pertained to the year under consideration.
7. On the facts and circumstances of the appellant's case and in law, and without prejudice to preceding grounds the Ld. Commissioner of Income Tax (Appeals), failed to consider the 'Income from Other Sources to the tune of Rs 15,08,243/- whilst providing a relief to the appellant on account of explained sources of investments of Rs 1,53,02,644/-.
8. On the facts and the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in not providing opportunity of being heard, despite the fact that the appellant had specifically requested the Ld. Commissioner of Income Tax (Appeals) to afford an opportunity of personal hearing via video-conferencing before finally deciding on the matter vide letter/s dated 08.03.2021, 19.03.2021 and 09.04.2021 and thereby rendering the appellate order devoid of principles of natural justice and liable to be quashed summarily.
9. The appellant craves leave to add to, alter, amend, modify and/or delete all or any of the foregoing grounds of appeal. The appellant prays before the Hon'ble Tribunal to delete the addition made by the AO and confirmed by the Ld. CIT(A) and/or any other relief as the Hon'ble Tribunal may deem fit.
Sunil Ghanshaymdas Khandelwal, Mumbai.
We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records, we noticed that the addition u/s 69C of the Act was made in the case of assessee which were also upheld by Ld. CIT(A). After evaluating the documents placed on record, we noticed that initially the case of the assessee was scrutiny through CASS on the issue of “business loss and substantial increase in capital in a year”.
It was observed by the AO that the assessee’s capital had been shown at Rs. 14,28,86,529/-, whereas during the previous assessment year i.e 2017-18, the capital was shown only Rs. 2,69,53,800/-. In this regard explanation with regard to source of huge increase in capital was sought from the assessee and after considering the reply of the assessee, AO concluded that the assessee is constantly claiming depreciation for A.Y 2015-16, 2016-17 & 2017-18 and now suddenly he started claiming that his balance sheet had not correctly been made and had thus amended his balance sheet as per his convenience. Therefore after accepting the part source of capital introduced during the year under considering, according to the AO the source of remaining capital amounting to Rs. 10,06,30,085/- (11,59,32,729-1,53,02,644), still remained unexplained in the absence of any documentary evidence and thus the same was added back.
Sunil Ghanshaymdas Khandelwal, Mumbai.
Whereas, against this order of assessment, assessee preferred appeal before Ld. CIT(A) and relied upon the revised assets and liabilities statement as on 31.03.2017 and consequential reworking of capital account which find mentions in the order of Ld.CIT(A) from page 7 to 15. Apart from this assessee also relied upon the documentary evidences filed before Ld. CIT(A) which are at paper book page No. 1 to 100. However, the Ld. CIT(A) had rejected the claim of the assessee only on the observation that there was vast differences in the capital as noticed by AO, thereafter assessee prepared a balance sheet after a lapse of two years as per his convenience to avoid the addition thus in this way upheld the addition made by the AO.
After having heard the counsels at length, we found that assessee had relied upon the revised assets and liabilities statement as on 31.03.2017 and consequential reworking of capital account which has been submitted before the revenue authorities and also found mentioned at page 7 to 15 of the order of the Ld. CIT(A), which is reproduced herein below:
Apart from this assessee had also relied upon the documentary evidences annexed at paper book page No. 1 to 100. However the claim of the assessee was rejected by Ld. CIT(A) merely by holding that the assessee had corrected balance sheet and filed revised balance sheet after lapse of about two years. To our mind this alone cannot be a reason for rejecting the claim of the assessee more particularly when the assessee had relied upon number of documents, but Ld. CIT(A) had not pointed out any error or defect in the documents filed by the assessee.
Since, Ld. CIT(A) is statutory authority therefore it was its legal duty and obligation to pass well reasoned speaking order. The requirement for passing “speaking order” is necessitated as the order passed by Ld. CIT(A) being a statutory authority is expected to be an order that speaks for itself, provides reason and said mandate gives satisfactory to the effected party by showing them, rational beyond the decision which in our view aligns with wider principle that “justice must not only be done but must also appears to have been done” therefore failure to apply with the mandatory provisions invalidates the action of Ld. CIT(A). With these observations we restore the matter back to the file of Ld. CIT(A) to relook the entire issue again and to pass a well reasoned, cogent and clear order indicating the reasons for reaching to a conclusion.
Before parting, we make it clear that our decision to restore the matter back to the file of the Ld. CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute which shall be adjudicated by the Ld. CIT(A) independently in accordance with law.
In the result the appeal filed by the assessee is allowed for statistical purposes.