Basanti Mata Agri Product Private Limited Vs ACIT (ITAT Kolkata)
Rectification Cannot Enhance Income Without Prior Notice under Section 154(3): Kolkata ITAT Restores ₹85.06 Lakh Addition
The assessee, operating a cold-storage business, filed its return declaring nil income. In assessment under section 143(3), the AO made an addition of ₹85,06,000 under section 68 towards unexplained cash deposits, along with other disallowances.
On the assessee’s rectification application, the AO passed an order under section 154 and maintained:
- ₹85,06,000 as unexplained cash credit;
- ₹1,15,770, being one-third of machinery-maintenance expenditure; and
- ₹98,551 relating to donations and subscriptions.
The assessee contended that the donation addition was made or enhanced in rectification without issuing any prior notice. It also argued that the cash deposits had already been explained through the Income-tax compliance portal during demonetisation and that tax of ₹99,800 had been paid under the Pradhan Mantri Garib Kalyan Yojana Rules, 2016.
The ITAT observed that section 154(3) expressly prohibits any rectification that enhances an assessment, reduces a refund or otherwise increases the assessee’s liability unless prior notice and a reasonable opportunity of hearing are given. Therefore, increasing the donation-related disallowance without issuing a show-cause notice was unjustified.
The Tribunal also noted that the assessee’s explanation regarding the demonetisation deposits and PMGKY payment had not been properly considered by the CIT(A). Since the assessee could not effectively represent its case, all the disputed issues were restored to the AO for de novo disposal of the rectification application.
The AO was directed to examine the assessee’s evidence and provide a proper opportunity of hearing, particularly before proposing any enhancement. The appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Addl/JCIT(A)-2, Hyderabad [hereinafter referred to as Ld. ‘Addl/JCIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 22.04.2026.
