Section 69A Addition Cannot Come as a Surprise in Final Assessment: Karnataka HC

Teamview Developers LLP Vs Assessment Unit (Karnataka High Court)

Addition Under Section 69A Cannot Come as a Surprise in Final Assessment: Karnataka High Court Quashes Faceless Order and Penalty Notices

The Karnataka High Court has quashed a faceless assessment order in which an amount of ₹2,38,89,870 was treated as unexplained money under Section 69A, although no such proposal had been included in the show-cause notice issued to the assessee. The Court held that when an entirely new addition is made without putting the assessee on notice, interference is unavoidable because the assessee is denied an effective opportunity to explain the transaction.

M/s Teamview Developers LLP challenged the assessment order dated 18 March 2026 passed under Section 143(3) read with Section 144B of the Income-tax Act for Assessment Year 2024-25. It also challenged the consequential penalty show-cause notices issued under Sections 271AAC(1) and 272A(1)(d).

The assessee was issued a show-cause notice dated 27 February 2026 during the faceless assessment proceedings. The notice proposed variations relating to Section 69C and an addition as business income. The assessee filed its response to both proposed variations and furnished explanations supporting its returned income.

Significantly, the Assessing Officer accepted the assessee’s explanation concerning the variations actually proposed in the show-cause notice. However, while completing the assessment, the officer introduced an entirely different basis of addition and treated ₹2,38,89,870 as unexplained money under Section 69A.