Jitendrakumar Bhikhabhai Shrimali Vs ITO (ITAT Ahmedabad)
₹2.20 Crore Section 69C Addition: ITAT Orders Fresh Verification of Funds and Loan Evidence
Introduction
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, restored a dispute involving an addition of ₹2,20,50,000 under Section 69C to the Assessing Officer for fresh examination of the assessee’s supporting evidence.
The assessee submitted additional evidence before the Tribunal and explained that the necessary documents had not been produced during the earlier proceedings. Considering the interest of justice and proper assessment, the Tribunal set aside the CIT(A)’s order and directed verification of the availability of funds and the nature of the disputed transactions.
The appeal was allowed for statistical purposes. The Tribunal did not delete the addition on merits.
Background of the Assessment
The assessee, Jitendrakumar Bhikhabhai Shrimali, proprietor of Landmark Engineering Co., challenged the order passed by the CIT(A), National Faceless Appeal Centre, Delhi, dated 16.03.2026, for assessment year 2017-18.
The assessment involved an addition of ₹2,20,50,000 as unexplained expenditure under Section 69C, along with an addition concerning undisclosed interest income on an income tax refund.
The CIT(A) dismissed the assessee’s appeal because no documentary evidence had been submitted to substantiate the claim. The appellate authority also recorded the assessee’s failure to comply with notices issued during the appellate proceedings.
Before the Tribunal, the assessee disputed the confirmation of the assessment and sought a fresh opportunity to establish the relevant facts through documents.
Assessee Challenges the Treatment of Transactions
In the grounds of appeal, the assessee contended that the CIT(A) had sustained the assessment through an ex parte order and had referred to unexplained expenses or losses even though, according to the assessee, those issues did not arise in the manner assumed.
The assessee’s application further stated that the Assessing Officer had treated the disputed amount as payments of management fees or professional fees, resulting in an addition under Section 69C.
At the same time, the assessee referred to the amount in the context of unsecured loans. The nature and funding of the transactions therefore required factual clarification.
These were the assessee’s contentions. The Tribunal did not conclusively determine whether the disputed amount represented expenditure, a loan transaction, or an otherwise satisfactorily explained payment.
Additional Evidence Submitted Before ITAT
The assessee filed additional evidence together with an application under Rule 18(4) read with Rule 29 of the Income Tax Appellate Tribunal Rules, 1963.
Explaining the earlier failure to produce documents, the assessee stated that the proceedings had previously been handled by M/s Harish S. Kansara, Chartered Accountants, upon whom the assessee depended for proper representation.
The assessee claimed to have learnt of the adverse appellate outcome after receiving the CIT(A)’s order and subsequently entrusted the matter to new counsel.
It was also submitted that inadequate time had been available to collect the necessary supporting details and that vital documents had consequently remained unproduced before the authorities below.
The assessee relied on T. Ashok Pai Vs. CIT, 292 ITR 11 (SC), and Mahavir Prasad Jain Vs. CIT, 172 ITR 331 (MP), in support of the submission concerning reliance on professional representation.
Revenue Defends the Addition
The Revenue supported the actions of the Assessing Officer and the CIT(A).
Its representative argued that the authorities had been left with no option but to make and confirm the addition under Section 69C, given the non-compliance by the assessee or the assessee’s representative.
The competing submissions thus concerned both the earlier failure to substantiate the transactions and the request to examine documents now placed before the Tribunal.
The assessee requested restoration to the jurisdictional Assessing Officer so that the evidence could be examined and the dispute decided afresh.
Tribunal Directs Verification of Available Funds
The Tribunal set aside the CIT(A)’s order and restored the matter to the jurisdictional Assessing Officer.
The Assessing Officer was directed to fix a date and obtain all relevant details and supporting documents from the assessee.
These documents must substantiate the contention that the assessee possessed adequate own funds or borrowed funds for making the payments treated as unexplained expenditure or unsecured loans.
The remand therefore requires examination of the factual explanation and supporting financial records before a fresh decision is reached.
Specific Evidence Required for Loan Claim
The Tribunal issued further directions if the assessee maintained that the payment represented an unsecured loan.
The assessee must establish the nature of the transaction as a loan and produce evidence showing whether it had been repaid.
The borrowing and repayment transactions must also be supported by proper banking channels and confirmation from the other party.
Outcome
The appeal was allowed for statistical purposes, with the dispute restored for verification.
The order provides an opportunity to substantiate the transactions. It does not accept the loan explanation or cancel the addition; the outcome remains dependent on the evidence produced before the Assessing Officer.
Cases Discussed
- T. Ashok Pai Vs CIT (292 ITR 11, Supreme Court) – Cited by the assessee in support of the submission that a taxpayer should not be prejudiced by mistakes or failures of professional representation. The Tribunal recorded the citation but did not separately analyse the precedent.
- Mahavir Prasad Jain Vs CIT (172 ITR 331, Madhya Pradesh High Court) – Relied upon by the assessee in connection with dependence on earlier professional representation and failure to produce documents. The Tribunal did not separately discuss its ratio.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 16.03.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18.
2. The assessee has raised the following Grounds of Appeal:
“1. On the peculiar facts and circumstances of the case and in law, the Ld.CIT(A) has grossly erred in sustaining the AO’s impugned assessment order, and thereby dismissing the appeal of the appellant by ex parte holding that the AO is empowered to deem such expenses/loss as the unexplained income and make addition accordingly, when the issue of expenses/losses are not involved in the case and to that extent the order so passed by the Ld.CIT(A) is unfair and perverse.
2. On the peculiar facts and circumstances of the case and in law, in all fairness, the appellate order so passed in ex parte i.e. order which deserves to be set aside and referred back to the AO for making a fresh assessment, in terms of provisions of clause (a) of sub-section (1) of section 251 of the I.T. Act, 1961.”
3. The issue involved in this appeal is an addition of Rs.2,20,50,000/- made u/s 69C of the Act as unexplained expenditure and Rs.4,4000/- as undisclosed interest income on Income Tax refund. The assessee’s appeal against the aforesaid additions made in the assessment was dismissed by the CIT(A) on the ground that the assessee did not submit any documentary evidence to substantiate the claim and that the assessee failed to comply with the notices issued during the appellate proceedings.
4. Before us, the Ld. A.R. Shri Anil Kshatriya has submitted some additional evidence along with an application for admission thereof under Rule 18(4) read with Rule 29 of the Income Tax Appellate Tribunal Rules 1963. The assessee has stated as under:
“4. Reasons and submissions for additional evidences:
4.1 As may be perused from the impugned assessment order dated 06.01.2025, the A.O. has made addition of Rs.2,20,50,000/- on account of unsecured loans u/s.69C of the Act allegedly holding that the appellant has made payments of management fees/professional fees treating it as unexplained expenditure within the meaning of provision of section 69C of the Act, for non-furnishing of required detail/supporting evidence during the course of assessment proceedings. Besides, the Ld. CIT(A), NFAC too, agreeing with the view of the A.O., has unreasonably sustained the impugned addition causing irreparable loss to the appellant.
4.2 In this context, it is respectfully submitted that the case of the appellant was previously represented by M/s. Harish S. Kansara, Chartered Accountants. It is respectfully submitted that the appellant was dependent upon him for properly representing the case of the appellant before the authorities below.
4.3 However, it is only on receipt of the impugned appellate order dated 16.03.2026, the appellant came to know that the matter has been adversely decided by the authority in his case. Therefore, the brief of the matter has been handed over to a new counsel to represent his case and to take future course of action in the matter.
4.4 It is respectfully submitted that the appellant cannot be put to disadvantage for mistake or failure on the part of the counsel, particularly when he was fully dependent upon him for his proper guidance, as per the ratio laid down in the case of T.Ashok Pai vs. CIT 292 ITR 11 (SC) & Mahavir Prasad Jain vs. CIT 172 ITR 331 (MP).
4.5 In the aforesaid peculiar facts and circumstances, the appellant could not produce the requisite documents before the A.O./Ld. CIT(A) for the reason that owing to inadequate time allowed to the appellant for gathering the supporting details to substantiate his submission so made in the course of assessment proceedings at relevant time. On receipt of the impugned assessment order, the appellant was advised by the present counsel that the A.O. has made huge additions without providing the appellant adequate time and reasonable opportunity,that the vital documents filed now remained to be procured and adduced then. Therefore, now it is felt that proper and required documents were not coming forth looking to the present assessment order, hence the present documents could not be procured and produced before the A.O./Ld. CIT(A) at the relevant time. Therefore, these documents are being submitted through the present application 18(4) r.w.Rule-29 Of Income Tax (Appellate Tribunal) Rules, 1963 for production of additional evidence.”
5. For the aforesaid reasons, the Ld. A.R. prayed that the matter be sent back to the Jurisdictional Assessing Officer to examine the evidences in the correct prospective and decide the issue afresh.
6. The Ld. Sr. DR Shri Amit Pratap Singh defended the actions of the Assessing Officer and the CIT(A) stating that they had no option but to make/confirm the addition u/s 69C in view of non-compliance by the assessee/ Assessee’s Representative.
7. In the interest of justice and proper assessment, we set-aside the order of the CIT(A) and restore the matter to the Jurisdictional Assessing Officer who will fix a date and obtain from the assessee all the details and supporting documents in support of its contention that it had adequate own/borrowed funds for payment of the money that has been treated as unexplained expenditure/unsecured loans. If the assessee claims the payment to be an unsecured loan, it shall lead evidence to establish the nature of the transaction as loan and also provide evidence to show if the loan has been repaid and that the transactions of borrowing and repayment were made through proper banking channels and duly confirmed by the other party.
8. In the result, the appeal of the assessee is allowed for allowed for statistical purposes.
This Order is pronounced on 21/10/2026
