Prem Prakash Agrawal Vs ACIT (ITAT Agra)
Conditional Request to Merge Appeals Cannot Be Treated as Unconditional Withdrawal: ITAT Restores ₹1.22 Crore Addition for Merits Hearing
Case Details
In Prem Prakash Agrawal v. ACIT, Circle 1(1)(1), Agra, the Agra Bench of the Income Tax Appellate Tribunal held that an assessee’s request to discontinue an earlier appeal, conditional upon its merger with a subsequent appeal, could not be acted upon by dismissing the earlier appeal while leaving the disputed addition unexamined.
The decision in ITA No. 245/Agr/2026, concerning Assessment Year 2017-18, was pronounced on 7 October 2026 by Shri Sunil Kumar Singh, Judicial Member, and Shri Brajesh Kumar Singh, Accountant Member.
The Tribunal restored the matter to the CIT(A) for adjudication of the ₹1.22 crore cash-deposit addition on merits. It did not delete the addition or decide whether the deposits represented unexplained income.
Background: One Addition, Two Appeals
The Assessing Officer completed the assessment under section 143(3) on 27 November 2019, adding ₹1,22,00,000 on account of cash deposits in the assessee’s bank account under section 68 read with section 115BBE. Penalty proceedings under section 270A were also initiated separately.
On 27 December 2019, the Assessing Officer passed a rectification order under section 154 read with section 143(3). The addition and the reasoning supporting it remained unchanged. The only modification was that penalty proceedings were initiated under section 271AAC(1), instead of section 270A.
The assessee filed separate appeals against both orders. The first challenged the original assessment, while the second challenged the subsequent rectification order. Consequently, two appeals concerning the same underlying addition were pending before the first appellate authority.
Request for Merger and Dismissal of Both Appeals
During the appellate proceedings, the assessee requested that the original assessment appeal be merged with the appeal against the rectified order. His communication stated that the proceedings in the earlier appeal should be considered null and void, in conjunction with that merger request.
The CIT(A), however, treated the request as sufficient to dismiss the original appeal. The appellate order dated 4 August 2025 recorded that, since the assessee had filed another appeal concerning the revised order and the same addition, the original appeal stood dismissed.
When the subsequent appeal was considered, it too was dismissed, by order dated 10 March 2026. The CIT(A) reasoned that the challenge to the ₹1.22 crore addition required detailed verification and could not be addressed within the scope of rectification under section 154.
The consequence was that neither appeal resulted in a decision on the merits of the cash-deposit addition. The first was dismissed on the basis of the assessee’s communication, while the second was rejected by reference to the restricted scope of rectification.
Assessee’s Arguments Before the Tribunal
The assessee contended that the CIT(A) had failed to adjudicate the grounds on merits, contrary to section 250(6). He argued that the manner in which the two appeals were disposed of left him without an effective appellate remedy against the addition.
He also challenged the rectification order itself. According to the assessee, substituting section 271AAC(1) for section 270A constituted a substantive change, rather than correction of a mistake apparent from the record, and was therefore beyond section 154.
Separately, he disputed the ₹1.22 crore addition as arbitrary and unsupported. These were grounds raised by the assessee; their substantive correctness was not determined by the Tribunal.
Tribunal’s Findings: The Condition Could Not Be Ignored
The Tribunal examined the assessee’s communication as a whole. It found that the CIT(A) had dismissed the original appeal without merging it with the subsequent appeal, although merger was expressly requested.
The request to treat the earlier proceedings as null and void was conditional upon the earlier appeal being merged with the later appeal, with the merits of the ₹1.22 crore addition being decided in that proceeding.
The Tribunal therefore held that the assessee’s request could not be separated from its condition. Dismissing the original appeal while subsequently refusing to consider the addition defeated the basis on which the assessee had sought consolidation.
In the interests of equity and justice, the Tribunal set aside the CIT(A)’s order dated 10 March 2026 and restored the matter to the appellate authority.
Decision and Matters Left Open
The CIT(A) was directed to decide the appeal on the merits of the ₹1.22 crore addition under section 68 read with section 115BBE, after providing a reasonable opportunity of hearing and in accordance with law.
Grounds concerning the failure to adjudicate and denial of an effective remedy were allowed. The challenge to the change in penalty provision was left open as academic. The ground challenging the addition itself was allowed for statistical purposes, reflecting the remand rather than substantive deletion.
Author’s Comments
The decision highlights the importance of reading an assessee’s procedural request in its entirety. A request to discontinue one appeal on the understanding that its issues will be examined in another cannot fairly be treated as an unconditional abandonment of the underlying challenge.
The ruling is nevertheless confined to this procedural situation. It does not establish that every appeal against a section 154 order permits unrestricted reconsideration of the original assessment. Here, the decisive circumstance was the unfulfilled condition attached to the merger request.
Practically, requests involving multiple appeals should expressly preserve all substantive grounds and clarify that discontinuance is conditional upon their adjudication elsewhere. The Tribunal restored that opportunity; the explanation for the cash deposits and the sustainability of the addition remain to be decided.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated 10.03.2026 passed in appeal No. CIT(APPEALS)-1, AGRA/10433/2019-20 by the Commissioner of Income Tax (Appeals)/ ADDL/JCIT(A), Thiruvananthpuram (hereinafter referred to as “CIT(A)), u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2017-18.
2. In this case, the assessment was completed u/s. 143(3) of the Act on 27.11.2019, making an addition of Rs.1,22,00,000/- on account of cash deposits in the bank account of the assessee u/s. 68 r.w.s. 115BBE of the Act. The AO also initiated penalty proceeding u/s. 270A of the Act separately. On 27.12.2019, the AO passed a rectification order u/s 154 r.w.s. 143(3) of the Act wherein the addition was maintained at the same amount with the same reasoning and the only modification being made was that instead of penalty u/s. 270A of the Act, penalty proceeding u/s. 271AAC(1) of the Act was initiated by the AO.
2.1. Assessee filed an appeal on 10.12.2019 against the original assessment order u/s. 143(3) dated 27.11.2019 with Appeal No. CIT(Appeals)-1, Agra/10346/2019-20. The assessee also filed an appeal against the order u/s. 154 r.w.s. 143(3) of the Act dated 27.12.2019, being Appeal No. CIT(Appeals)-1, Agra/10433/2019-20.
2.2. Appeal No. CIT(Appeals)-1, Agra/10346/2019-20 was taken up for hearing. The assessee filed a letter dated 17.06.2026 before the ld. CIT(A), requesting to merge the old appeal No. CIT(Appeals)-1, Agra/10346/2019-20 with new appeal No. CIT(Appeals)-1, Agra/10433/2019-20 and proceedings of the old appeal should be considered as null and void. In this regard, relevant extract of the letter dated 17.06.2026 of the assessee before the ld. CIT(A) is reproduced as under :
“MAY IT PLEASE YOUR HONOUR,
Please refer to your Notice No ITBA/APL/F/APL_1/2025-26/1076866573(1) Dated: 10-06-2025 bearing Appeal No. CIT (APPEALS) 1, AGRA/10346/2019-20
Although, Appellant has already filed the reply yet it is further humbly required details are being furnished as under:-
It is humbly stated that first order u/s 143(3) vide order no. 1021162156 dated: 27/11/2019 was passed against which appeal to CIT was filed by assesse on dated: 10/12/2019 vide ack no. 269799210101219.
Later on revised order u/s 143(3)/154 vide order no. 1023222731 dated: 27/12/2019 was passed against which appeal to CIT was filed by assesse on dated: 06/01/2020 vide ack no. 288024250060120 passed merely on the basis of invoking different sections of penalties on which AO has further suspicion.
Revised order was passed making the same addition of income and on the same issue and inform you that we have also filed the appeal against the original order also having details CIT (APPEALS) 1, AGRA/10346/2019-20 later on appeal is filed against revised order having details CIT (APPEALS) 1, AGRA/10433/2019-20. Therefore two appeal with different appeal numbers are pending before the CIT(APPEALS) for disposal.
Hence we request your honor to merge the old appeal no. CIT (APPEALS) 1, AGRA/10346/2019-20 with new appeal no. CIT (APPEALS) 1, AGRA/10433/2019-20 and proceeding of old appeal should be considers as null and void.
Conclusion-
Proceeding of old appeal – CIT (APPEALS) 1, AGRA/10346/2019-20 should be considers as null and void. We have also filed same reply on date 26-03-2025 against same appeal number but still no action is taken.”
2.3. The ld. CIT(A) taking cognizance of the above letter, by an order dated 04.08.2025 in Appeal No. CIT(Appeals)-1, Agra/10346/2019-20, dismissed the appeal of the assessee. The relevant extract of the order of the ld. CIT(A) is reproduced as under :
“Observation and Decision:
The appellant has submitted that since he has filed an appeal against the assessment order passed u/s.143(3) on 27/11/2019 and another appeal against the Revised order making the same addition of Income and on the same issue, the present appeal having No. CIT(Appeals)-1, Agra/10346/2019-20 should be considered as null and void.
Accordingly, the appeal is dismissed.”
2.4. When the appeal No. CIT(Appeals)-1, Agra/10433/2019-20 was heard, the same was also dismissed by the ld. CIT(A) on the ground that in the order u/s. 154 of the Act passed, confirming the order passed u/s. 143(3) of the Act, there was no mistake apparent from record and dismissed the appeal of the assessee. In this regard, relevant findings of the ld. CIT(A) are reproduced as under :
“Observation and Decision:-
Section 154 of the Income-tax Act, 1961 states that
1. With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may
1. amend any order passed by it under the provisions of this Act.
An order of rectification can only change any mistake apparent from record. The order of rectification cannot verify the correctness of a claim which is in need of documentary evidence substantiating the same. Only arithmetical errors of calculation can be corrected using the section 154.
Order u/s.154 of the Act was passed, confirming the order passed u/s. 143(3) of the Act, as there was no mistake apparent from record in the order passed u/s.143(3) of the Act.
As the claim of the appellant involves detailed verification of the addition of Rs.1,22,00,000/- done u/s 143(3) of the Act, it does fall under the mistake apparent from record.
In view of the above, the order passed u/s 154 r.w.s 143(3) of the Act dated 27/12/2019 confirming the additions made u/s. 143(3) of the Act is upheld as there is no mistake from record in the order passed u/s.143(3) of the Act and the Appeal stands dismissed.”
3. Aggrieved with the said order, the assessee has filed an appeal before us on the following grounds of appeal:
“1. That the learned CIT(A) has grossly erred in law and on facts in dismissing the appeal without adjudicating the grounds raised by the appellant on merits, thereby violating the mandatory provisions of section 250(6) of the Income-tax Act, 1961. The order is thus vitiated in law.
2. That the learned CIT(A) has erred in law in dismissing the appeal on the ground that the issue raised in appeal does not fall within the scope of section 154, without appreciating that the appeal was against the addition made in the order passed u/s 154 and the appellate authority was required to examine the correctness and legality of such addition, rather than restrict itself to the scope of section 154.
3. That in the facts and circumstances of the case, the learned CIT(A) erred in dismissing the appeal, resulting in the appellant being left without any effective appellate remedy, which is contrary to settled principles of justice and law.
4. That, Without prejudice to the above, the order dated 27.12.2019 passed by the Ld AO u/s 154 is itself bad in law, as the change of penalty provision from section 270A to section 271AAC(1) is a substantive change. Such change does not constitute a “mistake apparent from record” and, thus, was beyond the scope of section 154 rendering the said order as bad, illegal and without jurisdiction.
5. That, having regard to the facts on record and in any view of the matter, the addition of ₹1,22,00,000/- made by the Ld AO u/s 68 read with Sec. 15BBE is arbitrary, unjustified and bad on facts and in law. Same is based on pure conjectures and surmises and is liable to be deleted.
6. The appellant craves leave to add, alter, amend or withdraw any ground of appeal at or before the time of hearing.”
4. We have heard both the parties and perused the material on record. In this case, the Ld. CIT (A) dismissed the Appeal No. CIT(Appeals)-1, Agra/10346/2019-20 by quoting the submission of the assessee vide letter dated 17.06.2026 that since the assessee has filed an appeal against the assessment order passed u/s.143(3) on 27/11/2019 and another appeal against the Revised order dated 27.12.2019 making the same addition of Income and on the same issue, the present appeal having No. CIT(Appeals)-1, Agra/10346/2019-20 should be considered as null and void. However, the Ld. CIT(A) while dismissing the said appeal did not merge the old appeal no. CIT (APPEALS) 1, AGRA/10346/2019-20 with new appeal no. CIT (APPEALS) 1, AGRA/10433/2019-20 as requested by the assessee vide his letter dated 17.06.2026 as reproduced earlier in this order. The request of the assessee to consider old appeal no. CIT (APPEALS) 1, AGRA/10346/2019-20 as null and void was conditional on the ground that the old appeal no. CIT (APPEALS) 1, AGRA/10346/2019-20 will be merged with the new appeal no. CIT (APPEALS) 1, AGRA/10433/2019-20 and the issue on merits in respect of the addition of Rs. 1,22,00,000/- on account of cash deposits in the bank account of the assessee will be decided in the new appeal no. CIT (APPEALS) 1, AGRA/10433/2019-20. Therefore, in the interest of equity and justice, we set aside the order dated 10.03.2026 of the Ld. CIT(A) in appeal no. CIT (APPEALS) 1, AGRA/10433/2019-20 and restore the matter to his file with a direction to decide the appeal on merits in respect of the addition of Rs. 1,22,00,000/- on account of cash deposits in the bank account of the assessee added by the AO u/s 68 of the Act r.w.s. 115BBE of the Act after giving a reasonable opportunity of being heard to the assessee and in accordance with law. Grounds nos. 1 to 3 of the appeal are allowed. In view of ground nos. 1 to 3 of the appeal being allowed ground no. 4 of the appeal becomes academic and is left open in this case. Ground no. 5 of the appeal on the merits of the addition of Rs. 1,22,00,000/- u/s 68 r.w.s.115BBE is allowed for statistical purposes.
5. In the result, the appeal filed by the assessee stands allowed in the terms indicated above.
Order pronounced in the Open Court on 07.10.2026
