Yashpalsinh Gajendrasinh Vaghela Vs ITO (ITAT Ahmedabad)
Same Diary, Different Outcome: ITAT Orders Fresh Hearing on ₹34.50 Lakh Addition
Fresh Opportunity to Contest Diary-Based Addition
The Ahmedabad ITAT restored an appeal concerning a ₹34.50 lakh addition under Section 69A to the CIT(A), directing a fresh adjudication after providing a reasonable opportunity of hearing. The addition arose from alleged cash capital contributions recorded in a handwritten diary seized during a search on a third-party group.
An important feature was the assessee’s production of a reassessment order for another assessment year, in which the Assessing Officer had accepted his explanation and made no addition concerning an alleged ₹12.50 lakh cash contribution recorded in the same seized material.
The Tribunal directed the CIT(A) to consider that assessment order along with corroborating documentary evidence. However, it expressly refrained from deciding the merits of the ₹34.50 lakh addition.
Search Diary Became the Basis for Reassessment
The assessee had filed his original return for AY 2020-21 on 10 January 2021, declaring total income of ₹4,30,200.
A search under Section 132 was conducted on 8 February 2024 on the PSY and associated group of Gandhinagar, covering key employees and associates. The seized material included a handwritten diary inventorised as Annexure A-6.
According to the order, page 19 contained individual partner ledger accounts reflecting cash capital contributions in M/s. Akshar Infrastructure. Entries attributed to the assessee included amounts of ₹34.50 lakh and ₹12.50 lakh.
Reassessment proceedings followed. By an assessment order dated 29 March 2025, the Assessing Officer treated ₹34.50 lakh as unexplained money under Section 69A, taxable at the rate specified in Section 115BBE.
The assessee disputed the addition, contending that he was not a partner in the firm during the relevant year. His grounds also alleged that documentary evidence had been ignored and that third-party material was relied upon without cross-examination or a personal hearing.
First Appeal Dismissed for Non-Compliance
The CIT(A) dismissed the appeal, recording non-compliance despite hearing notices issued on 29 May, 12 September, 18 November and 25 November 2025.
Before the Tribunal, the assessee’s principal grievance was that the appeal had been decided without a reasonable opportunity to present his case. The Department maintained that sufficient opportunities had already been provided and that the assessee had failed to make proper representation.
The Tribunal examined the actual sequence of notices and responses. It found that the assessee had submitted adjournment applications in respect of the notices dated 18 November and 25 November 2025.
Nevertheless, the CIT(A) proceeded to pass the order on 9 December 2025, four days after the last scheduled hearing date of 5 December 2025, without granting further time.
Another Hearing, With a Clear Duty to Cooperate
Considering these circumstances, the Tribunal granted the assessee another opportunity to make proper representation before the CIT(A). It directed the appellate authority to adjudicate the grounds afresh after allowing a reasonable opportunity of hearing.
The relief came with an express responsibility. The assessee was directed to furnish relevant documents, details and submissions without seeking unnecessary adjournments.
The Tribunal clarified that if the assessee again failed to appear or provide supporting material, the CIT(A) would be free to decide the appeal on the basis of the available record. The remand therefore requires active participation and a properly documented explanation.
Other-Year Assessment Must Be Considered
During the hearing, the assessee produced an assessment order dated 24 March 2026 for AY 2021-22, passed under Section 147 read with Section 144.
The Tribunal recorded that, in those proceedings, the Assessing Officer had accepted the assessee’s explanation and made no addition for the alleged ₹12.50 lakh cash contribution appearing in the same incriminating material.
It specifically directed the CIT(A) to consider this order together with the assessee’s corroborating evidence while deciding the present appeal.
This direction makes the other-year assessment relevant to the fresh examination. It does not automatically establish that the disputed ₹34.50 lakh entry must receive the same treatment.
Statistical Relief, With Merits Open
All grounds were allowed for statistical purposes, and the appeal was restored to the CIT(A). The Tribunal explicitly stated that it had returned no findings on the merits of the addition.
The order contains inconsistent assessment-year references in its factual narration. While the cause title and operative directions identify AY 2020-21, paragraph 4 refers to AY 2019-20. The diary-entry years also differ from the later discussion of the ₹12.50 lakh assessment. These references should therefore be checked against the underlying assessment records when citing the decision.
Author’s Comments
The decision highlights the importance of examining adjournment requests and the surrounding circumstances, rather than treating every unsuccessful appearance as complete non-compliance. At the same time, the Tribunal’s directions make clear that the assessee must use the restored opportunity responsibly.
The other-year reassessment order provides a potentially valuable factual comparison because it concerns the same seized material. Its usefulness will depend on the explanation accepted there and whether supporting documents establish a comparable position for the disputed entry.
The ruling should be cited for fresh appellate consideration and examination of relevant evidence. It does not hold that diary entries are inherently unreliable, decide the cross-examination objection, or delete the ₹34.50 lakh addition. Those substantive questions remain open before the CIT(A).
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The present appeal has been preferred by the Assessee against the Order, dated 09/12/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 29/03/2025, passed under Section 147 read with Section 144 of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2020-2021.
2. The Assessee has raised the following grounds of appeal:
1. The order passed by the Ld. CIT (A) is against law, equity and; justice.
2. The entire assessment and appellate process has been conducted in violation of the principles of natural justice, as the Ld. A.O. and CIT(A) have ignored key documentary evidence that supports the appellant contention.
3. The Ld. AO made and The CIT(A) confirmed the addition under Section 69A of Rs. 34,50,000, by treating as unexplained money as cash capital contribution though the appellant was not partner in the M/s Akshar Infrastructure during the year under consideration. The above mentioned addition is void, illegal, and against the principles of natural justice.
4. The Ld. CIT(A) has erred in law and fact by making addition as unexplained money only relied on third party evidences without providing cross examination and personal hearing.
3. The relevant facts in brief are that the Assessee filed original return of income for Assessment Year 2020-2021 on 10/01/2021 declaring total income of INR.4,30,200/-. A search and seizure action under Section 132 of the Act was conducted on 08/02/2024 (on PSY and its Associated Group of Gandhinagar, covering key employees and associates) during which incriminating materials were seized which included a handwritten diary (inventorised as Annexure A-6). At Page No. 19 of the said diary contained individual partner ledger accounts showing cash capital contributions in M/s Akshar Infrastructure included following entries relating to capital contributions by the Assessee:
(a) Assessment Year 2019-2020 : INR.34,50,000/-
(b) Assessment Year 2020-2021 : INR.12,50,000/-
4. In view of the above reassessment proceedings were initiated in the case of the Assessee for the Assessment Years 2019-2020 and 2020-2021. The present appeal pertains to Assessment Year 2019-2020.
5. Vide Assessment Order, dated 29/03/2025, the Assessing Officer had made addition of INR.34,50,000/- holding the cash contribution to be unexplained money in terms of Section 69A of the Act taxable at the rate specified in Section 115BBE of the Act. The first appeal preferred by the Assessee was dismissed by the Learned CIT(A) on the ground of complete non-compliance by the Assessee despite notice of hearing having been issued on 29/05/2025, 12/09/2025, 18/11/2025, and 25/11/2025. Being aggrieved the Assessee is now in appeal before this Tribunal.
6. We have considered both the sides and perused the material on record. The primary grievance of the Assessee is that the learned CIT(A) had dismissed the appeal preferred by the Assessee without granting a reasonable opportunity of being heard. Per Contra Learning Departmental Representative submitted that despite having been granting sufficient opportunity the Assessee failed to make proper representation. Therefore, the Learned CIT(A) was justified in dismissing the appeal.
7. On perusal of material on record, we find that four notice of hearing were issued by the Learned CIT(A) between May, 2025 to November, 2025. In respect of notices issued on 18/11/2025 and 25/11/2025, the Assessee has filed application seeking adjournment. However, the Learned CIT(A) did not grant any further time to the Assessee and proceeded to pass the impugned order on 9/12/2025 (within a period of 4 days from the last date of hearing fixed on 5/12/2025 by way of notice dated, 25/11/2025). Given the aforesaid facts we are inclined to grant another opportunity to the Assessee to make proper representation before the learned CIT(A) with the directions to adjudicate the grounds raised by the Assessee afresh after granting the Assessee a reasonable opportunity of being heard. The Assessee is directed file relevant documents, details and submission before the Learned CIT(A) without seeking any unnecessary adjournments. It is clarified that in case the Assessee fails to enter appearance before the Learned CIT(A) or fails to furnish documents/details in support of the grounds raised in the appeal, the Learned CIT(A) would be at liberty to adjudicate the grounds raised by the Assessee based upon material on record.
8. During the course of hearing the Learned Authorised Representative for the Assessee had placed on record copy of Assessment Order, dated 24/03/2026, passed in the case of the Assessee for the Assessment Year 2021-2022 passed under Section 147 read with Section 144 of the Act. Accepting the explanation/submission of the Assessee, the Assessing Officer did not make any addition in the reassessment proceedings in respect of alleged cash contribution of INR.12,50,000/- recorded in the same incriminating material. The Learned CIT(A) is directed to take the same into consideration along with corroborating documentary evidence filed by the Assessee while adjudicating the grounds raised by the Assessee in appeal for the Assessment Year 2020-2021.
9. In terms of above, all the grounds raised by the Assessee are allowed for statistical purposes without returning any findings on the merits of addition since we have restored the appeal back to the file of Learned CIT(A).
10. In terms of above the present appeal preferred by the Assessee is allowed for statistical purposes.
Order pronounced on 28.09.2026
