Smt. Savita Vs ITO (ITAT Jaipur)
Tax Dispute Settled, Fresh Addition Followed: ITAT Orders Rehearing of Rectification Appeal
A Fresh Hearing, Not Deletion of the Addition
The Jaipur Tribunal set aside an appellate order concerning a ₹33.50 lakh addition made through rectification under Section 154, after the original assessment dispute had been settled under the Direct Tax Vivad se Vishwas Scheme, 2024.
The Tribunal intervened because the first appellate authority had not provided an adequate opportunity of hearing. It restored the appeal for fresh adjudication and allowed it for statistical purposes. It did not delete the addition, decide whether Section 154 permitted it, or determine the effect of the earlier settlement on the subsequent proceedings.
Original Assessment Was Settled Under Vivad se Vishwas
The assessee filed her return declaring total income of ₹8,26,976. The AO completed scrutiny assessment under Section 143(3), determining total income at ₹92,01,080.
She challenged the assessment in appeal. That dispute was subsequently settled under DTVSV Scheme, 2024.
The controversy before the Tribunal arose from what happened afterwards. The AO invoked Section 154 and made a further addition of ₹33,50,000 as unexplained investment under Section 69.
The operative discussion in the Tribunal’s order identifies this ₹33.50 lakh adjustment as the subsequent addition in dispute. The previously assessed income of ₹92,01,080 should therefore not be described as another fresh addition merely because of the wording used in the order’s brief factual narration.
Assessee Questioned the Rectification and the Source Finding
The assessee pursued rectification relief against the subsequent adjustment, but her application was rejected.
Her grounds before the Tribunal referred to the original assessment order dated 22 September 2021 and contended that the ₹33.50 lakh amount had been discussed as an unexplained investment but had not been included while computing the assessed total income.
She further asserted that the payment had been made through banking channels from explained sources. On that basis, she maintained that her rectification application was valid.
The order also records her objection that the subsequent addition was beyond the scope of Section 154. These were the substantive issues requiring consideration in the appellate proceedings. The Tribunal, however, did not adjudicate their correctness because it first found a defect in the opportunity afforded to her.
Only One Hearing Notice Was Shown
The first appellate authority dismissed the appeal by order dated 17 February 2026.
The assessee complained that only one hearing notice had been issued, dated 24 December 2025, requiring a response by 13 January 2026. Her appeal ground stated that an adjournment sought on 13 January had not been considered.
While examining the appellate order, the Tribunal noted the single notice and observed that it appeared the assessee had not received it. The appellate authority had proceeded to decide the matter using the facts recorded in Form No. 35.
There is a difference between the assessee’s ground referring to an ignored adjournment request and the Tribunal’s observation regarding apparent non-receipt of notice. The decisive finding was that adequate opportunity had not been provided before disposing of the appeal.
Form No. 35 Could Not Substitute for Effective Participation
The Tribunal emphasised that a reasonable opportunity of hearing is a fundamental requirement of natural justice.
Here, the appeal had been decided without obtaining the assessee’s substantive reply and supporting evidence. The factual statements in Form No. 35 could not, in the circumstances, substitute for a meaningful opportunity to explain the disputed investment and challenge the rectification.
This mattered because the controversy involved both the scope of the rectification power and the assessee’s explanation of the underlying transaction. The appellate authority needed to consider those matters after allowing her to present her case.
The Tribunal therefore held that the appellate order was unsustainable.
Appeal Restored for Fresh Adjudication
The Tribunal set aside the impugned order and directed the first appellate authority to decide the appeal afresh after providing an adequate opportunity of being heard.
The result was procedural relief: the assessee secured a renewed opportunity to contest the disputed adjustment. The order contains no final conclusion that the investment was explained or that the subsequent rectification was unlawful.
Likewise, it does not hold that settlement under Vivad se Vishwas automatically prevented the AO from exercising Section 154. Those questions remain to be examined in the restored appeal.
Author’s Comments
The decision illustrates why the precise outcome of a remand order must be stated carefully. The sequence—settlement followed by a substantial rectification addition—is significant, but the Tribunal’s ruling rests on denial of adequate hearing, rather than a final interpretation of the settlement scheme or Section 154.
In the fresh proceedings, the original assessment computation, subsequent rectification order, settlement documents and banking evidence will be central to understanding the dispute.
For appellate authorities, the lesson is equally clear. A hearing opportunity must enable effective participation. Recording that a notice was issued and deciding the case from Form No. 35 may be insufficient where the circumstances show that the appellant’s reply and evidence were not meaningfully obtained or considered.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The Appellant, Smt. Savita (hereinafter referred to as the ‘assessee’) by filing the present appeal, sought to set aside the impugned order dated 17.02.2026 passed by the Additional/Joint Commissioner of Income Tax (Appeals)-1 Pune [hereinafter referred to as the ‘JCIT(A)’] qua assessment year 2019-20 on the grounds inter-alia that:-
“1. The Ld. CIT(A) has erred on facts and in law in dismissing the appeal filed by the assessee without providing adequate 1 opportunity of hearing in as much as only one hearing notice was issued on 24.12.2025 against which assessee sought the adjournment on 13.01.2026 which is not considered.
2. The Ld. CIT(A) has erred on facts and in law in upholding the order of AO in rejecting the application filed by the assessee u/s 154 on 13.10.2025 by not appreciating that when the amount of Rs.33,50,000/- for which addition is made by AO by treating the 2 same as unexplained investment but not included while computing the total income in order u/s 143(3) dt. 22.09.2021 which is paid from the banking channel out of explained sources, the application filed by the assessee to rectify the mistake apparent on record is valid in the eyes of law.
3. The appellant craves to alter, amend and modify any ground of appeal.
4. Necessary cost be awarded to the assessee.”
2. Briefly stated, facts necessary for consideration and adjudication of the issues at hand are : on the basis of return filed by the assessee declaring total income at Rs. 8,26,976/-. Assessment was framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) determining the total income at Rs. 92,01,080/-. The assessee challenged the said assessment order by way of appeal, which was settled under DTVSV Scheme, 2024. However thereafter Assessing Officer passed an order u/s 154 of the Act and thereby made two additions of Rs. 92,01,080/- and Rs. 33,50,000/- as unexplained investment u/s 69 of the Act. Thereafter the assessee filed a rectification application u/s 154 of the Act by the AO on the ground that the same does not fall in the purview of section 154 of the Act, which was dismissed.
3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal, who has dismissed the same. Feeling aggrieved with the impugned order passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeal.
4. We have heard Ld. ARs for the assessee and Ld. DR for the Revenue and perused the record available on file.
5. Undisputedly the original assessment was framed u/s 143(3) of the Act and at the total income of Rs. 92,01,080/- by making certain addition, which was settled under DTVSV Scheme, 2024. It is also not in dispute that subsequently the Assessing Officer by invoking the provisions contained under section 154 of the Act made further addition of Rs. 33,50,000/-, which was contested by the assessee on the ground that subsequent addition is beyond the purview of section 154 of the Act, which was also dismissed.
6. At the very outset, Ld. AR for the assessee contended that during appellant proceedings adequate opportunity has not been given to the assessee by way of issuance of notice and the order has been passed by Ld. CIT(A) at the back of the assessee. Perusal of para 4 of the impugned order goes to show that notice is shown to have been issued to the assessee on 24.12.2025, seeking his reply on 13.01.2026. It appears that assessee has not received any notice, Ld. CIT(A) proceeded to decide the appeal on the basis of facts recorded in Form No. 35. Providing an adequate opportunity to the assessee is fundamental rule of natural justice, but in this case order has been passed on the basis of facts without calling reply and evidences from the assessee. In these circumstances, the impugned order passed by the Ld. CIT(A) is not sustainable, hence liable to be set aside.
7. Resultantly, the appeal filed by the assessee is allowed for statistical purposes to be decided afresh after providing adequate opportunity of being heard by the Ld. CIT(A).
Order pronounced in the open court on 28-09-2026.
