ITO Vs Pradipbhai Dineshchandra Thakkar (ITAT Ahmedabad)
Rule 46A: CIT(A) Cannot Play a Solo Innings-₹1.01 Crore Addition u/s 69A Restored to AO for Fresh Examination
Summary:
Background of the Case
The assessee had not filed his return of income for AY 2018-19. He also failed to comply with the statutory notices issued u/s 142(1). Consequently, the AO completed the assessment ex parte u/s 144 r.w.s. 147 of the Income-tax Act, 1961.
During the assessment proceedings, the AO noticed cash deposits aggregating to ₹1,01,67,590 in the assessee’s bank account. Since the assessee neither participated in the proceedings nor furnished any explanation regarding the nature & source of the deposits, the AO treated the entire amount as the assessee’s unexplained money u/s 69A. The statutory provision concerning unexplained money under section 69A was thus invoked in the assessment.
Thus, the absence of an explanation at the assessment stage resulted in the entire cash deposit being brought to tax.
Relief Granted by the CIT(A)
Before the CIT(A), the assessee appeared to have changed course & furnished detailed submissions along with several documents. These included confirmations, copy of the ITR, audit report, profit & loss account, balance sheet, ledger account & bank statements.
The assessee contended that the impugned transactions had already been recorded & reported under another PAN, namely AFLPG5282. On the strength of these documents, the CIT(A) concluded that the assessee had satisfactorily explained both the source of the cash deposits & their recording in the books of account.
Accordingly, the CIT(A) deleted the entire addition of ₹1,01,67,590 made u/s 69A.
Revenue’s Grievance Before the ITAT
The Revenue challenged the deletion primarily on the ground that the CIT(A) had relied upon additional evidence furnished for the first time during the appellate proceedings without forwarding the same to the AO for examination.
According to the Revenue, the AO had no opportunity to verify the confirmations, financial statements, bank account, audit report or the claim that the transactions stood disclosed under another PAN. The CIT(A) neither called for a remand report nor gave the AO an effective opportunity to rebut the fresh material.
The Revenue also pointed out that there was an apparent mismatch between the assessee’s name & the other PAN under which the transactions were claimed to have been reported. The ownership, operation & disclosure of the relevant bank account had also not been properly verified.
It was further contended that the bank account containing the cash deposits had not been disclosed by the assessee in a return for the relevant year. Therefore, the CIT(A) could not have accepted the explanation solely on the basis of documents produced at the appellate stage without complying with the mandatory procedure prescribed under Rule 46A of the Income-tax Rules, 1962.
Proceedings Before the Tribunal
None appeared on behalf of the assessee when the appeal was taken up for hearing. The Departmental Representative submitted that the Revenue was principally aggrieved by the CIT(A)’s failure to send the additional evidence to the AO & obtain a remand report.
It was argued that the AO had never been given an opportunity to examine the documents on the basis of which the addition was deleted. Therefore, in the interests of justice, the matter ought to be restored to the AO for fresh consideration.
ITAT’s Findings
The Ahmedabad ITAT noticed that the Revenue had taken a specific ground regarding violation of Rule 46A. On examining the appellate order, the Tribunal found no reference showing that the additional evidence furnished by the assessee had been forwarded to the AO for his comments.
The CIT(A) had granted substantial relief solely on the basis of material produced during the appellate proceedings. However, the AO, who had originally completed the assessment ex parte because of the assessee’s non-compliance, was not afforded an opportunity to examine the authenticity, relevance & evidentiary value of that material.
The Tribunal therefore held that it would be fit & proper to restore the matter to the AO. The AO was directed to consider the assessment afresh after taking into account all the details & evidence furnished by the assessee before the CIT(A).
Accordingly, the order of the CIT(A) deleting the addition was set aside & the entire matter was remanded to the AO. The Revenue’s appeal was treated as allowed for statistical purposes.
Author’s Comments
The ruling reiterates that while the CIT(A) possesses wide appellate powers, such powers must be exercised in conformity with Rule 46A & the principles of natural justice. Where crucial documents are produced for the first time in appeal, the AO must ordinarily be given an opportunity to examine & rebut them.
Importantly, the Tribunal did not hold that the cash deposits were necessarily unexplained. Nor did it restore the addition of ₹1.01 crore on merits. It merely restored the issue for proper verification by the AO. The assessee thus retains the opportunity to establish the source, ownership & accounting of the deposits.
The lesson is simple: additional evidence may rescue an assessee’s case, but it cannot bypass the AO’s right of verification. The CIT(A) may admit fresh evidence, but cannot use it to knock out an addition without first allowing the AO to enter the ring.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the Revenue 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 10.02.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2018-19.
2. The Revenue has challenged the appeal on the following grounds:
1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,01,67,590/- made by the Assessing Officer on account of unexplained money u/s 69A of the Act in respect of assessee has made transactions of cash deposit. The Ld. CIT(A) failed to appreciate that the assessee had not satisfactorily established the source and genuineness of the cash deposits of Rs. Rs.1,01,67,590/-, and therefore the addition made by the Assessing Officer deserves to be restored.
2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in admitting and relying upon additional evidence such as confirmations, copy of ITR filed under PAN AFLPG5282), Audit report, P&L A/c, balance Sheet, Ledger A/c, bank A/c Statement furnished by the assessee during appellate proceedings without calling for a remand report from the Assessing Officer as mandated under Rule 46A of the Income-tax Rules, 1962.
3. The learned CIT (A) failed to provide adequate opportunity to the Assessing Officer to examine, verify, or rebut the additional evidence produced by the assessee, thereby violating the mandatory procedure prescribed under Rule 46A and principles of natural justice. The order passed by the learned CIT(A), based upon such unverified additional evidence admitted in contravention of Rule 46A, is bad in law, arbitrary, and liable to be set aside.
4. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in accepting the contention of the assessee that the impugned transactions were duly reported under another PAN AFLPG5282), without properly appreciating the material facts available on record.
5. The learned CIT(A) failed to appreciate that there was a clear mismatch in the name of the assessee vis-à-vis the alleged PAN AFLPG5282) under which the transactions were claimed to have been reported, and no cogent evidence establishing identity and nexus of the assessee with such PAN was brought on record.
6. The learned CIT(A) further erred in ignoring the fact that the bank account under consideration was not disclosed by the assessee in the return of income filed for the relevant assessment year, thereby rendering the explanation of the assessee unsubstantiated and unverifiable.
7. The learned CIT(A) passed the impugned order without proper verification of the ownership, operation, and disclosure of the bank account under consideration, resulting in an erroneous deletion of the addition made by the Assessing Officer.
8. The appellant craves leave to add, alter, amend, or withdraw any ground of appeal at the time of hearing.
3. In this case, the assessee had not filed return of income and did not comply with the notices u/s 142(1) of the Act and the A.O. completed assessment ex-parte u/s. 144 r.w.s. 147 of the Act. In the assessment, the assessing officer treated the cash deposit of Rs.1,01,67,590/- the assessee’s bank account as the assessee’s income.
4. In appeal, the Ld. CIT(A) having regard to the submissions filed by the assessee and the documentary evidence submitted in the course of appellate proceedings was satisfied that the assessee had satisfactorily explained both the source and recording of the cash deposits and therefore the addition made by the A.O. could not be sustained. In the course of hearing, no one appeared on behalf of the assessee.
5. Ld. Sr. D.R. Shri Amit Pratap Singh submitted that the Revenue was aggrieved by the fact that the additional evidence filed by the assessee before the Ld. CIT(A) was not sent to the assessing officer seeking a remand report and this was a violation of Rule 46A. He submitted that the A.O. had never had an opportunity to examine these details and it would be just and proper with the matter is restored to the assessing officer.
6. We find that the Revenue has taken a specific ground with regard to the additional evidence in ground of appeal no. 3. We also noticed from the impugned order that there is no reference to the evidence being sent to the assessing officer for his comments. We, therefore deem it fit and proper that the matter may be restored to the assessing officer for considering the assessment afresh after taking in to account all the details and evidences submitted by the assessee before the Ld. CIT(A). The matter is accordingly set-aside to the assessing officer.
7. In the result, the appeal of the Revenue is treated as allowed for statistical purpose.
This Order is pronounced on 31/08/2026
