ATUL KUMAR KALA,JAIPUR V. ITO WARD 4(1) JAIPUR, JAIPUR

ITA 30/JPR/2025

AI Insights

The case involves Atul Kumar Kala, the appellant, who contested the order passed by the Income Tax Officer (ITO), Ward-4(1), Jaipur, which invoked section 115BBE of the Income Tax Act, 1961, for taxing an addition of Rs. 4,64,706 as unexplained expenditure at a higher rate. The addition was initially made under section 69C of the Act. The appellant argued that the notice under section 154 was not properly served, violating principles of natural justice, and that the invocation of section 115BBE was incorrect as the relevant amendments were not in effect during the transaction period. The Tribunal agreed with the appellant on both counts, emphasizing the need for a fair opportunity and correct application of the law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717530 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 11-01-2025
• Other Referred Cases: M/s. Motisons Jewellers Ltd. in ITA Nos. 161 & 178/Jp/2022, Smt. Suraj Kanwar Devraa vs. ITO in ITA No. 50/Jodh/2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTM SINGH CHOUDHARY
• Assessee Lawyers: SHARWAN KUMAR GUPTA
• Keywords: Set aside; Opportunity of being heard; Unexplained expenditure; Principle of natural justice; Rectification of order
• Section: 142(1); 154; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR “SMC” BENCH : JAIPUR BEFORE DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A.No.30/JPR/2025 (Assessment Year 2017-18) Atul Kumar Kala, Rajhans A-29, Near Alwar House Main Road, Shastri Nagar, Jaipur. PAN : AGZPK 3362 J vs. ITO, Ward-4(1), Jaipur. (Appellant) (Respondent) For Assessee : Shri Sharwan Kumar Gupta, Adv. For Revenue : Shri Gautm Singh Choudhary, JCIT-DR Date of Hearing : 02.07.2025 Date of Pronouncement : 14.08.2025 ORDER This appeal at the instance of the assessee for the Assessment Year 2017-18 (A.Y.) is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”], dated 20/12/2025 framed u/s. 250 of the Income Tax Act, 1961 (for short, 'the Act'). 2. The assessee has raised the following grounds of appeal:- “1. The impugned order u/s 154 dated 14.07.2021, as well as the action taken u/s 154 and notices are bad in law, illegal, invalid, void-ab-initio on facts of the case, for want of jurisdiction, and also barred by limitation and various other reasons and hence the same may kindly be quashed. 2. The Id. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the action or order of the Id. AO of invoking of the provisions of Sec. 115BBE for taxing the income on higher rate by way of passing order u/s 154, which has not been charged in the assessment order nor any show cause notice was given during the assessment proceedings nor applicable. Thus erred in taking the income on higher rate. Hence the provisions of Sec. 115BBE so invoked and income so taxed at higher rate being absolutely, contrary to the provisions of law and facts of the case and not in Printed from counselvise.com 2 ITA.No.30/JPR/2025 (Atul Kumar Kala) conformity with the law, hence the same may kindly be deleted in full. 3. The Id. AO has grossly erred in law as well as on the facts of the case in charging interest u/s 234 A,B,C. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, may kindly be deleted in full. 4. The appellant prays your honors indulgence to add, amend or alter all or any of the grounds of the appeal on or before the date of hearing.” 3. Brief facts of the case are that assessee is an individual and declared income of Rs. 3,02,610/- in the return of A.Y. 2017-18 filed on 28/02/2018. Based on the information about cash deposits in the credit card account, the assessee’s case selected for limited scrutiny under CASS after serving of valid notices u/s. 143(2) and 142(1) of the Act. During the course of assessment proceedings, the assessee furnished various details. Ld.AO concluded the proceedings making addition of Rs. 4,64,706/- on account of unexplained expenditure u/s. 69C of the Act being the difference of amount of cash deposits shown by the assessee and the amount found as per the records available with Ld.AO. Thereafter, Ld.AO passed the order u/s. 154 of the Act observing that while concluding the assessment proceedings, he failed to invoke section 115BBE of the Act, as per which tax is payable @ 60% along with surcharge @25%, as the addition has been made for income referred to in section(s) 68/69/69A/69B/69C or 69D of the Act. The order u/s. 154 has been passed on 14/07/2021 and the same has been challenged before the Ld.CIT(A), but assessee failed to succeed. 4. Now, the assessee is in appeal before this Tribunal. Printed from counselvise.com 3 ITA.No.30/JPR/2025 (Atul Kumar Kala) 5. Learned counsel for the assessee vehemently argued referring to written submissions filed before the Ld.CIT(A) and further stated that notice issued u/s. 154 has not been served upon the assessee, thereby, no proper opportunity has been granted which is a clear violation of principles of natural justice. In support of his contentions, placed reliance on various decisions mentioned in the written submissions including that of this Tribunal in the case of M/s. Motisons Jewellers Ltd. in ITA Nos. 161 & 178/Jp/2022, dated 29/09/2022 and the decision of coordinate bench of Jodhpur in the case of Smt. Suraj Kanwar Devraa vs. ITO in ITA No. 50/Jodh/2021, dt 23/11/2021. It is further submitted that the debatable issues cannot be rectified u/s. 154 of the Act. 6. On the other hand, learned DR vehemently argued supporting the order of Ld.CIT(A). 7. I have heard rival contentions and perused the record placed before me. The first grievance of the assessee is that notice u/s. 154 of the Act has not been served upon the assessee. However, from going through the order u/s. 154 of the Act, Ld.AO has observed that notice u/s. 154 dated 20/04/2021 was served upon the assessee and an opportunity of being heard in this regard has been given to the assessee, but since there was no compliance, the order u/s. 154 has been passed. I note that notice of hearing has been sent on 20/04/2021 and at that point of time, our country was passing through Covid-19 pandemic and there were various restrictions for movements of the general public. There is no evidence to show that notice u/s. 154 of the Act has been served Printed from counselvise.com 4 ITA.No.30/JPR/2025 (Atul Kumar Kala) upon the assessee. Considering this aspect, the assessee deserves fair opportunity prior to being visited by additional tax liability. Though, the assessee has placed reliance on various decisions, but considering the fact about the Covid-19 pandemic, I deem it appropriate that the assessee succeeds on this ground and assessee deserves to be given one more opportunity. 8. The assessee has also raised alternative contention in ground No.2 that the order passed u/s. 154 of the Act deserves to be set aside because only apparent mistake can be rectified and not debatable issues. In the instant case, the addition of Rs. 4,64,706/- has been made u/s. 69C of the Act on account of unexplained expenditure. Now, no details have been filed before me as to whether the assessee has challenged the addition u/s. 69C of the Act. But admittedly, the addition has been made invoking section 69C and in the rectification order u/s. 154 of the Act, the Ld.AO has invoked section 115BBE of the Act, as per which the addition is subjected to tax rate @ 60% + surcharge @25% thereon. The instant appeal is for A.Y. 2017-18 i.e. for F.Y. 2016-17 and the period starts from 01/04/2016 to 31/03/2017. The alleged unexplained expenditure is towards transaction carried out during the said period of F.Y. 2016-17. Section 115BBE of the Act was originally inserted by the Finance Act, 2012 w.e.f. 01/04/2013 but the amendment as per which income determined u/s. 68, 69, 69A, 69B, 69C & 69D of the Act shall be subject to 60%, has been brought in by taxation law by second amendment to Finance Act 2016 w.e.f. 01/04/2017. Now when the assessee Printed from counselvise.com 5 ITA.No.30/JPR/2025 (Atul Kumar Kala) carried out the alleged transaction giving rise to the impugned addition, the old provisions of section 115BBE of Act were in force. However, ld.AO has passed the rectification order u/s. 154 of the Act by invoking the amendment to the provisions of section 115BBE which are applicable from 01/04/2017 onwards. This action of the Ld.AO itself is incorrect and not in accordance with law. It, thus, clearly shows that the Ld.AO has not passed rectification order for rectifying an apparent mistake appearing from record and has wrongly invoked section 115BBE of the Act for charging the assessee with tax rate @60% along with surcharge of 25%. I, therefore, fail to find any merit in the rectification order passed by the Ld.AO. The impugned order is set aside and ground No.2 raised by the assessee is allowed. 9. In the result, appeal of the Assessee is allowed as per the terms indicated hereinabove. Order pronounced in the open Court on 14.08.2025. Sd/- Sd/- [MANISH BORAD] ACCOUNTANT MEMBER Dated : 14th August, 2025 vr/- Printed from counselvise.com 6 ITA.No.30/JPR/2025 (Atul Kumar Kala) Copy to 1. The appellant 2. The respondent 3. The CIT(A), Jaipur concerned. 4. D.R. ITAT, SMC Bench, Jaipur. 5. Guard File. By Order //True Copy // Assistant Registrar, ITAT, Jaipur Printed from counselvise.com "