HARGOVIND MOTIBHAI DESAI,AHMEDABAD V. ITO WARD 3(3)(8), AHMEDABAD (EXISTING ITO WARD 3(3)(1), AHMEDABAD), AHMEDABAD

ITA 2191/AHD/2024

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The case involves Hargovind Motibhai Desai, who appealed against the common appellate order passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, for the Assessment Years 2015-16 & 2016-17. The appeals were consolidated due to the commonality of issues raised. The primary contention was that the Assessing Officer exceeded the scope of the limited scrutiny under which the case was selected, making several additions unrelated to the original issues without seeking prior approval for a complete scrutiny. The Tribunal referenced a similar case, Shri Rajnikanth S. Bhalavat vs. ACIT, to support its decision to set aside the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717604 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 29-12-2024
• Other Referred Cases: Shri Rajnikanth S. Bhalavat vs. ACIT in ITA No. 495/Ahd/2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P SRIVASTAVA
• Assessee Lawyers: PRAKASH D SHAH
• Keywords: Set aside; Business income; Unexplained cash credit; Capital Gains; Competent authority
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA Nos.2190 & 2191/Ahd/2025 (Assessment Years: 2015-16 & 2016-17) Hargovind Motibhai Desai, A/16, Jay Ambenagar Society, Opp. Lav Kush Tower, Ahmedabad-380054. [PAN :ADBPD9378 E] Vs. The Income Tax Officer, Ward 3(3)(7) (Existing Ward 3(3)(1), Ahmedabad). (Appellant) .. (Respondent) Appellant by : Shri Prakash D Shah, AR Respondent by: Shri BP Srivastava, Sr. DR Date of Hearing 15.07.2025 Date of Pronouncement 12.08.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- Delay Condoned The captioned two appeals have been filed by the Assessee against the common appellate order passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, relating to the Assessment Years 2015-16 & 2016-17. Since the issues raised in these two appeals are common, we are extracting the grounds of appeal from ITA No.2190/Ahd/2024 for A.Y 2015-16 for the purpose of adjudication. ITA No.2190/Ahd/2024 for AY 2015-16 2. The assessee has raised the following grounds of appeal:- 1. That the notice issued under section 143(2) of the Act and all the subsequent proceeding are bad in law and therefore the Order passed by Assessing Officer is required to be quashed and the additions made therein are to be deleted in full 2. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by confirming the addition of Rs. 27,63,050/- (Rs.32,57,364- Rs.4,94,314), under section 68 of the Act, on the account of treatment of Printed from counselvise.com ITA Nos. 2190-2191/Ahd/2024 Hargovind M Desai Vs. ITO Asst. Years : 2015-16 & 2016-17 - 2– agricultural income, as unexplained Income under section 68 of the Act and therefore the learned AO should be directed to delete the said addition while computing the total income. 3. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by treating rent income of Rs. 6,60,000/- as income from other sources, out of offered business income and against which expenses of Rs. 88,114/- has been allowed, while computing the income from other sources and finally computed income from other sources of Rs. 5,71,886/ The course of action of the Id. AO has resulted into disallowance of expenses of Rs. 17,74,579/- (Rs. 18,62,693-Rs.88,114) against the rent income, shown as business Income and accordingly the learned AD should be directed to not to treat rent income of Rs.6,60,000/- as income from other sources and allow the entire expense of Rs. 18,06,485 (Rs. 21,254+Rs 50,000+Rs. 21,500+Rs. 3,37,355+Rs. 13,76,376) under the head income from Business and Profession. 4. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by confirming the addition of Rs.1,00,450/- (Rent Rs.1,43,500 statutory Deduction Rs. 43,050) under the head Income from House Property and therefore the learned AO should be directed to treat said rent income Rs.1,43,500/-, as business income while computing the total income. 5. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by confirming the addition of Rs. 16,00,000/- under section 68 of the Act for cash deposit of cars sales and therefore the learned AO should be directed to delete the said addition while computing the total income. 6. That the learned National Faceless Appeal Centre, Delhi has erred in law and facts by confirming the addition of Rs.3,00,000/- under section 68 of the Act for the advance cash received for agriculture produce and therefore the learned AO should be directed to delete the said addition while computing the total income. 7. That the Learned National Faceless Appeal Centre, Delhi has erred in law and facts by confirming the addition of capital gain on sale of assets of Rs.1,36,642/- as the block of asset has not been exhausted and it is continue and the amount of Rs.1,36,642/-is the net gain on sale of cars as per the books of account and therefore the Ld.AO should be directed to delete the said addition while computing the total income. 3. The assessee is engaged in the business of leasing/renting properties and agricultural activities. The return of income was filed on 18.01.2016 declaring total income at Nil. The case was selected for limited scrutiny under CASS for the issue of (i) Income from heads other than Printed from counselvise.com ITA Nos. 2190-2191/Ahd/2024 Hargovind M Desai Vs. ITO Asst. Years : 2015-16 & 2016-17 - 3– business/profession – mismatch & (ii) Agricultural Income. The Assessing Officer completed the assessment under section 143(3) of the Act on 31.12.2017, making the following additions: i) Agricultural income of Rs.27,63,650/- treated as unexplained income u/s 68; ii) Rent income of Rs.6,60,000/- treated under \"Income from Other Sources\" after disallowing proportionate expenses of Rs.17,74,579; iii) Rental income of Rs.1,43,500/- treated as “Income from House Property” instead of business income; iv) Rs.16,00,000/- on account of cash deposits related to alleged car sales treated as unexplained cash credit u/s 68; v) Rs.3,00,000/- on account of advance for agricultural produce also treated u/s 68; vi) Capital gains of Rs.1,36,642/- on sale of motor cars. 3.1 The assessee challenged these additions before the Ld. CIT(A), who confirmed the action of the Assessing Officer. 4. Before us, the Ld. AR submitted that the case was selected for limited scrutiny for the issue of \"Agricultural Income\". However, the Assessing Officer made several additions unrelated to the limited scrutiny issue without seeking prior approval for conversion into complete scrutiny. The Ld. AR, in this regard, placed reliance on the decision of the Co- ordinate Bench in the case of Shri Rajnikanth S. Bhalavat vs. ACIT in ITA No. 495/Ahd/2019, wherein the assessment was quashed for similar reasons. 4.1 We observe that apart from agricultural income, the Assessing Officer made additions in respect of Sale of cars, Advances for agricultural produce Capital gain, Disallowance of expenses, rental income etc. We find that none of these issues were covered under the scope of the original limited scrutiny notice under section 143(2) and the Revenue has not brought on record any approval obtained from the competent authority for converting Printed from counselvise.com ITA Nos. 2190-2191/Ahd/2024 Hargovind M Desai Vs. ITO Asst. Years : 2015-16 & 2016-17 - 4– the case into complete scrutiny, as mandated under CBDT guidelines and the decision of Co-ordinate Bench in the case of Rajnikanth S. Bhalavat (supra). In view of the above discussion, we set aside the assessment order passed under section 143(3) of the Act and remand the matter to the file of the Assessing Officer for a de novo assessment within the scope of the limited scrutiny guidelines. 4.2 Since we are setting aside the assessment order on jurisdictional grounds, we do not express any opinion on the merits of the case. The assessee is at liberty to raise all legal and factual contentions during the course of the de novo proceedings. 5. In the result, both the appeals of the assessee are allowed for statistical purposes. The order is pronounced in the open Court on 12.08.2025. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 12.08.2025 *btk आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "