The Income Tax Appellate Tribunal, Agra Bench, has set aside an addition of Rs. 35,92,020 made on account of unexplained bank deposits for Assessment Year 2015-16. The Tribunal held that the first appellate authority failed to afford the assessee an opportunity to respond to the remand report and did not consider the assessee's submissions, thereby violating the principles of natural justice and the mandate of Section 250(6) of the Income Tax Act, 1961. The matter has been restored to the file of the Assessing Officer for fresh adjudication after providing a proper opportunity of hearing to the assessee.
Background & Facts
The Dispute
The appellant, Anupam Kumar Maheshwari, filed his return of income for Assessment Year 2015-16 on 31.03.2017, declaring a total income of Rs. 3,00,430. The case was selected for scrutiny due to large value sales of futures in a recognized stock exchange without declaring business income. The Assessing Officer issued statutory notices under Section 143(2) and 142(1) of the Income Tax Act, 1961, seeking details of securities transactions and explanations. The assessee submitted written explanations, copies of ITR, computation of income, trading details, bank statements, and ledger accounts. The Assessing Officer accepted the declared trading profits but observed unexplained bank deposits of Rs. 51,51,922 against withdrawals of Rs. 39,27,026 during the year. After excluding opening balances and revenue receipts, fresh deposits of Rs. 38,92,450 remained unverified, leading to an addition of Rs. 35,92,020.
Key Facts
- Assessment Year: 2015-16
- Return Filed: 31.03.2017
- Total Income Declared: Rs. 3,00,430
- Unexplained Bank Deposits: Rs. 51,51,922
- Total Withdrawals/Payments: Rs. 39,27,026
- Fresh Deposits (after exclusions): Rs. 38,92,450
- Addition Made: Rs. 35,92,020
Procedural History
- 15.03.2017: Return of income filed by the assessee
- Assessment Proceedings: Scrutiny initiated; notices issued under Section 143(2) and 142(1)
- Assessee's Submissions: Detailed explanations, trading records, and bank statements submitted
- Assessing Officer's Order: Addition of Rs. 35,92,020 made on account of unexplained deposits
- Appeal to CIT(A): Filed by the assessee against the addition
- CIT(A)'s Order: Dismissed the appeal on 04.09.2025, confirming the addition
- Appeal to ITAT: Filed on 23.04.2026 with a delay of 144 days; delay condoned on health grounds
- ITAT's Order: Set aside the CIT(A)'s order and restored the matter to the Assessing Officer for fresh adjudication
Relief Sought
The appellant sought quashing of the addition of Rs. 35,92,020 and restoration of the matter to the Assessing Officer for fresh adjudication after providing a proper opportunity of hearing, in accordance with the principles of natural justice and Section 250(6) of the Income Tax Act, 1961.
The Legal Issue
The central question was whether the Commissioner of Income Tax (Appeals) had complied with the principles of natural justice and the statutory mandate under Section 250(6) of the Income Tax Act, 1961, by not affording the assessee an opportunity to respond to the remand report and not considering the assessee's submissions before passing the impugned order.
Arguments Presented
For the Appellant
The learned representative for the appellant submitted that the CIT(A) failed to provide a proper opportunity of hearing to the assessee to file objections against the remand report dated 08.08.2025. It was further submitted that the CIT(A) did not consider the assessee's submissions dated 29.08.2025 before passing the impugned order on 04.09.2025. The appellant contended that the impugned order was passed without application of mind and in violation of the principles of natural justice and Section 250(6) of the Act.
For the Respondent
The learned Senior Departmental Representative supported the impugned order and argued that the addition was justified based on the unverified deposits.
The Court's Analysis
The Tribunal examined the procedural history and noted that the CIT(A) had called for a remand report from the Assessing Officer during the first appellate proceedings. However, the impugned order did not reflect whether the assessee was afforded an opportunity to raise objections against the remand report dated 08.08.2025. The Tribunal observed:
"It is not clear as to whether the ld CIT(A) has considered assessee's submissions dated 29.08.2025? It is easily inferred that the first appellate authority has not taken due and proper care and caution and there is no application of mind."
The Tribunal held that the impugned order lacked reasoned consideration and was not in accordance with the spirit of Section 250(6) of the Act. The principles of natural justice require that the assessee be given a fair opportunity to respond to adverse material and to present his case. The Tribunal emphasized that the CIT(A) must ensure observance of the principles of natural justice and provide a reasoned order.
The Verdict
The appeal of the assessee was allowed for statistical purposes. The Tribunal set aside the impugned order dated 04.09.2025 passed by the CIT(A) and restored the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer was directed to pass a fresh order after affording sufficient opportunity of hearing to the assessee and ensuring observance of the principles of natural justice. The Tribunal also directed the assessee to be diligent and cooperative in attending hearings and making submissions before the Assessing Officer.
What This Means For Similar Cases
Natural Justice Is Non-Negotiable in Appellate Proceedings
- Opportunity to Respond: Appellate authorities must afford parties an opportunity to respond to adverse material, such as remand reports, before passing orders.
- Consideration of Submissions: All submissions filed by the assessee must be considered and addressed in the order to demonstrate application of mind.
- Reasoned Orders: Orders must reflect reasoned consideration of facts and law to meet the standards of natural justice and statutory compliance.
Procedural Compliance Is Mandatory Under Section 250(6)
- Statutory Mandate: Section 250(6) requires the CIT(A) to provide a reasonable opportunity of being heard and to pass a reasoned order.
- Remand Reports: Parties must be given an opportunity to respond to remand reports or any adverse material relied upon by the appellate authority.
- Documentation: Appellate authorities must document the consideration of submissions and objections to avoid procedural lapses.
Restoration Is a Remedial Measure, Not a Penalty
- Purpose of Restoration: Restoration is intended to ensure compliance with natural justice and statutory mandates, not to penalize the revenue.
- Expeditious Disposal: Assessing Officers are directed to ensure timely and effective disposal of matters after providing proper opportunities to the assessee.
- Cooperation Expected: Both the assessee and the revenue are expected to cooperate in the adjudicatory process to avoid delays.
