Remand of Addition under Section 69 due to Lack of Proper Enquiry by CIT(A): ITAT Delhi in DCIT vs. Chaudhary Ventures Pvt. Ltd. (ITA No. 1968/Del/2024)

Facts of the Case

The assessee, Chaudhary Ventures Pvt. Ltd., is engaged in the business of purchase, sale, and leasing of buildings. It filed its return of income for AY 2018–19 declaring income of ₹8,30,410.

The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) were issued. During assessment proceedings, the Assessing Officer (AO) made an addition of ₹2,15,00,000 under Section 69 on account of unexplained investment.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition. Aggrieved, the Revenue preferred an appeal before the ITAT.

Issues Involved

  1. Whether the CIT(A) erred in deleting the addition of ₹2.15 crore made under Section 69 without proper enquiry.
  2. Whether the CIT(A) violated Rule 46A by admitting additional evidence without due compliance.
  3. Whether the appellate authority can delete additions without verifying the authenticity of documents such as audit reports and disclosures 

Petitioner’s Arguments (Revenue)

  • The assessee submitted an audit report; however, its authenticity was not examined by the CIT(A).
  • The CIT(A) failed to conduct necessary enquiries regarding:
    • Disclosure of investments in ITR and financial statements
    • Source of such investments
    • Timely submission and validity of audit report
  • The deletion of addition was made without proper verification or investigation.
  • Reliance was placed on the Delhi High Court ruling in CIT vs. Jansampark Advertising and Marketing (P) Ltd. (2015) 56 taxmann.com 286 (Delhi), which mandates that appellate authorities must conduct proper enquiry if the AO fails to do so.

Respondent’s Arguments (Assessee)

  • No appearance was made on behalf of the assessee despite proper notice.
  • The matter was decided based on the material available on record.

Court Findings / Order

  • There was insufficient enquiry conducted by the CIT(A) before deleting the addition.
  • The authenticity of documents such as audit reports and disclosures required proper verification.
  • The CIT(A) cannot delete additions merely on the basis of submissions without conducting meaningful enquiry.

Accordingly:

  • The order of the CIT(A) was set aside.
  • The matter was remanded back to the Assessing Officer for fresh adjudication.
  • The AO was directed to provide adequate opportunity to the assessee.

The appeal of the Revenue was allowed for statistical purposes.

Important Clarification

  • If the Assessing Officer fails to conduct proper enquiry, the responsibility shifts to the CIT(A) and even the Tribunal.
  • Appellate authorities cannot delete additions solely due to lack of enquiry by AO; instead, they must conduct or direct proper investigation.
  • Admission of additional evidence under Rule 46A must follow due process and cannot be done casually.


  • Link to download the order -  https://itat.gov.in/public/files/upload/1735631083-XyQ7b9-1-TO.pdf

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