ITAT Mumbai Mandates Fresh Adjudication for Rs 2.22 Crore Unexplained Property Investment Following Ex Parte Orders

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, recently delivered a significant ruling emphasizing the indispensable nature of natural justice in tax assessments. In the case of Hanoze Harish Thakkar Vs ITO, the Tribunal addressed the validity of substantial additions made under Section 69 of the Income Tax Act 1961, which were sustained through ex parte proceedings at both the assessment and first appellate stages.

The Tribunal concluded that an addition of Rs. 2,22,66,300 concerning an alleged unexplained investment in immovable property could not be summarily upheld without affording the assessee a meaningful opportunity to present supporting evidence. Consequently, the ITAT restored the matter to the Assessing Officer (AO) for a de novo review, while simultaneously laying down critical observations regarding the verification of Tax Deducted at Source (TDS) credits and the preservation of legal rights concerning reassessment validity.

Factual Matrix of the Dispute

The dispute pertains to the Assessment Year (AY) 2014-15. The jurisdictional Assessing Officer initiated reassessment proceedings against the assessee, which ultimately culminated in an ex parte assessment order dated 30 March 2022. Because the assessee did not participate in the proceedings, the AO proceeded to make multiple high-value additions to the assessee's total income based on the material available on record.

The primary addition, which formed the crux of the substantive legal battle, was a sum of Rs. 2,22,66,300. The AO categorized this amount as an unexplained investment in immovable property and brought it to tax under Section 69 of the Income Tax Act 1961.

In addition to the property investment, the AO made several other additions, which included:

  • Salary income assessed at Rs. 50,73,312
  • Interest income assessed at Rs. 1,14,667
  • Commission income assessed at Rs. 33,70,800
  • Estimated business income assessed at Rs. 10,25,176

Aggrieved by the ex parte assessment order, the assessee escalated the matter by filing an appeal before the National Faceless Appeal Centre (NFAC). However, the appellate proceedings also suffered from a lack of participation. The Commissioner of Income Tax (Appeals) [CIT(A)] at the NFAC disposed of the appeal ex parte via an order dated 18 December 2025, effectively confirming all the additions made by the AO. This prompted the assessee to seek recourse before the ITAT Mumbai.

Proceedings Before the ITAT Mumbai

During the hearing before the Tribunal, the authorized representative for the assessee made strategic concessions while vehemently contesting the core additions and procedural lapses.

Dismissal of Unpressed Grounds

At the very outset of the appellate hearing, the assessee’s counsel explicitly stated that the grounds challenging the additions related to salary (Rs. 50,73,312), interest (Rs. 1,14,667), commission (Rs. 33,70,800), and estimated business income (Rs. 10,25,176) were not being pressed.