Madras HC Sets Aside Ex Parte Assessment: ₹84 Lakh Section 69 Addition Linked to Home Loan — Remand on ₹5 Lakh Pre-Deposit Condition

Case Overview

Case Name: Sambasivam Bhaskaran Vs Assessment Unit (Madras High Court)

Appeal Number: WMP Nos. 31488 & 31490 of 2026

Date of Order: 13/08/2026

Court: Madras High Court

Background of the Dispute

This case arose from an assessment order dated 08.01.2026, passed under Section 144 read with Section 144B of the Income-tax Act, 1961, for Assessment Year 2024-25. The assessee, Sambasivam Bhaskaran, challenged the order before the Madras High Court, primarily contending that it was passed in gross violation of the principles of natural justice, having been made entirely ex parte.

The assessee's position before the Court was straightforward: he had no knowledge whatsoever of the assessment proceedings being initiated against him. According to him, the first time he became aware of any action by the tax authorities was in April 2026, when officials from the Income-Tax Department reached out to him over the phone to follow up on an unpaid penalty arising from the very same assessment. This was, from the assessee's perspective, the first signal that an assessment had been completed and a demand raised against him.

The Section 69 Addition: Nature and Magnitude

At the heart of the dispute was a staggering addition of ₹84 lakhs made by the Assessing Officer under Section 69 of the Income-tax Act, 1961. Section 69 deals with unexplained investments — situations where an assessee is found to have made investments that are not recorded in his books of account, or where the assessee fails to satisfactorily explain the nature and source of such investments.

The assessee, however, firmly contested this characterisation. His counsel submitted before the Court that the amount flagged as an unexplained investment was, in reality, a housing loan that the assessee had duly availed of. To substantiate this claim, he placed on record documentary evidence demonstrating that a sum of ₹66,34,950/- had been borrowed from Axis Bank, Pallavaram Branch, Chennai.

The significance of this addition cannot be understated — the entire aggregate tax demand raised against the assessee was substantially driven by this single Section 69 addition of ₹84 lakhs. In other words, without this addition, the tax liability would have been considerably lower.

Revenue's Stand: Multiple Opportunities Were Provided

The Revenue was represented by Dr. C.P. Priya, learned Senior Standing Counsel, who countered the assessee's plea robustly. She drew the Court's attention to the timeline of notices issued to the assessee and pointed out that this was not a case of denial of opportunity — rather, it was a clear case of deliberate or wilful non-response on the assessee's part.

Specifically, the assessee had been issued notices under the following provisions, none of which he responded to: