Rajkot ITAT Restricts Cash Vehicle Purchase Addition to 10% — Rules Out Application of Section 115BBE
Background and Overview
The Income Tax Appellate Tribunal, Rajkot Bench, delivered a significant ruling in the matter of Ratabhai Rambhai Sodhiya Vs ITO (ITAT Rajkot) concerning Assessment Year 2017-18. The Tribunal not only condoned a 192-day delay in filing the appeal but also granted substantial relief to the assessee by restricting the impugned addition to a mere 10% of the disputed amount and holding that Section 115BBE of the Income-tax Act, 1961 had no application to the facts of the case.
This ruling is particularly noteworthy for assessees who have faced ex parte assessments under Section 144 in conjunction with reassessment proceedings under Section 147, where cash payments towards asset purchases have been treated as unexplained investments.
Factual Matrix of the Case
Origin of Reassessment Proceedings
The case originated from intelligence received by the Assessing Officer from the DDIT (Investigation), indicating that the assessee had made a cash payment of ₹1,76,000 towards the purchase of a vehicle from M/s Kiran Motors Limited. Acting on this information, the Assessing Officer initiated proceedings under Section 147 of the Income-tax Act, 1961, after securing the requisite approval from the Additional Commissioner of Income Tax. Consequently, a notice under Section 148 of the Act was duly issued to the assessee.
Non-Compliance by the Assessee
Despite the issuance of notice under Section 148, the assessee did not file any return of income in response. Further, notices subsequently issued under Section 142(1) of the Act also went unheeded, as the assessee failed to comply with the same. Given this persistent non-compliance, the Assessing Officer proceeded to complete the assessment ex parte under Section 144 of the Act.
Addition Made by the Assessing Officer
In the ex parte assessment order dated 28.03.2022, the Assessing Officer treated the cash payment of ₹1,76,000 made towards the vehicle purchase as an unexplained investment within the meaning of Section 69 of the Income-tax Act, 1961, and added the entire amount to the total income of the assessee. Accordingly, the total income was assessed at ₹1,76,000.
Appellate History
Before the CIT(A) / NFAC
Aggrieved by the assessment order, the assessee filed an appeal before the learned Commissioner of Income Tax (Appeals). However, the appeal was dismissed by the CIT(A), who confirmed and upheld the order of the Assessing Officer in its entirety. The order under Section 250 of the Income-tax Act, 1961, in this regard was passed by the National Faceless Appeal Centre (NFAC) on 18.08.2025.
Filing of Appeal Before ITAT Rajkot
Remaining dissatisfied with the order of the NFAC, the assessee approached the ITAT Rajkot. However, there was a delay of 192 days in filing the appeal before the Tribunal.