ITAT Kolkata Flags Natural Justice Violation in Rs. 12.77 Crore Income Addition, Case Remands to CIT(A):

ITAT Kolkata Flags Natural Justice Violation in Rs. 12.77 Crore Income Addition, Case Remands to CIT(A) The appeal has been filed by the Sahara Welfare Foundation against the DCIT (Exemptions), Circle-1, Kolkata, in the ITAT Kolkata. The final decision on the matter was announced on November 21, 2025. The assessee challenged an order dated April 25, 2017, passed by the CIT(A) 25, Kolkata, under Section 250(6)/254 of the Income Tax Act, 1961, for the assessment year 2008-09. The assessee is a registered foundation under section 25 of the Companies Act, 1956, and section 12A of the Act. The assessee filed its income tax return (ITR) for the assessment year 2008-09, declaring NIL taxable income. The case was selected for scrutiny, resulting in the assessee being issued with statutory notices under sections 143(2) and 142(1) of the Act. In response to the notice, the assessee explained its income tax return and furnished all required documents. The assessing officer (AO) completed the assessment and declared the total income of the assessee at Rs. 3.46 Crore.

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The aggrieved assessee thereafter filed an appeal before CIT(A). The CIT(A) issued a detailed order on April 25, 2017. After reviewing the appeal and the earlier ITAT directions, the CIT(A) made an addition of Rs. 12.77 crore to the income of the assessee and ordered that it should be taxed at the highest tax rate under section 164(2) of the Income Tax Act. Thereafter, the assessee approached the ITAT Kolkata. The tribunal noted that the assessee was correct that it was not being issued with any proper notice before making an addition to its income. The tribunal cited an earlier ruling of ITAT in ITA No. 439/KOL/2013 for AY 2008-09, where the tribunal sent the case back to the CIT(A) with instructions. But even after these directions, the CIT(A) again confirmed an addition of Rs. 12.77 crore paid to BCCI as against the assessment made at the total income of Rs. 1.54 crore.

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Since the CIT(A) increased the income, he was required by law to first give the assessee a show-cause notice (SCN), disclosing the reason why the addition is being made. However, as per the authorised representative of the assessee, no such notice was issued to the assessee by the CIT(A). The CIT(A)’s order also discussed violations under sections 11 and 13 of the Income Tax Act. However, despite saying in one part of the order that the exemption under section 11 should not be completely denied, he still concluded that Rs. 12.77 crore should be taxed. Because the CIT(A) increased the income without giving prior notice, it goes against natural justice and also violates section 251(2) of the Act. The Department could not show any evidence that the assessee was given such an opportunity.

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Therefore, to ensure fairness, the Tribunal has again sent the matter back to the CIT(A). The CIT(A) must now properly give the assessee a chance to explain before increasing the income and then pass a fresh order as per law. The assessee’s appeal is partly allowed for statistical purposes.