ITAT Orders Fresh Hearing After CIT(A) Upholds Addition Without Assessee’s Representation

Senghani and Associates, a construction firm, faced an addition of Rs.1,00,25,000 to its income after a mismatch was found between Form 26AS and its tax return. The firm explained the difference was due to earlier taxed amounts and project advances, but the CIT(A) upheld the addition since its representative missed the hearing due to technical issues.

The assessee is a partnership firm doing construction work for builders and developers. In this year, it worked on a building project in Bhandup, Mumbai, for Vital Developers Pvt. Ltd.

When the tax return was checked, the Assessing Officer (AO) found that the firm’s total receipts (turnover) shown in Form 26AS were Rs 15,362,500, but the firm had shown a lower turnover in its income tax return while still claiming full TDS.

The Assessing Officer asked for an explanation to show why the difference in income should not be added to its total income. However, AO was not satisfied with the firm’s response. So, passed an order under section 143 (3) of the Act, dated December 29, 2018, and added Rs.1,00,25,000 (the difference between the income shown in Form 26AS and the turnover declared) to the firm’s taxable income.

In its appeal before the CIT(A), the assessee explained that it was using the mercantile system of accounting. It also stated that it followed Accounting Standard 7 (AS-7).

The assessee further explained that the difference of Rs. 1,00,93,013 in receipts was due to timing and accounting reasons. Out of this amount, Rs. 36,37,465 had already been offered as tax in the previous year, as it related to a bill raised in March 2015. A sum of Rs. 764,598 represented retention money, which had also been taxed in the earlier year. The remaining Rs. 56,90,950 was received as an advance from the customer in respect of the ongoing project, which was offered to tax in a subsequent year.

CIT(A) gave an opportunity to assess for hearing through video conferencing. However, there was no response from the assessed side. Therefore, the CIT(A) upheld the addition made by the AO. To challenge this addition assessee filed an appeal before the ITAT, Mumbai.

During the hearing, the authorized representative of the assessee explained why he could not attend the video conference. He said that on the hearing date, he was traveling in an area with no network, so he couldn’t join the video conference. He had asked his office assistant to request an adjournment of the hearing, but because of some technical problem on the online portal, the request didn’t go through. As a result, on the same day, June 17, 2025, the CIT(A) went ahead and passed the order without hearing the assessee.

ITAT set aside the earlier order made by the CIT(A) and restored the appeal to the file of the learned CIT(A). CIT(A) will look at the case again and give the assessee one more fair chance to explain their side properly before making a new decision.