ACIT CENTRAL CIRCLE-18, NEW DELHI V. TIRUPATI CONSTWELL PVT LTD, NEW DELHI

ITA 1506/DEL/2020

AI Insights

The case involves Tirupati Constwell Pvt. Ltd., a builder and developer, which was subjected to a search under section 132 of the Income Tax Act, 1961. Following the search, an assessment under section 153A/143(3) led to additions in the income of the assessee, which were contested. The primary issue revolved around the addition of Rs.1,67,90,937/- under section 68 of the Act, which was initially added by the Assessing Officer due to discrepancies in the accounts of M/s Anush Finlease & Construction Pvt. Ltd. and M/s Daga Trading Company. The CIT(A) later deleted this addition, a decision which the revenue appealed against, leading to the ITAT's decision to remit the case back to the CIT(A) for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312661 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIMISHA SINGH
• Assessee Lawyers: MAHAVIR SINGH
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Reassessment proceedings; Unexplained cash credit; Deemed to accrue or arise in india
• Section: 132; 68

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.1506/Del/2020, A.Y.2009-10 Assistant Commissioner of Income Tax, Central Circle-18, Room No. 269B, E-2, ARA Centre, Jhandewalan Extn. New Delhi-110055 PAN: AACCT2478E Vs. Tirupati Constwell Pvt. Ltd. Plot No.3, Welcome Hotel, Dwarka, New Delhi (Appellant) (Respondent) Appellant by Ms. Nimisha Singh, CIT-DR, Shri Pramod Kumar, Sr. DR Respondent by Sh. Mahavir Singh, Advocate Date of Hearing 31/01/2025 Date of Pronouncement 29/04/2025 ORDER PER AVDHESH KUMAR MISHRA, AM This appeal of the Revenue for the Assessment Year (hereinafter, the ‘AY’) 2009-10 is directed against the order dated 17.03.2020 passed by the Commissioner of Income Tax (Appeals)-27, New Delhi [hereinafter, the ‘CIT(A)’]. 2. The Revenue has raised following grounds of appeal: - “1. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition without making any enquiry and accepted whatever has been produced by the assessee when Hon'ble ITAT had set aside the whole issue back to the file of AO with a direction to the assessee to produce all the details once again and ITA No.1506/Del/2020 Tirupati Constwell Pvt. Ltd. 2 also produce all the parties for verification of the AO to prove the identity, creditworthiness of them and genuineness of the transaction. 2. Whether in the facts & in the circumstances of the case, the Ld. CIT(A) is right in deleting the addition of Rs. 1,67,90,937/- which were added by the Assessing Officer after making verification from the party who denied that this amount is receivable from the assessee. 3. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition when the liability was shown in the name of M/s Anush Finlease & Construction Pvt. Ltd. but the assessee explained that account of M/s Anush Finlease & Construction Pvt. Ltd. was credited inadvertently instead of M/s Daga Trading Company and that the entry of Rs. 1,67,90,937/- shown as payable to M/s Daga Trading Company has been reconciled now, without producing any documentary evidence in its support. 4. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition when assessee had failed to the identity, genuineness and creditworthiness in respect of loan of Rs. 1,67,90,937/- received during F.Y. 2008-09 from M/s Anush Finlease & Construction Pvt. Ltd. 5. On being asked to produce evidence in support of their claim, the assessee explained that M/s Daga Trading Company issued bill in the name of M/s Anush Finlease & Construction Pvt. Ltd. and produced a confirmation letter in which M/s Daga Trading Company stated that they have received Rs. 1,67,90,937/- during FY 2008-09 from M/s Anush Finlease & Construction Pvt. Ltd. Now the question arises as to how the assessee came into picture when bill was issued in the name of M/s Anush Finlease & Construction Pvt. Ltd. and the same amount was paid by M/s Anush Finlease & Construction Pvt. Ltd. during the same financial year. 6. Whether on the facts & in the circumstances of the case, the Ld. CITIA) was right to admit the additional evidence without fulfilling the conditions laid down in the Rule 46A of the IT Rules. a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts ITA No.1506/Del/2020 Tirupati Constwell Pvt. Ltd. 3 (b) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.” 3. The relevant fact giving rise to this appeal are that the assessee, builder & developer, was searched under section 132 of the Income Tax Act, 1961 (hereinafter, the ‘Act’). The consequential search assessment was completed under section 153A/143(3) of the Act vide order dated 28.03.2013 wherein the Assessing Officer (hereinafter, the ‘AO’), besides other additions/disallowances, also made addition of Rs.2,23,45,466/- under section 68 of the Act. On appeal of the assessee, the Ld. CIT(A) deleted the addition of Rs.2,23,45,466/- made under section 68 of the Act. Aggrieved, the Revenue filed appeal before the ITAT, who remitted this issue to the AO to decide the matter afresh. In the remitted matter, the AO made addition of Rs.1,70,59,385/- under section 68 of the Act as under: “5.1 In case of M/s Anush Finlease & Construction Pvt. Ltd., the assessee company had shown Rs. 6,17,90,937/- as outstanding to M/s Anush Finlease & Construction Pvt. Ltd. During the assessment proceeding u/s 153A/143(3) of the I.T. Act, M/s Anush Finlease & Construction Pvt. Ltd. had confirmed outstanding amount only to the extent of Rs-4,50,00,000/-as on 31.03.2009. On the basis of said information remaining amount of Rs.1,67,90,937/- was added to the total income of the assessee-company. In this regard, the assessee company vide show cause notices dated 26.10.2018 was asked to explain the same. In response, the assessee company came with new story and submitted that no loan/credit has been raised from M/s Anush Finlease & Construction Pvt. Ltd. and the credit balance has been brought forward from the previous year. The credit balance was due to supply of raw material by M/s Daga Trading Co. to the assessee company for which bills were generated in the name of M/s Anush Finlease & Construction Pvt. Ltd. On receipt of bills in the name of M/s Anush Finlease & Construction Pvt. Ltd., the assessee ITA No.1506/Del/2020 Tirupati Constwell Pvt. Ltd. 4 company inadvertently credited the account of M/s. Anush Finlease & Construction Pvt. Ltd. which was rectified later by making credit entry in the name of M/s Daga Trading Co. The assessee-company also submitted a letter issued by M/s Daga Trading Co. Pvt. Ltd. addressed to assessee-company in which they stated that total sum of Rs.1,67,90,937/-was received during F.Y.2008-09 from M/s Anush Finlease & Construction Pvt. Ltd. on your behalf. 5.2 The submission made by the assessee company has been considered in the light of the facts of the case but found not tenable for the reason that the loan creditor has not confirmed the amount of Rs. 1,67,90,937/- either during original assessment or re-assessment proceedings. It is pertinent to mention here that the assessee- company neither mentioned this story at the time of original assessment nor at the time of first submission before the Assessing Officer during this proceeding, which clearly indicates that the assessee-company is trying to fabricate fact of the case. Secondly, the assessee company has not produced its books of accounts for subsequent year i.e. A.Y. 2010-11 before the A.O. to substantiate the fact as mentioned in its reply that error of entry was occurred. It is not understandable as to why the assessee-company shown this entry into his books of account when bill was raised in the name of M/s Anush Finlease & Construction Pvt. Ltd. and subsequently, paid by them. It appears from the above fact the assessee-company had intentionally inflated their liability side to cover-up their actual assets. 5.3 In view of the above discussion, as the above loan creditors have not confirmed the fact of credit entry in the books of assessee company, therefore the credit amount in the books of assessee company alleged to be received from the above parties remained unexplained. Hence, the amount of Rs.1,70,59,385/- is being treated as unexplained and added to the income of the assessee for A.Y. 2009-10 as unexplained cash credit u/s 68 of I.T. Act, 1961.” ITA No.1506/Del/2020 Tirupati Constwell Pvt. Ltd. 5 3.1 Aggrieved, the assessee filed appeal before the CIT(A), who deleted the addition of Rs.1,67,90,937/- as under: “5.3 The facts on this issue are that the appellant company had shown the outstanding credit balance of M/s Anush Finlease & Construction Ltd. (AFCL) at Rs. 6,17,90,937/, whereas M/s AFCL at the time of original assessment had shown this balance at Rs. 4,50,00,000/-. The appellant stated that an amount of Rs. 1,67,90,937/- was credited to M/s AFCL as cross entry to the amount payable to M/s Daga Trading Company. The appellant has submitted ledger account as well as confirmation of M/s Daga Trading Company in this regard wherein it has confirmed that this amount was received by it from M/s AFCL on behalf of the appellant. It is observed that this fact was considered by CIT(A) in the order dated 20.11.2014 reproduced above. The AO has commented that in the assessment order that the appellant has come with a new story about this transaction. However, the CIT(A) has already considered these submissions of the appellant before deleting this addition and it cannot be said that the appellant has made this story during reassessment proceedings. From the ledger account of M/s Daga Trading Co., It is observed that the appellant has credited the amount of Rs.1,67,90,937/-on 18.06.2008 in his running account on account of M/s AFCL and the final balance of M/s Daga Trading Co. has been shown at credit of Rs. 91,37,970/-. The appellant has debited the account of M/s Daga Trading Co. and credited the account of M/s AFCL with Rs. 1,67,90,937/-. The AO has not brought any evidence on record to prove any discrepancy in the running ledger account of M/s Daga Trading Co. If the appellant would not have passed these cross entries, then the amount outstanding against M/s Daga Trading Co would have been at Rs 2,59,28,907/- (Rs. 91,37,970 + Rs 1,67,90,937/-) and that of M/s AFCL would have been at Rs 4,50,00,000/- (Rs 6,17,90,937- Rs 1,67,90,937). Thus these cross entries on capital account between two parties of appellant would not contain any element of deemed income u/s 68. In view of the nature of these cross entries on capital account and confirmation made by M/s Daga Trading Co to this effect, it is held that the difference in credit balances of M/s AFCL had been explained by the appellant. In these facts and circumstances of the case, the addition made by the ITA No.1506/Del/2020 Tirupati Constwell Pvt. Ltd. 6 AO amounting to Rs. 1,67,90,937/- is not sustainable and hence the same is liable to be deleted.” 4. The Ld. CIT-DR contended that the Ld. CIT(A) had decided the appeal without appreciating the facts and the justification offered by him for deleting the addition prima-facie was not proper at all. The Ld. CIT-DR submitted that the prime argument of the assessee was revolving around the book entries passed in the books of accounts of the appellant assessee. As per the assessee, it had purchased raw material worth of Rs.1,67,90,937/- from M/s Daga Trading Company Pvt. Ltd. during the relevant year, but M/s Daga Trading Company Pvt. Ltd. inadvertently issued the bill for the said purchases to M/s Anush Finlease & Construction Pvt. Ltd., a company under the same management of this Group engaged in the similar line of business. The appellant assessee and M/s Anush Finlease & Construction Pvt. Ltd. had common director. 4.1 The Ld. CIT-DR contended that if the submission of the assessee was justified then the said purchases would get reflected in the quantitative details of purchases of raw material of the assessee and the liability to pay the purchase consideration as sundry creditor in the balance sheet/books of account of the appellant assessee vis-à-vis respective contra entries/debtors in the books of accounts of M/s Daga Trading Company Pvt. Ltd. and M/s Anush Finlease & Construction Pvt. Ltd. However, the assessee failed to demonstrate his claim of purchase ITA No.1506/Del/2020 Tirupati Constwell Pvt. Ltd. 7 with contra entries in the audited Balance Sheets and Profit & Loss accounts of M/s Daga Trading Company Pvt. Ltd. and M/s Anush Finlease & Construction Pvt. Ltd. particularly when M/s Anush Finlease & Construction Pvt. Ltd. had denied the transaction during the assessment proceedings. Therefore, the Ld. CIT-DR argued that the submission of the assessee had been rightly not accepted by the AO in absence of any other corroboratory evidence. She further contended that the appellant had admitted having reconciled the said contra entries in subsequent year in its books of accounts; therefore, the narrations in the audited Balance Sheets and Profit & Loss accounts of M/s Daga Trading Company Pvt. Ltd. and M/s Anush Finlease & Construction Pvt. Ltd. and quantitative details of purchases and consumption of raw material by the assessee would establish the truth. Simple book entries, being self-serving, did not explain the genuineness of the credit appearing in the books of accounts of the appellant assessee. 4.2 To buttress her arguments, the Ld. CIT-DR placed reliance on various judicial pronouncements. Since the Ld. CIT(A) erred in appreciating the facts of the case in view of the above and that was why he accepted the assessee’s version of purchases summarily and deleted the addition. She prayed for setting aside the order of the Ld. CIT(A) and restoration of the AO’s order. ITA No.1506/Del/2020 Tirupati Constwell Pvt. Ltd. 8 5. On the other hand, the Ld. Counsel reiterating the details mentioned in the impugned order, prayed for dismissal of the appeal. 6. We have heard both parties and have perused the material available on the record. We find merit in the arguments of the Ld. CIT-DR. Without offering any comment on merit of the case, we deem it fit to set aside the impugned order and remit the matter back to the file of the CIT(A) for deciding the case afresh, in accordance with law, after providing adequate opportunity of being heard to the AO and assessee. Ordered accordingly. The assessee, no doubt, shall cooperate in remitted appellate proceedings. 7. In the result, the appeal of revenue is partly allowed for statistical purposes. Order pronounced in open Court on 29th April, 2025 Sd/- Sd/- (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29/04/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(Appeals) 5. CIT-DR ASSISTANT REGISTRAR ITAT, NEW DELHI "