DCIT 42 1 1 MUMBAI, MUMBAI V. DEVLEELA DEVELOPERS, MUMBAI

ITA 2097/MUM/2025

AI Insights

The case involves Devleela Developers, who were assessed by the AO for underreporting sales in the assessment year 2016-17. The AO made an addition of Rs. 4,30,54,535 to the assessee's income, suspecting underreporting based on discrepancies between the sales ledger and the debtors list. The CIT(A) deleted this addition, leading the revenue to appeal before the Tribunal. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not rejected the books of account and had not provided sufficient evidence to support the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786271 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 27-03-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANNAVARN KOSURI
• Assessee Lawyers: GUNJAN KAKKAD
• Keywords: Corroborative evidences; Principle of natural justice; TDS
• Section: 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2097/Mum/2025 (Assessment Year: 2016-17) DCIT – 42(1)(1) Room No. 732, kautilya Bhavan BKC (E), Mumbai – 400051. Vs. Devleela Developers 604-605, Aravalli Business Centre, Ramdas Sutrale marg, Borivali (W) PAN/GIR No. AACFD5181B (Applicant) (Respondent) Assessee by Shri Gunjan Kakkad, Adv Revenue by Shri Annavarn kosuri, Sr. DR Date of Hearing 21.07.2025 Date of Pronouncement 17.10.2025 आदेश / ORDER PER SANDEEP GOSAIN, AM: The present appeal has been filed by the assessee challenging the impugned order dt. 08.02.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2016-17. 2. Brief facts are that during the course of assessment proceedings, the AO observed that the assessee was developing the project name ASHRA and it had shown Nil Printed from counselvise.com 2 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. and it at for for had purchases opening stock Rs. 1,44,16,204/- and incurred direct expenses Rs.11,88,01,237/ which included IOD expenses, Ashra Preliminary Expenses, TDR Expenses and Compensation to Tenants, Corpus paid. On the income side the assessee had shown Rs. 10,48,09,000/- as sales and closing stock at Rs.1,44,16,204/- along with direct and indirect incomes. Further, the AO observed that the assessee sold Flats to 22 peoples amounting to Rs. 10,48,09,000/-, however, the list of sundry debtors reflects 32 including those 22 people reflected in sales account. The AO asked the assessee to reconcile and explain the above observation of the AO. In response, the assessee filed its reply but the AO was not satisfied by the same. Therefore, the AO passed the impugned assessment order making an addition of Rs. 4,30,54,535/ on account of under reporting of sales by the assessee. 3. Against the said order of AO, Assessee preferred appeal and Ld. CIT(A) after Considers the facts deleted the addition therefore aggrieved by the said order, Revenue has preferred the present appeal before us on the grounds mentioned herein above. 4. The sole ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the addition made by AO on account of ‘under reporting’ of sales made Printed from counselvise.com 3 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. to 8 parties. In this regard Ld. DR relied upon the order of assessment and the same is reproduced herein below: 4.1 Considering the above observations and facts, the assessee was asked to explain and reconcile the observations made. In this regard, the assessee was asked vide notice u/s. 142(1) dated 17.12.2018 to furnish the details & explanation as under:- \"It is observed from your submission that the opening stock (WIP) is nil and the purchases are shown at Rs 1,44,16,204/- and the same amount of purchase has been shown as closing stock(WIP). Hence it is seen that no stock has been sold, still the sales account reflects sale of Rs 10,48,09,000/-. You are requested to submit the inventory of the sold stock with name, flat no. of purchasers & amount of receipts along with Index 2 of the sale agreement. You have claimed IOD expenses for Rs 2,88,05,700/- and TDR expenses for Rs 2,96,02,080/- as revenue expense whereas this should be part of WIP. It is observed that these expenses are directly claimed against the sales shown for the year where as these expenses attributable to the whole project/stock. You have shown total 22 persons in sales as per your sales register, however the list of sundry debtors has 32 names. Please reconcile the same. are 4.2 In response the same, the assessee submitted its reply vide letter dated 20.12.2018 wherein the assessee contended that this project has commenced during the year and hence there is opening WIP as Rs. NIL. The assessee submitted that it is recognizing sale of mercantile basis and sales are crystallized on the day of execution of agreement of sales of flat. With regard to the debtors the assessee contended that, \"The debtors list constitute of the persons with whom sales agreement has been executed and also the persons who have given an advance for the booking and the sales agreement has been executed at Printed from counselvise.com 4 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. later date. In one account, there is advance received than cancellation done and the part of the amount has been returned until year end and the balance in the next year\" 4.3 The submission, explanation of the assessee and facts of the case has been considered. It is observed that the sales account of the project amounts for Rs. 10,48,09,000/-and the ledger of sales account reflects the same amount and name of 22 persons. However, the list of debtors has total 32 names including the 21 persons out of sales ledger and there are 08 transactions, reported in debtors list but not listed in the sales ledger. It is clear from the explanation of the assessee that this is the first year of the commencement of the project and there is no carry forward debtors. The debtors represent the amount on which income has been recognized and forms the part of the corresponding income/receipt reported in the P&L account for the concerned year. Here the sales have been reported at Rs. 10,48,09,000/-and 22 persons and this is the first year of sale thus there is no point wherein any persons. 4.4. Other than those 22 persons can be included in the debtors. Hence, it is found that the revenue from the transactions made with 08 additional persons has not been recognized by the assessee during the year in the P&L a/с. However, the same has been reflected in the balance sheet as debtors. Accordingly, it is construed that the assessee has under reported the sales during the year for the transactions made with these 08 extra persons reported in the debtors list. The amount of transaction made with these 08 persons listed in debtors list and not included in the sales ledger totaling to Rs.4,30,54,535/-. 4.4 In view of the observations, facts placed above, it is held that the assessee has under reported the sales for Rs.4,30,54,535/-, accordingly the amount of Rs.4,30,54,535/- is added to the total income of the assessee. Penalty proceedings u/s.271(1)(c) of the Act is initiated separately for furnishing inaccurate particulars of income.\" Printed from counselvise.com 5 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. And further submitted that the order passed by the Ld. CIT(A) is against the facts placed on record therefore Requested that the order of AO be restored back. 6. On the other hand Ld. AR while relying upon the order of Ld. CIT(A) has reiterated the same arguments as were raised by him before the Ld. CIT(A) and the same is reproduced herein below: 1. As regarding addition of Rs. 4,30,54,535 as regarding 8 ledger shown under DEBTORS GROUP, AO assumed on his own as under reported sales on ad-hoc basis without any supporting documents, without any bases of arriving such under reported sales, AO has also not rejected books of accounts. Re: a. Ld AO has added Sales only on the bases of suspicions, without further verification, without any corroborative evidence etc. b. AO has also not provided natural justice as books of accounts are audited and without rejecting books of account. Additions made as underreported sales as alleged on purely estimate basis and it is well- settled law that no addition could be made on estimated basis without rejecting books of account of assessee as held by various Courts. Addition made as under reported sales in trading account without rejecting books of accounts which was audited. c. Orders passed in casual manner by AO. The AO straight- away arrives at a finding and conclusion that the reply was considered but not satisfied as his own assumption and presumption with suspicions without any valid details and documents, without even giving any specific reasons. In his Printed from counselvise.com 6 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. order the AO simply notes that the assessee furnished reply, has been considered and observed with his own way that means it was not satisfactory. What exactly was the reply, finds no mention in his assessment order, without even giving any valid specific reasons and basis for rejecting the same. Since Assessing Officer passed impugned order in complete disregard to details furnished by assessee, there was breach of principles of natural justice. d. AO has also not verified ledger account in which no such sales was booked (some of the ledger for existing flat owner and is without name of customer i.e ledger name with old flat number like Ashra chs A-302, B-204, Ashra Chs A-2, of old building which was redeveloped) and such amount received reflected in ledger as advances, nor verified any registered document for flat if prepared for 8 parties, also not verified that some (Four) of the ledger name is in the list of existing flat owners list as per development agreement. e. Ld. AO has not mentioned how and why Sales to be calculated and considered in the year under consideration when 4 ledger account for future buyer clearly shown as advances/ initial payment received from customers but final agreement executed in subsequent year as regarding new buyers, other 4 ledger reflect existing flat owner and they have only purchased additional area as per redevelopment project. Such huge amount was calculated by Ld AO in his own assumption f. AO has also not verified Quantity (flat/area) available with developers, AO has not doubted for other parties sales amount ONLY DOUBTED for Sales was not BOOKED in such 8 ledger created under debtors group also not considered explanation provided. g. It is nothing but taxation on same income twice. High pitched assessment order passed without giving natural justice. So from above facts and circumstances it is very much clear that Sales/Income either booked as sales of flat (additional Printed from counselvise.com 7 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. flat area) to above parties or advances received but deal was not finalised and advance amount was received reflected in ledger as credit side. AO has added above sum only on the bases of suspects of some of the 8 ledger account shown in DEBTORS group without SALES, without any further verification and without any valid details and documents which proved such alleged Income. 7. We have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities. From the records, we noticed that as per the case set up by the AO, the assessee had declared turnover of Rs. 10,48,09,000/- received from 22 persons whereas the list of debtors comprises 32 persons therefore addition was made on account of ‘under reporting of sales’ by the assessee. However from the records, we also noticed that out of 8 persons, 4 are old parties with whom assessee had redevelopment agreement, as these parties intended to purchase extra constructed area ‘over and above’ the area as per the redevelopment agreement and remaining 4 parties are new customers who had given advance during the year under consideration but final payment and registration were pending. Since the assessee had treated both types of customers as debtors with credit balance. Therefore in this regard assessee submitted that it booked sales when in fact sales are registered and has also submitted ledger account under ‘Debtors Group’ and also submitted following documents: Printed from counselvise.com 8 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. 1. Copy of acknowledgement of submission filed with AO 2. Ledger account of 8 parties reflected under DEBTORS GROUP 3. Copy of relevant page of execution of Sale agreement made for 8 ledger. 4. Profit and loss with list of sales realised in AY 2016-17, 2017-18, AY 2018-19, AY 2019-20 5. 26AS for AY 2017-18, 2018-19, 2019-20 reflecting in Part E - Details of SFT Transaction of Purchase or Sale of Immovable Property. 6. Details of 8 ledgers with year of booking of Income on execution of agreement. 8. We also noticed that AO had not rejected the books of account of the assessee and as per the records it was very much clear that the assessee had booked the sales pertains to the 8 persons and the said fact is reflected from ledger account in the name of the said 8 persons for the financial year under reference and for the subsequent financial years i.e 2016-17 and 2017-18 which also shows that the amount of additions made by the AO had already been declared under sales by the assessee in the subsequent financial year when in fact the sales deed were registered and final payments were made. In our view the AO had not examined thoroughly the details and documents submitted by the assessee. Since the same amount has been declared in the subsequent year by the assessee therefore the addition made by the AO tantamount to double taxation. Printed from counselvise.com 9 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. 9. We also noticed that Ld. CIT(A) has discussed the entire facts in detail and passed well reasoned order the operative portion of the order is reproduced herein below: 7. Decision: I carefully considered the submission of the appellant with reference to the impugned assessment order. Also perused and considered the details and documents uploaded by the appellant on ITBA portal during the appellant proceedings. 7.1. Ground no. 6 of the appeal is consequential in nature and covered by other grounds of appeal, thus, need not to be discussed and decided separately. 7.2. Ground no. 7 of the appeal has become infructuous as no additional ground of appeal has been filed by the appellant during the appellate proceedings. 7.3.1. Ground no. 1 to 4 of the appeal are against the addition made by the AO at Rs. 4,30,54,535/- on account of under reporting of sales by the appellant. The above grounds of appeal pertain to the different aspects of a single issue, thus, all of them are discussed and decided together. 7.3.2. During the assessment proceedings, the appellant had furnished the following document to the AO: 1. Copy of acknowledgement of submission filed with AO 2. Ledger account of 8 parties reflected under DEBTORS GROUP 3. Copy of relevant page of execution of Sale agreement made for 8 ledger. 4. Profit and loss with list of sales realised in AY 2016-17, 2017-18, AY 2018-19, AY 2019-20 5. 26AS for AY 2017-18, 2018-19, 2019-20 reflecting in Part E - Details of SFT Transaction of Purchase or Sale of Immovable Property. Printed from counselvise.com 10 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. 6. Details of 8 ledgers with year of booking of Income on execution of agreement. During the appellate proceedings, the appellant has furnished the same documents along with detailed written submission. Perused and considered carefully the documents furnished by the finding of the AO. 7.3.3. The main observation of the AO is that the appellant has declared total turnover at Rs. 10,48,09,000/- received from 22 persons whereas the list of debtors comprises 32 persons. The AO further noticed that there are 8 persons reported in debtors list but not included in sales ledger. The appellant has submitted that out 8 persons 4 are old parties with whom the appellant had redevelopment agreements and these parties intended to purchase extra constructed area (over and above the area as per the redevelopment agreement) and remaining 4 parties are new -customers who had given advance during the year under reference but final payment and registration were pending. The appellant has treated both types of customers as 'Debtors with credit balance'. The appellant has submitted that it books sales when sales are registered. In its written submission the appellant has provided clarification for opening of the ledgers account under 'Debtors Group' which is reproduced as under: Generally, all existing flat owner in redevelopment project was intended to buy additional area with consideration was created under DEBTORS GROUP, in some of case it is created twice with little different name, as most of all are intended to purchase additional area with consideration, most of existing parties have already executed there agreement in AY 2016-17 (which was very much clear from sales details submitted, and Ld. AO has no objection for such sales) and some of existing member has executed there agreement in subsequent year/s with or without additional area. New buyers ledger also created under DEBTORS Group as some of them have given advances but agreement finally confirm and executed in subsequent year. The Development Agreement in respect of the said property was executed in the year 2009 and subsequently due to Printed from counselvise.com 11 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. change in Development Plan, the Supplementary Agreement for Development then in the year 2015 and agreeing therein to allot free area and additional area to existing members at a specific rate and it was shown in the sales on execution of the Agreement except in case of Flat Nos. 1203 and 1503, as the allottee of Flat No.1203 being the occupant in Krishna Prasad, the Agreement was executed late and in respect of Flat No.1503 original occupant died before executing the Agreement along with her and subsequently the Agreement was executed after the settlement amongst the legal heirs. As regards Mrs. Chandrakala R. Mehta was originally occupying Flat No.A-302 and was subsequently allotted Flat No.403 in the constructed building and her Agreement was executed in A.Y. 2016-2017, whereas the ledger account in respect of her contribution was opened under two separate numbers and the AO has not verified the number of flats and erroneously considered Flat No.A-302 being the old flat considered as sale and similarly as regards Mr. Tansukh Joshi was originally occupying Flat No.B- 204 and was subsequently allotted Flat No.502 in the constructed building and her Agreement was executed in A.Υ. 2016-2017, whereas the ledger account in respect of her contribution was opened under two separate numbers and the AO has not verified the number of flats and erroneously considered Flat No.B-204 being the old flat considered as sale. The sale in respect of Flat Nos. 1001 and 1002 and 901 and 902, the transactions were concluded in the subsequent year and the Agreements were executed and sale was booked. The amount was received as an earnest money in A.Y. 2016-2017. Therefore, account reflected in the DEBTORS GROUP as credit balance. Therefore, from above, it is very much clear that appellant has already booked sales of above 8 alleged ledger shown in DEBTORS GROUP either in the year under consideration or in subsequent year/s during the project on execution of agreement. Ledger account under DEBTORS group is not automatic considered as SALES DURING THE YEAR UNDER CONSIDEREATION as sales is already booked in AY 2016-17 and also in subsequent year/s. Ledger account created under Printed from counselvise.com 12 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. DEBTORS LEDGER as existing flat owner who desire additional area with agreed price and some of the existing flat owner has registered agreement in AY 2016-17 itself and some have registered in subsequent year/s. some of the new future buyer came for booking the flat with advances but deal was finalised in subsequent year/s and agreement executed in subsequent year. AO has not doubted in value of flat already sold but not verified the sales list with above alleged parties as for 2 ledgers sales to existing parties already booked. Year wise list of sales (which reflects above 8 alleged ledger) with copy of profit and loss a/c attached herewith for ready reference. As Ld AO has added Rs. 4,30,54,535 on account of 8 ledgers shown under DEBTORS GROUP on ad-hoc basis without any supporting and without any material on record, addition only on the basis of suspicion. Ld. AO has presumed and considered ad-hoc sales as under reported the sales of Rs, 4,30,54535 without any working, without any supporting document, without verified available details on online portal such as subsequent year sales executed as per SFT, 26AS of next year in which TDS reflected for sales to such parties as deduction of 1% TDS on payment for sale of flat, as per submitted books of account no such alleged sales value are reflected in these 8 ledger except in 2 ledger already sales booked for additional area to existing flat owner during the year under consideration, not verified sr. no. 2 and 4 for existing flat owner in redevelopment project sales already booked to existing flat owners for additional area purchased. 7.3.4. The appellant has furnished copies of ledger account in name of the above 8 persons for the financial year under reference and for the subsequent financial years 2016-17 and 2017-18 which shows that the amount of additions made by the AO has been declared under sales by the appellant in subsequent financial year when sale deeds were registered and final payments were made. The AO did not examine thoroughly the details and documents submitted by the appellant during the assessment proceedings. He had made the impugned addition only for the reason that the above parties were shown in the list of debtors. Since, the same Printed from counselvise.com 13 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. amounts have been declared in the sales in subsequent years by the appellant, the addition made by the AO tantamount to double taxation. In this regard the appellant has submitted as under: \"Ld AO Presumed and addition made as provisional Sales was not being treated as income during the year under consideration by ignoring the Section 199 of the Act read with Rule 37BA of the Rules. Admittedly there is no provision under the Act to tax the same income twice as done in the instant case. Contention of the appellant is that the impugned income has been offered to tax in the subsequent year/s has not been disregarded as per fact of the case. Therefore, if any addition is made in the year under consideration, then it will amount to double addition which is against the provision of law. The fact of the present case is as appellant has booked Income as sale in the year of execution of agreement of flat. It is because there will not be any change on the tax amount as the assessee is paying tax in subsequent year with b/forward loss as per provision of the act. If in case advances received by the appellant from customers and shown under DEBTORS GROUP, has been offered as income of subsequent financial years, then the same needs to be recognized as income as and when such income accrues to the appellant. Therefore, when the appellant has treated advances from customers as liability in the books of accounts pending recognition of income in subsequent financial years, it cannot be said that the assessee has under reported Sales, the Ld AO cannot make any adjustments to re-compute Sales as Income without considering the fact as above. Addition made only on imagination and on suspect without any supporting evidence or corroborative evidence. AO has also not mentioned how this sales amount derived for 8 ledgers under DEBTORS GROUP. The Ld. AO has overlooking the facts and circumstances of the case which clearly suggest that the appellant was not having such huge receipt in form of sales consideration as alleged by AO during the year under consideration and such facts can be Printed from counselvise.com 14 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. possible with verification of third party such as from buyer, from stamp duty authority, from 26AS of previous year and subsequent year 26AS, List of existing members name in redevelopment agreement, scrutiny record of AY 26AS for which Ld. AO has already accepted such sales in AY 2016-17 etc. 3. Ld. AO has added Sales only on the bases of suspicions, in casual manner. The Ld. AO has passed order without further verification, without any corroborative evidence etc. AO has also not provided natural justice as books of accounts are audited and without rejecting books of account addition made in trading account. It is very much clear from assessment para 4.3 page 2 and 3 as below \"Here the sales have been reported at Rs. 10,48,09,000/- and 22 persons and this is the first year of sale thus there is no point wherein any persons other than those 22 persons can be included in the debtors (without considering the fact of the case, suspected and presumption on his own). Hence, it is found that the revenue from the transactions made with 08 additional persons has not been recognized by the assessee during the year in the P&L a/c\" 4. Additions made as underreported sales as alleged on purely estimate basis without giving any working as how these huge amount as under reported sales when out of 8 ledger 4 ledger are for existing flat owner and sales amount only for additional area (it is also verified form sales to existing flat owner sales already provided to AO). Other 4 ledger already reflected advances in ledger and explanation also provided that such ledger created under DEBTORS group as advances received from them but sales agreement was not executed. Ledger account also submitted to AO. AO has also not verified Quantity (flat/area) available with developers. 4.3.5. In view of the facts of the case as discussed above, it transpires that the AO made the impugned addition without complete inquiry and examination of the documents uploaded by the appellant during the assessment proceedings. The addition results into taxation of the same income twice. Printed from counselvise.com 15 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. Therefore, I am of the considered opinion that the addition made by the AO is not justified, hence, the AO is directed to deleted the impugned addition of Rs. 4,30,54,535/-. Accordingly, ground no 1 to 4 are allowed. 8. In the result present appeal of the assessee stands allowed. 10. Therefore considering the totality of the facts and circumstances and also taking into consideration the documents relied upon by the assessee, we found that AO had made the addition without complete inquiry and examination of the documents. order inquiry Whereas Ld. CIT(A) has the passed well reasoned after appreciating documents wherein the amounts received by the assessee has been declared in the sales in the subsequent years when in fact the sale deeds were registered and final payments were made. 11. No new facts or circumstances have been placed on record in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, we see no reasons to interfere into or to deviate from the lawful findings so recorded by Ld. CIT(A). Hence, these grounds raised by the revenue stands dismissed. Order pronounced in the open court on 17.10.2025 Sd/- Sd/- (GIRISH AGRAWAL) (SANDEEP GOSAIN) ACCOUNTAN MEMBER JUDICIAL MEMBER Mumbai, Dated 17/10/2025 Printed from counselvise.com 16 ITA No.2097/Mum/2025 Devleela Developers, Mumbai. KRK, PS आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u000eथ / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण,मु\u0003बई/ DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/BY ORDER, स\u000eािपत ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai Printed from counselvise.com "