DCIT, CIRCLE -6, JAIPUR, NCRB, JAIPUR V. ASCENT BUILDHOME DEVELOPERS LIMITED, ADARSH NAGAR, JAIPUR

ITA 846/JPR/2024

AI Insights

The case involves the revenue's appeal against the CIT(A)'s decision, which had allowed the assessee's appeal and deleted the addition of Rs. 2,90,20,819 made by the AO on account of alleged bogus purchases and development expenses. The AO had disallowed the expenses due to non-submission of books of accounts, bills, or vouchers during the assessment proceedings. The CIT(A) admitted additional evidence under Rule 46A of the Income-tax Rules, 1962, which included ledger accounts and bills of the contractors, and found the expenses to be genuine. The revenue contended that the CIT(A) erred in admitting the additional evidence without giving the AO a reasonable opportunity to examine and rebut the same, and that the expenses were not verifiable as the assessee had filed its ITR and audit report belatedly and without proper evidence of the audit being conducted on or before the due date.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472793 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Other Referred Cases: Principal Commissioner of Income Tax vs. NRA Iron & Steel Pvt. Ltd., CIT vs. Manish Buildwell Pvt. Ltd., Smt. Prabhavati S. Shah vs. CIT, DCIT vs. Keshav Cement & Infra Ltd., CIT vs. Durga Prasad More, Sumati Dayal vs. Commissioner of Income Tax, CIT vs. Smt. P.K. Noorjahan, Raghunath Thakur vs. State of Bihar, State of Kerala vs. K.T. Shaduli, Smt. Kamla Devi vs. ITO
• Laws Referred To: Income-tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITA RINES H
• Assessee Lawyers: JITENDRA WADHWA
• Keywords: Set aside; Capital asset; Additional evidence; Corroborative evidences; Unexplained cash credit; Onus to prove; Commercial expediency; Principle of natural justice; TDS; Wrong claim; Source of fund; Procedural lapse; FORM 26AS; Bogus
• Section: 143(3); 142(1); 143(2); 143(1); 192; 271(1)(c); 208; 131; 194C; 20; 101

Judgement Text

" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 846/JP/2024 fu/kZkj.k o\"kZ@Assessment Year : 2013-14 DCIT, Circle-06, Jaipur, NCRB, Jaipur cuke Vs. Ascent Buildhome Developers Limited, J-99, 100, (Basement), Fateh Teeba Adarsh Nagar, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAHCA 6457 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Jitendra Wadhwa, CA jktLo dh vksj ls@ Revenue by : Mrs. Anita Rinesh, JCIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 21/01/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 30/01/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM By way of this appeal revenue challenges the finding of the National Faceless Appeal Centre (NFAC) [ for short “CIT(A)” ] which was passed on 12/04/2024 and it relates to assessment year 2013-14. That order of ld. CIT(A) arise because the assessee challenged the finding as recorded in the order of the assessment dated 30.03.2016 passed under section 143(3) 2 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited of the Income Tax Act, [ for short Act] by ACIT, Circle-6, Jaipur [ for short AO ] 2. In this appeal, the revenue has raised following grounds: - “1. On the facts and circumstances and in law, the Ld. CIT(A) has erred in admitting the additional evidence under Rule 46A of the Income-tax Rules, 1962 without giving reasonable opportunity along with evidences to the AO for examining and rebutting the same in remand proceedings. 2. On the facts and circumstances and in law, the Ld. CIT(A) has erred in admitting the additional evidences under Rule 46A of the Income-tax Rules, 1962 without verification of additional evidences by the AO even though the assessee has belatedly filed its ITR and Audit report on 26.05.2014 i.e. after a delay of eight months and no evidences were filed that audit had been conducted on or before 30.09.2013. 3. On the facts and circumstances and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of purchases and development expenses claimed by the assessee in profit and loss account amounting of Rs. 2,90,20,819/-in spite of the fact that the assessee has failed to submit the books of accounts, bills or vouchers etc. to substantial its claim during the assessment proceedings. 3. Succinctly, the fact as culled out from the record is that return declaring total income of Rs.39,10,260/- was filed on 26.05.2014 through e- filing which was processed u/s 143(1) at the same income. The case was selected for scrutiny and hence a notice u/s 143(2) was issued on 7-9-2015 which was duly served through registered post A/D on 15.09.2015. In response to the notices so issued assessee filed details and explanations which was examined. Assessee was engaged in the business of Real 3 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited Estate, for which the assessee has shown the sales of Rs. 6,23,30,330/- thereby declaring net profit of Rs. 51,98,803/-. 3.1 Ld. AO noted that the assessee had several agricultural lands at Tehsil Tapukda, Alwar and a residential plot at Jaipur in opening stock. During the year certain pieces of land were transferred to a firm namely M/s M.M. Realty wherein the assessee company is a partner. The details of that land were as under: Date Measurement of land (in hectre) Cost of land recorded in books of a/c (in Rs.) Value adopted by sub registrar (in Rs.) 18.2.2013 9.7133 1,08,16,681/- 4,27,38,520/- 18.2.2013 1.1200 20,31,147/- 76,50,720/- 18.2.2013 0.9300 10,74,328/- 49,41,090/- Total 1,39,22,156/- 5,53,30,330/- 3.2 In the books of account this transfer of land has been shown as sales at the same value as adopted by the sub registrar. Besides, a residential plot at Adarsh Nagar, Jaipur has also been sold during the year for a sum of Rs. 70 Lakh. Ld. AO from the note-3.6 of the P&L a/c observed that the assessee has debited purchase and internal development expenses of Rs. 2,90,20,819/- The assessee was having an opening stock of Rs. 5,22,86,108/-,after deducting the cost of lands sold/transferred during the year of Rs 2,12,91,356/- (Rs. 1,39,22,156/- +Rs.73,69,200/-), the figure of closing stock arrives at Rs. 3,09,94,775/- which has been correctly shown in note-3.6 of the P&L a/c. Having analyzed these figures, it transpires that the purchase and internal development expenses booked by the assessee 4 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited relate to the land transferred during the year to M/s M.M. Realty. In order to verify these expenses the assessee vide letter issued on 26.02.2016, was asked to furnish the details of internal development expenses and produce books of a/c along with supporting evidences and the case was fixed for hearing on 04.03.2016. On that day a letter dated 02.03.2016 along with some details was received through post. As per these details, internal development expenses aggregating to Rs 2,50,60,966/- had been paid to 7 parties/contractors. Details of TDS made by the assessee u/s 194C and copy of ITR acknowledgements and computation of income of 6 parties/contractors were also enclosed. However, in the absence of books of a/c, bills and vouchers verification of expenses was not possible. To enquire about the genuineness of expenses, summons u/s 131 for personal presence were issued on 04.03.2016 to Shri Mohd. Hamid and Smt Shagufta Parveen of Jaipur to whom such expenses were allegedly paid. On the same day a letter was issued to the assessee to produce books of a/c, bills and vouchers on 11.03.2016. A show cause notice for imposing penalty u/s 271(1)(b) was also issued on that day as the assessee had failed to produce books of a/c on 04.03.2016. Both the payees i.e. Shri Mohd. Hamid and Smt. Shagufta Parveen did not attend on 08.03.2016 and hence fresh summons u/s 131 were issued to them requiring their 5 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited personal presence on 10.03.2016. However, both of them did not attend in person and sent return reply through post enclosing therewith copy of ITR, computation of income and PAN card only. The parties avoided personal presence and production of books of a/c just to escape interrogation by the Department. On 09.03.2016 summons u/s 131 were also issued to five outstation parties to whom purchase, and internal development expenses were stated to have been paid. The payees were required to produce their books of a/c, bank statements, bills and vouchers for F.Y. 2012-13. Out of these, the summons issued to M/s Flexible Machine Tools, Faridabad and Shri Arun Sharma, Faridabad have been returned by postal department unserved. The other parties i.e. Shri Rajesh Kumar, Smt. Madhubala and M/s Munjal Enterprises sent their replies through post enclosing therewith copy of ITR, computation of Income and PAN card. None of the parties has attended in person as required in the summons u/s 131. As such, the summons issued to all parties/contractors to whom land development expenses are stated to have been paid, have not been complied with. All such parties have escaped interrogation/ examination by the AO. To ascertain the true and correct facts regarding incurring of so called development expenses, ld. AO deputed his Inspector to make on spot inquiries and submit his report. The Inspector visited the site on 11.03.2016 6 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited i.e. the land at Khasra No. 88 to 99 and 101 to 104 of village KhoriKhurd, Tehsil-Tapukda, Distt.-Alwar. The Inspector also contacted Shri Yogesh Kumar, Patwari of that area and obtained his report also. The Inspector and the Patwari, both in their respective reports, stated that the land in question is uneven, rugged and having no construction except a room. That the land is partly fenced up to 3-4 feet height. There is no agricultural or other activity on the land. In view of the reports of the Patwari and the Inspector, a fresh show cause notice was issued to the assessee on 16.03.2016 fixing the case for hearing on 23.03.2016. In the show cause notice ld. AO stated that: i) The assessee has failed to produce books of a/c, bills and vouchers, ii) The payees/ contractors have not attended in response to the summons issued u/s 131 to escape inquiry/ interrogation by the Deptt; iii) As per the inquiry reports of local Patwari and the Inspector of this office. there was no development activity was done on the land in question. Therefore, the purchases and development expenses claimed by the assessee have not been verified and hence the same were proposed to be disallowed. In response to the show cause dated 16.03.2016, a reply along with certain details was furnished on on 23.03.2016 through post wherein the Ld. A/R has stated as under:- 7 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited \"In the P&L a/c we have debited a sum of Rs. 2,90,20,819/- on account of purchases and internal development expenses for improvement of land. We have already submitted details of work done on land as landscaping, levelling of land, fencing etc. for amounting to Rs. 2,50,60,966/- Difference of Rs. 39,53,853/- is on account of purchases of Mitti, Khambi, wire for fencing etc. from open market. Further, the land which was transferred to M/s M.M.Realty during the year was immeasurable condition having lot of pitfall on it and open without fencing lot of expenses were incurred for its improvement to make it in saleable condition which are quite genuine.\" The assessee Id. A/R has not submitted any item wise, date wise details, any books of account, bills or voucher etc., its claim of its claim of incurring purchase and development expenses. The assessee has also not controverted the adverse finding of inquiry conducted by the Department. The facts being so the purchase and development expense debited by the assessee were held to be bogus and thereby an addition of Rs. 2,90,20,819/- was made to the income of assessee. 4. Aggrieved from the order of the assessment the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “Adjudication Ground Nos. 1 & 2:- These grounds of appeal are interrelated and have been raised against an addition of Rs. 2,90,20,819/- on account of purchase and development expenses debited by the assessee in his profit and loss account for the impugned assessment year. During the course of assessment proceedings, the Ld. AO had observed that the assessee had debited purchase and internal development expenses of Rs. 2,90,20,819/- in respect of the lands transferred to M/s M.M. Reality. As per the 8 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited details furnished before the Ld. AO, the said expenses had been paid to 7 parties/contractors. The assessee had furnished the details of TDS deducted u/s 194C, copy of ITR acknowledgments and computation of income of the parties/contractors. However, the relevant books of accounts, bills and vouchers verifying the expenses were not produced before the Ld. AO. The Ld. AO in order to inquire genuineness of the expenses issued summons u/s 131 to the parties. None of the parties appeared, however, they sent by post the relevant details to the Ld. AO. In case of M/s Flexible Machine Tools, Faridabad and Shri Arun Sharma, Faridabad the summons were delivered \"unserved\". Further inquiries by the inspector of the AO revealed that the land in questions is uneven, rugged and having no constructions except a room. There was no agriculture activity on the land. In view of the foregoing the Ld. AO disallowed the purchase and development expenses and made an addition of Rs.2,90,20,819/- to the income of the assessee. During the course of appellate proceeding, the appellant has filed additional evidence under Rule 46A and requested for admission of the same. The additional evidence include the ledger accounts of the parties to whom payments have been made in respect of purchase and development and the bills and vouchers of expenses incurred. The additional evidences were forwarded to Ld. AO on 15.12.2023 to comment on its admissibility and if necessary conduct inquiries u/s 250(4) of the Act. The reminders to the Ld. AO and Range Head were issued on 29.12.2023, 25.01.2024. The Ld. PCIT was also requested to expedite the remand report vide communication dated 07.03.2024 and 26.03.2024. However, the remand report is still pending, neither have any adjournments been sought by the Ld. AO. In view of the same, the appeal of the appellant is being decided on the submissions made by him and the material on record. In order to meet the ends of justice, the additional evidence submitted by the appellant under Rule 46A of the IT Rules is hereby admitted. From the assessment order of the Ld. AO and the submissions made by the appellant, it is seen that the appellant has submitted all the necessary details in respect of the expenses incurred by him. All the ledger accounts, bills and vouchers have been produced. The TDS has been paid u/s 194C, the copy of ITR acknowledgments have been provided, all the transaction have been carried out through the banking channels. Hence, the said expenses cannot be help to be bogus in nature. The appellant cannot be forced/compelled to produce its parties to prove genuineness of the transactions. By submitting the necessary documents, the appellant had discharged the onus cast upon him to prove the genuineness of the transactions quite sufficiently. Further, since all the details were available with the 9 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited Ld. AO necessary inquiries could have been conducted by the Ld. AO to determine the genuineness of the expenses. Also, in respect of the report of the Patwari that no agricultural activity has taken place on the land, it is pertinent to mention that the appellant has never claimed that he has done agriculture on the said land. Since, the land was rugged that is why land filling and landscaping were required to be made for the land to be sold. In view of the facts as stated above, the impugned addition of Rs.2,90,20,819/- made by the Ld. AO is hereby deleted. The grounds of appeal nos. 1 and 2 are Allowed. Ground No. 3: The ground of appeal is general in nature and does not require any adjudications. Ground No. 4:- The ground of appeal is in respect of penalty u/s 271(1)(c) of the Act. Since the cause for the same has not arisen as yet, the ground does not required any adjudication. In the result, the appeal is Allowed.” 5. Feeling dissatisfied from the finding so recorded by the ld. CIT(A), the revenue challenges that order of the ld. CIT(A) before this tribunal on the grounds as stated herein above. The ld. DR is heard who relied on the findings of the assessing officer and filed the following written submission: “Introduction 1.1 This humble submission is presented on behalf of the Revenue in the appeal concerning the order passed by the Learned Commissioner of Income Tax (Appeals) [CIT(A)] in the case of Ascent Build Home Developers Limited, ITA/846/JPR/2024(D) for the Assessment Year 2013-14, with PAN – AAHCA6467H. The assessee, engaged in the business of real estate development, filed its income tax return and audit report on 26.05.2014, declaring a total income of Rs. 39,10,260 through e-filing, after almost 08 months of due date and no reason was explained for such delay. The return was processed under 10 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited Section 143(1) of the Income Tax Act, 1961, and was later selected for scrutiny to ensure compliance with the provisions of the Act. 1.3 The Revenue respectfully submits this document to address the grounds raised in the appeal and to provide a balanced perspective supporting the disallowances made by the Assessing Officer (AO). These disallowances, based on specific observations, were subsequently modified by the CIT(A). This submission seeks to clarify the Revenue's stance on these matters with the utmost respect for the decisions of the appellate authorities. II. Issue Involved in Assessment 1.1 During the assessment, the assessee claimed development expenses amounting to Rs. 2,90,20,819 against the sale of various land parcels. Despite the Assessing Officer's (AO) due diligence and provision of multiple opportunities, the assessee’s responses were either incomplete or non- responsive, displaying a consistent pattern of evasiveness, which ultimately resulted in the disallowance of the development expenses. 2. Assessee’s Business and Initial Information Submission 2.1.BusinessOverview: The assessee, engaged in the real estate business, declared sales of Rs. 6,23,30,330 with a net profit of Rs. 51,98,803. The Profit & Loss account includes a debit of Rs. 2,90,20,819 as internal development expenses. 3. Non-Cooperation in Verification of Development Expenses 3.1 Failure to Produce Books and Supporting Evidence: Despite the AO’s specific requests on 26.02.2016 for books of account, bills, and vouchers, the assessee provided only partial details through dak. Essential documentation, such as itemized expenses and invoices, was withheld. Although the assessee reported payments of Rs. 2,50,60,966 to seven contractors, it failed to submit primary records substantiating these payments. 3.1.2 Evasion of Summons by Key Contractors: The AO issued summons under Section 131 to key contractors, including Shri Mohd. Hamid and Smt. Shagufta Parveen in Jaipur. However, these contractors failed to attend hearings, providing only limited responses by post. Their avoidance of personal attendance and refusal to provide comprehensive records hindered proper verification of the expenses. 3.2.3 Non-Compliance by Outstation Contractors: 11 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited Additional summons were issued to outstation contractors, such as M/s Flexible Machine Tools and Shri Arun Sharma from Faridabad. These summons were returned unserved, and responses from other contractors were minimal, with no personal appearance or submission of critical documentation. This non- compliance significantly restricted the AO’s ability to conduct a thorough inquiry, casting doubt on the credibility of the assessee's expense claims. 3.2.4 Local Investigation and Inspection Report: To verify the claimed development work, the AO deputed an Inspector to inspect the land in question. The Inspector’s report, along with findings from the local Patwari, indicated that the land was uneven, rugged, and lacked development activity, directly contradicting the assessee’s claims of extensive improvements. 3.2.5 Final Show Cause and Inadequate Response from Assessee: A final show cause notice was issued on 16.03.2016, highlighting the following issues: a. The assessee failed to produce books of account, bills, or vouchers. b. Contractors summoned by the AO avoided personal attendance and omitted crucial records. c. Local inspection contradicted the assessee's claim of land development. The assessee’s response, dated 23.03.2016, merely reiterated general assertions, failing to address these significant issues or provide substantive evidence. 3.2.6 Assessee’s Persistent Non-Compliance and the AO’s Diligent Assessment: Despite repeated opportunities, the assessee persistently withheld essential evidence necessary to verify the development expenses, thereby obstructing a comprehensive examination. The AO’s extensive efforts to conduct a fair and exhaustive assessment were undermined by the assessee’s non-cooperation, necessitating the disallowance of unverifiable expenses. The AO’s conclusions were reached with due care and prudence, given the lack of transparency by the assessee. 4. Failure to Record Reasons for Admitting Additional Evidence 4.1 In addition to procedural non-compliance, the Ld.CIT(A) failed to document any specific reasons for admitting the additional evidence submitted by the assessee. Rule 46A mandates that, in cases where new evidence is accepted, the appellate authority must provide documented reasons justifying this decision. The absence of such reasoning in the Ld. CIT(A)’s order not only violates procedural requirements but also weakens the credibility of the order. 5. Prejudice to the Revenue 5.1 By admitting additional evidence without sharing it with the AO, the Ld. CIT(A) effectively deprived the Revenue of a fair opportunity to address or counter the 12 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited evidence submitted by the assessee, resulting in substantial prejudice to the Revenue. 6. Relief Sought 6.1 In view of the above, it is respectfully submitted that the appeal order passed by the Ld. CIT(A) suffers from procedural irregularities, violating principles of natural justice and Rule 46A. Therefore, it is requested that the Hon’ble ITAT set aside the order of the Ld. CIT(A). 7. Conclusion 7.1 Based on the facts presented, it is respectfully requested that the Hon’ble Tribunal confirm the order of the AO and set aside the order of the Ld. CIT(A) due to lack of adherence to principles of natural justice and procedural compliance under Rule 46A. II. On the grounds of appeal the submission is as under 1.First ground of appeal and submission before the Hon’ble Bench is as under- II. Grounds of Appeal and Submission 1. First Ground of Appeal and Submission Before the Hon’ble Bench 1.1 “On the facts and circumstances and in law, the Ld. CIT(A) has erred in admitting the additional evidence under Rule 46A of the Income-tax Rules, 1962, without giving reasonable opportunity, along with the evidence, to the AO for examining and rebutting the same in remand proceedings.” 2. Findings of the Ld. CIT(A) 2.1 The Ld. CIT(A) made the following observations in the order allowing the appeal filed by the assessee (Appeal Order No. ITBA/NAFAC/S/250/2024- 25/1064053029(1), dated 12/02/24, on page 13): “During the course of appellate proceedings, the appellant filed additional evidence under Rule 46A and requested its admission. The additional evidence includes ledger accounts of the parties to whom payments were made in respect of purchases and development, as well as bills and vouchers of expenses incurred. The additional evidence was forwarded to the Ld. AO on 15.12.2023 to comment on its admissibility and, if necessary, to conduct inquiries under Section 250(4) of the Act. Reminders were sent to the Ld. AO and Range Head on 29.12.2023 and 25.01.2024. The Ld. PCIT was also requested to expedite the remand report via communications dated 07.03.2024 and 26.03.2024. However, the remand report is still pending, and no adjournments were sought by the Ld. AO. In view of the above, the appeal of the appellant is being decided based on the submissions and material on record. To meet the ends of justice, the additional evidence submitted by the appellant under Rule 46A of the IT Rules is hereby admitted.” 2.2.The Findings of the Ld. CIT(A) are Factually Incorrect: 1 On 15.12.2023, the Ld. CIT(A) requested a remand report based on the 13 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited additional evidence submitted during the appellate proceedings. However, the documents were not provided to the jurisdictional Assessing Officer. A report has been called from the AO and same is marked as Annexure-A (2 pages) The Ld. CIT(A) admitted the additional evidence submitted by the assessee with a remark that - Remand report is not received Even without providing the AO with these documents, which are essential for preparing a remand report. 3.Rule 46A of Income Tax Rules 1961 3.1 Under Rule 46A of the Income Tax Rules, 1962, \"additional evidence\" refers to any oral or documentary evidence that an appellant seeks to present before the Commissioner of Income Tax (Appeals) [CIT(A)] which was not produced during the original assessment proceedings before the Assessing Officer (AO). The rule outlines specific circumstances under which such evidence may be admitted: i. Refusal by the AO: If the AO refused to admit evidence that should have been accepted. ii. Prevention by sufficient cause: If the appellant was prevented by sufficient cause from producing the evidence when called upon by the AO. iii. Relevance to grounds of appeal: If the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal. iv. Lack of opportunity: If the AO made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. 3.2 For the CIT(A) to admit additional evidence, the following procedural requirements must be met: i. Recording of reasons: The CIT(A) must record in writing the reasons for admitting the additional evidence. ii. Opportunity for the AO: The AO must be given a reasonable opportunity to examine the evidence, cross-examine any witnesses produced by the appellant, and produce evidence or witnesses in rebuttal. 2.3 . Efforts to Obtain Documents for Remand Report 4.1 In response, the AO sent Letter No. 697 dated 28.12.2023 to the Ld. CIT(A), NFAC, New Delhi, requesting copies of the written submissions and additional evidence filed by the assessee, as the same were not downloadable. This request was critical for preparing a comprehensive remand report. Despite this follow-up, the Ld. CIT(A) issued another letter on 28.03.2024, reiterating the request for the 14 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited remand report by 10.04.2024. The AO clarified that, without access to the documentary evidence, it was impossible to fulfill the remand report requirement, as the additional evidence submitted by the assessee remained unknown. 4.2.It is humbly submitted that the Ld. CIT(A) failed to appreciate the mandatory requirements under Rule 46A of the Income Tax Rules, 1962, which govern the admission of additional evidence in appellate proceedings. As per Rule 46A, the admission of additional evidence is subject to strict procedural safeguards, including: i. Recording Reasons in Writing: The Ld. CIT(A) is obligated to record specific reasons for admitting additional evidence, demonstrating how the conditions under Rule 46A(1) were met. ii. Granting Opportunity to the Assessing Officer (AO): It is mandatory for the Ld. CIT(A) to allow the AO a reasonable opportunity to: a. Examine the additional evidence. b. Cross-examine the witnesses (if any). a. Produce evidence in rebuttal. iii. The Ld. CIT(A) failed to adhere to these essential requirements, thereby violating the principles of natural justice and rendering the proceedings unsustainable. 4.3. Supporting Case Law 1. ITO v. Kripa Shanker Gupta (2008) 14 DTR (All) 103 o Held that the CIT(A) cannot admit additional evidence without complying with Rule 46A. Any admission of such evidence in violation of Rule 46A vitiates the appellate order. 2. CIT v. Manish Buildwell Pvt. Ltd. (2012) 204 Taxman 106 (Delhi HC) o The Hon'ble High Court observed that the CIT(A) must record reasons for admitting additional evidence and ensure that the AO is provided with a reasonable opportunity to examine and rebut the same. Non-compliance with Rule 46A was deemed a violation of natural justice. 3. Smt. Prabhavati S. Shah v. CIT (1998) 231 ITR 1 (Bom) o The Bombay High Court emphasized that the conditions under Rule 46A must be fulfilled before additional evidence can be admitted. 4. DCIT v. Keshav Cement & Infra Ltd. (2015) 371 ITR 225 (Kar) o The Karnataka High Court held that failure to comply with Rule 46A vitiates the appellate order as it deprives the AO of the opportunity to contest the additional evidence. 2.5. Principles of Natural Justice and Mandatory Opportunity for AO’s Examination The case reflects a fundamental breach of the principles of natural justice, specifically that additional evidence cannot be accepted without allowing the AO a reasonable opportunity to examine and rebut the said evidence. Rule 46A mandates that if new evidence is presented at the appellate level, the AO must be provided with it and given an opportunity to scrutinize its authenticity. The Ld. 15 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited CIT(A) is not permitted to proceed with additional evidence independently without involving the AO, as this would compromise the fairness of the assessment. 2.6. Admission of Additional Evidence Due to Non-Submission of AO's Report The Ld. CIT(A) acknowledged that the remand report from the AO was not received, leading to the admission of additional evidence. This approach by the Ld. CIT(A), bypassing Rule 46A requirements due to non-submission of the AO’s report, constitutes a violation of procedural principles. 3. Relevant Case Laws Supporting the Requirements of Natural Justice i. CIT v. Manish Buildwell Pvt. Ltd. (2012) 245 CTR 397 (Delhi HC): This case held that “admitting additional evidence without providing the AO an opportunity to examine it violates Rule 46A and principles of natural justice.” The appellate authority is obligated to remand the evidence to the AO for verification to prevent prejudice to the Revenue. ii. Dhakeshwari Cotton Mills Ltd. vs. CIT [(1955) 27 ITR 126 (SC)]: The Supreme Court stated that “income tax authorities must adhere to the principles of natural justice.” Decisions cannot be based on evidence unseen by both parties. In this case, the Ld. CIT(A) disregarded this standard by withholding access to the additional evidence from the AO. iii. Raghunath Thakur vs. State of Bihar [(1989) 1 SCC 229]: The Court highlighted that “a fair hearing is a crucial element of justice.” Whenever new evidence is introduced, affected parties should be granted the right to respond. The AO’s exclusion from reviewing the additional evidence violated this fundamental right. iv. State of Kerala vs. K.T. Shaduli [(1977) 39 STC 478 (SC)]: This ruling emphasized that “no evidence should be taken behind the back of any party.” The AO was deprived of the opportunity to review the additional evidence, violating the requirement for procedural transparency. v. Smt. Kamla Devi vs. ITO (82 Taxman 144) (ITAT Delhi): It was held that the CIT(A) must confront the AO with any additional evidence; failure to do so compromises the fairness of the proceedings. In the present case, the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] proceeded without providing the additional evidence to the Assessing Officer (AO), thereby denying the AO a fair opportunity to examine and verify its authenticity. This action contravenes Rule 46A and violates the principles of natural justice, as laid down by statutory guidelines and supported by judicial precedents. 6.2 Therefore, it is respectfully submitted that the order of the Ld. CIT(A) be set aside, and the AO's order be confirmed. The additional evidence submitted was part of the audited books of accounts, and the assessee deliberately failed to 16 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited present it during the assessment proceedings. The documents submitted before the Ld. CIT(A) were not produced during the course of the assessment hearing, and this is not a case where the AO ignored such evidence or where the assessee had a valid reason preventing its submission before the AO. The assessee, being a company with a team of accountants, can reasonably be presumed to have had all relevant documents at its disposal before the audit. Hence, the non-submission of such evidence during the assessment cannot be justified Ground 2: Delay in Filing ITR and Audit Report, and Lack of Verification Ground:” On the facts and circumstances and in law, the Ld. CIT(A) has erred in admitting the additional evidences under Rule 46A of the Income-tax Rules, 1962 without verification of additional evidences by the AO even though the assessee has belatedly filed its ITR and Audit report on 26.05.2014 i.e., after a delay of eight months and no evidences were filed that audit had been conducted on or before 30.09.2013.” Submission: In the present case, the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] proceeded without providing the additional evidence to the Assessing Officer (AO), thereby denying the AO a fair opportunity to examine and verify its authenticity. This action contravenes Rule 46A and violates the principles of natural justice, as laid down by statutory guidelines and supported by judicial precedents. 6.2 Therefore, it is respectfully submitted that the order of the Ld. CIT(A) be set aside, and the AO's order be confirmed. The additional evidence submitted was part of the audited books of accounts, and the assessee deliberately failed to present it during the assessment proceedings. The documents submitted before the Ld. CIT(A) were not produced during the course of the assessment hearing, and this is not a case where the AO ignored such evidence or where the assessee had a valid reason preventing its submission before the AO. The assessee, being a company with a team of accountants, can reasonably be presumed to have had all relevant documents at its disposal before the audit. Hence, the non-submission of such evidence during the assessment cannot be justified. Relevant Case Law: • Prakash Chand Nahta v. CIT (2008) 301 ITR 134 (MP HC): The Madhya Pradesh High Court held that the belated filing of documents raises questions on their credibility, and it is the AO’s prerogative to verify such evidence, especially when it has been introduced late. In this case, the Ld. CIT(A)’s acceptance of additional evidence without verification by the AO does not align with the procedural requirements under Rule 46A and prejudices the AO's ability to conduct a fair assessment. Ground 3 : Erroneous Deletion of AO’s Addition of Development Expenses 17 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited Ground: “On the facts and circumstances and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of purchases and development expenses claimed by the assessee in profit and loss account amounting to Rs. 2,90,20,819/-in spite of the fact that the assessee has failed to submit the books of accounts, bills, or vouchers to substantiate its claim during the assessment proceedings.” 1. Submission: The order of the Ld. CIT(A) lacks appreciation of critical facts and has taken a contrary view, stating: “From the assessment order of the Ld. AO and the submissions made by the appellant, it is seen that the appellant has submitted all the necessary details in respect of the expenses incurred by him. All the ledger accounts, bills, and vouchers have been produced. The TDS has been paid u/s 194C, the copy of ITR acknowledgments has been provided, and all the transactions have been carried out through banking channels. Hence, the said expenses cannot be considered bogus in nature.” 2. The Ld. CIT(A) findings does not address the fact that the AO disallowed Rs. 2,90,20,819 claimed by the assessee as development expenses in the profit and loss account due to lack of non-submission of supporting documentation. Despite multiple opportunities provided, the assessee did not produce essential documents like books of accounts, bills, and vouchers necessary to validate the claimed expenses Despite multiple opportunities provided by the AO, the assessee did not produce essential documents such as books of accounts, bills, and vouchers necessary to validate the claimed expenses.The Ld. CIT(A) deleted this addition without considering the fact that the assessee failed to fulfill the onus of proof. The AO’s disallowance was based on substantial non-compliance by the assessee, who avoided personal attendance in response to summons issued under Section 131, thereby raising legitimate doubts regarding the claim. 3. Key Points and Errors in Ld. CIT(A)’s Observations 3.1 Documentation Submitted by the Appellant i. The Ld. CIT(A) observed that the appellant provided necessary documents, including ledger accounts, bills, vouchers, TDS payments under Section 194C, and ITR acknowledgments. This observation contradicts the assessment order, which notes that, despite requests, crucial records like books of accounts, bills, and vouchers were not provided by the assessee, hindering expense verification. ii. As per the assessment order on page 2, para 3.2, the AO highlighted that despite requests for documentation, essential records were not provided, preventing a comprehensive verification. iii. This observation contradicts the assessment order, which clearly notes that, despite requests, crucial records like books of accounts, bills, and vouchers were not provided by the assessee, hindering verification of expenses .The above observation is factually not correct as in the assessment order on page number 2 para no 3.2 the following findings is made by the AO- iv. 18 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited “3.2 In order to verify these expenses, the assessee vide letter issued on 26.02.2016, was asked to furnish the details of internal development expenses and produce books of a/c along with supporting evidence and the case was fixed for hearing on 04.03.2016. On that day a letter dated 02.03.2016 along with some details was received through post. As per these details, internal development expenses aggregating to Rs. 2,50,60,966/- had been paid to 7 parties/contractors. Details of TDS made by the assessee u/s 194C and copy of ITR acknowledgements and computation of income of 6 parties/contractors were also enclosed. However, in absence of books of a/c, bills and vouchers verification of expenses was not possible.” 3.2. Incomplete Submission of Evidence by the Appellant i. The AO issued a letter to the appellant on 26.02.2016, asking for detailed information on internal development expenses and supporting documents, with a hearing scheduled for 04.03.2016. In response, the appellant only provided a letter dated 02.03.2016 with partial details, submitted through post. Although the appellant attached details of internal development expenses amounting to Rs. 2,50,60,966/- and listed 7 parties/contractors involved, they failed to present the necessary books of accounts, bills, and vouchers, which were essential for a comprehensive verification process. The LD.CIT(A) has failed to appreciate that books were not produced and submission and verification are different it terms. Submitting documents are not production and verification of books. In the appeal order the Ld. CIT(A) has not discussed this issue. 3.2 TDS and ITR Acknowledgments Alone Are Insufficient for Verification i. While the appellant submitted details of TDS payments under section 194C and ITR acknowledgments along with income computations for 6 of the 7 parties, these documents alone do not substantiate the actual occurrence and accuracy of the expenses. In the absence of primary supporting documents like books of accounts and vouchers, the TDS and ITR acknowledgments do not serve as conclusive evidence. The AO, therefore, had justifiable grounds to question the authenticity of the expenses due to insufficient documentation. 3.3 Case Laws Supporting the AO’s Stance i. Principal Commissioner of Income Tax vs. NRA Iron & Steel Pvt. Ltd. o Citation: AIRONLINE 2019 SC 1729 o Key Finding: The Supreme Court held that the onus is on the assessee to establish the identity, creditworthiness of parties, and genuineness of transactions. Providing documents such as PAN or bank statements is insufficient without further evidence of the transaction’s authenticity. ii. CIT vs. Durga Prasad More o Citation: (1971) 82 ITR 540 (SC) 19 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited o Key Finding: The taxing authority is entitled to investigate the true nature of transactions beyond mere documentation if circumstances suggest evasion. Genuine transactions must be established through credible evidence. iii. Sumati Dayal vs. Commissioner of Income Tax o Citation: (1995) 214 ITR 801 (SC) o Key Finding: Evidence must be weighed in the context of reality and surrounding circumstances. Mere documentation does not suffice to establish transaction genuineness if doubt persists. 4. Non-Compliance with AO's Request for Documentation i. The AO issued a letter on 26.02.2016 requesting detailed information on internal development expenses and supporting documents. In response, the appellant only submitted partial details, omitting books of accounts, bills, and vouchers crucial for verification. ii. The Ld. CIT(A) overlooked the appellant’s non-compliance in submitting complete records, equating document submission with verification. This procedural lapse affects the credibility of the expenses claimed For verification of the genuineness of these transactions, the Assessing Officer (AO) issued summons to the parties involved. However, these summonses were not complied with by the contractors or parties, which raises further questions about the credibility of the claimed expenses. The AO’s inability to verify the authenticity of the work performed through primary supporting documents, such as books of accounts and vouchers, and the non-compliance of summoned parties, provided justifiable grounds for questioning the legitimacy of these expenses. Mere documentary evidence of payment does not suffice to establish the genuineness of the expenses. The Supreme Court has laid down the principle that the onus is on the assessee to prove not only the identity of the parties and the transaction itself but also the genuineness of the work claimed to have been done. Supporting Case Laws: 1. Principal Commissioner of Income Tax vs NRA Iron & Steel Pvt. Ltd. o Citation: AIRONLINE 2019 SC 1729 o Key Finding: The Supreme Court held that in cases involving substantial sums of money, the assessee has the onus to establish the identity and creditworthiness of the parties involved as well as the genuineness of the transaction. Merely producing documents such as PAN, bank statements, or IT returns is insufficient if the assessee fails to substantiate the genuineness of the transaction. The AO was justified in questioning the transaction due to a lack of adequate proof beyond these written records. 2. CIT vs Durga Prasad More o Citation: (1971) 82 ITR 540 (SC) o Key Finding: The Supreme Court held that the taxing authority is entitled to go beyond the apparent and investigate the reality behind the transaction. In this case, the Court emphasized that evidence on paper alone is not conclusive if the 20 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited underlying reality is questionable. The genuineness of transactions must be established through reliable evidence, not just documents. 3. Sumati Dayal vs Commissioner of Income Tax o Citation: (1995) 214 ITR 801 (SC) o Key Finding: The Supreme Court observed that evidence must be weighed in the context of reality and the surrounding circumstances. Just producing documents or adhering to formalities is not sufficient to prove the genuineness of a transaction if the circumstances raise doubt about its authenticity. 4. CIT vs Precision Finance Pvt. Ltd. o Citation: (1994) 208 ITR 465 (Cal) o Key Finding: The Calcutta High Court held that the identity of the creditor, genuineness of the transaction, and creditworthiness are crucial for any claim. A mere payment through banking channels does not validate the transaction's genuineness without corroborative evidence of work or services performed. Conclusion: In light of these judicial precedents, it is clear that the mere provision of documents showing payment, TDS deductions, or banking transactions does not meet the threshold for proving the genuineness of the claimed expenses. The appellant’s failure to provide primary supporting evidence, coupled with the non-compliance of summoned parties, supports the AO’s position that the genuineness of these expenses remains unverified. 2. Banking Channels for Transactions While the appellant has argued that conducting transactions through banking channels suffices to establish the legitimacy of expenses, it is respectfully submitted that banking channel transactions merely reflect the movement of money, not the actual performance of work or services. Banking Channels Indicate Mode of Payment, Not Verification of Work Performed • Banking channels serve as a medium to facilitate payments between parties and merely record the transfer of funds. They demonstrate that a payment was indeed made from one party to another, but they do not attest to the work or services for which such payments are claimed. • Payment through a bank does not confirm whether the services for which the expense is recorded were genuinely rendered or to what extent the work was performed. This is especially relevant when significant amounts are claimed as expenses, requiring a higher standard of proof beyond mere financial transfers. 2. Completion of Work and Performance Must Be Verified Independently of Banking Transactions • The completion and authenticity of work must be substantiated by primary evidence, such as work orders, progress reports, inspection records, invoices, books of accounts, bills, and vouchers. • In this case, while payments were processed through banking channels, no corroborating documentation has been provided to independently establish the 21 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited actual performance of work. Banking records alone, therefore, fail to satisfy the onus on the appellant to prove the genuineness of these transactions in terms of work performed. 3. Illustration: Payment Due Does Not Equate to Non-Performance of Work • For illustration, if a payment is delayed or due, it does not imply that the work was not performed. Conversely, merely making a payment does not prove that the work has been performed either. The genuineness of a transaction in the context of tax assessments requires a thorough examination of the underlying facts and evidence. • In the case of payments due, documentation and independent verification of completed work would be required to establish its genuineness, despite non- payment. Therefore, when payment is made, it similarly requires independent verification to confirm that work was actually conducted as claimed. 4. Judicial Precedents Emphasizing the Requirement of Verifying Genuineness Beyond Banking Transactions i. Principal Commissioner of Income Tax vs NRA Iron & Steel Pvt. Ltd. • Citation: AIRONLINE 2019 SC 1729 • Key Finding: The Supreme Court held that the onus is on the assessee to establish the identity, creditworthiness of the parties, and the genuineness of the transactions. Banking transactions alone are not sufficient to prove genuineness if the work claimed has not been substantiated by additional documentary evidence. ii. CIT vs Durga Prasad More • Citation: (1971) 82 ITR 540 (SC) • Key Finding: The Supreme Court held that evidence on paper alone cannot be taken at face value if it fails to reflect the reality of the transaction. Banking transactions do not establish the authenticity of the work or services claimed unless supported by other substantial evidence. iii. CIT vs Precision Finance Pvt. Ltd. • Citation: (1994) 208 ITR 465 (Cal) • Key Finding: The Calcutta High Court highlighted that while banking transactions provide a traceable method of payment, they do not establish the genuineness of the claimed services or work without additional supporting records. 5. Conclusion: Need for Comprehensive Evidence to Establish Genuineness • We respectfully submit that while banking transactions confirm that funds were transferred, they do not inherently confirm that the work was performed or the services were rendered as claimed by the appellant. • The appellant’s reliance on banking channels alone, without primary records like books of accounts, bills, and vouchers, does not fulfill the requirements of proof to establish the genuineness of the expenses claimed. • In the absence of corroborative documentation demonstrating the actual performance of work, the AO’s findings questioning the authenticity of these expenses are both reasonable and justified. 22 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited 2. Requirement for Research and Approval Processes in Awarding Contracts • As a company, the appellant is bound to follow a due diligence process, including research, background checks, and board approvals or memorandums, before awarding substantial contracts to service providers. The absence of records demonstrating these internal procedures reflects a lack of accountability and control over the selection of service providers. • AO’s Position: If work was genuinely allocated to these parties, there should be clear records of the decision-making process. However, the appellant has not submitted any documentation to substantiate how and why these service providers were selected. 3. Non-Traceability and Non-Compliance of Service Providers • The Department has confronted the appellant with the fact that the service providers are either untraceable or did not respond to the summons issued under section 131 for verification. This failure of service providers to attend proceedings significantly impacts the credibility of the transactions. 4. Requirement for AO to Conduct a Comprehensive Inquiry • The appellant has argued that they should not be compelled to produce additional evidence for verification. However, as per the Income Tax Act, the onus lies with the taxpayer to substantiate any expenses claimed as genuine. It is the AO’s duty to question and verify submissions, especially when critical evidence, like books of accounts, is not provided. • Relevant Case Law • CIT vs. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) • Background and Key Points: • In this case, the Supreme Court of India discussed the nature of scrutiny assessment and emphasized the role of the AO in examining the evidence presented by the assessee. • The AO's duty in scrutiny assessment is to critically analyze the evidence, ensuring it aligns with the Income-tax Act's provisions, rather than merely accepting the assessee's submissions without question. • Key Observations on Duty of AO: • Verification and Examination: The AO must carefully verify all relevant documents and supporting evidence. This includes examining bank statements, books of accounts, vouchers, and other financial documentation provided by the assessee. • Objective and Fair Assessment: The AO should assess all material facts impartially and must not act as a mere tax collector but as a quasi-judicial authority. Their role is to ensure both the collection of due taxes and the safeguarding of the taxpayer's rights. • Substantive Evidence: If the AO finds that the evidence does not substantiate the assessee’s claims (such as unexplained credits or sources of income), they have the authority to add such unexplained amounts to the income under scrutiny. 23 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited • Application of Judicial Mind: The AO must apply their judicial mind in the scrutiny process, considering all facts and circumstances before reaching a conclusion. This includes seeking clarification or additional information when there are discrepancies in the evidence. • Adherence to Principles of Natural Justice: The AO must give the assessee a fair opportunity to explain discrepancies or provide additional information if any inconsistencies are noted during scrutiny. • Judgment Summary: In CIT vs. Smt. P.K. Noorjahan, the Supreme Court emphasized that while the AO has the discretion to make additions based on unsatisfactory explanations, they must exercise this discretion judiciously and in a manner consistent with the principles of natural justice. The AO’s duty is not just to increase the assessment but to verify the legitimacy and genuineness of the claims made by the assessee. • Relevance of the Case Law: • This judgment illustrates the AO’s responsibilities in scrutiny assessments, especially when dealing with unexplained sources of income. The duty to verify, the discretion to question, and the obligation to follow a fair procedure are all fundamental to the AO’s role in the scrutiny assessment process. 5. Failure of the Appellant to Explain the Non-Production of Books and Records • The company’s audit status makes it reasonable to expect that comprehensive records would be maintained and readily available for inspection. However, the appellant has not provided any explanation as to why these books of accounts and vouchers were not produced, despite requests by the AO. • 6. Lack of Discussion by Ld. CIT(A) on Critical Issues • The Ld. CIT(A) has not addressed the appellant's failure to produce the necessary documentation or the unavailability of service providers in the order. This oversight has resulted in an incomplete examination of the case and a failure to critically assess the validity of the appellant’s claims. 4. Opportunity for Further Inquiry by the AO • The Assessing Officer (AO) had access to all details and could have conducted further inquiries but chose not to pursue them. This reply addresses the Ld. CIT(A)’s observation that the Assessing Officer (AO) had the opportunity to conduct further inquiries but failed to do so. It is respectfully submitted that this finding is factually incorrect and misinterprets the role of the AO in the assessment process. The AO not only conducted thorough inquiries, including a field inquiry, but also appropriately shifted the onus onto the assessee, who subsequently failed to discharge it. 1. AO’s Duty to Conduct Initial Inquiry and Shifting of Onus to the Assessee • The AO conducted a comprehensive field inquiry, gathering relevant information to verify the genuineness of transactions claimed by the assessee. Upon identifying inconsistencies and lack of substantial evidence, the AO rightly shifted the onus to the assessee to substantiate the transactions further. 24 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited • Legal Position on Onus: It is well-settled that once the AO raises a question regarding the genuineness of expenses or transactions, the burden shifts to the assessee to provide credible evidence. Merely expecting the AO to continue investigating without substantive support from the assessee does not align with established principles of the Income Tax law. 2. Failure of the Assessee to Discharge the Onus • After the AO shifted the burden, the assessee was required to produce primary evidence, including books of accounts, vouchers, and other records, to establish the genuineness of the expenses. The assessee’s failure to provide these documents highlights a lack of cooperation and transparency in the verification process. • Importance of Assessee’s Responsibility: The assessee cannot solely rely on the AO’s inquiry. Tax laws mandate that when a claim is questioned, the assessee must substantiate it with adequate proof. Here, the absence of compliance from the assessee justifies the AO’s questioning of the claim. 5. Necessity of Personal Presence: Personal presence of contractors was indispensable to ascertain: 1. Knowledge and Technical Capacity: To determine their understanding and expertise in performing large-scale development work. 2. Sources of Raw Materials: Especially the legal procurement of sand and other resources, which require licenses from the Rajasthan State Department. 3. Movement of Machinery and Labor: Verification of earthmovers, trucks, labor charges, and records related to their use during the claimed development period. iii. Verification of Sand Procurement, Licenses, and Work Execution: The nature of the development work claimed involves activities such as land levelling, earth-moving, and sand utilization—requiring the procurement of raw materials like sand and the engagement of licensed machinery, labor and transport vehicles. As per Rajasthan state regulations, sand procurement requires valid licenses. Further, movement of heavy equipment such as earthmovers and other machinery would leave a trail of verifiable evidence in terms of labor charges, fuel consumption, and transportation records. However, the contractors remained non attendee and thus hold AO to not conduct the enquiries during the assessment proceedings. Written submission is not cross verifiable, the statement or personal hearing is having on spot observation with documents that leads to verify the genuines of work performance. iv. Summary of Contractors' Compliance: S. No. Contractor Name Compliance Outcome 1 Shri Mohd. Hamid Failed to attend hearings, sent limited response by post; avoided personal attendance and did not provide full 25 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited S. No. Contractor Name Compliance Outcome records. 2 Smt. Shagufta Parveen Failed to attend hearings, sent limited response by post; avoided personal attendance and did not provide full records. 3 M/s Flexible Machine Tools Summons returned unserved; non- compliant and did not provide any supporting documentation. 4 Shri Arun Sharma (Faridabad) Summons returned unserved; did not provide any documentation or attend for verification. 5 Other Outstation Contractors Provided minimal responses; avoided personal appearance and omitted critical documentation. 6 Remaining Contractors Evasive responses; did not appear personally or submit necessary documents for verification. This lack of cooperation and incomplete documentation from contractors justifies the AO’s disallowance of the claimed expenses as unverifiable and unsupported. 4. Local Investigation and Inspection Report To verify the claimed development work, the AO deputed an Inspector to inspect the land in question. The Inspector’s report, corroborated by findings from the local Patwari, indicated that the land was uneven, rugged, and lacked development activity—contradicting the assessee’s claims of extensive improvements. Supporting Case Law: CIT v. Ram Narain Goel (1997) 224 ITR 180 (P&H) supports the use of physical inspection reports as substantial evidence for assessing the genuineness of claimed development expenses. Further, in Smt. Saroj Agarwal v. CIT (1985) 156 ITR 497 (SC), the Supreme Court upheld that physical verification by way of field inspection is a valid approach for evaluating claims of expenses in tax matters. the AO issued summons under Section 131 to contractors and third parties related to the assessee for verifying the genuineness of development expenses totaling Rs. 2,90,20,819. Despite the summons, the parties: 1. Submitted limited documents by post without appearing personally. 26 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited 2. Avoided direct interrogation by failing to produce books of accounts and other essential evidence. 3. Blocked the AO’s ability to verify their technical capacity, licenses, and operational ability to perform the claimed development work. As noted in Para 3.4 of the Assessment Order, the AO observed: \"The parties avoided personal presence and production of books of account just to escape interrogation by the Department.\" The assessee claimed that all relevant documents were submitted, and the Ld. CIT(A) also noted in the appellate order that the assessee had produced all necessary documents. However, this observation is not appreciable as it overlooks the non-compliance with the Section 131 summons. The submission of partial documents by post without personal attendance does not fulfill the requirements of Section 131, which mandates personal presence for cross-examination and full verification. The deliberate avoidance by both the assessee and contractors prevented the AO from conducting an effective inquiry into the genuineness of expenses, thereby necessitating the disallowance of the claimed deductions. 2. Importance of Section 131 Powers Section 131 empowers the AO with several quasi-judicial powers crucial for ensuring transparency, accuracy, and accountability during assessment proceedings. The provision serves the following key purposes: 1. Verification of Genuineness of Transactions Summons are crucial for directly verifying the authenticity of claims, such as expenses, credits, or income. Personal inquiry allows the AO to assess the credibility of the evidence provided by the assessee or third parties. 2. Cross-Examination of Summoned Parties: The AO can question summoned individuals to clarify discrepancies, resolve doubts, and ensure the accuracy of financial or commercial transactions. 3. Assessing Technical and Operational Capacity: In cases involving contracts, services, or development activities, Section 131 allows verification of technical expertise, knowledge, and financial capacity of contractors or third parties. 4. Preventing Evasion and Ensuring Cooperation: Summons compel accountability, preventing individuals from evading responsibility by ensuring their personal appearance and requiring detailed explanations. 5. Substantiating Claims through Evidence: The AO can ascertain whether claims, such as expenses or investments, are backed by actual performance, resources, or legally required licenses. 27 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited By empowering the AO to summon parties and inspect documents under oath, Section 131 strengthens the reliability and fairness of the assessment process. 3. Failure of Contractors and Assessee to Appear Under Section 131 The refusal of both the assessee and contractors to attend personally under Section 131 prevented the AO from: 1. Verifying the source and legality of raw materials (e.g., sand), which require licenses under Rajasthan State regulations. 2. Checking the movement and utilization of heavy equipment, transportation logistics, and labor charges related to the claimed development. 3. Cross-examining the contractors’ financial and operational capacity to undertake large-scale development activities. Their evasive behavior hindered the AO’s inquiry, justifying the disallowance of the expenses claimed by the assessee due to lack of cooperation and absence of credible evidence. While the assessee contended that all relevant documents were produced and the Ld. CIT(A) observed that sufficient documentation was submitted, this claim is insufficient in light of the non-compliance with Section 131 summons. Without personal attendance, the AO could not conduct the necessary cross-examination or verify the authenticity of documents. Hence, the limited submission of documents by post does not replace the mandatory requirements under Section 131, which were essential for an effective assessment. 1. CIT v. Kamal C. Mehboob (1989) 178 ITR 614 (Bom HC) o Facts: Summons were issued for claim verification, but the assessee failed to attend. o Ruling: The Bombay High Court ruled that personal inquiry under Section 131 is essential for verifying claims, and non-attendance justifies disallowance. o Significance: Summons are a legitimate and necessary tool for the AO to validate claims. 2. ITO v. D.K. Garg (2020) 424 ITR 165 (Delhi HC) o Facts: The AO summoned suppliers to verify purchase claims; they avoided personal attendance. o Ruling: The Delhi High Court held that non-compliance warranted an adverse inference. o Significance: Section 131 powers are vital for confirming genuineness when parties fail to cooperate. 5. Role of Section 131 in the Present Case In this case: 1. The AO judiciously exercised Section 131 powers to summon the contractors and the assessee for a personal inquiry. 2. Both the assessee and contractors deliberately avoided personal attendance, submitting only limited documents by post. 28 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited 3. This non-compliance deprived the AO of the opportunity to verify: o The genuineness of development work. o Operational capacity, licensing, and resource movement necessary for the claimed expenses. 4. The AO’s reliance on Section 131 was essential to reveal the truth and conduct a fair assessment. The lack of personal presence and failure to provide corroborative evidence justified the AO’s adverse inference and disallowance of expenses under scrutiny. 5. Clarification on Agricultural Activity • In response to the Patwari’s report stating no agricultural activity, the appellant clarified that they never claimed to have engaged in agriculture; land-filling and landscaping were conducted to prepare the rugged land for sale. • This is also not factually correct. The AO has stated that no activity was going on. The factual findings are reproduce as under- “and obtained his report also. The Inspector and the Patwari, both in their respective reports, have stated that the land in question is uneven, rugged (000000000) and having no construction except a room. That the land is partly fenced up to 3-4 feet height. There is no agricultural or other activity on the land.”(para first page number 4). • These observations confirm that the land was devoid of any development, landscaping, or agricultural activities, directly contradicting the appellant’s claim. 2. Appellant’s Claim of Land-Filling and Landscaping: No Evidence Provided • The appellant’s statement that they engaged in land-filling and landscaping to prepare the land for sale remains unsubstantiated. No documentary evidence, invoices, or work orders were provided to support the claim of any development work, including land-filling or landscaping. 3. Ld. CIT(A)’s Limited Mention of Agricultural Activity • The Ld. CIT(A) selectively referenced the absence of agricultural activity without addressing the broader factual context, including the lack of any development work or landscaping. The Ld. CIT(A) has overlooked the AO’s findings that no type of activity—agricultural or otherwise—was observed on the land. • Misrepresentation by the Appellant: The appellant has attempted to misrepresent the findings by selectively emphasizing agricultural activity and ignoring the broader observation by the AO, which included the absence of any development work. 4. Importance of Comprehensive Verification in Land Assessment • For a transaction involving significant land value, it is essential that any claims regarding development work, land-filling, or landscaping be substantiated by credible evidence. The absence of such evidence and the findings from field reports demonstrate the necessity of further verification. 29 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited • The appellant’s lack of credible evidence to support the claim of land development justifies the AO’s reliance on field inspection reports and rejection of unsupported assertions by the appellant. Conclusion Based on the above submissions, it is respectfully submitted that: 1. The Ld. CIT(A) erred in admitting additional evidence without giving the AO a reasonable opportunity to examine and rebut the evidence in remand proceedings, thereby violating Rule 46A and principles of natural justice. 2. The Ld. CIT(A) erred in admitting additional evidence without allowing the AO to verify the documents, especially considering the belated filing of ITR and audit report, and the absence of evidence that the audit was conducted on or before 30.09.2013. 3. The Ld. CIT(A) unjustifiably deleted the addition of Rs. 2,90,20,819 made by the AO towards development expenses, despite the assessee’s failure to produce supporting documentation like books of accounts, bills, or vouchers, which are essential for substantiating the expenses. Prayer In view of the above submissions, it is respectfully prayed that the Hon’ble Tribunal: 1. Set aside the order of the Ld. CIT(A) due to procedural lapses and lack of proper verification of evidence. 2. Uphold the AO’s addition of Rs. 2,90,20,819 towards development expenses, as the assessee failed to substantiate its claim with credible evidence and did not comply with procedural requirements.” 6. In addition to the above, ld. DR countered the written submission filed by the assessee by filling the following additional written submission which reads as under : “In Reference to Case File Dated 31.12.2024 before Hon’ble ITAT Bench A This counter submission is being respectfully submitted on behalf of the Revenue in continuation of earlier submissions. The present submission seeks to address the financial discrepancies and manipulation of stock details by the assessee, as well as to present cogent legal arguments for the disallowance of the assessee’s claims. It is humbly prayed that this submission be taken on record. 30 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited I. Comparative Analysis of Stock, Sales, and Purchases 1. Pursuant to the directions of the Hon’ble Bench, the assessee-appellant submitted the Profit and Loss Account (P&L A/c) for the year under dispute through email and physical submission. 2. The Revenue sought financial data from the jurisdictional officer for Assessment Years (AY) 2012-13 to 2017-18. The jurisdictional officer provided P&L A/c data extracted from the Income Tax Returns (ITRs) filed by the assessee for the relevant years. 3. Based on this data, a comparative analysis of sales, purchases, opening stock, and closing stock of finished goods and raw materials has been prepared and tabulated below: Sr. No. Particulars Amount(Rs.) 1. Asstt. Years 2012-13 2013-14 2014-15 2015-16 2016-17 2017- 18 2. Sales 2,03,58,795/- 6,23,30,330/- 34,17,123/- 18,05,233/- 41,85,519/- Nil 3. Closing Stock(finish goods) 5,22,86,102/- Nil Nil Nil Nil Nil 4. Closing Stock( Raw Material) Nil 3,09,94,775/- 5,09,85,231/- 5,11,28,177/- 5,13,03,242/- Nil 5. Opening Stock(finish goods) 6,48,02,581/- Nil Nil Nil Nil Nil 6. Opening Stock(Raw Material) Nil 5,22,86,102/- 3,09,94,775/- 5,09,85,231/- 5,11,28,177/- Nil 7. Purchases 3,66,780/- 2,90,20,819/- 1,99,90,488/- 1,42,978/- 1,75,000/- Nil 4. The above table reveals glaring discrepancies in the assessee’s declarations, summarized as follows: i. Stock and Sales in AY 2012-13: The assessee declared sales of Rs. 2,03,58,795/- out of the opening stock of Rs. 6,48,02,581/-. Total purchases during the year amounted to Rs. 3,66,780/-, with no expenses claimed for levelling, fencing, or other activities. This conclusively proves that the assessee held a ready-to-sale stock of land worth Rs. 6,48,02,581/-. 31 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited ii. Manipulation of Closing and Opening Stock: The assessee’s closing stock for AY 2012-13 comprised finished goods amounting to Rs. 5,22,86,102/-. However, for AY 2013-14, the assessee declared opening stock as raw material worth Rs. 5,22,86,102/- despite having no raw material in the preceding year. This inconsistency highlights deliberate manipulation. iii. Bogus Claims for Levelling and Fencing: The reclassification of opening stock in AY 2013-14 as raw material enabled the assessee to claim illegitimate expenses of Rs. 2,90,20,819/- for levelling, fencing, and related activities. This claim is devoid of any factual basis. iv. Unchanged Stock Classification: For AY 2013-14 to AY 2017-18, the assessee consistently declared stock as raw material, despite claiming substantial levelling and fencing expenses. It is illogical and untenable that stock classified as raw material remains unchanged over multiple years without any conversion into finished goods. 5. The foregoing analysis conclusively establishes that the assessee manipulated stock declarations and expense claims to evade tax liabilities. II. Reliance on Judicial Precedent The Hon’ble Supreme Court in Principal Commissioner of Income Tax (Central)-1 v. NRA Iron & Steel Pvt. Ltd., [(2019) 3 SCC 184], held that the burden of proof rests squarely on the assessee to establish the genuineness of transactions, including the identity and creditworthiness of investors and the authenticity of financial declarations. The Court further held that failure to provide cogent evidence renders the claims liable for disallowance. Applying the ratio of the above judgment, the assessee in the present case has failed to substantiate: 1. The authenticity of the reclassification of opening and closing stock; 2. The genuineness of levelling and fencing expenses amounting to Rs. 2,90,20,819/-; 3. The legitimacy of stock declarations over the disputed assessment years. III. Prayer In light of the above analysis and judicial findings, it is most respectfully prayed that the Hon’ble Bench may: 32 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited 1. Confirm the order of the Learned Assessing Officer (Ld. AO) and set aside the order of the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)]; 2. Disallow the bogus expenses amounting to Rs. 2,90,20,819/- claimed by the assessee for AY 2013-14; 3. Confirm the Revenue’s contention regarding manipulation of stock declarations; 4. Direct the assessee to furnish evidence substantiating its claims, failing which additions may be sustained; 5. Grant any other relief or directions as deemed appropriate in the interest of justice. 7. On the other hand, ld. AR of the assessee supported the order of the ld. CIT(A) and in furtherance he filed the following written submission: S. No Particulars FACTS 1. No failure to produce the relevant documents before the AO & CIT(A) • The Ld. DR in its submission dated 23.12.2024 has mentioned “point no. 3.1 Failure to produce books and supporting evidences” that in spite of AO’s specific request on 26.02.2016 for books of accounts, bill and vouchers, the assessee only provided partial reply through dak and also the assessee has failed to submit primary records substantiating the payment of Rs. 2,50,60,966/- to seven contractors. • In this matter we want to submit that the proceeding against the assessee had started through a notice issued on 30.06.2015 enquiring about the High Value transactions executed during the year and from that time the assessee has tried his best to submit the details in response to all the notices issued by your worthy department. 33 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited • In the very first reply of the assessee submitted on 13.07.20215, he had provided the following major documents as required by the department \u0001 PAN Card \u0001 ITR Ack. and Computation of A.Y.2013-14 \u0001 Audited Balance sheet and Profit & Loss of the A.Y.2013-14 \u0001 Sales ledger in the book of Ascent Buildhome Developers Limited \u0001 Transfer deeds \u0001 Bank account statement of following bank of the F.Y.2012-13 1) Punjab National Bank, Jaipur 2) Kotak Mahinda Bank, Raja Park, Jaipur 3) Kotak Mahindra Bank, Raja Park, Bhiwadi • Further, in respect to the payments made to the seven contractors, the assessee had provided the following details in its reply dated 02.03.2016 \u0001 Details of internal development expenses \u0001 Copy of ITR & Computation of those contractors \u0001 Form 26AS of those contractors (Pg No. 01-29 of paperbook) • The copy of ledgers and bills were also duly submitted at the time of appeal proceeding. 2. Response of summons by Key Contractors in respect of internal development expense of Rs. 2,50,60,966/- incurred by them • The Ld. DR in its submission dated 23.12.2024 has mentioned “point no. 3.1.2 Evasions of Summons by Key Contractors” and “point no. 3.2.3 Non- compliance by Outstation Contractors” that the AO had issued summons U/s 131 to the contractor but the contactors failed 34 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited to attend hearings & provided responses by post and also that some contractors did not submit their responses. • In this matter it is submitted that the creditors of the assessee have duly filed their submission in response to the summons issued by the AO U/s 131. (Pg No. 30-54 of paperbook) • The creditors could not attend the hearing personally but they have duly provided the following relevant documents on time: \u0001 Letter confirming the nature and details of transaction undertaken between them and the assessee \u0001 ITR & Computation \u0001 Copy of their PAN • All the basic documents related to the creditors were submitted at the assessment proceeding but the contention of the AO was that the assessee had failed to produce the party so as to establish genuineness of the transaction. Neither these creditors were related party of the assessee nor they have completely neglected the summon. Also, subsequent payments have also been made those creditors (Pg No. 75-86 of paperbook). The AO concluded that the internal development expenses are bogus solely based on the non- appearance of the creditors/contractors. • The details of closing balance of those contractors and their subsequent payment is as under: • In this matter, reliance is placed on the judgement of the Hon’ble ITAT Jaipur in the case of the DCIT, Circle-2, Jaipur vs Name of Contractor Closing Bal as on 31.03.2013 Payment made in subsequent years by A/c payee cheque Payment made in subsequent years in cash Munjal 27,92,066/- 27,92,066 No cash 35 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited 3. Acceptance of Additional Evidences by the CIT(A) • The Ld. DR had mentioned Point No. 4 Failure to Record Reasons for Admitting Additional Evidences as per which the Ld. CIT(A) has failed to document any specific reasons for admitting the additional evidences submitted by the assessee. • In this matter, we would like to submit that before accepting the additional evidences the Ld. A.O was requested to provide the remand report on the following dates” \u0001 15.12.2023 \u0001 29.12.2023 \u0001 25.01.2024 \u0001 07.03.2024 \u0001 26.03.2024 (Refer to CIT(A) order at page no. 12, para 3) • The CIT(A) has accepted the additional evidences as the Ld. AO had not provided the remand report even after so many reminders. 8. Ld. AR of the assessee to counter the contention of the revenue has also submitted a counter submission which reads as under : S. No Particulars FACTS 1. Brief facts of the case • The assessee is a limited company engaged in the business of development, sale and purchase of land and other properties. • For the year under consideration, the assessee had filed its return on income as on 26.05.2014 declaring a total income of Rs. 39,10,260/-. 36 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited • As per the audited financial statement, the assessee has debited purchase and internal development expense of Rs. 2,90,20,819/-. The Ld. A.O asked the assessee to submit the documentary evidences in support of this claim. • The assessee submitted all the necessary documents in respect of the expenditure claimed but still the Ld. A.O made the addition of Rs. 2,90,20819/- and raised a demand of Rs. 1,41,30,510/-. 2. Documents submitted during the assessment proceeding • The assessee had provided the following documents before the Ld. A.O to verify the claim of internal development expense” \u0001 Complete details of expense including: \u0002 Name of parties \u0002 Respective amount of parties \u0002 Tax deducted on payment \u0001 ITR & Computations of the parties (Page No. 10 to 28 of the Paper book) • Thereafter, the Ld. A.O had issued summons to the parties and most of the parties have submitted their response (Page No. 30 to 54 of the Paper book) • The details provided by the assessee resulted in total of Rs. 2,50,60,966/- as the remaining balance of Rs. 39,53,853/- was incurred on account of purchase of mitti, khambi, wire for fencing from the open market. • “The Ld. A.O did not raise any objection on the documents submitted by the assessee” and still made of the addition on account of internal development expenditure only because of non- submission of bills or vouchers of such expenditure. 37 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited 3. Documents submitted during the appeal proceeding • Since the Ld. A.O had made the addition only because of the non- submission of the bills & vouchers of the relevant parties, the assessee submitted an application for additional evidence during the appeal proceedings and the provided the ledgers accounts of the parties to whom the payment was made in respect of internal development expense. The assessee also provided the bills of those parties. (Page No. 75 to 192 of the Paper book) • After the submission of the application of additional evidence by the assessee, the Ld. A.O was requested to provide the remand report on the following dates” \u0001 15.12.2023 \u0001 29.12.2023 \u0001 25.01.2024 \u0001 07.03.2024 \u0001 26.03.2024 (Refer to CIT(A) order at page no. 12, para 3) • Since the Ld. A.O did not provide the remand report even after so many reminders the Ld. CIT(A) passed the order as on 12.04.2024, on the basis of facts and records available. 4. The CIT(A) has passed the order in accordance with the CBDT Circular F.No. 279/Misc./M- 102/2021-ITJ • The assessee had filed the appeal before the Ld. CIT(A) as on 28.08.2018 and the appeal order was passed on 12.04.2024 which means the appeal was pending before the Ld. CIT(A) for approximately six years. • The CBDT had issued a circular stating the Guidelines for priority/out of turn disposal of appeals by CIT (AU) and CIT (Appeals) vide F.No. 279/Misc./M- 102/2021-ITJ dated 29.12.2021. • It has been clearly mentioned in the circular that 38 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited “It has come to notice that many taxpayers have requested for priority/ out of turn hearing of their appeals pending with CsIT(AU) and/or CIT(A). With a view to address the issue it is decided that requests covering genuine and exceptional circumstances. raised at the instance of the appellant, may be considered by the Pr. CCIT NFAC and CCsTT of Central charges and International Taxation on the basis of recommendations of jurisdictional Pr.CIT/ Pr.CIT(Central)/ CIT (IT), in the following situations- ADVERTISEMENT i) Cases having Demand above Rs. 1 Cr, ii) Cases where refunds, as originally claimed in ITR, are in excess of 1,00,000/-, iii) Cases where directions to this effect have been issued by Courts, iv) Cases where request is made by senior citizens and/ or super senior citizens, v) Any other case or genuine hardship.” • Since the disputed demand of the assessee was Rs. 1,41,30,510/- i.e., more than Rs. 1 crore, this case clearly falls under the ambit of this circular and hence the CIT(A) has to dispose off the appeal on priority basis. 9. The Ld. AR of the assessee to support the order of the ld. CIT(A) and the contention so raised also filed a detailed paper book the index of the paper book filed reads as under : 39 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited S. No. Documents furnished before the Ld. A.O at the time of assessment proceedings. Page No. of Paper Book Remarks 1. Reply dated 02.03.2016 01-29 • The department issued notice U/s 142(1) on 26.02.2016 as per which the department required the following documents and information: - • Detail and valuation of closing stock In the reply dated 02.03.2016 assessee enclosed complete detail valuation of closing stock • Detail and valuation of Opening stock In the reply the assessee also enclosed detailed valuation of opening stock • Detail of internal development expenses In the reply assessee provided the detail of internal development expenses of Rs.2,50,60,966/- along with that assessee also enclosed the Parties ITR, Computation of Income & Form 26AS to whom payment for internal development expenses were made. (Pg. No.10-28) • Revised detail of book value of measuring 9.7133 hectares introduced to the firm namely MM Reality. 2. Reply of Summons issued to third parties as on 09.03.2016 30-54 • The department had issued summons U/s 131 of the Act on 09.03.2016 to all the parties to whom payment for internal development expenses were made. • The following parties submitted their reply along with the necessary documents • Mr. Jitender Kumar Proprietor of Munjal Enterprise and documents enclosed were reply, ITR, Computation and PAN Card • Mr. Rajesh Kumar and documents enclosed were reply, Computation and PAN Card 40 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited • Mrs. Madhu Bala and documents enclosed were reply, ITR, Computation and PAN Card • Mr. Mohammed Hamid and documents enclosed were reply, Computation and PAN Card • Mrs. Shagufta Parveen and documents enclosed were reply, Computation and PAN Card 3. Reply dated 21.03.2016 55-64 • Notice U/s 143(3) issued dated 16.03.2016 as per which the assessee was required to explain the nature of amount of Rs. 39,53,853/- which was not submitted earlier and explanation for valuation of opening stock and closing stock. • The assessee furnished the reply on 21.03.2016 in which he explains that the total internal development expenditure incurred during the year was Rs. 2,90,20,819/- out of which the detail of Rs.2,50,60,966/- already submitted by the assessee and the difference of Rs.39,53,853/- was related to the purchase of Mitti, Khambi, Wire for fencing etc. from the open market. and the following documents were provided along with the reply: • Revised detail of book value of measuring 9.7133 hectares • Detail of book value of the land measure 1.12 hectares, 0.93 hectares and detail book value of the other land • Ledger of Opening stock as on 01.04.2012 in the book of Ascent Buildhome Developers Limited • Ledger of Closing stock as on 31.03.2013 in the book of Ascent Buildhome Developers Limited S. No. Documents furnished before the Hon’ble CIT(A) at the time of appeal proceedings. Page No. of Paper Book Remarks 9. Reply on dated 15.06.2023 65-192 • The assessee had submitted his first submission during the appeal proceeding in physical form and had provided the copy of ledgers and invoices of the parties to whom payments were made in respect of purchase and development 41 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited (Pg. No.65-130) • The Assessee submitted an application for submitting additional evidences under rule 46(A) as on 15.06.2023 and had provided the bill of the following parties in respect of purchase and development expenses: • Bills copy of Arun Sharma HUF • Bills copy of Madhu Bala • Bills copy of Munjal Enterprises • Bills copy of Shagufta parveen • Bills copy of Flexible Machine Tools • Bills copy of Rajesh Kumar • Bills copy of Mohammad Ahmed • The assessee also submitted its written submission on 15.06.2023 • The Ld. A.O was requested to issue to remand report on 15.12.2023, 29.12.2023 and 25.01.2024. The Ld. PCIT was also requested to expedite the remand report vide communication dated 07.03.2024 and 26.03.2024. • No remand report was issued by the AO and hence appeal order was passed based on the evidences available on record. 10. As regards the contention of the raised while hearing the ld. AR of the assessee also filed a written submission to counter the arguments of the ld. DR wherein the ld. AR of the assessee contended as under : • Whether Expenses under consideration are declared in VAT returns or not? The assessee is a limited company engaged in the business of development, sale and purchase of land and other properties. The assessee company used to 42 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited purchase lands and then sell them in plots of different size. It was not engaged in constructing floors or buildings. In the previous hearing dated 02.01.2025, the honorable bench has raised a question that whether the expenses incurred by the assessee on internal development expense of Rs. 2,90,20,819/-, which are under consideration, was declared in their returns filed under the Value Added Tax/Sales Tax during the year under consideration. The details of such expenses are as under: S. No. Particulars Amount (Rs.) Remarks A. Internal Development Expense 2,50,60,966.00 No liability of VAT/Sales Tax B. Purchase of mitti, khambi, wire for fencing 39,53,853.00 No liability of VAT/Sales Tax Total 2,90,20,819.00 In this respect, first of all, we would like to draw your kind attention towards sub section (15) of section 2 of the Rajasthan VAT Act, 2003 which provides the definition of goods as under (Page no. 03 of this submission): “(15) “goods” means all kinds of movable property, whether tangible or intangible, other than newspapers, money, actionable claims, stocks, shares and securities, and includes materials, articles and commodities used in any form in the execution of works contract, livestock and all other things attached to or forming part of the land which is agreed to be severed before sale or under the contract of sale;” Hence, as per the Rajasthan VAT Act, 2003 lands are not considered as goods and therefore there was no liability on the assessee to be registered under the Rajasthan VAT Act. Therefore, the assessee was neither registered under the VAT/Sales Tax Act nor it filed any return under such act. Further, we would like to draw your kind attention towards the clause (d) of Section 2 of the Central Sales Tax Act, 1956 which defines the definition of goods in this Act which is as under (Page no. 05 of this submission): “(d) \"goods\" includes all materials, articles, commodities and all other kinds of movable property, but does not include actionable claims, stocks, shares and securities.” From the act, it is clear that for the purpose of Central Sales Tax, the definition of goods only includes only materials, articles, commodities and all other kinds of movable property. The immovable goods are not included in the definition of goods as the Central Sales Tax. Hence, since the assessee company was only engaged in selling plots/lands i.e., immovable property, it was not liable to be registered under this Act. Furthermore, the assessees wh specify that whether they were liable to pay any kind of indirect taxes such as excise duty, service tax, sales tax, customs duty, etc. And the assessee who were liable to pay such indirect taxes were also required to mention their registration no. under the relevant act in their tax audit reports. In the present case, the assessee had filed the tax audit report for the relevant assessment year i.e., A.Y 2013 was required to provide the registration no under the relevant acts if it was liable to pay any kind of indirect taxes. However, since there was no liability on the assessee to be registered and pay any kind of such indirect tax, it did not relevant extract of the Form 3CD filed by the assessee (point no. 4) is as under: The auditor had also not mentioned any negative comment in respect of the liability of the assessee to pay any kind of i assessee, it is a well- value added tax on sale of lands. • Liability of assessee to deduct tax at source on payments made to contractor on account of internal development expense The assessee had incurred internal development expense of Rs. 2,90,20,819/ the year under consideration. Further, in respect t the assessee had deducted the tax at source U/s 194C of the Income Tax Act. The 43 DCIT vs. Ascent Buildhome Developers Limited Furthermore, the assessees who were liable to file the tax audit report were required to specify that whether they were liable to pay any kind of indirect taxes such as excise duty, service tax, sales tax, customs duty, etc. And the assessee who were liable to pay were also required to mention their registration no. under the relevant act in their tax audit reports. In the present case, the assessee had filed the tax audit report for the relevant assessment year i.e., A.Y 2013-14 as on 30.08.2013 and at point no. was required to provide the registration no under the relevant acts if it was liable to pay any kind of indirect taxes. However, since there was no liability on the assessee to be registered and pay any kind of such indirect tax, it did not mention any such details. The relevant extract of the Form 3CD filed by the assessee (point no. 4) is as under: The auditor had also not mentioned any negative comment in respect of the liability of the assessee to pay any kind of indirect taxes. Hence, as per the tax audit report of the -established fact that there was no liability on the assessee to pay value added tax on sale of lands. Liability of assessee to deduct tax at source on payments made to contractor on account of internal development expense The assessee had incurred internal development expense of Rs. 2,90,20,819/ the year under consideration. Further, in respect to the payment of Rs. 2,50,60,966/ the assessee had deducted the tax at source U/s 194C of the Income Tax Act. The ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited o were liable to file the tax audit report were required to specify that whether they were liable to pay any kind of indirect taxes such as excise duty, service tax, sales tax, customs duty, etc. And the assessee who were liable to pay were also required to mention their registration no. under the relevant In the present case, the assessee had filed the tax audit report for the relevant 14 as on 30.08.2013 and at point no. 4, the assessee was required to provide the registration no under the relevant acts if it was liable to pay any kind of indirect taxes. However, since there was no liability on the assessee to be mention any such details. The relevant extract of the Form 3CD filed by the assessee (point no. 4) is as under: The auditor had also not mentioned any negative comment in respect of the liability of ndirect taxes. Hence, as per the tax audit report of the established fact that there was no liability on the assessee to pay Liability of assessee to deduct tax at source on payments made to contractor on The assessee had incurred internal development expense of Rs. 2,90,20,819/- during o the payment of Rs. 2,50,60,966/-, the assessee had deducted the tax at source U/s 194C of the Income Tax Act. The 44 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited assessee had also provided the Form 26AS of the contractors for the year under consideration, which evidences this fact (Page No. 10 to 28 of the Paper book). Hence, the assessee had complied with the law which was applicable on it at that time i.e., deduction of tax at source U/s 194C of the Income Tax Act on the payments made to contractors on account of internal development expenses.” 11. In addition to the written submission so filed the ld. DR vehemently argued that the ld. CIT(A) has entered the addition evidence and the ld. AO was not heard. The assessee was non co-operative at the time of the assessment proceedings. The assessee has not complied with the notice issued u/s. 142(1) of the Act and books of accounts were not produced. At the fag end the assessee submitted few vouchers based on that notices were issued u/s. 131 of the Act requesting those parties to remain present but they submitted the details in DAK to that fact ld. DR draw our attention to chart at page 20 of her submission stating that Shri Mohd. Hamid did not appeared and submitted the details in part. Smt. Shagufta Parveen also not appeared and details were not given as requested. Summons issued to M/s. Flexible Machine Tools and Shri Arun Sharma were returned unserved. In the case of other contractor the reply were evasive and critical evidence / reply relevant to the issue were not given. The inspector was deputed by the ld. AO and after consulting he filed the reply on site. The assessee paid majority of the payment in cash. Ld. AO has not violated any 45 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited the principles of natural justice in the assessment proceedings. The appeal filed by the assessee was not getting time barred and the ld. CIT(A) should have awaited the reply of the ld. AO and thus, the order of the ld. CIT(A) is bad and in law and that is why the revenue is in appeal. 12. On the other hand, ld. AR of the assessee in addition to the written submission so filed vehemently argued that the assessee has deducted TDS on the payments made. Purchase of material does not attract the liability of Value added tax and in respect of the creditor all the required TDS were placed on record. It was not duty of the assessee to enforce the attendance of the creditor and that is why the power were given to the ld. AO to issue the enforce the attendance of the third party. As regards the additional evidence as contended by the ld. DR it has not relevance and it was in furtherance to the record already available with the AO. The ld. AO has disallowed the whole expenditure without commenting upon as to which of the expenditure is not correct. The report of the inspector were based on reply given by the patwari that there was not agricultural activity. Even the ld. Inspector reported that the land was uneven it shows that to make it marketable assessee has incurred the impugned expenditure and therefore, in fact the report of the inspector support the incurring of the expenditure by 46 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited the assessee. Thus, looking to the nature of business the expenditure was fully allowable and thereby he supported the order of the ld. CIT(A). 13. We have heard the rival contentions and perused the material placed on record. The bench noted there are three grounds based on upon which revenue challenges the order of the ld. CIT(A) first was that ld. CIT(A) has erred in admitting the additional evidences under Rule 46A of the Income- tax Rules, 1962 without giving reasonable opportunity along with evidences to the AO for examining and rebutting the same in remand proceedings. Second was that those additional evidence were entertained without verification of the same the AO even though the assessee has belatedly filed its ITR and Audit report on 26.05.2014 i.e. after a delay of eight months and no evidence were filed that audit had been conducted on or before 30.09.2013 and third ground by which they claimed that ld. CIT(A) erred in deleting the addition made by the AO on account of purchases and development expenses claimed by the assessee in profit and loss account amounting of Rs. 2,90,20,819/-in spite of the fact that the assessee has failed to submit the books of accounts, bills or vouchers etc. to substantial its claim during the assessment proceedings. Since all the grounds are related to the claim of expenditure on the property that developed, we deal with all the grounds together. 47 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited 14. The assessee is a limited company engaged in the business of development, sale and purchase of land property. Return of income was filed by the assessee declaring income of Rs. 39,10,260/-. The bench noted that while issuing notice u/s. 142(1) of the Act dated 26.02.2016 the assessee was asked to submit the details of the valuation of closing and opening stock and details of internal development expenses claimed by the assessee. The assessee submitted all the details of the internal development expenses so claimed for an amount of Rs. 2,90,20,819/-. As is evident that while making the payment to those seven contractor the assessee has deducted as the compliance requirement under the law and thereby further supported the claim with submission of ITR and computation of those contractors, Form no. 26AS of those contractor wherein the contract details and TDS were reflected. Based on these details ld. AO issued summons and out of seven parties five have even filed the reply to the summons though the personal attendance was sought was avoided by the contractors. The ld. AO should have cross reverified that whether all the parties have offered the income so received by it based on the documents already on record such as TDS details and ITR copy of the contractor etc. That primary details was already submitted by the assessee. In furtherance to that the assessee submitted copy of the ledgers and bills thus those 48 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited evidence was in support of the details already on record. Ld. DR did not dispute the fact that the assessee provided the documents before the Ld. A.O to verify the claim of internal development expense by submitting the Complete details of expense including, Name of parties, Respective amount of parties Tax deducted on payment, ITR & Computations of the parties (Page No. 10 to 28 of the Paper book filed). Thereafter, the Ld. A.O had issued summons to the parties and most of the parties have submitted their response (Page No. 30 to 54 of the Paper book). The details provided by the assessee resulted in total of Rs. 2,50,60,966/- as the remaining balance of Rs. 39,53,853/- was incurred on account of purchase of mitti, khambi, wire for fencing from the open market and the ld. AO did not raise any objection on the documents submitted by the assessee and still made of the addition on account of internal development expenditure only because of non-submission of bills or vouchers of such expenditure thereby the same was submitted before the ld. CIT(A) by filling the application for additional evidence during the appeal proceedings and the provided the ledgers accounts of the parties to whom the payment was made in respect of internal development expense. The assessee also provided the bills of those parties. (Page No. 75 to 192 of the Paper book). After the submission of the application of additional evidence by the assessee, the 49 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited Ld. A.O was requested to provide the remand report on the 15.12.2023, 29.12.2023, 25.01.2024, 07.03.2024 and 26.03.2024. This aspect of the matter has already discussed in the order of the ld. CIT(A) at page no. 12, para 3. Therefore, the contention of the revenue that the AO was not provided sufficient opportunity is without any base, even the ld. AO does not deem it fit to place on record his comments. Not only that the evidence with the ld. CIT(A) has entertained are all those bills as ld. AO noted that he made the disallowance merely on account of not submitting the bills. Ld. CIT(A) the bills were not submitted. Ld. CIT(A) having co-terminus power has entertained that evidence ld. AO choose to remain silent and has not provided the remand report even after so many reminders the Ld. CIT(A) passed the order as on 12.04.2024, based on facts and records available. As is evident that the assessee had filed the appeal before the Ld. CIT(A) on 28.08.2018 and the appeal order was passed on 12.04.2024 which means the appeal was pending before the Ld. CIT(A) for approximately six years and sufficient opportunity was granted to the ld. AO. Without prejudice to that rule 46A(4) provide that “Nothing contained in this rule shall affect the power of CIT(A) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of 50 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited the assessment or penalty”. As regards the filling of the audit report belatedly, the ld. AO has already considered the audited accounts and made the addition there from and there being no further grievance on that delayed filling of audit report and therefore, they contention has no effect either on merit or that of the admitting the evidence on those accounts. Thus, when the ld. CIT(A) has considered those evidence giving equal chance to ld. AO for providing his comments he has considered those evidence in furtherance to the records already on record. Therefore, we do not find any merits on the grounds of appeal of the revenue and thereby the ground of appeal 1 & 2 raised by the revenue are dismissed. Now coming to the ground no. 3 wherein the revenue challenges the action of the ld. CIT(A) in deleting the addition made by the ld AO on account of purchases and development expenses claimed by the assessee in profit and loss account amounting of Rs. 2,90,20,819/- contending that the assessee failed to submit the books of accounts, bills or vouchers etc. to substantial its claim during the assessment proceedings. On this issue we note that Ld. AO had observed that the assessee had debited purchase and internal development expenses of Rs. 2,90,20,819/- in respect of the lands transferred to M/s M.M. Reality. As per the details furnished before the Ld. AO, the said expenses had been paid to seven parties / contractors. 51 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited The assessee had furnished the details of TDS deducted u/s 194C, copy of ITR acknowledgments and computation of income of the parties / contractors. However, the relevant books of accounts, bills and vouchers verifying the expenses were not produced before the Ld. AO as contended by him while making the addition. While in proceeding before him the ld. AO in order to verify the genuineness of the expenses issued summons u/s 131 to the parties. None of the parties appeared, however, they sent reply by post the relevant details to the Ld. AO forwarding the details as called for. In case of M/s Flexible Machine Tools, Faridabad and Shri Arun Sharma, Faridabad the summons the summons so issued were not served and came back as unserved. The ld. AO deputed his inspector for site verification and upon report of that inspector so deputed he stated that the land in questions is uneven, rugged and having no constructions except a room. There was no agriculture activity on the land. That also made reasons to disbelieve the expenditure claimed by the assessee. While arguing the case ld. DR in its submission dated 23.12.2024 has mentioned “point no. 3.1 Failure to produce books and supporting evidence that in spite of AO’s specific request on 26.02.2016 for books of accounts, bill and vouchers, the assessee only provided partial reply through dak and also the assessee has failed to submit primary records substantiating the payment 52 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited of Rs. 2,50,60,966/- to seven contractors. In this matter we note that in the assessment proceeding in the very first reply of the assessee submitted on 13.07.20215, he had provided the following major documents as required by the ld. AO i.e.PAN Card, ITR Ack. and Computation of A.Y.2013-14, Audited Balance sheet and Profit & Loss of the A.Y.2013-14, Sales ledger in the book of Ascent Buildhome Developers Limited, Transfer deeds, Bank account statement of Punjab National Bank, Jaipur, Kotak Mahinda Bank, Raja Park, Jaipur and Kotak Mahindra Bank, Raja Park, Bhiwadi. The assessee also submitted the details of the payments made to the seven contractors, the assessee had provided the details in its reply dated 02.03.2016 showing details of internal development expenses, Copy of ITR & Computation of those contractors and Form 26AS of those contractors. The assessee also submitted the copy of ledgers and bills were also duly submitted at the time of appeal proceeding but the ld. AO remained silent in the remand proceedings. The ld. DR in its submission dated 23.12.2024 has mentioned vide point no. 3.1.2 Evasions of Summons by Key Contractors and “point no. 3.2.3 Non-compliance by Outstation Contractors stating that the AO had issued summons U/s 131 to the contractor but the contactors failed to attend hearings & provided responses by post and also that some 53 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited contractors did not submit their responses. On this issue as we note that the creditors of the assessee have duly filed their submission in response to the summons issued by the AO U/s 131. (Pg No. 30-54 of paperbook). The creditors could not attend the hearing personally but they have duly provided letter confirming the nature and details of transaction undertaken between them and the assessee, their ITR & Computation and Copy of their PAN. This basic documents related to the creditors were submitted at the assessment proceeding but the contention of the AO was that the assessee had failed to produce the party so as to establish genuineness of the transaction. Neither these creditors were related party of the assessee nor they have completely neglected the summon. Also, subsequent payments have also been made those creditors (Pg No. 75-86 of paperbook). The AO concluded that the internal development expenses are bogus solely based on the non-appearance of the creditors/contractors which is not the correct. As we also note that the Hon’ble Supreme Court in the case of S. A. Builders Ltd. vs Commissioner of Income Tax (Appeals) [2007 (1) SCC 781] (page no 26 of this submission) have held that “…We agree with the view taken by the Delhi High Court in CIT vs. Dalmia Cement (Bhart) Ltd. (2002) 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily 54 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize its profit. The income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits.” The bench noted that the ld. CIT(A) while dealing with the appeal of the assessee has dealt with all the aspect of the matter and categorically held that the assessee submitted all the necessary details in respect of the expenses incurred by them. All the ledger accounts, bills and vouchers have been produced. The TDS has been paid u/s 194C, the copy of ITR acknowledgments have been provided, all the transaction have been carried out through the banking channels. Hence, the said expenses cannot be held to be bogus in nature. The appellant cannot be forced/compelled to 55 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited produce its parties to prove genuineness of the transactions. By submitting the necessary documents, the appellant had discharged the onus cast upon him to prove the genuineness of the transactions quite sufficiently. Further, since all the details were available with the Ld. AO necessary inquiries could have been conducted by the Ld. AO to determine the genuineness of the expenses. Also, in respect of the report of the Patwari that no agricultural activity has taken place on the land, it is pertinent to mention that the appellant has never claimed that he has done agriculture on the said land. Since, the land was rugged that is why land filling and landscaping were required to be made for the land to be sold. Therefore, we also do not find any infirmity in the finding so recorded by the ld. CIT(A) while allowing the appeal of the assessee on its merits. Thus, we do not find any merit of the ground number three raised by the revenue and the same is dismissed. In the result, the appeal of the revenue is dismissed. Pronounced in the Open Court on 30/01/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur 56 ITA No. 846/JP/2024 DCIT vs. Ascent Buildhome Developers Limited fnukad@Dated:-30/01/2025 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- DCIT, Circle-06, Jaipur 2. izR;FkhZ@ The Respondent- Ascent Buildhome Developers Ltd., Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 846/JP/2024) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar "