INCOME TAX OFFICER-23(2)(1), MUMBAI V. PUSHPA CONSTRUCTION COMPANY , MUMBAI

ITA 1960/MUM/2023

AI Insights

The case involves the Income Tax Officer, Ward - 23(2)(1) as the appellant and Pushpa Construction Company as the respondent. The Revenue appealed against the order of the Commissioner of Income Tax (Appeals), which had deleted additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961, concerning unsecured loans and estimated revenue from WIP. The Tribunal found that the assessee had not furnished complete details regarding the unsecured loans and the estimation of revenue from WIP required further factual verification, particularly regarding the application of the Project Completion Method and the taxability of income in the subsequent year when the project was completed.

• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2026
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2018-2019
• Appeal Filed On: 26-05-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: R.A. DHYANI
• Assessee Lawyers: VIPUL JOSHI
• Keywords: Set aside; Additional evidence; Principle of natural justice
• Section: 143(3); 142(1); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 1960/MUM/2023 (Assessment Year : 2018-19) Income Tax Officer, Ward - 23(2)(1), Room No.512, 5th Floor, Piramal Chambers, S.S. Rao Road, Lalbaug, Mumbai - 400012 ............... Appellant v/s Pushpa Construction Company, 101, B Building, 1st Floor, Priyadarshni CHSL, Sion – Bandra Link Road, Mukund Nagar, Mumbai- 400017 PAN: AAEFP4315P ……………… Respondent Assessee by : Shri Vipul Joshi Shri Prashant Ghumare Revenue by : Shri R.A. Dhyani, CIT-DR Date of Hearing – 16/02/2026 Date of Order - 24/03/2026 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The Revenue has filed the present appeal against the impugned order dated 27.03.2023, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2018-19. 2. In this appeal, the Revenue has raised the following grounds: - Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 2 “1. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in deleting the entire addition of Rs.32,67,97,616/- made on account of unsecured loan whereas the AO has established that the assessee failed to provide loan confirmation of Rs.7,15,18,245/- of 67 parties.\". 2. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred as the assessee has failed to provide verification of remaining 134 parties amounting to Rs.32,67,97,616/- during the appellate and remand proceedings. assessee has again failed to provide the details of 5 loan creditors amounting to Rs.29,82,891/-.” 3. “Whether on the facts and circumstances of the case and in law, the Ld. CTT(A), has erred in not considering the facts that the assessee has failed to provide any details in respect of creditworthiness, genuineness of transaction and identity of lenders during assessment proceedings as well as remand proceedings.\" 4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), was justified in deleting the addition of Rs. 11,10,51,000/- made on account of Sale of properties. As the assessee has failed to substantiate that the alleged sale of Rs. 11,10,51,000/- as informed by Sub Registrar are accounted for in advances received of Rs. 15,20,41,001/- as shown in the balance sheet. 5. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in deleting the addition of Rs.7,76,19,696/- as estimation basis @ 10% of WIP when the assessee has failed to substantiate the method followed to recognise revenue as the assessee is not a pure developer per se.\" 6. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in considering the fact that the assessee had shown substantial work in progress i.e. Rs.7,76,19,696/- but no revenue was recognized.\" 7. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in deleting the addition of Rs.7,76,19,696/ - on estimation basis @ 10% of WIP where the assessee has sold many flats in the same project and receipts shown in the balance sheet as advanced.\" 3. Grounds No.1-3, raised in Revenue’s Appeal, pertain to deletion of addition of Rs.32,67,97,616/- made on account of unsecured loans received by the assessee. 4. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 3 is a partnership firm engaged in the business of real estate development since 1993. For the year under consideration, the assessee filed its return of income on 01.10.2018, declaring a total income of Rs. Nil. The return filed by the assessee was selected for complete scrutiny under CASS on the issues of “income from real estate business” and “unsecured loans”. Accordingly, statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. 5. During the assessment proceedings, from the audit report for the year under consideration, it was observed that the assessee had taken loans from 201 parties to the tune of Rs. 39,83,15,861/-. Vide its submission filed during the assessment proceedings, the assessee filed loan confirmation in respect of 67 parties from whom loan amounting to Rs. 7,15,18,254/- was received by the assessee. In respect of the remaining 134 parties from whom loan amounting to Rs. 32,67,97,616/- was received by the assessee, the assessee did not furnish any documentary evidence. Accordingly, the Assessing Officer (“AO”), vide order dated 27.04.2021 passed under section 143(3) read with section 144B of the Act, made an addition of Rs. 32,67,97,616/- under section 68 of the Act. 6. During the appellate proceedings before the learned CIT(A), the assessee filed additional evidence in respect of the loans amounting to Rs. 32,67,97,616/-. Accordingly, the learned CIT(A) forwarded the additional evidence to the AO as per Rule 46A of the Income Tax Rules, 1962 (“the Rules”) and sought a remand report. The AO vide its remand report dated 06.10.2022 filed before the learned CIT(A), observed as follows: - Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 4 “Comment of AO: From perusal of Assessment Order, it has been noticed that Faceless Assessing Officer has added unsecured loan received from 134 parties in absence of establishing the working/confirmation of the creditors. During appellate proceeding. assessee has submitted details of unsecured loan taken from 93 parties and during remand proceeding, the assessee has submitted details of unsecured loan taken from 36 parties. However, the assessee could not submit the complete details in respect of unsecured loan taken. For some of the parties, assessee could not submit complete details i.e. bank statements/ ITR/identity proof/loan confirmation. The details of parties submitted during appellate proceeding are attached as Annexure-A, details of parties submitted during remand proceeding is attached as Annexure-B. Further, assessee has failed to submit any details of 5 loan creditors which is attached as Annexure-C. Since, the assessee had not submitted these evidences before the assessing officer during faceless assessment proceedings. the addition made on account of unsecured loan taken of Rs.32.67.97.616/- from 134 parties while passing assessment order dated 27.04.2021 is found to be appropriate and justified. In view of above discussion, it is requested that the case may kindly be decided on merits.”. 7. Thus, from the perusal of the remand report filed by the AO, it is evident that the AO noted that during the appellate proceedings, the assessee submitted that details of unsecured loans taken from 93 parties, and during the remand proceedings, the assessee submitted the details of unsecured loans taken from 36 parties. The AO further noted that in respect of balance 5 loan creditors, the assessee failed to submit any documents. From the perusal of the documents submitted by the assessee during the appellate proceedings and remand proceedings, the AO observed that the assessee could not submit complete details in respect of some of the parties, as bank statements, ITRs, and identity proof/loan confirmation could not be furnished by the assessee. 8. After considering the submissions of the assessee and the remand report filed by the AO, the learned CIT(A), vide impugned order, held that as the assessee has furnished the list of creditors along with PAN details and Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 5 bank statements duly confirming the credit, the addition of Rs. 32,67,97,616/- made under section 68 of the Act is unwarranted. Accordingly, the learned CIT(A) allowed the ground raised by the assessee on this issue and deleted the addition made by the AO under section 68 of the Act. 9. During the hearing, the learned Departmental Representative (“learned DR”), by referring to the remand report submitted by the AO before the learned CIT(A), submitted that complete details in respect of unsecured loans taken from 134 parties has not been submitted by the assessee and the learned CIT(A) despite the categorical observation by the AO, vide its remand report, proceeded to delete the impugned addition. The learned DR accordingly submitted that the assessee, despite being granted ample opportunities, did not furnish all the details in respect of 134 loan creditors and, thus, the impugned addition made under section 68 should be reinstated. 10. The learned Authorised Representative (“learned AR”) submitted that at no stage, the assessee was ever apprised about the incompleteness of the documentation in respect of 134 loan creditors. The learned AR further submitted that the documents furnished by the assessee during the appellate proceedings, as well as the remand proceedings, have not been disputed by the Revenue. 11. Having considered the submissions of both sides and perused the material available on record, we find that the addition of Rs. 32,67,97,616/- was made by the AO under section 68 of the Act as the assessee could not submit complete details in respect of 134 parties from whom loan was Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 6 received. As per the assessee, due to the COVID pandemic and lockdown during the scrutiny proceedings, confirmations and other details in support of the unsecured loans received by the assessee during the year could not be furnished before the AO. As per the assessee, in respect of 93 parties, the details were furnished during the appellate proceedings, and in respect of 36 parties, the assessee submitted the details during the remand proceedings before the AO. 12. From the perusal of the remand report dated 06.10.2022 filed by the assessee before the learned CIT(A) and placed on record before us by the learned DR, we find that the AO categorised these 134 parties into three categories and mentioned the details provided by them in Annexures “A”, “B”, and “C” respectively. Insofar as Annexure “A” is concerned, the same enlists 93 parties in respect of which the assessee submitted details during the appellate proceedings. Annexure “B” enlists 36 parties in respect of which the assessee submitted details during the remand proceedings before the AO. Lastly, Annexure “C” enlists 5 parties in respect of which the assessee did not furnish any details. 13. From the perusal of Annexure “A” and Annexure “B”, in respect of which the assessee submitted details during the appellate proceedings and remand proceedings, respectively, we find that complete details were not furnished in respect of some of the parties, as information such as identity proof, bank statements, and ITRs is not available. Further, we find that in respect of some of the parties mentioned in Annexure “B”, the assessee could not furnish the loan confirmations. Thus, we do not find any merit in the findings of the Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 7 learned CIT(A), vide impugned order, that the assessee furnished the details in respect of loan creditors, and accordingly, has discharged the primary onus to determine the genuineness of the credit. 14. It is pertinent to note that the impugned addition has been made by the AO under section 68 of the Act, and therefore, the identity and creditworthiness of the loan lender and the genuineness of the transaction need to be satisfied by the assessee qua each and every loan lender. Thus, we are of the considered view that the assessee is required to discharge the onus under section 68 of the Act by referring to the necessary documentary evidence. It is further pertinent to note that the AO, in its remand report, duly took note of the fact that complete details in respect of unsecured loans taken from 134 parties were not furnished. 15. Accordingly, in the interest of justice and fair play, we deem it appropriate to grant one more opportunity to the assessee to furnish the missing details regarding each of the 134 parties for necessary verification/examination. Consequently, we restore this issue to the file of the jurisdictional AO for de novo adjudication, as per law. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. As a result, the impugned order on this issue is set aside, and Grounds No. 1 to 3 raised in the Revenue’s appeal are allowed for statistical purposes. Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 8 16. Grounds No. 5 to 7, raised in Revenue’s appeal, pertain to the deletion of the addition of Rs. 7,76,19,696/- on an estimation basis @ 10% of work- in-progress (“WIP”). 17. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case pertaining to this issue are that during the assessment proceedings, on perusal of the profit and loss account, it was observed that the assessee had made Nil sales and has closing stock of Rs. 77,61,96,968/-. Considering the reflection of high closing stock with Nil sales during the year, the assessee was asked to explain the same with due reconciliation of WIP and closing stock with the relevant ledger extract for expenditure incurred along with supporting details/vouchers and confirmations from customers/agreements for sale/receipt of advances confirming the transactions of purchase advance. However, the assessee could not provide the supporting details regarding the expenditure incurred and the working of WIP . Accordingly, the AO, vide order passed under section 143(3) read with section 144B of the Act, held that the assessee’s claim of following the Project Completion Method involving WIP of Rs. 77,61,96,968/- available for carry forward could not be reconciled/explained by the assessee and the same clearly established the fact that the expenses involved were neither reconcilable nor verifiable with supporting sources. Accordingly, the AO estimated the revenue of the assessee @ 10% of the WIP , treating the same as its income for the year under consideration, thereby making an addition of Rs. 7,76,19,696/-. Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 9 18. The learned CIT(A), vide impugned order, deleted the addition of 10% of the WIP . Being aggrieved, the Revenue is in appeal before us. 19. During the hearing, the learned AR submitted that the assessee is consistently following the Completed Contract Method/Project Completion Method since inception, and the same was accepted by the Revenue in earlier years. The learned AR further submitted that the assessee fully offered the income from the project in the subsequent year, i.e., the assessment year 2023–24, when the project was completed, and the same has been accepted and assessed in the assessee's hands by the Revenue. It was further submitted that such facts are easily verifiable. However, the AO ignored the same and estimated the income of the assessee from the project by applying 10% to the amount of closing WIP . In this regard, the learned AR also referred to the details of income offered in the subsequent year. 20. On the other hand, the learned DR vehemently relied upon the observations of the AO in its remand report filed before the learned CIT(A), which reads as follows: - “Comment of AO: After examining the written submission along with details filed during appellate proceedings, it is noticed that the assesse is following project completion method and accordingly the work in progress is reflected in the balance sheet and not recognized in the Profit and loss A/c. On perusal of balance sheet of AY-2020-21 of the assessee from the system, it is noticed that assessee has not shown any WIP in the balance sheet for AY-2020-21. The assessee pointed out relevant paras of the Guidance note, submitted copy of the guidance note applicable for real estate transaction. The assessee also submitted project wise expenses incurred by the appellant with respect to the ongoing projects for A.Y 2018-19 including name, PAN address of the suppliers of the raw materials. Project wise break up of various other expenses incurred by the appellant including party wise breakup of the interest paid were also furnished. Further, re-conciliation of work in progress of both the projects and the details of all expenses with address of the vendors/suppliers have been submitted by the assessee. However, during the remand proceedings, assessee had not submitted any fresh evidence in support of the claim that Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 10 income on account of WIP of Rs.77.61cr. in AY-2018-19 has been offered. On analysis of these evidence, it is found that the assessee could not substantiate before the assessing officer that no revenue was recognized during the year from the WIP of Rs.77.61 Cr. Therefore, the addition made of Rs.7,76,19,696/- on estimation basis @ 10% of WIP is found to be appropriate and justified. In view of above discussion, it is requested that the case may kindly be decided on merits.” 21. From the perusal of the remand report dated 06.10.2022 filed by the AO before the learned CIT(A), it is evident that the AO noted that during the assessment proceedings, the assessee has not submitted any fresh evidence in support of its claim that income on account of WIP of Rs. 77.61 crores in the year under consideration was offered in the subsequent year. Accordingly, the AO found the addition on an estimated basis @ 10% of WIP to be appropriate. 22. Having considered the submissions of both sides and perused the material available on record, it is evident that merely because the assessee declared a high closing WIP of Rs. 77.61 crores with Nil sales, the AO proceeded to estimate the income @ 10% of WIP . As per the assessee, it is consistently following the Project Completion Method, and therefore, all the revenue was offered to tax in the assessment year 2023–24 when the project was completed. Accordingly, we are of the considered view that this aspect requires factual verification, as once the entire income is found to have been assessed in the subsequent year, the impugned addition would tantamount to double taxation. Accordingly, we restore this issue to the file of the jurisdictional AO for verifying the claim of the assessee that the entire project revenue was offered to tax in the subsequent year. We further direct that if the assessee’s claim is found to be correct, then the impugned addition, being Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 11 estimated @ 10% of WIP , be deleted. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned order on this issue is set aside, and Grounds No. 5-7 raised in the Revenue’s appeal are allowed for statistical purposes. 23. Ground No. 4, raised in the Revenue’s appeal, pertains to the deletion of the addition of Rs. 11,10,51,000/- made on account of the sale of properties. 24. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case pertaining to this issue are that during the assessment proceedings, from the information received from the Sub-Registrar Office, Mumbai, it was noticed that during the year, the assessee sold 13 flats for an amount of Rs. 11,10,51,000/-. Since the said amount was not reflected in the books of account, the assessee was asked to file its submissions. In response, the assessee submitted that it follows the Project Completion Method of Accounting and all the revenues, costs and income are offered to tax upon completion of the project. 25. During the hearing, the learned AR reiterated the submissions made before the lower authorities and submitted that since it is following the Project Completion Method, the income arising from the sale of 13 flats stood included in the final total income assessed to tax by the Revenue in the subsequent year. Since we have already restored a similar issue pertaining to taxability of income in the hands of the assessee in the subsequent year on the basis of Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 12 its claim that it was following the Project Completion Method, with similar direction as rendered in Grounds No.5-7, we restore this issue to the file of the jurisdictional AO for de novo adjudication, as per law. Accordingly, Ground No. 4 raised in Revenue’s appeal is allowed for statistical purposes. 26. In the present appeal, the assessee has also filed an application under Rule 27 of the ITAT Rules, 1963, primarily on the basis that the assessment is bad, illegal, void, and non est, being in violation of the principles of natural justice. Since all three issues raised by the Revenue before us have been restored to the file of the jurisdictional AO for de novo adjudication after granting reasonable and adequate opportunity of hearing to the assessee, we are of the considered view that the grievance of the assessee vide its application under Rule 27 of the ITAT Rules, 1963, has also been duly addressed. 27. In the result, the appeal by the Revenue is allowed for statistical purposes. Order pronounced in the open Court on 24/03/2026 Sd/- VIKRAM SINGH YADAV ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 24/03/2026 Prabhat Printed from counselvise.com ITA No. 1960/Mum/2023 (A.Y. 2018-19) 13 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai. Printed from counselvise.com "