INCOME TAX OFFICER, WARD-3(1), HYDERABAD V. SR PEDDI ESTATES INDIA PRIVATE LIMITED, HYDERABAD

ITA 1302/HYD/2024

AI Insights

The case involves the Income Tax Officer, Ward 3(1), Hyderabad as the appellant and M/s. SR Peddi Estates India Pvt. Ltd. as the respondent. The core issue revolved around the reopening of the assessee's case under section 147 of the Income Tax Act, 1961, due to non-filing of return and subsequent discrepancies noted in the income reported and the bank credits observed. The Assessing Officer added a significant amount as income not offered by the assessee, which was contested and led to an appeal before the CIT(A). The CIT(A) ruled in favor of the assessee, leading to the Revenue's appeal to the Income Tax Appellate Tribunal. The Tribunal's decision dismissed the Revenue's appeal, supporting the CIT(A)'s findings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780097 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2015-2016
• Appeal Filed On: 17-12-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SACHIN KUMAR
• Assessee Lawyers: S.RAMA RAO
• Keywords: Additional evidence; Principle of natural justice; TDS; Related party transaction
• Section: 147; 148; 139

Judgement Text

" आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad Įी ͪवजय पाल राव, उपाÚ य¢ एवं Įी मधुसूदन सावͫडया, लेखा सदè य क े सम¢ । BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.1302/Hyd/2024 (िनधाŊरण वषŊ/Assessment Year:2015-16) Income Tax Officer, Ward 3(1), Hyderabad. Vs. M/s. SR Peddi Estates India Pvt. Ltd., Hyderabad. PAN : AAJCS2906F (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri S. Rama Rao, Advocate राज̾ व Ȫारा/Revenue by: Dr. Sachin Kumar, SR-DR सुनवाई की तारीख/Date of hearing: 11/09/2025 घोषणा की तारीख/Pronouncement: 08/10/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by the Revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 30.10.2024 for the A.Y. 2015-16. 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA No.1302/Hyd/2024 2 3. The brief facts of the case are that, the assessee is a company. It had taken a building on rent and modified the same to enable software companies to establish their business units therein. For A.Y. 2015–16, the assessee did not file any return of income under section 139 of the Income Tax Act, 1961 (“the Act”). Based on information available (including TDS statements), the Ld. Assessing Officer (“Ld. AO”) noticed that the assessee had income of Rs.33,50,249/-, on which tax had been deducted at source. Accordingly, the case of the assessee was reopened under section 147 of the Act and notice under section 148 of the Act was issued on Printed from counselvise.com ITA No.1302/Hyd/2024 3 27.03.2021. In response, the assessee filed return of income on 08.10.2021 declaring total income of Rs.24,11,310/-. 4. During the assessment proceedings, on examination of the assessee’s bank statement with Indian Overseas Bank, the Ld. AO observed aggregate credits of Rs.5,40,00,000/-. However, turnover of the assessee as per the Profit & Loss Account was Rs.1,00,73,917/- . Therefore, the Ld. AO treated the difference of Rs.4,39,26,083/- (i.e., Rs.5,40,00,000/- minus Rs.1,00,73,917/-) as income not offered and added the same in the hands of the assessee. The assessment was completed under section 147 r.w.s. 144B of the Act on 29.03.2022 at a total income of Rs.4,63,37,393/-. The observations of the Ld. AO in this regard appears at para 6.2 to para 7.1 of the assessment order, which is to the following effect : Printed from counselvise.com ITA No.1302/Hyd/2024 4 5. Aggrieved with the order of Ld. AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition and allowed the assessee’s appeal. The Ld. CIT(A)’s findings are contained in para 5.2.3 to para 5.2.5 of his order, which is to the following effect : Printed from counselvise.com ITA No.1302/Hyd/2024 5 Printed from counselvise.com ITA No.1302/Hyd/2024 6 Printed from counselvise.com ITA No.1302/Hyd/2024 7 Printed from counselvise.com ITA No.1302/Hyd/2024 8 6. Aggrieved with the order of Ld. CIT(A), the Revenue is in appeal before us. Ground Nos.1 and 6 of the Revenue are general in nature and, therefore, dismissed as not pressed. Printed from counselvise.com ITA No.1302/Hyd/2024 9 7. Ground Nos.2 and 3 of the Revenue related to loan taken by the assessee from Smt. P. Udayasri (“ Director”), director of the assessee-company, and the acceptance by the Ld. CIT(A) of additional evidence / reconciliation in that regard. In this regard, the Learned Departmental Representative (“Ld. DR”) submitted that during assessment proceedings the assessee failed to substantiate the alleged loans of Rs.2,62,00,000/- received from its Director. Before the Ld. CIT(A), the assessee filed confirmations/ledger/bank extracts, which, according to the Ld. DR, ought not to have been admitted under Rule 46A, as adequate opportunities had already been given by the Ld. AO. The Ld. DR further pointed out that, (i) the related party disclosure (audited financials; page no.6 of paper book) reported transactions with the Director of Rs.2,02,11,646/-, whereas (ii) the confirmation of the Director (page no.42 of paper book) stated that loans of Rs.2,62,00,000/- were given during the year. He argued that this inconsistency was never satisfactorily reconciled. He also submitted that the Ld. AO could not trace an entry of Rs.15,00,000/- in the Director’s bank statement corresponding to Printed from counselvise.com ITA No.1302/Hyd/2024 10 what the assessee credited to the Director’s ledger account. The Ld. DR also submitted that, since the assessee’s declared turnover (Rs.1,00,73,917/-) exceeded the threshold under section 44AB of the Act, a tax audit was mandatory; yet, no report was filed on the income-tax portal by the assessee. Therefore, according to the Ld. DR, the “audit report” placed in the paper-book (page nos.3 to 9 of the paper book) is not reliable. On these premises, the Ld. DR prayed that the issue be restored to the file of the Ld. AO for full verification, and that the deletion of the addition based on bank credits vs. turnover be reversed. 8. Per contra, the Learned Authorised Representative (“Ld. AR”) supported the order of the Ld. CIT(A). He submitted that audited accounts by a Chartered Accountant (page nos.3 to 9 of the paper book) were furnished before the appellate authority. He further argued that, non-upload of a report under section 44AB of the Act on the portal does not, by itself, discredit the authenticity of audited financial statements or the primary evidence placed before the appellate fora, particularly when the dispute pertains to Printed from counselvise.com ITA No.1302/Hyd/2024 11 character/nature of bank credits and not a penalty for audit default. Further, on the alleged mismatch (Rs.2,62,00,000/- vs. Rs.2,02,11,646/-), the Ld. AR took us through the ledger account of the Director in the assessee’s books (page no.41 of the paper book) and the confirmation of the Director (page no.42 of the paper book). He explained that, the gross inflow from the Director during the year was Rs.2,62,00,000/- (as confirmed by the Director at page no.42 of the paper book) and the repayments during the year was Rs.59,88,354/- (as appearing in the ledger at page no.41 of the paper book). Accordingly, there was net movement for the year i.e. Rs.2,62,00,000/- (received) minus Rs.59,88,354/- (repaid) = Rs.2,02,11,646/-, which exactly tallies with the amount shown in the Related Party Transactions note in the audited financial statements (page no.6 of the paper book). Thus, the figure of Rs.2,02,11,646/- in the audited note represents the net movement with the related party, whereas the confirmation states the gross amount advanced during the year. Therefore, there is no inconsistency as far as this objection of the Ld. DR is concerned. Printed from counselvise.com ITA No.1302/Hyd/2024 12 8.1. Addressing the objection of the Ld. DR as regards Rs.15,00,000/-, the Ld. AR submitted that this consolidated figure comprises Rs.1,50,000/-, Rs.10,00,000/- and Rs.3,50,000/- received on 15.09.2014, 15.10.2014 and 23.01.2015 respectively. He pointed out that the Ld. CIT(A), at para 5.2.4, verified Rs.1,50,000/- and Rs.3,50,000/- from the evidences and found them in order. As regards Rs.10,00,000/- credited on 15.10.2014, the Ld. AR demonstrated (i) copy of cheque No. 467880 dated 09.10.2014 issued by Gyansamhita Tech Pvt. Ltd. (page no.123 of the paper book) and (ii) the assessee’s bank statement (page no.19 of the paper book) reflecting credit of Rs.10,00,000/- on 15.10.2014 with matching cheque particulars. This amount was inadvertently posted in the Director’s ledger and the reconciliation placed before the Ld. CIT(A) explained the correction, which was accepted by the Ld. CIT(A) at para 5.2.4 of his order. 8.2 On the Ld. AO’s objection regarding source in the hands of the Director, the Ld. AR drew our attention to page no.10 of the Ld. CIT(A)’s order, where the explanation regarding the Director’s source Printed from counselvise.com ITA No.1302/Hyd/2024 13 was reproduced and after verification, the same was accepted by the Ld. CIT(A). Finally the Ld. AR submitted that, there is no infirmity in the order of Ld. CIT(A) qua the issue related to loan taken from Director. 9. We have carefully considered rival submissions and gone through the material available on record. We have perused the assessment order (para nos. 6.2 to 7.1), the Ld. CIT(A)’s order (para nos. 5.2.3 to 5.2.5), and the paper-book filed by the assessee, including audited financial statements (page nos.3 to 9 of the paper book), Related Party Transactions note (page no.6 of the paper book), copy of Director’s ledger account (page no.41 of the paper book), confirmation letter of Director (page no.42 of the paper book), bank statement (page no.19 of the paper book) and cheque copy of Gyansamhita Tech Pvt. Ltd. (page no.123 of the paper book). On perusal of these documents, we accept the Ld. AR’s contention that Rs.2,62,00,000/- is the gross amount advanced by the Director during the year (as per confirmation), while Rs.2,02,11,646/- in the related party note is the net movement after considering Printed from counselvise.com ITA No.1302/Hyd/2024 14 repayments of Rs.59,88,354/- reflected in the Director’s ledger. The arithmetical reconciliation is cogent and directly borne out by the records (page nos. 6, 41 and 42 of the paper book). We also note the Ld. CIT(A)’s specific verification regarding the Rs.15,00,000/- item i.e. Rs.1,50,000/- and Rs.3,50,000/- were verified as received from the Director, while Rs.10,00,000/- was received from Gyansamhita Tech Pvt. Ltd. by cheque No. 467880 dated 09.10.2014, credited on 15.10.2014 in the assessee’s bank (page no.19 of the paper book) and inadvertently posted to the Director’s ledger, an error that was satisfactorily explained and accepted by the Ld. CIT(A) (para no. 5.2.4 of the order). The Ld. AO’s objection on the Director’s source also stands addressed in the Ld. CIT(A)’s order (page no.10 of the order), which records the explanation and acceptance after verification. Therefore, we find no perversity in these concurrent factual verifications so as to warrant interference. Accordingly, the ground nos. 2 and 3 of the Revenue are dismissed. 10. Ground no.4 of the Revenue relates to the treatment of Rs.1,73,32,864/- received by the assessee as rental advances from Printed from counselvise.com ITA No.1302/Hyd/2024 15 tenants, which the Ld. AO had doubted, but the Ld. CIT(A) accepted the same as genuine after verification. In this regard, the Ld. DR submitted that during assessment the assessee did not produce any documentary evidence in support of the alleged rental advances. For the first time before the Ld. CIT(A), the assessee furnished lease agreements and details of rent received as additional evidence. Though the Ld. CIT(A) called for a remand report from the Ld. AO, the Ld. DR contended that there were material discrepancies in the documents filed by the assessee. He referred to the lease agreement with M/s. Clinical IT Consulting India Pvt. Ltd. (page nos.67 to 72 of the paper book) and pointed out that the assessee claims to have received a deposit of Rs.50 lakhs from this company. However, the TDS statements of the assessee for the relevant year did not disclose any TDS on the same from this party, thereby casting doubt on the genuineness of the arrangement. 10.1 Further, the Ld. DR drew our attention to para no. 5 of the lease agreement with IT India Pvt. Ltd. dated 09.03.2015 (page nos.73 to 79 of the paper book), which stipulates for receipt of Printed from counselvise.com ITA No.1302/Hyd/2024 16 security deposit of Rs.35 lakhs after the execution of the lease deed. However, according to the assessee’s bank statement, sums of Rs.5 lakhs on 26.09.2014 (page no.12 of the paper book) and Rs.13 lakhs on 16.12.2014 (page no.15 of the paper book) were received before the execution of the lease deed. The Ld. DR contended that such receipts prior to execution of the lease agreement create doubt about their genuineness and require verification. 10.2 The Ld. DR also referred to the lease cancellation with Nexgen Technologies LLC ( page nos. 86 & 87 of the paper book) and submitted that in fact the rent was received from Nexgen Mindspace Solutions Pvt. Ltd. and not from Nexgen Technologies LLC. Such variation in the name of the tenant also creates doubt and requires independent verification. For these reasons, the Ld. DR prayed that the issue be restored to the Ld. AO for de novo verification. 11. Per contra, the Ld. AR submitted that all the relevant lease agreements and bank statements were produced before the Ld. CIT(A), who called for a remand report from the Ld. AO. In the Printed from counselvise.com ITA No.1302/Hyd/2024 17 remand proceedings, the Ld. AO did not point out any deficiency or adverse inference. Hence, it is not correct to contend that the discrepancies remain unresolved. With regard to the deposit of Rs.50 lakhs from Clinical IT Consulting India Pvt. Ltd., the Ld. AR submitted that the receipt was a security deposit and not rental income, and therefore there is no requirement of TDS under the Act. The dispute was only about the genuineness of receipt of security deposit, which was satisfactorily verified by the Ld. CIT(A). 11.1 Regarding the receipt of deposit of Rs.35 lakhs from IT India Pvt. Ltd., the Ld. AR admitted that certain instalments were received prior to the date of the lease agreement. However, he drew our attention to the bank statement entries (page nos.12, 15 and 16 of the paper book) showing receipts of Rs.5 lakhs (26.09.2014), Rs.13 lakhs (16.12.2014) and Rs.17 lakhs (10.03.2015), all credited in the name of IT India Pvt. Ltd. He argued that, even though part of the amount was received earlier, the genuineness of receipt from the same party is not in doubt. The Ld. CIT(A), after verifying the documents, found them satisfactory. Printed from counselvise.com ITA No.1302/Hyd/2024 18 11.2 On the issue of Nexgen Technologies LLC vs. Nexgen Mindspace Solutions Pvt. Ltd., the Ld. AR invited our attention to page no.87 of the paper book, where a certificate issued by Nexgen Mindspace Solutions Pvt. Ltd. records that its name was subsequently changed to Nexgen Technologies LLC. Hence, the Ld. AR submitted that the apparent discrepancy is only a result of change of name and not indicative of any non-genuineness. The Ld. AR finally submitted that the Ld. CIT(A) has verified the documents, the remand report was considered, and no adverse inference was recorded by the Ld. CIT. Therefore, there is no justification for remanding the matter once again to the file of the Ld. AO. 12. We have carefully considered the rival contentions and gone through the record. We have perused the lease agreements (page nos.67 to 72 of the paper book), the bank statements (page nos.12, 15 and 16 of the paper book) and the certificate of name change (page no.87 of the paper book). We have also examined the Ld. CIT(A)’s findings at para nos. 5.2.3 to 5.2.5 of his order. As regards the Rs.50 lakhs deposit from Clinical IT Consulting India Pvt. Ltd., we Printed from counselvise.com ITA No.1302/Hyd/2024 19 find merit in the Ld. AR’s contention that security deposits are not subject to TDS provisions. The genuineness of the receipt has been verified by reference to the lease agreement and bank records by the Ld. CIT(A). The Ld. DR’s contention that absence of TDS implies non- receipt is misplaced, since the statutory requirement itself does not extend to security deposits. 12.1 Regarding the receipt of Deposit of Rs.35 from IT India Pvt. Ltd., it is true that part of the amounts were received prior to execution of the formal lease agreement. However, the bank statements clearly reflect the amounts in the name of IT India Pvt. Ltd. (page nos.12, 15 and 16 of the paper book). The mere fact of receiving the deposit instalments earlier than the date of execution does not vitiate the genuineness of the transaction, especially when the amounts are routed through banking channels and duly explained. The Ld. CIT(A) has also verified the same and found them satisfactory. Printed from counselvise.com ITA No.1302/Hyd/2024 20 12.2 With respect to the alleged discrepancy in the tenant’s name (Nexgen Technologies LLC vs. Nexgen Mindspace Solutions Pvt. Ltd.), we note that the assessee has placed on record a certificate of name change (page no.87 of the paper book) issued by the tenant itself. This adequately explains the difference in names and no adverse inference can be drawn once the documentary evidence of name change is produced. 12.3 On the basis of the above discussion, we find that the Ld. CIT(A) has properly verified the genuineness of the rental advances aggregating Rs.1,73,32,864/-. The remand exercise was carried out and the Ld. AO did not record any deficiency in his report. The so- called discrepancies raised now by the Revenue stand reconciled through the documents cited above. Therefore, we see no infirmity in the Ld. CIT(A)’s order warranting interference. The finding of the Ld. CIT(A) accepting the genuineness of rental advances of Rs.1,73,32,864/- is hereby upheld. Accordingly, ground No.4 raised by the Revenue is dismissed. Printed from counselvise.com ITA No.1302/Hyd/2024 21 13. Ground No.5 of the Revenue relates to alleged contravention of Rule 46A. In this regard, the Ld. DR submitted that the Ld. CIT(A) has erred in procedure by not following Rule 46A of the Income Tax Rules, 1962. It was argued that though the Ld. CIT(A) initially called for a remand report from the Ld. AO on the additional evidence furnished by the assessee, subsequently the assessee filed some further documents during rejoinder. According to the Ld. DR, for such further documents no additional remand was called from the Ld. AO, which amounted to contravention of Rule 46A. Therefore, the Ld. DR contended that the order of the Ld. CIT(A) is vitiated in law and the matter requires to be restored to the Ld. AO for fresh verification. 14. Per contra, the Ld. AR submitted that there was no violation of Rule 46A. He further submitted that, the assessee had filed additional evidence before the Ld. CIT(A) in accordance with Rule 46A and on such filing, the Ld. CIT(A) duly called for a remand report from the Ld. AO. The Ld. AR also submitted that during the course of hearing, the assessee furnished explanations and clarificatory Printed from counselvise.com ITA No.1302/Hyd/2024 22 documents only in the nature of rejoinder to objections raised by the Ld. AO in his remand report. Such rejoinder is part of the natural justice process and cannot be treated as “fresh evidence” so as to require yet another round of remand. Once the recipient (i.e., the Revenue through the Ld. AO) has already given its report, no further right of rejoinder arises at that stage. The Ld. AR further submitted that the documents filed by the assessee were clinching evidences, such as confirmations, ledger extracts, and bank statements, which were self-explanatory and directly reconciling the objections of the Ld. AO. Hence, there was no necessity for a further remand. The Ld. CIT(A) was justified in relying on such documents and arriving at findings. 15. We have considered the rival submissions and gone through the material available on record. We have also perused the order of the Ld. CIT(A), the additional evidences filed and the remand report of the Ld. AO. On perusal of the record, it is evident that the assessee filed additional evidence before the Ld. CIT(A). The Ld. CIT(A) called for and obtained a remand report from the Ld. AO, thereby Printed from counselvise.com ITA No.1302/Hyd/2024 23 complying with the requirements of Rule 46A. The further documents filed by the assessee were only in the nature of clarificatory rejoinder to address the objections raised by the Ld. AO in his remand report. Therefore, we are of the considered view that such rejoinder documents cannot be equated with fresh additional evidence so as to mandate a second remand report. Rule 46A requires that whenever additional evidence is admitted, the AO should be given an opportunity. That requirement stood satisfied in this case. To insist on repeated remands for every clarificatory rejoinder would render the appellate process unending. Further, we note that the documents filed by the assessee i.e. ledger accounts, confirmations and bank statements, are primary evidences capable of verification and have been found by the Ld. CIT(A) to be clinching in nature. Once the evidence itself is clinching and reconciles the objections raised, there is no justification for remanding the matter again to the Ld. AO. In view of the above, we hold that there is no violation of Rule 46A in the procedure adopted by the Ld. CIT(A). The grievance of the Revenue is without merit. We uphold the procedure Printed from counselvise.com ITA No.1302/Hyd/2024 24 adopted by the Ld. CIT(A), holding that once a remand report has been called for and clarificatory rejoinders are filed by the assessee, no further remand is required when the documents are clinching evidence. Accordingly, ground no.5 of the Revenue is dismissed. 16. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 8th Oct., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 08.10.2025. * Reddy gp/PVV Copy of the Order forwarded to : 1. M/s. SR Peddi Estates India Pvt. Ltd., 7th Floor, Signature Towers, Kondapur, Hyderabad-500084 2. The ITO, Ward 3(1), Hyderabad. 3. Pr.CIT, Hyderabad. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "