ITO WARD - 10(4), NEW DELHI V. GHP BUILDCON PVT LTD, NEW DELHI

ITA 2622/DEL/2019

AI Insights

The case involves M/s GHP Buildcon Pvt. Ltd., which faced scrutiny under the Income Tax Act for the Assessment Year 2014-15. The Assessing Officer made significant additions to the income of the assessee under various sections, primarily under section 68, concerning unverified creditors. The CIT(A) later deleted some of these additions, leading the Department of Revenue to appeal against this decision. The Tribunal found that while the assessee had provided some evidence of payments to creditors, the verification process was inadequate, particularly for unserved creditors. The Tribunal directed a more thorough investigation into the identities and the genuineness of the transactions with these creditors.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126248 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Other Referred Cases: CIT(A) vs Virgin Securities & Credits (P) Ltd. 332 ITR 396(Del), Keshav Mills Co. Ltd. 56 ITR 365 (SC), Prabhavati S. Shah 231 ITR 1 Narrondas Manordas 31 ITR 909 (Bom), Scindia Steam Navigation Co. Ltd. 80 ITR 589 (Bom), P. N. Balsubramaniam 112 ITR 512 (AP), Kanpur Coal Syndicate 53 ITR 225 (SC), Jute Corp. of India Ltd. 187 ITR 688 (SC), National Thermal Power Co. Ltd/229 ITR 383 (SC), Ahmedabad Electricity Co. Ltd. 199 ITR 351 (Bom) (FB)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: RANO JAIN; MANSI JAIN; SAKSHIRUSTAGI; WAY OF A LETTER DATED
• Keywords: Set aside; Additional evidence; Deemed dividend; Principle of natural justice; Grounds of appeal; Syndicate; Dismissed; Judgment; Commissioner; Commissioner of Income Tax; Deleted; Commercial Space; Tangible Evidence; Department; Explanation
• Section: 144; 68; 13; 145; 40(a)(ia); 145(3)

Judgement Text

" 1 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL [DELHI BENCH: ‘C’ NEW DELHI] BEFORE SHRIYOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRINAVEEN CHANDRA, ACCOUNTANT MEMBER I.T.A. No. 2622/DEL/2019 (A.Y. 2014-15) ITO, Ward-10(4), New Delhi. (APPELLANT) Vs. M/s GHP Buildcon Pvt. Ltd., 519, 5th Floor, D Mall, PaschimVihar, New Delhi. PAN No.AADCG1584F (RESPONDENT) ORDER PER YOGESH KUMAR U.S., JM This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-35, New Delhi dated 28.12.2018 for the Assessment Year 2014-15. 2. The Grounds of Appeal of the Revenue are as under:- 1. “Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs..9,11,81,859/- made by the AO on account of disallowance of creditors which remained unverified even Department by: Shri Om Prakash, Sr. DR Assessee by : Ms. Rano Jain, Adv. & Ms. Mansi Jain, CA & Shri SakshiRustagi, Adv. Date of Hearing 01.04.2025 Date of Pronouncement 25.04.2025 2 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. during the remand proceedings as the notices issued to such creditors returned un-served. 2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in ignoring the fact mentioned in the remand report that except seven creditors and rest of the creditors and rest of the creditors either did not appear or their letter have returned back with the remarks “No such office”, No such person”, left without address? 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in ignoring the fact that the identity and creditworthiness of most of the creditors could not be established and merely filing of confirmation of PAN before Ld.CIT(A) and return to the amount in subsequent years is not sufficient to discharge onus casted upon the assessee. 4. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.” 3. Brief facts of the case are that the Assessee filed return of income declaring total income of Rs.51,190/-. The case was selected for scrutiny under CASS. An assessment order came to be passed u/s 144(1) r.w.s. 145(3) of the Act by making addition of Rs.11,00,81,859/- u/s 68 of the Act, Rs.22,37,314/- made by treating the total accumulated profit of lender company, loan amount as deemed dividend in the hands of the Assessee and Rs.1,22,248/- has been disallowed u/s 40(a)(ia) of the Act, thereby computed the income of the Assessee at Rs.11,24,92,610/-. 3 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. 4. Aggrieved by the assessment order dated 26/12/2016, the Assessee preferred an appeal before the CIT(A). The Ld. CIT(A) vide order dated 28/12/2018, deleted the addition of Rs.9,11,81,859/- made u/s 68 of the Act. The Ld. CIT(A), however, dismissed the other grounds of the Assessee by sustaining the additions.Aggrieved by the deletion of addition of Rs.9,11,81,859/- u/s 68 of the Act, the Department of Revenue preferred the present appeal on the grounds mentioned above. 5. The Ld. DR vehemently submitted that the Assessee never produced any document before the Assessing Officer. Therefore, the Assessing Officer has rightly passed the order u/s 144(1) of the Act. Further submitted that, all the creditors have not been verified either before the A.O. during the assessment proceedings or during the Remand proceedings. The notices issued to the creditors during the Remand proceedings have been returned un-served with the remark “no such office, no such person, left without address”. However, the Ld.CIT(A) erroneously gone ahead in deleting the addition made by the AO.The Ld. DR further submitted that the identity and creditworthiness of most of the creditors could not be 4 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. established based on the documents produced by the Assessee during the first appellate proceedings or before the A.O. in Remand Proceedings and the Assessee has not discharged the onus cast upon him. Therefore, the Ld. DR submitted that the order of the CIT(A) is liable to be set aside. The Ld. Department's Representative also filed written submission by relying on the several Judgments. 6. Per contra, the Ld. AR submitted that the Assessee has produced all the documents before the A.O. during the Remand Proceedings, in respect of all 42 sundry creditors. Further submitted that all the creditors have been paid back the dues and there is no outstanding payable. Further submitted that the confirmation letter given by the creditors were also produced, which have not been doubted by the authorities.The Ld. AR relying on the order of the CIT(A), sought for dismissal of the appeal of the Revenue. 7. We have heard the parties, perused the material. In the present case. The Assessee has not complied with the notices issued by the A.O. during the Assessment proceedings and not produced any documents before the A.O. Therefore, an ex-parte 5 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. assessment order came to be passed on 26/12/2016. During the first appellate proceedings, the Assessee filed additional documents such as confirmations of the creditors and other relevant documents in the case of all the Sundry Creditors. The Assessee has also produced ledger accounts and claimed that the entire amount has been paid to the respective Sundry Creditors. 8. The Ld. CIT(A) called for the Remand Report from the A.O. During the Remand Proceedings, A.O. in order to verify the genuineness of the creditors issued notices to 25 parties, out of which, only 7 creditors namely Sh. Manoharlal Arora (Rs. 35 lakh), Smt Manju Arora (Rs 35 lakhs), Sanjay Tandon (Rs. 23 lakhs), Sh. Hem Chand (Rs. 50 lakhs ), Sh. Gopal Yadav (Rs. 10 lakhs ), Sh. Vijay Yadav (Rs. 24 lakhs ), Sh. B B Srivastava (Rs. 12 lakhs) have filed their confirmation, but remaining creditors either did not appear or their letters have been returned with remarks ‘no such office, no such person, left without address’. The Ld. A.O. in his Remand Report stated as under:- ‘the above seven persons have admitted that they have advanced money to the Assessee for booking commercial space (shop) and after the sufficient time when they did not got any 6 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. allotment of commercial space, insisted for refund of the amount, one such person i.e. Sh. Hem Chand filed complaint with the police authorities, when he came to know that the Assessee did not have any license from HUDA Authorities for booking of the space and in other cases also though the money was returned, it raised the serious question as to the intention of the Assessee in collecting the money from various persons when they know that they do not have appropriate license for booking of the commercial space. In the interest of natural justice, this office has waited for further confirmations, however, apart from above seven persons rest of the persons have not complied, implying that the genuineness, identity of the rest of the creditors could not be verified.’ 9. However, the Ld. CIT(A) deleted the addition in following manners:- “4.3.5.1. The AR of the appellant has submitted that the assessment order has been passed u/s 144 of the Act as the assessment proceedings remained partially unattended and has stated that the non-attendance is attributable to the reasons beyond the control of the appellant. The AR has submitted that the claim made of expenses and/ or verification of the parties, sundry creditors etc could not be done which resulted in the addition. The AR of the appellant filed a petition to furnish additional evidence under Rule 46A of the Act, 1961. 4.3.5.2. The submissions filed by the Appellant for admissibility of the Additional evidence has been considered. Reliance is placed in the ratio of the judgment CIT(A) vs Virgin Securities & Credits (P) Ltd. 332 ITR 396(Del) where it was held that evidence which is vital and crucial and that which advances the interest and disposal has to be accepted. In view of the above discussion, the evidence furnished by the Appellant is considered for adjudicating the contentions raised in the 7 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. present appeal. It is the inherent power of the CIT (A) to admit any evidence as deemed fit for the proper disposal of the case as the rule specifically provides that nothing contained in it shall effect the power of the CIT (A) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, he should exercise his power judicially and should make enquiry where facts so demand. Reliance is also placed on the decision of Keshav Mills Co. Ltd. 56 ITR 365 (SC).; the Bombay High Court in Prabhavati S. Shah 231 ITR 1 NarrondasManordas 31 ITR 909 (Bom); Scindia Steam Navigation Co. Ltd. 80 ITR 589 (Bom); P. N. Balsubramaniam 112 ITR 512 (AP); Kanpur Coal Syndicate 53 ITR 225 (SC); Jute Corp. of India Ltd. 187 ITR 688 (SC); National Thermal Power Co. Ltd/229 ITR 383 (SC); and Ahmedabad Electricity Co. Ltd. 199 ITR 351 (Bom) (FB). In view of the above discussion, the additional evidence is admitted. FINDINGS: GROUND 2, 3 & 4 4.3.5.3. The facts of the case are that the appellant company filed original return of income on 28.11.2014 declaring a Total Income of Rs. 51,190/- and assessment order u/s 144 r.w.s 145 (3) of the Act was passed, with additions u/s. 68 and 41(1) of Rs. 11,00,81,859/-. The Details of Sundry Creditors and the repayment done is given below: 8 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. 9 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. 10 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. 11 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. It can be seen from the above table that all the creditors have been paid in the subsequent periods. Considering the fact that the AO has passed the order u/s 144 of the Income Tax Act, 1961 and the Appellant has submitted all the confirmations and other relevant documents in case of all the sundry creditors during the appellate proceedings, the details filed by the appellant have been considered. Further, it is also seen from ledger accounts submitted along with written submission dated 28.12.2018 vide page no. 18-59 (filed during appellate proceedings and kept of record) that the amount has been paid in full as per details given in the chart above. In view of the fact that all the accounts are squared up as on date, all relevant documents have been submitted during the appellate proceedings including confirmations from all the creditors along with supporting documents, no adverse inference can be drawn in case of any of the creditors. 4.3.5.4. As per the provisions of the law u/s 68 of Income Tax Act, it is seen that the section is applicable \"Where any sum is found credited in the books of account of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing officer is not satisfactory, the sum so credited may be charged to as income of the assessee of that previous year\". 12 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. The onus cast on the appellant in the instant case has been discharged during the appellate proceedings and as the assessment was passed u/s. 144 of the Act and the additional evidence has been admitted at the appellate stage, the appellant has proved the identity of the creditor and the genuineness of the transaction. The appellant has discharged the onus by submitting the confirmations from all the creditors and PAN of all the parties and the appellant company has submitted evidence proving that all the creditors have been paid by account payee cheque and there is no outstanding as on date. The appellant has also submitted the Ledger copies of all the creditors showing payment of outstanding amount in the subsequent years. In view of the above discussion and considering the facts of the case, the appeal on ground nos. 2, 3 & 4 are allowed.” 10. In the present case, it is a matter of fact that the Assessee has produced all the confirmation of the Sundry Creditors and other relevant documents before the CIT(A) for the first time to prove the genuineness and identity of the creditors. As per the ledger account submitted before the Ld. CIT(A), the entire amount has been paid in full as per the chart reproduced in the order of the Ld. CIT(A) and as per the Assessee,all the accounts are squared up. It is seen from the record that,during the Remand proceedings before the A.O.,except seven creditors, other creditors to whom notices were issued remained absent as the notices issued were not served as the same were retuned with an endorsements ‘no such office, no 13 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. such person, left without address’, therefore, the Ld. A.O. drawn adverse inference that the genuineness and identity of the rest of the creditors could be verified. 11. When the said Remand Report is produced by the A.O. before the Ld. CIT(A), the Assessee by way of a letter dated 26/11/2018 submitted that ‘the Assessing Officer did not provide any opportunity to the Appellant to present the remaining creditor and also examined to those persons’, accordingly the Assessee itself requested to recall the Remand Report for want of opportunity to produce remaining creditors. Thus,it is clear that the Assessee has not produced remaining creditors before the A.O. during the Remand Proceedings. However, the Ld. CIT(A) by accepting the contention of the Assessee that the entire dues of the creditors have been paid and squared up, without verifying the said fact with the bank statement of respective creditors and in the absence of any confirmation from the creditors, deleted the addition. In our considered opinion, when an Assessee claims that all the creditors have been paid back, it is the dutyof the authorities to verify the genuineness of the said claim and should make sure that the list of 14 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. creditors are not fictitious and the same are genuine by corroborating the same with tangible evidence such as bank statements, confirmation letter etc. In the present case, the Assessee himself contended before the A.O. during the Remand proceedings that A.O. has not provided any opportunity to the Appellant to present the remaining creditor and also to cross examine those persons. The A.O. should have provided sufficient opportunity to the Assessee to produce all the creditors in order to prove the genuineness of the transaction and also the confirmations from remaining creditors. In our considered opinion, the Ld. CIT(A) has committed error in deleting the addition made by the A.O. on account of disallowance of creditors without making proper enquiry. 12. In view of the above, we set aside the order of the Ld. CIT(A) and remand the matter to the file of the A.O. with a direction to the Assessee to produce all the remaining unverified creditors and also get the confirmation from respective creditors in order to prove the genuineness of the transaction. The A.O. is also directed to make proper enquiry into all the remaining unverified creditors and also examine the claim of the Assessee regarding repayment made to the 15 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. respective creditors with a tangible evidencesto be produced by the Assessee. Accordingly, the Grounds of Appeal of the Revenue are partly allowed. 13. In the result, Appeal of the Revenue is partly allowed. Order pronounced in the open court on: 25/04/2025 Sd/- Sd/- (NAVEEN CHANDRA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25/04/2025 *Kavita/R.N Sr. PS Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 16 ITA No. 2622/Del/2019 M/s GHP Buildcon Pvt. Ltd. "