PATEL KNR HEAVY INFRASTRUCTURE LIMITED,HYDERABAD V. ACIT, CIRCLE-5(1), HYDERABAD

ITA 1998/HYD/2025

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The case revolves around an appeal by Patel KNR Heavy Infrastructures Limited against the order of the Commissioner of Income Tax (Appeals), which sustained the addition of Rs. 46,81,600/- to the assessee's income. This addition was initially made by the Assessing Officer (A.O.) on the grounds that the assessee had received subcontract works from M/s. Annai Infra Developers Ltd., which were deemed to be accommodation entries without any actual work being carried out. The Tribunal examined the evidence presented, including work orders and subcontract details, and concluded that the assessee had no direct link with M/s. Annai Infra Developers Ltd. and had not executed any project for them. The Tribunal's decision was based on the lack of a direct business relationship and the nature of the work subcontracted, which was different from that alleged by the A.O.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848373 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Hyderabad
• Assessment Year: 2019-2020
• Appeal Filed On: 21-11-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Additional evidence; Corroborative evidences; Search and seizure; Accommodation entries; Bogus
• Section: 148; 132

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “B” Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER आयकरअपीलसं./I.T.A.No.1998/Hyd/2025 (निर्धारण वर्ा/ Assessment Year: 2019-20) Patel KNR Heavy Infrastructures Limited, Hyderabad. PAN : AADCP8821E Vs. The Assistant Commissioner of Income-tax, Circle – 5(1), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri Pankaj Sancheti, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Shri Siva Prasad SV, Sr. A.R. सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 03.03.2026 घोर्णध की तधरीख/ Date of Pronouncement : 25.03.2026 O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 25.09.2025, pertaining to the assessment year 2019-20. Printed from counselvise.com 2 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited 2. The brief facts of the case are that, the assessee company is engaged in the business of civil construction works filed its return of income for A.Y. 2019-20 on 05.10.2019 declaring the current year loss of Rs. 1,14,55,669/-. A search and seizure operation under Section 132 of the Income-tax Act, 1961 was carried out on DNC Group and in the case of M/s. Annai Infra Developers Ltd., on 01.11.2019. During the course of search and survey operation, it was found that, M/s. Annai Infra Developers Ltd., was involved in obtaining contracts from several infrastructure companies and subcontracting the same to others with a profit margin of 3-4%. It was also found that, no genuine supply of works/services were provided to the infrastructure company awarding the contract and this arrangement facilitated in siphoning off funds by the infrastructure company. The statement of Shri S. Ashok Kumar, Managing Director of M/s. Annai Infra Developers Ltd., was recorded on oath wherein he deposed that, no work was carried out by M/s. Annai Infra Developers Ltd., and he had stated that, it had only subcontracted all the contract works received from infrastructure companies on a profit margin of 3-4% without any verification of the work done. As per the details found, M/s. Patel KNR Heavy Printed from counselvise.com 3 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited Infrastructure Ltd., is one of the principal infrastructure companies and beneficiary of the subcontract works provided by M/s. Annai Infra Developers Ltd. 3. Consequent to search in the case of DNC Group, the assessment has been reopened and a show-cause notice under Section 148A(b) of the Act, dated 01.03.2023 was issued and served on the assessee. In response, the assessee vide letter dated 13.03.2023 submitted that, it had entered into a Service Concession Agreement with National Highways Authority of India (“NHAI”) for the design, construction, development, finance, operation and maintenance of Islam Nagar (KM 230.00) to Kadtal (KM 278.00) of Nagpur-Hyderabad Section on NH-7 in the State of Telangana. The assessee further submitted that, during the financial year 2018-19, the company received change of scope of bills for an amount of Rs. 43,34,911/- from NHAI which was executed by the subcontractor M/s. Patel KNR-JV on back-to-back basis. The assessee further claimed that, it has not received any subcontract work from M/s. Annai Infra Developers Ltd. The statement of M/s. Annai Infra Developers Ltd., was verified and an order under Section 148A(d) of the Act, was passed on 06.04.2023 holding it as a fit case for Printed from counselvise.com 4 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited issuance of notice under Section 148 of the Act, and a notice under Section 148 of the Act dated 06.04.2023 was issued. In response to the notice, the assessee furnished a return of income on 15.04.2023 declaring current year loss of Rs. 1,14,50,359/-. 4. The case was selected for scrutiny and during the course of assessment proceedings, the A.O. called upon the assessee to furnish relevant details of contracts awarded by NHAI and subcontract works given to M/s. Patel KNR-JV. In response, the assessee has filed complete details of work order issued by NHAI, subcontract works awarded to M/s. Patel KNR Heavy Infrastructure Ltd., consequent details submitted by JV along with the details submitted by third-party management consultancy. The A.O., after considering relevant submissions of the assessee and also taking note of statement of Shri S. Ashok Kumar, Managing Director of M/s. Annai Infra Developers Ltd., observed that, as per the information received, the assessee has not done any work and it is only an accommodation entry and hence, the expenditure of Rs. 46,81,600/- has been disallowed and added back to the returned income. Printed from counselvise.com 5 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited 5. Aggrieved with the assessment order, the assessee preferred an appeal before the Ld. CIT(A) and challenged the additions made by the A.O. towards disallowance of subcontract payment made to M/s. Patel KNR JV. The Ld. CIT(A), after considering the submissions of the assessee and also taking note of reasons given by the A.O., observed that, the assessee has failed to substantiate actual execution of work beyond self-serving invoices. Independent verification such as measurement sheets or certified site reports were not produced. The categorical statement of M/s. Annai Infra Developers Ltd., admitting non-execution of contracts, coupled with the absence of rebuttal evidence, outweighs the assessee’s claim. Therefore, the Ld. CIT(A) rejected the explanation of the assessee and sustained the addition made towards subcontract payment of Rs. 46,81,600/-. 6. Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal. 7. The learned counsel for the assessee, Shri Pankaj Sancheti, C.A. submitted that, the Ld. CIT(A) erred in sustaining addition made by the A.O. towards disallowance of subcontract works given to M/s. Printed from counselvise.com 6 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited Patel KNR JV as bogus in nature, even though the assessee company does not have any link with M/s. Annai Infra Developers Ltd., and has not executed any project for them. The learned counsel for the assessee further referring to certain additional evidences submitted that, M/s. Annai Infra Developers Ltd., has awarded subcontract works to M/s. Patel KNR JV and the assessee company does not have any link or connection with the above company. Further, the assessee company has also awarded subcontract works to M/s. Patel KNR JV with reference to different works on which the assessee has furnished all the details. The A.O., without appreciating the relevant facts, simply considering the amount of subcontract works awarded by M/s. Annai Infra Developers Ltd., to M/s. Patel KNR JV, has disallowed the amount and added back in the hands of the assessee even though the above work has not been executed by the assessee company. Therefore, he submitted that, the additions made by the A.O. should be deleted. 8. The learned Senior A.R. for the Revenue, Shri SV Siva Prasad, on the other hand, supporting the order of Ld. CIT(A), submitted that, there is a categorical admission from Shri S. Ashok Kumar, Managing Director of M/s. Annai Infra Developers Ltd., regarding Printed from counselvise.com 7 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited bogus nature of works contract and on the basis of his statement, the A.O. found that, the assessee company has carried out subcontract works for M/s. Annai Infra Developers Ltd., without actually carrying any work. Although the assessee company has filed various evidences, but going by the statement of Managing Director of M/s. Annai Infra Developers Ltd., there is no dispute with regard to the fact that, the above company has not carried out any work and has only siphoning of funds by awarding subcontract works to various parties. The A.O., after considering relevant facts, has rightly disallowed the amount and added back to the total income. Therefore, he submitted that, the order of the A.O. should be upheld. 9. We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. The assessee company engaged in the business of construction works has received work order from NHAI for development of National Highway – 7 in Nagpur-Hyderabad Section. In pursuance to the above work order, a modified work order has been issued with reference to construction of entry and exit lanes, providing toilets, hoardings, and dustbins at Rolmamda Toll Plaza on NH-44 under Swachh Bharat Mission for an additional contract value of Rs. Printed from counselvise.com 8 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited 43,34,911/-. The A.O. made addition of Rs. 46,81,600/- towards subcontract expenditure debited in the profit and loss account on the ground that, the assessee has received subcontract works from M/s. Annai Infra Developers Ltd., and the same is only an accommodation entry without carrying out any actual work. The learned counsel for the assessee has furnished relevant details, including the work order issued by M/s. Annai Infra Developers Ltd., to M/s. Patel KNR JV and the nature of work executed by them. The assessee has also furnished nature of work order received from NHAI and subcontract work given to M/s. Patel KNR JV. Upon perusal of relevant details, we find that, the assessee has received work order from NHAI for a different work, and the same has been subcontracted to M/s. Patel KNR JV, for which relevant supporting evidences, including certified bill from a third party, project management consultancy, has been submitted. The assessee company has also filed a work order issued by M/s. Annai Infra Developers Ltd. to M/s. Patel KNR JV. Upon perusal of relevant details, we find that, nature of work awarded by M/s. Annai Infra Developers Ltd., is altogether a different one and there is no one-to- one relationship between the work awarded by M/s. Annai Infra Printed from counselvise.com 9 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited Developers Ltd., to M/s. Patel KNR JV and the subcontract works given by the assessee to M/s. Patel KNR JV. Therefore, from the above, it is undisputedly clear that, the A.O. has made an addition only on the basis of statement of Shri S. Ashok Kumar, Managing Director of M/s. Annai Infra Developers Ltd., even though there is no business relationship between the assessee company and M/s. Annai Infra Developers Ltd., for the financial year 2018-19 relevant to assessment year 2019-20. Further, as per the statement of Shri Ashok Kumar, it is not discernible as to the bogus nature of work carried out by any of the parties, but what was emanating from the above statement is that, M/s. Annai Infra Developers Ltd., is receiving work and subcontracting the entire works on back-to-back basis after getting 3-4% of profit. Therefore, the conclusion drawn by the A.O. on the basis of statement of M/s. Annai Infra Developers Ltd., that the assessee company is also a beneficiary of accommodation entries is totally baseless, devoid of merit, and without any evidences. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of Ld. CIT(A) and direct the A.O. to delete the Printed from counselvise.com 10 ITA No.1998/Hyd/2025 Patel KNR Heavy Infrastructure Limited addition made towards subcontract works to M/s. Patel KNR JV for Rs.46,81,600/-. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Open Court on 25th March, 2026. Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- (मंजूिधथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 25.03.2026. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Patel KNR Heavy Infrastructures Limited, KNR House Phase I, Plot No.114, Jubilee Hills, S.O., Shaikpet, Hyderabad, Telangana – 500033. 2. रधजस्व/ The Revenue : The Assistant Commissioner of Income Tax, Circle 5(1), Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad Printed from counselvise.com TIRUPATI YAMINI NAGA MALLESWARI Digitally signed by TIRUPATI YAMINI NAGA MALLESWARI Date: 2026.03.27 19:38:47 +05'30' "