RADHAKISHAN BENIWAL,JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, JAIPUR, JAIPUR

ITA 695/JPR/2025

AI Insights

The case involves appeals by Radhakishan Beniwal against orders passed by the National Faceless Appeal Centre (NFAC) and the Assessing Officer (AO) under sections 147, 144, and 144B of the Income Tax Act, 1961, for the assessment years 2015-16 and 2016-17. The primary contention was regarding the addition of Rs. 6,26,68,011 as unexplained cash credit under section 68 of the Act, which the assessee argued was income from a genuine sub-contract awarded by Dineshchandra R Agarwal Infracon Pvt Ltd (DRAIPL). The Tribunal found that the CIT(A) had overstepped his jurisdiction by directing the AO to verify the documents, which was not permissible under section 251 of the Act, except in cases where the assessment was made under section 144.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775626 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 28-04-2025
• Other Referred Cases: UOI Vs. Ashish Agarwal, Hexaware Technologies Ltd., Sanjay Gandhi Memorial Trust, TKS Builders Pvt. Ltd. Vs. ITO, Talati and Talati LLP v. Office of Assistant Commissioner of Income Tax, Circle 4(1)(1). Ahmedabad
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GORAV AVASTHI
• Assessee Lawyers: P.C. PARWAL; MAHAVEER SHARMA
• Keywords: Set aside; Business income; Revenue expenditure; Business expenditure; Question of law; Unexplained cash credit; Commercial expediency; Capital expenditure; TDS; Search and seizure; Audit objection; FORM 26AS; Bogus
• Section: 147; 148; 144; 142(1); 132; 68; 90; 133(6); 139; 145; 37; 37(1); 194C; 260A

Judgement Text

"vk;djvihyh; vf/kdj.k] t;iqjU;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” 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;djvihy la-@ITA Nos. 694 & 695/JP/2025 fu/kZkj.ko\"kZ@Assessment Years : 2015-16 & 2016-17 Radhakishan Beniwal Ward No. 14, Behind Kishan Hostel Krishim Mandi Road, Nagarpalika Degana Goredi Chancha Nagaur cuke Vs. DCIT Cirecle-01, Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.:AGMPB3851A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri P. C. Parwal, CA & Shri Mahaveer Sharma, CA jktLodh vksjls@Revenue by: Shri Gorav Avasthi, JCIT lquokbZ dh rkjh[k@Date of Hearing : 21/07/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 10/09/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM Feeling dissatisfied with the order dated 17.02.2025 passed by the National Faceless Appeal Centre, Delhi [ for short NFAC/ CIT(A) ] for the assessment years 2015-16 & 2016-17 the above-named assessee preferred the present appeals. The said orders of the ld. CIT(A), arises as against the separate order dated 22.05.2023& 31.05.2023passed under Printed from counselvise.com 2 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal section 147r.w.s 144r.w.s 144Bof the Income Tax Act, 1961 [ for short Act ] by Assessment Unit, Income Tax Department [ for short AO ]. 2. Since the issue raised in both the appeals were identical and of the same assessee were heard together and are disposed of by a common order. 3. First, we take up the appeal of the assessee in ITA No. 694/JP/2025 where in the assessee has taken following grounds of appeal: 1. Ground Based on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to verify the claim of the assessee and the documents furnished without appreciating that as per section 251 of the Act, the Ld. CIT(A) has been granted the power to either confirm, reduce, enhance or annul the assessment and the power to set aside the assessment for making fresh assessment has been granted only where assessment is made under section 144 of the Act and therefore the order passed by the CIT(A) is in violation of section 251 of the Act. 2. Ground Based on facts and circumstances of the case and in law, the AO has erred in taxing amount of Rs 6,26,68,011 under section 68 of the Act as unexplained credits disregarding the various evidences filed by the Assessee proving that the sub-contract work was awarded and executed by the Assessee and the fact that Dineshchandra R Agarwal Infracon Pvt Ltd had deducted TDS under section 194C of the Act and the same is reflected in For 26AS of the Assessee and the Ld CIT(A) has erred in setting aside the issue for verification to the AO even when all documents are on record. 3. Ground Based on facts and circumstances of the case and in law, the AO has erred in taxing amount of Rs 6,26,68,011 under section 68 of the Act without appreciating that the said amount has already been credited to the profit and loss account on which tax has been paid by the Assessee therefore adding the same amount again has resulted in double addition which is grossly incorrect and therefore the Ld CIT(A) has erred in not deleting the addition made by the AO. Printed from counselvise.com 3 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 4. Ground The appellant craves to alter, amend and modify any ground of appeal. 5. Ground Necessary cost be awarded to the assessee. 4. Briefly, the fact as culled out from the records is that the assessee filed ITR u/s 139 on 29.09.2015 declaring business income of Rs. 1,29,27,430/-. Based on the search action on M/s. Dinesh R Agrawal Infracon Pvt Ltd (DRAIPL) the revenue was in possession of the information that the assessee benefited of the unaccounted money by way of booking bogus subcontracts expenses. Record reveals that the assessee received sub contract of Rs. 8,69,21,424/- from Dinesh R Agrawal Infracon Pvt Ltd during the year. The assessee failed to provide necessary supporting documents to establish that the transaction between the assessee and Dinesh R Agrawal Infracon Pvt. Ltd.are genuine during the course of proceedings of the order u/s. 148A(d) of the Act. Therefore, ld. AO noted that the income received from Dinesh R Agrawal Infracon Pvt Ltd. remained unexplained. Hence after complying the detailed procedure in the order of the Apex Court in the case of UOI Vs. Ashish Agarwal and instruction no. 1/2022 dated 11.05.2022 issued by the CBDT the notice u/s 148 was issued on 30.07.2022 to the assessee. Printed from counselvise.com 4 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal Record reveals that the assessee failed to furnish a valid return of income in response to the notice u/s. 148 of the Act. Ld. AO issued statutory notices as required and noted that as the assessee failed establish that the work was actually executed by the assessee. He also noted that the assessee failed to furnish a valid return in response to notice u/s. 148 of the Act. Therefore, the amount of Rs. 6,26,68,011/- received as sub-contract receipt from DRAIPL remained unexplained. So ld. AO presumed that the assessee has brought the income from the undisclosed sources to the books of account and accordingly ld. AO made an addition of Rs. 6,26,68,011/- in the hands of the assessee as per provision of section 68 of the Act. 5. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds raised by the assessee the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below: “6. Decision: 6.1 I have gone through the order passed by the AO, submissions of the appellant, remand report and rejoinder filed by the appellant. On going through the same, it is seen that the appellant had challenged the proceedings initiated u/s. 148 of the Act. The AO has relied upon the various case laws in his favour. In the remand report, the AO did not accept the submissions of the appellant in this regard and has relied upon the OM dated 20.02.2023 issued by CBDT wherein it has been clarified that even after insertion of Section 151A, the JAO has the jurisdiction to issue notice u/s.148of the Act. In support, the AO has also relied Printed from counselvise.com 5 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal upon the decision of Hon'ble Calcutta High Court in the case of Triton Overseas (P) Ltd. 6.2 In the rejoinder to the remand report, the appellant has relied upon the decision of Hon'ble Punjab And Haryana High Court in the case of Jatinder Singh Bhangu vs. UOI [CWP-15745-2024] dated 19.07.2024 wherein the Hon'ble Punjab and Haryana High Court referring to the Official Memorandum dated 20.02.2023 held that circulars, instructions and letters issued by Board or any other authority cannot override statutory provisions. The appellant also relied upon the decision of Telangana High Court in the case of Venkataramana Reddy Patioola [TS-557-HC-2024(TEL)] dated 24 July 2024 and also the decision of Hon'ble Bombay High Court in the case of Kairos Properties Pvt. Ltd. [TS-576- HC-2024 (BOM)] dated 05.08.2024 and hence submitted that notice u/s.148 issued by the JAO is illegal. I have gone through the case laws relied by the AO and the appellant. 6.3 It is seen that the Hon'ble ITAT has vehemently relied upon the decision of Hon'ble Bombay High Court in the case of Hexaware Technologies Ltd., however, the matter is sub-judice and the appeal has been preferred against the order of the Hon'ble Bombay High Court before Hon'ble Supreme Court. In this regard, it is seen that there are plethora of judgments wherein the Courts/ITATs held that the issuance of notice u/s.148 by JAO is legal and valid. In the case of TKS Builders Pvt. Ltd. Vs. ITO, Ward-25(3), New Delhi, the Hon'ble Delhi High Court has held as under:- “83. In Sanjay Gandhi Memorial Trust v. Commissioner of Income Tax (Exemption)22, the Court directly addressed whether the JAO could exercise assessment authority alongside the faceless assessment system. The Court concluded that, while the faceless system centralizes case handling through the NFAC, this framework does not completely replace or nullify the JAO's role. The CBDT notifications further affirm this shared responsibility, specifying that the NFAC and the JAO hold concurrent jurisdiction, thereby allowing the faceless system to conduct assessments without stripping the JAO of its foundational authority. 84. In this way, the JAO's retention of original jurisdiction provides a critical balance, ensuring that human oversight remains available within the faceless assessment structure when needed. Importantly, the Court highlighted that the JAO's authority is not merely residual but an active, complementary role that reinforces the flexibility of the assessment system. For instance, the NFAC retains the capacity to transfer cases back to the JAO during assessment proceedings if circumstances require a return to jurisdictional assessment. This adaptability affirms that faceless and jurisdictional assessments are not mutually exclusive; instead, they Printed from counselvise.com 6 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal are interwoven aspects of the Act's broader design, intended to operate in tandem to achieve fairness and procedural integrity. 85. The issue of the JAO having concurrent jurisdiction arose directly for the consideration of this Court in Sanjay Gandhi Memorial Trust. One of the arguments which appears to have been addressed 22 2023 SCC OnLine Del 3161 before the Court in that case was of the JAO having no authority or jurisdiction to assess. Dealing with the aforesaid, our Court held:- -48. This Court is of the view that though in the year 2019, the concept of e- assessment and in 2020, the concept of faceless assessment were introduced, yet the jurisdictional assessing officer continues to exercise concurrent jurisdiction with faceless assessing officer. In fact, pursuant to exercise of power under Section 120(5) of the Act which empowers CBDT to confer concurrent jurisdiction on two or more assessing officers for proper management of the work, the CBDT has vide Notification No. 64/2020 dated 13-8-2020 conferred power upon the income tax authorities of the National e- Assessment Centre to exercise the power and function of assessment -concurrentlyll while the original jurisdiction continues with the jurisdictional assessing officer. The relevant portion of the said notification is reproduced hereinbelow: -S.O. 2756(E). In pursuance of the powers conferred by subsections (1), (2) and (5) of Section 120 of the Income Tax Act, 1961 (43 of 1961) (hereinafter referred to as \"the said Act\"), the CBDT hereby directs that the Income Tax Authorities of the National e-Assessment Centre (hereinafter referred to as \"the NeAC\") specified in column (2) of the Schedule below, having its headquarters at the place mentioned in column (3) of the said Schedule, shall exercise the powers and functions of assessing officer concurrently, to facilitate the conduct of faceless assessment proceedings).... 49. It is clarified in the e-assessment and faceless assessment scheme that once a case is selected for scrutiny, for the limited purpose of passing assessment order for a particular assessment year, the case is assigned to National e-Assessment Centre and after assessment, the electronic records of the case are to be transferred back to the jurisdictional assessing officer. 50. Further, the E-assessment Scheme, 2019 and faceless assessment scheme issued vide two notifications each dated 12-9-2019 and 13-8-2020 under Sections 143(3-A) and (3-B) of the Act clearly stipulate that the provision of Section 127 of the Act shall apply subject to exceptions, modifications and adaptations as stipulated therein. In other words, if the faceless assessment scheme has not modified Section 127 of the Act, the Printed from counselvise.com 7 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal powers under the said section would continue to apply to all cases in an unmodified manner. 51. Clause (xxi) of the Notification Nos. 61/2019 and 62/2019 dated 12-9- 2019 issued in exercise of powers under Sections 143(3-A) and (3-B) of the Act in order to give effect to the e-assessment scheme authorises the National e-Assessment Centre to transfer the case of the assessee at any stage of the assessment (i.e. only when the assessment proceeding is pending before the National e-Assessment Centre) to the assessing officer having jurisdiction over such case, as the scope of power and functions of National e-Assessment Centre is limited to facilitating the conduct of e- assessment. 52. Consequently, this Court is of the view that the two Notifications dated 12-9-2019 enlarge and supplement the power of transfer by authorising the National e-Assessment Centre to transfer at any stage of assessment the case of the assessee to the assessing officer having jurisdiction over such case le. from faceless assessing officer to jurisdictional assessing officer (an assessing officer always having concurrent jurisdiction). 53. To the same effect are the Notifications dated 13-8-2020, which clarify, \"The provisions of... Section 127 of the Act shall apply to the assessment made in accordance the said Scheme subject to the following exceptions, modifications and adaptations Clause (2) of the Notification Nos. 60 and 61 of 2020 dated 13-8-2020 enable the Principal Chief Commissioner or Principal Director General in charge of National e-Assessment Centre, at any stage of the assessment Le. during assessment, to send back the case to the assessing officer having jurisdiction over such case, with prior approval of the Board. Clause (2) of the Scheme only authorises a transfer back to the jurisdictional assessing officer holding original jurisdiction, which he never loses as it is only the function of assessment that is to be carried out by the faceless assessing officer having concurrent jurisdiction. Consequently, clause (2) of the Scheme only retransfers the function of assessment to the jurisdictional assessing officer holding concurrent jurisdiction. Further, the said clause confers power of transfer upon Principal Chief Commissioner or Principal Director General of National e- Assessment Centre and not upon any other Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. As is evident from the above, the Court came to the firm conclusion that irrespective of the system of faceless assessment that had come to be introduced and adopted, it would be wholly incorrect to hold or construe the provisions of the Act as denuding the JAO of the authority to undertake an assessment or of the Printed from counselvise.com 8 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal said authority being completely deprived of authority and jurisdiction. The judgment in Sanjay Gandhi Memorial Trust is thus a resounding answer to the challenge as raised by the writ petitioners. That decision reinforces our conclusion of the two permissible modes of assessment being complimentary and the Act envisaging a coexistence of the two modes. 86. This quite apart from we having discerned the various sources of information which the JAO stands independently enabled to access and which could constitute material justifying initiation of reassessment. If the position as canvassed by the writ petitioners were to be accepted, those provisions would be rendered a complete dead letter and the information so gathered becoming worthless and incapable of being acted upon. This since, as we have found, such information is firstly provided to the JAO and it is that authority which is statutorily obliged to assess and evaluate the same in the first instance. 87. Within the framework of the faceless assessment system, the JAO retains powers that do not conflict with, but rather complement, the objectives of neutrality and efficiency. The faceless assessment scheme centralizes processes under the Faceless Assessing Officer (FAO) to reduce direct interaction. However, this structure does not diminish the JAO's authority. Instead, the JAO's retained jurisdiction is vital for ensuring continuity and accountability, acting as a complementary element to the faceless assessment framework. Even beyond this concurrent jurisdiction, the JAO independently wields powers under various provisions, is granted access to distinct sources of information that may substantiate grounds for reassessment. Accepting the position advocated by the petitioners-that the JAO's role is entirely overridden by the faceless system-would effectively nullify these provisions, rendering such information inaccessible and unactionable. The Act specifically channels this information to the JAO, who is then statutorily responsible for the initial assessment and evaluation of this data. 88. Therefore, the JAO's powers should be understood as integral and not in conflict with faceless assessment. Rather, it represents a foundational jurisdictional safeguard, enabling the JAO to initiate reassessment based on independent, credible sources of information. This concurrent authority of the JAO reinforces the integrity and adaptability of the faceless system, ensuring that both centralized and jurisdictional assessments operate cohesively within the larger statutory framework. 89. Regard must also be had to the fact that an Assessing Unit of the NFAC derives no authority or jurisdiction till such time as a case is randomly allocated to it and which triggers the assessment process in accordance with the procedure prescribed by Section 1448. The evaluation of data and Information would indubitably precede the actual process of assessment. If the interpretation which is advocated by the writ petitioners were to be countenanced, the appraisal and Printed from counselvise.com 9 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal analysis of information and data functions which the Act entrusts upon the JAO would be rendered wholly unworkable and clearly be contrary to the purpose and intent of the assessment power as constructed under the Act. 90. The notion of entirely ousting the JAO from the assessment process is both impractical and misaligned with the objectives of the faceless assessment system. The faceless framework was established to reduce direct human interaction in assessments thereby enhancing objectivity, transparency, and efficiency. However, eliminating the JAO's role altogether would not only fail to further these goals but could actually compromise the system's functionality and flexibility. The JAO's retained powers, particularly in accessing and evaluating specific information sources for reassessment, play a critical role in supplementing the centralized, algorithm-driven processes of faceless assessment. By allowing the JAO to operate in conjunction with the FAO, the Act ensures that both roles work complementarily to deliver comprehensive and balanced assessments. Far from conflicting with the faceless system, the JAO's role enhances it, ensuring that assessments remain grounded in thorough investigation. 91. The decisions of various High Courts which have taken a contrary view, have proceeded on the basis that consequent to faceless assessment coming into force by virtue of Section 1448, the JAO stands completely deprived of jurisdiction. This becomes apparent from the conclusions which the Telangana High Court came to record in Kankanala Ravindra Reddy when it held that after the introduction of the scheme on 29 March 2022, it becomes mandatory for the Revenue to conduct proceedings of reassessment in a faceless manner. It was this line of reasoning which appears to have been adopted by High Courts in the various decisions cited for our consideration by Mr. Goel. 92. The principal judgment which most of the High Courts have chosen to follow and reiterate is of Hexaware Technologies. In Hexaware Technologies, a specific issue with respect to the validity of the notice came to be raised with it being argued that once the scheme of faceless reassessment had come to be promulgated, the JAO would stand denuded of jurisdiction. It must at the outset be noted that apart from the Faceless E-Assessment Scheme 2022 itself and the instructions which were provided to counsel appearing for the Revenue, most of the High Courts do not appear to have had the benefit of reviewing the copious material which Mr. Chawla has so painstakingly assimilated and placed for our consideration. They also do not appear to have had the advantage of a principled stand of the respondents having been placed on the record of those proceedings. 93. In Hexaware Technologies, the Bombay High Court ultimately came to conclude that there could be no question of a concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148. From a reading of the Printed from counselvise.com 10 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal record, it is unclear whether the notifications conferring jurisdiction on authorities of the NFAC for the purposes of conducting faceless assessment was placed before the High Court. At least the decision makes no reference to the notification of 13 August 2020 which has been produced in these proceedings and which in clear and unambiguous terms declares that the officers empowered to conduct faceless assessment were being conferred concurrent powers and functions of the AO. We, with respect, also find ourselves unable to concur with Hexaware Technologies bearing in mind the various sources of information and material which may assist a JAO in forming an opinion as to whether income had escaped assessment and have been noticed herein above. Those aspects clearly do not appear to have been either taken into consideration or engaged with by the High Court in Hexaware Technologies. The view expressed in Hexaware Technologies then came to be reiterated by the Bombay High Court in Kairos Properties. This decision too fails to advert or allude to the notifications in terms of which authorities forming part of the various assessing units of NFAC were conferred concurrent jurisdiction. 94. The High Court of Gauhati in Ram Narayan Sah has essentially followed the view taken by the Bombay High Court in Hexaware Technologies. Although the decision of our Court in Sanjay Gandhi Memorial Trust appears to have been cited, the judgment neither enters any reservation nor does it record any reasons which may have assisted us in discerning what weighed with that High Court to brush aside the aspect of concurrent jurisdiction. In Jatinder Singh Bhangu, the Punjab and Haryana High Court too does not appear to have had the advantage of reviewing and analysing the material that has been placed by the respondents in these proceedings. Here too, the Court was constrained to proceed merely on the basis of the instructions and letters issued to counsels appearing for the Revenue. It was perhaps in light of the state of the record as it existed that those High Courts ultimately observed that in the absence of any ambiguity in the language of the scheme, instructions and circulars can neither supplement nor supplant the statutory provisions. 95. The comprehensive material presented on the record by the respondents has afforded a holistic understanding of the nuanced aspects of the faceless assessment scheme enabling us to appreciate its intent and purpose in greater depth. Unlike prior cases where certain High Courts, including in Hexaware Technologies, were not provided with the full spectrum of relevant notifications and contextual information, the extensive documentation in this matter has helped clarify ambiguities in both law and fact. This record has allowed for a deeper analysis, addressing key points left unexamined in previous judgments, and has illuminated the legislative and procedural intentions behind the faceless Printed from counselvise.com 11 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal assessment scheme, particularly the concurrent jurisdiction between the JAO and FAO. 96. Although we had reserved judgment on this batch of writ petitions on 04 October 2024, we find that in a recent decision rendered by the Gujarat High Court on 01 October 2024, a view has been expressed which appears to be in tune with the conclusions which we have reached. We thus deem it apposite to refer to the decision of that High Court in Talati and Talati LLP v. Office of Assistant Commissioner of Income Tax, Circle 4(1)(1). Ahmedabad23. 97. The solitary question which arose for consideration in the aforesaid matter was whether the Section 148 notice was rendered invalid on the ground of having been issued by the JAO. In a judgment penned by the leamed Chief Justice of that High Court in Talati and Talati LLP, it was held as follows- -(22) From a further reading of Explanation 1 and Explanation 2 attached to Section 148, it is clear that the provisions Under Section 148 for issuance of notice before making assessment re-assessment or re-computation under Section 147 operate in two different ways. For the purpose of Section 148, where Section 148A is applicable, Explanation 1 provides: xxxxx xxxx xxxxx (23) The provisions contained in Explanation 1 shows that the information with the Assessing Officer for the purpose of Section 148, which suggests that the income chargeable to tax has escaped assessment under the Explanation would mean: (i) any information in the case of the assessee, for the relevant assessment year, in accordance with the risk management strategy formulated by the Board from time to time: or (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act, of 2024: GUJHC: 54567-DB (iii) any information received under an agreement referred to in Section 90 or Section 904 of the Act or (iv) any information made available to the Assessing Officer under the scheme notified under Section 135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court. On the contrary, Explanation 2 which deals with the information received during search and seizure operations under Section 132 requires fulfillment of pre- requisites conditions. noted hereinbefore, in the submission of the learned counsel appearing for the Revenue Printed from counselvise.com 12 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal (24) The concept of Risk Management Strategy formulated by the Board is incorporated in Clause (i) of Explanation 1, as also specified in Clause 3 of the notification dated 29.03.2022 issued by the Central Government in accordance with the provisions of Explanation 1 clause (i) to Section 148, which is not applicable in the case of information received during the course of search and seizure under Section 132. (25) From the language employed in the Explanation 1 and Explanation 2 to Section 148 of the Act' 1961, we reach at an opinion that the method of automated allocation, le for random allocation of cases through algorithm, or by using suitable technological tools. including artificial intelligence and machine learning, in accordance with risk management strategy formulated by the Board, as referred to in Explanation 1 clause (i) to Section 148 of the Act, for issuance of notice under Section 148 in a faceless manner, as per the scheme framed vide notification dated 29.03.2022, cannot be applied to the case of Search and Seizure under Section 132, where the Jurisdictional Assessing Officer (JAD) is required to record his satisfaction on the basis of the maternal for affirmation of opinion in an honest and bona fide manner. (26) We find substance in the submission of the learned counsel for the Revenue that recording of satisfaction by the Assessing Officer on a perusal of the information received by him as a result of search and seizure operation. under Section 132 of the Income Tax Act 1961. requires application of human mind, inasmuch as, reasons affirmed on the part of the Satisfaction Note may also become subject matter of scrutiny by the Court in a case of challenge, where the Court in exercise of power of judicial review may examine as to whether they are actuated by mala fides or passed on extraneous or irrelevant considerations. (27) The decision of the Division Bench of the Bombay High Court in the case of Hexaware Technologies Ltd. (supra) has been rendered in a case, which falls within the arena of Explanation 1 to Section 148 and not where Explanation 2 to Section 148 of the Income Tax Act 1961, would be attracted (28) From the above, by reading all the relevant provisions of the Income Tax Act 1961 as also the notification dated 29.03.2022 issued by the Central Government framing scheme for \"E- Assessment of Income Escaping Assessment under sub- sections (1) and (2) of Section 151 A of the Act 1961, we reach at an irresistible conclusion that the challenge to the notice under Section 148 dated 22.03.2024 for A.Y. 2021-2022 on the sole premise that the said notice could have been issued only through automated allocation in faceless manner and not by Jurisdictional Assessing Officer (JAO), cannot be sustained. 98. Proceeding further to notice the scheme of faceless reassessment itself, the High Court in Talati and Talati LLP further observed:- Printed from counselvise.com 13 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal -(30) Moreover, Section 151A contemplates framing of the scheme by the Central Government by notification in the official Gazette, even for the purpose of issuance of notice under Section 148 in the case of re-assessment or sanction for issue of such notice under Section 151, with the aim to impart greater efficiency, transparency and accountability by eliminating the interface between the income tax authority and the assessee or any other person to the extent technologically feasible. (31) The feasibility of implying technology for the process, therefore, would be relevant. There may be a situation, where a scheme may be framed by the Central Government for issuance of the notice under Section 148 even in the case of Search and Seizure under Section 132 of the Act 1961, so as to meet out the expectations of the legislature under Section 151A, to impart greater efficiency, transparency and accountability by applying artificial intelligence, technological innovations, etc., but as of now, from a careful reading of the notification dated 29.03.2022, along with the statutory provisions, we find that the aforesaid notification does not cover a case where notice under Section 148 is issued by the Jurisdictional Assessing Officer (JAO) the information received by him in the matter of Search and Seizure under Section 132 of the Act 1961, or requisitioned under Section 132A.// 99. Returning then to the Faceless Reassessment Scheme 2022 itself, we find sufficient merit in the interpretation of its clauses as has been commended for our consideration by the respondents. Clause 3 of the said scheme provides that assessment, reassessment or recomputation under Section 147 of the Act as well as issuance of notice under Section 148 would be through automated allocation in accordance with the risk management strategy and in a faceless manner. The respondents rightly draw our attention to the usage of punctuation at various places in Clause 3. A careful reading of that clause shows that the draftsman has used a comma immediately after the phrase \"shall be through automated allocation\". Yet another comma appears after the phrase \"for issuance of notice\". It thus appears to have been the clear intent of the author to separate and segregate the phases of initiation of action in accordance with RMS, the formation of opinion whether circumstances warrant action under Section 148 of the Act being undertaken by issuance of notice and the actual undertaking of assessment itself. 100. Beyond the specific use of punctuation within Clause 3, a comprehensive reading of the Faceless Reassessment Scheme 2022, supported by the extensive material presented by the respondents, bolsters the clear intent underlying each phase of the faceless assessment process// 101. As we had noticed in the preceding parts of this decision, the RMS and the Insight Portal pushes information to the JAO and is principally not concerned with Printed from counselvise.com 14 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal faceless assessment at all. The RMS essentially enables the JAO to firstly examine the veracity of disclosures made and examine the return against various parameters and information which has been collated by the Directorate of Systems. It thus provides the JAO with an insight in respect of various transactions to which the assessee may be connected as well as data pertaining to that assessee which has otherwise been aggregated and mapped on the basis of material existing on the system of the respondents. The respondents would, therefore, appear to be correct in their submission that when material comes to be placed in the hands of the JAO by the RMS, it would consequently be entitled to initiate the process of reassessment by following the procedure prescribed under Section 148A if after consideration of the objections that are preferred, it stands firm in its opinion that income was likely to have escaped assessment, it would transmit the relevant record to the NFAC. It is at that stage and on receipt of the said material by NFAC that the concepts of automated allocation and faceless distribution would come into play. The actual assessment would thus be conducted in a faceless manner and in accordance with an allocation that the NFAC would make. This, in our considered opinion, would be the only legally sustainable construction liable to be accorded to the scheme. Our conclusion would thus strike a harmonious balance between the evaluation of information made available to an AO, the preliminary consideration of information for the purposes of formation of opinion and its ultimate assessment in a faceless manner. 102. We are also, in this regard, guided by the principles of beneficial construction and thus avoiding an interpretation that would render portions of the Act or the Faceless Assessment Scheme superfluous or ineffective should be avoided//. To assert that the JAO's powers become redundant under the faceless assessment framework would conflict with beneficial construction, as it would undermine provisions specifically established to support comprehensive data analysis and informed decision-making, such as the JAO's access to RMS and Insight Portal information. 103. We are fully cognizant of the contrarian view which was expressed in this respect in Hexaware Technologies and which stands reflected in para 36 of the report which has been extracted hereinabove. However, for reasons assigned in the preceding parts of this decision, we find ourselves unable to concur with the interpretation accorded by the Bombay High Court upon Clause 3 of the Faceless Reassessment Scheme 2022. As was noted by us earlier, Clause 3 clearly contemplates the initial enquiry and formation of opinion to reassess being part of one defined process followed by actual assessment in a faceless manner. It thus divides the process of reassessment into two stages and when viewed in that light Printed from counselvise.com 15 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal it is manifest that it strikes a just balance between the obligation of the JAO to scrutinize information and the conduct of assessment itself through a faceless allocation. The distribution of functions between the JAO and NFAC is complimentary and concurrent as contemplated under the various schemes and the statutory provisions. This balanced distribution underscores the legislative intent to create a seamless integration of traditional and faceless assessment mechanisms within a unified statutory framework This we so hold and observe since we have, principally, been unable to countenance a situation where the JAO stands completely deprived of the jurisdiction to evaluate data and material that may be placed in its hands. 104. We, accordingly and for all the aforesaid reasons find ourselves unable to sustain the challenge as addressed. The contention that the impugned notices are liable be quashed merely on the ground of the same having been issued by the JAO is thus negated. 6.4 In view of the above facts and circumstances and various judicial pronouncements, I am of the view that the JAO has the jurisdiction to issue notice u/s.148 of the Act. Therefore, ground of appeal No.1, regarding changeling the validity of notice issued u/s.148, is hereby dismissed. 6.5 In the grounds of appeal No.2 & 3, the appellant has contended that the AO has wrongly made the addition of Rs.6,26,68,011/- u/s.68 of the Act as unexplained credits. 6.6 The return of income for AY 2015-16 was filed by assessee on29.09.2015 declaring income of Rs 1,29,27,430/-. There was an information available with the department revealed the appellant has received sub contract from M/s Dineshchandra R Agarwal Infracon Pvt Ltd during the financial year 2014-15 relevant to the assessment year 2015-16. Further, the appellant was one of the beneficiaries who have received bogus sub contract of Rs.8,69,21,424/- from M/s. Dineshchandra R Agrawal Infracon Pvt. Ltd. during the year under consideration. Also, the appellant during the course of proceedings of the order under section 148A(d) of the Income Tax Act, 1961 failed to provide necessary supporting documents to establish that the transaction between the appellant and M/s Dineshchandra R Agarwal Infracon Pvt Ltd are genuine. Therefore the subcontract receipts from DRAIPL remained unexplained. Hence, after complying the detailed procedure in the order of the Honourable Supreme Court in the case of Union of India vs. Ashish Agarwal and instruction No. 01/2022 dated 11.05.2022 of the Central Board of Direct Taxes (CBDT), the AO issued notice under section 148 of the Income Tax Act, 1961 on 30/07/2022. Thereafter, the AO issued show cause notice u/s.142(1) of the Act to the appellant to furnish the submissions. In response, the appellant made the partial submissions. Printed from counselvise.com 16 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 6.7 On perusal of the submissions, the AO noticed that instead of the sub contract agreement the appellant furnished the letter sent by the appellant to the DRAIPL expressing its interest to do the portion of the project as sub contractor with the approval of NHAI. However, on agreement the acceptance of the parties, stamps are not on the document, hence AO did not accept the same as a sub-contract agreement. 6.8 On perusal of the document submitted by the assessee as 'approval letter of NHAI', the AO noticed that the Project Director of NHAI has only forwarded the proposal for approval of sub-contracting work to the Team Leader, M/s. Theme Engineering Services Pvt. Ltd. However, in the absence of approval from NHAI, it is not possible to presume the work has been executed by the appellant. 6.9 Further, the document submitted as 'VAT exemption certificate and VAT order by the appellant, it was found that the exemption was granted to DRAIPL and not to the appellant. Hence the document submitted as 'VAT exemption certificate and VAT order by the appellant cannot be considered an evidence for the execution of contract work. 6.10. In the assessment order, the AO mentioned that the appellant was requested to furnish specific details vide notice under section 142(1) of the Act. However, the appellant failed to furnish the relevant contract agreement with M/s Dineshchandra R Agarwal Infracon Pvt Ltd., income received in connection with the execution of work as per the agreement with supporting documentary evidences and the genuineness of the transaction of the appellant with M/s Dineshchandra R Agarwal Infracon Pvt Ltd. The appellant has furnished only copy of the ledger account of DRAIPL maintained in the books of the appellant and not ledger confirmation account. The appellant also failed to furnish copy of audited financial statements, however, the appellant furnished copy of profit and loss account without any signature and seal of the tax auditor is affixed. 6.11 In view of the above, the AO held that the appellant failed to establish that the wok was actually executed by the it and has also failed to furnish a valid return of income in response to the notice under section 148 of the Act. Therefore, the amount of Rs.6,26,68,011/- received as sub contract receipts from DRAIPL remained unexplained and hence the amount received Rs.6,26,68,011/- added to the total income of the appellant as unexplained credits in the books of account under section 68 of the Income Tax Act by the AO. 6.12 Now, the appellate proceedings, the appellant has submitted as under: 17. Thereafter, a show cause notice dated 9 May 2023 (PB 96-102) was issued to the Appellant against which no reply was filed. Rebuttal of the arguments basis which the FAO made addition is as under: Arguments by FAO Rebuttal by Appellant The sub contract agreement entered The letter dated 7 August 2014 Printed from counselvise.com 17 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal between the Appellant and the DRAIPL is not acceptable as the acceptance of the parties, stamp etc are not on the document executed between the Appellant and DRAIPL is duly, signed by the Appellant at all the pages and signed by DRAIPL on the last page. Thus, the observation of the FAO that the agreement is not signed is incorrect. Approval letter of NHAI to appoint the Appellant as a subcontractor is not available. Approval was granted by NHAI to DRAIPL to sub-contract work to the Appellant is enclosed at PB-103 The Appellant has failed to furnish the relevant contract agreement with DRAIPL, income received in connection with the execution of work as per the agreement with supporting documentary evidences and the genuineness of the transaction Relevant contract with DRAIPL was furnished. The income earned has already been offered to tax. The Appellant has failed to furnish copy of audited financial statements and has only furnished copy of profit and loss account and no signature and seal of the tax auditor is affixed. Audited financial statements of the appellant are enclosed at PB 104-146. 18. Basis the above documents, it is evident that the Appellant is an approved sub-contractor of NHAI, the receipts from DRAIPL has already been offered to tax, the Appellant has actually executed the work and therefore no addition can be made. 6.13 The appellant also submitted that during the year, it raised invoices of Rs.6,26,68,011/- on DRAIPL against which payment received in bank account of the appellant was Rs.6,20,41,331/- and TDS of Rs.6,26,680/- was deducted which is reflected in Form 26AS of the appellant. Further, addition of Rs.6,26,68,011/- has resulted in double addition as the appellant has already included the said income in its profit and loss account and paid taxes on it and same cannot be added under section 68 of the Act. 6.14 In view of the above facts and circumstances, the AO is directed to verify the claim of appellant and the documents furnished by the appellant as mentioned above in para 6.12 and delete the addition made u/s.68 of the Act if the same are found to be correct, after due verification and as per law. Accordingly, grounds of appeal No.2 and 3 are allowed. 7. In the result, the appeal of the appellant is partly allowed.” Printed from counselvise.com 18 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 6. Aggrieved with the above finding so recorded in the order of the ld. CIT(A), the assessee preferred the present appeal. To support the grounds so raised by the assessee, ld. AR of the assessee, has filed a detailed written submissions which reads as follows :- “Ground No 1: Based on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to verify the claim of the assessee and the documents furnished without appreciating that as per section 251 of the Act, the Ld. CIT(A) has been granted the power to either confirm, reduce, enhance or annul the assessment and the power to set aside the assessment for making fresh assessment has been granted only where assessment is made under section 144 of the Act and therefore the order passed by the CIT(A) is in violation of section 251 of the Act. Facts:- 1. The Appellant, an individual, filed return of income (“RoI”) declaring a total income of Rs 1,29,27,430 for the subject AY (PB 1).Re-assessment order under section 147 r.w.s 144B of the Act dated 22 May 2023 was passed by Ld. Faceless Assessing Office (“Ld. FAO”) assessing total income at Rs 7,55,95,441 by making the following addition: • Unexplained cash credits under section 68 of Act of Rs 6,26,68,011 2. Against the assessment order, the Appellant filed an appeal before the National Faceless Appeal Centre [“CIT(A)”]. The CIT(A) vide order dated 17 February 2025, while allowing the appeal of the Appellant, at paras 6.14 of its order, directed the Ld. Jurisdictional Assessing Officer (“Ld. JAO”) to verify the claim of the Appellant and documents furnished and delete the addition made under section 68 of the Act if the same are found to be correct, after due verification and as per law. Relevant extracts of the decision are as under: “6.14 In view of the above facts and circumstances, the AO is directed to verify the claim of appellant and the documents furnished by the appellant as mentioned above in para 6.12 and delete the addition made u/s.68 of the Act if the same are found to be correct, after due verification and as per law. Accordingly, grounds of appeal No.2 and 3 are allowed.” Submission:- 3. The action of the Ld. CIT(A) by directing the Ld. JAO to verify the claim Printed from counselvise.com 19 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal and the documents furnished by the Appellant is against the powers granted under section 251 of the Act to the CIT(A). Relevant extracts are as under: “Powers of the [Joint Commissioner (Appeals) or the] Commissioner (Appeals). 251. (1)In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: [Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;] (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit.” 4. As evident above, the CIT(A) has the power to confirm, reduce, enhance or annul the assessment where the appeal is against the order of assessment. However, only in case where the assessment order is passed under section 144 of the Act, the CIT(A) may set aside the assessment order and refer the matter back to the Assessing Officer and that too for making a fresh assessment. 5. The assessment order dated 31 May 2023 was passed under section 147 r.w.s. 144B of the Act.Further, at para 4.4.1 of the assessment order, it is mentioned that as the Appellant has not furnished a valid return of income, the assessment is proposed to be completed under section 144 of the Act, however the same was done under section 147 r.w.s. 144B of the Act.Further, the Ld. CIT(A) had also obtained a remand report dated 16 August 2024 (PB 177-178) and therefore directing the JAO to verify the claim or documents filed by the Appellant is in violation of section 251 of the Act. The Ld. CIT(A) should have confirmed, reduced, enhanced or annulled the assessment order but should have not set aside the order for verification to the AO. 6. Reliance in this regard is placed on following decisions: • Arun Kumar Bose vs ITO [2024] 158 taxmann.com 282 (Calcutta) (PB 161-164): The Hon’ble Calcutta High Court held as under: 3.The short question involved in this appeal is whether the Commissioner of Income-tax (Appeals), Siliguri CIT(A), after having fully agreed with the Printed from counselvise.com 20 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal assessee and reached a conclusion that the assessing officer committed an error in making certain additions, could have remanded the matter back to the assessing officer for certain verifications. Section 251 of the Act deals with the powers of the Commissioner of Appeals. Sub-Section (1) states that in disposing of an appeal the Commissioner (Appeals) shall have the powers as enumerated in clauses (a), (aa), (b), (c). In so far as the case on hand, clause (a) of section 251(1) of the Act should be relevant, which states in an appeal against the order of assessment the Commissioner (Appeals) may confirm, reduce, enhance or annul the assessment. On a reading of the Finance Act, 2001 (Circular No. 14 of2001) the Commissioner of Appeals had no power to remand the matter back to the assessing officer for fresh assessment in accordance with the direction given by the Commissioner (Appeals) after making such further enquiry as may be necessary. Though such power was conferred on the Commissioner (Appeals), the said provision stood omitted by the Finance Act, 2001. In the explanatory notes on the provisions relating to direct taxes, the powers of the Commissioner (Appeals) has been dealt with in paragraph 78.1 which reads as follows :- \"78.1 Under the existing provision contained in sub-section (1) of section 251 of the Income-tax Act, inan appeal filed before a Commissioner (Appeals) against an order of assessment, the Commissioner(Appeals) may confirm, reduce, enhance or annul the assessment, or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by him, after making such further enquiry as may be necessary. With a view to help bringing about an early finalisation to the assessment and to avoid prolonging the process of litigation, the Act has amended section 251 so as to provide that, in an appeal filed before the Commissioner(Appeals), against an order of assessment, the Commissioner (Appeals) may not set aside the assessment and refer the case back to the Assessing Officer for making fresh assessment. The Commissioner(Appeals) continues to have the powers under section 250 of making further inquiry, or directing the Assessing Officer to make further inquiry and report the result of the same to him, which can be made use of in appeals needing further enquiry or gathering of additional facts or evidence. 78.2 This amendment will take effect from 1st June, 2001.\" 4. In the light of the above statutory embargo, the Commissioner could not have remanded the matter back to the assessing office after having decided the case in favour of the assessee in its entirety. ………. 6. We have heard the learned Advocate for the appellant on the above submission. Though in the order passed by the CIT(A), the word \"prima facie\" has been used, from a cumulative reading of an order passed by the CIT(A) we find that the case has been discussed on merits and thereafter a finding has been recorded that the assessing officer was not justified in making the addition Printed from counselvise.com 21 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal and there was a positive direction to delete the addition. If such is the finding, mere use of the word \"prima facie\" could not make prima facie view as the CIT(A) has discussed the matter elaborately taking into the consideration the factual position. Before the learned Tribunal, the assessee had specifically raised the ground that the CIT(A) exceeded the limits of powers statutorily bestowed as per Section 251(1)(a) of the Act and grossly erred in law in restoring the case to the assessing officer for action in terms of the order dated 23-11-2011 passed by the CIT(A). Though, such a specific ground raised by the appellant before the Tribunal and noted by the Tribunal in paragraph 3 of the impugned order, this aspect has not been dealt with by the learned Tribunal. Thus, in our view not only the CIT(A) committed an error of law by remanding the matter to the assessing officer for a fresh consideration after having held in favour of the assessee, the Tribunal also did not deal with the said issue. In the light of the statutory embargo, the order of remand passed by the CIT(A) is not tenable in law and consequently, the same required to be set aside as well as the order passed by the learned Tribunal.” (emphasis supplied) • Sapphire Land Development (P) Ltd vs DCIT [2023] 147 taxmann.com 50 (Mumbai - Trib.) (PB 165-176): The Hon’ble Mumbai ITAT has held as under: 14. It is an established position of law about the powers of the Ld. CIT (A) as discussed (Supra), based on above, Ld. CIT (A) can confirm, reduce, enhance or annul the assessment, but he cannot remand the matter back to the file of AO. Direction of Ld. CIT(A) in directing the AO to re-verify claim of Long Term Capital Loss of Rs. 7,82,60,511/- will tantamount to remand of matter back to the file of AO which is not permissible in the eyes of law. If required and Ld. CIT(A) deemed it fit to confirm, reduce, enhance or annul the assessment, he may ask for a report from the AO to act. Hence, this action of Ld. CIT (A) is bad- in-law and not sustainable. Hence, this ground of appeal raised by assessee is allowed. 7. In the instant case as well, the Appellant had furnished all the information before the Ld. AO and before the Ld. CIT(A) and the Ld. CIT(A) had also obtained a remand report dated 16 August 2024 from the Ld. AO. Thus, no question of directing the Ld. AO for verification of documents filed by the Appellant arises and therefore the order of the Ld. CIT(A) be kindly quashed as being in violation of express provisions laid down in section 251 of the Act. Ground No 2: Based on facts and circumstances of the case and in law, the AO has erred in taxing amount of Rs 6,26,68,011 under section 68 of the Act as unexplained credits disregarding the various evidences filed by the Assessee proving that the Printed from counselvise.com 22 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal sub-contract work was awarded and executed by the Assessee and the fact that Dineshchandra R Agarwal Infracon Pvt Ltd had deducted TDS under section 194C of the Act and the same is reflected in For 26AS of the Assessee and the Ld CIT(A) has erred in setting aside the issue for verification to the AO even when all documents are on record. Ground No 3: Based on facts and circumstances of the case and in law, the AO has erred in taxing amount of Rs 6,26,68,011 under section 68 of the Act without appreciating that the said amount has already been credited to the profit and loss account on which tax has been paid by the Assessee therefore adding the same amount again has resulted in double addition which is grossly incorrect and therefore the Ld CIT(A) has erred in not deleting the addition made by the AO. Facts:- 8. The re-assessment proceeding of the Appellant was initiated due to the reason that department gathered information during search action on Dineshchandra R Agarwal Infracon Pvt Ltd (“DRAIPL”) that DRAIPL generated unaccounted money by way of booking bogus sub-contract expense and alleged that the Appellant is one of the beneficiariesof the bogus sub contract expenses. During the course of re-assessment proceedings, the Appellant filed detailed submission stating that he is an approved sub-contractor of National Highways Authority of India Limited (“NHAI”) and furnished the necessary evidences and documents as asked for.At paragraphs 4.4.3 to 4.4.7 (page number 5-6 of the assessment order), the Ld. FAO listed down the followings reasons of making the addition: • The sub contract agreement entered between the Appellant and the DRAIPL is not acceptable as the acceptance of the parties, stamp etc are not on the document; • Approval letter of NHAI to appoint the Appellant as a subcontractor is not available; • The Appellant has failed to furnish the relevant contract agreement with DRAIPL, income received in connection with the execution of work as per the agreement with supporting documentary evidences and the genuineness of the transaction. • The Appellant has failed to furnish copy of audited financial statements and has only furnished copy of profit and loss account and no signature and seal of the tax auditor is affixed. In view of the above, the FAO held that the Appellant failed to establish that the wok was actually executed by the Appellant and thus made addition of Rs 6,26,68,011 under section 68 of the Act. Printed from counselvise.com 23 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal Submission:- 9. The Appellant is a civil contractor and carries on the business with his proprietary concern M/s Radhakishan, having registration with PWD, Rajasthan in AA class category. Project road work “Widening and Strengthen to two lane with paved shoulder of Nimbi Jodha-Degana-Merta city section of NH-458 from km.0.000 to km.139.900 in the state of Rajasthan under NHDP on EPC mode” was awarded by NHAI to DRAIPL, Ahmedabad. 10. Since the Appellant was already established at Degana, he approached DRAIPL and proposed to enter to an agreement to provide subcontract for a part of said project.The Appellant was awarded subcontract work between the chainage 53.000 km to 139.000 km on fix value of Rs. 70 crore and consequently a written note of this award was executed by Appellant. Also, a power of attorney was executed to authorize the Appellant to execute the sub- contracted work. Further, DRAIPL wrote a letter to NHAI for approving this subcontract as nominated subcontract, basis which the Appellant was declared as approved subcontractor. During the year, the Appellant raised invoices of Rs 42,00,40,000 on DRAIPL against which payment received in bank account of the Appellant was Rs 41,58,39,600 and TDS of Rs 42,00,400 was deducted which is reflected in Form 26AS of the Appellant. Details of various documents filed during the course of assessment proceedings is as under: 11. Vide submission dated 30 January 2023 (PB 7-9), the Appellant submitted the following details: Particulars PB no Remarks Letter dated 7 August 2014 executed between the Appellant and DRAIPL 10-13 The Appellant expressed its interest to act as a sub-contractor for Project Road work “Widening and Strengthen to two lane with paved shoulder of Nimbi Jodha-Degana-Merta city section of NH-458 from km.0.000 to km.139.900 in the state of Rajasthan under NHDP on EPC mode” which was awarded by NHAI to DRAIPL, Ahmedabad. Other terms and conditions were also laid out in the said letter Letter dated 10 June 2015 by DRAIPL to NHAI for obtaining approval for sub contract of work 14 Approval for work for Km 53 to Km 140 in stretches for a total value of Rs 70 crore was requested from NHAI Letter dated 16 June 2015 by NHAI to M/s Theme 15 M/s Theme is a multi-disciplined consultancy organization who partners in Government projects. NHAI had written this letter to M/s Theme to examine the sub contract proposal and provide its Printed from counselvise.com 24 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal Engineering Services Pvt Ltd (“M/s Theme”) recommendation Bank statement 16-37 Reconciling receipts from DRAIPL as the same have been received through banking channel. The receipts have also been offered to tax Confirmation of account along with Form 26AS 38-46 Account statement of DRAIPL in books of M/s Radhakishan detailing all the transactions and receipt Profit and loss account 47 12. Thereafter, a show cause notice dated 9 May 2023 (PB 48-54) was issued to the Appellant against which no reply was filed. Rebuttal of the arguments basis which the FAO made addition is as under: Arguments by FAO Rebuttal by Appellant The sub contract agreement entered between the Appellant and the DRAIPL is not acceptable as the acceptance of the parties, stamp etc are not on the document The letter dated 7 August 2014 executed between the Appellant and DRAIPL is duly signed by the Appellant at all the pages and signed by DRAIPL on the last page. Thus, the observation of the FAO that the agreement is not signed is incorrect. Approval letter of NHAI to appoint the Appellant as a subcontractor is not available Approval was granted by NHAI to DRAIPL to sub-contract work to the Appellant is enclosed at 55 The Appellant has failed to furnish the relevant contract agreement with DRAIPL, income received in connection with the execution of work as per the agreement with supporting documentary evidences and the genuineness of the transaction. Relevant contract with DRAIPL was furnished. The income earned has already been offered to tax. The Appellant has failed to furnish copy of audited financial statements and has only furnished copy of profit and loss account and no signature and seal of the tax auditor is affixed. Audited financial statements of the Appellant are enclosed at PB 56-98. 13. Basis the above documents, it is evident that the Appellant is an approved sub-contractor of NHAI, the receipts from DRAIPL has already been offered to Printed from counselvise.com 25 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal tax, the Appellant has actually executed the work and therefore no addition can be made.Inspite of above submissions and documentary evidences, the FAO passed the assessment order making addition of Rs 6,26,68,011as unexplained cash credit under section 68 of Act and the Ld. CIT(A) incorrectly directed the Ld. AO to verify the same documents which were already filed before the Ld. AO during assessment proceedings. 14. It is further submitted that in present facts section 68 of the Act is not applicable. Section 68 is reproduced as under: “Cash credits. 68. Where any sum is found credited in the books 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, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.” 15. In the instant case, the Appellant has duly explained the nature and source of the sum that is credited in the books of accounts along with documentary evidences such as details of party, invoices raised, Form 26AS, bank statements, etc and therefore section 68 of the Act is not applicable. Reliance in this regard is placed on the following decisions: • Smt. Harshila Chordia vs. Income tax officer (2008) 298 ITR 349 (Raj) dated 7 November 2006 (PB 99-106): The High Court held as under: “Apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract s. 68 because the Printed from counselvise.com 26 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal cash deposits become self-explanatory and such amount was received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise. Therefore, no addition was required to be made in respect of the amount which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. • Shree Sanand Textile Indus Ltd. vs The Dy CIT (ITA No.1166/Ahd/2014) dated 6 January 2020 (PB 107-132): The Ahmedabad ITAT held that section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. Relevant extracts of the decision are as under: “9.3. Admittedly, the amount of sale as claimed by the assessee was offered to tax by reflecting the same in the trading and profit and loss account. This fact has not been doubted by the authorities below. However, the existence of the parties was not proved by the assessee based on the documentary evidence during the proceedings. Accordingly, the learned CIT (A) treated the amount received from such parties as unexplained cash credit under section 68 of the Act. In this connection we note that the impugned amount has been taxed twice firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. Even if we assume that the action of the learned CIT (A) is correct i.e. the impugned amount is representing the cash credit as provided under section 68 of the Act. Then, the learned CIT (A) was duty-bound to reduce the same from the amount of sales as the same does not represent the sale but unexplained cash credit. As such, the same amount cannot be held taxable twice as per the wish of the learned CIT (A). In our considered view the action of the learned CIT (A) is erroneous to the extent of treating the same as sale proceeds and the unexplained cash credit simultaneously. … 9.6. We also note that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only.” • Dewas Soya Ltd, Ujjain vs Department Of Income Tax (ITA Nos. 426 to 428/Ind/2012) dated 23 January 2013 (PB 133-160): The ITAT held as under: “6.20 The claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit & loss account) and on the other hand amounts received from above parties has also been added u/s. 68 of the Act. Printed from counselvise.com 27 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 6.21 This view has been held by the Hon'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969) 72ITR194 (SC) that \"It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed\". The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again. Reliance is also placed on the decision of Hon'ble Supreme Court in the case of CIT vs Durga Prasad More (1969) 72ITR807 (SC) in which it was held \"If the amount represented the income of the assessee of the previous year, it was liable to be included in the total income and an enquiry whether for the purpose of bringing the amount to tax it was from a business activity or from some other source was not relevant\". In view of the above, it is submitted that section 68 of the Act is not attracted and double addition cannot be made and therefore the addition be directed to be deleted. 16. It is further submitted that the CIT(A) in the case of Bharat Spun Pipe and Construction Company vide order dated 8 January 2025 (enclosed Annexure) deleted the addition of Rs 15.32 crores made in its hands on account of sub- contract receipts received from the same party DRAIPL in respect of the same project for AY 2017-18 holding that DRAIPL had genuinely subcontracted the work to Bharat Spun Pipe and Construction Company and also in the case of DRAIPL, the Ahmedabad ITAT in ITA No 369/Ahd/2019 deleted the bogus expense to the tune of 16.98 crores added by the JAO. In view of the above, it is requested to kindly direct the AO to delete the addition made as sub-contract work has genuinely been carried out by the Appellant and the receipts therefrom have been already offered to tax. Conclusion: 17. It is submitted that the addition made by the FAO are incorrect due to the following reasons: • The observation of the FAO that the Appellant has not furnished relevant documents is incorrect as the Appellant has filed all the details and information from time to time as evidenced by above documents and acknowledgements of filing submissions on the e-filing portal. • The Appellant has submitted the sub contract signed by DRAIPL (PB 10- 13) and submitted approval of the NHAI (PB 55) evidencing the genuineness of the transaction. • Addition of Rs 6,26,68,011 has resulted in double addition as the Appellant has already included the said income in its profit and loss account and paid taxes on it and same cannot be added under section 68 of the Act. In view of above, it is submitted that the assessment order passed is grossly incorrect, based on false assumption and allegation, and without considering the Printed from counselvise.com 28 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal detailed documents submitted during the assessment proceeding the therefore the additions made be deleted.” 7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S. No. Particulars Page No. File before AO/CIT(A) 1. Acknowledgment of filing return of income along with computation of income 1-6 Yes 2. Submission dated 30 January 2023 submitted following details: • Letter dated 7 August 2014 executed between the Appellant and DRAIPL • Letter dated 10 June 2015 by DRAIPL to NHAI for obtaining approval for sub construct of work • Letter dated 16 June 2015 by NHAI to M/s Theme Engineering Services Pvt. Ltd. (“M/s Theme”) • Bank statement • Confirmation of account along with Form 26AS • Profit and loss account 7-9 10-13 14 15 16-37 38-46 47 Yes 3. 3. Show cause notice dated 9 may 2023 48-54 Yes 4. Approval of NHAI to DRAIPL to sub-contract work to the Appellant 55 Yes 5. Audited financial statements of the Appellant 56-98 Yes 6. Copy of decision of Rajasthan High Court in the case of Smt. Harshila Chordia vs. Income tax officer (2008) 298 ITR 349 (Raj) 99-106 Yes 7. Copy of decision of Ahmedabad Tribunal in the case of Shree Sanand Textile Indus Ltd. vs The Dy CIT (ITA No.1166/Ahd/2014) dated 6 January 2020 107-132 Yes 8. Copy of decision of Indore Tribunal in the case of Dewas Soya Ltd, Ujjain vs Department of Income Tax (ITA Nos. 426 to 428/Ind/2012) dated 23 January 2013 133-160 Yes 9. Copy of decision of Calcutta High Court in the case of Arun Kumar Bose vs ITO [2024] 158 taxmann.com 282 (Calcutta) 161-164 NA 10. Copy of decision of Mumbai Tribunal in the case of Sapphire Land Development (P) Ltd vs DCIT [2023] 147 taxmann.com 50 (Mumbai - Trib.) 165-176 NA 11. Remand report dated 16 August 2024 obtained by CIT(A) from the AO 177-178 NA 12. Rejoinder submission of the Appellant against remand report 179-181 NA Printed from counselvise.com 29 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 8. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee the power of the ld. CIT(A) to remand back the matter to the file of the ld. AO was vested upon him w.e.f. 01.10.2024 and the order in question is not passed as per provision of section 144 of the Act. He also relied upon the decision of the CIT(A) passed in the case of Bharat Spun Pipe and Construction Company [ PAN : AABFB4917G ] for A. Y. 2017-18 it was held that the sub-contract income received from DRAIPL was not considered as bogus and the addition made in that case was deleted relying on the decision of the ITAT in the case of DRAIPL. 9. Per contra, ld. DR relied upon the finding recorded in the order of the lower authority. 10. We have heard the rival contentions and perused the material placed on record. Vide ground No. 1 to 3 raised by the assessee he challenges the addition of Rs. 6,26,88,011/- under section 68 by treating the contract income from M/s DRAIPL as bogus. During the course of search proceedings in the case of M/s. DRAIPL it was found that DRAIPL has been generating unaccounted money by booking bogus sub-contract expenses and purchases. DRAIPL was awarded by National Highway Authority of India and that work was sub-contracted to the assessee firm. During the Printed from counselvise.com 30 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal year under consideration, assessee firm received Rs. 6,26,88,011/- from DRAIPL as payments for the above contract work. These payments were received through bank after deduction of TDS. The appellant had accounted these receipts in the total turnover as per audited profit and loss account and paid tax on profits thereon. All details of expenditures and bills were submitted during assessment proceedings. However, the assessing officer stated that it is not verifiable from the details of direct expenses and copies of bills whether the said expenditure was actually incurred against the contract of DRAIPL. The AO concluded that no expenditures have been incurred to perform work on the above mentioned contract and proceeded to make an addition of Rs. 6,26,88,011/- u/s. 68 of the Act. The assessing officer has not doubted the receipt of Rs. 6,26,88,011/- as sub-contracting income from M/s DRAIPL. The appellant had offered source of credits along with documentary evidences in the shape of Work Order, ITR and ledger accounts. There was no doubt regarding identity of Main contractor and actual execution of project by DRAIPL as the contract was awarded by National Highways Authority of India (NHAI). The suspicion is whether the work 15was actually executed by the appellant. The appellant submitted a letter dated 07.102015 issued by National Highway Authority of India wherein it is apparent that the Printed from counselvise.com 31 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal assessee Radha Kishan was granted Permission sub contract work in connection with widening and strengthening of two lane with paved aboulders of Nimbai Jodha (near Ladnu Degana Merta City section of NH 458. The said subcontract work allotment letter placed at page 55 of the paper book filed by the assessee. From the perusal of documents furnished during assessment proceedings it can be concluded that appellant had provided necessary explanations and evidences regarding the genuineness of the subcontract. The Bench also noted that the Income Tax Appellate Tribunal, Ahmedabad in the case of M/s Dineshchandra R Infracon Private Limited vide order passed in ITA no 369/Ahd/2019 and 414/Ahd/2018 relevant to AY 2016-17 has deleted the bogus expenses added by the jurisdictional AO. From the perusal of the above order, it is evident that the additions regarding bogus sub-contract expenses in the case of DRAIPL which were the only basis for co-ordinate reopening the case of assessee, stood deleted by the Coordinate Bench of ITAT, Ahmedabad. Further, of the sub-contract receipt Rs. 6,26,88,011/- was declared in the return of income filed by the assessee and due taxes were paid. Hence on being consistent to the finding so recorded wherein above we considered the ground No. 1 to 3 Printed from counselvise.com 32 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal raised by the assessee and vacate the addition of Rs. 6,26,88,011/- made in hands of the assessee. Ground No. 4 being general does not require our finding and ground No. 5 relates to the awarding cost which the assessee has not preferred any argument and therefore, the same is also not adjudicated. In the result, the appeal in ITA no. 694/JP/2025 filed by the assessee is allowed. 11. Now we take up the appeal of the assessee in ITA no. 695/JP/2025 wherein the assessee has raised the following grounds of appeal; 1 Ground Based on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to verify the claim of the assessee and the documents furnished without appreciating that as per section 251 of the Act, the Ld. CIT(A) has been granted the power to either confirm, reduce, enhance or annul the assessment and the power to set aside the assessment for making fresh assessment has been granted only where assessment is made under section 144 of the Act and therefore the order passed by the CIT(A) is in violation of section 251 of the Act. 2. Ground Based on facts and circumstances of the case and in law, the AO has erred in taxing amount of Rs 42,00,40,000 under section 68 of the Act as unexplained credits disregarding the various evidences filed by the Assessee proving that the sub-contract work was awarded and executed by the Assessee and the fact that Dineshchandra R Agarwal Infracon Pvt Ltd had deducted TDS under section 194C of the Act and the same is reflected in For 26AS of the Assessee and the Ld CIT(A) has erred in setting aside the issue for verification to the AO even when all documents are on record. Printed from counselvise.com 33 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 3. Ground Based on facts and circumstances of the case and in law, the AO has erred in taxing amount of Rs 42,00,40,000 under section 68 of the Act without appreciating that the said amount has already been credited to the profit and loss account on which tax has been paid by the Assessee therefore adding the same amount again has resulted in double addition which is grossly incorrect and therefore the Ld CIT(A) has erred in not deleting the addition made by the AO. 4. Ground Based on facts and circumstances of the case and in law, the AO has erred in making adhoc disallowance of Rs 2,65,36,577 as unexplained expenses under section 37 of the Act by assuming project expense of Rs 26,53,65,770 towards project 4 awarded by DRAIPL without contradicting the evidences filed during assessment proceedings in relation to various expenses incurred by the Assessee for carrying on the business and the Ld CIT(A) has erred in setting aside the issue for verification to the AO even when all documents are on record. 5. Ground The appellant, craves to alter, amend and modify any ground of appeal. 6. Ground Necessary cost be awarded to the assessee. 12. As is evident from the above grounds of appeal that the case of the assessee in ITA Nos. 695/JP/2025 is similar to the case in ITA No. 694/JP/2025 and we have heard both the parties and persuaded the materials available on record. Therefore, it is not imperative to repeat the facts, various grounds raised by the assessee and the arguments of both the parties in ITA No. 695/JP/2025. Hence, the bench feels that the decision taken by us in ITA No. 694/JP/2025 for the Assessment Year 2015-16 shall apply mutatis mutandis in the case of Radhakishan Beniwal Printed from counselvise.com 34 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal in ITA No. 695/JP/2025 for the Assessment Year 2016-17 so far as ground no. 1 to 3 and 5 & 6 is concerned. Thereby now the only one ground that is different in this year is disallowance adhoc amount of Rs 2,65,36,577 as unexplained expenses under section 37 of the Act by assuming that project expense of Rs 26,53,65,770 towards project awarded by DRAIPL without contradicting the evidences filed during assessment proceedings in relation to various expenses incurred by the Assessee for carrying on the business and the Ld CIT(A) has erred in setting aside the issue for verification to the AO even when all documents are on record. Apropos to this ground the relevant finding of the ld. AO is as under: In view the above facts, information available and failure on the part of assessee to establish the genuineness of receipt from DRAIPL, therefore, the amount of \u000142,00,40,000 is treated as unexplained cash credit under section 68 read with section 115BBE of the Income Tax Act and added to the income of the assessee. Also expenses claimed related to the receipt from DRAIPL are not explained therefore 10% of the proportionate expenses that is 2,65,36,577 is disallowed under section 37(1) of the Income Tax Act as per the discussion and added to the income of the assessee. 12.1 When the matter carried before the ld. CIT(A) he set aside the issue to the file of the ld. AO by observing as under ; In view of the above facts and circumstances, the AO is directed to verify the claim of appellant and the documents furnished by the appellant and delete the addition made u/s. 37(1) of the Act if the same are found to be correct, after due verification and as per law. Printed from counselvise.com 35 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 12.2 The above finding of the ld. CIT(A) is under challenge before us and in support of the ground raised by the assessee, ld. AR of the assessee has filed a detailed written submission which reads as follows: Ground No 4: Based on facts and circumstances of the case and in law, the AO has erred in making adhoc disallowance of Rs 2,65,36,577 as unexplained expenses under section 37 of the Act by assuming project expense of Rs 26,53,65,770 towards project awarded by DRAIPL without contradicting the evidences filed during assessment proceedings in relation to various expenses incurred by the Assessee for carrying on the business and the Ld CIT(A) has erred in setting aside the issue for verification to the AO even when all documents are on record. Facts and submission: 19. The Ld. AO disallowed Rs 2,65,36,577 as unexplained expenses under section 37 of the Act by assuming project expense of Rs 26,53,65,770 towards project awarded by DRAIPL. It is submitted that the amount of project expense of Rs 26,53,65,770 has been only assumed by the Ld. AO and the basis of the same is not provided to the Appellant. The Appellant had duly submitted that site wise / project wise expenses are not maintained, rather expenses incurred in aggregate are maintained on expense wise basis ie bitumen, cement, greet sand and stone, sand and soil, diesel, etc (refer profit and loss account at PB 38) and therefore assuming expenditure of Rs 26,53,65,770 is only on the basis of surmises, conjectures and presumptions. 20. The FAO has made addition of Rs 2,65,36,577 as adhoc disallowance of expense under section 37(1) of the Act on the basis that the Appellant was not able to furnish plausible explanation or details or project wise ledger account. It is submitted that the Appellant had furnished ledger accounts of all the expenses (PB 67-68) running into 170 pages incurred to the FAO. The FAO has not pointed out any defect in any of the ledger accounts and have accepted the same. It is submitted that the Appellant does not maintain project wise ledger account as the Appellant carried out construction work for other projects also which are awarded by Public Works Department and the ledgers are maintained on a consolidated basis. 21. Section 37 of the Act is a residual provision envisaging deduction in respect of items of business expenditure not covered by preceding sections, for the purposes of computing business income. The conditions which have to be fulfilled for an item of expenditure to be deductible under section 37(1) as laid down by the various courts have been succinctly summarized as under: Printed from counselvise.com 36 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal “(a) The expenditure must be incurred wholly and exclusively for the purpose of business or profession; and (b) The expenditure must not be:- (i) Capital in nature; (ii) Personal in nature; or (iii) An allowance of the character described in sections 30 to 36” The allowability of the expenditure incurred has been examined in the following paragraphs, in light of the aforesaid principles. The expenditure must be incurred wholly and exclusively for the purpose of business or profession It has been held by Hon'ble Supreme Court in the case of CIT vs Chandulal Keshavlal [1960] 38 ITR 601 (SC), that commercial expediency has to be emphasized on for deciding whether payment of money is a deductible expenditure. In the case of CIT vs Kirloskar Tractors Limited [1998] 231 ITR 849 (Bom), it was held that the purpose of the expenditure and the effect should be considered from a common sense angle having due regard to the business realities. A similar view was taken by the Hon’ble Supreme Court in several other cases, inter alia: • CIT vs Nainital Bank Ltd [1966] 62 ITR 638 (SC) • India Cements Ltd vs CIT [1966] 60 ITR 52 (SC) Reliance can also be placed on the decision of the Hon’ble Supreme Court in the case of Bombay Steam Navigation Co. Private Ltd. vs CIT [1965] 56 ITR 52 (SC), wherein it was held that: ‘…If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure…’ In light of the principles laid down in the above-stated judgments and the facts of the instant case, it is submitted that the operating expenses have been incurred wholly and exclusively for the purpose of business and are thus fully deductible. The expenditure must not be capital in nature Printed from counselvise.com 37 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal In the instant case, the expenditure has not resulted in creation of asset of any enduring nature and is therefore not capital expenditure. The expenditure must not be personal in nature or an allowance of the character described in sections 30 to 36 In the instant case, the fact that the expenditure is not personal in nature has not been doubted at all. Needless to say, this expenditure has not been dealt with in any of the provisions from section 30 to section 36 of the Act. Therefore, the subject expenditure satisfies the third test for allowability of expenditure under the provisions of section 37(1) of the Act. 22. Further, ad-hoc disallowance of operating expenditure is not warranted in light of the following cases wherein it was held that no ad-hoc disallowance of any expenditure could be made by the assessing officer without pointing out any specific inflation or unvouched expenditure. • Your Honour's kind attention is drawn to the decision of the Hon’ble Supreme Court in the case of J J Enterprises vs CIT [2002] 254 ITR 216 (SC), wherein it was held by the Court that no reference was called for in respect of the finding of the Tribunal that additions was made partly on the basis of guess work and was unsustainable and there was also no reason to restore the matter back to the assessing officer for re-examining. • In the case of Dwarka Prasad Agarwal vs ITO [1995] 52 ITD 239 (Calcutta) the assessing officer disallowed Rs 30,000 of publicity and advertisement expenditure on an estimated basis which was confirmed in first appeal. On second appeal, the disallowance was deleted by the Calcutta Bench of Tribunal observing that since complete details had been filed by the assessee with regard to the expenditure and no specific inflation or unvouched expenditure had been pointed out by the assessing officer, the disallowance made on an estimated basis was not sustainable. • In the case of Mahendra Oil cake Industries Pvt. Ltd. vs ACIT (1996) 55 TTJ (Ahmedabad) 711 the Ahmedabad Tribunal deleted the ad-hoc disallowance in respect of foreign travelling expenses on the ground that the entire time would not be devoted fully and exclusively for company’s work while on tour. • The Chandigarh Bench of Tribunal in the case of Rattah Mechanical Works Ltd. vs ITO [1996] 87 Taxman 288 (Chandigarh) held that since the assessing officer had not pointed out any specific item of personal or inadmissible expenditure, no disallowance could be made in such circumstances. • In the case of Shriram Pistons and Rings Ltd vs IAC (1991) 39 TTJ (Delhi) 132, it was held by the Delhi Bench of Tribunal that where the expenditure incurred by the appellant is supported by evidence and there is no dispute regarding the payment of the same, disallowance of such expenditure cannot be made in absence of any evidence Printed from counselvise.com 38 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal brought to record by the department to show that the expenditure incurred was excessive or unreasonable. An ad-hoc disallowance of Rs 10,000 out of the total professional fee of Rs 33,640/- paid by the assessee was deleted by the bench. Conclusion: 23. It is submitted that the additions made by the FAO and deleted by the Ld. CIT(A) subject to verification by the Ld. AO are incorrect due to the following reasons: • The Appellant has filed all the details and information from time to time as evidenced by above documents and acknowledgements of filing submissions on the e- filing portal. Reference to section 144 of the Act in the assessment order is incorrect or at best related to adhoc disallowance of expenses. • The Appellant has submitted the sub contract signed by DRAIPL (PB 51-54) and approval of the NHAI (PB 77) evidencing the genuineness of the transaction and actual incurring of the expenses. • Ledger account of all the direct and indirect expenses were submitted during the assessment proceedings. During video conferencing hearing, the Appellant submitted that project wise expenses is not maintained as the Appellant undertakes sub contract work not only for DRAIPL but also for Public Works Department. The books of accounts are maintained on consolidated basis and not project wise. The ledger account of all the expenses submitted evidences that expenditure has been incurred for undertaking sub-contracting work. The FAO has not rejected the books of account or has not pointed out any discrepancy in the ledgers and vouchers submitted during the assessment proceedings and without any basis made an ad-hoc 10% disallowance of expenses. • The allegation of the FAO that the Appellant is a beneficiary who has received bogus sub contract from DRAIPL is baseless and incorrect as DRAIPL has also confirmed that sub-contract payments were made to the Appellant in response to notice issued under section 133(6) of the Act (PB 84). • Addition of Rs 42,00,40,000 has resulted in double addition as the Appellant has already included the said income in its profit and loss account and paid taxes on it and same cannot be added under section 68 of the Act. In view of above, it is submitted that the assessment order passed is grossly incorrect, based on false assumption and allegation, and without considering the detailed documents submitted during the assessment proceeding the therefore the additions made be directed to be deleted. Printed from counselvise.com 39 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal In addition, ld. AR of the assessee submitted that the considering the material placed on record the ld. CIT(A) should have directed to delete the adhoc disallowance made by the ld. AO. 12.3 On the other hand, ld. DR representing the revenue supported the orders of the lower authority and vehemently submitted that since the matter is remanded back to the ld. AO there cannot be any grievance of the assessee. 12.4 We have heard the rival contentions and perused the material placed on record. Vide ground no. 4 the assessee challenged the adhoc disallowance of Rs 2,65,36,577 as unexplained expenses under section 37(1) of the Act by assuming project expense of Rs 26,53,65,770 towards project awarded by DRAIPL without contradicting the evidences filed during assessment proceedings in relation to various expenses incurred by the Assessee for carrying on the business and the Ld CIT(A) has erred in setting aside the issue for verification to the AO even when all documents are on record. The bench noted that in this case the assessment proceeding were participated by the assessee and has provided all the details as called for by the assessee the books of account of the assessee were produced and being audited not founded any fault. Record reveals that the assessee gets his books of accounts audited under the Income Printed from counselvise.com 40 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal Tax Act. The expenditure incurred were supported by bills and vouchers and duly recorded in the books of account. The bench noted that the assessee is a big contractor there cannot be disallowance on adhoc basis which are for the purposes of the business and without rejecting the books of account the adhoc addition cannot be made. At this stage it would be appropriate to deal with the provision of section 145 of the Act which reads as follows; Method of accounting. 145. (1) Income chargeable under the head \"Profits and gains of business or profession\" or \"Income from other sources\" shall, subject to the provisions of sub- section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. As is evident that section 145(3) provides that if the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided Printed from counselvise.com 41 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal in section 144. Thus, while disbelieving the claim of the assessee and that too in part he has not given the required notice pointing out any specific defects in the books of account and thereby proceeded to make the lump sum disallowance which are not permitted. We get support of our view from the various decision cited by the ld. AR of the assessee and the one which directly applicable to the facts of the case is our Rajasthan High Court in the case of Commissioner of Income Tax Vs. Gupta, K. N. Construction Co. [ 59 taxmann.com 293 (Rajasthan) ] wherein the Hon’ble High Court held that; 11. Though the argument of the learned officer of the Revenue can be said to be proper and justified that in a case where the assessee manipulates the accounts by keeping the profit margins commensurate with the past assessment years or slightly increases and that itself by a large cannot be a basis for acceptance of the results. But, in the face of the said facts, if it is for the Assessing Officer to bring on record some concrete material/evidence to make a proper addition. We have already noticed hereinabove that the Assessing Officer has merely disallowed 20 per cent. or 10 per cent., as the case may be, out of the various expenses, which, in our view, is not proper and he had to bring on record justifiable basis for making of an addition and bring on record some evidence for making of addition. 12. The hon'ble apex court as well as this court had held that invoking of the provisions of section 145(3) and/or estimation of income by itself is a finding of fact and it would be appropriate to refer to a few judgments in this regards. 13. The hon'ble apex court in the case of Chhabildas Tribhuvandas Shah v. CIT [1966] 59 ITR 733 has observed as under (page 737) : \"We may point out that we are not concerned with the correctness of the conclusion and we are only concerned with the question whether there is any material in support of the finding of the Appellate Tribunal. In cases involving the applicability of the proviso to section 13, the question to be determined by the Income-tax Officer is a question of fact, namely, whether the income, profits and gains can or cannot be properly deduced from the method of accounting regularly adopted by the assessee. There is nothing special about this question of fact, and generally the only question of law that can possibly arise is whether there is any material for the finding. In our opinion the High Court was right in refusing to call for a statement of the case.\" Printed from counselvise.com 42 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal 14. This court in the case of CIT v. Singhal Natural Stone (P.) Ltd. [2012] 21 taxmann.com 493/208 Taxman 184 (Raj.) has held that the finding about the rejection of income from a particular amount (from Rs. 20,78,821 to Rs. 5,15,259) was based on appreciation of material on record and, accordingly, it was observed that no question of law, much less a substantial question of law, arises so as to entertain the said appeal. 15. This court, again in the case of CIT v. Amrapali Jewels (P.) Ltd. [2012] 19 taxmann.com 207/208 Taxman 185 (Raj.) (Mag.) observed as under : \"In our opinion, therefore, once the Tribunal accepted the factual explanation of the assessee and accordingly, deleted the additions in question made by the Assessing Officer in exercise of its appellate discretionary powers, then it would not involve any substantial issue of law as such. In other words, this court in its appellate jurisdiction under section 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether the explanation offered by the assessee and which found acceptance to the Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or when it had been based on no reasoning, or when it had been based on absurd reasoning to the extent that no prudent man of average judicial capacity could have ever reached to such conclusion, or when it had been found against any provision of law, then a case for formulation of any substantial question of law on such finding can be said to arise. Such is not the case here on facts.\" 16. This court in the case of Pansari Gems International v. CIT [2013] 33 Taxmann.com 667 (Raj.) has held as under : \"The total turnover during the year under reference is Rs. 8.86 crores. The Income- tax Appellate Tribunal has held that gross profit rate does not depend on the basis of specification of item, but it depends upon the quality, shine, etc. The assessee has earned gross profit varied from 6.32 per cent. to 26.45 per cent., but from the chart filed by the assessee, it cannot be concluded that gross profit rate declared by the assessee was correct. The Assessing Officer has found that purchases were not fully verifiable. The books of account were rejected for various reasons. Previous year also gross profit rate was 18.87 per cent. and this year, it has been accepted at 17 per cent. by the Commissioner of Income-tax (Appeals) and the order passed by the Commissioner of Income-tax (Appeals) has been affirmed by the Income-tax Appellate Tribunal. In view of the reasons assigned by the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal in its orders, we find that no substantial question of law arises in the present appeal. The facts of the case and the evidence have been properly appreciated by the Commissioner of Income-tax (Appeals) as well as the Income- tax Appellate Tribunal.\" 17. That other judgments on the above aspect are in the case of CIT v. Dr. A. P. Bahal [2010] 322 ITR 71 (Raj.)), CIT v. Jaimal Ram Kasturi [2013] 33 taxmann.com 315/216 Taxman 226 (Raj.), CST v. Girja Shanker Awanish Kumar [1996] 11 SCC 648; CIT v. Jas Jack Elegence Exports [2010] 324 ITR 95/191 Taxman 386 (Delhi), Arya Confectionery Works v. CIT [1983] 143 ITR 814 Printed from counselvise.com 43 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal (M.P.) and Awadhesh Pratap Singh Abdul Rehman and Bros. v. CIT [1994] 210 ITR 406/76 Taxman 106 (All.). 18. This court in the case of CIT v. Inani Marbles (P.) Ltd. [2009] 316 ITR 125/[2008] 175 Taxman 56 (Raj.) and also the Delhi High Court in the case of Action Electricals v. Dy. CIT [2002] 258 ITR 188/[2003] 132 Taxman 640 have observed that the past history of the assessee would be one of the reliable guidelines to make or not to make any estimation/addition. We have already referred to hereinabove that the Assessing Officer has failed to bring on record any comparable case so as to justify any estimation/addition, the addition has been deleted by the Commissioner of Income-tax (Appeals) as well as upheld by the Income-tax Appellate Tribunal. 19. In view of what we have observed hereinabove, it is essentially a finding based on appreciation of evidence and is pure finding of fact. Thus, there is no question much less a substantial question of law, which can be said to arise out of the order of the Tribunal. Even this Jaipur bench has also considered the above judgement and thereby directed to delete the lump sum disallowance in the case of Ahluwalia Erectors & Fabricators P. Ltd. Vs. ACIT [ 173 taxmann.com 351 ]. Therefore, on being consistent and following the judicial precedent serviced before us we consider ground no. 4 raised by the assessee. In the result, the appeal filed by the assessee in ITA no. 695/JP/2025 is allowed. Order pronounced in the open court on 10/09/2025. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 10/09/2025 Printed from counselvise.com 44 ITA Nos. 694 & 695/JP/2025 Radhakishan Beniwal *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Radhakishan Beniwal, Nagaur 2. izR;FkhZ@ The Respondent- DCIT, Circle-01, Jaipur 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZQkbZy@ Guard File (ITA Nos. 694 & 695/JP/2025) vkns'kkuqlkj@ By order, lgk;diathdkj@Asst. Registrar Printed from counselvise.com "