RUSHDI CONSTRUCTION PVT LTD,LUCKNOW V. ITO-5(1), LUCKNOW

ITA 395/LKW/2024

AI Insights

Rushdi Construction Pvt. Ltd. appealed against the orders of the CIT(A), which confirmed the additions made by the AO under sections 147 and 144B of the Income Tax Act, 1961. The additions included Rs. 82,48,500 for the assessee's alleged full ownership in sold properties and Rs. 82,00,695 for disallowed expenses related to the construction of a commercial complex. The Tribunal noted procedural lapses and insufficient evidence in the AO's assessment, leading to the decision to restore the matter for a detailed examination of the ownership shares and the claimed expenses.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785119 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 19-06-2024
• Other Referred Cases: Collector of Land Acquisition vs. MST. Katiji (1987) 167 ITR 471 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAJESH SRIVASTAVA
• Assessee Lawyers: SUYASH AGARWAL
• Keywords: Condonation of delay; Principle of natural justice
• Section: 147; 148

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘A’ BENCH, LUCKNOW BEFORE SH. KUL BHARAT, VICE PRESIDENT AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.395/LKW/2024 A.Y. 2018-19 Rushdi Construction Pvt. Ltd., 57, Nazz Cinema Road, Aminabad, Lucknow vs. Income Tax Officer-5(1), Lucknow New PAN: AACCR5186K (Appellant) (Respondent) Assessee by: Sh. Suyash Agarwal, Advocate Revenue by: Sh. Prajesh Srivastava, Sr. DR Date of hearing: 21.08.2025 Date of pronouncement: 13.11.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC dated 19.10.2023 wherein the ld. CIT(A) has dismissed the appeals of the assessee against the orders of the Assessing Officer passed under section 147 r.w.s. 144B of the Income Tax Act, 1961. The grounds of appeal are as under: - “1. Because on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law while confirming the addition of Rs.82,48,500/-being 50% share in property sold by assessee in relevant year (Gross value Rs. 1,64,97,000) jointly with Mohd Shahnaam Khan & Mr. Rizwan Khan whose share is also added in the hands of assessee. 2. Because on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law while confirming the addition Rs.82,48, 500/- Without considering the information Submitted during the assessment proceedings ignoring the facts assessee already accounted for Revenue of Rs. 82,48,500/ in books of accounts being 50% of Revenue from sale of property jointly with Mohd. Shahnaam Khan & Mr Rizwan Khan Co-owner whose share is also added in hands of assessee. 3. Because on the facts and in the circumstances of the case, the Ld. CIT(A) erred on, facts and in law while confirming the addition Rs.82,48,500/- ignoring the purchase & sale deeds, where share of each co-owner are specifically mentioned. Therefore there was no reason to make addition on Revenue against the assessee. Printed from counselvise.com ITA No.395/LKW/2024 Rushdi Construction Pvt. Ltd. A.Y. 2018-19 2 4. Because on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law while confirming the addition Rs. 82,00,695/- ignoring the facts that assessee acquired in jointly piece of land with old structure and constructed Commercial complex and sold shops there from. Therefore expenses incurred in construction cannot be disallowed in Toto as claimed in P&L Account. 5. Because on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law while confirming the addition and law while making an addition of Rs. 82,00,695/ on account of cost of material Consumed Rs. 72,24, 870/-, Labour charges Rs. 8,92, 910/- Finance Cost Rs. 83, 715/- ignoring the facts that books of accounts are regularly maintained and duly Audited as per Company Law. 6. Because on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law while confirming the addition of Rs. 82,00, 695/-, where all the payment were various parties routed through books of accounts duly made to acknowledge by them. 7. Because on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law while confirming the addition u/s 147 without following the spirit of such section on one side AO has accepted the books of accounts and other side revenue is enhanced by 100% and all expenses as claimed against 50% share sales were disallowed, resulting to which High Pitch Assessment has been made against the natural justice also. 8. Because, on the facts and in the circumstances of the case, the CIT (A) has passed the order without providing the assessee with a due and proper opportunity of hearing and therefore the impugned order deserves to be set- aside being bad in law. 9. The humble assessee, craves for leave to add/amend any other ground with the prior permission of the Hon'ble Tribunal.” 2. At the very outset, it is observed that the appeal is delayed by 188 days. The assessee has filed a petition for condonation of delay in which it has been submitted that the order of the ld. CIT(A) was uploaded on the e-filing portal on 19.10.2023 and in view of the same, the appeal was to be filed on or before 18.12.2023. The task of filing the appeal had been entrusted to Sh. Shafayat Husain, Director of the assessee but the said person was unwell and undergoing treatment from 10.12.2023 to 25.12.2023 for which a medical certificate was enclosed. It was further submitted that after his recovery, when Mr. Husain joined his office, he forgot that the said appeal had to be filed and it was only when notice under section 221 of the Income Tax Act dated 27.05.2024 was received by him, that he realized that the appeal had yet to be filed. Accordingly, the said person immediately contacted the concerned counsel and filed the appeal thereafter. It Printed from counselvise.com ITA No.395/LKW/2024 Rushdi Construction Pvt. Ltd. A.Y. 2018-19 3 was prayed that the delay having been caused due to oversight was not deliberate or intentional and therefore, it may kindly be condoned in the interest of justice and the case may be heard on its merits. After considering the condonation petition and the judgment of the Hon’ble Supreme Court in the case of Collector of Land Acquisition vs. MST. Katiji (1987) 167 ITR 471 (SC), we are of the view that the case of the assessee should be heard on its merits and not rejected at the outset due to an act of oversight, which the assessee has admitted. Accordingly, we admit the said appeal for it to be heard on its merits. 3. The facts of the case are that the AO noted that the assessee had failed to file a return of income for the year under consideration. However, the Department had received information that the assessee had sold office space at 6 Visheswar Nath Road amounting to Rs. 1,99,97,000/- and a Motor Vehicle amounting to Rs. 20,69,000/-. He, therefore, issued a notice under section 148A(b) but since the assessee did not make any response therefore, he passed an order under section 148A(d) and issued the notice under section 148 on 29.03.2022. In response to the same, the assessee filed a return of income on 28.04.2022. Subsequently, the ld. AO issued several notices to the assessee to submit his responses. In respect of the Motor Vehicle, it was submitted that the assessee had not sold but rather purchased a motor vehicle and a copy of the registration certificate was submitted. However, with regard to the sale of properties, the assessee admitted that the said properties had been sold, though the realization was only Rs. 1,64,97,000/-, as one of the properties given in the list of the Assessing Officer was a duplicate entry. It also submitted that it had only 50% share in the ownership of these properties but the AO records that it did not furnish any details or explanation in this regard. On perusal of the sale deeds, the ld. AO noted that percentage of shareholding was not mentioned and assessee also failed to furnish any copy of joint venture agreement therefore, the AO concluded that the sale consideration of five properties amounting to Rs. 1,64,97,000/- should be taxed in the hands of the assessee and he issued a show cause notice to the assessee in this regard and further to explain Printed from counselvise.com ITA No.395/LKW/2024 Rushdi Construction Pvt. Ltd. A.Y. 2018-19 4 certain expenditures reflected in its accounts. After considering the reply of the assessee, the AO came to the conclusion that there was no evidence of the fact that the assessee company had only 50% of the share in the said properties and therefore, he added back a sum of Rs. 82,48,500/- to the returned income of the assessee on account of his finding that the assessee was the absolute owner of the properties that it had sold. Furthermore, in view of the failure of the assessee to submit copies of the ledgers, copies of bank statements and bills and vouchers in respect of cost of materials consumed, labour charges and finance cost amounting in total to Rs. 82,00,695/-, he disallowed the said expenses and added them back to the income of the assessee. Accordingly, income of the assessee was computed at Rs. 1,61,44,542/- after allowing for the loss claimed as per the return of income. 4. Aggrieved with the said assessment order, the assessee went in appeal before the ld. CIT(A). In the grounds of appeal, it was submitted that the ld. AO had erred on facts and law while making an addition of Rs. 82,48,500/- ignoring the fact that the assessee had already accounted for its share of the Revenue, being 50% of Revenue from sale of property jointly with Mohd Shahnaam Khan and Rizwan Khan & their shares had also been added back in the hands of the assessee. It was submitted that in the purchase and sale deeds, the share of each co-owner was specifically mentioned and therefore, there was no reason to make the addition in the hands of the assessee. Furthermore, it was submitted that the AO was unjustified in making the addition of Rs. 82,00,695/- by ignoring the fact that the books of accounts were regularly maintained and duly audited as per Company Law. The ld. CIT(A) records that he issued several opportunities to the assessee to present its case before him but no compliance was made. He, therefore, proceeded to complete the proceedings on the basis of materials available before him. After reproducing the observations of the AO, he recorded the fact that the assessee had not bothered to comply with any notices issued by his office and in the absence of satisfactory explanation and supporting documents, it had to be held that the AO had correctly made the addition of Rs. 82,48,500/- as income from business. Printed from counselvise.com ITA No.395/LKW/2024 Rushdi Construction Pvt. Ltd. A.Y. 2018-19 5 Furthermore, with respect to the expenses of Rs. 82,00,695/- which had been disallowed, the ld. CIT(A) recorded that the assessee had not furnished any documentary evidences before him and therefore, the AO had correctly made the addition. Accordingly, he confirmed the additions made by the AO. 5. Aggrieved with the summary disposal of his appeal, the assessee has come before us. Sh. Suyash Agarwal, Advocate (hereinafter referred to as the ld. AR) appearing on behalf of the assessee drew our attention to the paper book filed by him which contained the sale deeds of the various properties from pages 60 to 127. It was pointed out that in each one of the sale deeds, three parties had been mentioned as being the sellers namely Rushdi Construction Pvt. Ltd. (the assessee), Mohd Shahnaam Khan and Mohd Rizwan. It was submitted that the fact of ownership being clearly mentioned in the sale deeds, the ld. AO was unjustified in treating the entire property as belonging to the assessee merely on account of the fact that the extent of ownership was not mentioned in the said sale deeds in percentage terms. It was further submitted that the assessee had offered half the sale consideration for tax in its return filed on 28.04.2022 and there was no information in the possession of the AO to suggest that it had any share more than what was declared in the said property. Therefore, the entire addition was bad in law and deserving of being deleted. Our attention was further invited to page no. 151 and 152 of the paper books and it was submitted that the assessee had sought time from the ld. CIT(A) to make a submission as the documents were under preparation but the ld. CIT(A) had gone ahead and passed the order without waiting for the said document. The ld. AR submitted that all the sale deeds had been submitted before the ld. AO and even the copy of the purchase deed had been submitted which showed that the assessee had only 50% of the ownership of the land. In the circumstances, there was no occasion for the AO to make this addition and no occasion for the ld. CIT(A) to confirm it. He, therefore, prayed that the addition may be deleted. With regard to the disallowance of Rs. 82,00,695/-, the ld. AR submitted that bank statement and the final accounts alongwith the ledgers had been submitted before the ld. AO and if the AO wanted any more information, Printed from counselvise.com ITA No.395/LKW/2024 Rushdi Construction Pvt. Ltd. A.Y. 2018-19 6 then he should have asked for the same rather than simply adding back the amounts that he had by ignoring the fact that the accounts of the assessee were audited. Accordingly, he prayed that the addition deserves to be deleted. 6. On the other hand, the ld. Sr. DR drew our attention to page no. 49 of the assessee’s paper book and pointed out that even though the assessee claimed to have submitted the ledgers for cost of materials consumed, labour charges and finance cost, no such ledgers had actually been submitted as per the e-proceedings response acknowledgment. With regard to the additions made on account of sale of properties, the ld. DR submitted that the shares of the respective parties in the sold properties were not clear from the sale deeds and the assessee had not furnished any document showing that it had only 50% share of the said property. Accordingly, he relied upon the orders of the ld. AO. 7. We have duly considered the facts of the case and the submissions of the rival parties. We observe from a perusal of the sale deeds that the properties in question have been jointly sold by the assessee, Mohd Rizwan s/o Mohd Khalil and Mohd Shahnam Khan s/o Shamim Khan. While their exact shares in the said property may not be reflected in the sale deed, it is quite clear from the same that the assessee company was not the sole owner of the properties that it has subsequently sold. We believe the ld. AO has erred in ignoring this fact and in taxing the entire amount in the hands of the assessee. Since, the assessee has not submitted any document before us that would demonstrate its exact share in the properties that have been sold, we restore the matter back to the file of the AO with a direction to the assessee to demonstrate that it was the owner of only 50% share of the said properties and thereafter for the AO to consider the same and such other evidences that the assessee may produce in its favour before determining the amount of sale consideration that is required to be brought to tax in its hands. We also note that while the assessee has referred to having submitted the accounts with relation to the expenses that have been disallowed, the same is not clear from the submissions made on page 49 of the paper book. Accordingly, Printed from counselvise.com ITA No.395/LKW/2024 Rushdi Construction Pvt. Ltd. A.Y. 2018-19 7 we restore this matter back to the file of the Assessing Officer and direct the assessee to produce the necessary ledgers, bank statements etc., before the AO so that the AO may satisfy himself with regard to the genuineness of the expenses and thereafter decide whether any amount is required to be disallowed at all. As both issues are restored to the file of the AO, the appeal of the assessee is held to be allowed for statistical purposes. 8. In the result, the appeal of the assessee is held to be allowed for statistical purposes. Order pronounced on 13.11.2025 in the Open Court. Sd/- Sd/- [KUL BHARAT] [NIKHIL CHOUDHARY] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 13/11/2025 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S. Printed from counselvise.com "