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Facts
The assessee, a civil contractor, filed its return declaring a total income of Rs.37,46,040. The Assessing Officer (AO) noted a turnover of Rs.7,83,44,780 and a net profit of 7.51%. As the assessee failed to furnish documentary evidence, the AO estimated profits at 12% and made an addition of Rs.37,89,889. The AO also added Rs.1,24,00,000 as unexplained unsecured loans.
Held
The Tribunal noted that neither the AO nor the CIT(A) verified the documents supporting the receipts and that the assessee did not file supporting documents. The Tribunal remitted both issues back to the AO for necessary verification, emphasizing that the assessee must be given a proper opportunity of being heard.
Key Issues
Whether the addition made on account of estimated profits and unexplained unsecured loans is justified without proper verification and opportunity to the assessee.
Sections Cited
143(2), 142(1)
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 06/06/2025 passed by NFAC, Delhi for assessment year 2012-13 on following grounds of appeal :
2 ITA 4921/Mum/2025; A.Y. 2012-13 Manasvi Project Private Limited “1) The Ld. Commissioner has erred in law and fact in not giving proper opportunity of being heard and in determining the fact that the appellant has intentionally avoided to furnish the details before the assessing officer and confirming the addition of Rs.1,24,00,000/- and estimating the income of Rs.62,75,582/-. 2) The Ld. CIT (A) has erred in estimating the profit at the rate 8% due to which additional estimated income Rs.6,64,098/- is confirmed as against 7.1% profit declared by the appellant on the contract amount the appellant prays that the NP ration of 7.1% should be accepted in the absence of any reasons and comparable cases for estimating the income. 3) The Ld. Commissioner has erred in law and fact in making an addition of Rs. 1,24,00,000/- unsecured loans received by the appellant. The appellant prays that the Ld. CIT (A) has erred in law in not considering the confirmations and other detail submitted by the appellant during the appellate proceedings. 4) The appellant reserves the right to add, amend, alter or delete any of the grounds of appeal.” Brief facts of the case are as under:
2. The assessee is a company and a civil contractor. The assessee filed its return of income for the year under consideration, on 30/09/2012, declaring total income of Rs.37,46,040/-. The case was selected for scrutiny and notice u/s. 143(2) and 142(1) was issued. In compliance to the statutory notices, representative of assessee submitted details/documents. 2.1 The Ld.AO noted that, turnover of the assessee during the year was Rs.7,83,44,780/- against which, the assessee shown net profit at Rs.56,11,484/- which is 7.51%. As the assessee failed to furnished documentary evidences in respect of the assessee, the Ld.AO estimated profits at 12% and made addition of Rs.37,89,889/- in the hands of the assessee.
3 ITA 4921/Mum/2025; A.Y. 2012-13 Manasvi Project Private Limited 2.2 The Ld.AO further observed that the assessee had unsecured loans of Rs.1,24,00,000/- from various entities. As the assessee did not provide any supportive documents in support of the loan creditors, the entire loan was added as unexplained loans/credits during the year under consideration.
Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A).
The Ld.CIT(A) after considering the submissions of the assessee dated 24/05/2025, observed and held as under :
“7.1 The grounds of appeal
, copy of assessment order, submissions of the appellant, statement of facts and Form 35 have been carefully considered and adjudicated as under: 7.2 During the course of appellate proceedings, the appellant has furnished some of the additional evidences for consideration. It is observed from the Assessment Order that the appellant was given sufficient opportunity at the time of Assessment proceedings and the appellant has intentionally avoided to furnish the details before the Assessing Officer. The appellant could not establish the reasonable cause that the details could not be furnished on account of reasons beyond his control. Since, the reasonable opportunity was given at the time of Assessment proceedings, the additional evidences furnished by the appellant could not be considered. 7.3 The Assessing Officer has stated that the appellant representative has appeared and the books of accounts and other details were not furnished, hence, the books of accounts were rejected and the income of Rs.94,01,374/- is estimated at 12% on the total gross receipts. Further, the AO has observed that the appellant has furnished the details of loan creditors on 20.03.2015 i.e. fag and of the year hence, the same could not be verified. The Assessing Officer has added Rs. 1,24,00,000/- as unexplained credits. 7.4 The Assessing Officer has stated that the appellant has not filed any of the details of books of accounts, though the appellant C.A. has appeared for the hearing. Therefore, the books of accounts are rejected and estimated 12% of Rs.94,01,374/-on the turnover of 4. ITA 4921/Mum/2025; A.Y. 2012-13 Manasvi Project Private Limited Rs.7,84,44,780/-. The Assessing Officer has not given any reasons and comparable cases for estimating the income at 12% on the total turnover. In the absence of comparable cases and supporting documents, it is not possible to substantiate the estimation of income at 12%, therefore, the Assessing Officer is directed to estimate the income of the appellant at 8% of Rs.62,75,582/- on the total turnover of Rs. 7,84,44,780/-. The appellant has already shown the income of Rs.56, 11,484/-, hence, the estimated income of Rs.6,64,098/- (6275582- 5611484) is confirmed and the remaining addition of Rs.31,25,791/- is deleted. Ground no. 1, 2 & 4 are on the issue of estimated income of Rs.37,89,889/- and Ground по. 1, 2 & 4 are partly allowed. 7.5 During the A.Y. 2012-13, the appellant has received unsecured loan of Rs.1,24,00,000/- from six parties. The appellant has furnished the details of unsecured loan creditors on 20.03.2015 i.e. just before the time barring date for passing Assessment Order, therefore, the Assessing Officer could not complete the verification. The appellant has very well known that the required details to be furnished well in advance for completing the Assessment proceedings whereas the appellant has intentionally furnished the details just before passing the Assessment Order. The appellant wanted to escape from the verification of unsecured loan creditors. The appellant has to prove the identity, creditworthiness and genuineness of the unsecured loan transactions whereas the same was not proved. In the absence of details of identity, creditworthiness and genuineness of the unsecured loan creditors, the Assessing Officer has correctly assessed unsecured loan amount of Rs. 1,24,00,000/-, therefore, the addition made on account of unsecured loan amount of Rs.1,24,00,000/- is confirmed and the appeal of the appellant is dismissed. Ground no. 3 & 4 are on the issue of unsecured loan creditors, therefore, ground no. 3 & 4 are dismissed.” Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.
The Ld.AR submitted that, Ground no.1 and 3 are in respect of unsecured loan added in the hands of the assessee to the extent of Rs.1,24,00,000/-. 4.1 He submitted that, the assessee furnished loan confirmation, bank statement, balance sheet etc. of the loan creditors before the Ld.CIT(A). He referred to the written
5 ITA 4921/Mum/2025; A.Y. 2012-13 Manasvi Project Private Limited submission filed before the Ld.CIT(A), reproduced in the impugned order. It is submitted that, the Ld. CIT(A) erred in not considering the documents that proved the identity creditworthiness and genuineness of the transaction. 4.2 In respect of Ground no.2 the Ld.AR submitted that, the Ld.CIT(A) in the impugned order restricted the profit rate at 8%, whereas the assessee offered 7.51% profit, which is more than the industry norms. He submitted that, the addition to the extent confirmed by the Ld.CIT(A) is on adhoc basis. The Ld.AR emphasis that the profit rate offered by the assessee in the preceding year do not exceed 6% and therefore profit offered to tax on 7.1% for the year under consideration is on higher side. He thus prayed that profit rate of 7.1% offered by the assessee may be accepted. 4.3 On the contrary, the Ld.DR submitted that, even though the assessee did not furnish any evidences in support of the receipts, the Ld.CIT(A) granted relief and restricted the addition at 8% as against 12% estimated by the Ld.AO. He thus submitted that the addition restricted by the Ld. CIT(A) should upheld. 4.4 In respect of the unsecured creditors, the Ld.DR submitted that, the details furnished by the assessee was never verified and therefore merely based on the documents, it cannot be said that, the genuineness of the transaction, creditworthiness and the identity of the assessee stands established.
We have perused the submissions advance by both sides in the light of record placed before us.
6 ITA 4921/Mum/2025; A.Y. 2012-13 Manasvi Project Private Limited 5. It is noted that, the Ld.AO as well as the Ld.CIT(A) estimated the profits of the assessee, without verifying the documents in support of the receipts. Admittedly, the assessee did not file any documents before the authorities below, to support its claim. Considering the fact that the addition challenged before this Tribunal only is to the extent of 8% of profits, The Ld.AO is directed to verify the same having regards to the documents/evidences furnished by the assessee. And to consider the issue in accordance with law. 5.1 In respect of the addition made on account of unsecured creditors, neither any verification was carried nor the evidences furnished establish creditworthiness, identity and genuineness of the transaction. 5.2 We therefore, remit both the issue back to the Ld.AO for necessary verification and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee in accordance with law. Accordingly the grounds raised by the assessee stands allowed for statistical purposes. In the result the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 13/10/2025