A N PATEL & OTHERS,LOWER PAREL vs. DY COMMISSIONER OF INCOME TAX CIRCLE 22 1 MUMBAI , LALBAUG PAREL

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: A BEFORE HON’BLESMT. BEENA PILLAI, JUDICIAL MEMBERAND HON’BLE SHRI JAGADISH, ACCOUNTANT MEMBER ITA 1597/MUM/2026 निर्धारणवर्ा/Assmt. Year:2023-24) Permanent Account Number: AAAAA1739K DY. COMMISSIONER OF A N PATEL AND OTHERS INCOME TAX, CIRCLE A-1/54, SHAH AND NAHAR 22(1), MUMBAI INDUSTRIAL ESTATE, ROOM NO. 322, 3RD SITARAM JADHAV MARG, FLOOR, PIRAMAL Vs. LOWER PAREL (WEST), CHAMBERS, LALBAUG, MUMBAI, MAHARASHTRA MUMBAI, 400013 MAHARASHTRA 400012 (अपीलार्थीAppellant) (प्रत्यर्थीRespondent)

Shri Jitendra Singh, Adv., ननधधाऩितीद्वधिध/Assessee Shivali Mhatre Adv., and represented by: Rajesh Gaikwad, Adv.

Shri Surendra Mohan, SR. िधजस्व द्वधिध/Revenue represented DR. by:

सुनवधईकीतधिीख/Date of conclusion of hearing: 24.06.2026 घोषणधकीतधिीख/Date of pronouncement: 15.07.2026

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 आदेश / ORDER

PER: BEENA PILLAI, JUDICIAL MEMBER: Present appeal filed by the assessee arises out of order dated 06.01.2026 passed by the NFAC, Delhi for Assessment Year 2023-24 on following grounds of appeal:

1.That on the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in confirming the addition of Rs. 3,63,790/-on account of the various expenses and payments made by the assesee- company treated as disallowable u/s 40A(3) ofthe Income tax Act, 1961( hereinafter to be referred as the Act) made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY :2012-13.

2.That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the addition of Rs.72,28,969/- on account of non-deduction of TDS on the sum amounting to Rs.72,28,969/-debited to the profit & loss account treated as disallowable u/s 40a(ia) of the Act made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act, in the case of the assessee for AY: 2012-13.

3.That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the Rs.19,53,49,672/- on account of disallowance of expenses towards discount, salary and purchases of shares & goods debited to the Profit and Loss Account along with mismatch in closing stock figure as per the balance sheet & sale of scrips of M/s Sunrise Asian Limited and M/s Sampada Chemicals Limited appearing as revenue receipt in the profit & loss account treated as unexplained expenditure u/s 37(1) of the Act; made by the Assessing Officer while passing the order u/s 144 read with section

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 153A of the Act in the case of the assessee for AY: 2012-13 without appreciating the fact that expenses were linked with the business.

4.That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in confirming the addition of Rs.56,88,62,490/- on account of receipt of unsecured loan, amount of sundry credits and other payables converted into unsecured loans through journal entries and repayment of unsecured loan, aggregating to Rs.56,88,62,490/- treated as unexplained cash credit u/s 68 of the Act, made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2012-13 without appreciating the fact that the genuineness of the transactions, identity of the lenders and their credit worthiness with regards to receipt of unsecured loan along with journal entries converted into unsecured loan were prima facie proved by the appellant through documents before the learned Assessing Officer. Further that on the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in confirming the addition pertaining to repayment of loan which by no stretch of imagination was to be treated as unexplained cash credit u/s 68 of the Act.

5.That on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the addition of Rs. 3,63,790/-on account of the various expenses and payments made by the assessee- company treated as disallowable u/s 40A(3) of the Income tax Act, 1961, addition of Rs.72,28,969/- on account of non-deduction of TDS on the sum amounting to Rs.72,28,969/- debited to the profit & loss account treated as disallowable u/s 40a(ia) of the Act; addition of Rs.19,53,49,672/- on account of disallowance of expenses towards discount, salary and purchases of shares & goods debited to the Profit and Loss Account along with mismatch in closing stock figure as per the balance sheet & sale of scrips of M/s Sunrise Asian Limited and M/s Sampada Chemicals Limited appearing as revenue receipt in the profit & loss account treated as unexplained expenditure u/s 37(1) of

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 the Act; and addition of Rs. Rs. Rs.56,88,62,490/- on account of receipt of unsecured loan, amount of sundry credits and other payables converted into unsecured loans through journal entries and repayment of unsecured loan, aggregating to Rs.56,88,62,490/- treated as unexplained cash credit u/s 68 of the Act, at page 81-82 of the assessment order and at pages 74-82 of the appellate order when no incriminating documents qua the unabated assessment year 2010- 11 were found during the search operation in the premises of the assessee to justify the impugned additions in line with the settled principle of law that additions in an order u/s 153A of the Income tax Act , 1961 for an unabated assessment year is to be strictly made on the basis of evidence found in the course of the search, or other post search material or requisition of documents and assets pertaining to the searched person or person in whose case requisition has been made, categorically with regards to the assessment year in question.

In addition that on the facts and in the circumstances of the case and in law, decision of the Id. CIT(A) to uphold all the additions made by the learned Assessing Officer in absence of any incriminating documents qua the unabated AY 2012-13 found during the course of search & seizure operation in the case of the appellant is contrary to the decision dated 20th April, 2023 of the Hon'ble Supreme Court of India in Civil Appeal No 6580 of 2021 in the case of Pr. CIT Central-3 Vs Abhisar Buildwel Pvt Ltd and the decision of Delhi High Court in the case of Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) & Principal Commissioner of Income Tax, Central -2, New Delhi Vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) and the decision of Jurisdictional Bombay High Court in the case of Commissioner of Income Tax-II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay).

6.That on the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in upholding the rejection of books of accounts of the assessee u/s 145(3) of the Act by the learned AO while passing

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 the assessment order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2012-13 without appreciating that the facts and circumstances of the case did not warrant the rejection of the books of account.

Further that on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in upholding the order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2012-13 which entailed additions in respect of entries in the books of accounts of the appellant which had already been rejected u/s 145(3) of the Act.

In addition that on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in concurring with the decision of the learned AO to hold that the retraction of statement through an affidavit by Sri Vipul Vidur Bhatt on 02.09.2016 retracting the deposition made by him in his earlier statements made between 04.02.2016 to 12.05.2016 was beyond "reasonable period" with regards to filing of the retraction and there was no conclusive evidences to prove that the statements during summon/survey/search actions were recorded under force and coercion by the departmental authorities and as such not maintainable while rejecting the validity of the retraction made by the Assessing Officer while passing the order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2012-13.

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 8.That on the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in upholding the order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2012-13 which was based on the special audit conducted under section 142(2A) of the Act without appreciating that the facts and circumstances of the case warranting a special audit did not exist as there was no such complexity in the accounts of the Appellant.

9.That on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in upholding the additions made in the assessment order passed by the learned AO u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2012-13 based on the statements of third parties without appreciating the fact that the Appellant was not granted an opportunity of cross examination of the third parties.

Further in addition that on the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in appreciating the fact that without any incriminating material found at the premises of the Appellant during the course of search, the statements recorded under section 132(4) did not have any evidentiary value.

10.That on the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the fact that the approval of the Additional Commissioner was obtained and granted in a mechanicalway without any application of mind and the assessment order u/s 144 read with section 153A of the Act in the case of the assessee for AY: 2012- 13 was passed on the very same day along with other cases in sizeable number.

Further that on the facts and in the circumstances of the case and in law, the CIT(A) erred in ignoring the contention of the appellant that the orders passed u/ 144 read with section 153A of the Act for AY: 2012-

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 13 was time barred u/s 1538 of the Act as the order was received on 13.08.2018, beyond 08.08.2018, the last date by which the order was to passed and served upon the appellant u/s 153B of the Act, being dispatched from the office of the Assessing officer on 11.08.2018 as supported by the speed post tracking trails of India Post which was utilized to make the service of the order.

Brief facts of the case are as under:

2.1. In response to the notices issued from time to time, the assessee submitted that it had developed a residential project known as "Nirvan Tower", the construction of which commenced on 02.11.2010 and was completed on 28.07.2017. It was explained that, in accordance with the terms governing the Association of Persons (AOP), execution of the sale agreements required the signatures of all the members of the AOP. However, one of the members expired on 30.03.2021 and, subsequently,

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 his legal heir also passed away on 07.08.2022. According to the assessee, on account of these unforeseen events, it was not possible to execute the sale agreements in respect of certain flats. Consequently, the amount of ₹16,08,17,599/- received from prospective purchasers continued to be reflected as "Advance from Customers" under the head "Current Liabilities" in its books of account.

2.2. The assessee further submitted that it had consistently followed the project completion method of accounting and recognised revenue in accordance with Accounting Standard-9. It was contended that, as a matter of consistent accounting policy, no sale was recognised unless more than 50% of the sale consideration had been received, whereupon the agreement for sale would be registered and possession of the flat handed over to the purchaser. It was also reiterated that execution of the sale agreement necessarily required the signatures of all the members of the AOP.

2.3. The assessee submitted that, as on 31.03.2023, four flats continued to form part of its closing stock having an aggregate value of ₹12,75,42,783/-, while advances aggregating to ₹16,08,17,599/- received against two of the flats were disclosed as current liabilities. It was explained that the sale deeds in respect of these two flats could ultimately be executed only during Assessment Year 2025-26 owing to the disruption caused by the COVID-19 pandemic, the demise of one of the AOP members and thereafter his legal heir, coupled with delays arising on account of adjudication relating to insufficiency of stamp duty. It was only

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 after completion of these formalities that the sale deeds were registered and possession was handed over to the respective purchasers.

2.4. Insofar as the remaining two flats were concerned, the assessee submitted that less than 50% of the agreed sale consideration had been received from the prospective purchasers. Consequently, in accordance with its consistently followed accounting policy, neither the sale agreements were registered nor was possession of the flats handed over. Therefore, according to the assessee, no occasion arose for recognition of revenue in respect of those flats during the year under consideration.

2.5. During the course of assessment proceedings, the Ld.AO issued notices under section 133(6) of the Act to various purchasers. One of the purchasers, in response, stated that the purchase consideration as well as stamp duty and registration charges had been paid and possession of the flat had been received. Relying upon such response, the Ld.AO held that execution of the registered sale deed or sale agreement was only a procedural formality and that the transfer of the flats had already taken place.

2.6. Accordingly, the Ld.AO treated the entire sale consideration as accrued during the year and brought to tax the difference between the sale consideration and the closing stock by treating the same as the profit of the AOP.

Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld. CIT(A).

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 3. Before the Ld.CIT(A), the assessee challenged, inter alia, the disallowance of business loss of ₹18,55,482/-, contending that the said loss arose on account of maintenance charges collected from the buyers on a lump-sum basis. The assessee also assailed the addition of ₹8,64,57,270/- made by the Ld.AO by treating the profit from the real estate business as taxable during the year under consideration. The Ld. CIT(A), however, upheld the additions made by the Ld.AO.

Aggrieved by the impugned order of the Ld. CIT(A), the assessee is in appeal before us.

We have considered the rival submissions and perused the material available on record.

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 4.1. In our considered opinion, the controversy involved is essentially factual in nature and requires a comprehensive examination of the evidences on record before determining the correct year of taxability of the revenue. Since the impugned order does not reflect any such examination, we deem it appropriate, in the interest of justice, to set aside the order of the Ld.CIT(A) on this issue and restore the matter to his file for de novo adjudication. The Ld. CIT(A) shall examine all the evidences and submissions that may be placed on record by the assessee, verify the assessee's claim that the impugned revenue has been offered to tax in the subsequent assessment years, and thereafter pass a speaking order in accordance with law after affording adequate opportunity of being heard to the assessee.

The appeal is thus restored to the file of the Ld. CIT(A) for adjudication afresh in accordance with law.

Accordingly grounds raised by the assessee stands allowed for statistical purpose. In the result, appeal filed by the Assessee stands allowed for statistical purpose. Order pronounced in the open court on 15.07.2026

Sd/- Sd/- (JAGADISH) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER ANKIT, PS Mumbai Dated: 15.07.2026

ITA 1597/MUM/2026 A N PATEL AND OTHERS A.Y. 2023-24 Copy of the Order forwarded to: 1. अपीलधथी/The Appellant , 2. प्रनतवधदी/ The Respondent. 3. आयकिआयुक्त CIT 4. नवभधगीयप्रनतनननध, आय.अपी.अनध., म ुंबई/DR, ITAT, Mumbai 5. गधर्ाफधइल/Guard file. TRUE COPY

ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., MUMBAI