NAVNIRMAN DEVELOPERS,AMBERNATH EAST vs. ASSISTANT COMMISSIONER OF INCOME TAX, KALYAN WEST

The assessee is a partnership firm engaged in the business of builders and developers, land dealing, real estate consultancy and civil works of the Public Works Department, etc. The assessee filed its return of income for the assessment year 2017-18 on 28.10.2017 declaring a total income of Rs.1,80,10,190/-. The case was selected for complete scrutiny under CASS.

Notice under section 143(2) of the Act was issued on 13.08.2018 by the Income Tax Officer, Ward-2(5), Kalyan, and was duly served upon the assessee. The case was transferred from the Income Tax Officer, Ward-2(5), Kalyan, on 11.09.2018. Owing to a change in the incumbent, a fresh notice under section 143(2) was issued on 28.09.2018 in terms of section 129 of the Act. Thereafter, notice under section 142(1) dated 26.09.2019, along with a questionnaire, was issued calling for the requisite details.

The Assessing Officer recorded that the assessee did not initially comply with the aforesaid notices. Considering the principles of natural justice, another opportunity was granted by issuing notice under section 142(1) dated 28.10.2019, fixing compliance on 04.11.2019. In response thereto, the authorised representative of the assessee furnished through the e-filing portal, inter alia, the letter of authority, a note on the nature of business,

The Assessing Officer, therefore, treated the difference between the unsecured loans shown as on 31.03.2017 and 31.03.2016, amounting to Rs.1,69,78,730/-, as unexplained cash credit under section 68 of the Act. The addition was made under section 68 read with section 115BBE of the Act. Consequently, by assessment order dated 21.12.2019 passed under section 143(3) of the Act, the total income of the assessee was determined at Rs.3,49,88,920/-.

Aggrieved by the assessment order, the assessee filed an appeal. Before the learned CIT(A), the assessee contended that, in response to the show-cause notice dated 16.12.2019, it attended the hearing on 19.12.2019 and furnished party-wise details of the unsecured loans along with some of the confirmations. The assessee sought time up to 23.12.2019 to furnish the remaining confirmations and copies of the returns of income of the loan creditors.

It was further submitted that the assessee had collected the loan confirmations, copies of the returns of income and PAN cards of the loan creditors and attempted to upload the same on the morning of 23.12.2019. However, the online facility had been

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

Before us, the learned Authorised Representative (AR) reiterated the facts and submissions made before the lower authorities. He submitted that a reply furnished by the assessee before completion of the assessment had not been considered by the Assessing Officer. The learned authorised representative referred to dates stated as 22.11.2019 and 23.11.2019. However, the assessment order on record bears the date 21.12.2019 and was digitally signed on 23.12.2019. The substance of the submission of the learned authorised representative was that the reply and supporting evidence furnished or sought to be furnished immediately before completion of the assessment were not considered by the Assessing Officer. The precise dates and the filing of the reply were stated to be verifiable from the assessment records.

The learned AR further submitted that the learned CIT(A) had recorded the assessee’s contention regarding its attempt to furnish the confirmations and supporting documents before completion of

The assessment order shows that the Assessing Officer made the addition principally because the assessee had not furnished complete confirmations and supporting evidence in respect of the loan creditors within the time allowed. On the other hand, the assessee has consistently contended that it furnished some of the confirmations, sought a short adjournment for furnishing the remaining documents, collected the requisite evidence and attempted to furnish the same before completion of the assessment.

The learned CIT(A) declined to admit the additional evidence on the ground that the assessee had not demonstrated compliance with Rule 46A of the Income Tax Rules, 1962. However, the learned CIT(A) did not call for a remand report from the Assessing Officer regarding the evidence sought to be furnished by the assessee. The record placed before us is also stated to contain notices issued by the Assessing Officer to some of the creditors and replies furnished by some of them. These documents have a direct bearing on the identity and creditworthiness of the creditors and the genuineness of the loan transactions.

The issue under section 68 requires creditor-wise examination of the relevant evidence. A mere comparison of the aggregate unsecured loans appearing in the balance sheets of two

The Assessing Officer shall identify the credits introduced during the relevant previous year and decide the identity and creditworthiness of each creditor and the genuineness of each transaction in accordance with law. Needless to state, the Assessing Officer shall afford the assessee a reasonable opportunity of being heard and shall pass a speaking order after considering all the material placed on record. The assessee is also directed to extend full cooperation and furnish the requisite evidence within the time allowed by the Assessing Officer. We have not expressed any opinion on the merits of the addition, and all contentions of both sides are left open. Accordingly, Ground Nos. 1, 1.1 and 1.2 are allowed for statistical purposes.

Ground No. 2 relates to the initiation of penalty proceedings under section 271AAC of the Act. Since the quantum addition has been restored to the Assessing Officer for fresh adjudication, the challenge to the initiation of penalty proceedings is premature and does not require separate adjudication at this stage. The Assessing Officer shall act in accordance with law depending upon the outcome of the fresh assessment proceedings.

In the result, the appeal of the assessee is allowed for statistical purposes.