K.P. CONSTRUCTION,CHENNAI vs. DCIT, CENTRAL CIRCLE-1(4), CHENNAI

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ITA 3212/CHNY/2025Status: DisposedITAT Chennai06 May 2026AY 2013-1411 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that the closing balance for creditor IVRL was cleared in the subsequent year and was verifiable. Similarly, the closing balance for creditor CCL was reconciled and cleared in the subsequent year.

What were the facts?

During a search, Rs. 5,00,000 was seized from the assessee's premises. The AO added outstanding sundry creditors of Rs. 1,60,55,962 for want of evidence. The CIT(A) deleted part of the addition but confirmed Rs. 55,72,490.

What were the issues?

Whether the addition of sundry creditors was justified in the absence of incriminating material from the search, and whether the discrepancies in creditor balances were genuine.

Which sections of the Income-tax Act were involved?

Section 132,Section 153C,Section 143(2),Section 142(1),Section 139,Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI INTURI RAMA RAO

Hearing: 25.02.2026Pronounced: 06.05.2026

आयकर अपीलीय अधिकरण, ‘ए’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI श्री एबी टी. वर्की, न्यायिर्क सदस्य एवं श्री इंटूरी रामा राव, लेखा सदस्य के समक्ष BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.3212/Chny/2025 ननिाारणवर्ा/Assessment Year: 2013-14 v. K.P. Construction, The DCIT, No.19/10, F2, Rangarajapuram, Central Circle-1(4), 4th Street, Saidapet, Chennai. Chennai-600 015. [PAN: AAIFK7611H] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Appellant by : Mr.G. Baskar, Advocate & Mr.S. Velpandian, Advocate : प्रत्यर्थी की ओर से /Respondent by Mr.S. Senthil Kumaran, CIT : सुनवाईकीतारीख/Date of Hearing 25.02.2026 घोर्णाकीतारीख /Date of Pronouncement : 06.05.2026 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai-18, dated 17.10.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2013-14.

2.

Brief facts of the case are that, the assessee is a construction Firm engaged in the business of executing civil contracts for PWD department

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 2 :: and railways. A search action was conducted u/s 132 of the Income Tax Act 1961 (herein after ‘the Act’) upon Shri C P Anbunathan on 22.04.2016 and Shri P Janakar on 10.05.2016. During the course of search upon Shri P Janakar, the business premises of the assessee was also searched and sum of Rs.5,00,000/- was seized therefrom. Upon analysis of the material seized in the course of the search at Shri P Janakar, it was gathered that, they contained various transactions and notings of receipts of the assessee. Accordingly, proceedings u/s 153C of the Act was initiated in the matters of the assessee and notice u/s 153C of the Act for AY 2013- 14 was issued on 10.09.2018. The assessee filed the return of income on 02.10.2018 declaring total income of Rs.84,03,160/-. Notices u/s 143(2) & 142(1) issued by the AO, were partly complied with by the assessee. The AO had inter alia requisitioned the details of sundry creditors with confirmations, which was not furnished by the assessee. The AO accordingly added the outstanding sundry creditors of Rs.1,60,55,962/- for want of evidence.

3.

Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A). It is observed that, the assessee had assailed the validity of the addition made by the AO u/s 153C of the Act as it was not based on any incriminating material unearthed in course of search, which was rejected by the Ld. CIT(A). The Ld. CIT(A) observed that, the assessee had not filed any return of income u/s 139 of the Act and that

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 3 :: the income declared u/s 153C was with reference to the material seized in the course of search. According to Ld. CIT(A), once the seized material found from the premises of Shri P Janakar had found relevance in the filing of return of income by the assessee, then the AO was free to question on any or all issues in the course of proceedings u/s 153C of the Act. For this, the Ld. CIT(A) referred to the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (149 taxmann.com 399).

4.

On merits, the assessee is found to have furnished the details of sundry creditors by way of additional evidence. The Ld. CIT(A) admitted the same and called for a remand report from the AO. The AO in his remand report stated that, out of total creditors of Rs.1,60,55,962/-, creditors to the extent of Rs.1,02,90,322/- have confirmed the balances against the assessee. The AO further observed that, though two creditors viz., IVRL Concrete [in short ‘IVRL’] and Chettinad Cement Corporation [in short ‘CCL’] had confirmed transactions with the assessee but found discrepancies in the ledgers furnished by them, which stood at Rs.55,72,490/-. The Ld. CIT(A) following the reasoning set out in the remand report retained addition to the extent of Rs.55,72,490/- and deleted the balance addition of Rs.1,02,90,322/-. Aggrieved by the Ld. CIT(A)’s action, the assessee is now in appeal before us.

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 4 :: 5. Ground Nos. 1 to 3 raised by the assessee relates to the challenge to the legal validity of the addition of Rs.55,72,490/- confirmed by the Ld. CIT(A) in absence of any incriminating material found in the course of search. The Ld. AR appearing for the assessee did not seriously contest the findings of the Ld. CIT(A) rejecting this legal plea and therefore we also dismiss these grounds.

6.

Ground No.4 raised by the assessee challenging the merits of the addition retained by the Ld. CIT(A) in relation to the discrepancies found in the ledgers of two creditors viz., IVRL and CCL. The facts as noted are that, the assessee had shown purchases of Rs.94,33,900/- made from IVRL against which the assessee’s ledger showed payment of Rs.73,35,600/-, resulting in closing balance of Rs.20,98,300/-. Before the AO in the remand proceedings, IVRL had stated to have reported sales of Rs.76,47,600/-. The AO accordingly quantified the excess purchase / closing balance as per the books of the assessee to the extent of Rs.17,86,300/- [94,33900 - 76,47,600], which was confirmed by the Ld. CIT(A). Likewise, in the case of CCL, the AO noted the following discrepancies in the total of purchases & payments, which as tabulated by the Ld. CIT(A) is as under:-

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 5 ::

As per Purchases Payment Cl. Balance Assessee 1,00,56,950 61,58,400 38,98,560 CCCL 95,49,960 94,37,600 1,11,960 Difference 5,06,990 32,79,200 37,86,600

The Ld. CIT(A) accordingly confirmed the addition on account of discrepancy in the account of CCL to the extent of Rs.37,86,600/-.

7.

We have heard the rival submissions and the material placed before us. We first take up the addition of Rs.17,86,300/- made on account of the creditor IVRL. The Ld. AR has placed the relevant ledger of IVRL, as appearing in the books of the assessee, on Page 46 of the paper book, which for the sake of convenience, is reproduced hereunder:-

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 6 ::

8.

From the above, it is seen that, the assessee had recorded purchases of Rs.94,33,900/- and the payment side reflects that aggregate sum of Rs.73,35,600/- was paid through banking channel resulting in closing balance of Rs.20,98,300/-. The lower authorities have disputed the closing balance to the extent of Rs.17,86,300/- on the ground that it did not reconcile with the response furnished by IVRL. The Ld. AR, on the other hand, showed us that, the closing balance of Rs.20,98,300/- was

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 7 :: cleared in the immediately subsequent FY 2013-14 and the relevant ledger as placed at Page 47 of paper book is extracted below:-

9.

The Ld. AR also invited our attention to the confirmation issued by IVRL dated 30.12.2018, copy of which was placed at Page 48 of paper book, wherein it had confirmed the receipt of the above outstanding amount of Rs.20,98,300/- in the subsequent FY 2013-14 which is also reproduced hereunder :-

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 8 ::

10.

As rightly pointed out by Ld. AR and as is evident from the ledgers, there was no purchases made from IVRL in subsequent AY 2014-15 and thus the payment of Rs.20,98,300/- was towards the outstanding due of

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 9 :: AY 2013-14 which exactly matched as well. The assessee has also furnished before us the bank statements in support of these payment made in AY 2014-15. We thus find that the assessee has been able to clarify the discrepancy and the closing balance of IVRL as appearing in the books of accounts of the assessee on 31.03.2013 is found to be genuine, verifiable which was also cleared in the subsequent year. The AO is thus directed to delete the addition of Rs.17,86,300/- confirmed by the Ld. CIT(A) on account of IVRL.

11.

We now come to the creditor’s account of CCL. Here also, it is observed from the ledger of the assessee that, it had recorded purchases of Rs.1,00,56,950/- against which payments of Rs.61,58,400/- was made through banking channel. The Ld. AR showed us the date-wise payments made towards these purchases, which is found to be verifiable. According to the ledger of the assessee therefore, there was an outstanding balance of Rs.38,98,560/-, which is in dispute before us. The Ld. AR showed us that, the assessee had made further purchases of Rs.36,67,500/- in the subsequent FY 2013-14 and therefore the total outstanding due to CCL stood at Rs.75,66,060/- [Rs.38,98,560 + Rs.36,67,500]. He brought to our notice that the aggregate due was cleared by way of amount of Rs.75,43,000/- paid through bank and balance sum of Rs.23,060/- paid in cash and accordingly the entire account of CCL stood squared off in the subsequent AY 2014-15. We find that CCL had also confirmed the receipt

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 10 :: of Rs.75,43,000/- in AY 2014-15, and the copy of the confirmation placed at Page 45 of the paper book is reproduced below, for the sake of convenience,

12.

Having perused the above confirmation in light of the ledgers furnished by the assessee, according to us, the purchases from CCL reported by the assessee and the payments made thereto in the relevant AY 2013-14 is found to be verifiable. We also note that the books of

ITA No.3212/Chny/2025 (AY 2013-14) K.P. Construction :: 11 :: accounts of the assessee had not been rejected u/s 145(3) of the Act by the lower authorities. Further, the closing balance of Rs.38,98,560/- is also found to have been reconciled by the assessee with reference to the ledgers and the confirmation issued by CCL for the subsequent AY 2014- 15. We thus are in the agreement with the Ld. AR that, the closing balance of creditor, CCL was neither bogus nor was any excessive purchases debited in relation thereto in P&L A/c. We accordingly direct the AO to delete the addition of Rs.38,98,560/- made in this regard, as well. Overall therefore, Ground No. 4 stands allowed.

13.

In the result, appeal filed by the assessee is partly allowed.

Order pronounced on the 6th day of May, 2026, in Chennai.

Sd/- Sd/- (इंटूरी रामा राव) (एबी टी. वर्की) (INTURI RAMA RAO) (ABY T. VARKEY) न्यानयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनांक/Dated: 6th May, 2026. KB आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकरआयुक्त/CIT, Chennai / Madurai / Salem / Coimbatore. 4. ववभागीयप्रविविवि/DR 5. गार्डफाईल/GF

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