PTG ESTATES LLP,HYDERABAD vs. ITO., WARD-8(1), HYDERABAD

PER VIJAY PAL RAO, VICE PRESIDENT : This appeal by the Assessee is directed against the Order dated 28.02.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2022-2023.

2 ITA.No.1048/Hyd./2025 delay which is supported by the affidavit of the Managing Partner of the Assessee-LLP. The learned Authorised Representative of the Assessee has submitted that earlier the LLP was formed by three partners vide partnership firm agreement dated 25.11.2020. Thereafter, on 19.03.2025 there was a change in the constitution of the Assessee-LLP due to retirement of the two of the partners viz., Mr. TG Vishwa Prasad and Mr. M. Kutumba Rao and one new partner Mr. Kishore Karnati joined the Assessee-LLP which has resulted reconstitution of the partnership firm. The email-ID of one of the partners Mr. TG Vishwa Prasad was given in Form-35 for notice and communication purpose however, he retired from the LLP and therefore, the impugned order dated 28.02.2025 remained unattended as the same was sent to the email-ID belongs to the retired partner Mr. TG Vishwa Prasad. Thus, the learned Authorised Representative of the Assessee has submitted that the partners who continued with the LLP were not aware about the impugned order passed by the learned CIT(A) and therefore, the appeal could not be filed within the limitation

3 ITA.No.1048/Hyd./2025 period and only when the Department asked for the tax arrears, the assessee realized and found that the learned CIT(A) has passed the impugned order and thereafter, immediately the appeal was filed with a delay of 50 days. Thus, the learned Authorised Representative of the Assessee has submitted that the delay in filing the appeal may be condoned and appeal of the assessee may be admitted for adjudication.

2.1. He has referred to the LLP agreement dated 25.11.2020 and dated 19.03.2025 and submitted that due to reconstitution of LLP and impugned order sent to the email- ID of the entity of the outgoing partner, the assessee could not take steps to file the present appeal within the period of limitation.

4 ITA.No.1048/Hyd./2025 4. We have considered the rival submissions as well as the relevant material on record. The assessee has explained the cause of delay of 50 days in filing the appeal by filing the petition for condonation of delay which is supported by the affidavit of the partner of the Assessee-LLP which reads as under:

“AFFIDAVIT FOR CONDONATION

5 ITA.No.1048/Hyd./2025 7. The reasons for delay of 50 days are as under:  We are an LLP with three Partners, viz Mr.T.G. Vishwa Prasad, Mr.M.Kutumba Rao, and Mr. Bh. Praveen Kumar, and the LLP was entered into on 25th November, 2020.  On the 19th of March, 2025, there was a change in the constitution in the LLP. On that date, Mr.T.G. Vishwa Prasad, and Mr.M.Kutumba Rao, retired from the firm, and one new partner had joined.  Prior to his retirement from the LLP, Mr.T.G. Vishwa Prasad, was the partner looking after the business of the LLP on a day-to-day basis, and was also looking after the taxation matters. The mail id given in the Form No. 35 was, finance.team@peopletech.com.  Mr.T.G.Vishwa Prasad, is the CEO of PeopleTech Group and had given the above email for taxation purposes, which was being monitored by the finance division of People Tech Group.  The order of the Appellate Commissioner is dated 28th of February, 2025.  Mr.T.G.Vishwa Prasad, had left the LLP on the 19th of March, 2025.  The order of the Appellate Commissioner had gone to the mail id finance.team@peopletech.com, which was being monitored by Mr.T.G.Vishwa Prasad.  As a result, the partners of the continuing LLP had no idea that the appellate order had been passed. It was only when the department had asked for the tax arrears to be paid, the LLP realized that the order has been passed.  We had taken immediate remedial steps to file the appeal before the Hon'ble ITAT. Hence the delay of 50 days.

6 ITA.No.1048/Hyd./2025 8. It is therefore submitted that there is no malafide and was from genuine reasons that the appeal was filed belatedly. Hence it is prayed that the appeal be admitted. For PTG ESTATES LLP Date: 15.10.2025 Sd/- B. Praveen Kumar Place: Hyderabad Deponent Designated Partner”

4.1. Thus, the assessee has explained the cause of delay that in Form-35 the email-ID of M/s. People Tech Group belonging to Mr. TG Vishwa Prasad was given for the purpose of communication of notice and order. Since there was a reconstitution of the LLP and two of the partners viz., Mr. TG Vishwa Prasad and Mr. M. Kutumba Rao retired from the Firm on 19.03.2025 therefore, the impugned order could not be communicated to the Assessee-LLP or to the continuing partners. We find that initially the Assessee-LLP was created vide partnership firm Deed/Agreement dated 25.11.2020 and thereafter vide Supplementary LLP Agreement dated 19.03.2025 two of the partners got retired and one new partner was inducted into the partnership firm. Further as per Form-35 the email-ID finance.team@ peopletech.com was given for the purpose of notice/order and

7 ITA.No.1048/Hyd./2025 Mr. TG Vishwa Prasad is the CEO of People Tech Group. Thus, it is clear that for the purpose of monitoring the tax matters email of finance.team@peopletech.com was given which is a concern of Mr. TG Vishwa Prasad. But due to the retirement of the partners and reconstitution of the LLP there was a miscommunication of the impugned order to the Assessee-LLP and its continuing partners and hence, we are satisfied that the assessee has explained the ‘sufficient cause’ for delay of 50 days in filing the present appeal. It is settled proposition of law that while considering the ‘sufficient cause’ the Courts should take a lenient view so as to decide the matters on merits instead of technicalities. Accordingly, in the facts and circumstances of the case and in the interest of justice, we condone the delay of 50 days in filing the present appeal.

8 ITA.No.1048/Hyd./2025 3. The Appellate Commissioner erred in not confirming the evidences filed before the lower authorities, which the appellant has submitted. 4. The Appellate Commissioner erred in confirming the finding of the A.O, that the persons who had advances the amounts had no incomes. 5. Any other grounds which the Assessee may urge either before or at the time of the hearing.”

9 ITA.No.1048/Hyd./2025 also asked to furnish the details of payment of interest and TDS deducted of such interest payment. In reply, the assessee furnished bank account statement, LLP agreement, capital account, cash flow statement, P & L A/c, balance- sheet, ledger extract and sundry creditors and sought some more time to submit the other details. Thereafter, the Assessing Officer passed the assessment order and made the addition u/sec.68 of the Act on the account of unsecured loans of Rs.20,10,40,000/- shown as outstanding as on 31.03.2022. The assessee challenged the Order of the Assessing Officer before the learned CIT(A) but could not succeed.

10 ITA.No.1048/Hyd./2025 letter and also justified the source of fund in the form of loan received from these parties. He has further contended that the loan was received through banking channel and one of the partners of the Assessee-LLP was also a Director in the loan creditor company. The Assessing Officer has made the addition by giving the reasons that on one hand the assessee has taken loans and on the other hand the assessee has granted the advances to the sister concerns and therefore, the Assessing Officer was of the view that it is not a business prudence for anybody to borrow and then advance loan without any interest. The learned Authorised Representative of the Assessee has submitted that non-charging of interest on the advances given to the sister concern cannot be a reason to make an addition u/sec.68 of the act. He has further contended that the assessee has received the unsecured loans from 06 parties and filed their confirmations along with the details of PAN and also explained the fact that the lenders are also assessed to tax. The assessee also produced the bank account statement clearly showing that they have sufficient funds in their bank account to give the

11 ITA.No.1048/Hyd./2025 loan to the assessee. Thus, the learned Authorised Representative of the Assessee has submitted that the assessee has discharged its onus of establishing the identity of the loan creditors, their creditworthiness and genuineness of the transaction by producing the supporting evidence. The learned Authorised Representative of the Assessee has further submitted that once the assessee has produced all the supporting evidence which includes the confirmation of the loan creditors along with loan agreements, their bank account statements then, in the absence of any discrepancy or deficiency in the evidences produced by the assessee or any contrary material brought on record by the Assessing Officer, the addition u/sec.68 of the Act cannot be made merely on the basis of the suspicion. The Assessing Officer has not disputed the identity of the loan creditors who are assessed to tax as well as the creditworthiness of the creditors but has made the addition only on the ground of doubting the genuineness of the transaction and business prudence in taking the loan on one hand and giving the advance to the sister concerns.

12 ITA.No.1048/Hyd./2025 8. On the other hand, the learned DR has submitted that the creditworthiness is not proved by the assessee and further the transactions are between the related parties. Therefore, the onus was on the assessee to discharge its burden of providing the identity, creditworthiness and genuineness of the transaction beyond doubt. He has relied upon the Orders of the authorities below as well as the following decisions: Order of ITAT, Ahmedabad in the case of Pavankumar M 1. Sanghvi Vs. ITO, W-3(1)(2), Vadodara [2017] 81 taxmann.com 308 (Ahmedabad-Trib.) Judgment of Hon’ble Supreme Court in the case of 2. Pavankumar M Sanghvi Vs. ITO, Income-Tax Officer [2018] 97 taxmann.com 398 (SC)/2018 Judgment of Hon’ble Gujarat High Court in the case of 3. Pavankumar M Sanghvi Vs. ITO, Income-Tax Officer (2018) 90 taxmann.com 386 (Gujarat)/2018 Judgment of Hon’ble Supreme Court in the case of Pr. 4. Commissioner of Income-Tax (Central)-1 Vs. NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48(SC)/2019 Judgment of Hon’ble Calcutta High Court in the case of 5. Balgopal Merchants (P.) Ltd. Vs. Pr. Commissioner of Income- Tax [2024] 162 taxmann.com 465 (Calcutta) 2024. 6. Order of ITAT, Mumbai SMC Bench, Mumbai in the case of J.K. Global Vs. ITO, W-31(2)(2), Mumbai ITA Nos. 3260,3259 & 3258/Mum/2023, dated 05.09.2024. Order of ITAT, Mumbai B-Bench, Mumbai in the case of DCIT- 7. 14(2)(2), Mumbai Vs. M/s. Mishal Construction Pvt. Ltd. ITA Nos. 3561 to 3565/Mum/2029, dated 23.12.2021. Judgment of Hon’ble Delhi High Court in the case of Pr. 8. Buildcon Pvt. Ltd Commissioner of Income-Tax Vs. Jaguar Buildcon Pvt Ltd., ITA No. 530 & 531/2023, dated 03.03.2025.

13 ITA.No.1048/Hyd./2025 9. We have considered the rival submissions as well as the relevant material on record. The Assessing Officer has given the details of loan taken by the assessee and showing as outstanding as on 31.03.2022 at Page no.5 as under:

“1.3. Given the above, out of total outstanding loan of Rs.24,60,40,000 only amounting to Rs. 20,10,40,000 belongs to the current financial year the remaining balance of Rs. 4,50,00,000 is an opening balance amount. 1.4. Further, as requested by your goodself, the Assessee have made available the identity of the lender by submitting the PAN details of each lender along with the confirmation letters. Accordingly, this would justify the source of funds in the form of Loans received from the above mentioned parties.”

14 ITA.No.1048/Hyd./2025 9.1. Thus, the assessee has furnished the PAN details of each of the loan creditor along with the confirmation letters. We further note that the assessee has also produced the loan agreements and bank account statements of the loan creditors. The Assessing Officer has clearly mentioned in the assessment order that the assessee has also provided loan agreements where it is stated that 7% simple interest will be charged however, in the ITR the assessee has neither declared any income from interest nor debited any expenditure towards interest paid. Thus, the Assessing Officer has taken note of the fact that the assessee has also advanced the loans to three parties’, details of which, are provided at Page no.16 of the assessment order as under:

15 ITA.No.1048/Hyd./2025

9.2. Out of the loan taken, the assessee has given the loans to its two sister concerns and one related party. The Assessing Officer has finally given reasons for disallowing the claim of the assessee as under:

“It can be seen from the above table that the assessee has given short term loans to Sri Kutumbarao Meka and Indo Sunshine spaces LLP. It is pertinent to mention here that Sri Kutumbarao Meka is one of the partner in PTG Estates, LLP and also the director in Indo Sunshine Spaces LLP. The assessee is using colourable devices to make these transactions look like normal business transactions. Moreover, it is not business prudence for anybody to borrow and then advance loan in the quantum of 20,10,40,000/- without any interest. All the above discussed factors point towards a sham transaction. Under these circumstances, the entire unsecured loan creditors are treated as unexplained and the

16 ITA.No.1048/Hyd./2025 amount of Rs.20,10,40,000/- on account of USL is brought to tax as assessee's income for the FY: 2021-22 relevant to the AY: 2022- 23 as unexplained credits u/s 68 of the Income tax Act, 1961.” 9.3. Thus, the Assessing Officer has given the reasons to make the addition that the assessee has also given short term loans to the related party and sister concern which the Assessing Officer has considered as a colourable device to make these transactions look like normal business transactions. The Assessing Officer has not disputed the identity of the parties from whom the assessee has taken loans, their creditworthiness but since the loan was utilised by the assessee to provide advances to the sister concerns/ related parties, the Assessing Officer has made the addition u/sec.68 of the Act. At the outset, we are of the considered view that the reasons assigned by the Assessing Officer without conducting a proper enquiry on the genuineness of the transaction would not justify the addition u/sec.68 of the Act. Once the assessee has produced the confirmation of all the parties along with the loan agreements which is also accepted by the Assessing Officer then, the utilisation of the loan cannot be a ground for making the addition u/sec.68 of

17 ITA.No.1048/Hyd./2025 the Act. If the assessee has not utilised the loan for business purposes then, only the interest on such loan can be disallowed however, the assessee has not claimed any interest in the return of income therefore, the Assessing Officer could not find any reason to make any disallowance on account of interest and resorted to make the addition u/sec.68 of the Act.

9.4. From the evidences produced by the assessee, we find that once each and every party has entered into a loan agreement for granting loan to the assessee and their identity was not in dispute as all these loan creditors are assessed to tax then, the genuineness of the transaction cannot be doubted merely on the ground that the assessee has utilised this loan for making advances to the sister concerns/related party. From the bank account of these concerns, it is clear that sufficient fund was available with these loan creditors and there is no abnormal transaction in the bank account of the loan creditors in the shape of any cash deposit prior to the loan given to the assessee or any other abnormal movement of fund. Thus, once the Assessing Officer has not

18 ITA.No.1048/Hyd./2025 made out any defect in the documentary evidence produced by the assessee in respect of the loan transactions then, the utilisation of loan amount would not constitute failure of the assessee to discharge its onus caste u/sec.68 of the Act. The Assessing Officer has not even found or doubted that assessee’s own unaccounted money has routed back to the assessee in the garb of unsecured loans. At the most the reasons assigned by the Assessing Officer are indicating that assessee could be a conduit for transfer of funds from the loan creditors to the other related parties but that itself cannot be a reason to bring the transaction in the mischief of sec.68 of the Act. Therefore, when the identity and capacity of the loan creditors is neither disputed nor disproved then, merely because the assessee has taken the loan and given the advances to the sister concerns/related party would not convert the transaction as non-genuine. Though the Assessing Officer has used the term ‘colourable device’ in making such transactions however, it is not even the case of the Assessing Officer that the assessee’s own unaccounted

19 ITA.No.1048/Hyd./2025 money has routed back to the assessee in the shape of unsecured loans.

9.5. The learned CIT(A) has also not given the finding of fact on this issue to confirm the addition made by the Assessing Officer by giving the reasons in Para no.7.4 as under:

“7.4. The fundamental question involved is that whether or not the AO was justified in making the additions of Rs. 20,10,40,000/- u/s 68 in the hands of the assessee, and the most critical thing to be examined in this regard is explanation of the assessee with respect to these expenditures/investments/credits. There is no, and there cannot be any, dispute on the fundamental legal position that the onus is on the assessee to prove 'bonafides' or 'genuineness' of the money credited in his bank account. This approach finds support from the scheme of Section 68/69, which provides that where any expenditure/investments/credits is found in the books/bank accounts of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, such sum may be charged to income tax as the income of that assessee for that previous year. The burden is thus on the assessee to prove the nature and source thereof, to the satisfaction of the Assessing Officer. Everything thus hinges on the explanation given by the assessee and on how acceptable is the explanation so given by the assessee. The next question is as to what the kind of explanation that the assessee is expected to give.”

20 ITA.No.1048/Hyd./2025 9.6. Thus, the learned CIT(A) has discussed only about the primary onus on the assessee to establish the identity and creditworthiness of the loan creditors as well as genuineness of the transaction but not given any finding how the assessee has failed to discharge its onus. It is settled proposition of law that once the assessee has discharged its primary onus to prove the identity and creditworthiness of the creditor and also established the genuineness of the transaction by production of the evidence of the capacity of the creditors as well as the transaction through banking channel without any abnormality then, the burden is shifted to the Assessing Officer to disprove the claim of the assessee which the Assessing Officer failed. Therefore, in the facts and circumstances of the case, when the assessee has produced the audited financial accounts along with the confirmation of the loan creditors which are placed at Page nos.1 to 50 of the paper book and further the assessee also produced the bank account statement of the loan creditors who are also undisputedly assessed to tax then, the assessee has discharged its onus caste u/sec.68 of the Act. Accordingly,

21 ITA.No.1048/Hyd./2025 the addition made by the Assessing Officer is not justified and liable to be deleted. We Order accordingly.

9.7. Before parting with the matter, we deal with the decisions/Judgments relied upon by the learned DR in the case of Pavankumar M Sanghvi vs. ITO (supra) where loans were found to be taken from shell companies and therefore, when the assessee failed to produce the lenders for verification the addition made by the Assessing Officer was found to be justified. Similarly, in the case of CIT (Central)-1 vs. NRA Iron & Steel (P.) Ltd., (supra), the assessee failed to establish the creditworthiness of the investor companies which is not in the case in hand. Therefore, these decisions relied upon by the learned DR would not help the case of the Revenue.

Sd/- Sd/- [MANJUNATHA G.] [VIJAY PAL RAO] ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 06th May, 2026. VBP

22 ITA.No.1048/Hyd./2025 Copy to : PTG Estates LLP, D.No.1-80/1/L/NR/C/P, Plot No.76, 1. Lumbini Avenues, Hitech City, Gachibowli, Hyderabad. PIN – 500 081. Telangana. The Income Tax Officer, Ward-8(1), Signature Towers, 11th Venkat Enclave, Whitefields, Hitech 2. City, Kondapur, Hyderabad – 500 084. Telangana. 3. The Pr. CIT, Hyderabad. 4. The DR, ITAT, “B” Bench, Hyderabad. 5. Guard file. BY ORDER VADREVU Digitally signed by VADREVU PRASADA PRASADA RAO Date: 2026.05.06 RAO 14:24:25 +05'30'