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Facts
A search action on related entities led to a statement from Shri Prashant Tekale, who narrated incriminating facts. The Assessing Officer (AO) added Rs. 77,40,922 to the assessee's income as an unexplained cash credit based on this statement. The assessee claimed this was revenue from operations with Magarpatta Township Development & Construction Company Ltd., supported by an agreement and invoices.
Held
The CIT(A) deleted the addition, finding that the assessee provided sufficient documentary evidence to prove the services rendered and the receipt of the amount as revenue. The CIT(A) noted that the statement relied upon by the AO was retracted and the transaction was through banking channels.
Key Issues
Whether the CIT(A) erred in deleting the addition made under Section 68 of the Income Tax Act for an amount claimed as revenue from operations, when the addition was based on a retracted statement.
Sections Cited
68, 132, 133A, 132(4)
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
Assessee by : Shri Neelkanth Khandelwal, A/R Revenue by : Ms. Kavitha P. Kaushik, Sr. D/R सुनवाई की तारीख/Date of Hearing : 31/07/2025 घोषणा की तारीख /Date of Pronouncement: 05/08/2025 आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the revenue is preferred against the order of the ld. CIT(A)-50, Mumbai [hereinafter the ‘ld. CIT(A)’] dated 13/03/2025 pertaining to AY 2021-22.
The grievance of the revenue reads as under:- “1. Whether on the facts and circumstances of the case and in law, the Ld CIT(1) erred in deleting the addition made us 68 of the Income-tax Act, 1961 (herein under referred to as 'the Act') to Rs. 77,40,922/- which was made by the Assessing Officer on the basis of the findings during the search action on the assessee 's group of cases: 2. Whether on the facts and circumstances of the case and in law, the let CIT(A) erred in not forwarding the additional evidences, if any, filed before it to the Assessing Officer for verification, calling for a Remand Report in the matter; 2 3. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) erred in considering the retraction of Shri Prashant Tekale to be valid even though the same had been made after a lapse of almost 430 days;
4. Whether on the facts and circumstances of the case and in law, the Ld CITM) erred in considering the statement of Shri Prashant Tekale given during the cross- examination to be valid even though it had been admitted during the course of the search action that actually no work was done by the assessee company and that Shri Prashant Tekale had been directed by the assessee to raise a certain amount of invoice;
5. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) erred in not considering the fact the assessee was unable to produce any documentary evidences as appearing the agreement entered into with Magarpatta Township Development and Construction Co Lid to substantiate the work claimed to be done by it honouring the terms of the agreement alongwith corroborating evidences in support of the same;
Whether on the facts and circumstances of the case and in low, the Ld CIT(A) erred in not appreciating the conclusion of the Assessing Officer that in rejecting the Profit and loss Account of the assessee in view of the fact that the receipts shown therein were unexplained cash credits as revealed during the search action;
The appellant craves leave to add to, alter, amend, modify and / or delete any or all of the above said grounds of appeal
. the appellant reserves its right to file further submissions in the appeal."
3. Briefly stated the facts of the case are that a search/survey action u/s 132/133A of the Act were conducted on M/s. DB Realty Group, Dynamix Group and other related entities on 07/10/2021. Statement of Shri Prashant Tekale was recorded u/s 132(4) of the Act during which he narrated certain incriminating facts in the case of the assessee. Accordingly, statutory notices were issued and served upon the assessee. The assessee electronically filed his return of income on 24/12/2022 declaring total income at Rs. 18,55,230/-. The return was selected for scrutiny assessment. During the course of the scrutiny assessment proceedings, it came to the notice of the AO that Magarpatta Township Development & Construction Company Ltd. constructed a township known as ‘Magarpatta City’. Magarpatta company engaged 3 the services of the assessee by entering into business agreement, for rendering consultancy and operative services for carrying out the contract of power distribution. The AO further noticed that in the profit and loss account of the assessee only one entry on credit side is appearing amounting to Rs. 77,40,922/- under the head ‘Income - Revenue from operations’. The assessee claimed that this amount has been received from Magarpatta Township Development & Construction Company Ltd.. 3.1. On the basis of the statement of Shri Prashant Tekale, the AO came to the conclusion that the said credit entry is unexplained and accordingly made addition of Rs. 77,40,922/- as unexplained cash credit u/s 68 of the Act. 3.2. The assessee agitated the matter before the ld. CIT(A) and strongly contended that the AO grossly erred in treating the business income declared by the assessee as unexplained cash credit. It was brought to the notice of the ld. CIT(A) that the impugned amount was received from a body corporate and, therefore, there is no question of disbelieving the identity of Magarpatta Township Development & Construction Company Ltd.. It was further explained that the entire transactions were done through banking channels supported by the agreement between the assessee and Magarpatta Township Development & Construction Company Ltd.. It was brought to the notice of the ld. CIT(A) that the statement of Shri Prashant Tekale, which was strongly relied upon by the AO for making the impugned addition was retracted on oath by way of an affidavit dated 12/12/2022. Before the ld. CIT(A), the assessee submitted copy of invoices raised by the 4 assessee to Magarpatta Township Development & Construction Company Ltd. along with copies of invoices raised by persons on the assessee for providing various services and the statement of bank account. These documents were also furnished before the AO during the assessment proceedings. 3.2.1. The assessee also drew attention of the ld. CIT(A) to cross- examination of Shri Prashant Tekale, done during the appellate proceedings in the case of Magarpatta Township Development & Construction Company Ltd., wherein Shri Prashant Tekale specifically mentioned that the statement given during the search was retracted. After considering the facts and the submissions, the ld. CIT(A) was convinced that the assessee has furnished enough documentary evidence to prove that it has rendered services to Magarpatta Township Development & Construction Company Ltd., and against this it has received an amount of Rs. 77,40,922/- from Magarpatta Township Development & Construction Company Ltd. and the AO has not disregarded these documents. This amount has been offered as revenue from operations in the profit and loss account. Therefore, these receipts again cannot be taxed u/s 68 of the Act and deleted the addition.
Before us, the ld. D/R strongly relied upon the assessment order and read the operative part. The ld. Counsel for the assessee reiterated what has been stated before the lower authorities.
We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that there was a contract between the assessee and the Magarpatta Township Development & Construction Company Ltd., availed service from the assessee. This is I.T.A. No. 3946/Mum/2025 5