INCOME TAX OFFICER, THANE vs. AURA NAVKAR DEVELOPERS, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated
22.07.2024 passed by the Ld. Commissioner of Income-tax
(Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld.
CIT(A)’] for assessment year 2015-16, raising following grounds:
“1. The CIT(Appeal) while concluding the appellate order has observed that "the A0 was supposed to verify the details of investment like amount of investment during the financial year relevant to the impugned assessment year and sources of Aura Navkar Developers
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investments. The AO failed to do so at the stage of remand proceedings". The CIT(Appeal), being the first fact finding authority has thereby erred in not using his co-terminus powers under section 250(4), equivalent to that of the Assessing Officer, to arrive at the correct facts by merely accepting the submissions of the assessee without any verification.

The appellant has challenged the action of the AO in adding Rs.
3,65,00,000/- as unexplained investments u/s 69 of the income tax act for the impugned assessment year.

The appellant is a partnership firm engaged in the business of builders and developers. The appellant did not file the return of income for the impugned assessment year.

The AO, based on an information that the appellant Purchased
Immovable Property for Rs.3,65,00,000 during the FY 2014-15 relevant to AY 2015-16, issued notice u/s 148 of the income tax act on 31.03.2021. In response, the appellant neither filed any return nor filed

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any response. The AO issued statutory notice u/s 142(1) of the income tax act calling for the details of investment. The appellant did not respond to such notices. The AO concluded the assessment within the meaning of section 144 of the income tax act by adding Rs.
3,65,00,000/- as unexplained investments u/s 69 of the income tax act.

The appellant, at the appellate stage submitted as under:

Copy of plot purchase account in the books of the appellant company reflecting closing balance of Rs.51.55,000/- and ledger account of M/s
Sharp Realtors in the books of the appellant firm for the year ended on 31.03.2015 evidencing payment of Rs.33,00,000/- are enclosed herewith.

The details of payment during the FY 2014-15 is as under:

Sr.No.
Date
Date
Amount (Rs.)
Bank Name
Chq/RTGS
1
10.06.2014
Paid to Mis
Sharp
Realtors towards purchase consideration
8,00,000/-
Vijaya
Bank
Che
No.
041837
2
11.02.2015
Paid to Mis
Sharp
Realtors towards purchase consideration
25,00,000/-
Vijaya
Bank
RTGS

33,00,000/-

3
29.12.2014
Stamp duty paid
18,25,000/-
Vijaya
Bank
RTGS
4
29.12.2014
Registration charges
30,000/-
Vijaya
Bank
RTGS

18,55,000/-

Total
51,55,000/-
Shown under investment in Balance sheet

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1. The sources of such investment are as under:

Sr. No.
Date
Name
Amount
(Rs.)
Source of funds
Chq/RTG
S
1
09.06.2014
Arvind Jain
300,000/-
Partner’s captial
RTGS
2
09.06.2014
Bhavesh
Madhani
6,00,000/-
Partner’s captial
RTGS
3
11.02.2015
Bhavesh
Madhani
15,00,000/-
Partner’s captial
RTGS
4
11.02.2015
Arvind Jain
10,00,000/-
Partner’s captial
RTGS
5
26.11.2014
Hari
Om
Enterprises
1,75,000/-
Advance for flat booking
RTGS
6
28.11.2014
Daksha
A.
Mehta
6,00,000/-
Advance for flat booking
RTGS
7
26.12.2014
Bhavesh
Madhani
11,00,000/-
Partner’s captial
Vijaya
Bank
Cheque no.
267989

Total Rs.
52,75,000/-

Sr. No.
Nature of documents
Encl. at page nos
1
Copy of Form
A-Application for registration of firms dt. 10.06.2014
03 to 08
2
Copy of acknowledgement of payment of fees for registration of partnership firm dt. 30.09.2014
09
3
Copy of death certificate of one of the partners of the appellant firm viz.
Dayaram Zuri Pal on 08.10.2020
10
4
Copy of reconstitution of partnership deed dt. 02.11.2020 admitting new partner shri Sandeep Dayaram Pal being son of the deceased partner
11 to 24
5
Copy of affidavit dt. 22.09.2023 of the partner of the appellant firm affirming facts
25 to 27

These documents were produced as additional evidence at the appellate stage under rule 46A. The appellant stated that it was Aura Navkar Developers
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prevented by reasonable cause in submitting the above documents before the AO.
The appellant submits that it was prevented by reasonable cause
[death of one of the partner of the appellant firm and Covid 19
pandemic] in submitting the above documents before the Id. AO. The above-mentioned facts are duly supported by affidavit of appellant enclosed herewith. The said evidences are crucial and of prime importance in determining the correct income of the appellant and therefore in the interest of justice, it is humbly prayed that the evidences submitted before your honour by way of enclosures herewith may kindly be admitted under the provisions of Rule 46A of the I.T Rules,
1962 and considered in deciding the present appeal on merits.
All the documents were forwarded to the AO for his comments. The AO submitted the remand report as under:
Since the assessee failed to furnish the details and supporting evidences, the A.O completed the assessment u/s.144 of the Act, treating the investment as unexplained u/s. 69 of the Act. It is observed from the submission made by the assessee vide their letter dated
25.09.2023 that the assessee was incorporated on 10.06.2014 i.e.
during the year under consideration for development of a plot bearing survey No. 49 to 56 & 77, at Vasai from together with a building appurtenant thereto from M/s. Sharp Realtors, for Rs. 3.65 crore. The agreement was entered into with the said party on 28.01.2015. Against total amount, assesse had paid only Rs. 33 lakhs + stamp duty and registration fee of Rs. 18.55 lakhs totalling to Rs. 51.55 lakhs which is shown under investment. The source of payment was through partner's capital and advance for flat booking.
…..the submission made by the assessee may not be acceptable and the books required to be rejected. No relief may be granted to the assessee. Further, since no return was filed by the assessee on the ground that no taxable income is contrary to the provisions of the Act as it is mandatory for firms to file returns even if there is no income. As such, the assessee may not be allowed carry forward the 'work-in- progress.
The AO stated that the submission of the appellant is not acceptable and the appellant did not prove that he was prevented by reasonable cause.. The AO did not verify the details of investments made out capital contribution of the partners of the firm and advance towards sale of flats during the financial relevant to the impugned assessment year.
The appellant, on the other hand, cited death of one of partners due to corona virus during Covid Pandemic and there was re-constitution of Aura Navkar Developers
8
Partnership deed to admit the son of the deceased partner. The email id of the new partner was updated on the IT Portal in 2022. These are held as sufficient reason for holding that the firm was prevented by reasonable cause from producing the necessary evidence before the AO.
All the documents produced at the appellate stage are admitted to avoid miscarriage of justice.
The AO was supposed to verify the details of investment like amount of investment during the financial relevant to the impugned assessment year and sources of such investments. The AO failed to do so at the stage of remand proceedings. The AO, in his ex-parte order did not even mention the nature of investment and the details of financial transaction between the parties to the transaction, mode of payment and date of payment etc. The AO did not make any effort to make enquires as expected from him to collect relevant material before resorting to the best judgement assessment.
The appellant has submitted that the investment was only Rs.
51,55,000/-during the year under consideration and such payments were sourced out of Partners' capital and advance towards flat booking.
The appellant submitted the copy of development agreement dated
28.01.2015 along with the details of payment, receipts from the transferor of development rights, the ledger account of the firm in the books of transferor and the bank statements. The appellant has discharged the onus cast upon it and it is held that the appellant has recorded the investments in its books of accounts and offered explanation satisfactorily. The AO is not justified in making addition of Rs.3,65,00,000 as unexplained investments u/s 69 of the act for AY
2015-16 and he is directed to delete the addition made. All the grounds are allowed.”

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without seeking objection from the AO. Further, Ld. DR submitted that Ld. CIT(A) has not verified regarding the discrepancy of Rs.
10,00,000/-in the ledger account of the assessee as compared with the ledger account of M/s Sharp Realtor. He submitted that Ld.
CIT(A) has not verified from the ledger account as from whom said amount of Rs. 10,00,000/- was received and whether it was against the purchase of the development rights or otherwise, which was not examined by the Ld. CIT(A). Secondly, he submitted that the source of Rs. 33,00,000/- explained by the assessee was admitted by the Ld. CIT(A) as such without verifying from the records creditworthiness of parties. The Ld.DR submitted that assessee has given mere statement that Rs. 33,00,000/- was received by of capital from partners and advanced booking from the flat. In the case, any kind of approval for the construction was not received and therefore, the Ld. CIT(A) was required to examine the source of money received against sale of the flats and therefore, in the circumstance order of the Ld. CIT(A) might be setaside and matter may be restored back to the file of the Assessing Officer for verification of the claim of the assessee.
5. On the contrary, Ld counsel for the assessee submitted that though the assessee has entered into registered agreement for acquisition of the development rights in respect of the building at Vasai from M/s Sharp Realtor on 28.01.2015 for a total consideration of Rs. 3,65,00,000/-, but during the year under consideration, the assessee had only paid Rs. 33,00,000/- to M/s

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Sharp Realtors out of the total agreed consideration of Rs.
3,65,00,000/-. The assessee also incurred stamp duty and registration charges of Rs. 18,55,000/- making the total investment to Rs. 51,55,000/- (Rs.33,00,000/-+ Rs.18,55,000/-). The Ld.
counsel referred that said sum of Rs.51,55,000/- was appearing in the books of account as ‘plot investment’ under the head investment/deposit on the asset side of balance sheet dated
31.03.2015. Regarding the receipt of Rs. 43,00,000/-appearing in the ledger confirmation from M/s Sharp Realtor, the Ld Counsel submitted that partner of the assessee firm had made payment of Rs. 10,00,000/- to said M/s Sharp Realtor in his personal capacity which was wrongly recorded by the M/s Sharp Realtor against the assessee firm. Ld. Counsel submitted that AO has failed to appreciate that development agreement dated 28.01.2015 was a conditional agreement with the developer and developer was required to perform a series of functions as described in the said agreement and balance consideration of Rs.3,32,00,000/-
(Rs.3,65,00,000/- minus Rs.33,00,000/-) was payable on grant of full Commencement Certificate, which was evidenced by the para no.3(a)/page no.15 of the concerned agreement. For ready reference said para is reproduced here in below:
"3..... The receipt of which owners doth hereby admits and acknowledges. The balance remaining amount of Rs. 3,32,00,000/- (Rs.
Three Crores Thirty-Two Lacs Only) shall be payable as under.
a) Rs. 1,66,00,000 (Rs. One Crore Sixty-Six Lacs Only) within fifteen (15) days from the date of full C.C

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b) Rs. 1,66,00,000/- (Rx. One Crore Sisty-Six Lacs Only) within Sixty
(60) days from the date of full C.C."

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9. As far as merit of issue is considered, neither return of income was filed by the assessee nor any submission was made before the Ld.AO during assessment proceeding. The Additional evidence filed by the assessee before the Ld. CIT(A) were forwarded to the Ld.AO.
but the ld AO objected for admission of the additional ground and without prejudice gave comment that entire addition of Rs.
3,65,00,000/- should be made in the case of the assessee in view of the terms and condition provided in the development agreement, but the Ld. CIT(A) admitted the additional evidence of the assessee and thereafter accepted that contention of the assessee that only amount of Rs. 33,00,000/- was paid by the assessee. The source of the said 33,00,000/- provided by the assessee was also accepted by the Ld. CIT(A).
10. In view of the above facts and circumstances, we are of the opinion that two issues require consideration in the case.
11. Firstly, the discrepancy of Rs. 10,00,000/- appearing in the ledger account of the assessee as well as the ledger account of M/s
Sharp Realtor from whom the assessee has purchased said development rights. On perusal of the ledger account of the assessee in the books of M/s Sharp Realtor, we find that M/s Sharp
Realtor has shown payment of Rs. 10,00,000/- on 21.05.2014 from the assessee. However it is the contention of the assessee that said payment was given by one of the partner of the assessee firm and Aura Navkar Developers
14
which has been wrongly recorded by the M/s Sharp Realtor against the assessee. The relevant ledger account is reproduced as under 1-Apr-14 to 31-Mar-15
“ Given below is the details of your Accounts as standing in my/our Books of Accounts for the above mentioned period.

Kindly return 3 copies stating your I.T. Permanent A/c No., duly signed and sealed, in confirmation of the same. Please note that if no reply is received from you within a fortnight, it will be assumed that you have accepted the balance shown below.
Date
Particulars
Debit Amount
Date
Particulars Credit Amount

21-May-14
Bank
10,00,000.00

10-June14
Bank
8,00,000.00

11-Feb-15
Bank
25,00,000.00

Closing
Balance
43,00,000.00

43,00,000.00

43,00,000.00

43,00,000.00

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had not examined this aspect in the remand report, the Ld. CIT(A) was required to verify this issue.
13. Secondly, the issue which needed verification is regarding source of investment of Rs. 51.55 lakhs, which was explained by the assessee as under:
“The details of payment during the FY 2014-15 is as under:

Sr.No.
Date
Date
Amount (Rs.)
Bank Name
Chq/RTGS
1
10.06.2014
Paid to Mis Sharp
Realtors towards purchase consideration
8,00,000/-
Vijaya Bank
Che
No.
041837
2
11.02.2015
Paid to Mis Sharp
Realtors towards purchase consideration
25,00,000/-
Vijaya Bank
RTGS

33,00,000/-

3
29.12.2014
Stamp duty paid
18,25,000/-
Vijaya Bank
RTGS
4
29.12.2014
Registration charges
30,000/-
Vijaya Bank
RTGS

18,55,000/-

Total
51,55,000/-
Shown under investment in Balance sheet

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14. In the above table the assessee has shown receipt from partners as well as receipt against advance for flat booking. The assessee has not filed any confirmation or documentary evidence discharging burden of proof in terms of section 68 of the Act.
Neither the assessing officer in remand report nor the Ld. CIT(A) has examined/verified the identity, creditworthiness and genuineness of the transaction in respect of those credits. The Hon’ble
Delhi
High
Court in the case of Jansampark
Advertising and marketing P Ltd in ITA 525/2014 has held that if the assessing officer fails in carrying out the enquiries which are required in the matter, then the Ld. CIT(A) is under obligation to carry out such enquires and he cannot seat ideal and allow relief to the either of party. The relevant part of decision is reproduced as under:
42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or Aura Navkar Developers
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causing to be made a "further inquiry" in exercise of the power under Section 250(4). This approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld.
15. Respectfully, following the finding of Hon’ble Delhi High Court
(supra0, We find it appropriate to set aside the order of the Ld.
CIT(A) on the issue and dispute to restore back the matter to him for carrying out necessary enquires in the matter himself or by way of remand report from the ld. assessing officer and then decide the issue and dispute in accordance with law. The ground of the appeal of the revenue is allowed.
16. In the result, the appeal of the Revenue is allowed

Order pronounced in the open Court on 09/05/2025. (KAVITHA RAJAGOPAL)
ACCOUNTANT MEMBER
Mumbai;
Dated: 09/05/2025
Disha Raut, Stenographer

Copy of the Order forwarded to :

BY ORDER,
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