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Facts
The assessee, an auditor and proprietor of a liquor business, declared income for AY 2017-18. The AO added the entire loan and current liability of Rs. 1,70,60,000/- to the assessee's income for failing to provide confirmations and creditworthiness of creditors. The CIT(A)/NFAC confirmed these additions, partly allowing the appeal.
Held
The Tribunal held that the issue of additions made by the AO and confirmed by the CIT(A)/NFAC due to lack of creditworthiness and genuineness of transactions should be decided afresh. The Tribunal remitted the issue back to the AO for reconsideration.
Key Issues
Whether the additions made by the AO and confirmed by the CIT(A)/NFAC are sustainable when the assessee claims the loans and advances were invested in land development and is involved in litigation regarding the same, and whether a fresh opportunity should be granted to substantiate the claims.
Sections Cited
143(2), 142(1), 250, 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
Assessment Year : 2017-18 Mr. Shivakumar Mahadevaiahre ITO B-9, 9th Main Lalith Mahal Nagar Ward 2(3) Mysore, Karnataka 570028 Vs. Mysuru-570010 Karnataka PAN:ACZPM8866F APPELLANT RESPONDENT Appellant by : Sri Sukesh Patil, CA. Respondent by : Sri Subramanian, JCIT DR Date of Hearing : 15.05.2025 Date of Pronouncement : 12.08.2025 O R D E R
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 20.12.2024 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1071397505(1) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2018-19.
The assessee has raised the following grounds of appeal:-
“1. The order passed by Learned Assessing officer is bad in law without considering the fact of the case.
2. The Learned Commissioner of Income Tax Appeals uphold the additions made by A.O, on the premises that advances and loans were not returned, without knowing the fact that appellant is facing the litigation in respect developed land in which these loans and advances were invested.
3. The Learned Commissioner of Income Tax Appeals uphold the additions made by A.O without considering the confirmations and credentials of loans and advance payers.
Shivakumar Mahadevaiahre, Mysore Page 2 of 6 4. The Learned Commissioner of Income Tax Appeals uphold the additions made by A.O without giving proper opportunity of being heard the appellant.
Appellant reserve the right to add, to alter, to amend and to delete any other grounds at the time of hearing.”
Brief facts of the case are that assessee being an Auditor by profession has declared income from profession as an Auditor and Tax Consultant. Further, the assessee is also a proprietor of Sri Shivashakthi Liquors and also derives income from agricultural activities. The assessee filed his return of income for the A.Y.2017- 18 on 29.10.2017 by declaring Net Taxable income of Rs.11,66,490/-. The assessee had also declared agriculture income of Rs.49,75,447/-. Thereafter the case of the assessee was selected for scrutiny and accordingly, notices under section 143(2) as well as 142(1) of the Act were issued. The Assessee furnished the submissions on various dates. The Ld. AO verified the submissions as made by the assessee and observed that the assessee had not furnished the confirmations of the creditors along with their creditworthiness and genuineness of the transactions as detailed below: -
Loan Liability during the Current liability towards advance year during the year
Madesh 4,50,000 M. Nagendra 14,00,000 Mahadeswamy 1,60,000 M/s. Nichin Builders 98,50,000 Y.S. Dananjay 27,00,000 Lease Advance 25,00,000 Total 33,10,000 Total 1,37,50,000 4. Thus, the loan liability of Rs.33,10,000/- and the current liability of Rs.1,37,50,000/- aggregating to Rs.1,70,60,000/- recorded in the balance sheet was charged to tax as per the provisions of the Act, as the same is not being substantiated with
5. Aggrieved by the order of the Ld. AO, assessee preferred an appeal before ld. CIT(A)/NFAC. The ld. CIT(A)/NFAC partly allowed the appeal of the assessee. The ld. CIT(A)/NFAC held that as the lease advance received amounting to Rs.25,00,000/- was already assessed to tax in A.Y.2014-15 with tax demand of Rs.8,32,080/- and thereby assessing this loan amount of Rs.25,00,000/- again in A.Y. 2017-18 would lead to double taxation and accordingly directed the Ld. AO to ascertain and satisfy himself that the same claim have been received in F.Y.2013-14 had been carried forward and appearing as the closing balance in F.Y.2016-17. Further, with respect to balance addition of Rs.1,45,60,000/- the ld. CIT(A)/NFAC confirmed the same as detailed below: -
Amount in Sl.No. Particulars Rs. i. Advance received from M/s. Nichin Builders 98,50,000 ii. Advance received from M. Nagendra 14,00,000 iii. Loan received from Madesh 4,50,000 iv. Loan received from Mahadeswamy 1,60,000 v. Loan Received from Y.S. Dananjay 27,00,000
Aggrieved by the order of the ld. CIT(A)/NFAC, the assessee has filed the present appeal before this Tribunal. The assessee has also filed paper book comprising therein 35 pages containing therein the written submissions as well as the following details: -
S.No. Particulars i. Written Submissions ii. Copy of Information of Mr. M. Nagendra Shivakumar Mahadevaiahre, Mysore Page 4 of 6 S.No. Particulars iii. Copy of order giving effect to CIT(A) order iv. Copy of Information of Mr. H.K. Madesha v. Copy of Information of Mr. Dhananjaya Y.S vi. Copy of Information of Mr. M. Mahadevaswamy Copy of Rectification of mistakes under section 154 of the Act. vii. viii. Copy of reply to notice dated 16.03.2020.
Before us, Ld.AR of the assessee vehemently submitted that ld. CIT(A)/NFAC erred in upholding the additions made by the AO on the ground that advances and loans were not returned back, without appreciating the fact that assessee is having the litigation with respect to development of land in which these loans and advances were invested. Further, Ld.AR of the assessee submitted that the Ld.CIT(A) did not consider the confirmation and credentials of loans and advances produced before him and passed an order without giving proper opportunity of being heard and prayed that one more opportunity may be granted before the Ld. AO to produce all these confirmations and credentials of the loan creditors to substantiate the claim of the assessee.
Ld.DR, on the other hand, supported the orders of the authorities below.
We have heard rival contentions and perused the material available on record. Assessee and Sri Gopal owned a land near Mysore wanted to develop the land and sell sites to make profit. Accordingly, they approached Mr. Tushar Prakash Chandraghatgi (M/s. Nichin Builders) during the F.Y. 2007-08. The assessee and Sri Gopal entered into a sale agreement on 21.11.2007 with Mr. Tushar Prakash Chandraghatgi (buyer). The assessee received his share of Rs.98,50,000/- as advance from Mr. Tushar Prakash Chandraghatgi. Since the assessee and Sri Gopal are into the Shivakumar Mahadevaiahre, Mysore Page 5 of 6 business of developing land into sites for sale, they were also developing this property which was agreed to sale to Mr. Tushar Prakash Chandraghatgi. As the dispute arose between Mr. Tushar Prakash Chandraghatgi and assessee, Mr. Tushar Prakash Chandraghatgi filed the suit before the Court of City Civil Judge Senior Division, Mysore on 26.03.2018 bearing O.S. 306/2018. It is submitted that the suit is still pending to be heard and meanwhile the Hon’ble Court ordered to maintain the status quo of the said property. Before us, the copy of the suit filed before the Court of City Civil Judge Senior Division, Mysore and the order of the status quo was submitted. Further, with regard to other loans and advances amounting to Rs.47,10,000/- the assessee produced the copy of confirmation letter along with ledger extract and submitted that these amounts were used for the development of land and the land so developed is under litigation. As a result, these amounts were not returned. Further, it is submitted that it is mutually agreed that once litigation is over, either amount along with the agreed portion of profit would be given or the site would be allotted depending upon the outcome of the litigation.
On going through the order of assessment, we take note of the fact that the Ld. AO on the ground that the assessee has not furnished the confirmation of the creditors along with their creditworthiness, genuineness of the transactions has added entire loan and current liability amounting to Rs.1,70,60,000/- as income of the assessee. On going through the order of the ld. CIT(A)/NFAC, we also take note of fact that ld. CIT(A)/NFAC confirmed the additions of the Ld. AO on the ground that assessee failed to establish the creditworthiness and genuineness of the transactions. This being so, in the interest of justice and fair play and as requested by Ld.AR of the assessee, we deem it fit and proper to remit this issue back to the file of Ld. AO to decide afresh after Shivakumar Mahadevaiahre, Mysore Page 6 of 6 taking into consideration the confirmation of accounts, ledger extract, order of Court of City Civil Judge Senior Division, Mysore, in accordance with law. Needless to say reasonable opportunity of being heard must be granted to the assessee. Assessee is also directed to produce / submit all the necessary documents / information / financials, to substantiate his claim. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 12th August, 2025