ACIT., CIRCLE-5(1), HYDERABAD vs. SIKANDER DAREDIA, HYDERABAD

5 ITA.No.604/Hyd./2025 4. The assessee challenged the action of the Assessing Officer before the learned CIT(A) and produced relevant details. The assessee claimed that the purchase of immovable properties were in the ordinary course of business of the assessee of real estate and the source of purchases was from the sale proceeds of the year under consideration and unsecured loans. The assessee has thus produced the record to show that the assessee was having sufficient funds for the said purchases made during the year. The learned CIT(A) called for a remand report from the Assessing Officer wherein the Assessing Officer has not raised any doubt about the record filed by the assessee, rather accepted the source explained by the assessee and, therefore, the addition made by the Assessing Officer was deleted.

6 ITA.No.604/Hyd./2025 evidences cannot be deleted. The Learned DR has submitted that the Assessing Officer in his remand report has stated that the assessee explained the source of purchases as out of unsecured loans. However, the basic details were not furnished by the assessee regarding the identity, creditworthiness and genuineness of such unsecured loan creditors. Thus, the Learned DR has submitted that when the assessee has not responded to any of the notices issued by the Assessing Officer and there is a complete failure on the part of the assessee to explain the source of the purchases to the tune of Rs.14,34,50,000/-, then, the said addition ought not to have been deleted based on the remand report without complete details and extensive examination of the relevant facts on record. The Learned DR has submitted that even the applicability of sec.56(2)(x) of the Act has not been examined in the appellate proceedings either by the learned CIT(A) or in the remand proceedings which were only for limited purpose. Thus, when the assessee has not participated in the assessment proceedings and not furnished any record before the 7 ITA.No.604/Hyd./2025 Assessing Officer, then, it is not feasible to verify and examine the entire record in the remand proceedings due to the time constraint and limited purpose proceedings. Thus, he has pleaded that when the assessment order was passed ex-parte due to non-participation of the assessee and non- furnishing of any record, then, the learned CIT(A) ought to have remanded the matter to the record of the Assessing Officer for proper verification and examination of the record instead of deleting the addition.

9 ITA.No.604/Hyd./2025 extracts, purchase documents, bank account, payment summary were verified and found consistent. The Assessing Officer further noted that the assessee’s investments are properly accounted. He has also filed copy of the bank account statement reflecting all the payments made during the year for purchase of the properties which are stock-in- trade and, therefore, the provisions of sec.56(2)(x) of the Act are not applicable. The learned Authorised Representative of the Assessee submitted that when the purchases of immovable properties are made in the nature of stock-in- trade of the assessee, then, no addition can be made u/sec.56(2)(x) of the Act as it would amount to double addition when all the transactions are already part of the profit and loss account of the assessee. He has, supported the impugned order of the learned CIT(A).

10 ITA.No.604/Hyd./2025 cause notice u/sec.144 of the Act. Therefore, the assessment was framed by the Assessing Officer on the basis of best Judgment whereby the entire purchases made by the assessee during the year was treated as unexplained investment u/sec.69 of the Income Tax Act, 1961. Before the learned CIT(A), the assessee filed it’s reply and explained the reasons for non-appearance before the Assessing Officer and also filed additional evidences under Rule 46A of I.T. Rules, 1962. The learned CIT(A) forwarded the additional evidences filed by the assessee to the Assessing Officer and called for a remand report. The learned CIT(A) has discussed remand report in the impugned order and the observations of the Assessing Officer are reproduced as under :

“4. AO's observation: On verification of the assessee's reply and the information, it is observed (i) On perusal of the sale deed. Audit report and Bank account, it is observed that the payment made to the seller in respect of the investment made are through the bank account out of the sale receipt and unsecured loans.

(ii) The properties are recorded under two heads in the audited accounts:

11 ITA.No.604/Hyd./2025 Fixed Assets: Includes a flat purchased for Rs.47,74,600/-.

Other Current Assets: Includes the remaining properties totalling Rs.14,72,87,600/-

(iii) Each property purchase is detailed, with purchase deeds and supporting documents provided. The flat purchase is recorded under "Fixed Assets" as Flat No. 22, while other properties are accounted for under "Other Current Assets."

(iv) The ledger extracts, purchase documents, bank statements, and payment summaries were verified and found consistent. and assessee's investments are appropriately accounted."

12 ITA.No.604/Hyd./2025 examined and verified all these documents and details in the remand proceedings and finally found all the documents and transactions including payment summaries as consistent and purchases of the assessee are appropriately accounted in the books of accounts. Based on the remand report, the learned CIT(A) has deleted the addition in Paras- 7.3 to 7.3.3. as under :

“7.3. In Ground Numbers 3, 4, 5 and 6 the appellant has filed objections on the addition made by the AQ and claimed that the Assessing Officer erred in holding that no sources were available for investment of Rs.14,34,50,000/- made in the immovable properties and the Assessing Officer ought to have seen that the provisions of Sec.69 or Sec. 115BBE of the Act are not applicable to the facts of the case as none of the investments are unexplained and the said Immovable Property is work in progress for the appellant and was recorded in the books of account. The appellant has also claimed that Assessing Officer ought to have considered the fact that the appellant had substantial sources for investment in acquisition of the land and, therefore, the Assessing Officer ought not to have made any addition.

13 ITA.No.604/Hyd./2025 7.3.1. The facts of the case involved and submissions filed in respect of this ground are examined and is seen that the appellant had not filed any details whatsoever before the AO to establish the source of funds used for making investments in immovable properties and whether the same were disclosed in the books of accounts. Thus, the AQ was left with no choice but to assess the same as unaccounted investments u/s 69. Thus, as during assessment proceedings no details were filed by appellant there is no infirmity in the actions of the AQ while making the addition u/s 69 in the assessment order passed.

7.3.2. During the appellate proceedings now the appellant has filed substantial details to establish the source of funds used for making investments in immovable properties and also filed evidences to show that the same were disclosed in the books of accounts. As the appellant had filed additional evidences a Remand Report on the additional evidences was sought by this office. As per the Remand Report Dated 07.02.2025 received with forwarding of Range Head in ITBA on 17.02.2025, it is clear that appellant has filed details and explanations before the AO to show that the Investments in the immovable properties amounting to Rs.14,34,50,000/- were disclosed in the books of accounts and the sources for acquiring these properties

14 ITA.No.604/Hyd./2025 are also explained. The Remand Report received is detailed in para 6 of this order.

7.3.3. In view of the findings in the Remand Report received from the AO and facts of the case involved as per the submissions made before me during the appellate proceedings, it is clear that the investments in immovable properties amounting to Rs.14,34,50,000/- are accounted for and the sources have also been explained. Thus, the AO is directed to delete the additions made in the assessment order on this issue. Therefore, these grounds of appeal are allowed.”

9. Thus, the learned CIT(A) has observed that during the appellate proceedings, the assessee filed substantial details to establish the source of fund used for making the purchase of the immovable properties and as per the remand report dated 07.02.2025, it is clear that the assessee has filed details and explanation before the Assessing Officer to prove that investments [purchases] in the immovable properties [stock-in-trade] amounting to Rs.14,34,50,000/- were duly disclosed in the books of accounts and source of acquisition was also explained. We further note that the purchases in question though are 15 ITA.No.604/Hyd./2025 considered by the Assessing Officer as investment, however, the profit and loss account as well as balance-sheet of the assessee placed at page nos.29 and 31 of the paper book clearly manifest that the transaction of purchases are debited in the profit and loss account and sale of the properties during the year is credited in the profit and loss account including the closing stock/inventories. Further in the balance-sheet also the assessee has shown all the unsold stock under the Head “Inventories”. Therefore, it is clear that the transaction of purchases were not in the nature of investment in the immovable properties, but, these are purchases of trade-in-stock of the immovable property and hence, as per the definition of “Property” given in Explanation to Clause-(x) of Sec.56(2) read with Explanation to Clause (vii) of Sec.56(2) only the capital asset in the nature of inter alia, land and building or both is treated as the property for the purpose of sec.56(2)(vii) and (x) of the Act. Thus, when the purchases were made for acquiring the stock-in-trade, then, the provisions of sec.56(2)(x) would not be applicable in the case of the 16 ITA.No.604/Hyd./2025 assessee. Even otherwise, neither the Assessing Officer nor the learned CIT(A) has applied the provisions of sec.56(2)(x) of the Act. Therefore, when this issue was not the subject matter of the assessment order or even the remand proceedings during the first appellate proceedings, then, the Revenue cannot be permitted to raise this issue in the appeal before the Tribunal.

10. Considering the facts and circumstances of the case as well as the relevant supporting evidences filed by the assessee, we do not find any error or illegality in the impugned order of the learned CIT(A) qua this issue. The same is upheld.

Order pronounced in the open Court on 12.11.2025.