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Facts
The assessee received large funds which were withdrawn in cash, and claimed significant labour charges. The Assessing Officer reopened the case under Section 147 and made an addition for unexplained labour charges after rejecting the assessee's book results under Section 145(3).
Held
The Tribunal restored the issue to the file of the CIT(A)/NFAC, granting the assessee a final opportunity to substantiate her case with requisite details. The CIT(A)/NFAC is directed to decide the issue after providing a proper opportunity of being heard.
Key Issues
Whether the rejection of book results and addition for unexplained labour charges was justified, and whether the CIT(A)/NFAC's dismissal for non-prosecution was proper.
Sections Cited
147, 148, 151, 142(1), 145(3), 144, 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA
The above two appeals filed by the assessee are directed against the separate orders dated 21.02.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment years 2013-14 and 2014-15 respectively. Since identical grounds have been raised by the assessee in both the appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order.
Facts of the case, in brief, are that the assesse is an individual and filed her return of income on 30.09.2013 declaring total income of Rs.33,26,896/-.
Subsequently, on perusal of information available with the department it was noticed that the assessee has received large amount of funds from Dr. D.Y. Patil Medical College and Dr. D.Y. Patil Hospital and Research Centre which were immediately withdrawn in cash. It was further observed that the turnover from 01.09.2012 to 13.09.2012 was found credited of Rs.0.85 crore and debit is also of Rs.0.85 crore and thus the entire amount of Rs.0.85 crore was withdrawn in cash which is suspicious. Therefore, the case of the assessee was reopened u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and notice u/s 148 of the Act was issued to the assessee after taking prior approval u/s 151 of the Act from the competent authority. Although the assessee was required to file her return of income within 30 days of receipt of notice, however, no return was filed in response to the said notice. Thereafter, the Assessing Officer issued notice u/s 142(1) of the Act calling for certain details. From the submissions made by the assessee against certain details, the Assessing Officer observed that the assessee through her proprietary concern namely M/s. Mahalaxmi Enterprise has made and claimed payment of labour charges amounting to Rs.9,13,26,387/-. The entire payment of labour charges was made after withdrawing cash from the three bank accounts of her proprietary concern held with State Bank of India, Bank of Maharashtra and Andhra Bank. He observed that the assessee has provided the manpower of various types on contract basis to various colleges / institutions run and administered by Dr. D.Y. Patil Vidyapeth Society and Dr. D.Y. Patil Vidya Pratisthan Society. The payments or contract value from these institutions were received through cheques only which was subsequently withdrawn and claimed towards payment to labourers / workers etc paid in cash. The Assessing Officer asked the assessee to justify by furnishing evidence to substantiate her claim made under the head ‘Labour charges’. Rejecting the various explanations given by the assessee and observing that the particulars of income reported by the assessee through her bank statements are incorrect, the Assessing Officer rejected the book results by applying the provisions of section 145(3) of the Act and made addition of Rs.2,48,92,257/- as unexplained labour charges by observing as under:
(similar addition has been made in assessment year 2014-15 at Rs.3,54,09,954/-)
Since the assessee did not respond to any of the notices issued by the Ld. CIT(A) / NFAC, therefore, the Ld. CIT(A) / NFAC dismissed both the appeals for non-prosecution.
Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds in assessment year 2013-14:
1. On the facts & in the circumstances of the case & in law, the learned Assessing Officer has erred in not considering the copies of Bills submitted to D.Y Patil Group of Institutions, Salary musters and cash and bank analysis submitted during the course of assessment proceedings.
2. On the facts & in the circumstances of the case & in law, the learned Assessing Officer has erred in applying the Minimum wages act in the case of the assessee and disallowed an amount of Rs.2,48,92,257/-, where the submission was given for all the payment made without appreciating the facts that there can be variation as per the skills of the labour.
3. On the facts & in the circumstances of the case & in law, the learned Assessing Officer has erred in applying the provisions of section 145(3) of the Income Tax Act, 1961 and thereby rejecting the duly audited books of accounts.
4. On the facts & in the circumstances of the case & in law, the learned Assessing Officer has erred in passing the order u/s 144 of the Income Tax Act, 1961 despite providing the documents and information as called for by the Assessing Officer during the course of the assessment proceedings.
5. On the facts and circumstances of the case & in law the learned Assessing Officer has erred in initiating penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 which may please be dropped.
6. The appellant craves leave to add, alter or amend to the grounds of appeal, before or at the time of hearing.
Identical grounds have been raised in assessment year 2014-15.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We find the Assessing Officer in the instant case disallowed an amount of Rs.2,48,92,257/- out of total labour charges claimed during the year under consideration by applying the Government of India Minimum Wage rates. While doing so, he rejected the book results by disbelieving the wage payments. We find the assessee did not respond to any of the notices issued by the Ld. CIT(A) / NFAC, for which the Ld. CIT(A) / NFAC dismissed the appeals for want of prosecution. It is the submission of the Ld. Counsel for the assessee that although full details were given before the Assessing Officer, however, the Assessing Officer without going through the details properly and without pointing out any defect in the various submissions made, made addition on adhoc manner which is not justified. Further, the Ld. CIT(A) / NFAC without passing a speaking order on merit has dismissed the appeal for want of prosecution which is not justified. It is also his submission that given an opportunity the assessee is in a position to substantiate her case by filing the requisite details. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Ld. CIT(A) / NFAC with a direction to grant one final opportunity to the assessee to substantiate her case by filing the requisite details and decide the issue as per fact and law after providing due opportunity of being heard to the assessee. The assessee is also hereby directed to submit the requisite details before the Ld. CIT(A) / NFAC on the appointed date without seeking any adjournment under any pretext, failing which the Ld. CIT(A) / NFAC is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee in both the appeals are accordingly allowed for statistical purposes.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 19th December, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 19th December, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘A’ Bench, Pune ग र्ड फ ईल / Guard file. 5. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 15.12.2025 Sr. PS/PS 2 Draft placed before author 17.12.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Office 9 Superintendent 10 Date on which file goes to the A.R. 11 Date of Dispatch of order