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Facts
The assessee, a Civil Contractor, appealed against the order of CIT(A) confirming additions made by the Assessing Officer for AY 2011-12. The additions pertained to disallowance of labour expenses and addition of unsecured loans.
Held
The Tribunal condoned the delay in filing the appeal. Ground No. 2 regarding CIT(A) not providing sufficient opportunity was dismissed. Ground No. 3 & 4 regarding disallowance of labour expenses were partly allowed, with the disallowance being estimated at Rs. 1,00,00,000/-. Ground No. 5 regarding addition of unsecured loan was set aside for de-novo adjudication.
Key Issues
Whether the disallowance of labour expenses and the addition of unsecured loans were justified, and if the assessee was provided with adequate opportunities by the lower authorities.
Sections Cited
250, 143(3), 68, 131, 40A(3), 40(a)(ia), 145(2), 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “A” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
Assessment Year:2011-12 Dilip Jawaharlal Varyani, V The Dy.Commissioner of S.No.9/2B, CTS No.905, s Income Tax, Circle-8, Vaibhav Vihar, Near Vikram Pune. Vihar, Pimpri, Pune – 411017. PAN: ACAPV0521H Appellant/ Assessee Respondent / Revenue Assessee by Shri Sarad Vaze, CA – AR Revenue by Shri Ramnath P Murkunde, IRS–DR Date of hearing 12/08/2025 Date of pronouncement 28/10/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], Delhi passed under section 250 of the Income Tax Act, 1961 dated 19.06.2024 for the A.Y.2011-12 emanating from the Assessment Order under section 143(3)of the Income Tax Act, 1961, dated 26.03.2014. The Assessee has raised the following grounds of appeal :
An affidavit explaining the rear lo delay will be submitted at the time of hearing
On the basis of facts and circumstances of the case and as per law, the Commissioner of Income Tax. (A) NFAC Delhi, is not justified in confirming the addition solely on account of non-submission necessary information / documents during the appellate proceedings of The assessee humbly prays one more opportunity be given to the assessee to defend the appeal
Therefore, the appeal before CIT(A) be restored by setting aside his order dt 19/06/2024
3. Without prejudice to Ground No 2 above, on the basis of facts and in the circumstances of the case and as well as in law, the disallowance of labour expense amounting to Rs 1,41,38,625/- is unwarranted as the same is any logical basis
4. Without prejudice to Ground No 2&3 above, on the basis of facts and in the circumstances of the case and as well as in law the disallowance of labour expense be restricted to a reasonable amount
Without prejudice to Ground No 2 above, on the basis of facts and in the circumstances of the case and as well as in law, the addition of Rs 1,50,50,000/- u/s 68 is unwarranted and hence needs to be deleted
The appellant craves leave to add alter omit or substitute any of the grounds at the time of hearing of the appeal 2 Submission of ld.AR : 2. The ld.Authorised Representative(ld.AR) Mr.Sharad Vaze- Chartered Accountant for the Assessee submitted a paper book along with Power of Attorney, to represent the Assessee. Ld.AR submitted that there was a delay in filing appeal before this Tribunal by 192 days. Ld.AR invited our attention to the Affidavit of the Assessee and Medical Certificate submitted along with the Affidavit. Ld.AR submitted that Due to the Illness of the Assessee, the appeal could not be filed in time. Ld.AR requested for condonation of delay.
2.1 Ld.AR submitted that Assessee is a Civil Contractor doing work for Municipal Corporations. For A.Y.2011-12, the Assessing Officer has partly disallowed labour expenditure claimed by Assessee. Ld.AR submitted that no vouchers were submitted. Ld.AR has not made any argument to prove genuineness of labour expenditure. Ld.AR invited our attention to Page No.107 of the paper book which was submission made by Assessee before ld.CIT(A) on 15.05.2017. Regarding addition of unsecured loan, ld.AR submitted that Assessee had obtained loan from one Mr.Kishore G Ahuja. Mr.Kishore G Ahuja is Dubai based. Ld.AR 3 Mr.Kishore G Ahuja has deposited Cash in his Dubai Account and then transferred Telegraphically to his Account in India in Bank of India-Pimpri Branch, Pune. Ld.AR invited our attention to page no.79 to 83 of the paper book which were showing the Telegraphic Transfer. Ld.AR further submitted that the cash was deposited in “Economic Exchange Centre, AI Fahed Street, Burdubai”. Ld.AR invited our attention to page no.84 of the paper book which was a single page of copy of Bank Statement of Mr.Kishore G Ahuja from 1st April 2010 to 2nd February 2011. Ld.AR submitted that the loan was given by Kishore G Ahuja from the said Account to Assessee. It was noted that from 27th July 2010 to 9th August 2010 there were five transactions all pertaining to amounts transferred to “Omega Enterprises” Proprietor Dilip Jawaharlal Varyani. We specifically asked Ld.AR that from April 2010 to February 2011 there are no significant transactions in the Bank Account of Mr.Kishore G Ahuja maintained with Bank of India other than transfer to Omega Enterprises. We specifically asked the ld.AR the reason for the same. Ld.AR could not explain.
We specifically asked ld.AR regarding source of the impugned cash deposited by Mr.Kishore G Ahuja, however, ld.AR could not 4 [A] answer regarding the source of cash deposits. Ld.AR further submitted that Mr.Kishore Ahuja have a company and a partnership firm. Ld.AR invited our attention to page no.99 -103 and 104 – 106. Page No.99 to 103 were copies of certificate of incorporation of DEVNIK (GHANA) LIMITED, wherein one of the Directors was KISHORE GURMUKHDAS AHUJA and another Director was RASMI KISHORE AHUJA.Page No.104 was regarding DEVNIK GENERAL TRADING (LLC).
3.1 We specifically asked Ld.AR that when the Labour Payments outstanding in the name of sub-contractors were paid? Ld.AR could not answer to the said question. Ld.AR only submitted that the sub- contractors had filed Return of Income and TDS was deducted.
Submission of ld.DR : 4. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of the Assessing Officer and ld.CIT(A). Ld.DR vehemently submitted that ld.CIT(A) had given 13 opportunities, hence ld.CIT(A) had given sufficient opportunities. Ld.DR submitted that ld.AR’s request to set-aside the ld.CIT(A) order to ld.CIT(A) may not be accepted as more than sufficient opportunities were provided both by AO and ld.CIT(A). Ld.DR also submitted 5 Form called MT-103 for Transfers to India from outside India. No such Form has been filed by Assessee. Ld.DR for the Revenue also distinguished the case laws relied by Assessee.
Findings & Analysis : 5. We have heard both the parties and perused the records. In this case, Assessee had filed his Return of Income for A.Y.2011-12 on 30.09.2011 declaring total income at Rs.93,19,313/-. The Assessee’s case was selected for scrutiny. As per the Assessment Order, Assessee is a Civil Contractor and during the A.Y.2011-12, Assessee had undertaken contract work from Municipal Corporations relating to laying of water pipelines. It is specifically mentioned in the Assessment Order that Assessee Mr.Dilip Varyani had attended the hearings before the Assessing Officer along with his Authorised Representative.
5.1 We will discuss each ground here onwards.
Ground No.1 regarding Delay : 6. Ground No.1 is regarding Delay in filing appeal before ITAT. Assessee has filed an Affidavit along with Medical Certificate. We have perused the Affidavit and Medical Certificate. We are 6 Ground No.2 : 7. The Ground No.2 is reproduced here as under : “2. On the basis of facts and circumstances of the case and as per law, the Commissioner of Income Tax. (A) NFAC Delhi, is not justified in confirming the addition solely on account of non-submission necessary information / documents during the appellate proceedings of The assessee humbly prays one more opportunity be given to the assessee to defend the appeal
Therefore, the appeal before CIT(A) be restored by setting aside his order dt 19/06/2024.”
7.1 Thus, it is contended by Assessee that sufficient opportunity was not provided by ld.CIT(A). We have carefully studied the order of ld.CIT(A). Ld.CIT(A) in para 4 has reproduced details of opportunities provided which are reproduced here as under : S.No. Date of notice Date of compliance Remarks 1 03.12.2018 12.12.2018 No response 2 28.12.2018 10.01.2019 Sought adjournment 3 06.08.2019 19.08.2019 Sought adjournment 4 12.09.2019 19.09.2019 No response 5 02.01.2020 10.01.2020 Sought adjournment No response 6 14.02.2020 25.02.2020 No response 7 17.07.2020 27.07.2020 No response 8 05.09.2020 14.09.2020 No response 7 9 11.08.2023 25.08.2023 No response 10 23.01.2024 30.01.2024 No response 11 20.02.2024 28.02.2024 No response 12 12.03.2024 19.03.2024 No response 13 16.05.2024 24.05.2024 7.2 Only one submission was made by Assessee dated 15.05.2017.
7.3 Thus, it can be noted that ld.CIT(A) had provided 13 opportunities to the Assessee. It is also noted from para 6.3.2 of the order of the ld.CIT(A) that Assessee had made submission dated 15.05.2017 before ld.CIT(A). Ld.CIT(A) in his order has duly considered the submission dated 15.05.2017 of the Assessee and then decided the appeal on merits.
7.4 The ld.AR or Assessee has not submitted any reason before us for non-compliance to various notices issued by ld.CIT(A).
7.5 In these facts and circumstances of the case, we do not find any merit in the contention of the Assessee. Accordingly, Ground No.2 raised by Assessee is dismissed.
Ground No.3 and 4 : 8. Ground No.3 & 4 reproduced here as under : “3. Without prejudice to Ground No 2 above, on the basis of facts and in the circumstances of the case and as well as in law, the disallowance of labour expense amounting to Rs 1,41,38,625/- is 8 unwarranted as the same is any logical basis.
Without prejudice to Ground No 2&3 above, on the basis of facts and in the circumstances of the case and as well as in law the disallowance of labour expense be restricted to a reasonable amount.”
8.1 During the Assessment Proceedings, Assessing Officer noted that Assessee has shown receipts of Rs.13,99,53,070/-. Assessing Officer further noted that Assessee had debited Rs.5,87,00,094/- on account of labour expenses. The Labour Expenses of Rs.5,87,00,094/- consist of Direct Labour Expenses of Rs.2,63,22,333/- and Labour Sub-Contractor Charges of Rs.3,23,77,761/-.
8.2 The Assessing Officer in the Assessment Order has mentioned that the entire amount of Direct Labour Expenses of Rs.2,63,22,333/- have been incurred in cash. This fact has not been disputed by ld.AR before this Tribunal. Thus, it is an admitted fact that entire Direct Labour Expenditure of Rs.2,63,22,333/- were incurred in cash. Assessing Officer has mentioned specifically that as per Assessee’s submission dated 13.02.2014, more than 200 persons were employed. Assessing Officer specifically asked Assessee to produce supporting documents like ESI, PF Deduction, Bills, Vouchers, Attendance Sheet of Employees. However, no such 9 8.3 Regarding the Labour Sub-contract Payment of Rs.3,23,77,761/- claimed by Assessee, the Assessee claimed that these amounts were paid to Sub-contractors. The details are as under : Sr. Name of Sub- Amount Amount Amount No. Contractor Credited Outstanding Outstanding as on as on 31.3.2011 31.12.2013
(1) (2) (3) (4) (5) 1. Mayur Varyani 56,96,602/- 56,96,602/- 29,91,602/- 2. Mukesh Mulchandani 52,75,442/- 52,75,442/- 31,47,442/- 3. Rajesh Varyani 57,42,658/- 57,42,658/- 24,94,458/- 4. Shashi Mulchandani 53,78,907/- 53,78,907/- 25,21,907/- TOTAL : 2,20,93,609/- 2,20,93,609/- 1,11,55,409/- 8.4 The Assessing Officer in the Assessment Order noted that there is no sub-contractor agreement between the Assessee and Sub- contractor. All the sub-contractors are close relatives of the Assessee. All the sub-contractors do not have any office or employees. The sub-contractors have claimed to have made payments to labourers in cash only and no evidences were filed before the Assessing Officer. The Assessing Officer recorded 10 [A] statement u/s.131 of Mr.Mukesh Mulchandani and Shashi Mulchandani. Copies of these statements were provided to the Assessee. Assessee was provided opportunity of cross-examination. The Assessing Officer has reproduced relevant part of the statement in the order. Gist of the statement is that the so-called sub- contractors have not maintained any bills, vouchers, they claimed to have got the work done from someone, but could not provide details of those persons from whom they claimed to have done the work. The Assessing Officer after his elaborate investigation arrived at a conclusion that the Labour Expenditures claimed by Assessee were not genuine. Therefore, the Assessing Officer in order to understand the amount of labour expenditure required for the kind of work done by Assessee, got information from Additional City Engineer, Pune Municipal Corporation. The Additional City Engineer, Pune Municipal Corporation has specified the work done by Assessee and percentage of labour expenditure. Based on the information provided by Additional City Engineer, Pune Municipal Corporation, the Assessing Officer issued a show cause notice to the Assessee. In the assessment order, at page no.18 and 19 the Assessing Officer has specifically noted that Assessee had not objected to the proposed disallowance mentioned in the show cause notice dated 19.03.2014. 11
Aggrieved by the said disallowance of Rs.1,41,38,625/-, the Assessee filed an appeal before ld.CIT(A). The ld.CIT(A) has specifically mentioned in the order that Assessee has made only one submission dated 15.05.2017. Ld.CIT(A) duly considered the submission of the Assessee. Ld.CIT(A) confirmed the disallowance of Rs.1,41,38,625/-.
Aggrieved by the said disallowance, Assessee has filed appeal before ITAT. The Ground No.3 and 4 raised by the Assessee are regarding the said disallowance of Rs.,1,41,38,625/-. During the hearing before this Tribunal, ld.AR has not made any specific submission, but stated that in the business of Civil Contractor 8% profit is an acceptable profit. Ld.AR submitted that after the disallowance of Rs.1,41,38,625/-, the net profit comes to 16% which is very high in the business of Civil Contractor. Ld.AR submitted that without prejudice the disallowance should be reduced so that Net Profit comes to 8%.
11. In this case, admittedly Assessee has not produced any documents like Bills, Vouchers, Attendance Register of Employees etc., for the Direct Labour Expenses of Rs.2,63,22,333/-. Even before the ld.CIT(A), no documents have been filed. No evidence has been filed by Assessee before this Tribunal to substantiate the claim of Direct Expenditure of Rs.2,63,22,333/-. The onus of proving Direct Expenditure is on Assessee. In this case, Assessee has miserably failed to prove his claim of Direct Expenditure of Rs.2,63,22,333/-. It is important to note that Assessee had received contract from Municipal Corporation. The total receipts for A.Y.2011-12 were Rs.13,99,53,070/-. It is beyond the preponderance of probability that the Assessee who is engaged into carrying out such a huge contract do not maintain any documents related to Direct Expenditure on Labour. This shows that Assessee do not want to produce the documentary evidence related to Direct Labour Expenditure. Before Assessing Officer, Assessee has claimed that documents were lost in June 2011 and Assessee had filed copy of FIR. However, Assessing Officer has specifically mentioned that no details of documents mentioned in the FIR. FIR is First Information Report regarding an event filed by a person before a Police Officer. It is just preliminary information. Assessee 13 FIR. Therefore, the contention of the Assessee that documents were lost is unbelievable. Before the ITAT, Assessee has not made any submission regarding the documents lost.
11.1 In these facts and circumstances of the case, in the absence of supporting documents like Bills, vouchers, attendance register etc, we agree with the Assessing Officer that Assessee’s claim for Direct Labour Expenditure of Rs.2,63,22,333/- is not genuine.
Assessee has claimed that Rs.3,23,77,761/- were expenditure incurred on Sub-contractors. We have already reproduced the names of the Sub-contractors. Ironically, the entire amount was outstanding as on 31.03.2011. In this line of business, normally a sub-contractor is paid based on running bills raised by sub- contractors and amount of work done. No evidence has been filed by Assessee like copies of running bills raised by the sub- contractors. Astonishingly, all the four sub-contractors are close relatives of the Assessee. The Assessing Officer has recorded statements of two of the sub-contractors. Those sub-contractors could not provide any details regarding the work carried out for the Assessee. They could not file any documentary evidence before the 14 12.1 In these facts and circumstances of the case, we agree with ld.AO that expenditure claimed to have been made on account of sub-contractors are not genuine.
We are convinced that Assessee could not prove the genuineness of the expenditure claimed by Assessee of Rs.5,87,00,094/- on account of labour expenses. However, it is also a fact that Assessee has received Rs.13,99,53,070/- from Municipal Corporation on account of the work done. It means that Assessee had carried out the work. The Civil Work cannot be carried out without labour expenditure. Therefore, there has to be some labour expenditure incurred by Assessee. In order to estimate the labour expenditure, the Assessing Officer called-for information from Additional City Engineer(Projects), Pune Municipal Corporation. Based on the information provided by Additional City Engineer(Projects) - Pune Municipal Corporation, Assessing Officer has disallowed expenditure of Rs.1,41,38,625/- out of total expenditure of Rs.5,87,00,094/-. Before us, ld.AR submitted that the report of the Additional City Engineer(Projects)-Pune Municipal 15 Corporation cannot be considered while estimating the labour expenditure, as the assessee had also done work for other Municipal Corporations, however no similar report has been submitted by Ld.AR from any other corporation. We have already held that Assessee has miserable failed to prove genuineness of labour expenditure of Rs.5,87,00,094/-. However, it is also a fact that Assessee had executed the contract awarded by Municipal Corporation. It means, Assessee must have incurred some labour expenditure. The onus of proving expenditure is always on the Assessee. Since assessee has failed to file any documentary evidence regarding labour expenditure, one has to estimate the labour expenditure. For any estimation, there must be some basis. In this case, Assessing Officer made an estimation based on report of the Additional City Engineer(Projects) - Pune Municipal Corporation. Therefore, we do not find any infirmity in the comparable selected for estimation by the Assessing Officer. One has to have some expert opinion to estimate the labour expenditure, in the absence of any other expert opinion, the expert opinion of Additional City Engineer Pune Municipal Corporation needs to be considered. However, it is also a fact that the sub-contractors have filed returns for A.Y.2011-12 copies of Acknowledgments of 16 Returns of sub-contractors have been filed by Assessee at page no.42 to 49 of the paper book. Apparently, it seems that all these sub-contractors have shown 8% of profit on their receipts. However, it is also a fact that these sub-contractors could not produce any documentary evidence regarding the work carried out by them for the Assessee. We have already noted that genuineness of the expenditure on account of sub-contractors is not proved.
We find support from the decision of Hon’ble Madhya Pradesh High Court in the case of S.S.Crop Care Limited vs. CIT 221 Taxman 399, in IT Appeal No.79 of 2013. In the said case, Hon’ble Madhya Pradesh High Court vide order dated 17.12.2013 has held as under : “5. The appellant is a registered Private Limited Company registered under the provisions of Companies Act and is engaged in the business of manufacture of pesticide on job work basis for M/s Bayer Crop Science Limited. For the assessment year 2007-2008, the appellant filed return of income on 29-08-2007 and declared a total income of Rs.16,86,270/-. Assessment proceedings were held and it is seen that the Assessing Officer examined the wages, register and other bills and vouchers with regard to labour engaged on casual basis and with regard to expenditure of Rs.50,84,778/- towards payment for casual labour, proper bills and vouchers having not been maintained. Expenditure to the tune of Rs.3,50,000/- was disallowed by the Assessing Officer, as is evident from para-4 of the order passed by the Assessing Officer i.e. Annexure A-3 dated 24-12-2009. ……………… 11………………….On the contrary, the finding recorded by the Appellate Tribunal in para-3 goes to show that with regard to this item, as is contained at serial no.5 of table no.2 of the order passed by the Assessing Authority, no proper books of account and vouchers etc. has been produced and taking note of all these factors, it is held that the expenditure is not proved to have been incurred and therefore, it is disallowed. If that be the position without proof of expenditure being established, the benefit of section 37 cannot be granted.
12. Taking note of all these circumstances, we find no ground to interfere into the matter as no substantial question of law as alleged arise for consideration.”
In these facts and circumstances of the case and in the interest of justice, we estimate the disallowance on account of labour expenditure to Rs.1,00,00,000/-(one crore). Accordingly, we direct Assessing Officer to make a disallowance of Rs.1,00,00,000/- on account of labour expenditure instead of Rs.1,41,38,625/-. Accordingly, Ground No.3 and 4 are partly allowed.
15.1 In the Profit and Loss Account (page 27 of Paper book) the Assessee has shown Sale of Rs.13,99,53,070/- and Net Profit of Rs.93,91,001, but assessee has also shown Rs.10,11,425/- as Interest on Fixed Deposit. Hence once we remove the Interest earned by the 18 Net Profit shown by assessee in P& L account will be 5.9% only ( Rs.83,79,576/-) . We have confirmed the disallowance of Rs.1 Crores hence after the disallowance of Rs.1 Crore the NET Profit will be 13.1%. We have discussed in subsequent paragraphs why we do not agree to Net Profit of 8%. There is no empirical study to prove that Civil Contractors earn 8% net profit. Whereas the Assessing Officer has worked out the disallowance based on the expert opinion of the Engineer of the Municipal Corporation. We have already discussed why we have accepted the methodology adopted by the Assessing Officer.
Distinguishing Case Laws relied by Assessee :
16.1 The ld.AR has relied on certain case laws, however, all the case laws are distinguishable on facts. Ld.AR has relied on the decision of Arihant Builders Developers & Investors (P) Ltd Vs. ACIT of ITAT Indore Special Bench. The issue before ITAT in the case of Arihant Builders Developers & Investors (P) Ltd Vs. ACIT(supra) was regarding rejection of books of accounts u/s.145(2) of the Act and estimation of profit. The said decision of Arihant Builders Developers & Investors (P) Ltd Vs. ACIT is distinguishable on facts as in the case of the Assessee, the issue is 19 16.2 Assessee has relied on the decision of ITAT Pune in the case of B.C.Biyani Project Pvt. Ltd vs. JCIT in ITA No.773/PUN/2015. The said decision of B.C.Biyani Project Pvt. Ltd.(supra), the labour payments were disallowed u/s.40A(3) r.w.s 40(a)(ia) of the Act. However, ITAT has noted in its order that Assessee had produced vouchers for labour payments and books of accounts. The decision of ITAT in the case of B.C.Biyani Project Pvt. Ltd. is distinguishable on basic fact that in the case of B.C.Biyani Project Pvt. Ltd., vouchers, books were produced, but in the case of Assessee, no vouchers, bills were produced. Therefore, the decision of B.C.Biyani Project Pvt. Ltd., is distinguishable on facts.
16.3 Assessee has relied on the decision of ITAT Delhi Bench in the case of Eastern Construction Company vs. ITO in for A.Y.1986-87. The said decision in Eastern Construction Company distinguishable on facts as in the case of Eastern Construction Company Assessing officer has merely made disallowance without any basis. However, in the case of Assesseei.e.Dilip Jawaharlal Varyani, the Assessing Officerhas 20 Additional City Engineer(Projects)-Pune Municipal Corporation. Therefore, the decision of Eastern Construction Company is distinguishable on facts. It is important to mention here that the Net Profit of 8% mentioned u/s.44AD is specifically for smaller assessees. Therefore, the Net Profit of 8% cannot be applied on each and every case. Each and every case has to be analysed based on the peculiar facts of the case. In this case, the turnover of the Assessee-Dilip J. Varyani is in crores. We have already mentioned that it is highly unlikely that a contractor doing turnover of crores of rupees do not have evidences for expenditure. But, Assessee has not produced any evidence to prove the impugned expenditure, it means Assessee do not want to produce it. Similarly, the decision of Shri Nishikant T. Patne Vs. ACIT in for A.Y.2007-08 of ITAT Pune Bench, is distinguishable. Thus, all decision relied by Assessee are distinguishable.
Ground No.5 reproduced here as under : “5. Without prejudice to Ground No 2 above, on the basis of facts and in the circumstances of the case and as well as in law, the addition 21 17.1 It has been claimed by Assessee that Assessee has taken a loan of Rs.1,50,50,000/- from Shri Kishore Ahuja without paying any interest. The Assessing Officer asked Assessee to produce Mr.Kishore Ahuja. The Assessing Officer asked Assessee to produce copy of bank statement, balance sheet, profit and loss account of Mr.Kishore Ahuja to prove creditworthiness, identity, genuineness. However, Assessee has not filed copy of bank statement, balance sheet, profit and loss account before the Assessing Officer.
17.2 Assessing Officer had asked assessee to produce Mr.Kishore Ahuja. However, Mr.Kishore Ahuja was never produced before the Assessing Officer. Assessee submitted loan confirmation from Mr.Kishore Gurumukhdas Ahuja.Assessing Officer noted that NRE Account has been used to transmit cash. Therefore, after considering the submission of the Assessee, AO made an addition under section 68 of the Act, of Rs.1,50,50,000/-. Aggrieved by the addition, Assessee filed appeal before the ld.CIT(A) who confirmed the addition. 22 17.3 Aggrieved by the same, Assessee filed appeal before this Tribunal.
17.4 Before us in the paper book, Assessee has filed copy of the passport of Mr.Kishore Ahuja from page no.50 to 78. Assessee also filed copy of statement of Bank of India Account of Mr.Kishore Ahuja at page no.84 of the paper book. Apparently, copy of the bank statement of Bank of India was not filed before Assessing Officer. We specifically asked ld.AR about the same, but ld.AR could not answer. However, as per Assessee’s submission dated 15.05.2017, copy of bank statement was filed before the ld.CIT(A). The ld.CIT(A) has considered the said submission dated 15.05.2017. However, as per Rule 46A of Income Tax Rules, the ld.CIT(A) should have called-for a report from the Assessing Officer with reference to the documents filed before ld.CIT(A), which were not filed during Assessment Proceedings.
17.5 On perusal of the bank statement of Bank of India filed by Assessee at page no.84 of the paper book, it is observed that before providing impugned loan to Assessee, there were hardly any balances in the account of Mr.Kishore Ahuja. As per the copies of 23 Assessee at page no.79 to 83 regarding telegraphic transfer, it is observed that Assessee has deposited cash in UAE DIRHAM which was Telegraphically transferred to Kishore Ahuja’s Bank of India Account in India. Thus, it seems that Mr.Kishore Ahuja has deposited cash in UAE just before transferring the amounts to Omega Enterprises proprietor Mr.Dilip Varyani. It has been pleaded by ld.AR that these loans have been subsequently repaid. However, these facts were never placed before the Assessing Officer. On perusal of the copies of the passport filed by the Assessee, it is also observed from immigration stamps that Mr.Kishore Gurumukhdas Ahuja was in India for substantial period when the Assessment Proceedings were going on. Thus, there was no reason for Assessee NOT to produce Mr.Kishore G Ahuja before Assessing Officer as Assessing Officer had issued summons under section 131 of the Act in the name of Kishore G Ahuja. Assessee has never submitted how he knows Mr.Kishore G Ahuja , what were the Terms of the so called Loan !In these facts and circumstances of the case, in the interest of justice, we set-aside the issue of addition of Rs.1,50,50,000/- u/s.68 regarding impugned loan from Kishore G Ahuja to the Assessing Officer for de-novo adjudication. Assessee shall file all the necessary documents before the Assessing Officer. 24 If asked by the Assessing Officer, Assessee shall also produce Mr.Kishore G Ahuja before Assessing Officer to record statement u/s.131 of the Act if asked by the Assessing Officer. The Assessing Officer shall provide opportunity of hearing to the Assessee. Accordingly, Ground No.5 is allowed for statistical purpose. Ground No.6 : 18. Ground No.6 reproduced as under : “6. The appellant craves leave to add alter omit or substitute any of the grounds at the time of hearing of the appeal.”
The assessee has not altered, amended any of the grounds during the hearing, hence, Ground No.6 is dismissed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 28 October, 2025.