DHARMANANDAN DEVELOPERS,AHMEDABAD vs. THE ITO, WARD-3(3)(1), AHMEDABAD

PDF · subscribers
ITA 97/AHD/2025Status: DisposedITAT Ahmedabad13 August 2025AY 2019-204 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that in the interest of justice, considering the totality of facts and circumstances and the quantum of additions made, the matter should be restored to the file of the Assessing Officer for de-novo consideration. The Tribunal acknowledged the assessee's submission regarding portal issues and the request for another opportunity. The Ld. DR did not object to this course of action. Therefore, the Tribunal allowed the appeal for statistical purposes, effectively setting aside the orders of the lower authorities and remanding the case back to the AO for a fresh examination. No specific finding was given on the validity of the additions themselves, as the case was remitted.

What were the facts?

The assessee, Dharmanandan Developers, engaged in real estate, filed an appeal against the order of the NFAC, Delhi (CIT(A)) for Assessment Year 2019-20. The Assessing Officer (AO) completed the assessment under Section 144 due to non-response to notices. The AO made additions totaling Rs. 19,29,73,444/-. These included Rs. 16,11,05,296/- for unsecured loans, Rs. 21,92,645/- as disallowance of interest expenses, and Rs. 55,78,330/- as disallowance out of purchases and labour. The assessee failed to provide supporting documents for these transactions. The CIT(A) upheld the AO's additions, noting lacunae in the evidence provided during appellate proceedings and stating the assessee could not substantiate its claims.

What were the issues?

1. Whether the addition of Rs. 16,11,05,296/- on account of unsecured loans is valid, considering the assessee's alleged inability to provide identity, creditworthiness, and genuineness of the lenders, as per Section 68 of the Income Tax Act, 1961? 2. Whether the disallowance of interest expenses of Rs. 21,92,645/- is justified, given that the underlying unsecured loans were treated as non-genuine under Section 68, as per Section 37(1) of the Act? 3. Whether the disallowance of Rs. 55,78,330/- out of purchases and labour expenses is correct, when the assessee failed to provide documentary proof for these expenses and substantiate their business purpose? Assessee's contentions: The assessee argued that it had made complete responses to the AO's queries, but these were ignored due to issues with the Income Tax Portal. The assessee requested another opportunity to produce relevant evidence. The assessee also contended that the CIT(A) failed to provide sufficient opportunities and passed a cryptic order without reasoning. Revenue's contentions: The judgment does not record specific contentions from the Revenue before the Tribunal, other than the Ld. DR not objecting to the matter being restored to the AO.

Which sections of the Income-tax Act were involved?

Section 68,Section 37(1),Section 144,Section 144B,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri S. N. Divatia, AR
For Respondent: Shri B. P. Srivastava, Sr. DR
Pronounced: 06.08.2025

(Assessment Year: 2019-20) Dharmanandan Developers, Vs. Income Tax Officer, Dwarkesh Greens, Nr. Ward-3(3)(1), Anandniketan School, Thaltej, Ahmedabad Shilaj, Ahmedabad-380058 [PAN No.AAKFD3922A] (Appellant) .. (Respondent) Appellant by : Shri S. N. Divatia, AR Respondent by: Shri B. P. Srivastava, Sr. DR 06.08.2025 Date of Hearing Date of Pronouncement 13.08.2025 O R D E R

PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

1.

This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 06.11.2024 passed for A.Y. 2019-20.

2.

The assessee has raised the following grounds of appeal:

“1.1 The order passed u/s.250 on 06.11.2024 for AY 2019-20 by NFAC, [CTT(A)], Delhi (for short CIT(A)" upholding the additions/disallowances aggregating to Rs. 19,29,73,444/- towards unsecured loan, disallowance of expenses made by A.O. is wholly illegal, unlawful and without jurisdiction. 1.2 The ld.CIT(A) ought to have allowed sufficient opportunities to the appellant to produce all relevant evidence/documents in respect of the impugned additions/disallowances which the appellant could not produce for sufficient reasons. 1.3 The CIT(A) has failed to appreciate that the appellant had sent mail to NEAC (samadhan.faceless.assessement@incometax.gov.in) on 13.09.2021 with documents / details which was totally ignored by AO.

Dharmanandan Developers vs. ITO Asst. Year –2019-20 - 2– 2.1 The ld.CIT(A) has grievously erred in law and or on facts in upholding the following additions/disallowances: - (i) Unsecured loans - Rs. 16,11,05,296/- (ii) Disallowance of interest expenses Rs. 21,92,645/- (iii) Disallowance out of purchases and labour Rs.55,78,330/- 2.2 That in the facts and circumstances of the case as well as in law the ld. CIT(A) ought not to have upheld the above said additions/disallowances. 2.3 The ld. CIT(A) ought to have considered the evidence/documents produced by the appellant with regard to impugned additions/disallowances rather than passing a cryptic order without reasoning.”

3.

The brief facts of the case are that the assessee is engaged in the real estate business i.e. he is a builder, developer etc. During Financial Year 2018-19, the assessee filed return of income declaring total income of Rs. 2,40,97,173/-.

4.

The Assessing Officer issued various notices of hearing to the assessee but since there was no response to various notices issued under section 142(1) and the final show-cause notice under section 144 of the Act, the Assessing Officer completed the assessment under section 144 of the Act based on available records. On reviewing Form 3CD, the Assessing Officer observed that the assessee had received unsecured loans amounting to ₹16,11,05,296/- during the year. The assessee was repeatedly asked to furnish details and supporting documents, such as identity proofs of lenders, their financial statements for the past three years, and documents to verify the creditworthiness and genuineness of the transactions, but the assessee repeatedly failed to respond. Due to this non-compliance on part of the assessee, the Assessing Officer held that the conditions under section 68 of the Act i.e. identity, creditworthiness, and genuineness could not be verified. Therefore, the Assessing Officer treated the entire amount of ₹16,11,05,296/- Dharmanandan Developers vs. ITO Asst. Year –2019-20 - 3– as unexplained income under section 68 of the Act and taxed the same at the higher rate of taxation under section 115BBE of the Act. Since these loans were held to be non-genuine, the Assessing Officer also disallowed the corresponding interest expense of ₹21,92,645/- under section 37(1) of the Act. Further, the assessee had also claimed purchases of ₹97,06,429/- and labour expenses of ₹1,81,85,212/-. The Assessing Officer noted that despite being issued notices calling for documentary proof, including party-wise details, sample invoices, and agreements, no evidence was submitted by the assessee. Since the assessee failed to substantiate that these expenses were incurred wholly and exclusively for business purposes, the Assessing Officer disallowed and added 20% of the total expenses, amounting to ₹55,78,330/- to the income of the assessee. The total income assessed by the Assessing Officer came to ₹19,29,73,444/- and the assessment was completed under section 144 read with section 144B of the Act.

5.

In appeal, the Ld. CIT(A) dismissed the appeal of the assessee with the following observations:

5.4 On due consideration of all the above, it is noted that the appellant had filed certain evidences during appellate proceedings. On examination of all the evidence furnished, the AO has pointed out certain lacunae in the evidence as discussed in the remand report. The appellant was unable to substantiate its claims with credible evidence in spite of ample opportunities provided in the present proceedings. Accordingly, I see no cause to interfere with the additions made by the A.O in the assessment order under 144 rws 144B dated 27-09-2021, and the same are hence upheld, and the appellant's grounds are dismissed.

6.

The assesse is in appeal before us against the aforesaid order passed by the Ld. CIT(A). Before us, the Counsel for the assessee drew our attention to Page 2, Para 2.3 of CIT-A’s order, wherein it was specifically submitted that the assessee had made complete responses to various queries before the Dharmanandan Developers vs. ITO Asst. Year –2019-20 - 4– Assessing Officer, but the same were omitted to be considered in the faceless assessment scheme since even during the first week of September 2021, the Income Tax Portal was not responding properly. The Counsel for the assessee submitted that substantial additions have been made in the hands of the assessee and in the interest of justice, the assessee may be granted one more opportunity to produce the relevant evidence in support of it’s case.

7.

In response, Ld. DR also did not object to the matter being restored to the file of Assessing Officer for de-novo consideration.

8.

We have heard the rival contentions and perused the material on record. Looking into the totality of facts and circumstances and the quantum addition made in the hands of the asessee, in the interest of justice, the matter is hereby restored to the file of Assessing Officer for de-novo consideration.

9.

In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 13/08/2025

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →