INCOME TAX OFFICER INDORE 5(1), INDORE vs. UMANG DEVELOPERS, INDORE

आदेश/ O R D E R

Per B.M. Biyani, AM:

The captioned two appeals are filed by revenue, the details are as under:

(i) ITA No. 502/Ind/2023 is directed against order of first-appeal dated 31.05.2023 passed by learned Commissioner of Income-tax (Appeals), National Faceless appeal Centre, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 29.12.2019 passed by ITO-5(1), Indore [“AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18.

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 (ii) ITA No. 503/Ind/2023 is directed against order of first-appeal dated

31.05.2023 passed by same CIT(A) which in turn arises out of

assessment-order dated 20.09.2021 passed by National Faceless

Assessment Centre, Delhi [“AO”] u/s 143(3) r.w.s. 144B of Act for AY

2018-19.

revenue/appellant has filed applications for condonation of delays

supported by affidavits. In these documents, Ld. DR for revenue explained,

the revenue has submitted following reason for delay:

“I, Sanjeev Kumar, presently posted as Income Tax Officer-5(1), Indore do solemnly affirm as under:- 1. I am assessing officer having jurisdiction over the case of M/s. Umang Developers, Indore, PAN: AACFU7969E, Appeal no. ITA No. CIT(A), Indore- 2/10840/2019-20 dated 30/05/2023 for A.Y. 2017-18. 2. The order of Ld. CIT(A) was received in the office on 31/05/2023 as per ITBA appeal register but the same was not reflected in the list generated on 01/06/2023. Due to which it do not come to the notice of the undersigned that this order has been passed by the CIT(A) against the revenue. Thereafter, Scrutiny report was submitted before the Pr.CIT-1, Indore which was sent back with the observation of the Pr.CIT-1, Indore. Again scrutiny report was submitted and letter of authorization were issued by the Pr.CIT-1, Indore on 06/12/2023. Accordingly, this appeal has been filed on 08/12/2023 delayed by 130 days. 3. The limitation for filing appeal in this case was 30/07/2023. However, due to technical fault and office procedural, this office has delayed in filing appeal. It is prayed to Hon'ble ITAT, Indore Bench to kindly condone the delay in filing of this Appeal.” 2.1 The above reasoning was deliberated and the Ld. AR for assessee did

not have any objection if the delay is condoned. After careful consideration,

we find that the revenue has explained the “sufficient cause” of delay in

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 filing these appeals. We find that section 253(5) of the Act empowers the

ITAT to admit an appeal after expiry of prescribed time, if there is a

“sufficient cause” for not presenting appeal within prescribed time. It is also

a settled position by Hon’ble Supreme Court in Collector, Land

Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387

that whenever substantial justice and technical considerations are opposed

to each other, the cause of substantial justice must be preferred by adopting

a justice-oriented approach. Thus, taking into account the provision of

section 253(5) and the decision of Hon’ble Supreme Court, we take a

judicious view, condone delay, admit these appeals and proceed with

hearing.

assessee is a partnership firm engaged in the business of real estate. For AY

2017-18 & 2018-19, the assessee filed its returns/revised returns of income

u/s 139 declaring total incomes of Rs. Nil (with current year loss of Rs.

89,056/-) and Rs. 1,76,500/- respectively for those years. The cases of

assessee were selected for scrutiny-assessments and statutory notices u/s

143(2)/142(1) were issued. Finally, the AO completed assessments vide

assessment-orders dated 29.12.2019 & 20.09.2021 determining total

incomes as high as Rs. 10,37,01,498/- & 12,90,13,010/- respectively after

making certain additions. Aggrieved, the assessee carried matters in first-

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 appeal before CIT(A) and succeeded to a large extent. Now, the revenue has

come in next appeals before us assailing the relief granted by CIT(A).

identical/connected; they were heard together at the request of parties and

are being disposed of by this consolidated order for the sake of convenience,

brevity and clarity.

ITA No. 502/Ind/2023 – A.Y. 2017-18:

“1. On the facts and circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 35,00,000/- w.r.t. transactions with M/s. KCL Infra Project merely on the basis that the AO had not given any rebuttal, ignoring the fact that M/s. KCL Infra Project is a well-known penny stock company and involved in providing entries to its beneficiaries. 2. On the facts and circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 1,81,33,897/- u/s 68 as bogus sundry creditors on the basis of remand report submitted by the AO. Ld. CIT(A) ignored that the issue required proper verification and AO in his report clearly mentioned that authenticity of bills submitted by the assessee cannot be verified at that time due to Covid-19 Pandemic and lockdown due to second wave of Covid-19. 3. On the facts and circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 57,50,000/- merely on the basis that the AO had not given any rebuttal, ignoring the fact that AO had not accepted the contention of the assessee and object that the same cannot be entertained in his remand report. 4. On the facts and circumstances of the case, the Ld. CIT(A) erred in admitting additional evidences at the time of appeal ignoring the fact that it does not fulfill the conditions laid down in Rule 46A of Income Tax Rules, 1962 as sufficient opportunities were provided to the assessee during the assessment proceedings to submit evidences/documents.” Ground No. 4: 6. We first take up Ground No. 4 since this is the ground on which the

revenue is harping much and shall be relevant in other grounds also. In this

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 Ground No. 4, the revenue is assailing the CIT(A)’s action of admitting

additional evidences during first-appellate proceedings.

before AO without any valid reason and still the CIT(A) has admitted the

newer evidences filed by assessee before him. He submitted that the AO has

given sufficient opportunities to assessee but it was fault of assessee in not

filing requisite evidences to AO. He submitted that CIT(A)’s action to admit

evidences is against the provision of Rule 46A of Income-tax Rules, 1962

[“Rule 46A”]. He prayed that the Ground No. 4 of revenue has a merit and

must be allowed and consequently all other grounds of revenue also deserve

to be allowed.

and Para No. 4 (Page No. 8-10) of order of CIT(A) and contended that the

CIT(A) has given a vehement discussion qua this issue reading as under

which shows that there is no error in the action of CIT(A) in admitting

additional evidences filed by assessee:

Para 3 / Page 3 of CIT(A)’s order: “3. Reason for admission of additional evidences: The appellant has filed additional evidences in the course of appeal proceedings. The appellant explained that due to mistake of his Counsel, certain documents could not be submitted before the AO in time, In the interest of natural justice, the additional evidences were taken on record. They were then remanded to the AO for examination and producing rebuttal, if any. AO's Remand Report was further given to the appellant for rejoinder thereto. Thus reasonable opportunity has been given to each side. Additional evidences filed

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 by appellant, AO's Remand Report (rebuttal) and appellant's rejoinder stand admitted.”

Para 4 / Page 8-10 of CIT(A)’s order: “The AO in his Remand Report has categorically stated that ‘in respect of the amount received in the year through, the assessee has submitted relevant documents during the course of remand proceedings’. It is clear that when given chance of rebuttal, the AO has not given any adverse finding. However, the AO has taken a legal stand that additional evidences cannot be entertained as they do not fulfil the conditions laid down in rule 46 of the IT Rules. Thus, one thing is clear that the AO has not faulted with merits of arguments / additional evidences submitted by the appellant rather admitted that relevant documents have been submitted by the appellant. But the AO is not willing to entertain them under the technicality of Rule 46A. Rule 46A of the IT Rules, 1962 is reproduced as under: “46A. (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :— (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal ; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

(2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commission (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.

(3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity— (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.

(4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.”

Additional evidences are normally not allowed so as to bring finality to assessment proceedings. However, this cannot be at the cost of natural justice. Therefore, Rule 46A(1)(b) & 46A(1)(c) give opportunity to appellant to produce additional evidences in cases where an appellant is prevented by sufficient cause from producing such evidences. The rule is ended as it clearly provides further powers (beyond the previously passed order) to examine evidence or to cross-examine witness produced by an appellant and to produce further evidence or witness in rebuttal of additional evidence produced by appellant [Rule 46A(3)]. In this case the appellant has provided reasons which prevented him to present these evidences before the AO, including that of mistake of his Counsel, because of which certain documents could not be submitted before the AO in time. These have been found sufficient enough reasons and hence additional evidences are admitted. Most importantly purpose of the Income Tax Act is to collect rightful tax from assesses and therefore in situations where AO is convinced on merits of the matter, he cannot say that the additional evidences submitted by assessee cannot be entertained on account of technicalities of Rule 46A. As the appellant has submitted all the relevant documents before the AO (which he could not at the time of assessment) in respect of credits received during the year and the AO has not given any rebuttal, no addition is called for with respect to the fresh credit of Rs. 57,50,000/- received by the appellant from the above named four lenders during the previous year relevant to AY-2017- 18. It is to be appreciated that various Courts of Law have ruled that once an appellant has discharged the primary onus of giving evidences in respect of identity, creditworthiness and genuinity, it is the responsibility of the AO to make further investigation and prove the transaction as ingenuine. This ground of appeal is thus allowed.” 9. We have considered rival submissions of both sides and perused the

order of CIT(A). We find that the CIT(A) has carefully and judiciously

considered the reasoning given by assessee for invocation of Rule 46A and

also followed the procedure prescribed in the said Rule by seeking a

remand-report from AO. Further, the AO has also filed a remand-report

which has been considered by CIT(A) while adjudicating assessee’s

grievances on merit. Thus, there is no error or perversity in CIT(A)’s action of

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 admitting additional evidences. Accordingly, we do not find any merit in this

ground raised by revenue, the same is hereby dismissed.

Ground No. 1: 10. In this ground, the revenue claims that the CIT(A) has erred in

deleting the addition of Rs. 35,00,000/- made by AO qua the loan taken by

assessee from M/s KCL Infra Project [“KCL”].

fact, the AO has extracted a list of as many as 17 loans aggregating to Rs.

2,29,82,730/- from the reporting made by tax auditors of assessee in Form

No. 3CD and treated all those loans as unexplained due to non-filing/part-

filing of evidences by assessee and accordingly made addition of Rs.

2,29,82,730/- u/s 68.

terms of Rule 46A. The CIT(A) admitted such additional evidences and

sought a remand-report from AO which the AO filed. After vehement

consideration, the CIT(A) deleted entire addition of Rs. 2,29,82,730/-.

assessment-order and showed that one loan of Rs. 35,00,000/- appearing at

S.No. 9 in the list (forming part of overall loans of Rs. 2,29,82,730/-) was

taken by assessee from KCL which has also been deleted by CIT(A). Now, the

revenue is aggrieved by deletion of addition of this loan of Rs. 35,00,000/-

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 taken from KCL only; the revenue has no grievance against the deletion of

rest of addition qua other loans made by AO. Therefore, we are required to

examine the issue of loan of Rs. 35,00,000/- taken by assessee from KCL

only.

to AO which is duly acknowledged by AO himself in last column of the

aforesaid list of 17 loans. Further, the assessee filed A/c Confirmation, ITR

and Bank Statement of KCL to CIT(A) as additional evidences which the

CIT(A) forwarded to AO for conducting remand-proceeding. Thereafter, the

AO filed remand-report to CIT(A) as under:

order:

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 “Sr. No. 9: KCL Infra Project: The AO held in the assessment order that the appellant has submitted copy of loan confirmation, but mere submission of confirmation was not enough material to substantiate appellant's claim.

When the additional evidences field by appellant were remanded to the AO, the AO acknowledged receipt of copies of ITR and relevant part of bank statement but did not present any rebuttal. However, the AO commented that this particular creditor has been considered by the Investigation Wing of the Department as an 'entry provider' and also featured in the list of penny stock companies prepared by the CBDT. The AO, therefore, held that this transaction might be dubious.

The appellant now submits that in the assessment-order there were no observations apart from lack of documentary evidence in the form of ITR, Bank Statement etc. The evidences were submitted during remand stage and AO has not made any remarks on merit but observed that this lender is in the list of persons providing accommodation entries and is a penny stock. The appellant submits that the loan taken by it from this lender was a genuine business loan. The appellant further submits that during the remand proceeding, the AO did not make the appellant aware of any incriminating report of Department and directly levelled such serious allegations in the Remand Report. The appellant further submits that neither the extract of investigation report nor the extract of CBDT list of penny stock was made available to it by the AO for its comments. The appellant further submits that fresh public offer of right issue was made by the lender on 17.08.2022 and the detail thereof are available is public domain on SEBI website and that approval of BSE & SEBI for fresh public offer and trading of the scrip of lender on the BSE proves the bonafide of this lender. The appellant further submits that it has creditworthiness to take this loan as is borne by revenue- generating capacity of appellant in F.Y. 2016-17 and F.Y. 2017-18 wherein good enough incomes have been generated. Further, the appellant has relied upon the order of ITAT Indore in Shri Sanjay Shukla V/s. ACIT Central-2, Indore, 2022 where also the AO has treated the lender as bogus and entry provider but the Hon'ble Jurisdictional Tribunal held otherwise on perusal of the audited accounts of the lender - demonstrating enough reserves and surplus.

Facts on record, appellant's submission and case laws have been perused. The addition was made first by the AO in assessment order u/s 143(3) dated 29.12.2019 for want of documents other than loan confirmation. The appellant then submitted additional evidences viz., ITR, bank statement, etc, to evidence identity, genuinity and credit worthiness of the lender. The evidences being additional were remanded to the AO for rebuttal. The AO examined the evidences and the appellant in remand proceeding and then in the remand report did not rebut these evidences but commented that this loan may be dubious as the lender was named as entry provider in Investigation Department report and as a penny stock in CBDT list. However, the AO never gave a copy of the relevant extract to the appellant for cross-examination or comment. Thus Report, if any, indicating the lender has been used by the AO without affording any opportunity to the appellant and against the appellant at the time of concluding the remand report. It is also noteworthy that the AO has not rebutted any of the evidences filed by the appellant. On the other hand, the appellant has explained the net worth of the

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 lender and also bonafide of the lender from reference from BSE & SEBI. The appellant has also explained its own creditworthiness to take the loan. In view of all these facts, the addition made by the AO is not sustained.” 16. Contending for this issue, Ld. DR for revenue relied upon assessment-

order and remand-report of AO. He also repeated the same submission that

the additional evidences were not filed to AO without any valid reason.

CIT(A). He re-iterated the vehement findings made by CIT(A).

case record including the orders of lower-authorities. After a careful

consideration, we find that although the assessee filed only A/c

Confirmation of KCL to AO during assessment-proceeding but subsequently

during first-appeal proceedings the assessee also filed ITR and Bank

Statements of KCL to CIT(A) in terms of Rule 46A. The CIT(A) thereafter

sought remand-report from AO and admitted the evidences as per

prescribed procedure. The AO filed remand-report, which is re-produced

above, wherein there is no objection by AO against the evidences filed by

assessee. The AO has merely raised a doubt qua impugned loan on the basis

that the KCL has been found to be a penny stock company engaged in

providing accommodation but even while saying so, the AO ultimately left

the matter for decision of CIT(A) of merit. The CIT(A) has thereafter evaluated

the evidences/facts of KCL carefully and concluded that (i) the KCL was

having net worth to advance loan to assessee, (ii) the KCL brought a public

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 issue of shares and thus its bona fides are recognised by SEBI & BSE, (iii)

that the ITAT, Indore has already accepted the genuineness of KCL in Shri

Sanjay Shukla (supra) [Refer Para 9 of ITAT’s order]. Thus, the CIT(A) has

passed a reasoned order qua this issue, the revenue is not able to rebut the

observations/conclusions made by Ld. CIT(A).

Rs. 47,50,000/- taken by assessee (forming part of overall addition of Rs.

2,29,82,730/- made by AO) from another lender “Mr. Manan Jhawar”. The

factual position of the loan taken from “Mr. Manan Jhawar” is at parity with

the impugned loan taken from KCL in the sense the AO, in remand-report,

raised the very same doubt as raised for loan from KCL. The AO noted that

Mr. Manan Jhanwar was a relative of director of KCL and KCL was a penny

stock company. The CIT(A), after considering this reporting made by AO in

remand-report, deleted the addition qua the loan taken from Mr. Manan

Jhanwar; the order passed by CIT(A) is re-produced below for an immediate

reference:

“Sr. No. 10: Manan Jhawar: As regards receipt of credit of Rs. 47,50,000/- from Mr. Manan Jhawar, is concerned the AO in his assessment-order made this addition for the reason that copy of ITR, bank statement and lender's capital account to show his credit worthiness were not furnished. These additional evidences submitted in appellate proceedings were remanded to the AO for rebuttal. In the Remand Report, the AO has recorded that the appellant has submitted copy of loan confirmation, relevant part of bank statement and copy of ITR. Thus, identity, creditworthiness and genuinity of the transactions is demonstrated by the appellant. The AO has neither challenged nor found fault with this evidence in his Remand Report.

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 However, he has merely stated that Mr. Manan Jhawar is a family member of the Director of KCL Infra Project which is said to be indicted by Investigation Wing as entry provider. However, no evidence was ever produced either in assessment- order or in Remand Report by AO that KCL Infra Project had no net worth to advance loans. Even if it is assumed that Mr. Mohan Jhawar was a Director of KCL Infra Project and Mr. Manan Jhawar was family member of Mr. Mohan Jhawar, then Mr. Manan Jhawar is a separate legal entity and responsible for his own errors and omissions rather than of KCL Infra Project or of Mr. Mohan Jhawar. Thus, being a family member of Mr. Mohan Jhawar, presumed to be Director of KCL Infra Project which in turn is presumed to be an entry provider, cannot be a satisfactory reason to put the credit received from Mr. Manan Jhawar in doubt. Relevant documents / additional evidences with respect to this lending were produced by the appellant to the AO for examination and the AO was free to make further examination / inquiry and point out if there was any colourable device in this transaction. However, the same has not been done by the AO at the Remand Report stage. On merit, KCL Infra trades on BSE, has sufficient net worth and its public offer of rights issue on 17.08.2022 was approved by SEBI and bonafide of this lender was accepted by the Jurisdictional ITAT in Shri Sanjay Shukla Vs ACIT-2, Indore (supra). Therefore, credit received from Mr. Manan Jhawar cannot be treated as malafide on mere presumption of Mr. Manan Jhawar being a family member of Mr. Mohan Jhawar who in turn is presumed to be a Director of KCL Infra Project.” It is noteworthy that the revenue is not in appeal against the above order of

CIT(A) deleting the addition of loan taken by assessee from Mr. Manan

Jhanwar despite the fact that the adjudication made by CIT(A) in both loans

[i.e. loan taken from KCL as well as loan taken from Mr. Manan Jhanwar] is

same. We do not find any justification in the approach of revenue in

agitating CIT(A)’s adjudication qua the loan taken from KCL even while

accepting CIT(A)’s decision on the very same lines qua the loan taken from

Mr. Manan Jhanwar.

no error or perversity in the order of CIT(A) deleting the addition qua the

loan of Rs. 35,00,000/- taken from KCL. We uphold the order of CIT(A) and

the Ground raised by revenue is dismissed.

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 Ground No. 2: 21. In this ground, the revenue claims that the CIT(A) has erred in

deleting the addition of Rs. 1,81,33,897/- made by AO u/s 68 qua sundry

creditors.

assessment-proceeding, the AO observed that the assessee has shown

current liability of sundry creditors at Rs. 1,81,33,897/- in its Balance-

Sheet. When the AO asked assessee to justify the claim of sundry creditors,

the assessee filed its reply giving a complete list of creditors and seeking

more time for submission of A/c Confirmations. The list filed by assessee is

placed at Page 169 of Paper-Book, the same is re-produced here for an

immediate reference:

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 The AO, however, rejected assessee’s submission and treated the impugned

creditors as unexplained and made addition by following order:

“7…….The assessee is totally unjustified in making above claim. Along with its submission the assessee has submitted a list in which merely of name of such creditors totaling to Rs. 1,81,33,897/- is mentioned. No other requisite details are enclosed along with submission. The assessee has submitted confirmations of a few creditors that are absolutely insufficient. It is very surprising that assessee's books of account are audited within the meaning section 44AB of the Income Tax Act. The assessee itself has claimed in its submission these creditors are actually trade creditors. But even after availing so many opportunities the assessee is totally unable in furnishing copy of ledgers of such creditors maintained in assessee’s books of accounts. Because of that it is strongly apprehended that assessee's books of accounts have not been maintained properly. It is big question-mark over the authenticity of the audited books of accounts. If it is a trade creditors, without making a delay the assessee was supposed to furnish copy of bills, vouchers, copy of bank statement, details of transactions etc. to justify such liability of 'Sundry creditors'. Most of the creditors are local as evident from the list, so assessee is not justified in making excuses that these are outsiders. In spite of that availing four months of time is abnormally too much. But unfortunately, even after availing much time the assessee has grossly failed in producing details and documentary evidences as mandated u/s 68 of the Income Tax Act, 1961 so as to justify the claim of 'Sundry creditors' under reference. In such situation it is concluded that amount of Rs. 1,81,33,897/- which is shown by the assessee under the head of 'Sundry Creditors' stands unexplained and it is considered as 'unexplained credit or 'unexplained liability' within the meaning of section 68 of the Income Tax Act and the same is being disallowed and added back to the total income of the assessee. Penal action u/s 271AAC is being initiated on this issue. Addition: Rs. 1,81,33,897/-” 23. During first-appeal, the assessee filed additional evidences in the form

of Ledger A/c Confirmations and Invoices of creditors to CIT(A) which the

CIT(A) forwarded to AO for conducting remand-proceeding. Thereafter, the

AO filed remand-report to CIT(A) as under:

“IV. Addition on account of 'Sundry Creditors' Rs. 1,81,33,897 /-:

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 At the time of scrutiny assessment proceeding on perusal of the assessee's Balance sheet for the year under consideration, it was found that the assessee has shown Current Liability i.e. 'Sundry Creditors' to the tune of Rs. 1,81,33,897/-. Vide a query the assessee was requested to furnish the requisite documentary evidences so as to justify this claim. Later, the assessee submitted a list of 'Sundry Creditors' exceeding Rs. 2 lakh. No other details were furnished so as to justify this claim and other documentary evidences giving details of transactions carried out which resulted into raising of 'Sundry Creditors'. It was very surprising that assessee's books of account are audited within the meaning section 44AB of the Income Tax Act. The assessee itself has claimed in its submission that these creditors are actually trade creditors. But even after availing so many opportunities the assessee was totally unable in furnishing copy of ledgers of such creditors maintained in assessee's books of accounts or other relevant details too. Now the additional evidences submitted by the assessee at appellate stage, are duly perused, in which the assessee has contended that out of total addition of Rs. 1,81,33,897/-, addition of Rs. 1,63,21,564/- pertains to the opening balance which were received in earlier assessment year and are not covered u/s 68 of the Act. Since at the time of scrutiny assessment proceeding, even after repeated requests and reminders, the assessee did not give any details so as to ascertain that whether these credit entries are with opening balances, nor any schedule was annexed with audited balance sheet made it unverifiable. Now along with additional evidences, the assessee has submitted copy of ledgers of 16 creditors (closing balance totaling to the tune of Rs. 1,63,21,564/-). In support of his claim the assessee has submitted either confirmation or invoices and in some cases both are enclosed by the assessee. So far as details of remaining creditors totaling to the tune of Rs. 17,60,333/- out of total of Rs. 1,81,33,897/-, is concerned, the assessee has submitted that these are fresh credit against purchase during the year. Along with additional evidences, the assessee has submitted copy of ledgers/invoices of 8 creditors. The authenticity of these bills cannot be verified at this stage as market enquiry cannot be conducted due to Covid-19 Pandemic.” 24. After considering AO’s remand-report, the CIT(A) passed following

order deleting the addition:

“4…. From AO's report it is clear that Rs. 1,81,33,987/- represents business credits. Out of these, Rs. 1,63,21,564/- represents old credits, for which confirmations or invoices or both have been submitted by the appellant. Even though outside the context of section 68 addition, the AO has examined them and found nothing adverse. Similarly, necessary documents have been furnished by the appellant for balance / fresh credit of Rs. 18,12,233/- (Rs.

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 52,000/- Service tax grouped wrongly with sundry creditors and Rs. 17,60,333/- representing 8 creditors from whom purchases were made during the year). Thus, the appellant has discharged the onus cast upon it. It was open to the AO to cross verify the invoices from market during Remand stage which could not be done at assessment stage due to Covid Pandemic. But this was not done. No fault has been reported by the AO in Remand Report with the representation of the appellant. No adverse view can therefore, be taken against it. This ground of appeal is therefore, allowed.” 25. Before us, Ld. DR for revenue relied upon assessment-order and

remand-report of AO. He harped on the very same contention that the

assessee is at fault for not submitting evidences to AO when the AO called

the same.

CIT(A). He re-iterated the vehement findings made by CIT(A). He submitted

that the AO has not made any objection in remand-report against the

evidences filed by assessee and that the assessee cannot be penalised for

AO’s inability to verity the evidences due to Covid-19 pandemic.

case record including the orders of lower-authorities. The addition of Rs.

1,81,33,987/- made by AO in respect of sundry creditors shown in

assessee’s Balance-Sheet is an issue of controversy in this ground.

Admittedly, the assessee filed a list of 25 creditors, re-produced above, to AO

and sought time for filing A/c Confirmations of creditors. The AO, however,

rejected assessee’s request and treated the entire amount of outstanding

liability appearing in Balance-Sheet as unexplained and made addition.

During first-appeal proceedings the assessee filed the very same list to CIT(A)

Page 18 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 with A/c Confirmations and Invoices of creditors in terms of Rule 46A. The

CIT(A) thereafter sought remand-report from AO and admitted assessee’s

evidences as per prescribed procedure. The AO filed remand-report, which is

re-produced above. A perusal of remand-report clearly shows that the AO

has accepted opening liability of Rs. 1,63,21,564/- brought forward from

earlier year which is a major part of total liability of Rs. 1,81,33,897/- added

by AO. Ld. DR for revenue does not have dispute against the conclusion of

CIT(A) holding that the liability of Rs. 1,63,21,564/- brought forward from

earlier year is outside the scope of section 68 meaning thereby no addition

can be made in current year for such opening balance. Once the liability of

opening balance is excluded, there remains a small liability of Rs.

18,12,333/- for which the CIT(A) is again correct in observing that the

assessee has discharged its onus by filing A/c Confirmations and Invoices of

creditors. In remand-report, the AO has not reported any objection against

the evidences filed by assessee, he has merely mentioned his own inability

to verify documents due to Covid Pandemic. Taking into account these

points, Ld. CIT(A) has deleted the addition made by AO. In our considered

view, the order passed by CIT(A) is very correct and does not suffer from any

error or perversity. Hence, we have no reason to interfere with the order of

CIT(A), the same is hereby upheld and this ground is also dismissed being

meritless.

Ground No. 3:

Page 19 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 28. In this ground, the revenue claims that the CIT(A) has erred in

deleting the addition of Rs. 57,50,000/- made by AO qua unexplained loans

taken by assessee from friends and relatives.

fact, the AO has extracted a list of as many as 11 loans aggregating to Rs.

1,14,39,825/- and made addition u/s 68 treating the same as unexplained

due to non-filing of evidences by assessee.

terms of Rule 46A. The CIT(A) admitted such additional evidences and

sought a remand-report from AO which the AO filed. After consideration, the

CIT(A) deleted the entire addition of Rs. 1,14,39,825/-.

assessment-order passed by AO and the order of first-appeal passed by

CIT(A) and demonstrated that out of loans of Rs. 1,14,39,825/- added by AO,

the assessee took new loans of Rs. 57,50,000/- only during current year

from 4 creditors and the rest was opening balance brought forward from

earlier year. The details of new loans as noted by CIT(A) in a tabular format

on Pages 6-8 of impugned order, are re-produced below:

Sr. Name of lender Amount AO’s remarks in remand Report on No. additional evidence (in Rs.)

Page 20 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19

1 Chandra R. Bakhru 3,50,000/- As per ledger, received during the year. Submitted copy of confirmation PAN, relevant part of Bank statement showing amount transferred through bank.

2 Heaven construction P. Ld. 45,00,000/- As per ledger, received during the year. Submitted copy of confirmation, copy of ITR A.Y. 2017-18.

3 Poonam Udhav Rajani 6,00,000/- As per confirmation, received during the year. Submitted copy of confirmation, copy of ITR A.Y. 2017- 18.

4 Udhavdas Rupchand 3,00,000/- As per confirmation, received during Rajani the year. Submitted copy of confirmation, copy of ITR A.Y. 2017- 18.

Total 57,50,000/-

Now, the revenue is aggrieved by deletion of addition of Rs. 57,50,000/- qua

these new loans taken during the year only; the revenue has no grievance

against the deletion of rest of addition by CIT(A). Therefore, we are required

to examine the issue of new loans of Rs. 57,50,000/- only taken by assessee

from aforesaid 4 creditors.

and Bank Statements of creditors to CIT(A) which the CIT(A) forwarded to

AO for conducting remand-proceeding. Thereafter, the AO filed remand-

report to CIT(A) [Page 6 of remand-report at Page 277 of Paper-Book] making

a limited objection that the evidences filed by assessee “cannot be

Page 21 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 entertained as it does not fulfil the conditions laid down in Rule 46A of the IT

Rules.”

remand-report of AO:

Pages 8-10 of CIT(A)’s order - We have already re-produced this part in foregoing paragraph and the same is once again repeated: “The AO in his Remand Report has categorically stated that ‘in respect of the amount received in the year through, the assessee has submitted relevant documents during the course of remand proceedings’. It is clear that when given chance of rebuttal, the AO has not given any adverse finding. However, the AO has taken a legal stand that additional evidences cannot be entertained as they do not fulfil the conditions laid down in rule 46 of the IT Rules. Thus, one thing is clear that the AO has not faulted with merits of arguments / additional evidences submitted by the appellant rather admitted that relevant documents have been submitted by the appellant. But the AO is not willing to entertain them under the technicality of Rule 46A. Rule 46A of the IT Rules, 1962 is reproduced as under: “46A. (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely :— (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer ; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal ; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

(2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commission (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.

(3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity—

Page 22 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19

(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.

(4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.”

Additional evidences are normally not allowed so as to bring finality to assessment proceedings. However, this cannot be at the cost of natural justice. Therefore, Rule 46A(1)(b) & 46A(1)(c) give opportunity to appellant to produce additional evidences in cases where an appellant is prevented by sufficient cause from producing such evidences. The rule is ended as it clearly provides further powers (beyond the previously passed order) to examine evidence or to cross-examine witness produced by an appellant and to produce further evidence or witness in rebuttal of additional evidence produced by appellant [Rule 46A(3)]. In this case the appellant has provided reasons which prevented him to present these evidences before the AO, including that of mistake of his Counsel, because of which certain documents could not be submitted before the AO in time. These have been found sufficient enough reasons and hence additional evidences are admitted. Most importantly purpose of the Income Tax Act is to collect rightful tax from assesses and therefore in situations where AO is convinced on merits of the matter, he cannot say that the additional evidences submitted by assessee cannot be entertained on account of technicalities of Rule 46A. As the appellant has submitted all the relevant documents before the AO (which he could not at the time of assessment) in respect of credits received during the year and the AO has not given any rebuttal, no addition is called for with respect to the fresh credit of Rs. 57,50,000/- received by the appellant from the above named four lenders during the previous year relevant to AY-2017- 18. It is to be appreciated that various Courts of Law have ruled that once an appellant has discharged the primary onus of giving evidences in respect of identity, creditworthiness and genuinity, it is the responsibility of the AO to make further investigation and prove the transaction as ingenuine. This ground of appeal is thus allowed.” 34. Before us, Ld. DR for revenue relied upon assessment-order and

remand-report of AO. He submitted that the additional evidences were not

Page 23 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 filed to AO without any valid reason. He submitted that the CIT(A) is wrong

in accepting additional evidences over-ruling the objection raised by AO.

CIT(A). He re-iterated the order of CIT(A) and submitted that the CIT(A) has

given vehement observations and conclusions; his order must be preserved.

case record including the orders of lower-authorities. After a careful

consideration, we find that the assessee filed evidences of impugned loans to

CIT(A) during first-appellate proceeding invoking Rule 46A and acting upon

assessee’s request the CIT(A) forwarded those evidences to AO. The AO filed

remand-report wherein he has not expressed anything adverse against the

evidences but raised only a limited objection that the additional evidences

cannot be entertained. But the CIT(A) has taken in account the verdict of

Rule 46A which permits admission of additional evidences in sufficient

situations. Further, the CIT(A) has not only accepted assessee’s explanation

as sufficient to invoke Rule 46A but also accepted a well-recognised

principle that only rightful tax can be collected from assessee. The CIT(A)

has also held that by adducing evidences the assessee has discharged the

primary onus of section 68 and the AO has not made further investigation to

prove that the transactions of impugned loans were not genuine. We do not

find any error or mistake in these observations and conclusion made by

CIT(A) and accordingly do not find any reason to interfere with the order of

Page 24 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 CIT(A). Consequently, we uphold the same and the ground raised by revenue

is dismissed.

ITA No. 503/Ind/2023 - A.Y.2018-19: 37. The grounds raised in this appeal are as under:

revenue is harping much and shall be relevant in other grounds. In this

Ground No. 5, the revenue is assailing the CIT(A)’s action of admitting

additional evidences during first-appellate proceedings.

Page 25 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 39. We have already decided identical ground in appeal of AY 2017-18 in

earlier part of this order. Since the underlying facts and issue remain same,

our adjudication therein would apply mutatis mutandis. Carrying the same,

this ground of revenue is dismissed.

Ground No. 1: 40. In this ground, the revenue claims that the CIT(A) has erred in

deleting the addition of Rs. 5,03,68,443/- made by AO qua unexplained

loans taken by assessee, ignoring the adverse reporting made by AO in

remand-report.

During assessment-proceeding, the AO observed that the assessee has

shown liabilities of unsecured loans. The AO has noted that when he asked

assessee to explain the same, the assessee initially filed reply on 21.04.2021

showing that he has taken loans and paid interest amounting to Rs.

5,03,68,443/- (Rs. 4,40,37,039/- of principal loans + Interest of Rs.

63,31,404/-). When the AO asked assessee to submit documentary

evidences, the assessee filed another reply on 24.05.2021 with certain

documentary evidences showing that out of loans of Rs. 4,40,37,039/-,

loans to the tune of Rs. 4,02,92,500/- were taken during the year from 6

lenders. The AO, however, rejected assessee’s submissions by making

following remarks on the 6 lenders and accordingly made addition of Rs.

5,03,68,443/-:

Page 26 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19

Page 3-4 of AO’s order:

Sl. Name Amount (in Rs.) Remarks (documents given)

No. For F.Y.2017-18

1 Abhilasha Rs 20,00,000/- No ITR given. (Bank Details & ITR of Trading Abhishekh Singh, Individual, is given with Company Returned income of Rs. 5,25,560/-only.)

2 Manan Rs.18,00,000/- ITR declaring Income of Rs 2,90,600/- for S/o Mohan AY 2018-19. Bank Details given which shows that the amount has been credited to Manan's account by Mohan on same day and before couple of days

3 Manisha Rs.1,52,67,500/- ITR declaring Income of Rs 13,62,510/- W/o with exempt income of Rs 38,95,070/- for Mohan A.Y 2018-19 given. Incomplete Bank Details given. Statement of Axis Account No. 917030055472582 for the period (From: 01-08-2017 To 28-02-2018) given, but as per bank book transactions starts from 11/08/2017, which is contradictory to the data given in books of accounts. As per assessee's books entries transactions also happened on 03/08, 7/08, 9/08, & 12/08/17 which is not reflected in the Bank statements. It is also found that transaction dated 11/10/2017 of Rs 5,00,000/- which is claimed to be transferred to Umang Developers has been actually transferred to Shri Manish Kr. P. It is also found that before almost every transfer the same amount of money has been credited to Manisha's accounts through Mohan Jhawar on same day or one & two days before the transfer.

Page 27 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 date or one & two day before the transferring to Umang Developers.

6 KCL Infra Rs.1,82,25,000/- ITR, declaring Income of Rs. 39,75,580/- Projects for AY 2018-19. Bank Details given on Ltd. 01/07/2021, after going through the bank statements, it is found that the company lend money only 2-3 company and Umang Developers is one of them. The statements show that before transferring the huge amounts, the same amount has been credited to KCL bank Accounts, thereafter the KCL transfer the same to Umang Developers.

Total Rs.4,02,92,500/-

For which show cause dated 07/06/2021 has been issued to the assessee for which the assessee replied on 01/07/2021, but the assessee submitted only the Bank Statements of KCL Infra Projects And Rohit Creations. After verification of the lenders bank accounts, it is found that on each transaction date a lump sum amount has been transferred to the lenders account one or two days before. Assessee has also failed to provide creditworthiness of lenders as their income in the ITR is substantially less compared to loan amount given by them. The source of lenders income is not proven from given submission. It is also found that the assessee has paid Interest @ Rs. 13,76,982/- out of total interest paid claim to the tune of Rs. 63,31,404/-, for the loan taken during F.Y 2017-18 i.e. A.Y 2018-19, Rest amount of Interest has been paid for the Loan amount which has been taken before the F.Y 2017-18 and as per Assessment-Order for A.Y 2017-18, the assessing Office has disallowed the total loan amount and added back to the total income of the assessee, So claim of interest paid on that loan amount is also not acceptable. In view of the above, the assessee has failed to prove the credit worthiness of the lenders and genuineness of the transactions. So the whole amount of Rs 5,03,68,443/- (Rs. 4,40,37,039 + Interest of Rs. 63,31,404/-) has been added to the total income as unexplained cash credit u/s 68 of the IT act 1961 and the same is taxed u/s 115BBE of Income tax Act, 1961. After satisfying on the facts of the case penalty proceedings u/s 271AAC are initiated separately. (Addition: Rs. 5,03,68,443/-)”

comprising of documents already filed before AO as well as some newer

documents under Rule 46A. The CIT(A) forwarded those evidences to AO for

Page 28 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 conducting remand-proceeding. The AO submitted remand-report to AO

wherein he re-produced assessment-order and raised following limited

objection:

“The assessee has submitted relevant documents during the course of remand proceedings, the same cannot be entertained as it does not fulfil the conditions laid down in Rules 46A of the ITAT Rules. However, the case may be decided on merit.” 43. The CIT(A) considered AO’s remand-report and finally decided the

issue on merit whereby he deleted addition fully by observing and holding

thus:

“Ground No. 2: The AO found out that the appellant has taken unsecured loan of Rs. 5,03,68,443/- (Rs. 4,40,37,039/- loan + Rs. 63,31,404/- interest). The AO asked the appellant to furnish requisite documentary evidence to justify its claim. The AO considered the submission of the appellant but did not find them acceptable. The AO noted that on verification of lender's bank account, it was found that on each transaction date, a lump sum amount has been transferred to the lender's account one or two days before. The AO, therefore, insisted on demonstration of creditworthiness of lenders. The AO was not satisfied with the evidences submitted by the appellant and hence disallowed the loan amount of Rs. 4,40,37,039/-. The AO further noted that for A.Y. 2017- 18, the then AO has disallowed the loans taken by the appellant and added back to the total income of the appellant. The AO, therefore, held that claim of interest payment on the disallowed loan amounts of earlier year cannot be accepted. In view of these findings, the AO disallowed an amount of (Rs. 4,40,37,039/- loan amount + Interest Rs. 63,31,404/-) = Rs. 5,03,68,443/-. The AO added this to the total income of the appellant as unexplained cash credit u/s 68 of the Act. In course of appellate proceedings, additional evidences were filed by appellant. The matter was remanded to the AO for examination and rebuttal. In the remand report, the AO reproduced verbatim para 4 of assessment order and then commented as under: "The assessee has submitted relevant documents during the course of remand proceedings, the same cannot be entertained as it does not fulfill the conditions laid down in Rules 46A of the IT Rules. However, the case may be decided on merit."

Page 29 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 Thus, the AO has not given any rebuttal to the additional evidences submitted by the appellant and taken recourse to technicalities of Rule 46A. For the sake of easy reference, AO's remarks on these lenders is reproduced hereunder: XXX (already re-produced in foregoing para in a Tabular Format. Hence not being re-produced to avoid duplication) Facts on record, appellant's submission and AO's remand report has been examined. Each lender is accordingly discussed below: Abhilasha Trading Company The appellant submits that it has duly submitted the ITR of Mr. Abhishek Singh, Proprietor, Abhilasha Trading Company. In the assessment order, the AO notes that no ITR is given. This shows lack of application of mind. Mr. Abhishekh Singh is a proprietor of Abhilasha Trading Company and hence the appellant has given ITR and bank details of the proprietor. The relationship of Abhishekh Singh, Individual as proprietor of Abhilasha Trading Company has not been acknowledged by AO. This is arbitrary. When the appellant has submitted ITR, bank statement and confirmation from the lender, it has discharged primary onus with respect to identity, genuinenity of transaction and creditworthiness of the lender M/s Abhilasha Trading Company. If any contrary view is to be held then AO must controvert the evidences. But even at remand stage no rebuttal is given by AO. Hence, to this extent AO's order cannot be sustained. Manan S/o Mohan The AO noted that this person has filed ITR for A.Y. 2018-19, declaring income of Rs. 2,90,600/- and that bank details of this lender showed that he has received money from his father Mohan prior to lending the money to the appellant. On this ground, it has been held that identity, genuineity of transaction and creditworthiness of lender is not established. The matter was remanded to the AO. In his Remand Report dated 13.04.2023, the AO refused to entertain the additional evidences on technical ground. Thus, there is no adverse finding by the AO in Remand Report with respect to identity of this lender. The lender is a bonafide tax payer filing regular ITRs. As far as crediting of money in Manan's account by his father Mohan is concerned that does not prove anything adverse in itself for the appellant. No net worth analysis has been done by the AO with respect to Mr. Manan. No complicity between appellant and either the lender, Mr. Manan or his father Mr. Mohan has been established or even demonstrated by the AO. By submitting ITR, bank statement and such other details as required by the AO in course of assessment proceeding or by the AO in course of remand proceeding, the appellant has discharged the onus. It was then incumbent upon the AO to

Page 30 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 prove that the lender did not have net worth to lend or that there was complicity between lender and the appellant and therefore the transaction was ingenuine. No such thing has been brought on record by the AO. Neither was this attempted during remand proceedings. This addition therefore cannot be sustained in absence of clinching evidence. Manisha W/o Mohan This lender has lend Rs. 1,52,67,500/- to the appellant. It is seen that this lender has filed ITR for A.Y. 2018-19, declaring income of Rs. 13,62,510/- with exempt income of Rs. 38,95,070/-. The AO in assessment order noted that bank statement were not complete and did not tally with bank book. Further, it's pointed out that before every credit given by the lender to the appellant, there was credit to lenders account by Mr. Mohan Jhawar. However, during appeal, the appellant submitted complete bank statement and the same were remanded to the AO. The AO did not offer any rebuttal. It is to be noted that the lender is a bonafide income tax payer, filing regular tax return and for the A.Y. 2018-19, has declared income of Rs. 13,62,510/-, with exempt income of Rs. 38,95,070/-. Thus, the lender is flush with ample income during A.Y. 2018-19. Moreover, no net worth analysis has been made by the AO either at assessment stage or during remand proceeding. In absence of net worth analysis, it cannot be said that the lender was not having necessary net worth to advance this loan to the appellant. Also, infusion of money by Mr. Mohan Jhawar into the account of lender Mrs. Manisha Jhawar just before advancing of loan by lender to the appellant does not prove or disprove anything on its own until a link is completed with the appellant. The AO has not demonstrated that Mr. Mohan Jhawar was complicit with the appellant and was working as a conduit between appellant and the lender to layer appellant's unexplained income with the lender. Further, as per requirement of section 68, the appellant was required to file ITR, bank statement and such other document as requisited by AO during assessment proceeding/remand proceeding. No case is made out by the AO that during remand proceeding he sought certain document and they were not submitted constraining him from establishing the credit worthiness of the lender or the genuinenity of the transaction. No adverse view therefore can be sustained on the loans given by the lender Mrs. Manisha Jhawar to the appellant. Rohit Somani This person has lent Rs. 7 lakh to the appellant. ITR and bank details have been submitted. No adverse finding has been recorded by the AO either during assessment stage or during remand proceeding. The appellant therefore has discharged the primary onus. It was incumbent upon the AO to prove that the transactions were ingenuine and the lender did not have net worth to advance such loan. In absence of any such comment in either assessment order or Remand Report, no adverse view can be taken on this loan given to the appellant.

Page 31 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 Sonali Bagree This person has lent Rs. 23 lakh to the appellant. Appellant has submitted her ITR, declaring income of Rs. 3,83,590/- for A.Y. 2018-19. The AO has recorded that there was transaction of money to the lender before advancing of loan to the appellant. However, this finding in itself does not prove or disprove anything. Net worth of the lender has not been examined by the AO. It has also not been established that money has been transferred to the account of lender by the appellant before receiving the same as loan on subsequent date. Thus, no complicity has been established. By submitting loan conformation, bank statement and ITR of the lender, the appellant has discharged the initial onus upon it. Thereafter it was incumbent upon the AO to prove its point through necessary enquiry. In absence of any findings with respect to complicity between lender and appellant and inadequacy of net worth of the lender, no adverse view can be taken on this loan. KCL Infra Project Ltd. This person has advanced Rs. 1,82,25,000/- to the appellant. Bank Statement and ITR of the lender, declaring income of Rs. 39,75,580/- for A.Y. 2018-19 has been submitted by the appellant. The AO has given findings that before advancement of loan to the appellant the lender has received money, which has been used to lend money to the appellant. However, the AO has not found out as to which person has credited money to lender's account and has not linked the person crediting money to lender's account with the appellant and thus establishing complicity. Also, it is seen that the lender has ample income of Rs. 39,75,580/- during the relevant assessment year and that no net worth analysis of the lender has been done by the appellant. The appellant on the other hand has discharged its onus by submitting necessary document to the AO. It was therefore incumbent upon the AO to make further necessary enquiry and establish lack of net worth and complicity between appellant and lender, which has not been done. In absence of this, AO's finding becomes presumptuous. No adverse view therefore can be taken on this transaction.” 44. For this issue also, Ld. DR for revenue opposed the order of CIT(A) by

placing reliance upon AO’s assessment-order and the objection raised by AO

in remand-report. He contended that the CIT(A) should not have given any

relief to assessee.

submitted that the addition made by AO has two components, viz. (i)

principal loans of Rs. 4,40,37,039/- and (ii) interest on those loans Rs.

Page 32 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 63,31,404/-. So far as the 1st component of principal loans is concerned, he

submitted that the assessee has taken loans of Rs. 4,02,92,500/- only

during the year which is a fact admitted by AO, therefore the AO is

apparently wrong in making addition of Rs. 4,40,37,039/-. So far as the

merit of loans of Rs. 4,02,92,500/- taken during the year is concerned, Ld.

AR submitted that the assessee filed ample evidences before AO barring

some of the evidences which could not have been filed at that time. The

deficiency was, however, recovered by filing all evidences to CIT(A) in terms

of Rule 46A. He submitted that in remand-report, the AO has not given any

adverse comment qua the evidences of assessee, the AO raised a limited

objection against admission of evidences but even while raising such

objection, the AO has ultimately reported to CIT(A) “However, the case may

be decided on merit”. He submitted that the CIT(A) has taken into account

the AO’s remand-report, the assessee’s evidences and made a vehement

analysis of all 6 lenders one by one in impugned order. Thus, the CIT(A) has

judiciously decided the issue on merit and thereafter granted relief to

assessee; there is no error or perversity in the adjudication made by CIT(A).

While arguing so, Ld. AR also carried us to assessment-order (re-produced

above) to show that the AO has made addition by mentioning thus “after

verification of the lenders bank accounts, it is found that on each transaction

date a lump sum amount has been transferred to the lenders account one or

two days before.” This, according to Ld. AR, shows that the AO has accepted

‘source’ of loans taken by assessee but was expecting the assessee to explain

Page 33 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 ‘source of source’ which is not permissible in the provision of section 68

before introduction of first proviso to section 68 through Finance Act, 2022. So far as the 2nd component of interest on loans is concerned, Ld. AR

submitted that after adjudication by CIT(A) and ITAT, there survives no

addition of principal loans either in current AY 2018-19 or preceding AY

2017-18. Therefore, when the loans have been accepted as genuine, the

disallowance of interest has not legs to stand. With these submissions, Ld.

AR prayed that the entire addition of Rs. 5,03,68,443/- consisting of

principal loans and interest thereon, made by AO is rightly deleted by CIT(A)

and hence the impugned order of CIT(A) must be upheld.

sides and carefully perused the documents held on record including the

orders of lower-authorities. The issue in this ground relates to the addition

of principal loans and interest thereon. So far as addition of principal

amounts is concerned, we firstly agree that the AO is wrong in making

addition of Rs. 4,40,37,039/- when the loans taken during the year were Rs.

4,02,92,500/- only. It is a settled law that the scope of section 68 is

restricted to the credit entries/loans taken during the year in the books of

assessee. Going further to the new loans of Rs. 4,02,92,500/- taken during

the year, the assessee has taken those loans from 6 lenders and filed all

evidences before CIT(A) [including those evidences which were also filed

before AO] and the CIT(A) has admitted the same under Rule 46A after due

Page 34 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 consideration. The AO, in his remand report filed to CIT(A), has not raised

any comment against the evidences, he has raised a limited objection

against admission of additional evidences but even while raising such

objection, the AO has ultimately reported to CIT(A) to decide case on merit.

Accordingly, the CIT(A) has made a vehement adjudication qua all 6 lenders

taking into account the evidences filed which is well narrated in CIT(A)’s

order and we refrain from repeating the same to avoid repetition. In so far as

the disallowance of interest amounting to Rs. 63,31,404/- is concerned,

since the principal loans have been accepted as genuine and entire addition

made in that regard had been deleted, there remain no reason for

sustenance of disallowance of interest. Therefore, the disallowance of

interest has to vanish automatically. That brings us to find that the CIT(A)

has rightly deleted the entire addition of Rs. 5,03,68,443/-. Ld. DR could

not rebut the adjudication made by CIT(A); he has merely relied upon

assessment-order and remand-report submitted by AO. In the situation, we

do not have any reason to interfere with the order of CIT(A). Accordingly, we

uphold the same and the ground raised by revenue is dismissed being

devoid of any merit.

Ground No. 2: 47. In this ground, the revenue claims that the CIT(A) has erred in

deleting the addition of Rs. 1,82,25,000/- made by AO qua the loan taken

by assessee from M/s KCL Infra Project [“KCL”]. The ground raised by

revenue reads as under:

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 “2. On the facts and circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 1,82,25,000/- w.r.t. transactions with M/s. KCL Infra Project merely on the basis that the AO had not given any rebuttal ignoring the fact that M/s. KCL Infra Project is a well-known penny stock company and involved in providing entries to its beneficiaries.” 48. After deliberations during hearing, we agree with the submission of Ld.

AR for assessee that nowhere in the assessment-order as well as remand-

report, the AO has mentioned that KCL was a penny stock company and

involved in providing entries to beneficiaries as being claimed in the ground

raised by revenue. Although such an allegation was made by AO in the

remand-report of preceding AY 2017-18 but there is no such allegation in

current AY 2018-19. It appears that the revenue has copied this ground

from preceding AY 2017-18. Therefore, in the first place, the ground raised

by revenue is baseless. Even otherwise, the merit of identical ground raised

by revenue in preceding AY 2017-18 (Ground No. 1) has already been

adjudicated by us in earlier part of this order wherein we have dismissed

revenue’s ground after due examination. We adopt the same reasoning and

conclusion mutatis mutandis and accordingly this ground raised by revenue

in AY 2018-19 is also dismissed.

although it was not submitted by either side during hearing but it is

necessary for the sake of completeness. KCL is one of the 6 lenders and the

loan of Rs. 1,82,25,000/- taken from KCL is a part of the overall addition of

Rs. 5,03,68,443/- dealt by us in preceding Ground No. 1 wherein we have

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 upheld the order passed by CIT(A) deleting the addition. Thus, the addition

of Rs. 1,82,25,000/- stands deleted in preceding Ground No. 1 also.

Ground No. 3: 50. In this ground, the revenue claims that the CIT(A) has erred in

deleting the addition of Rs. 1,47,16,146/- made by AO u/s 68 qua sundry

creditors.

assessment-proceeding, the AO observed that the assessee has shown

current liability of sundry creditors at Rs. 2,03,22,536/- in its Balance-

Sheet. When the AO asked assessee to justify the claim of sundry creditors,

the assessee furnished Ledger A/cs of creditors and Bills/Vouchers.

However, the AO observed that the assessee has not filed all bills/vouchers

and copies of bank statements; that there were repetition of same bills twice

in assessee’s submission; that many of the A/c Confirmations were not

legible. Ultimately, the AO rejected assessee’s submission and treated an

amount of Rs. 1,47,16,146/- as unexplained creditors and made addition to

that extent.

CIT(A) remanded matter to AO. The AO submitted remand-report as under:

“Since at the time of scrutiny assessment proceeding, even after repeated requests and reminders, the assessee did not give concrete details so as to ascertain that whether these credit entries are with opening balances, nor any schedule was annexed with audited balance sheet made it unverifiable. Now

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 along with additional evidences, the assessee has submitted containing details of creditors including name, PAN, address and amount, copy of ledger account of creditors, Confirmation of accounts of creditors, copy of bills. The authenticity of these bills cannot be verified at this stage as market enquiry cannot be conducted due to Covid-19 Pandemic and lockdown due to second wave of covid-19. The assessee has submitted relevant documents during the course of remand proceedings the same cannot be entertained as it does not fulfill the conditions laid down in Rules 46A of the IT Rules. However, issue may be decided on merit.” 53. The CIT(A) considered AO’s remand-report and the evidences filed by

assessee and deleted addition by passing following order:

“Ground No. 4: The AO found out that the appellant has shown sundry creditors to the tune of Rs. 2,03,22,536/-. The AO asked for requisite documentary evidences to justify this claim. The appellant furnished copy of ledgers of such creditors maintained in its books of account but did not furnish all bills/vouchers, copy of bank statement highlighting the transactions. The AO also noted that some of the confirmations were not legible. The AO computed that out of the total sundry creditors of 2,03,22,536/-, an amount of Rs. 1,47,16,146/- shown by the appellant as purchase during the year was unexplained credit and added the same to the income of the appellant u/s 68 of the Act. During the appellate proceeding, the appellant submitted additional documents which were remanded to the AO for examination and rebuttal. The appellant has submitted details of creditors including Name/PAN/Address & amount, copy of ledger account of creditors, confirmation by creditors and copies of bills. The appellant has explained that due to second wave of Covid- 19, confirmation of accounts and bills of some of the creditors could not be arranged in time during the assessment proceeding. The AO has recorded in his remand report that authenticity of the bills submitted by the appellant could not be verified as market enquiry was not possible due to 2nd wave of Covid-19 pandemic. This is to be noted that the Remand Report has been submitted by the AO on 13.04.2023 and there was no Covid-19 pandemic around this time. The AO has further recorded that ‘the appellant has submitted relevant documents during the course of remand proceedings, the same cannot be entertained as it does not fulfil the conditional laid down in Rule 46A of the I.T. Rules. However, issue may be decided on merit.' Rule 46A clearly provides for production and admission of additional evidences in circumstances where the appellant was prevented by sufficient cause from producing the evidences. The issue of admissibility of additional evidence as already been discussed in Para 3. Therefore, the additional evidences submitted by the appellant cannot be rejected.

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 The AO has not found any loophole in the additional evidences submitted by the appellant. On mere technicality the appellant cannot be denied natural justice. The Remand Report for A.Y. 2018-19 was requisitioned on 13.01.2023 and is given by AO on 13.04.2023. If the AO had any doubt, he should have made further necessary inquiry. The appellant has discharged the primary onus by submitting necessary and requisited documents. It was then incumbent upon the AO to give rebuttal. În absence of any adverse findings on the additional evidences submitted by the appellant, no addition u/s 68 is warranted. This ground of appeal is therefore allowed.” 54. Before us, the Ld. DR for revenue relied upon AO’s assessment-order

and remand-report. Per contra, Ld. AR for assessee supported the order of

CIT(A).

in this ground is broadly similar to Ground No. 2 of AY 2017-18. Hence, it

does not require much elaboration. Suffice it to narrate limited facts that the

assessee filed Ledger A/cs and Bills/Vouchers to AO which were found by

AO as not complete or not legible. However, during first-appeal proceedings

the assessee filed all documents to CIT(A) and thereafter CIT(A) sought

remand-report from AO and admitted assessee’s evidences as per prescribed

procedure. The AO filed remand-report which is re-produced above. In

remand-report, the AO has not reported any objection against the evidences

filed by assessee, he has merely mentioned his own inability to verify

documents due to Covid Pandemic but even while mentioning so, the AO

reported the CIT(A) to take a decision on merit. The CIT(A) has considered

the points raised by AO as well as the documents filed by assessee and

thereafter deleted the addition on merit. In our considered view, the order

passed by CIT(A) is very correct and does not suffer from any error or

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 perversity. Hence, we have no reason to interfere with the order of CIT(A),

the same is hereby upheld and this ground is dismissed.

Ground No. 4: 56. In this ground, the revenue claims that the CIT(A) has erred in

deleting the addition of Rs. 4,05,38,902/-. For the sake of immediate

reference, we re-produce the ground raised by revenue:

“4. On the facts and circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 4,05,38,902/- ignoring the fact that the adverse finding of AO submitted in Remand report where it is specifically concluded that an amount of Rs. 2,85,64,210/- (Rs. 1,56,25,000/- + Rs. 1,29,39,210/-) may be considered as unexplained credit or unexplained liability within the meaning of section 68 of the 1.T. Act.” 57. The AO has made this addition in Para 7 of assessment-order under

the hearing “Introduction of Capital”. The AO has noted the inferences

gathered by him from Capital A/cs of 7 partners of assessee-firm and

ultimately made an addition of Rs. 4,05,38,902/- [this figure is stated to be

a sum total credits of Rs. 2,38,02,032/- in Partners’ Capital A/cs which is

basically a difference of closing balances and opening balances in Partners’

Capital A/cs (+) amount of Rs. 1,67,36,870/- returned to partners during

the year].

with additional evidences whereupon the CIT(A) sought remand-report from

AO. The assessee filed a summarised chart showing the movements in

Partners’ Capital A/cs to CIT(A), the same is available at Page 516 of Paper-

Book and re-produced below for an immediate reference:

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19

CIT(A) passed following order deleting the addition made by AO:

“Ground No. 5: During the assessment proceeding, the AO found out that there was introduction of capital by the partner of the firm by an amount of Rs. 2,38,02,032/-. The AO pointed out that the appellant firm has NIL income during A.Y. 2017-18. The AO, therefore, grew suspicious as to how the partners of the appellant contributed to capital of the appellant when they were not having any income from the appellant. The AO undertook examination of credit worthiness of the partners and held that capital introduced by the partners was from undisclosed sources and therefore unexplained credit within the meaning of section 68 of the Act. In course of appellate proceedings, the appellant submitted additional evidences which were remanded to the AO for examination and rebuttal. The AO concluded on basis of perusal of additional evidences that an amount of Rs. 1,56,25,000/- was only credited to appellant's capital account rather than Rs. 2,38,02,032/-. Further, the AO concluded that an amount of Rs. 1,29,39,210/- only related to interest payable or paid to partners was returned to partners during the year instead of Rs. 1,67,36,870/- as held by the AO earlier during assessment stage. The AO further concluded that Rs. 1,56,25,000 + Rs. 1,29,39,210/- = Rs. 2,85,64,210/- should be considered from undisclosed sources and may be added as unexplained credit within the meaning of section 68 of the Act.

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 The appellant has submitted that fresh capital received from the partners is only Rs. 1,56,25,000/- and remaining increase to partners’ capital is attributed to interest credited to the partners by the appellant. Thus, on the quantum of fresh capital introduced during the year, there is no dispute between the appellant and the AO in Remand Report. The appellant further submitted that it has furnished ITRS/PAN/Copies of Bank Statement and Confirmation from the partners to prove the bonafide of introduction of partner capital. Analysis of partner's capital is therefore summarised as under: 1. Amit Parikh:

He has introduced capital of Rs. 64 lakh and his returned income as per ITR for A.Y. 2018-19 is Rs. 12,40,150/- with other exempt income of Rs. 56,899/-. The AO has not giving any findings on net worth of Mr. Parikh. Even during the remand stage, net worth of this person has not been demonstrated to be inadequate. Therefore, conclusion of the AO that the appellant failed to prove credit worthiness of Mr. Parikh and genuineness of transaction is hasty and lacks substance. 2. Baldev Rajani:

He has introduced capital of Rs. 17,50,000/- as per ITR for A.Y. 2018-19. He has returned income of Rs. 8,12,140/- with other exempt income of Rs. 4,48,210/-. No adverse finding has been given by the AO against this partner on his net worth or genuineity of the transaction. No adverse findings on this person's net worth has been given in the remand report either. Therefore, no adverse view can be taken on this transaction.

He has introduced capital of Rs. 17,50,000/-. His Returned Income as per ITR for A.Y. 2018-19 is Rs. 4,32,310/- with exempt income of Rs. 1,26,024/-. The AO has discovered that the appellant has deposited an amount of Rs. 1.5 lakh on 05.05.2017 and thereafter Mr. Vachani has transferred the same amount to the appellant on the same day. The AO has further pointed out that before every transfer of capital by Mr. Pawan Vachani to the appellant, the same amount has been transferred to the account of Mr. Pawan Vachani by Shri Sarichand Vachani

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 and Smt. Kamini Vachani. The AO has thus concluded that creditworthiness of this partner and genuineness of transaction is not proved.

During the remand proceeding, the AO has not contributed further to this discussion.

As far as deposit of Rs. 1.5 lakh by appellant into Mr. Pawan Vachani's account and subsequent transfer of the same by Mr. Vachani to the appellant as partner's capital is concerned, it is submitted by the appellant that this has happened due to server error and that the said amount was returned to the appellant and thus the effect was nullified and this fact can be verified from bank statement of the appellant attached at Page No. 540 of the paper book. This submission has not been controverted by the AO in remand report. Therefore, no adverse view can be taken against the appellant. However, as far as introduction of money into account of Mr. Pawan Vachani by Shri Sarichand Vachani and Smt. Kamini Vachani is concerned, no link has been established for these persons with the appellant and therefore, complicity is not established. Hence, the entire introduction of capital of Rs. 17,50,000/- by Mr. Pawan Vachani into the appellant cannot be faulted. 5. Rajesh Nareshchand Chelawat:

He has introduced capital of Rs. 7,50,000/-. As per his ITR for A.Y. 2018-19 he has returned income of Rs. 1,44,55,580/-. The AO disallowed this amount because bank statement was not furnished to him. Subsequently the appellant has submitted additional evidences and they were remanded to AO for examination and rebuttal. The AO has not given any comment either in favour of or against this transaction. No net worth analysis has been done. In this situation, especially in view of sufficient income, creditworthiness of this person, unless something specific is brought out by AO, cannot be doubted. 6. Ravi Somani:

He has introduced capital of Rs. 35,75,000/-for A.Y. 2018-19. His Returned Income as per ITR is Rs. 6,61,570/- only. The AO has noted that bank statement was not legible and hence credit worthiness of partner and genuineness of transaction was not proved. Additional details were filed by the appellant and were remanded to the AO for examination and rebuttal. No specific comment either in favour or against has been made by the AO in his remand report. In absence of any demonstration of lack of net worth by this person or complicity between this person and the appellant, no adverse view can be held against this transaction. Thus, no adverse view is warranted against introduction of fresh capital worth Rs. 1,56,25,000/-. As far as interest component of Rs. 1,29,39,210/- is concerned, this is on earlier year balance. In A.Y. 2017-18, the issue of partner capital has been examined and no adverse view is taken. Therefore, no addition on this issue is required. In sum, this ground of appeal is allowed.”

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 61. Per contra, Ld. AR for assessee attacked the order of AO in very strong

terms. He submitted that while passing assessment-order, the AO has made

a baseless addition as high as Rs. 4,05,38,902/- without giving proper

thought to Partners’ Capital A/cs. Hence, the assessee filed a summarised

chart to CIT(A) during first-appellate proceedings (re-produced above). From

this chart, it is quite evident that there was a capital introduction of only Rs.

1,56,25,000/- by partners during the year and further credit of Rs.

1,29,39,210/- in their Capital A/cs was on account of interest. Thus, Ld. AR

submitted, the addition of Rs. 4,05,38,902/- made by AO is apparently

wrong in the first instance. So far as the fresh capital of Rs. 1,56,25,000/- is

concerned, the same was brought by 6 partners. Ld. AR submitted that the

assessee filed all evidences to AO except bank statement of one partner Shri

Rajesh Naresh Chand Chelawat. However, the AO made unusual addition of

Rs. 4,05,38,902/-. During first-appeal before CIT(A), the assessee re-filed all

evidences including the bank statement of Shri Rajesh Naresh Chand

Chelawat. The CIT(A) has vehemently considered the facts of all partners in

his order and taken a concious decision to delete the addition made by AO.

He prayed that the order of CIT(A) must be upheld.

perused the case record including the orders of lower-authorities. At first,

we find that the AO has made an addition of Rs. 4,05,38,902/- on mere

arithmetical calculation. He has firstly taken a figure of Rs. 2,38,02,032/-

Page 44 of 46

Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 on the basis of difference in closing balances and opening balances in

Partners’ Capital A/cs and secondly taken a figure of Rs. 1,67,36,870/-

returned to partners; aggregated the two figures at Rs. 4,05,38,902/- and

made addition by treating the same as unexplained credit during the year.

The assessee has, however, filed a summarised chart showing movements in

Partners’ Capital A/c demonstrating therein that there was fresh capital

introduction of Rs. 1,56,25,000/- only and then there was a credit of

interest on capital to partners amounting to Rs. 1,29,39,210/-. Therefore,

the addition of Rs. 4,05,38,902/- made by AO is patently wrong. In so far as

the fresh capital of Rs. 1,29,39,210/- is concerned, the same has been

brought by 6 partners and the documentary evidences have been analysed

by CIT(A) who has, after due consideration, found that no adverse view is

warranted against introduction of fresh capital. As for the interest

component of Rs. 1,29,39,210/-, the same is calculated and credited on

Partners’ Capital by way of accounting entry, there is no inflow of funds in

this. That apart, the interest is allowable as deduction in terms of section 37

read with section 40(b). Thus, there cannot be any addition u/s 68 qua the

interest credited in Partners’ Capital A/cs. Being so, the order passed by

CIT(A) deleting the entire addition of Rs. 4,05,38,902/- is valid in which no

mistake could be pointed out by Ld. DR. Hence, we uphold the order of

CIT(A) and consequently this ground raised by revenue is also dismissed.

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Umang Developers ITA Nos. 502 & 503/Ind/2023 - AYs. 2017-18 & 2018-19 63. Resultantly, both of these appeals are dismissed.

Order pronounced by putting up on notice board as per Rule 34 of ITAT, Rules 1963 on 27/03/2025

Sd/- Sd/- (PAWAN SINGH) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore

िदनांक/ Dated : 27/03/2025

Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY SSSsssR. Sr. Sr. Private secretary Income Tax Appellate Tribunal Indore Bench, Indore

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