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Facts
The Revenue filed appeals against the CIT(A)'s order partly deleting additions made regarding unascertained trade liabilities and administrative/employee expenses for AYs 2012-13 and 2014-15. These appeals arose from a search and seizure operation. The AO had made additions for bogus liabilities and a 25% ad-hoc addition on expenses due to lack of substantiating documents.
Held
The Tribunal found that the CIT(A) had admitted additional evidence without confronting it to the AO. Therefore, for the issue of bogus liabilities, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the CIT(A) for fresh adjudication after calling for a remand report from the AO. For the administrative and employee expenses, the Tribunal upheld the CIT(A)'s reduction to 10%.
Key Issues
Whether the CIT(A) erred in admitting additional evidence without confronting it to the AO; and whether the addition for administrative and employee expenses was correctly restricted by the CIT(A).
Sections Cited
132, 153A
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Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,
Before: SHRI YOGESH KUMAR US, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- The above captioned two separate appeals by the Revenue are preferred against the order of the ld. CIT(A) - 31, New Delhi dated 28.09.2016 pertaining to A.Ys. 2012-13 and 2014-15 respectively.
and 6089/DEL/2016 [A.Y 2012-13 & 2014-15] ACIT Vs. Pearl Buildwell Infrastructure 2. Since the underlying appeals were heard together and the facts in issues are identical, both these appeals and cross objections are being disposed off by this common order for the sake of convenience and brevity, though the quantum may differ.
Grounds of Appeal taken by the Revenue are:
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the expenditure (i.e. Rs 3,78,58,892/-) treating them as unascertained trade liabilities without giving any opportunity to the AO for verifying the submissions filed by AR which he has not submitted before AO. 2.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in restricting the addition of Administrative & Employee expenses (i.e. Rs 62,57,170/-) to 10% in absence of any bills and vouchers, when assessee has not produced them to enable the AO to point out defects. 3. That the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law. 4. That the grounds of appeal
are without prejudice to each other.
5. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.
Brief facts of the case are that the assessee-company is primarily engaged in the business of real estate and construction of buildings etc.
Search and seizure operation u/s 132 of the Income Tax Act, 1961 was carried out on 20.6.2013 in M/s PACL Group of cases. The case of the assessee was also covered u/s 132(1) of the Act as the assessee is one of the contractor/land developers for the projects of M/s PACL Ltd.
The assessee company filed its original return on 25.11.2014 declaring total loss of Rs. 1,08,02,803/-. In response to notice u/s 153A,
Page 2 of 6 and 6089/DEL/2016 [A.Y 2012-13 & 2014-15] ACIT Vs. Pearl Buildwell Infrastructure the assessee filed a return of Rs nil. Subsequently, the AO passed order u/s 153A adding an amount of Rs 4,46,53,043/- in AY 2012-13 and Rs 1,17,27,147/- for AY 2014-15, appearing in the balance sheet on account of bogus liability as no documents were filed to substantiate the liability. The AO further added 25% of expense towards administrative and employees amounting to Rs 62,57,170/- in AY 2012-13 and Rs 91,70,830/- for AY 2014-15, on account of the fact that the same had no supporting documents.
On appeal, the CIT(A) partly deleted the additions made.
Aggrieved the Revenue is before us.
7. At the very outset, the ld. DR pointed out that additional evidences were admitted by the ld. CIT(A) without confronting the same to the AO and without getting a report from the Assessing Officer. The ld AR however relied on the CIT(A).
6. We have heard the rival submissions and have perused the relevant material on record. We find that in both the AYs 2012-13 and 2014-15, the CIT(A) has given part relief on account of bogus liabilities on the basis of submissions and evidence filed by the assessee before him. We are of the considered opinion that the CIT(A) should have confronted the materials filed before him to the AO for his comments before adjudicating the issue. In view of the same, we are of the view that in Page 3 of 6 and 6089/DEL/2016 [A.Y 2012-13 & 2014-15] ACIT Vs. Pearl Buildwell Infrastructure the interest of justice and balance of convenience, the issue, for both the assessment years, should be set aside to the file of the ld. CIT(A) for examining the issue judiciously. We therefore, consider it fit to set aside the orders of the CIT(A) for both the assessment years and direct the ld. CIT(A) to give a reasonable opportunity to the assessee and examine and adjudicate on the impugned issue afresh after calling for remand report from the Assessing Officer on account of additional evidences. The assessee is also directed to furnish all documents /evidence as and when required by the ld. CIT(A) for examination. In view of the same, ground 1 for both the assessment years, is allowed for statistical purposes.
As regards administrative and employee expenses, we find that the Assessing Officer has, keeping in view the nature of the business and to plug leakage of revenue expenses, added an ad-hoc @ 25% of the total expenses and added to the income of the assessee company.
When the assessee went in appeal before the ld. CIT(A), the ld. CIT(A) reduced the same to 10% in both the A.Ys under consideration as the AO made an ad-hoc addition. We find no infirmity in the findings of the ld. CIT(A) and accordingly, decline to interfere with the same.
Ground no 2 is dismissed.
In the result, appeals of the Revenue in and 6089/DEL/2016 are partly allowed for statistical purposes.
Page 4 of 6 and 6089/DEL/2016 [A.Y 2012-13 & 2014-15] ACIT Vs. Pearl Buildwell Infrastructure
The order is pronounced in the open court on 21.01.2026.