SEW INFRASTRUCTURE LIMITED,HYDERABAD vs. ACIT, CIRCLE-3(1), HYDERABAD

(i) Business Promotions expenses of Rs.17,12,195/-; (ii) Addition Rs.1,07,64,800/- on the issue of dividend on preference shares; (iii) Addition towards Income From Long Term capital gain Rs.25,32,871/-; (iv) Addition towards unexplained cash credit U/s 68 of the IT Act of Rs.13,45,60,000/-.

4. Any other legal or factual ground that may be urged at the time of hearing of the appeal.”

5 ITA.Nos.1779 & 1825/Hyd./2025 for the Assessee and no objection of the learned DR, ground nos.1, 2 and 3 (i) to (iii) are dismissed as being not pressed.

6 ITA.Nos.1779 & 1825/Hyd./2025 produced all the relevant details and confirmation of these parties before the Assessing Officer, however, the source of source in respect of all these lenders/depositors could not be produced by the assessee as the assessee was not having a direct relation or interaction with the other parties with whom these three depositors have done the business or transactions of sale of lands and shares. The learned Authorised Representative of the Assessee has further submitted that now the assessee has obtained the relevant record in the shape of financials of these entities as taken from the website of Ministry of Corporate Affairs/ Registrar of Companies to show that the depositors were having creditworthiness and sufficient source of funds to make the investments/deposits with the assessee. He has further submitted that the assessee has also now obtained the details of the transactions, under which, these depositors have received the funds which were in turn, invested with the assessee as in the shape of ICD and therefore, the assessee has now filed a petition under Rule-29 of ITAT Rules, 1963 for admission of the additional evidence. The learned

7 ITA.Nos.1779 & 1825/Hyd./2025 Authorised Representative of the Assessee has referred to the additional evidence running into 88 pages in the page book no.1 filed by the assessee in the shape of financial statements of the companies from where the depositors have received the amounts against the transaction of sales of land and shares. He has pointed out that the addition was made by the authorities below for want of relevant documentary evidences to establish the identity and creditworthiness of the lenders. Therefore, this evidence filed by the assessee is an independent material of the financial statements of the parties and the same goes to the root of this issue. Since this material could not be gathered at the time of assessment proceedings therefore, the same requires verification and examination at the level of the Assessing Officer. Thus, the learned Authorised Representative of the Assessee has submitted that this additional evidence filed by the assessee may be admitted and matter may be remanded to the record of the Assessing Officer for verification and examination of the same and then decide the issue as per law.

8 ITA.Nos.1779 & 1825/Hyd./2025 6. The learned DR on the other hand has submitted that despite sufficient opportunities given by the Assessing Officer as well as the learned CIT(A), the assessee failed to submit supporting evidence to discharge its onus of proving the identity and creditworthiness of the creditors. Therefore, he opposed to the admission of the additional evidence at this stage.

“5.9. Addition of Rs.13,45,60,000/- as unexplained cash credit u/s 68 of the Act-During the course of the assessment proceedings, it was observed by the AO that during the concerned year, the appellant has received loans/deposits and advances from 4 entities (collectively known 'Lenders'), other than financial institutions, totalling to Rs.13,45,60,000/- as under: i. Sew Realty Ltd. Rs. 3.25 cr. ii. Gopal Realty Pvt. Ltd. Rs. 8 cr. iii. BSN Bala Realty Pvt. Ltd. (BBRPL) Rs. 2 cr iv. Shri Yalamanchili Gangadhar Rao Rs.20,60,000/-

9 ITA.Nos.1779 & 1825/Hyd./2025 The AO has from pages 58 to 66 of his Order has specifically mentioned the failure of the appellant to submit relevant documents in the form of copies of ITRs and other details to establish identity and creditworthiness of the Lenders and proceeded to make the impugned addition and unexplained cash credit u/s 68 of the Act of Rs.13,45,60,000/-.

5.9.1. Despite being given 3 opportunities to represent its case, the appellant has not been able to controvert the findings of the AO and has only sought adjournments. Under these circumstances, I do not find any reason to interfere with the Order of the AO, hence the addition made is confirmed.

7.1. Thus, the learned CIT(A) has confirmed the addition on the ground that the assessee has not produced the relevant documents and details to establish the identity and creditworthiness of the lenders despite various opportunities given to the assessee. So far as the identity of the lenders is concerned, there is no dispute about the identity as the existence of these companies are not disputed as an active company and doing the business. However, since the creditworthiness of the lender company are to be established as the primary onus of the assessee therefore, the record filed by the assessee now in the shape of additional evidence needs to be verified and examined as the same goes

10 ITA.Nos.1779 & 1825/Hyd./2025 to the root of the matter of establishing the creditworthiness of the lender companies. This Tribunal being the final fact finding authority and having the wide power of deciding the appeals, cannot ignore the fact that the additional evidence filed by the assessee was not in the possession of the assessee nor in the control of the assessee and therefore, the non- production of these evidences before the authorities below cannot be termed as failure of the assessee rather the Assessing Officer ought to have called for these evidences to verify and examine under his power u/sec.133(6) of the Act. Accordingly, in the facts and circumstances of the case and in the interest of justice, we admit the additional evidence and remand this issue in the assessee’s appeal to the record of the Assessing Officer to verify and examine the material as well as any other record and documentary evidences in support of the claim of the assessee and to establish the creditworthiness of the lenders to be verified and examined on production of the same by the assessee. Needless to say, the assessee be given a proper opportunity of hearing before passing the fresh order.

11 ITA.Nos.1779 & 1825/Hyd./2025 8. In the result, ITA.No.1779/Hyd./2025 of the Assessee is allowed for statistical purposes.

ITA.No.1825/Hyd./2025 – A.Y. 2023-2024 – Revenue Appeal:

12 ITA.Nos.1779 & 1825/Hyd./2025 consumable items during the course of execution of the project. The project was to be executed at the remote area where skilled workers were mobilized from the other places and therefore, due to lack of proper hotel or mess facilities, these expenses were incurred towards their daily refreshments tea, snacks, meals etc. Thus, the learned Authorised Representative of the Assessee has submitted that the expenditure incurred by the assessee for providing the refreshment tea, snacks and meals to the workers at site are wholly for the purpose of business of the assessee. He has relied upon the order of the learned CIT(A).

“5.4. Addition of Rs.3,22,812/- on account of expenses towards kitchen consumables - The appellant is involved in the business of execution of infrastructure projects. From the reply filed by the appellant it was observed by the AO that an amount of Rs.1,20,73,870/-was claimed by it as expenses for West Bengal Road Project Package -I wherein expenses in nature of kitchen consumables amounting to Rs.3,96,612/- was included. Considering that these expenses had no relation with the 13 ITA.Nos.1779 & 1825/Hyd./2025 appellant's business activities, show-cause was issued to it by the AO as to why the same should not be disallowed u/s.37(1) of the Act. In response, the appellant submitted that it takes up contract projects in very remote areas wherein skilled workers are mobilized from other places. In the said remote areas, due to lack of proper hotel/mess facilities, certain expenses towards their daily refreshments such as tea, snacks, meals, etc. are incurred to ensure smooth functioning of both skilled and unskilled workers. On this count, as against the claim of the AO, only a meagre sum of Rs.1,42,805/- was incurred by the appellant and the same is entirely for the purposes of its business without involving any personal element therein. However, the AO tabulated item-wise details of the expenses incurred by the appellant on this count from pages 24 to 38 of his Order and concluded that the expenses under these heads of Rs.3,22,812/- were incurred by the appellant. Finding that the same were not spent wholly and exclusively for the purposes of the business or profession of the appellant, the AO proceeded to disallow the same u/s 37(1) of the Act. 5.4.1. The facts of the case and the submissions filed by the appellant before the AO have been perused and it is found that out of total expenditure of Rs.1,20,73,870/- towards completion of the project the appellant has incurred a nominal sum of Rs.3,22,812/- towards refreshments of its skilled and unskilled workers. In the appellant's line of business it is not uncommon to undertake projects wherein proper restaurant/mess facilities are not available readily and hence these kind of expenses become necessary. Even otherwise in any line of business refreshments given to workers towards completion of their official duties is considered to be incurred wholly and exclusive for the purpose of business. I, therefore, do not agree with the contention of the AO that impugned sum incurred by the appellant towards providing

14 ITA.Nos.1779 & 1825/Hyd./2025 refreshments to its workers had no business connection. Hence, the addition made on this count is deleted.”

12.1. Thus, when the assessee has brought all the relevant details about the expenditure incurred in respect of the project executed at the remote area namely West Bengal Road Project Package where no proper facility of restaurant or mess was available to the workers, then, the expenditure incurred by the assessee for making arrangement of refreshment like tea, snacks and meals for the skilled and unskilled workers working at the site will be considered as wholly and exclusively incurred for the purpose of business. Accordingly, in the facts and circumstances of the case, we do not find any error or illegality in the order of the learned CIT(A) qua this issue. Grounds of appeal no.1 of the Revenue is dismissed.

13. Ground No.2 of the Revenue appeal is regarding the disallowance of expenses towards professional charges.

16 ITA.Nos.1779 & 1825/Hyd./2025 16. We have considered the rival submissions and carefully perused the Orders of the authorities below. The Assessing Officer has not disputed the cases which were pending and disposed of as well as settled between the assessee and other parties, the list of which are reproduced by the Assessing Officer at page no.9. However, the Assessing Officer has partly allowed the claim of the assessee and balance of Rs.6,32,000/- was disallowed. On appeal, the learned CIT(A) has considered and decided this issue in Para nos.5.5 and 5.5.1 as under:

“5.5. Addition of Rs. 6,32,000/- being disallowance of professional charges - The AO observed that the appellant had incurred expenses of Rs.9,49,06,238/- towards professional fees and the same, as per the appellant, was incurred by it for settlement of court cases filed against it and also towards arbitration cases. The appellant provided list of cases which were pending against it at various forums (mostly Company Law Tribunal) to the AO and claimed that professional fees was on account of fees paid to various lawyers for handling such cases which were pending litigation against the appellant. Since they were incurred during the course of business exigency, the same were allowable u/s 37 of the Act. The AO pointed out to the appellant that out of its professional fees paid sum of Rs.6,32,000/- was towards contesting criminal cases. The appellant was asked by the AO to establish the relation of such 17 ITA.Nos.1779 & 1825/Hyd./2025 expense with its business activity and accordingly substantiate it claim of allowability u/s 37 of the Act. In response, the appellant submitted the relevant invoices and also the details of disputes related to various project works for which said amount was paid to the advocates as their fees. However, the AO was not convinced, and invoking the provisions of Explanation (1) to section 37(1) of the Act wherein any expenditure incurred for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business, and therefore not allowable, he added the same to the Total Income of the appellant. 5.5.1. The facts of the case, the submissions filed by the appellant before the AO, and relevant provisions of the Act viz., Explanation (1) to section 37(1) have been perused. It is to be appreciated that assessee is into a business which involves execution of various contract works for its different clients at multiple locations. In the conduct of its business, disputes with respect to its project works are bound to arise. If such disputes are carried to the courts of law, the appellant has got to defend itself so as to continue with its business operations. Therefore, defending itself against various legal disputes at different forums is an act which is related to business activities carried out by the appellant. Further, what is prohibited by the provisions of Explanation (1) to section 37(1) of the Act is that the expenditure should not be incurred for any purpose which is an offence or which is prohibited by law. Defending itself in various law suits filed against it, albeit criminal in nature, by the appellant cannot, by any stretch of imagination, be considered as an offence or something which is prohibited by law. It is also not the case of the AO that these expenses were bogus in nature. Therefore, I do not find any merits in the action of the AO to treat the expenditure incurred of Rs.6,32,000/- by the appellant to defend itself in criminal cases as not allowable by 18 ITA.Nos.1779 & 1825/Hyd./2025 virtue of provisions of Explanation (1) to section 37(1) of the Act. I, therefore, direct the AO to delete this addition.”

16.1. Thus, the learned CIT(A) has allowed the claim of the assessee and deleted the addition made by the Assessing Officer after verification and examination of the relevant record as well as the details of the cases for which the expenditure was incurred. Accordingly, in the absence of any contrary fact and record brought before us by the Assessing Officer, we do not find any error or illegality in the impugned order of the learned CIT(A) qua this issue. Grounds of appeal no.2 of Revenue appeal is dismissed.

nos.3 to 5 of the Revenue’s appeal is regarding the addition made by the Assessing Officer on account of job work expenses which was deleted by the learned CIT(A).

18. The learned DR has submitted that the assessee claimed job work expenses of Rs.37.23 crores. However, the assessee failed to establish the expenses to the tune of Rs.6,92,03,128/- paid to Lokesh Enterprises and therefore, the Assessing Officer has disallowed the same by considering

19 ITA.Nos.1779 & 1825/Hyd./2025 that all the invoices were raised on the same date on 30.11.2023 which were not raised as per the work order or as per the schedule of the work order.

20 ITA.Nos.1779 & 1825/Hyd./2025 has considered the relevant evidence including the work order, GST invoices raised by the sub-contractor as well as bank account statements reflecting the payment made to Lokesh Enterprises against the invoices raised and execution of the work including the books of accounts particularly, the profit and loss account and balance sheet. The relevant findings of the learned CIT(A) in Para nos.5.8.2 is as under:

“5.8.2. Considering the facts of the issue involved, it is found that disallowance has been made by the AO only on the pretext that the project was not completed by the sub-contractor during the concerned FY and the impugned payment for the same was also not made during the said year. However, from the submission filed by the appellant before the AO, it is felt that the project was completed by the sub-contractor during the current FY itself although invoices were raised by it belatedly in the next FY. Further, payment of the impugned sum by the appellant to the sub- contractor in the succeeding FY is not a demerit on which claim of expense can be disallowed as the appellant is following mercantile system of accounting. Further, it is also not the case of the AO that the said expenses were bogus in nature especially when the appellant has evidenced that the same were paid in the month of May, 2023. 1, therefore, delete the addition made by the AO on this count.”

21 ITA.Nos.1779 & 1825/Hyd./2025 evidence then, in the absence of any contrary material or fact to disprove the evidence produced by the assessee, the claim of job work expenses cannot be disallowed. Accordingly, we do not find any merit or substance in these ground nos.3 to 5 of Revenue’s appeal. The impugned order of the learned CIT(A) qua this issue is upheld.

Order pronounced in the open Court on 25.02.2026.