Loading judgment…
Facts
The assessee, a property constructor, declared a total income of ₹69,84,230/- for AY 2017-18. The AO made significant additions for unexplained unsecured loans (₹60.50 lakhs u/s 68), consequential interest expenditure (₹8.98 lakhs u/s 69C), excessive interest payments (₹35.21 lakhs), and unexplained income (₹2.39 lakhs u/s 69A). The AO also disallowed statutory dues of ₹2.27 lakhs. The CIT(A) largely confirmed these additions, except for the statutory dues and premature penalty proceedings.
Held
The Tribunal deleted the additions for unexplained unsecured loans (u/s 68) and consequential interest expenditure (u/s 69C), finding the assessee had provided sufficient evidence of identity, creditworthiness, genuineness, and repayment. It also deleted the disallowance of excess interest payments, asserting that the AO cannot interfere with commercial expediency. The addition for unexplained income (u/s 69A) was deleted, clarifying it was service tax liability, not income. The CIT(A)'s deletion of statutory dues disallowance (u/s 43B) and dismissal of premature penalty grounds were upheld, and the AO was directed to recompute interest u/s 234B and 234C.
Key Issues
1. Whether various additions related to unsecured loans (u/s 68), interest expenditure (u/s 69C), excessive interest (commercial expediency), and unexplained income (u/s 69A) were justified. 2. The correctness of disallowance of statutory dues and initiation of penalty proceedings.
Sections Cited
Section 68, Section 69C, Section 69A, Section 115BBE, Section 43B, Section 234B, Section 234C, Section 270A, Section 271AAC, Section 272A(1)(b), Section 40A(2)(b), Section 40A(2)(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 18.09.2025 passed for A.Y. 2017-18.
The assessee has raised the following grounds of appeal:
“Invalid Order
1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi ["CIT(A)"] erred in fact and in law in passing the impugned order without providing adequate and reasonable opportunity of being heard to the Appellant.
2. The learned CIT(A) erred in fact and in law in disposing of the appeal without granting the Appellant a virtual hearing, despite specific request was made by the Appellant.
The learned CIT(A) erred in fact and in law in passing the impugned order in violation of the principles of natural justice and thus impugned order is bad in law, invalid, and liable to be quashed being void ab initio. Without prejudice to the above: 4. The learned CIT(A) erred in fact and in law in confirming the action of the learned Assistant Commissioner of income Tax, Circle - 2(1)(2), Vadodara ["the AO"] in making following additions/disallowances to the returned income of the Appellant: Sr. No. Addition/Disallowance Amount (Rs.) 1 Unexplained unsecured loan u/s 68 60,50,000 2 Unexplained expenditure u/s 69C 8,98,956 3 Disallowance of interest expense 35,21,790 4 Unexplained income 2,39,752 Unexplained Unsecured Loan u/s 68- Rs. 60,50,000: 5. The learned CIT(A) erred in fact and in law in upholding the addition of Rs. 60,50,000 made by the learned AO u/s 68 of the Income Tax Act, 1961 ("the Act"), in respect of loans received from various parties, without appreciating the evidence and explanations furnished by the Appellant. Unexplained Expenditure u/s. 69C - Rs. 8,98,956: 6. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in making addition of interest expenses u/s 69C of the Act amounting to Rs. 8,98,956. Disallowance of Interest Expenses - Rs. 35,21,7 90: 7. The learned CJT(A) eJTed in fact and in law in confirming the disallowance of interest expense of Rs. 35,21,790 treating it as excess interest on erroneous and extraneous grounds and ignoring the fact that similar interest expenses have been allowed in A.Y. 2012-13 and A. Y. 2018-19 on identical facts. Unexplained Income u/s. 6 9A- Rs. 2,39,752: 8. The learned CIT(A) erred in fact and in law by confirming an addition of Rs. 2,39,752 u/s 69A, without appreciating the detailed explanations and supporting documents provided by the Appellant regarding the transaction with Mr Pathik Vachhani. 9. The learned CIT(A) erred in disregarding the fact that the difference of Rs. 2,39,752/ pertains to service tax liability accounted for under "Duties and Taxes Payable" in the financial statements and does not constitute income of the Appellant.
11. The CIT(A) erred in fact and in law in charging interest u/s. 234C of the Act.
12. The CIT(A) erred in fact and in law in initiating penalty proceedings u/s. 270A of the Act.
13. The CIT(A) erred in fact and in law in initiating penalty proceedings u/s. 271AAC of the Act.
14. The CIT(A) erred in fact and in law in initiating penalty proceedings u/s. 272A(1)(b) of the Act.
Your appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal
.”
3. The brief facts of the case are that the assessee filed its return of income for Assessment Year 2017-18 on 28.09.2017 declaring a total income of ₹69,84,230/-. The assessee is engaged in the business of construction of property. During the course of assessment proceedings, the Assessing Officer examined the return of income, books of account and details furnished by the assessee and identified several issues requiring verification.
4. At the assessment stage, the Assessing Officer noticed from the balance sheet that the assessee had shown unsecured loan liabilities of ₹23,96,66,909/- as on 31.03.2017, out of which unsecured loans of ₹1,43,00,000/- were received during the year from twelve parties. The assessee was required to prove the identity, creditworthiness of the lenders and genuineness of the loan transactions. Although the assessee furnished confirmations, PAN details, bank statements and returns of income in respect of some lenders, the Assessing Officer found that in respect of seven lenders aggregating to ₹60,50,000/-, the assessee Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 4– failed to establish their creditworthiness. The Assessing Officer observed that several lenders had filed meagre return of income, had insufficient bank balances and the funds were routed through their bank accounts shortly before being advanced to the assessee. In certain cases, interest was not actually paid but merely capitalised by the assessee. On these facts, the Assessing Officer held that the assessee had not discharged the burden under section 68 of the Act and accordingly treated unsecured loans of ₹60,50,000/- as unexplained cash credits taxable under section 68 read with section 115BBE of the Act. Consequentially, the Assessing Officer also disallowed interest expenditure of ₹8,98,956/- claimed on such unexplained loans and added the same as unexplained expenditure under section 69C of the Act. Further, the Assessing Officer examined the interest expenditure claimed by the assessee and observed that interest at rates ranging from 18% to 19% was paid on certain unsecured loans, whereas interest on advances given by the assessee was charged only at 9%. The Assessing Officer held that interest paid beyond 12% was excessive and not justified on grounds of commercial expediency, the and therefore disallowed excess interest of ₹35,21,790/-. The Assessing Officer also noticed a mismatch in advances received from Shri Pathik D. Vachhani resulting in an unexplained amount of ₹2,39,752/-. As the assessee did not offer any explanation or supporting evidence, this amount was treated as unexplained income under section 69A of the Act. Further, the Assessing Officer observed that VAT of ₹62,941/- and Service Tax of ₹1,64,778/- pertaining to earlier years were claimed as paid during the year, but no evidence of actual payment was furnished. Accordingly, these statutory dues amounting to ₹2,27,719/- were Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 5– disallowed. The Assessing Officer completed the assessment determining total income at ₹1,79,22,447/- and also initiated penalty proceedings under sections 270A, 271AAC and 272A(1)(b) of the Act.
5. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(Appeals). With respect to the addition of ₹60,50,000/- under section 68 of the Act, the assessee contended that all loans were received through banking channels and that confirmations, PAN and bank statements had been furnished. The Ld. CIT(Appeals), however, observed that mere furnishing of confirmations and PAN details was not sufficient and that the assessee had failed to establish the real financial capacity of seven lenders. The Ld. CIT(Appeals) noted that the return of incomes of these lenders were grossly disproportionate to the amounts advanced and that their bank accounts showed mere routing of funds. The CIT(Appeals) held that the assessee failed to discharge the onus under section 68 of the Act and he confirmed the addition of ₹60,50,000/- as unexplained cash credits.
6. In relation to the disallowance of interest expenditure of ₹8,98,956/- under section 69C of the Act, the Ld. CIT(Appeals) held that once the principal loan itself was held to be unexplained, the interest claimed thereon could not be allowed as a genuine business expenditure. Accordingly, this disallowance was also confirmed. Regarding the disallowance of excess interest of ₹35,21,790/-, the Ld. CIT(Appeals) agreed with the Assessing Officer that payment of interest at rates as high as 18% to 19% was not commercially justified, especially when the assessee itself was earning interest at much lower rates and when the genuineness of some loans was already in doubt.
Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 6– The Ld. CIT(Appeals) held that restricting allowable interest to 12% was reasonable and confirmed the disallowance. As regards the addition of ₹2,39,752/- treated as unexplained income under section 69A of the Act, the Ld. CIT(Appeals) observed that the assessee had failed to explain the discrepancy in advances even during appellate proceedings and therefore confirmed the addition. However, with respect to the disallowance of statutory dues of ₹2,27,719/-, the Ld. CIT(Appeals) examined the additional evidence and reconciliations furnished by the assessee during appellate proceedings and found that VAT and Service Tax liabilities had actually been paid during the year. The CIT(Appeals) held that the conditions of section 43B were satisfied, and accordingly CIT(Appeals) deleted the disallowance of statutory dues. On the grounds relating to charging of interest under sections 234B and 234C, the Ld. CIT(Appeals) held that levy of interest is mandatory and consequential and directed the Assessing Officer to recompute the same in accordance with law after giving effect to appellate relief. The grounds challenging initiation of penalty proceedings were held to be premature and were dismissed. In the result, the Ld. CIT(Appeals) partly allowed the appeal by deleting the disallowance of statutory dues and granting consequential relief on interest, while confirming all other additions made by the Assessing Officer.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
We have heard the rival contentions and perused the material on record.
Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 7– 9. Grounds relating to challenging the order with respect to violation of principles of natural justice are clearly misplaced since adequate opportunity of hearing was provided at all stages of proceedings and hence Grounds 1 to 3 are dismissed.
With respect to addition of unsecured loans of Rs. 60.50 lakhs made by the Assessing Officer, the counsel for the assessee has taken us through the relevant Paper-Book and submitted that Ledger, confirmation, PAN, ITR acknowledgment, Bank Statement for each of the parties is already on record. Further, the amounts have also been repaid back along-with interest for these parties. The counsel for the assessee placed reliance on the Gujarat High Court decisions which have held that when the unsecured loans have been repaid back along- with interest, there is no question of invoking the provisions of section 68 of the Act in respect of these creditors.
We have carefully considered the submissions of the learned counsel for the assessee and perused the material placed before us. The grievance of the assessee under this ground relates to the addition of unsecured loans aggregating to ₹60.50 lakhs made by the Assessing Officer under section 68 of the Act.
The learned counsel for the assessee has drawn our attention to the paper-book and submitted that in respect of all the impugned creditors, the assessee has already placed on record the ledger accounts, confirmations, PAN details, acknowledgements of returns of income and bank statements. It has further been contended that the unsecured loans in question have subsequently been repaid through banking Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 8– channels along with interest and that such repayment is duly reflected in the books of account. On this basis, reliance has been placed on several decisions of the Hon’ble Gujarat High Court to contend that once unsecured loans are repaid along with interest, the provisions of section 68 cannot be invoked in respect of such credits.
We have carefully considered the rival submissions and perused the material placed on record. With respect to the addition of unsecured loans aggregating to ₹60.50 lakhs made under section 68 of the Act, the ld. counsel for the assessee has given a detailed and party-wise explanation before us, supported by documentary evidence placed in the Paper-Book, which has not been controverted by the Revenue by bringing any adverse material on record. In so far as the addition relating to Pareshbhai S. Dalal is concerned, the ld. counsel for the assessee drew our attention to page 72 of the Paper-Book, being the ledger account of the said party, which clearly reflects an opening balance of ₹14.68 lakhs. It is an admitted position that this amount represents a sum advanced by the said party to the assessee in earlier years and, therefore, there was no occasion for the Assessing Officer to make any addition in the year under consideration. The ld. counsel further submitted that the said amount has also been repaid to Pareshbhai S. Dalal in the year 2020 by way of account payee cheque. In view of these undisputed facts, we are of the considered view that the addition made in respect of this party is unsustainable. With regard to Hemantbhai Patel involving an amount of ₹1 lakh, the ld. counsel for the assessee drew our attention to page 86 of the Paper-Book, which reflects an opening balance of ₹15 lakhs from the said party, being an advance given by Hemantbhai Patel in earlier years. The ld. counsel Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 9– further invited our attention to page 171 of the Paper-Book, wherein Hemantbhai Patel has filed his return of income declaring income of approximately ₹18 lakhs, thereby establishing his creditworthiness. In the absence of any adverse finding, we are of the considered view that the addition in respect of this party cannot be sustained. In the case of Jagrutiben Patel, involving an amount of ₹1 lakh, the ld. counsel for the assessee drew our attention to page 67 of the Paper-Book, being the ledger account of the said party, which reflects an opening balance of ₹25 lakhs. The existence of such substantial opening balance clearly establishes the creditworthiness of the said party and also demonstrates that the impugned amount does not represent any unexplained credit during the year. Therefore, the addition made in respect of this party is liable to be deleted. As regards Vastupal M. Shah (HUF) involving an amount of ₹35 lakhs, the ld. counsel for the assessee submitted that the said amount has been repaid back along with interest to the said party (Page 74 of Paper Book). The ld. counsel further drew our attention to page 113 of the Paper-Book, being the confirmation, to demonstrate that the said amount was sourced out of repayment received from Shri Bakul Shah, to whom Vastupal M. Shah (HUF) had earlier advanced an unsecured loan of ₹35 lakhs. These documents clearly establish the source of funds, genuineness of the transaction and creditworthiness of the creditor. In the absence of any contrary material brought on record by the Revenue, the addition made in respect of this party cannot be sustained. With respect to the remaining parties, the ld. counsel for the assessee drew our attention to page 226 of the Paper-Book, wherein the assessee had furnished complete details of all the balance creditors during the assessment proceedings and had specifically requested the Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 10– Assessing Officer to intimate if any further information or clarification was required. No adverse finding was thereafter recorded by the Assessing Officer in respect of these parties. In our considered view, the assessee had duly discharged the onus cast upon him under section 68 of the Act and, in the absence of any adverse material, the addition cannot be sustained.
In view of the detailed explanations furnished by the ld. counsel for the assessee, supported by documentary evidence, we hold that the addition of ₹60.50 lakhs made under section 68 of the Act is not sustainable. Accordingly, Ground No. 5 raised by the assessee is allowed.
15. Ground No. 6 relates to the disallowance of interest expenditure of ₹8,98,956/- under section 69C of the Act with respect to the above unsecured loans. Since this disallowance is consequential to and directly connected with the addition made under section 68 of the Act, which has been deleted by us, the disallowance of interest cannot survive. Accordingly, Ground No. 6 is also allowed.
With respect to Ground Number 7 (disallowance of Interest expenses of Rs. 35.21 lakhs), the counsel for the assessee submitted that this interest payment is with respect to loans taken in earlier assessment years. Further the counsel for the assessee submitted that on identical set of facts and with respect to same loans, Ld. CIT(Appeals) for assessment year 2018-19 has deleted the disallowance of interest payments to these parties. The counsel for the assessee also submitted before us the order passed by CIT(Appeals) for assessment year 2018-
It would be useful to reproduce the relevant extracts of the order passed by CIT(Appeals) for ready reference:
“5. The appellant is an individual who is a proprietor of Sharda Construction and is engaged in the business of construction of property. The appellant filed its return of income for the AY 2018-19 on 19/09/2018 declaring income at Rs 3,82,51,890/-. The case of the appellant was selected for the complete scrutiny to verify the issues of "ICDS Compliance and adjustment" and the "details of assets and liabilities". During the scrutiny proceedings it was found by the AO that the appellant has paid interest on unsecured loans, rate of which was varied from 9% to 19%. Out of 41 creditors, the appellant has paid interest at the rate of 18% to 2 persons and at the rate of 19 percent to 2 persons. During the assessment proceedings the appellant has submitted written submission to substantiate the reason for paying the interest at higher rate to few persons and the same is reproduced as under: (ii) Vide above referred notice, your kind office has proposed to disallow excess interest paid to Smt. Bela Shah, Shri Vasthupal Shah and Vasthupal Shati(HUF). It may be appreciated that these three parties to whom interest is paid are not related to the assessee as stated in section 40A920(b) of the Act. It is submitted that the interest paid to such unrelated parties is neither unreasonable nor excessive. (iii) it may be mentioned that the loan Was taken from unrelated parties considering availability vis-à-vis requirement of the funds. Since last few years, there is intense competition in the real estate business and due to stagnation in the real estate business, the Assessee has borrowed fund from various parties at the rate of interest mutually agreed by both the parties to survive in the market. It is not the case where the Assessee has paid excess interest amount to few parties and claimed interest expenditure. The said transactions including rate of interest charged have been confirmed by the parties in their confirmation submitted to your kind office in the earlier submission. It is submitted that the assessee preferred to take unsecured loans to reduce the burden of large formalities and giving securities, pledging some immovable property etc. and also in this case there is flexibility of repayment of unsecured loans. Therefore, sometimes little higher interest is to be paid on unsecured loans. (iv) It is submitted that the Assessee has taken loans from unrelated parties. It is submitted that your kind office cannot assume reasonable rate of interest at 12% and disallow excess interest rate on presumption basis." However the AO did not accept the contention of the appellant. The AO also found that the appellant has also given loans to some parties and receives the interest at the rate of 9% only. Thus the AO after considering these facts and after making the observation that the banks are charging interest at the rate of 12% (approx) has restricted the rate of interest allowable at 12% and disallowed the excessive interest paid by the appellant over and above 12% which resulted in the addition of Rs 32,79,017/-.
5.1 During the appellate proceedings, the appellant has placed reliance on various decisions where the similar issue is squarely covered up and where the authorities have taken the decisions in the favor of the appellant. In this case the facts are not in dispute that the interest was actually paid by the appellant and is not a bogus claim. It is pertinent to mention here the AO himself in his assessment order has submitted that the out of 41 creditors the higher interest is paid to only 5 persons and the same according to me, appears to be acceptable depending on the need of the business. Even, the AO has not mentioned anything about these 5 creditors whether they are related party (covered u/s 40A(2) of the Act) to the appellant or not. 5.2. Further, it is pertinent to mention here apart from the decisions quoted by the appellant, similar type of came across various benches of ITAT's, and the decisions rendered in few of them is reproduced in brief as under: (1) ITO v. Bansi Lal Gupta [2009] 23 SOT 1 (Asr.) (URO) [24 per cent interest paid to persons covered under section 40A(2)(b) of the Act held not disallowable]. (2) Asstt. CIT v. Alfa Rubber Inds. [2008] 172 Taxman 35 (Ast)(am) [21 per cent interest paid to persons covered under section 40A(2Xb) held allowable]. (2) ITO v. Chamba Mal Roop Chand [2001] 119 Taxman 169 (Asr.)(leg.) [held that market value of the services and not the individual action of the assessee has to be looked into while making the disallowance under section 40A(2)(a) of the Act- market rate of interest at the rate of 24 per cent held to be reasonable]. (3) Hynoup Food & Oil Industries (P.) Ltd. v. Assn. CIT[1994] 48 ITD 202 (Ahd.,) (held that where interest paid to the directors was not at a rate higher than the market rate, disallowance could not be made on the ground that other creditors were paid interest at a lesser rate). (4) The ITAT Bangalore Bench in ITA 1145/Bang/2013 in the case of Sri. Shambulal G Chhabra, vs Addl.CIT, held that In the case on hand, the fact is that the assessee has paid interest to his relatives / own business concerns @ 9%, 12% and 15% on unsecured loans taken from them and it is also generally known that interest on Fixed Deposits is in the range of 8% to 9%. We, however, find from the orders of the authorities below that they have not rendered factual finding that the interest payments made by the assessee in respect of unsecured loans taken from relatives /related business concerns are either excessive or unreasonable having regard to the circumstances and requirements of the business of the assessee. In this factual matrix of the case, as discussed above, and respectfully following: the aforesaid decision of the ITAT, Mumbai Bench in the case of M. M. Textiles (2010) 122 ITD 435 (Mum - ITAT) and of the ITAT, Bench, in the case of Subhash Chander and Co., (2009) 31 SOT 11 (ASR), we are of the considered view that the disallowance of interest payment of Rs.48,66,556/- under section 40A(2)(b) of the Act, in the case on hand, is factually unsustainable and accordingly delete the same. (5) The ITAT Ahmedabad, in ITA.No.869/Ahd/2010 in the case of Vipul Y Mehta Vs ACIT also held that Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 13– At the time of hearing before us, it is submitted by the learned counsel that during the year under consideration, the assessee paid interest to the relatives at the rate of 18%. The AO was of the view that reasonable rate of interest is 12%, he therefore disallowed 6% under Section 40A(2)(b) of the Act. On appeal, the CIT(A) was of the opinion that the banks are charging interest at the rate of 16% and therefore he directed the AO to allow interest at the rate of 16%. It is submitted by the learned counsel that the loan taken from the relatives cannot be compared with the bank loan because the loan from the ITA.No.869/Ahd/2010 relatives are without security while the loan from the bank is secured. He also pointed out that in the case of Omkarmal Gaurishanker Vs. /TO, 92 TTJ (Ahd) 223 the Tribunal held that the interest paid to the relatives at the rate of 24% is be reasonable. He also submitted that during the year under consideration, the assessee himself has charged interest from others at the rate of 18%. In view of this, it is submitted by the learned counsel that the payment of interest at the rate of 18% was reasonable and not excessive.
The learned DR, on the other hand, relied upon the order of the authorities below: 5. We have heard both the sides and also perused the material placed before us. Considering the facts of the case and the arguments of both the sides, in our opinion, the payment of interest at the rate of 18% per annum to the relatives on unsecured loan cannot be said to be excessive or unreasonable. We, therefore, delete the disallowance made under Section 40A(2)(b) of the Act. Accordingly, Ground No.1 of the assessee’s appeal is allowed. (6) Moreover, as held in S.A. Builders Ltd. v. CIT (Appeals [2007] 288 1TR 1 (SC), the revenue cannot justifiably claim to put itself in the armchair of the businessman and assume the role to decide as to how much expenditure is reasonable having regard to the circumstances of the case; no businessman can be complied to maximize his profit; the IT authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act, and that the authorities must not look at the matter from their viewpoint, but that of a prudent businessman impelled by commercial expediency. 5.3. Respectfully following the above decisions, I am also of the view that the AO has no power to sit on the chair of the businessman and has no authority to decide as to how much expenditure is. reasonable having regard to the circumstances of the case. Hence, the action taken by the AO does not appear to be in order and accordingly the disallowance of Rs 32,79,017/- made on account of excessive interest paid by the appellant over and above 12 percent to 5 parties is hereby deleted. 5.4 Ground 4, 5 and 6 are against levy of interest u/s 234A and 234B of the Act. The charge of interest in mandatory and consequential and the AO is therefore directed to rework the interest, if any, as per law after giving effect to this order. Accordingly the ground 4,5 and 6 are allowed for statistical purpose.
Shaileshkumar Dahyabhai Patel vs. DCIT Asst.Year –2017-18 - 14– 5.5 Ground 7 is against the initiation of penalty proceedings u/s 270A (2)(a) of the Income Tax Act, 1961. This ground is premature at this stage and accordingly is dismissed 5.6 In ground 8 the appellant reserves its right to add other additional grounds during the course of hearing. No such option was exercised by the appellant and accordingly this ground is treated as dismissed.
In the result the appeal is Partly Allowed.”
Looking into the facts of the instant Grounds of Appeal and observations made by CIT(Appeals) for assessment year 2018-19 we are inclined to allow this Grounds of Appeal raised by the assessee.
18. In the result, Ground Number 7 of the assessee’s appeal is allowed.
19. With respect to Ground Nos. 8 and 9 relating to the addition of ₹2,39,752/- treated as unexplained income, the ld. counsel for the assessee drew our attention to page 123 of the Paper-Book and explained that the discrepancy noted by the Assessing Officer arose on account of service tax liability. It was submitted that the assessee had received advances of ₹73,09,752/- and had recognized revenue of ₹62,36,262/-, and the difference was attributable to service tax payable amounting to ₹3,09,752/-, leaving a balance of ₹7,63,738/-. It was further submitted that there was a typographical error in reporting the amount of advances taken from Shri Pathik D. Vachhani in Form 3CD and that the ledger account of the said party fully supports the reconciliation furnished. Considering the reconciliation and supporting documents placed on record, we find that there is no mismatch between the amount received, revenue recognized and the closing balance reflected in the balance sheet. The impugned amount represents
20. Accordingly, Ground Nos. 8 and 9 are allowed.
In the combined result, appeal of the assessee is partly allowed. This Order pronounced in Open Court on 26/02/2026