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Facts
The assessee, a partnership firm engaged in real estate, filed a return declaring Rs. 2,89,400. The Assessing Officer (AO) computed total income at Rs. 1,27,38,630 by making additions/disallowances related to unsecured loans, interest, salary, depreciation, and construction expenses.
Held
The CIT(A) deleted additions on account of unsecured loans (receipts and payments) and interest thereon, and also deleted the disallowance of construction development expenses. The Tribunal upheld the CIT(A)'s order, finding no infirmity in its deletion of additions related to unsecured loans, noting that the assessee substantiated the genuineness and creditworthiness of creditors with evidence.
Key Issues
Whether the CIT(A) erred in deleting additions related to unsecured loans and construction/development expenses without proper enquiry, and whether the AO's additions were justified. Also, whether the procedure under Rule 46A was followed.
Sections Cited
68, 690, 37, 143(3), 144B, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DEHRADUN BENCH: DEHRADUN
(ASSESSMENT YEAR: 2018-19) Income Tax Officer-2(1)(4), Swarnim Promotoers & Rudrapur. Developers, Vs. Mandi Parisar Kichha Road, Rudrapur, Uttarakhand. PAN: ABQFS9375M (Appellant) (Respondent) Assessee by Shri Amit Goel, CA and Shri Pranav Yadav, Adv. Department by Shri Amar Pal Singh, Sr. DR Date of Hearing 11/09/2025 Date of Pronouncement 05/12/2025 O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (‘the CIT(A) in short) passed u/s 250 of the Income Tax Act, 1961, dated 06.02.2025 for Assessment Year 2018-19.
The brief facts of the case are that the assessee is a partnership firm engaged in the business of Real Estate. The return of income was e-filed on 17.10.2018 declaring total income at Rs.2,89,400/-. The case of the assessee was selected for complete scrutiny and the Assessing Officer has computed the total income at Rs.1,27,38,630/- vide order passed u/s 143(3) r.w.s. 144B of the Act dated 02.06.2011 by making the following additions/disallowances:
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(i) Addition towards unsecured loans u/s 68 of 48,59,400/- (ii) Repayment of unsecured loan of Rs.38,40,000/- (iii) Payment of interest of Rs.17,50,315/- on the unsecured loan. (iv) Disallowance of salary of Rs.1,80,000/-. (v) Disallowance of depreciation of Rs.12,666/- and (vi) Disallowance of construction and development expenses of Rs.4,36,249/-.
Against the said order, the assesse preferred an appeal before the Ld. CIT(A) who deleted the additions made on account of receipt as well as payment of unsecured loans and interest thereon and further deleted the disallowance of construction development expenses.
Against the said order, the Revenue is in appeal before the Tribunal by taking the following grounds of appeal:
“1. Law and on facts of the case by deleting the amount of Rs.1,18,20,315/- made by the AO u/s 68 & 690 of the Act who has made the addition after recording the detailed reasons for doing so in length in the order itself.
Law and on facts of the case by addition of Rs.1,18,20,315/-after admitting the submission of assessee during appellate 2 proceedings and therefore has erred by violating the procedure laid down in Rule No. 46A(3) of 1.T. Rule, 1962 without directing the AO to examine the additional evidences submitted during appellate proceedings.
Law and on facts of the case by ignoring the AO to examine such evidences, accepting the additional evidence in the matter & deleting the addition of Rs.1,18,20,315/- without making any enquiry & merely relying on the documents submitted by the assessee.
Law and on facts of the case by deleting the addition of Rs. 4,36,249/-made by the AO u/s 37 of the Act ignoring the observation of the AO that the assessee did not provide details of construction & development expenses along with reflection of construction & development expenses payments in bank statement during assessment proceedings.
Law and on facts of the case by asking addition of Rs.1,24,49,230/- in place of correct figure of Rs. 1,18, 20, 315/- on account of loans and interest thereto’,.
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Before us, Ld. AR of the assessee under Rule 27 of the ITAT Rules, 1962 has supported the orders of Ld. CIT(A) and submits that in the instant case, AO has proceeded in a very casual manner where he has made the additions not only on account of receipt of loan but also their repayments were also added and interest paid on such loans was disallowed. He drew are attention to pages 8 of the appellate order wherein the Ld. CIT(A) after considering the facts of the case has observed that assessee has substantiate the genuineness of the loans and the creditworthiness of the creditors by filing through confirmations and the copy of the ITRs and in respect of various loans taken, bank statements were also filed. The Ld. CIT(A) further observed that the copies of the ledger etc. were filed before the AO, on perusal of which, it could be seen that except three loans of Rs.2,00,000/- from Samvedna Sharma, Rs.1,80,000 from Smt. Savitri Devi and 1,50,000 from Bijay Bhushan (HUF), remaining loans were brought forward from previous year, since, there is no credits in their accounts except payment of interest thus these loans could not be added u/s 68 of the Act in the year under appeal. Ld. AR submits that the Ld. CIT(A) appreciated these facts and thus, deleted the additions for the opening balances as well of the interest and repayment of loans. The Ld. AR also drew our attention to the observations of Ld. CIT(A) in deleting the ad hoc disallowance of 20% out of construction and development expense by observing that the payments were made after making necessary TDS and no specific instance was brought on record for making such disallowance. Therefore, the Ld. AR of the assessee in terms of Rule 27 of ITAT Rules has requested for confirmation of Ld. CIT(A)’s order.
On the other hand, the Ld. SR. DR submits that assessee has filed additional details before the Ld. CIT(A) who had not followed the process of Rule 46A of Income Tax Rules, 1962 and not confronted the documents filed from the AO and accordingly, it is a violation of Rule 46A of the IT Rules and thus, the 4 IT No.55/DDN/2025 ITO vs. Swarnim Promotors & Developers action of the Ld. CIT(A) in deleting the additions deserves to be held bad in law. He prayed for the restoration of the case before ethe ld. CIT(A).
Heard both the parties and perused the materials available on record. From the findings of Ld. CIT(A) given at page 8-9 of the order, we find that the CIT(A) has mainly deleted the addition on account of unsecured loans received during the year and also made addition us 68 of the Act for the brought forward loans which were repaid in the year and payment of interest on such loans were also disallowed. It is seen that only a sum of Rs5,80,000/- from three parties were received during the year for which all the evidences were filed by the assessee to prove their creditworthiness. In view of these facts, we find no infirmity in the order of the Ld. CIT(A) which is hereby upheld.
Regarding disallowance of expenses, we find that AO has made the adhoc disallowance of 20% out of the expenses claimed under the head construction and development expenses without providing any specific instance of expenses which is not supported by the bills and vouchers and, therefore, we find no error in the order of Ld. CIT(A) in deleting the disallowance. Accordingly, all the grounds of appeal of Revenue are dismissed.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 05.12. 2025.
Sd/- Sd/- (YOGESH KUMAR U.S.) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 05.12. 2025. PK/Sr. Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT
5 IT No.55/DDN/2025 ITO vs. Swarnim Promotors & Developers