SHANTI DEVELOPERS,RAJKOT vs. ITO, WARD-1(2)(2), RAJKOT, RAJKOT

आयकर अपील�य अ�धकरण, राजकोट �यायपीठ, राजकोट। IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND DR. DINESH MOHAN SINHA, JUDICIAL MEMBER आयकरअपीलसं./ITA No. 827/RJT/2024 (�नधा�रणवष�/Assessment Year: 2011-12) Shanti Developers The DCIT, Circle – 1(1), V-88, Opp. S.R.P. Quarter, 150ft Ring Vs. Aayakar Bhavan, Nr. Race Course Road, Ghanteshwar, Jamnagar Road, Ring Road, Rajkot (Gujarat) – 360006 Rajkot (Gujarat) – 360001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: ABPFS2815R (अपीलाथ�/Appellant) (��यथ�/Respondent)

आयकरअपीलसं./ITA No. 274/RJT/2025 (�नधा�रणवष�/Assessment Year: 2011-12) Shanti Developers ITO, wd – 1(2)(2), V-88, Opp. S.R.P. Quarter, 150ft Ring Aayakar Bhavan, Race Course Ring Vs. Road, Ghanteshwar, Jamnagar Road, Road, Rajkot (Gujarat) – 360001 Rajkot (Gujarat) – 360006 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: ABPFS2815R (अपीलाथ�/Appellant) (��यथ�/Respondent) Appellant by : Shri Mehul Ranpura, Ld. AR Respondent by : Shri Vijay Kumar Singh, Ld. CIT(DR) Date of Hearing : 04/11/2025 : 28/01/2026 Date of Pronouncement ORDER Per, Dr. Arjun Lal Saini, A.M.

Captioned two appeals filed by the same assessee, pertaining to same Assessment Year 2011-12, are directed against the separate orders passed under

ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), dated 20.08.2024 and dated 20.02.2025, respectively, which in turn arise out of separate orders passed by the Assessing Officer u/s 143(3) r.w.s. 147/ 263 of the Act.

“1. The grounds hereunder are without prejudice to one another of appeal mentioned. 2. The Id. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred as to the "CIT(A)"] erred on facts as also in law in dismissing the appeal ex-parte without allowing adequate opportunity of being heard. 3. The Id. CIT(A) erred on facts as also in law in confirming disallowance made of Rs. 3,66,32,345/- on the alleged ground of contravention of provision of section 40A(3) of the Act, in respect of expenses related to WIP. The addition confirmed is totally unjustified and uncalled for which deserves to be deleted and may kindly be deleted. 3. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.”

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers money" received in cash form customers Rs. 3,75,05,000/- was found. In the statement recorded u/s 133A of the Act, Shri Ketan Shobhana- partner has stated (Answer to Question No. 22) that "After consulting my engineer/partners and accountant can state that WIP of our project is of Rs. 5 crore approx." which indicates that the WIP was not recorded in the books of accounts. Further, with regard to source of the WIP as on the date of survey, the firm's partner Shri Ketan G Shobhang has stated that the expenses incurred on the WIP was met out of the cash of Rs. 3,75,05,000/- received as "on money" from various customers. The assessee has shown the amount of "On money" so received under the head "Income Disclosure in I.T. Survey" in the return of income. The assessment was finalized u/s 143(3) of the Act, vide assessment order dated. 29.11.2013 determining income at Rs. 3,71,97,130/-. 5. Thereafter,, on examination of records by ld. Pr.CIT, Rajkot-1, it was observed by him that no bifurcation of WIP as on the date of the survey is placed on record. It was also noticed that there were no details to correlate between "on money" received and expense incurred towards WIP. Further, it was noticed that no details have been placed on record in respect of the basis on which the WIP as on the date of the survey was shown at Rs. 3,66,32,345/-. Also there are no details of the constructed area as on the date of the survey. Therefore, the assessee's claim that the WIP of Rs. 3,66,32,345/- was created from the "on money" received and which was disclosed during the survey, was accepted by the AO without making inquiries or verification which should have been made. The, Pr.CIT-1, Rajkot observed that the order passed by the AO was erroneous and prejudicial to the interest of the revenue. 6. Accordingly, in order to pass an appeal effect order, under section 143(3) r.w.s.263 of the Act, an opportunity of being heard was given to the assessee, vide

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers notice of the assessing officer, dated. 01.08.2016 to furnish supporting evidence to substantiate its contention in the matter.

“1.The Honourable A.O. has made assessment u/s 143(3) on 29.11.2013. At the time of assessment proceeding, we have submitted all details/relevant materials, books of accounts. After verification of the same, A.O. has passed the order u/s 143(3) on 29.11.2013. 2. At the time of assessment proceeding, we have provided all details relating to disclosure of survey. All the vouchers/bills relating to expenses of Rs. 3,66,32,345/- was verified by the Honourable A.O. & for your reference, we are submitting list of all payment of Rs. 3,66,32,345/- further, all the expenses are below Rs. 20,000/-. So question of disallowances u/s 40A(3) of the Act does not arise. Further these expenses also do not attract to the provision of TDS as it is below the prescribed limit of T.D.S. 3. Further all the details of expenses of Rs. 3,66,32,345/- with bills/vouchers was there at the time of survey. Without the above figure how it is arrived without the details and department has also accepted the same at the time of survey as well as at the time of assessment made by A.O. Further, as alleged that no details of constructed area on the date of survey is furnished or called for. As on the date of survey, Department has not asked for details of W.I.P. So, we have not furnished the same. So, it means that the A.O. is satisfied regarding valuation of work in progress while conducting survey. Otherwise he might have been called for valuation of W.I.P. by valuer. So, there is no point for details of constructed area". 8. However, the assessing officer rejected the above contention of the assessee, and held that assessee has not submitted details in support of his contention. The assessing officer observed that assessee ought to have proved its case by submitting details in respect of WIP of Rs. 3,66,32,345/-. The trading and profit and loss accounts reveal that during the year, the assessee has spent Rs. 8,72,95,968/- (Closing WIP Rs. 9,96,64,696/- opening WIP Rs. 1,68,68,728/-) which includes construction labour expense of Rs. 1,31,16,680/- Reti Fera Expense of Rs. 42,54,271/- and also WIP of Rs. 3,66,32,345/-. Therefore, assessing officer noticed

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers that the explanation furnished by the assesse was not found to be satisfactory and therefore, the expenses of Rs. 3,66,32,345/- claimed to have incurred on WIP require to be disallowed in view of the provision of Section 40A(3) of the I.T. Act. Accordingly an amount of Rs.3,66,32,345/- was added to the total income of assessee- firm. 9. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld.CIT(A) who has dismissed the appeal of the assessee. Before learned CIT(A), the assessee had submitted written submission, however, after considering the written submissions of the assessee, the learned CIT(A), just reiterated the facts narrated in the assessment order and confirmed the addition made by the assessing officer. 10. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 11. At the outset, the Learned Counsel for the assessee submitted that in the assessee case, the original assessment order u/s 143(3) of the Act, was framed by the assessing officer on 29.11.2013. Then-after, Ld.PCIT exercised his jurisdiction u/s. 263 of the Act and order was passed by the Ld.PCIT on 08.03.2016. Then after, the appeal effect order was passed by the assessing officer, under section 143(3) of the Act, dated 29.11.2016. During the proceedings, before the assessing officer, the assessee submitted every kind of documents and details, which were demanded by the assessing officer. The assessee has also explained before the learned CIT(A), the documents and details submitted before the assessing officer by way of letter dated 11.09.2023, which was reproduced by the Ld.CIT in its order, page no.14. Further, it was stated that amount of Rs.3,66,32,345/- was invested in WIP and on account of said WIP, an additional income of Rs.3,75,05,000/- has been voluntary offered as additional income over and above the regular income for the assessment year

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers 2011-12, hence, there is no loss to the revenue. Hence, the addition made by the assessing officer may be deleted. 12.On the other hand, the Learned DR for the revenue submitted that since the assessee did not effectively participated in the appellate proceedings and only part of submission was made before the Ld.CIT(A), therefore, matter may be remitted back to the file of the Ld.CIT(A) for fresh adjudication. On merit, the Ld. DR further submitted that assessee has failed to explain his claim by submitting the sufficient documents and details, therefore addition made by the assessing officer may be sustained. 13. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record.We note that during the assessment proceedings the assessee submitted required documents and details, to justify the amount invested in the work in progress (WIP), and the amount so invested in the work in progress (WIP) was below Rs.20,000/-, to substantiate these facts, the assessee has submitted the relevant documents before the Bench, ( which were also submitted by the assessee before the lower authorities) vide page no.1, 2, 6 and 7 of the Paper-Book. That is, at the time of assessment proceeding, the assessee had provided all details relating to disclosure of survey. Therefore, we find that when the amount was disclosed in the survey and paid the taxes, thereon, then in that circumstances, there should not be any loss to the revenue. Besides, all the vouchers/bills relating to expenses of Rs. 3,66,32,345/- was verified by the assessing officer. The assessee also submitted the list of all payments of Rs. 3,66,32,345/- further, submitted that all the expenses are below Rs. 20,000/-, hence the question

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers of disallowances u/s 40A(3) of the Act does not arise. Further these expenses also do not attract the provision of TDS, as it is below the prescribed limit of T.D.S.

“10. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the assessee in the course of survey proceedings dated 22.03.2012 under Section 133A of the Act has admitted unaccounted income to the tune of Rs. 2,01,50,000/- which was duly disclosed in the profit and loss account of the assessee which are placed on Page 33 of the Paper Book. The nature of income disclosed by the assessee during the survey operation was also explained by it in the statement recorded under section 131 (1A) of the Act stating that the entire income was generated from the land dealing activities. Part of such income was distributed among the partners of the firm and part of it was utilized for the construction of the expenses precisely amounting to Rs.1,35,80,000/-. The relevant extract of the statement recorded during survey is placed on Pages 10 to 11 of the Paper Book. However, the authorities below have denied the deduction claimed by the assessee on account of construction expenses amounting to Rs.1,35,80,000/- on the reasoning that the assessee has also increased the work-in-progress as closing stock WIP by the same amount which will make the profit of the year under consideration as tax neutral but the assessee in the subsequent year will claim the deduction of such expenses. 11. From the above discussion, we find that the genuineness of the construction expenses has nowhere been doubted by the authorities below. What has been doubted is this that the assessee will claim the WIP as an expense in the subsequent year against the sales. Thus, effectively the assessee will get the benefit of Rs.1,35,80,000/- representing the construction expenses. Once the undisclosed income of the assessee has been admitted by the revenue then the corresponding expenses incurred out of such income should also be allowed as deduction until and unless claim of the assessee is bogus. However, the case before us is not of bogus expenses. 12. We also note that the Delhi Tribunal involving identical facts and circumstances in the case of Shri Dinesh Chand Jain vs. ACIT, reported in 116 Taxman 225 has decided the issue in favour of assessee. The relevant extract of the order is reproduced below: “On facts as they emerged from the material placed, the inference of the authorities below that as a result of entries in respect of stock of Rs. 4,65,000, the effect of surrender was nullified, was misconceived. If the excess stock was not introduced in the trading account, sales of Rs. 3,57,703 could not be effected in the post-search period and yet leaving a closing stock of Rs. 2,26,785 the stock on the date of search, as per books, being only Rs. 1,81,700. The Assessing Officer

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers had not drawn a separate trading account as per book, for the pre-search period. He had gone by the trading Profit & Loss Account filed by the assessee and had computed the total income starting from the net profit of Rs. 5,22,945 as per that account. The correctness of the total sales shown at Rs. 23,11,451 was not disputed. No discrepancy in the trading Profit & Loss Account was pointed out. The total addition to be made, quantified at Rs. 8,77,092, was only on a hypothetical working. This was a search & seizure case and the entire position had to be considered as a whole. When so done, the surrender of Rs. 7,65,000 made by the assessee could be held to take care of the excess stock, unaccounted for sales and unexplained investment and profit thereon, particularly when no other specific discrepancy was pointed out by the Assessing Officer. Therefore, the further addition of Rs. 1,12,092 was uncalled for and was, accordingly, deleted.” 13. With respect to the disallowance made under the provisions of Section 40A(3) of the Act, we note that expenses claimed by the assessee were incurred out of the unaccounted income which has already been suffered to tax. Therefore, any further disallowance under the provisions of Section 40A(3) of the Act would lead to the double addition to the total income of the assessee which is unwanted under the provisions of law. Furthermore, if the assessee claims the expenses of Rs.1,35,80,000/- but at the same time the assessee has also increased its WIP by the said amount which makes the same as tax neutral. Thus, the claim as such was not made by the assessee for any deduction in the year under consideration. In view of the above and after considering the facts in totality, we are not inclined to uphold the finding of the authorities below. Accordingly, we set-aside the order of the Ld. CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. 14. In the result, the appeal of the assessee is allowed.”

“1. The grounds of appeal mentioned hereunder are without prejudice to one another.

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers 2.The Id. Commissioner of Income- tax(Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred as to the "CIT(A)"] erred on facts as also in law in rejecting the ground of appeal related to validity of notice issued u/s 148 of the Income tax Act, 1961. That on facts as also in law, initiation of action u/s 147 of the Act is invalid and assessment made on such invalid initiation deserves to be quashed and may kindly be quashed. 3. The Id. CIT(A) erred on facts as also in law in confirming addition of Rs.25,17,880/- being alleged accommodative entries in unsecured loan of Rs.25,00,000/- and interest thereon of Rs.17,880/- from M/s. Bhoomidev Credit Corporation Ltd. The addition made and confirmed is bad in law as also on facts therefore the same may kindly be deleted. 4. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.”

"We have received genuine loan from M/s Bhoomidev Credit Corporation Limited & not an entry which can be duly established from the following:

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers 1. We have already submitted loan confirmation and copy of Acknowledgment of return to your honor of M/s Bhoomidev Credit Corporation Limited. 2. We have received the loan amount by A/c payee cheque and it is duly reflected in our bank statement. 3. M/s Bhoomidev Credit Corporation Limited is regular assessee. 4. We have repaid this loan in FY 2013-14 and a copy of account is attached herewith for your ready reference. 5. We have paid interest to them & T.D.S. & interest in their return. 6. There is no proof the we have given cash to M/s Bhoomidev Credit Corporation Limited and they have given entry. 7.As mentioned by your honour about the inquiry report dated 14.12.2011, but it is not for us but for some other assessee. Hence, it is not relevant for us. 8. In your letter, your honour has mentioned about entry of share application money/premium/advances, we have taken loan from M/s Bhoomidev Credit Corporation Limited and not share application money/premium/advances. Further, we have not received any reopening notice u/s 148 till date from I.T.O., Ward 3(3)(10), Ahmadabad for this ground. So no addition can be made on this ground as our case is reopened by ITO, Ward 1(2)(2), Rajkot on other ground. Further, we have attached herewith a copy of affidavit by M/s Bhoomidev Credit Corporation Limited which clearly mentions about genuineness of loan and repayment of the same. Thus, from all the above mentioned points, it is clear that loan taken by us is genuine & satisfies identity, credit worthiness and genuineness. So we request your honour not to treat as unexplained cash credit u/s 68 of the I.T. Act 1961,"

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers 21. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld.CIT(A), who has confirmed the action of the assessing officer. The ld.CIT(A) observed that despite filing the paper documents in relation to receiving of loan form BCCL (M/s. Bhoomidev Credit Corporation Limited) the appellant neither establish the business exigency of taking loan from one unregistered NBFC company, M/s BCCL, whose main activity is stated to be "Trading in Share" nor could have established how the appellant choose the said concern of having creditworthiness to advance huge loan nor could have produced any specific loan agreement with the said concern for which the appellant was allowed to repay loan after more than 3 years(29-03-2014) of taking loan w.e.f 03- 03-2011. Considering these facts, the learned CIT(A) sustained the addition made by the assessing officer, therefore, the assessee is in further appeal before this Tribunal. 22. The Ld. Counsel for the assessee, argued that the transaction being routed through banking channel, giving swearing affidavit by one of the directors of BCCL, deducting tax at source and even the amount is reflecting in the books of accounts, the assessee has proved the genuineness of the transaction. Moreover, the assessee issued under consideration is squarely covered by the order of the Co-ordinate Bench of ITAT, Rajkot in ITA 332/Rjt/2024 for AY 2009-10, vide order dated 29.08.2025. Hence addition made by the assessing officer may be deleted. 23. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 24. We heard both sides in detail and also perused the records of the case including the paper book filed by the assessee. We find that the issued under consideration is

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers squarely covered by the order of the Co-ordinate Bench of ITAT, Rajkot in ITA 332/Rjt/2024 for AY 2009-10, in the case of M/s. Dawn Chemicals, vide order dated 29.08.2025, wherein the Tribunal held as follows:

“9. We have heard both the representative of both the party and perused all the material available on record, and also perused the paper-book filed by the assessee before the Tribunal. We noted that return of income declaring income of Rs.20,61,596/- was filed on 29.09.2009 and the assessment was originally finalized on dated 29.11.2011 on total income of 20,91,625/- vide order u/s.143(3) of the Act wherein minor addition was made on the ground of non- deduction of tax at source. On the basis of information received from Investigation wing by AO that in search proceeding carried out at the business premises of one Shri Prakash Bagrecha, a director of M/s. Bhumidev Credit Corporation Ltd. (hereinafter referred as to the "BCCL"] that director of above companies were indulge in business of providing accommodation entries in the form of unsecured loan and it represented the undisclosed income of the beneficiaries for assessment year 2009-10.. On the contrary Shri Prakash S. Bagrecha the Director of Bhoomidey vide his affidavit executed on 08.12.2016 has affirmed that the transaction is genuine business transaction and not in nature of accommodation entry. Copy of affidavit, PAN of Shri Bagrecha, and statement of account is placed on record (Page to 14. Of PB). Entire deposits / loan was repaid by 08.03.2011. Tax was also deducted u/s 194A of the Act and was deposited.. We further note that the assessment order has confirmed that the assessee attended from time to time and furnished the details as required by AO in respect of cash credit of ₹ 11,00,000/- , the AO vide para 7 of the notice has called for the details of cash credits stating: Provide name, address, PAN, Confirmation, contra a/c from all the persons who have contributed towards unsecured loans during the financial year. 10. We note that the appellant has furnished the details of Loan and confirmation of loan from Bhoomidev Credit Corporation Ltd.. The interest payable was worked out at 12,477/- and TDS of ₹2,570/-was deducted. (Page 26 to 27 in Paper-Book) The AO found that in the original assessment transaction as genuine and accepted the income declared in return with minor disallowances out of the interest payment. That the fact as stated above. Shri Prakash S. Bagrecha the Director of Bhoomidey Credit Corporation Ltd. vide his affidavit executed on 08.12.2016 has affirmed that the transaction is genuine business transaction and not in nature of accommodation entry. PAN of Shri Bagrecha, and statement of account is on record. The appellant further submits that the books of accounts are audited u/s 44AB of the Act and the same is already on record. The AO and the auditor have not pointed out any defect in the Books of accounts. 11. Thus, on both count i.e. the factual issue as well as on the legal issue there is no justification to treat the loan of 11,00,000/- as unexplained income and addition of 16,500/- being payment of commission @ 1.5% not recorded in the books of accounts. We note that once the assessee has established that money has been taken by way of account payee check and duly recorded in the books of accounts and books are audited. Moreover, the assessee has repaid the amount in subsequent year, then genuineness of the transaction should not be doubted. The assessee submitted the name address pan no. and confirmation of account

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ITA No. 827/Rjt/2024 & 274/RJT/2025 Shanti Developers of the party given the unsecured loan than the burden of the assessee is dully discharged under section 68 of the Act. In view of the above, we delete the addition made in the total income for A.Y. 2009-10. Hence, both the addition deserves to be deleted. Therefore, we order to delete the addition in total income of the Assessee, That we have decided the appeal on merit the ground No.1, related to reopening of the case does not require any adjudication.”

Order is pronounced in the open court on 28/01/2026.

Sd/- /- Sd/- (Dr. Dinesh Mohan Sinha) (Dr. Arjun Lal Saini) Judicial Member Accountant Member राजकोट/Rajkot //True Copy// िदनांक/ Date: 28/01/2026 Copy of the order forwarded to :  The assessee  The Respondent  CIT  The CIT(A)  DR, ITAT, RAJKOT  Guard File /True copy/ By order Assistant Registrar/Sr. PS/PS ITAT, Rajkot

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