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Facts
The assessee, a construction company, faced financial crisis due to geopolitical events leading to business stoppage. During the Assessment Year 2018-19, the AO made an addition of Rs. 1,90,00,000/- under Section 69 of the Income-tax Act, treating a fixed deposit renewal as a fresh investment.
Held
The Tribunal upheld the deletion of the addition made by the Assessing Officer. It was held that the fixed deposit in question was a renewal of an old FDR and not a fresh investment, especially considering the company's defunct status and lack of business operations during the relevant period.
Key Issues
Whether the renewal of a fixed deposit, made for securing bank guarantees, constitutes a "fresh investment" to be added as undisclosed income under Section 69, when the company was defunct and had no business operations. Also, whether the Ld. CIT(A) erred in admitting additional evidence.
Sections Cited
69, 144, 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
(Assessment Year: 2018-19) DCIT, Circle 4 (2), vs. Continental Construction Ltd., New Delhi. 28-29, Continental House, Nehru Place, New Delhi – 110 019. (PAN : AAACC2309R) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri M.P. Rastogi, Advocate Shri Shivam Malik, Advocate REVENUE BY : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 26.06.2025 Date of Order : 22.09.2025 ORDER
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The Revenue has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 06.06.2024 for the Assessment Year 2018-19 raising following grounds of appeal :-
1. Whether the Ld. CIT (A) has erred on facts and in law in deleting the addition amounting to Rs.1,90,00,000/- u/s 69 of the Act.
Brief facts of the case are, as brought out before us by the ld. AR of the assessee, the assessee is a limited Company formed in 1962 and it was one of the top construction companies in the Country in its hay days. He submitted that the Company executed many prestigious constructions in India and in gulf Countries like Iraq and Libya. He submitted that the assessee Company fell into bad days when the Iran-Iraq war erupted in 1980 which lasted till 1988 and later Gulf war followed in 1990 and lasted till 1991 and it had to stop all its operations in those Countries, leave all the assets, equipment and machinery and leave the Country. He further submitted that a decade of stoppage of work got the assessee into severe crisis and back in India, the assessee suffered serious financial issues and there was legal trouble, the assessee faced cases on all fronts and there were disagreements among the Directors, the offices were closed. He brought to our notice that the Income tax Department seized its bank accounts and there was no electricity and water and the offices were closed and accounts were not audited. He submitted that the assessee later got permission from Company Law Board to get its accounts prepared and audited which could be done by August 2017 and the audit of accounts for the Assessment year 2018-19 was not done and so return could not be filed. He submitted that in the absence of a return, the Revenue passed an order u/s 144 relying on the information available in Form 26AS.He submitted that when it was doing active business, had to give bank guarantees to H.P. Electricity Board and other authorities as performance securities and the assessee made fixed deposits for securing bank guarantees in State Bank of India, UCO Bank and SBI Exim Bank. He submitted that these deposits were renewed from time to time and some were closed as and when required and guarantee was released. He submitted that one such deposit came for closure on 29.12.2017 and Rs.1,99,12,379/- was credited to the account and on the same day, an FDR was issued for Rs.1,90,00,000/- and the same was continued. He submitted that it is thus clear that the assessee had not made any fresh investment but it is a reinvestment of an old FD. However, AO made the addition Rs.1,90,00,000/- u/s 69 of the Income-tax Act, 1961 (for short ‘the Act’) not considering the contention of the assessee that it was renewal and not a fresh deposit.
Ld. AR further submitted that being aggrieved with the order of AO, assessee filed an appeal before the ld. CIT (A) and submitted detailed written submissions before him. Ld. CIT (A) after considering the detailed submissions of the assessee deleted the addition by observing as under :-
7.3 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. I find that the appellant made fixed deposits for securing bank guarantees in State Bank of India, UCO Bank and SBI Exim bank and these deposits were renewed from time to time and some were closed as and when required and guarantee was released. It is seen that one such deposit came for closure on 29.12.2017 and Rs 1,99,12,379 was credited to the account. On the same day an FDR was issued for Rs.1,90,00,000. Just because the appellant failed to produce copy of FDR prior to F.Y 2017-18 was not sufficient ground for AO to make addition of Rs 1,90,00,000 when it was clear from the statements, that there was closure and renewal of FDs. Form 26AS, shows that there was no receipts from operations during the year as the appellant company had become defunct. The AO could have made independent enquiries in the Bank and obtained information. It was difficult for the appellant to get information from the bank due to non-fulfillment of KYC requirements because of the internal differences within the company. When the appellant company had become defunct and it had no business receipts during the year there was no question of the appellant having any disclosed or undisclosed income which would result in undisclosed investment. 7.4 In view of the above discussion and facts, I am of the considered view that the addition of Rs 1,90,00,000 u/s 69 of the Act made by the AO is not sustainable and is directed to be deleted. The appeal on Ground Nos.3 to 5 are thus treated as allowed.
Aggrieved, Revenue is in appeal before us.
With regard to ground no.1, ld. DR of the Revenue relied on the findings of the Assessing Officer.
On the other hand, ld. AR of the assessee relied on the findings of the ld. CIT(A).
Considered the rival submissions and material placed on record. We observe that assessee made fixed deposits for securing bank guarantees in State Bank of India, UCO Bank and SBI Exim bank and these deposits were renewed from time to time and some were closed as and when required and guarantee was released. We further observe that one such deposit came for closure on 29.12.2017 and Rs 1,99,12,379 was credited to the account and on the same day an FDR was issued for Rs.1,90,00,000. We observe that just because the assessee failed to produce copy of FDR prior to F.Y 2017-18 was not reasonable ground for AO to make addition of Rs 1,90,00,000 when it was clear from the statements, that there was closure and renewal of FD. After going through the detailed findings of the ld. CIT (A), we do not see any reason to disturb the findings of the ld. CIT (A) and accordingly uphold the same. Hence, ground no.1 raised by the Revenue is dismissed.
With regard to ground no.2, Ld. DR of the Revenue submitted that ld. CIT (A) has given relief to the assessee on the basis of fresh evidence submitted before him and he submitted that ld. CIT (A) failed to ask for the remand report from the AO and objected to the relief granted to the assessee.
On the other hand, ld. AR of the assessee submitted that assessee has not submitted any additional evidences before the ld. CIT (A) and all the relevant information was already available on record and ld. CIT (A) has decided the issue based on the material already available on record and he objected to the submissions of the ld. DR of the Revenue.
Considered the rival submissions and material placed on record. We observe that assessee made fixed deposits for securing bank guarantees in SBI, UCO Bank and SBI Exim Bank. The issue under consideration is whether the assessee has made fresh FDR or renewed the FDR. As per the information brought on record, we observe that assessee has utilized the closure of earlier FDR and created new FDR during the year and all the relevant information was already submitted before the AO and no fresh material submitted by the assessee. There is no reference of fresh evidence submitted by the assessee in anywhere in the appellate order, therefore, the submission of ld. DR on the Rule 46A of Income-tax Rules, 1962 is unfounded. Accordingly, Ground No.2 raised by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on this 22nd day of September, 2025.