Deletion of ₹32.67 Cr Unsecured Loans, WIP Estimation & Property Sale Additions Unsustainable Without Proper Verification: ITAT [Read Order]

The Income Tax AppellateTribunal (ITAT) Mumbai Bench has quashed an order passed by the Commissioner ofIncome Tax (Appeals) [ CIT(A) ] in deleting various additions made and held that the deletion was not sustainable in the absence of verification and examination of facts.

The Tribunal has remanded all the major issues back to the Assessing Officer (AO) for fresh adjudication, laying stress on the importance of verification and examination of facts.

The assessee Pushpa Construction Company a partnership firm dealing in the business of real estate development had filed its return declaring nil income for Assessment Year 2018-19. During scrutiny assessment, the Assessing Officer (AO) observed that the assessee had received unsecured loans amounting to ₹39.83 crore from 201 parties.

However, confirmations were only furnished for 67 parties, while ₹32.67 crore from 134 parties was left unexplained. Hence, an addition was made under Section 68. The AO had also observed that the assessee reported high work-in-progress (WIP) amounting to ₹77.61 crore along with nil sales which the assessee failed to substantiate by providing supporting documentation.

The AO computed income at 10% of the WIP amount, adding ₹7.76 crore to the income. Further, the AO added ₹11.10 crore under the head ‘unaccounted property sales’ based on the data obtained from the Sub-Registrar. However, the CIT(A) completely deleted all the additions.

The Revenue department stated that the assessee did not provide full details regarding the identity, creditworthiness, and genuineness of the loan creditors. The Revenue further argued that the deficiencies persisted even in the remand proceedings.

The assessee argued that additional evidence was provided in the remand proceedings, along with the income being reported using the Project Completion Method.

The Tribunal observed that the documentation was not provided in respect of some creditors, which included the absence of bank statements, ITRs, and confirmations. Hence, the CIT(A) was not right in holding that the assessee had established the burden under Section 68 without proper verification.

The Tribunal observed that the claim by the assessee to have offered the income in the subsequent years needed verification to avoid double taxation. Similarly, the issue relating to the sale of property was also set aside for further consideration.

Accordingly, the Bench comprising Sandeep Singh Karhail (Judicial Member) and Vikram Singh Yadav (Accountant Member) set aside the order of the CIT(A) on all grounds and remanded the case back to the AO for fresh consideration after providing adequate opportunity to the assessee.

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