Ampulla Developers Private Limited vs ITO, Ward 2 (3)

PER S.RIFAUR RAHMAN,AM:

This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short ‘ld. CIT (A)] dated 16.03.2026 for the Assessment Year 2012-13.

At the time of hearing, ld. AR of the assessee brought to my notice relevant facts of the case and his submissions as under. She submitted that assessee is a company incorporated on 12.07.2010 engaged in the business of real estate development. Accordingly, the assessment year under consideration i.e. AY 2012-13 is the second year of the company operating in its gestation or incubation period. She submitted that a real estate business generally has a longer gestational period for purchasing lands, making negotiations with the prospective buyers, obtaining necessary statutory approvals before starting with the project of real estate development.

She submitted that the DDIT(Inv.), New Delhi passed certain information about one, M/s Janardhan Infrastructure Pvt Ltd, that it has received debits as well as credits from various companies which included the name of the assessee company. On the basis of the above investigation report, it was concluded that since the assessee company has been used for layering of funds, accordingly, commission income @ 2% of the total credits in the bank account i.e. Rs.23.24 Cr., i.e. Rs.46,48,980/- was considered as income of the Assessee.

Aggrieved against the above order, assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. Ld. CIT (A) after considering the submissions of the assessee, sustained the addition and dismissed the appeal.

Aggrieved with the above order of the ld.CIT(A), the assessee filed an appeal before us.

At the time of hearing, ld. AR submitted that assessee has filed the following additional legal grounds :-

She submitted that the additional grounds are primarily legal in nature, accordingly, it is prayed that the same may please be admitted in view of the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd reported in 229 ITR 383.

On the other hand, ld. DR for the Revenue has no objection of admitting the additional ground of appeal being purely legal issue.

In view of the reliance made by the ld. AR for the assessee on the judgment of Hon’ble Supreme Court in the case of NTPC Ltd. (supra) and issue being purely legal, I proceeded to admit the additional ground of appeal being a legal issue.

At the time of hearing, ld. AR of the assessee specifically argued additional ground no.2 and submitted that ad hoc addition of commission income is bad in law on the ground that the AO erred in making an ad hoc addition of commission income without rejecting the books of account of the Assessee and also the AO erred in making an adhoc addition of commission income on an estimate basis without pinpointing any defects in the books of accounts which is arbitrary and against the principle of natural justice.

Further, she submitted that the AO made an addition of adhoc commission income @ 2% of Rs.23.24 Cr (aggregate of bank credits) i.e. Rs.46.48 Lacs on an estimate basis keeping in mind the market trend. She submitted that no ad hoc addition ought to be made without rejecting books of account. In this regard, it is submitted that the books of account of the Assessee have been audited by Independent Chartered Accountant and copy of the audit report and the audited financial statement are placed at Paper Book Page 1-10.

Further, she submitted that the AO has not rejected the books of account of the Assessee rather accepted the books since at the end of the assessment order, the returned income has been considered from the audited financial statement and thereafter, an ad hoc commission income has been added. She brought to my attention assessment order at page 16 of the Paper Book and the Screenshot quoted hereinafter:

She further submitted that no ad hoc addition ought to be made where the books of account are audited and the same have been accepted by the AO. Furthermore, the AO initiated the assessment proceedings on the basis of assumption that Rs.23.24 Cr have not been disclosed, however, during the course of assessment proceedings after considering the ITR and confirmation, he dropped the reasons midway that Rs.23.24 Cr is the undisclosed income rather accepted the same and further moved to make a new addition of undisclosed income. This also proves that the books of accounts were not rejected rather accepted by the AO..

She further submitted that even otherwise, no show cause notice was issued by the AO for rejecting books of account, neither any such fact has been mentioned in the assessment order rather the ad hoc addition has been made to the returned income which evidently proves that the books stand accepted by the O.

She submitted that in these circumstances, when books of account have not been rejected, an ad hoc addition of commission income is invalid in the eyes of law. In this regard, she brought to my attention to the following judicial precedents:

 PCIT v. R. G. Buildwell Engineers Ltd ( 2018) 99 taxmann.com 283 / 259 Taxman 371 ( Delhi) (HC)

 SLP of revenue is dismissed , PCIT v. R. G. Buildwell Engineers Ltd ( 2018) 259 Taxman 370 (SC)

 PCIT vs Forum Sales Private Limited (ITA No. 862/2019 dated 01.03.2024) Delhi High Court  CIT v. Anil Kumar & Co. [2016 SCC OnLine Kar 8512]

 Principal Commissioner of Income-tax v. Marg Ltd. [2017 SCC OnLine Mad 37852]

 DCIT vs. Bright Point India Pvt. Ltd., ITA No.1697/DEL/2023 Dated: 18.08.2025

She accordingly pleaded that in view of the above case laws and the factual matrix of the case wherein the books of account have been duly audited and the same have not been rejected by the AO rather the assessment has been made u/s 143(3), no ad hoc addition of commission income ought to be made without rejecting the books of account and prayed to allow the appeal.

On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.

Considered the rival submissions and material placed on record. I observed that the AO made an addition of ad hoc commission income @ 2% of Rs.23.24 Cr (aggregate of bank credits) i.e. Rs. 46.48 Lacs on an estimate basis. It was submitted that the AO has not rejected books of account and the books of account of the Assessee are duly audited by the independent Chartered Accountant and copy of the audit report and the audited financial statement are also placed on record. I noticed that the Assessing Officer had initiated the proceedings with the belief that the credits appearing in the Axis Bank is cash credit and undisclosed income of the assessee but later, he noticed that it is accommodation entries and proceeded to restrict the income on the basis of estimation. I am not in agreement with the submissions of ld. AR that Assessing Officer had estimated the income of the assessee without rejecting the books of account. In my view, the Assessing Officer had not estimated the income of the assessee, rather, he was of the view that the assessee had given accommodation entry and estimated the income on the relevant transaction. The case law relied upon are distinguishable.

After careful consideration, I noticed that the Assessing Officer had proceeded to reopen the assessment on the basis of intimation from Inv. Wing with the wrong satisfaction that the whole credit in the bank account as undisclosed income u/s 68 of the Act overlooking the fact that all the transactions are inter-group/sister concerns. All the transactions are through banking channels and onus on the assessee are already proved. Estimating the commission upon recording of reasons to initiate proceedings without actually bringing on record the material to establish how the same credits are cash credits and escapement of income is bad in law. Therefore, I am inclined to allow the first additional ground and reject the second additional ground raised by the assessee.

We have not dealt with the other grounds and the same are kept open.

In the result, the appeal filed by the assessee is allowed.