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Judgment
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the Revenue against the order of ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 11.09.2025 for the Assessment Year 2017-18 raising the following grounds of appeal :-
“Whether the learned CIT (AS) erred in admitting additional evidences, including sale deeds, certificates and other document at the appellate stage without providing any opportunity to the Assessing Officer to examine or rebut the same, thereby violating Rule 46A of the Income Tax Rules, 1962, and the principles of natural justice.”
Brief facts of the case are, the assessee company filed its return of income declaring income of Rs.2,09,030/- on 28.10.2017 and the case had been selected for complete scrutiny under section 143(3) of the Income-tax Act, 1961 (for short ‘the Act’). Notice u/s. 143(2) of the Act was issued on 17.08.2018 to the assessee. Further notices u/s.142(1) of the Act were issued to the assessee on different dates. In response, the assessee filed its submissions from time to time and those were examined and verified during the course of assessment proceedings. The AO passed the assessment order u/s. 143(3) of the Act and determined the total income of the assessee company at Rs.18,24,48,808/- by making the addition u/s. 68 of the Act of Rs.18,22,39,778/- as the amount was treated as not utilized for purchase of properties and the fund received as advance has been diverted and appropriated by the assessee which could not justify its claims.
Aggrieved against the aforesaid order, assessee preferred an appeal before thee ld. CIT (A) and filed detailed submissions. Ld. CIT (A), after considering the detailed submissions, deleted the additions by observing as under :-
“In the appellate stage the appellant company has uploaded / filed its written submission along with documents like -
1.Petition under Rule 46A of the I.T. Rules, 1962,
2.Audit Report,
3.Instruction No. 20/2015, Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi dated 29th of December, 2015. Sale deeds,
4.Agreement with MGF Land Ltd.,
5.Certificate u/s. 42 of Indian Stamp Act, 1889,
6.Copy of order of Hon’ble ITAT in the case of Raksha Buildtech Private Limited Vs. ITO, Ward 21(1), Delhi.
The appellant company has stated in its grounds of appeal that the AO had grossly erred by making addition of Rs.18,22,39,778/- u/s. 68 of the Act on account of advances received in past years towards collaboration agreement with M/s Emaar MGF Land Limited. The appellant has also stated that the AO had erred an advance to the extent of Rs. 18,22,39,778/- had not been utilized for the purchase of properties but diverted and appropriated without even any iota of evidence directly or indirectly to prove the same which was baseless. Further, an addition could not be invoked u/s. 68 as the said section cast the onus of proving the source of a sum of money ought to had been received by an assessee rather not to prove the way it had been apportioned or diverted. Section 68 of the Act states :
“Cash credits.
68.Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year:
Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—
(a)the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
(b)such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”
The words mentioned is if any sum is found credited for any previous year, it should be treated as income of that previous year. Apparently, the AO’s order identifies that the sums paid for purchases were in different years. None of them were in the current year. It is also apparent from the confirmation submitted by appellant that the sources of fund apparently are from Emarr MGF land limited. The screenshot is as under:
The addition of Rs.18,22,39,778/- u/s 68 of I T Act is accordingly deleted.”
Aggrieved against the above order, Revenue is in appeal before us.
At the time of hearing, ld. DR of the Revenue submitted that ld. CIT (A) erred in admitting additional evidences, including sale deeds, certificates and other documents at the appellate stage without providing any opportunity to the Assessing Officer to examine or rebut the same. He heavily 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 observed that the amount of Rs.18,22,39,778/- under section 68 of the Act was received on account of advances received in past years towards collaboration agreement with M/s Emaar MGF Land Limited. We further observed that the same was confirmed by M/s. Emaar MGF Land Limited, as reproduced above. We further observed that the assessee has submitted all the relevant details and documents to establish the identity and genuineness of the transaction. As per the provisions of section 68, assessee had to prove the source of the credit. In this case, the assessee had clearly brought on record the sources of the funds received from Emaar MGF Land Ltd. in the earlier years. No funds were received this year under consideration.
Further, we observed that an addition cannot be invoked under section 68 as the said section cast the onus of proving the source of a sum of money ought to have been received by an assessee rather not to prove the way it has been apportioned or diverted. We also observed that while making the addition under section 68 of the Act as said section cannot be applied on the opening balance which does not arise out of any transaction during the year. Further, we observed that section 68 clearly mentioned that if any sum is found credited for any previous year, it should be treated as income of that previous year and the assessment order clearly identifies that the sums paid for purchases were in different years and none of them were in the current year.
With regard to grievance of the Revenue that ld. CIT (A) had entertained the additional evidence without giving opportunity to the Assessing Officer, we observed that it depends upon the nature of the evidence, if the evidence submitted before the ld. CIT (A) which was not according to ld. CTI (A) a complicated and can be adjudicated, the relevant power to accept or reject as well to adjudicate, comes under section 251(1) of the Act. Since, ld. CIT(A) has co-terminus power, it is not necessary that he should give opportunity to the Assessing Officer who has lower rank. It is for the ld. CIT (A) to take a call. Since in the present case, the merit of the issue is in favour of the assessee, ld. CIT (A) had taken the decision to entertain the additional evidences. Therefore, it cannot be interfered with by the lower authorities. Accordingly, in view of the above, we are inclined not to disturb the findings of the ld. CIT (A) and dismiss the ground raised by the Revenue.
In the result, the appeal filed by the Revenue is dismissed.