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Judgment
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A) in short], dated 13.08.2025 in Appeal No. CIT(A), Gurgaon-1/10798/2018-19 arising out of the order passed u/s 143(3) of the Income Tax Act, 1961 (the Act, in short) dated 26.12.2018 for Assessment Year 2016-17.
Brief facts of the case are that assessee is a company engaged in the business of civil Contractor and e-filed return of income on 29.11.2016 declaring loss of Rs.19,18,611/-. The case was selected for limited scrutiny under CASS and the AO observed that assessee has claimed depreciation on various intangible assets which is not in accordance with law and, therefore, disallowed the same. Besides this the AO disallowed a sum of Rs. 9,16,11,917/- being 30% of the total project expenses claimed at Rs.30,53,60,952/- by alleging that assessee had failed to justify the purpose of incurring such expenses and business necessity of these expenses with supporting evidences.
Aggrieved by the said order, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal, thus, the assessee is in appeal before the Tribunal by taking following grounds of appeal:
“1.That on the facts and in law, the Assessment order dated 26/12/2018 passed by Assistant Commissioner of Income-tax, Circle 2(1), Gurugram [hereinafter referred to as "Ld. Assessing Officer" or "Ld. A.O."] u/s 143(3) of the Income Tax Act (hereinafter referred to as "the Act"] and upheld by the Ld. Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "Ld. CIT(A)") vide order dated 13.08.2025 is void ab initio and liable to be quashed.
2.That on the facts and in law, the Ld. CIT(A) erred in holding that the id. AO had legal jurisdiction over the Appellant
3.That on the facts and in law, the Ld. CIT(A) erred in upholding that Id. AO has granted a sufficient and reasonable opportunity of hearing to the Appellant in the Assessment proceedings.
3.1.That on the facts and in law, the learned Assessing Officer erred in granting inadequate time to the appellant for submitting a response to the Show Cause Notice, thereby violating the principles of natural justice.
4.That on the facts and in law, the Ld. CIT(A) has grossly erred in passing this order without bestowing the opportunity of being on "Video Conferencing as stipulated/prescribed under Rule 12 (3) of the Faceless Appeal Scheme, 2021, even when the Appellant had explicitly requested the same in the appellate proceedings.
5.That on the facts and in law, the Ld. CIT(A) erred in not considering and admitting additional evidence filed in the appellate proceedings.
5.1That on the facts and in law, the Ld. CIT(A) erred in not forwarding the additional evidence filed by the Appellant to the Ld. AO for his comments as per the provision of Rule 46A (3) of the Income Tax Rules.
6.That on the facts and in law, the Ld. CIT(A) erred in not accepting and following the judicial pronouncement on the principles of res judicata and of consistency.
7.That on facts and in law, the Ld. CIT (A) erred in upholding the additions/disallowance for an amount of Rs. 9,16,11,917/-being 30% of project expenses of Rs. 30,53,60,952/.
8.That on facts and in law, the Ld. CIT(A) erred in upholding the disallowance of depreciation on intangible assets to the tune of Rs. 1,56,03,648/-.
9.That on facts and in law, the Ld. CIT(A) erred in upholding the denial of depreciation on WDV of intangible assets as on 31.03.2015 to the tune of Rs 85,65,701/-.
10.Without prejudice to ground No. 9 above, that on facts and in law, the Ld. CIT(A) and Ld. AO have erred in upholding the disallowance of Rs 4,12,00,701/- as revenue expenses incurred during the year on rehabilitation & development cost and road restoration as per the contract with DJB.
11.Without prejudice to ground No. 9 and 10 above, that on facts and in law, the Ld. CIT(A) and Ld. AO have erred in not appreciated the applicable clarifications issued by the Central Board of Direct Taxes (CBDT) on Build-Operate-Transfer (BOT) projects.
12.That on facts, the Ld. CIT(A) erred in not disposing of the ground of the appeal of erroneous observation that "The Assessee is a Contractor for Delhi Jal Board. Its main expenses are maintenance of water pipes to ensure an unobstructed water supply."
13.That on facts and in law the Ld. CIT(A) erred in upholding the charge of interest
a)u/s 234A when the return of income is filed in time before the due date of filing of Income Tax return as per the provisions of section 139 of the Act.
b)u/s 2348 & 234C when Appellant is not liable to deposit advance tax on return income as per the provisions of the Act.
14.All the above grounds are independent and without prejudice to others.
15.That the appellant carves the right to add, modify, amend and delete the grounds of appeal during the course of the hearing.”
Ground of appeal No.5 and 5.1 are with respect to non-admission of additional evidence filed by the assessee during the course of appellate proceedings under Rule 46A of IT Rules, 1962 as no details in respect of various expenses could not be filed before the AO.
Heard both the parties and perused the materials available on record. At the outset, it is observed that assessee in terms of application Under Rule 46A of the Income Tax Rules, 1962 (“the Rules”) dated 12.07.2023 filed online additional evidences before the Ld. CIT(A), for which necessary copy of acknowledgement of e-proceedings are placed in the paper book filed before us. The assessee, thereafter time and again filed additional evidences before the Ld. CIT(A) and relevant copies of e-proceedings are filed before us in paper book. However, from the perusal of the order of Ld. CIT(A), it is observed that Ld. CIT(A) while dismissing the appeal of the assessee has not discussed any of the evidence so filed by the assessee as additional evidence nor made any refence to such documents. Ld. CIT(A) observed that assessee has failed to discharge the burden of proving the genuineness of business necessity and nexus of expenditure claimed with supporting evidences. Further ld. CIT(A) has not even stated as to why the additional evidences filed by the assessee were not considered by him. Since all the details are crucial to decide the issue of genuineness of the expenses claimed by the assessee, thus in the larger interest we set aside the order of ld. CIT(A) and remand all the issues back to the file of Ld. CIT(A) with the directions to admit the additional evidences filed by the assessee and to decide the appeal of the assessee after obtaining the remand report from the AO on the additional evidences so filed. With these directions, the grounds of appeal No. 5 and 5.1 raised by the assessee are allowed for statistical purposes.
Since we have allowed assessee’s grounds of appeal No. 5 & 5.1 and remanded the issue back to the file of ld. CIT(A), the other grounds of appeal taken on the merits of the disallowances made by the AO become academic.
In the result, the appeal of the assessee is allowed for statistical purposes.