Facts of the Case

The assessee, a private limited company engaged in real estate development, filed a return declaring income of ₹22,214. The assessment was completed at ₹62,25,390, including additions relating to amounts received as advances for booking plots in a housing project.

In earlier proceedings, the Tribunal had restored the matter to the Assessing Officer to verify unsecured loans shown as advances against plot bookings received from certain individuals. During remand assessment, the Assessing Officer sought agreements, books of account, and production of creditors.

Although confirmations, bank statements, and other documents were filed, the assessee failed to produce agreements and complete books of account. Only one creditor appeared; discrepancies were noted between his statement and bank records. Consequently, the Assessing Officer accepted only ₹1,50,000 as genuine and added ₹20,00,000 under section 68 as unexplained cash credits.

Issues Involved

  1. Whether advances received for plot booking can be treated as unexplained cash credits under section 68.
  2. Whether failure to produce creditors and agreements justifies addition despite submission of confirmations and documents.
  3. Whether appellate orders passed ex parte without effective opportunity are sustainable, particularly where the assessee’s business has ceased.

Petitioner’s Arguments

The assessee submitted that the company had closed its business long ago and therefore could not respond to notices. It was contended that the appellate order was passed without reasonable opportunity and was not a speaking order.

It was further argued that during assessment proceedings, substantial documentary evidence had been furnished, including PAN, Aadhaar, confirmation letters, sale deeds, and affidavits of the Director, which were not properly considered. The assessee requested deletion of the addition or restoration of the matter for fresh adjudication.

Respondent’s Arguments

The Revenue contended that the Assessing Officer had provided adequate opportunities, but the assessee failed to produce agreements, creditors, and books of account. It was also submitted that one creditor who appeared was found unreliable due to inconsistencies in financial records, justifying the addition under section 68.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the company had ceased operations, which constituted a reasonable cause for non-compliance with appellate notices. As a result, the assessee was unable to effectively contest the addition before the appellate authority.

Considering the principles of natural justice, the Tribunal held that the assessee should be given one final opportunity to present its case. Accordingly, the matter was restored to the file of the JCIT(A) for fresh adjudication on merits after providing due opportunity of hearing.

The assessee was cautioned to remain vigilant and comply with notices during the remand proceedings. The appeal was allowed for statistical purposes.

 Important Clarification

The Tribunal did not rule on the merits of the addition under section 68 but emphasized that substantial additions cannot be sustained solely on account of non-compliance, particularly where the assessee demonstrates genuine difficulty such as closure of business. Proper adjudication requires examination of evidence after affording reasonable opportunity.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771066919_UNISUNHOUSINGCOMPANYLIMITEDALLAHABADVS.ITOWARD23ALLAHABAD.pdf

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