Case Law Details
Greentime Projects Private Limited Vs ITO (ITAT Hyderabad)
In this case, the assessee company challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)] sustaining an addition of ₹36,50,000 made by the Assessing Officer (AO) towards an alleged difference in closing work-in-progress (WIP). Before examining the merits, the Income Tax Appellate Tribunal (ITAT), Hyderabad, considered a delay of 64 days in filing the appeal. The assessee explained that the appellate order dated 17.07.2025 came to the notice of its director only in the first week of October 2025 when he checked the Income-tax portal. Since no further notices had been received for a considerable period after submissions were filed and the director believed the appeal was still pending, the delay occurred unintentionally. Accepting the explanation as bona fide and constituting reasonable cause, the Tribunal condoned the delay and admitted the appeal.
On merits, the assessee had originally filed its return for AY 2011-12 declaring income of ₹10,45,817. The assessment was reopened after information received during a search in another case indicated a discrepancy in the assessee’s closing stock. According to impounded material, the closing work-in-progress was shown at ₹1,21,50,000, whereas the audited balance sheet reflected ₹85,00,000. The AO observed that the unaudited financial statements generated from Tally software showed closing WIP of ₹85,00,000 in the profit and loss account but ₹1,21,50,000 in the balance sheet. Although the assessee explained that the difference of ₹36,50,000 represented opening work-in-progress that had been incorrectly added in the unaudited statements and subsequently corrected during finalisation and audit of accounts, the AO rejected the explanation and added ₹36,50,000 to income. The CIT(A) upheld the addition on the ground that the assessee failed to reconcile the discrepancy with sufficient supporting evidence.
Before the Tribunal, the assessee argued that the addition was based solely on rough, unaudited Tally-generated statements and ignored the audited financial statements. The Tribunal examined the audited accounts for FY 2009-10 and FY 2010-11 and found that the closing WIP as on 31.03.2010 was ₹36,50,000. In the audited accounts for FY 2010-11, the same amount was correctly taken as opening WIP, while closing WIP was shown at ₹85,00,000. The Tribunal held that there was no actual discrepancy in the audited records and that the difference identified by the AO arose because the opening WIP of ₹36,50,000 had been added instead of being adjusted appropriately in the unaudited Tally-generated statements. Since the assessee had satisfactorily explained the difference and the audited financial statements supported its explanation, the Tribunal concluded that the addition of ₹36,50,000 could not be sustained. Accordingly, it set aside the CIT(A)’s order and directed the AO to delete the addition. The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal filed by the assessee company is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 17.07.2025, pertaining to the assessment year 2011-12.
2. At the outset, there is a delay of 64 days in filing the present appeal before the Tribunal. The learned counsel for the assessee company Shri Sashank Dundu, Advocate, has filed an affidavit of Shri C. Indra Kumar, Director of the assessee-company, explaining the reasons for the delay. It was submitted that, the order of the Ld. CIT(A) was passed on 17.07.2025. However, the same came to the notice of the director of the assessee company only in the first week of October, 2025, when he logged into the Income-tax portal to verify the status of the appellate proceedings. It was further submitted that, Shri C. Indra Kumar was personally taking care of the income-tax proceedings of the assessee-company. Although his e-mail id was registered on the portal, he was not regularly monitoring the e-mails and was generally verifying the proceedings through the Income-tax portal from time to time. It was submitted that, during the appellate proceedings, replies were filed before the Ld. CIT(A) on 23.08.2023 and again on 27.01.2025. Thereafter, no further notices were issued for considerable time and therefore, the director of the assessee company was under the bona fide belief that the appeal proceedings were still pending. However, a notice was issued on 18.06.2025 and within a short period thereafter, the order came to be passed on 17.07.2025. Since the order could not be noticed immediately on the portal, the appeal before the Tribunal could not be filed within the prescribed time limit, resulting in delay of 64 days. It was therefore submitted that, the delay occurred due to bona fide reasons and not on account of any deliberate negligence or malafide intention on the part of the assessee company. Accordingly, it was prayed that, the delay may kindly be condoned in the interest of justice.
3. The learned CIT-DR for the Revenue, on the other hand, opposed the condonation petition filed by the assessee company and submitted that, the assessee company ought to have been more diligent in tracking the appellate proceedings and therefore, the delay should not be condoned.
4. We have heard both parties and perused the petition and affidavit filed by Shri C. Indra Kumar, Director of the assessee-company, seeking condonation of delay of 64 days in filing the appeal before the Tribunal. We find that, the reasons explained by the assessee company appear to be bona fide and constitute “reasonable cause” for not filing the appeal within the prescribed time. The Hon’ble Supreme Court in the case of Collector, Land Acquisition Vs. MST. Katiji reported in 167 ITR 471 (SC), has laid down that a liberal and pragmatic approach should be adopted while considering applications for condonation of delay so as to advance substantial justice. Respectfully, following the principles laid down by the Hon’ble Supreme Court and considering the bona fide reasons explained by the assessee company, we condone the delay of 64 days in filing the appeal and admit the appeal for adjudication.
5. The brief facts of the case are that, the assessee company, M/s. Green Time Projects Pvt. Ltd., filed its return of income for the assessment year 2011-12 on 22.08.2011, admitting income of Rs. 10,45,817/-. Subsequently, information received from ACIT, Central Circle-1, Visakhapatnam, reveals that during the search operation in the case of M/s. Haigriva Infratech Projects Ltd., some of the documents relating to M/s. Green Time Projects Pvt. Ltd. were found at the premises of M/s. Haigriva Infratech Projects Ltd. A statement from Shri Indra Kumar, Managing Director, was recorded. On perusal of the information, it was found that, the closing stock as on 31.03.2011 shown in the audited balance sheet was at Rs. 85,00,000/-, whereas as per the impounded material, it was at Rs. 1,21,50,000/-. During the course of proceedings, the assessee company could not substantiate the discrepancy. Therefore, the assessment has been reopened under Section 147 of the Income Tax Act, 1961, and notice under Section 148 of the Act, dated 23.04.2015 was issued and served on the assessee company. In response to the notice, the assessee company filed the revised return of income on 22.05.2015 declaring income of Rs. 10,45,817/-.
6. During the course of assessment proceedings, the A.O., on the basis of the impounded material, observed that, the assessee company prepared profit and loss account for the period from 01.04.2010 to 31.03.2011 and shown closing work-in-progress of Rs. 85,00,000/- and reported net profit of Rs. 47,28,278/-. Further, as per the impounded material at page No. 42, which is a balance sheet for the period from 01.04.2010 to 31.03.2011, the closing stock was mentioned at Rs. 1,21,50,000/-. The assessee company was asked to explain the difference and in response, the assessee company submitted that, the difference in the closing work-in-progress as per unaudited tally generated profit and loss account and balance sheet is on account of addition of opening work-in-progress of Rs. 36,50,000/- and closing stock of Rs. 85,00,000/-. However, at the time of finalization of books of accounts, the above discrepancy was noticed and the correct closing stock has been reported in the financial statements filed along with the return of income and as per which, the assessee company has taken opening work-in-progress of Rs. 36,50,000/-and closing work-in-progress has been considered at Rs. 85,00,000/-. To support its arguments, the assessee company has furnished relevant audited financial statements for F.Y. 2010-11 along with corresponding F.Y. 2009-10.
7. The A.O., after considering the relevant submissions of the assessee company and also taking note of the seized material found during the course of search, observed that, the assessee company could not explain the difference in closing work-in-progress as per audited financial statements, and profit and loss account and balance sheet taken as per tally data. Although the assessee company claims to have reconciled the difference and argued that, the difference is on account of opening work-in progress of Rs. 36,50,000/-, but the same could not be substantiated with relevant details. Therefore, the A.O. rejected the explanation of the assessee company and made addition of Rs. 36,50,000/- towards difference in closing stock to the returned income.
8. Aggrieved by the assessment order, the assessee company preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee company reiterated the submissions made before the A.O. and argued that, the difference noticed by the A.O. towards the closing work-in-progress as per financial statements generated from tally data and audited financial statements filed along with the return of income is on account of addition of opening work-in-progress of Rs. 36,50,000/- to the closing work-in-progress in the tally accounts and the same has been rectified in the financial statements prepared during the course of audit of the books of account of the assessee company. Although the facts have been explained to the A.O., but the A.O. rejected the explanation and made addition of Rs. 36,50,000/-. Therefore, he submitted that, the addition made by the A.O. should be deleted.
9. The Ld. CIT(A), after considering the submissions of the assessee company and also taking note of the material found during the course of search, observed that, the assessee company failed to explain the difference with relevant supporting evidence, which is evident from the fact that, if we consider opening work-in-progress of Rs. 36,50,000/- and closing work-in-progress of Rs. 1,21,50,000/-, the net increase in work-in-progress for the year comes to Rs. 85,00,000/-, which has been reported by the assessee company. Since the assessee company has failed to reconcile the same, the A.O. has rightly made addition towards difference in stock-in-trade of Rs.36,50,000/-. Therefore, the Ld. CIT(A) rejected the explanation of the assessee company and sustained the addition made by the A.O.
10. Aggrieved by the order of the Ld. CIT(A), the assessee company is now in appeal before the Tribunal.
11. The learned counsel for the assessee company, Shri Sashank Dundu, Advocate, referring to the evidences considered by the A.O. for the purpose of addition of Rs. 36,50,000/-, submitted that, the A.O. considered the unaudited and rough financial statements generated from the tally software and noticed that, there is a difference between the closing work-in-progress as per the profit and loss account and the closing work-in-progress shown in the balance sheet. The A.O. further noted that, as per the profit and loss account as on 31.03.2011, the closing work-in-progress was at Rs. 85,00,000/-, whereas in the balance sheet, the closing work-in-progress has been shown at Rs. 1,21,50,000/. Therefore, he observed that, there is a clear difference between closing stock shown in the profit and loss account and the balance sheet and further, the same has been confirmed from the audited financial statements filed by the assessee company, where the assessee company has correctly taken closing work-in-progress of Rs. 85,00,000/-. Although the assessee company explained the difference by filing relevant financial statements, but the A.O. and the Ld. CIT(A) simply made addition only on the basis of difference in work-in-progress, even though the figures adopted by the A.O. are on the basis of tally generated unaudited financial statements. Therefore, he submitted that, the addition made by the A.O. should be deleted.
12. The learned Senior A.R. for the Revenue, Shri T. Sunil Gowtham, on the other hand, supporting the order of the Ld. CIT(A), submitted that, the assessee company could not explain the difference to the satisfaction of the A.O. and the Ld. CIT(A), which is evident from the findings recorded by the Ld. CIT(A), where the Ld. CIT(A) has rightly analysed the figures furnished by the assessee company and proved that, there is a clear difference of Rs. 36,50,000/- in closing work-in-progress shown by the assessee company. Since the assessee company has failed to reconcile the difference, the A.O. has rightly made addition of Rs. 36,50,000/- towards difference in closing work-in-progress. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. Therefore, he submitted that, the addition made by the A.O. should be upheld.
13. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that, as per the unaudited financial statements generated from tally software, closing work-in-progress was shown at Rs. 85,00,000/- in the profit and loss account, whereas in the balance sheet, closing work-in-progress was shown at Rs. 1,21,50,000/-. It is also not in dispute that, as per the audited financial statements, the assessee company has shown closing work-in-progress at Rs. 85,00,000/-and further explained that, the discrepancy noticed by the A.O. is on account of addition of opening work-in-progress of Rs. 36,50,000/- as per unaudited tally generated profit and loss account and balance sheet to the closing work-in-progress, which is the exact amount of difference noticed by the A.O. The learned counsel for the assessee company has furnished audited financial statements for the financial years 2009-10 and 2010-11. As per the audited financial statements for the year ended 31.03.2010, the assessee company has shown closing work-in-progress at Rs. 36,50,000/-. Further, as per the audited financial statements for the year ending 31.03.2011, the assessee company has rightly taken opening work-in-progress at Rs. 36,50,000/- and closing work-in-progress at Rs. 85,00,000/- and the difference has been taken into the profit and loss account. From the audited financial statements filed by the assessee company, we find that, there is no difference in work-in-progress reported by the assessee company for the year ending 31.03.2011. The A.O. simply considered unaudited financial statements generated from the tally software, compared the closing work-in-progress reported in the balance sheet with the closing work-in-progress shown in the audited balance sheet and observed that, there is a difference of Rs. 36,50,000/- and made addition. The assessee company has explained the difference, and we find that, the said difference is on account of addition of Rs. 36,50,000/- towards opening work-in-progress instead of subtracting the same from the closing work-in-progress. Therefore, in our considered view, the addition made by the A.O. towards difference in stock-in-trade of Rs. 36,50,000/-cannot be upheld. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition of Rs. 36,50,000/- made towards difference in stock-in-trade.
14. In the result, the appeal filed by the assessee company is allowed.
Order pronounced in the Open Court on 20th May, 2026.
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