Case Law Details
Hitec Cyber City Spaces LLP Vs ACIT (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, allowed the assessee’s appeal for statistical purposes by admitting additional evidence and remanding the matter to the Assessing Officer (AO) for fresh adjudication after accepting the explanation for the delay in producing supporting documents.
The assessee, a Limited Liability Partnership (LLP), filed its return of income for Assessment Year 2022-23 declaring a total income of Rs.1,88,46,730. The case was selected for scrutiny on account of high liabilities or substantial increase in capital and large investment in immovable property. During the assessment proceedings, the AO issued a notice under Section 142(1) seeking details and documentary evidence relating to fresh capital introduced, investment in immovable property, bank statements, exempt income, and creditors. As the assessee failed to furnish the required information despite reminders, the AO completed the assessment under Section 143(3) read with Section 144B and made additions towards unexplained capital contribution under Section 68, unverifiable other payables, disallowance of interest expenditure, and unexplained investment in immovable property under Section 69.
Before the Commissioner of Income Tax (Appeals), the assessee sought to produce additional evidence under Rule 46A of the Income Tax Rules, 1962. However, the application was rejected on the technical ground that Form No. 35 indicated that no additional documentary evidence was being relied upon. Consequently, the appeal was dismissed without admitting the additional evidence.
Before the Tribunal, the assessee explained that the necessary records could not be produced during the assessment proceedings because the accountant handling the LLP’s accounts and tax matters was absent due to his son’s serious medical condition involving brain epilepsy and fits. The assessee filed an affidavit of its authorised signatory explaining these circumstances, along with the accountant’s leave application and the son’s medical records. It was also submitted that the LLP maintained regular books of account and relevant records, but the documents could not be prepared and furnished during the assessment because of these unavoidable circumstances. The assessee further pointed out that it had already attempted to produce the additional evidence before the Commissioner (Appeals), but the request had been rejected on technical grounds.
The Tribunal observed that the additions had primarily been made because the required details and supporting documents were not produced before the AO. It noted that the assessee was a newly formed LLP and that introduction of capital by partners in the first year was not an unusual transaction. The Tribunal also observed that the registered sale deed relating to the purchase of immovable property had been produced and reflected payment through banking channels, although the AO made the addition due to the absence of further supporting details.
The Tribunal found the explanation for non-production of evidence to be bona fide and reasonable in light of the affidavit, the accountant’s leave records, and the medical documents relating to his son’s illness. Since the assessee had already attempted to file the additional evidence before the Commissioner (Appeals), and its request was declined on a technical ground, the Tribunal admitted the additional evidence. It set aside the order of the Commissioner (Appeals) and remanded the matter to the AO for verification and examination of the additional evidence and for fresh adjudication in accordance with law after providing the assessee with a sufficient opportunity of being heard. The appeal was accordingly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal by the assessee is directed against the Order dated 10.03.2026 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2022-2023.
2. The assessee has raised the following grounds of appeal:
1. “On the facts and circumstances of the case, the Ld.CIT(A) erred both in law and facts.
2. On the facts and circumstances of the case and in law, the Ld.CIT(A) is not justified in rejecting the plea of the appellant that the Ld. Assessing Officer is erred in making the addition of Rs.80,25,93,462/- under Section 68 of the Act towards capital contribution made by the partners assuming that there are no sources for capital infusion in the appellant firm.
3. On the facts and circumstance of the case and in law, the learned CIT(A) is not justified in not considering the evidences filed even though Learned CIT(A) is having Coterminous powers with the Assessing Officer.
4. On the facts and circumstance of the case and in law, the Learned CIT(A) is not justified in rejecting the claim of admission of additional evidence under Rule 46A that the appellant has not demonstrated sufficient cause for non-production during assessment proceedings.
5. On the facts and circumstance of the case and in law, the Learned CIT(A) is not justified in coming into conclusion that the appellant’s submissions cannot substitute for evidence that should have been furnished during Assessment.
6. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) is not justified in rejecting the plea of the appellant that the Ld. Assessing Officer erred in making addition of Rs.6,89,46,225/-under section 68 of the Act in respect of other payables’ shown in the Balance sheet.
7. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) not justified in rejecting the plea of the appellant that the Ld. Assessing Officer is erred in making the addition of Rs.2,74,33,825/- towards disallowance of interest expenditure debited in the profit and loss account u/s 37(1) of the Act.
8. On the facts and circumstances of the case and in law, the Ld. CIT(Appeals) is not justified in rejecting the plea of the appellant that the Ld. Assessing Officer is erred in making the addition of Rs.143,00,00,000/- under Section 69 of the Act towards unexplained investment in purchase of immovable property without observing the fact that the said investment formed part of the financial statements and is duly is reflected in the Balance sheet and return of income.
9. On the facts and circumstance of the case and in law, the Learned CIT(Appeals) is not justified in not considering the Jurisdictional High Court case laws quoted by the Appellant even though these case laws are binding on learned CIT(Appeals)
10. Any other legal or factual ground that may be urged at the time of hearing of the appeal.”
3. The assessee is a LLP, filed its return of income for the year under consideration on 11.10.2022 declaring total income of Rs.1,88,46,730/-. The case was selected for scrutiny on the issue of (A) high liabilities/substantial increase in capital and (B) large investment in property. During the course of assessment proceedings, the Assessing Officer issued notice u/sec.142(1) of the Income Tax Act [in short “the Act”], 1961 calling the details of source of fresh capital introduced during the year with documentary evidence. The Assessing Officer also asked the assessee to furnish the copy of bank statement of the assessee as well as details of the creditors along with documentary evidence regarding the identity, creditworthiness and genuineness of the transaction. Since there was no response to the notice u/sec.142(1) of the Act and assessee failed to furnish the complete details as asked by the assessee therefore, the Assessing Officer has completed the assessment u/sec.143(3) r.w.s.144B of the Act by making additions on account of unexplained capital introduced, unverifiable other payables, interest expenditure and unexplained investment. The assessee challenged the assessment order before the learned CIT(A) but could not succeed as the request of the assessee for production of additional evidence in respect of capital introduction, outstanding payables and interest was rejected by the learned CIT(A).
4. Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that due to unavoidable circumstances the assessee could not produce the relevant details and supporting evidence before the Assessing Officer. He has submitted that one Mr. M. Someswara Rao was looking after the accounts as well as tax matters of the assessee firm was not available during the assessment proceedings due to his son’s serious health condition being suffering from brain epilepsy and fits and therefore, the assessee could not submit the requisite details and documents which were to be prepared by the accountant Sri M Someswara Rao but due to medical emergency he was not attending the office of the assessee firm. He has filed an affidavit of the authorised signatory of the assessee firm LLP explaining the facts and reasons for not furnishing the requisite details and supporting evidence before the Assessing Officer. The learned Authorised Representative of the Assessee has further submitted that the assessee filed an application before the learned CIT(A) under Rule 46A of I.T. Rules, 1962 for production of the additional evidence comprising of the relevant details and supporting documentary evidence however, the learned CIT(A) has rejected the application and declined to admit the additional evidence sought to be filed by the assessee. He has referred to Para-6.3 of the impugned order and submitted that the application of the assessee under Rule-46A was rejected on technical ground of not mentioning the same in Form-35. Thus, the learned Authorised Representative of the Assessee has submitted that the assessee has now filed an application under Rule-29 of ITAT Rules, 1963 for admission of the additional evidence which was turned down by the learned CIT(A) on technical ground. The learned Authorised Representative of the Assessee has submitted that the assessee is maintaining regular books of account as well as all the relevant record however, due to unavoidable circumstances beyond the control of the assessee, the same could not be produced before the Assessing Officer at the time of completion of the assessment proceedings. Thus, he has pleaded that when the additions are made by the Assessing Officer for want of necessary details and supporting documentary evidence, then the additional evidence filed by the assessee before the learned CIT(A) ought to have been admitted. Hence, he prayed that the additional evidence filed by the assessee may be admitted and matter may be remanded to the record of the Assessing Officer for verification and examination of the additional evidence filed by the assessee.
5. On the other hand, the learned DR has submitted that despite sufficient opportunities given by the Assessing Officer, the assessee did not furnish any supporting evidence and details in respect of the issues taken up for scrutiny. He has relied upon the Orders of the authorities below.
6. We have considered the rival submissions as well as relevant material on record. In the scrutiny assessment the Assessing Officer issued notice u/sec.142(1) of the Act dated 31.01.2024 calling for the relevant details, information and record as under:
1. The following accounts or documents or information is/are sought under section 142(1) of the Income-tax Act, 1961:
In consequence of assessment proceedings u/s. 143(3) of the IT Act for A.Y. 2022-23, it is requested to furnish following-
1. Please furnish details of sources of fresh capital introduced during the year under consideration along with supporting documentary evidence.
2. Please furnish details of sources of investment made to acquire immovable property during the year under consideration along with supporting documentary evidence viz bank statement highlighting payment made to acquire immovable property, payment of TDS on purchase of property.
3. Please furnish details of exempt income with documentary evidence.
4. Please furnish copy of bank statement of all the bank accounts held during the year under consideration.
5. Please furnish details of creditors along with documentary evidence regarding identity. genuineness and credit worthy ness of the transaction made with them.
6.1. In response to the said notice the assessee did not furnish the relevant details, supporting evidence as well as submissions and consequently, the Assessing Officer has issued reminder to the assessee but still there was no compliance on behalf of the assessee. Ultimately, the Assessing Officer has made the additions on account of unexplained capital introduced during the year, unverifiable other payables, interest expenditure and unexplained investment, the details of the same are given in Para-4 of the assessment order as under:
6.2. Thus, ongoing through the assessment order we find that for want of necessary details and supporting evidence the Assessing Officer has made these additions. It is pertinent to note that this is the first year of the assessee LLP and therefore, the introduction of capital by the partners is not an unusual transaction. Similarly, the assessee produced the registered sale deed showing the transaction of purchase of immovable property and payment details. Therefore, the payment for purchase of property was made through banking channel and details were given in the sale deed. However, the Assessing Officer has made the addition on account of unexplained investment on the ground that no other details were provided by the assessee. The assessee has explained the reasons for non-production of the relevant details and supporting evidence as the accountant of the assessee was not available during the relevant period due to the illness of his son who was suffering from brain epilepsy and fits. The assessee has filed an affidavit of the authorised person along with application of the accountant Sri M Someswara Rao for availing the leave due to the illness of his son. The assessee has also filed the relevant medical record of the son of the accountant to show that due to genuine reasons the accountant was not available to prepare the relevant details as well as production of the documentary evidence during the assessment proceedings. Before the learned CIT(A), the assessee sought to file additional evidence under Rule-46A of IT Rules, 1962 however, the learned CIT(A) has rejected the application of the assessee on technical ground as given in Para-6.3 as under:
“6.3. It is noted that in Form No. 35, Column 12, the appellant has indicated “No,” signifying that no documentary evidence other than that produced during the assessment proceedings is being relied upon in the appeal under Rule 46A. This submission is crucial as it confines the appellate consideration to the evidence that was available to the Assessing Officer during assessment. Consequently, while submissions, explanations, and arguments raised at the appellate stage are examined, they must be evaluated on the basis of the material already on record; no weight can be accorded to alleged evidence that was not filed during assessment.”
6.3. Therefore, this is not the case of filing the additional evidence first time before the Tribunal, but the assessee also filed a request before the learned CIT(A) for filing the additional evidence. But since there was no such indication was given in Form-35, the learned CIT(A) has declined to accept the additional evidence filed by the assessee. Thus, it is manifest from record that the assessee LLP was newly formed and additions were made by the Assessing Officer for want of relevant details and supporting documentary evidence and thereafter the assessee before the ITA.No.883/Hyd./2026 learned CIT(A) attempted to produce the relevant details and supporting evidence which was declined on technical ground. The explanation of the assessee for non-production of the relevant details and documentary evidences is found to be bonafide and reasonable as the son of the accountant who was dealing with the accounts and tax matters of the assessee was suffering from serious disease and was undergoing treatment therefore, the said accountant was not available at the relevant point of time. The reasons explained by the assessee in the affidavit are as under:
“AFFIDAVIT
I, Killamsethy Joga Rao, son of Late Sri K. Sri Ramulu, aged about 59 years, residing at Plot No. 101,4th Cross west, Hastinapuri Colony, Near Ganesh Temple, Sainikpuri, Kapra, Secunderabad 500094, Telangana do hereby solemnly affirm and state as follows:
1. That I am the Authorized Signatory of HITEC CYBER CITY SPACES LLP, incorporated under the Limited Liability Partnership Act, having its registered office at 802, Astral Heights, Banjara Hills, Hyderabad-500034, Telangana.
2. That I am duly authorized to make and submit this affidavit on behalf of the said LLP.
3. That Mr. M. Someswara Rao, employed as Chief Accountant with M/s. Aparna Infra Housing Pvt. Ltd., which holds a 50% share in the said Limited Liability Partnership Firm, has been entrusted with handling Income Tax-related matters of the firm.
4. That Mr. M.Someswara Rao, who also serves as the common accountant for both the company and the LLP, was on leave from 01.03.2024 to 30.04.2024 due to his son’s serious health condition (suffering from brain epilepsy combined with fits).
5. That the said accountant is responsible for preparing tax documents, maintaining accounts, ensuring financial compliance, and handling related duties for the firm.
6. That due to his temporary absence, the company has been unable to respond fully or provide the requisite information as sought in the notice issued by the Income Tax Department.
7. Furthermore, I would like to clarify that no employees were appointed on the rolls of the LLP, and accordingly, no salary expenditure has been claimed in the Profit & Loss account of the LLP. All statutory compliance requirements have been managed by its holding company, M/s Aparna Infra Housing Pvt. Ltd and Mr. Someswara Rao is an employee of Aparna Infra Housing Pvt. Ltd.
8. That in light of the above genuine and unavoidable circumstances, the company respectfully requests the condonation of delay in submitting the required response.
9. This affidavit is being submitted to place the aforementioned facts on record and to request your kind consideration and leniency in this matter.”
6.4. Along with the affidavit, the assessee has also filed medical record of the son of the accountant. Hence, in the facts and circumstances of the case, we admit the additional evidence filed by the assessee for proper verification and examination at the level of the Assessing Officer. Accordingly, the impugned order of the learned CIT(A) is set aside, and the matter is remanded to the record of the Assessing Officer for fresh adjudication after verification and examination of the additional evidence filed by the assessee. Needless to say, the Assessing Officer is directed to provide sufficient opportunity of being heard to the assessee before passing the fresh order.
7. In the result, appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open Court on 03.06.2026.
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