DCIT Vs Continental Construction Ltd (ITAT Delhi)
The Revenue (Income Tax Department) filed an appeal against the order of the CIT(A)/NFAC, Delhi, for the Assessment Year (AY) 2018-19, challenging the deletion of an addition of ₹1,90,00,000/- made under Section 69 of the Income-tax Act. The Revenue also contested the CIT(A)’s admission of additional evidence.
The assessee, Continental Construction Ltd, a limited company formed in 1962, had been one of the top construction companies in India and Gulf Countries. However, the company faced a severe financial crisis due to the Iran-Iraq and Gulf Wars, leading to the stoppage of operations, legal troubles, director disagreements, and the closure of offices. The company’s bank accounts were seized by the Income Tax Department, and its accounts were not audited, leading to the filing of the return being delayed. In the absence of a filed return, the Assessing Officer (AO) passed an assessment order under Section 144, relying on information from Form 26AS.
The AO made an addition of ₹1.90 crore by treating the creation of a Fixed Deposit Receipt (FDR) as unexplained investment under Section 69. The assessee argued that while it was actively in business, it had made fixed deposits in State Bank of India, UCO Bank, and SBI Exim Bank to secure bank guarantees for performance securities. The assessee contended that the FDR in question was not a fresh investment but a renewal of an old FD. Specifically, an earlier deposit closed on December 29, 2017, resulting in a credit of ₹1,99,12,379/- to the account, and an FDR for ₹1,90,00,000/- was issued on the same day.
