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IN THE INCOME TAX APPELLATE TRIBUNAL

“F” BENCH MUMBAI

BEFORE SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER &

SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER

ITA No. 1959/Mum/2018

(Assessment Year: 2010-11)

M/s. U. S. Reality Pvt. DCIT-10(3),

Ltd. 452, Aaykar Bhavan,

M. K. Road, Mumbai-

115-116, J.K. Chambers, Vs.

400 020

Sector No. 17, Vashi, Navi

Mumbai-400 705

PAN/GIR No. AAACU8241J

(Applicant) (Respondent)

Assessee by Shri Madhur Agarwal, Ld. AR

Revenue by Shri Vivek Perampurna, Ld. DR

Date of Hearing 23.12.2025

Date of Pronouncement 29.12.2025

आदेश / ORDER

PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal is filed by the assessee against the order passed

by the Commissioner of Income Tax (Appeals)-24, Mumbai

[hereinafter referred to as “CIT(A)”], dated 21.12.2017, for

Assessment Year 2010–11, arising out of the assessment order

passed by the Assessing Officer under section 143(3) of the

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M/s. U. S. Reality Pvt. Ltd.

Income Tax Act, 1961[hereinafter referred to as “the Act”], dated

28.03.2013.

2. The brief facts of the case are that the assessee is a

company engaged in the business of land acquisition, investment

and contracting. For the assessment year under consideration,

the assessee filed its original return of income on 25.06.2010,

declaring a total income of Rs. 1,03,79,180/-and the same was

initially processed under section 143(1) of the Act.

3. Thereafter, notice under section 143(2) was issued on

26.08.2011 and duly served. Upon change of incumbent, a fresh

notice under section 143(2) was issued on 06.08.2012. Further

notices under section 142(1) along with questionnaires calling for

various details were issued on 06.08.2012, 19.12.2012 and

15.02.2013.While framing the assessment for A.Y. 2010–11, the

Assessing Officer also relied upon impounded material and the

Special Audit Report pertaining to A.Y. 2009–10.

4. After examination of the submissions of the assessee, the

impounded material, the Special Audit Report and the books of

account, the Assessing Officer recorded a categorical finding that

the books of account were incomplete and incorrect, and that the

explanations furnished by the assessee were not acceptable on

several counts. Accordingly, invoking the provisions of section

145(3) of the Act, the Assessing Officer rejected the books of

account and proceeded to complete the assessment in the

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manner provided under section 144, after holding that adequate

opportunity of being heard had been afforded to the assessee.

5. During the assessment proceedings, the Assessing Officer

noticed that the assessee had credited Rs. 91,00,00,000/- to the

Reserve and Surplus Account without routing the amount

through the Profit and Loss Account. When called upon to

explain, the assessee stated that the entry was passed on ill

advice, represented liquidated damages, involved no actual

receipt or payment, and was an incorrect book entry sought to be

rectified through revised financial statements filed beyond the

time limit. The Assessing Officer rejected the explanation, holding

that the original audited financial statements filed with the return

and the Registrar of Companies could not be disregarded, that

revised statements filed beyond time without a valid revised

return were not acceptable in view of Goetze (India) Ltd. v. CIT

(284 ITR 323), and that the assessee failed to establish the nature

and source of the credit. The credit was treated as an artificial

inflation of equity and added as unexplained cash credit under

section 68.

6. The Assessing Officer further found that the assessee had

claimed liquidated damages of Rs. 100,43,14,489/- in the Profit

and Loss Account. The assessee explained that no such damages

were payable or paid and that the entry was merely a book entry

passed on ill advice. The Assessing Officer held that the assessee

failed to discharge the onus under section 37(1) to prove that the

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expenditure was actually inc