2025 (2) TMI 1130 - AT - Income Tax

AO's assessment reopening valid but Rs. 8 lakh addition under section 69 deleted due to genuine share sale evidence

Pixel Commercial Private Limited Versus ITO Ward-9 (3), Kolkata

ITAT Kolkata upheld AO's reopening of assessment as valid, finding proper approval and due application of mind. However, regarding Rs. 8 lakh addition ... Validity of reopening of assessment - HELD THAT:- AO reopened the assessee’s assessment after due application of mind and obtained proper approval and therefore no interference is called for in the finding of ld.CIT(A) - Decided against asssessee. Addition u/s. 69 - information received from the DDIT (Investigation) about huge cash deposits in certain bank accounts and thereafter immediate transfer through RTGS to the other interlinked accounts and from one of such account assessee was found to have received Rs. 8.00 lakh from Destiny Goods Private limited - HELD THAT:- Assessee was holding Equity Shares prior to the alleged transaction. The assessee sold some of the Equity Shares held by it to M/s. Destiny Goods Private Limited for a consideration of Rs. 8.00 lakh. In support of said transaction, the assessee has furnished the copy of sale bill, ledger copy, bank statements. So far as the proof that the alleged sum was not an accommodation entry, but was sale consideration received from sale of Equity Shares, CIT(A) has also mentioned these facts but nowhere during the course of proceedings before the lower authorities, the genuineness of these documents have been doubted. Rather no enquiry has been conducted by the AO to verify the correctness of these details and in absence of any such enquiry, it has to be presumed that the assessee received sale consideration against the genuine transaction of sale of Equity Shares. DR failed to controvert these facts. Therefore, CIT(A) has erred in confirming the addition made by the AO u/s. 69 of the Act. Decided in favour of asssessee. The appeal in this case pertains to the Assessment Year 2009-10 and challenges the order passed by the National Faceless Appeal Centre, Delhi under section 250 of the Income-tax Act, 1961, arising from the Assessment Order dated 20.12.2016. The appellant, a Private Limited Company, raised multiple grounds of appeal, primarily challenging the validity of reassessment proceedings and additions made under section 69 of the Act.Issues Presented and Considered:1. Validity of reassessment proceedings, including jurisdiction and legality.2. Addition made under section 69 of the Income Tax Act, 1961.Issue-Wise Detailed Analysis:1. Reassessment Proceedings:The appellant contested the validity of reassessment proceedings on various grounds, alleging lack of jurisdiction, illegality, and violation of natural justice principles. The appellant argued that the initiation of reassessment proceedings and the subsequent assessment order were without jurisdiction and void ab initio. The appellant also challenged the reasons recorded for reopening the assessment, claiming they did not meet the legal standards set by courts.The Court examined the details provided by the appellant, the reasons recorded, and the findings of the lower authorities. The Court concluded that the assessing officer had properly reopened the assessment after due consideration and approval, dismissing the appellant's legal grounds challenging the reassessment proceedings.2. Addition under Section 69:The appellant contested the addition of Rs. 8.00 lakh made under section 69 of the Act, alleging that the amount was received as sale consideration for Equity Shares and not as an accommodation entry. The appellant provided supporting documents such as sale bills, ledger copies, and bank statements to substantiate the transaction.The Court noted that the appellant had sold Equity Shares to Destiny Goods Private Limited for Rs. 8.00 lakh and had provided documentation to support this claim. The Court found that the assessing officer had not conducted any inquiry to verify the authenticity of the transaction. Consequently, the Court held that the addition made under section 69 was not justified and set aside the findings of the lower authorities. The grounds of appeal related to this issue were allowed.Significant Holdings:The Court held that the assessing officer had properly reopened the assessment in compliance with the law, dismissing the appellant's challenges to the validity of the reassessment proceedings. Additionally, the Court ruled in favor of the appellant regarding the addition made under section 69 of the Act, finding that the amount received was genuine sale consideration for Equity Shares.In conclusion, the Court partly allowed the appellant's appeal, setting aside the addition made under section 69 of the Act. The order was pronounced on January 31, 2025.