AI Drafter 
TaxTMI 
TaxTMI 
2025 (12) TMI 474
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....the appeal of the revenue in ITA No.1551/Kol/2025 for A.Y. 2016-17 for adjudication. ITA No.1368/Kol/2025 for A.Y. 2016-17 -Assessee's appeal and ITA No.1551/Kol/2025 -Revenue's appeal 3. The assessee in its appeal has raised the following grounds: "1. For that the Commissioner of Income Tax (Appeals), Kolkata 27. ['CIT(A)], erred on facts and in law in partly allowing the appeal filed by the appellant, vide order passed Act), dated 13-04-2025 2. that the CIT(A) erred in confirming the additions to the extent of Rs 36,67,500/as against addition of Rs 7,33,50,000/ made by the Deputy Commissioner of Income Tax, Central Circle 4(3), Kolkata, (the AO), assessing the appellant under section 147 read with section 143(3) of the Act, vide order dated 29-03-2024 at an income of Rs. 7,43,61,550/- against the returned income of Rs. 10,11,550/-, which is wrong, illegal and unjustified 3. For that the learned CIT(A) has erred in the facts and circumstances of the case in confirming the addition of Rs 36,67,500/ by estimating business profit on the amount received on sale of investments, which is wrong, illegal and unjustified 4. For that the learned....
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....ionnaire, calling upon the assessee to explain the sale of investments of unlisted private equity shares. The Assessing Officer observed during the course of assessment proceedings that the assessee had acquired several paper/shell companies to re-route the unaccounted income of the group in regular books of account in the form of 'sale of investment' done by these paper/shell companies prior to amalgamation with the assessee. The Assessing Officer noted that the companies were M/s. Jyani Agencies Pvt Ltd., and M/s. Jyani Dealers Pvt Ltd., The AO further noted that before acquisition of these two companies, the said companies had sold investments in unlisted equity shares standing in their books of account of which the ultimate beneficiary was the assessee company as it acquired these companies through amalgamation. The Assessing Officer noted that these shell entities were managed by the same entry operators. Thereafter, the Assessing Officer discussed the modus operandi and details regarding these shell companies in the assessment order. The AO also discussed the sale of shares by the amalgamating company i.e. M/s. Jyani Agencies Pvt Ltd. in assessment order. Thereafter, the AO d....
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....ed under the Companies Act, 1956 on 30.12.2004 and since then regularly assessed to tax with the department. Ld. counsel submitted that the assessee is, inter alia, engaged in carrying on the business of trading of sundry iron and steel items. The ld AR submitted that the two companies namely, M/s. Jyani Agencies Pvt Ltd., and M/s. Jyani Dealers Pvt Ltd., were amalgamated with the assessee company vide order dated 26.12.2022 in Company Petition (CAA) No.100/KB/2022 connected with Company Application (CAA) No.27/KB/2022 passed by the National Company Law Tribunal, Kolkata Benches. 11. Ld AR submitted that in the case of M/S Jyani Dealers Pvt Ltd, the assessment was concluded u/s.143(3) of the Act for assessment year 2017-18 vide order dated 02.05.2019, copy of which is available at pages 38 to 39 of CPB. The Ld. counsel submitted that the notice u/s.143(2) of the Act was issued to the assessee, copy of which is available at pages 42 to 45 of CPB. Ld. counsel submitted that the case was selected for scrutiny under the Computer Aided Scrutiny Selection and the reasons for selection were the examination of expenses incurred for earning exempt income and investments/advances/loans. L....
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....ng the contentions of the assessee that these are not shell companies are based on facts and that the assessee has furnished all the details before the AO as well as before the appellate proceedings. Ld. counsel further submitted that as the investments in private equity shares were made by the amalgamating company and the realization of sale proceeds of the investments were also received by the company, the same cannot be added to the income of the assessee by doubting the same as bogus. 12. Similarly, as regards the second amalgamating company M/S Jyani Agencies Pvt Ltd, the ld. AR submitted that the assessment was framed u/s 143(3) of the Act for assessment year 2017-18 vide order dated 22.05.2019 copy whereof is available at page no. 23 & 24 of PB. The Ld. counsel submitted that the notice u/s.143(2) of the Act was issued to the assessee, copy of which is available at pages 28 to 31 of CPB. Ld. counsel submitted that the case was selected for scrutiny under the Computer Aided Scrutiny Selection and the reasons were for examination of expenses incurred for earning exempt income and investments/advances/loans. Ld. AR thereafter referred to the notice issued u/s.142(1) of the A....
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.... of PCIT vs. Tulsyan and Sons Pvt Ltd., reported in (2025) 174 taxmann.com 37 (Cal High Court). Ld. AR therefore, prayed that the appeal of the assessee may be allowed by modifying the order of the ld. CIT(A), directing the deletion of the part sustenance of addition to the extent of 5% of the sales consideration made by the ld. CIT(A) for the reasons aforementioned. 14. On the other hand, ld Ld. CIT(A) DR heavily relied on the order of the Assessing Officer by submitting that the amalgamating companies were shell companies which were holding the private equity shares. The ld CIT DR submitted that these shares were sold on cost price by the amalgamating companies, which was nothing but only accommodation entries in the hands of the amalgamating companies. The ld DR submitted that after merger with the assessee, the total sale consideration was rightly treated as unexplained cash credit u/s.68 of the Act in the hands of the assessee as the assessee was ultimate beneficiary of these transactions. Ld. CIT DR while relying heavily on the order of the Assessing Officer, submitted that the Assessing Officer has discussed comprehensively in the assessment order the reasons why the addi....
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.... investments in private equity shares and the assessments were framed u/s.143(3) of the act dated 02.05.2019 & 22.05.2019 as stated above accepting these investments in private equity shares. Whereas in the impugned assessment order, the AO has raised suspicion on share capital raised by the amalgamating companies by overlooking the fact that the share capital of the amalgamating companies were accepted in their respective assessments by the AO. In our opinion the AO has no basis of such suspicion and therefore, we do not find any merit in the contention of the revenue that these were shell companies and has been rightly treated so by the AO while framing the assessment and the addition has been rightly made u/s.68 of the Act at Rs. 7,33,50,000/-. In our opinion, once these investments have been accepted in the earlier assessment years in the hands of the amalgamating companies, then how the same can be treated as unexplained investments when these investments were sold by the same amalgamating companies. The decision of Hon'ble Supreme Court in the case of PCIT vs NRA Iron and Steel Pvt Ltd.(supra) is distinguishable on facts and therefore not applicable to the present case before....
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....ed in A.Y. 2011-12. Similarly 2017-18 the case of the assessee was selected for scrutiny and investments were not doubted at all. Thus it is clear that over all these years the investments were not doubted by the department. These investments made in the A.Y. 20111-12 were partly sold at cost by the assessee during the instant assessment year which realized Rs. 11,56,20,000/- which were accepted by the Revenue right from A.Y. 2011-12 till the instant assessment year. We have also noted that the assessee has filed before the ld. AO as well as before the ld. CIT(A) all the evidences qua the purchases and sale of shares. The assessee has filed all the evidences qua the purchasers such as ITRs, names, addresses, audited balance sheets, bank statements, confirmations, etc. proving the identity, creditworthiness of the purchasers and genuineness of the transactions. We note that even the purchasing companies have filed their evidences as called for by the ld. AO comprising all the evidences as stated above. The ld. CIT(A) has recorded a finding of fact that apart from the assessee, purchasing companies had also filed all the evidences before the ld. AO however the ld. AO had not brought ....
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....essee company had raised share capital (including premium) amounting to Rs. 119,84,67,000/- in financial year 2010-11, relevant to AY 2011-12 and the capital so raised in AY 2011-12 was invested in shares/securities and accounted for in the books of accounts which were audited and audited accounts are placed at page no. 102 to 111 of PB Vol.-1. We also note that the assessment for AY 2011-12 was framed u/s 143(3) of the Act vide order dated 17.03.2014 a copy of which is placed at page no. 276 and 277 of PB Vol.-1 and the neither the share capital/share premium nor the investments out of that source were doubted by the AO. 9.2. We also note that similar issue was involved in the case of M/S Swarna Kalash Commercial Pvt Ltd. Vs ACIT,Central Circle -2(2), Kolkata, a group concern of the Rashmi Group of Companies,which was also subjected to search u/s 132(1) of the Act in the same search proceedings. We note that the coordinate bench has decided the issue in favour of the assessee in ITA No. I.T.(S.S.) A.No.53/Kol/2022 A.Y.2019-20 vide order dated 01.09.2023 involving the same issue of addition of sale of shares/investments by the AO on the ground that identity and credentials....
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....ssessee had made purchases and sale of investments as under which is tabulated as under: Opening Investment Purchases made during the year Investment sold during the year Closing Balance of Investments 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,365 11.2. The shares were held by the assessee as investments and were sold at the cost of acquisition by the assessee. Hence, there is no profit/loss on such sale of investment. We also look at the movement of investment held by the assessee, which is tabulated below: FY AY Opening Purchase Sales Amount Closing Balance by A.O. 2014-15 2015-16 63,42,00,000 63,42,00000 2015-16 2016-17 63,42,00,000 42,44,960 18,344,960 62,01,00,000 1,83,44,960 2016-17 2017-18 62,01,00,000 56,27,44,459 468,499,459 71,43,45,000 46,84,99,459 2017-18 2018-19 71.43.45,000 1,55,17,29,538 2,062,064,910 20,40,09,628 2,06,20,64,910 2018-19 2019-20 20,40,09,628 66, 47, 64, 007 170,560,000 69,82,13,635 17,05,60,000 Total 2,71,94,69,23....
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.... Page No. FY 2018-19 1 Bhootnath Commodities Pvt Ltd 1-262 Rs. 1,71,59,300 2 Bluestar Mercantile Pvt Ltd 263-265 Rs. 5,00,000 3 Charvi Dealmark Pvt Ltd 267-356 Rs. 10.00,000 4 Daania Trading Pvt Ltd 357-359 Rs. 30,00,000 5 Elvof Trading Pvt Ltd 361-369 Rs. 1,00,000 6 Express Image Pvt Ltd 370-542 Rs. 1,11,00,000 7 Laxhmidhan Business Pvt Ltd 544-546 Rs. 6,00,000 8 MuditVanijya Pvt Ltd 547-59 Rs. 5,50,000 0 Outright Commodities Pvt Ltd 599-846 Rs. 2,44,90,700 10 Over Arching Impex Pvt Ltd 847-1053 Rs. 81,00,000 11 Radhacharan Tradevin Pvt Ltd 1055-1158 Rs. 10,00,000 12 S P Udyog Pvt Ltd 1159-1161 Rs. 25,00,000 13 SamundarTradelink Pvt Ltd 1162-1164 Rs. 34,00,000 14 Shatabdi Entertainment Pvt Ltd 1165-1193 Rs. 14,00,000 15 Spur Trading Pvt Ltd 1195-1204 Rs. 7,50,000 16 Swarnmahal Vyapaar Pvt Ltd 1205-1252 Rs. 15,00,000 17 Swetang Retails Pvt Ltd 1253-1356 Rs. 50,00,000 18 Viewpoint Advisory Pvt Ltd 1357-1490 Rs. 85,00,000 19 Yuthika Merchandise Pvt Ltd 1492-....
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....tiary value. Similar view has been adopted by the Jaipur bench of the Tribunal in the case of "Shree Chand Soni vs. DCIT" (2006) 101 TTJ 1028 (Jodhpur). The Hon'ble Delhi High Court in the case of "CIT vs. Harjeev Agarwal" in ITA No.8/2004 vide order dated 10.03.16 has observed that a statement made under section 132(4) ofthe Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. In the case of "Commissioner of Income Tax vs. Sunil Agarwal" (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the course of search, made a categorical admission under section 132(4) that the cash amount seized belonged to him and it represented undisclosed income not recorded in the books of accounts. The assessee did not immediately retract from the above admission but only during the assessment proceedings at a belated stage. In his retraction, the assessee stated that the surrender was made under a mistaken belief and without looking into books of account and without understanding law and that he ....
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....bserved that it is well settled legal position that merely on the basis of a statement which is not supported by the department with cogent corroborative material cannot be a valid basis for sustaining such ad-hoc addition. The co-ordinate Jaipur Bench of the Tribunal (supra) further observed that the issue of existence of pressure, threat, coercion during search proceedings is to be judged by reference to the existing facts and circumstances, human conduct and preponderance of possibilities. During the search proceedings, record relating thereto being in exclusive custody of the searching officers, it is their wish and will which prevails during the fateful period. That it is almost impossible for the assessee to adduce demonstrative evidence of exerting such pressure. The co-ordinate bench of the Tribunal (supra) while holding so, apart from relying upon various decisions of the higher courts has also relied upon the decision of the Tribunal in the case of "Dy CIT vs. Pramukh Builders" (2008) 112 ITD 179 (Ahd.) wherein it has been held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, merely in the absence....
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....ences should be collected or obtained before making such additions. The circular of the CBDT is binding on the revenue officials. In the facts and circumstances of this case, when seen in the light of above case laws and CBDT circular, additions in this case cannot be said to be justifiably made. 13. All the above details when kept in juxtaposition, there remains nothing to cast an iota of doubt on the sale transaction of shares held by the assessee as investments which it undertook in the ordinary course of its business, more importantly, purchases having made in the current year also. Further, as rightly pointed out by the learned Counsel, both opening balance of investment in shares and the purchases made during the year have not been disputed or doubted by the authorities below so as to bring the entire sale consideration to tax. 14. At this stage, the ld. DR has submitted that the assessee has claimed that it has undertaken this sale transaction by selling the shares at the cost at which it had acquired them in AY 2006-07. At the same time, assessee submits that it has undertaken this transaction in the ordinary course of its business. The ld. DR has submitte....
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....ated 10.5.2023 by which the assessee's appeal was allowed and the addition made under section 68 of the Act was deleted. The Assessing Officer made the addition by invoking section 68 of the Act on the ground that the assessee failed to discharge its onus to establish identity, creditworthiness and genuineness of the transaction in respect of the money received through cash trail. The CIT(A) in course of hearing the appeal called for a remand report from the Assessing Officer and in the said remand report the Assessing Officer has in no uncertain terms accepted the receipt of the impugned sum on account of sale proceeds of investment. The Assessing Officer verified the investment sold which are shown in the balance-sheet for the financial year 2010-11 in Schedule-4 of the balance-sheet and after considering these facts it was stated that the assessee had sold shares held by way of the investment during the year to M/s. Shivshakti Communications and Investment Pvt. Ltd. and Carnation Tradelink Pvt. Ltd. and it is not a receipt of unsecured loan. This fact, apart from other factual details, were considered by the CIT(A) and by an elaborate order dated 10.5.2023 the appeal filed by th....