TaxTMI 
TaxTMI 
2026 (1) TMI 246
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....) of the Act on 03/06/2020. The assessee company was engaged in manufacturing of TMT Bar, Billets, Ingots, Sponge Iron, Ferro Alloy and generation of Captive Power Plant etc, and also engaged in trading activities of Iron Steel Products. A search & seizure operation u/s 132 of the Act, 1961 was conducted on Agarwal Group and its associates by the Directorate of Investigation, Kolkata on 17.09.2021 and on subsequent dates. Being one of the associate members of the above group, the assessee was also covered in search by executing a warrant. Pursuant to the search & seizure operation, the case of the assessee was re-opened u/s 147 of the Act after taking approval from the competent authority and notice u/s 148 of the Act was issued and served upon the assessee on 06.09.2022 asking the assessee to file return of income within 30 days from the receipt of the notice. On 13.10.2022 the assessee has filed return u/s 148 of the Act declaring same total income as returned originally in the return of income filed u/s 139(1) of the Act dated 31.10.2019. Thereafter, statutory notices u/s 143(2) of the Act dated 11.11.2022 and notice u/s 142(1) of the Act dated 12/01/2023 along with a set of que....
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.... find that the PCIT has accorded the approval only as per the proviso (a) to Section 148A, without their being any positive finding about the escapement of income. We also find that there is no incriminating material seized during the course of search with regard to any purchases & sale outside the books of accounts. Therefore, we hold that, despite the deeming fiction applicable to searched persons, the issuance of notice under Section 148 still requires the Assessing Officer to demonstrate that the information unearthed during search leads to escapement of income in the specific assessment year. The mere fact of search, in itself, is not sufficient reason to issue a notice. Failure to establish this connection would render the issuance of notice without proper approval u/s 151 as bad in law and unsustainable." [Copy of such order is enclosed at Annexure-1] iv) The AO at best could have initiated the proceedings w/s 153C for the alleged searches and alleged material evidences/ documents pertaining/relating to conducted on "Kesara Group"[on 30.11.2018) and on Anup Majee Group[on 5.11.2020] which the AO failed to issue and such addition c....
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....f the authorities below and submitted that the case was validly reopened by the ld. AO by issuing notice u/s. 148 of the Act under the new scheme of taxation which mandatorily required the AO to issue notice u/s 148 of the Act for certain assessment years irrespective of whether any incriminating materials were found and seized or not..Ld.CIT-DR submitted that under new regime of the search provisions, the old code as contained in section 153A to 153C has been discontinued and new scheme has been put in place which required the AO to re-open certain numbers of assessment years. The ld DR submitted the provisions of Section 148 of the Act after search are analogous to the provisions to the provision of Section 153A of the Act which was prevalent and applicable till now whereunder the AO was required to issue notice u/s 153A of the Act for preceding six assessment years preceding the date of search irrespectrive of any incriminating materials. Therefore, the issue raised by the assessee has no merit and may kindly be dismissed. 2.6. After hearing the rival contentions and perusing the material on record, we find that the assessee has challenged the issue of notice u/s. 148 of the ....
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....see have no merit and accordingly the same are dismissed by upholding the appellate order on this issue. 3. The only issue raised by the assessee on merits is against the confirmation of addition by ld. CIT (A) of Rs.42,43,50,000/- as made by the ld. AO in respect of sale of investment during the impugned year. 3.1. The facts in brief are that the assessee filed the return of income on 25.10.2019, declaring total loss of Rs.11,67,951/-. The assessee revised the return on 12.02.2020, offering the same income. The assessee is engaged in the business of investment activities. A search action u/s 132 of the Act was conducted on 17.09.2021and on subsequent dates on 'Agarwal Group' and its associate concerns by directorate of investigation, Kolkata.Simultaneously, survey u/s 133A of the Act was also conducted at the assessee company at Lachhmanpur, PO Ramkanali PS-Raghunathpur, Purulia-723144 and documents bearing identification Mark BTUPL/01 to BTUPL/08 were found and impounded. On perusal of the said documents it was found that the assessee in the earlier years had raised share capital along with huge premium without any justification. The said capital/ premium raised were utiliz....
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....t. The ld. AO held that these transactions were pre-arranged and concocted. Therefore, these are nothing but accommodation entries arranged by Mr. Munka, accordingly, show cause notice was issued on 27.12.2023, which was replied by the assessee vide written submission dated 28.12.2023. It was submitted that the assessee company during the financial year 2009-10 relevant to A.Y. 2010-11, issued8,25,560 equity shares of face value of Rs.1 per share with a premium of Rs.999 per share worth Rs.82,55,60,000/- which were subscribed by 24 companies and company realized total realization of Rs.82,55,60,000/-. It was also submitted that the case of the assessee was under scrutiny for A.Y. 2010-11, vide order u/s 143(3) of the Act dated 29.04.2013, passed by ITO, Ward 13, Kolkata and the issue of higher capital/ share premium raised by the assessee from 24 subscribing companies had been thoroughly examined, scrutinized and verified by the ld. AO and when nothing wrong was found, the same was fully accepted in the said assessment framed u/s 143(3) of the Act. Pertinent to state that this was the only issue for which the case of the assessee was selected for scrutiny. The assessee also submitt....
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....e raised in respect of sale of shares to the tune of Rs. 42,43,50,000/- as bogus on the basis of seized document AKM-189 (pg 130). The submission of the assessee was forwarded to the learned AO for his comment and the learned AO furnished the remand report in which there was no mention of the issues which were raised by the assessee. The learned CIT(A) noted that the AO has relied on the decision of Jurisdictional High Court in case of Swati Bajaj & Ors. (2022) 139 taxmann.com 352 quoting para 55 to 59 of the said decision in page no. 63 to 65 of the assessment order. The learned CIT(A) further noted that the statement of Shri Abhishek Kumar Munka was provided to the assessee well in advance at the initial stage proceedings and now the objection of the assessee is not tenable and is mere an attempt to escape from the clutches of section 68 of the Act. The learned CIT(A) thereafter discussed the seized document AKM 189 page 130 and discussed the same in the appellate order. Finally, the learned CIT(A) confirmed the order of the learned AO on this issue. 3.3. After hearing the rival contentions and perusing the materials available on record and also taking into account the submiss....
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....licable to the instant case as section 68 of the Act is applicable to the fresh unexplained cash credit and not to the realization of any existing assets. Therefore, the sale of existing assets cannot be treated as unexplained income of the assessee. The ld. AR submitted that the share purchase by the assessee of private unlisted companies were held as investment under the head capital asset shown under non-current asset investment till in the subsequent assessment years. The ld. AR also submitted that replies received from the respective buyer companies by the ld. AO u/s 133(6) of the Act with supporting evidences/ documents were never confronted to the assessee and the ld. AO ultimately came to the conclusion that the money received from the said four companies (as given in para 4.11 were unexplained cash credit while the very sale of investments by other two entities covered in the same search action were accepted as genuine by the department and therefore, on this count along, the addition made by the ld. AO is bad in law and deserved to be deleted. 3.5. The ld. AR also submitted that the assessee was never provided the statement of Shri Abhishek Kumar Munka, an entry operat....
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....opposed the arguments of the ld. AR by submitting that the raising of fund as well as the investments thereof is nothing but part of accommodation entries received by the assessee. The ld. DR submitted that the mere acceptance of particular fact during assessment proceedings, would not ipso facto prove that the same could not be doubted in the subsequent year when the genuineness the transactions came to cloud. The ld. DR submitted that though admittedly these investments were accepted in A.Y. 2010-11 in the assessment proceedings in the order passed u/s 143(3)/ 147 of the Act but the same cannot be bar to treat the said investments as bogus when these were sold in the year of sale. The ld. DR submitted that these accommodation entries were unearthed during a search conducted on Shri Abishek Kumar Munka u/s 132 of the Act and he admitted that he and his associated concerns is providing accommodation entries. Therefore, the addition made and sustained by the ld. CIT (A) after giving a very comprehensive finding needs to be sustained. The ld. DR further prayed that the order of ld. CIT (A) may kindly be upheld by dismissing the appeal of the assessee. 3.8. We have heard the rival ....
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....assessee company during the year were amounting to Rs.68,94,40,000/- to nine companies which have been extracted above. We also find that out of the said sale of 68,94,40,000/-, the ld. AO accepted the sale of investments amounting to Rs.26,50,90,000/- as genuine. We also note that the four companies to whom the shares worth Rs.42,43,50,000/- were sold were appearing in the nine companies as extracted above and the ld. AO in some cases treated the sales of share as genuine and partly as non-genuine. Therefore, how the sale of shares to the same companies could to be treated as genuine as well as non-genuine. In our opinion the said dichotomy in the treatment of sale of shares is unfair and cannot be accepted. 3.11. We also note that the AO accepted the sales of shares by DMP Vanijya Pvt Ltd and Hardco Commercial Pvt Ltd covered in the same search to the same four private companies as genuine while the sale to the same parties were treated as non genuine in the hands of the assessee as is apparent from the following table:- Name of the Companies to whom the shares were sold Assessee DMP Vanijya Private Limited Hardo Commercial Private Limited Bluemotion Infotech Pv....
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....matter from Deepak who is alleged to be main person of Aggarwal Group and without questioning Shri Abhishek Munka or Deepak on AKM 189(Pge 130) and therefore the said seized document has no relevance and is rather a dumb document. The mere matching of certain entries do not legally sanctify a document without other corroborating evidences which are missing Therefore, the addition made on the said statement and without cross-examination is not sustainable in the eyes of law. We also note that the sale of investments, which was out of share capital and was accepted by the department in A.Y. 2010-11, even in the scrutiny proceedings which culminated in assessment order u/s 143(3)/ 147 of the Act, can not be doubted in the year of sale. We also note that out of total sales of investments of Rs. 68,94,40,000/- made by the assessee during the year, the sale of shares/investments to the tune of Rs.26,50,90,000/- were accepted. This shows total non application of mind by the AO during assessment proceedings. Therefore the action of the ld. CIT (A) in confirming the order of the ld. AO is not sustainable in the eyes of law. The case of the assessee find support from the decision of Hon'....
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....sed." 3.15. The said decision of the Hon'ble High Court has been followed by the co-ordinate bench in the case of ACIT Vs. Pawanputra Advertising Private Limited in IT(SS)A Nos. 144 & 145/KOL/2024 and Ors. vide order dated 26.08.2025, the operative part of the same is extracted below:- "7. We have heard the rival contentions and perused the materials available on record including the written submissions dated 21.04.2025 and paper books No. 1 (page No. 1 to 357), paper book no. 2 (page No. 1 to 354 and paper book 3 (Case Laws). We find that the only dispute is sale of part unlisted equity shares to various parties thereby realizing total sales consideration of Rs.11,56,20,000/-. We note that the assessee raised money by issue of equity shares in A.Y. 2008-09 of Rs. 64,85,49,000/-. We also note that entire funds raised were invested in unlisted equity shares in AY 2011-12. We note that the case of the assessee was selected for scrutiny only for this reason and the money raised by the assessee was accepted by the department and no adverse interference was drawn. We note that in A.Y. 2010-11 also, the case of the assessee was selected for scrutiny and all the money shar....
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....e benches followed by the ld. CIT (A) and find that the issue is exactly similar as before us in the present case. The operative part of M/s Ashtvinayak Sales Pvt. Ltd. vs ACIT (supra) extracted below: - 9. We have heard the rival contentions and perused the materials as placed before us. The issue for adjudication before us is in respect of confirmation of addition by ld CIT(A) as made by the AO on the ground that the identity and credentials of the purchasers are suspicious. We observe that the assessee has been in the regular business of purchase and sales of investments over the years as corroborated by the materials placed before us. Even the sales proceeds received during the current financial year were in respect of sale of shares /investments partly out of opening balance and partly out of current purchases as is apparent from the following chart placed before us:- Opening Investment Purchases made during the year Investments sold during the year Closing Balance of Investments 24,81,12,740 106,69,21,561 99,72,36,896 31,77,97,405 9.1. The assessee has also filed movement of investments over the years which showed that the phenomenon ....
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.... the assessment order cannot be taken cognisance of. 7. So far as the original order (extracted above) passed by the Assessing Officer is concerned, we are in agreement with the contentions of the Ld. Counsel for the assessee that the same is a small and cryptic order and the additions have been made by the Assessing Officer in the said order in a mechanical manner without any discussion on merits and without pointing out any justifying material warranting such additions. Therefore, the additions made by the Assessing Officer by way of such an cryptic order are not sustainable as per law. ........ 11. We have considered the rival contentions and gone through the record. We find force in the submissions made by the learned Counsel of the assessee which have been discussed above in detail. We note that it is an admitted fact on record that assessee raised share capital at a premium in FY 2005-06 which was accepted by the AO in scrutiny assessment under section 143(3). The capital so raised was invested in shares of Pvt. Ltd. of various companies. These shares were sold during the year under consideration to different parties, corporate/non-corporate. The sale procee....
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.... 0 12 Sankul Retailers Private Ltd 0 74,49,572 74,49,572 0 13 Alok Financial Services Pvt Ltd 0 8,10,000 8,10,000 0 14 Asankul Cosmetics Pvt Ltd 0 6,55,26,090 6,55,26,090 0 15 Daffodil Plaza Pvt Ltd 0 88,198 88,198 0 16 NAT Communication & Marketing Pvt Ltd 0 1,26,37,632 1,26,37,632 0 17 Alok Pattanayak 0 3,00,000 3,00,000 0 Total 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,634 11.4. Based on the analysis of the above details, it is evident that entire sales ismadefrom purchases & opening stock as under: Breakup of Sale of Shares Amount(Rs.) Breakup of Sale of Shares Amount(Rs.) Sold out of Opening Investment 5,86,73,194 Sold out of Opening Investment 5,86,73,194 Sold out of Investment Purchased During the Year 11,18,86,806 Sold out of Investment Purchased During the Year 11,18,86,806 Total 17,05,60,000 11.5. It is also important to note that the AO has made enquiries from the buyers of the shares sold by the assessee by issuing summons u/s 131 of the Act who have responded and furnished the....
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.... made by the Assessing Officer was far more than the alleged disclosure made by these persons in their retracted statements and hence, no cognizance in fact can be taken for the purpose of the addition. 12.1. We find force in the above contentions of the ld. Counsel in the facts and circumstances of the case. As laid down by the various Higher Courts of the country, the retracted statement can not be made sole basis for making the additions. The Jurisdictional Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Golden Goenka Fincorp Ltd. [2023]148 taxmann.com 313(Calcutta) has held that where assessing officer solely based on statement of assessee's director recorded during search operation treated share application money received by assessee company as undisclosed income and made additions u/s 68 of the Act, since said statement was retracted and there was no cash trail or any other corroborative evidence or investigation brought on record by AO, impugned additions were liable to be deleted. Even the Hon'ble A.P. High Court in the case of "Naresh Kumar Agarwal" (2015) 53 taxmann.com 306 (Andhra Pradesh) has observed that where, in the absence of an....
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....ted in (2015)63 taxmann.com 199 (Jaipur Trib.), the assessee therein, during the search and seizure action u/s 132 of the Act, offered a summary discloser of income as undisclosed and the department accepted the summary surrender of income and thereafter advance tax for the said surrendered of income was also deposited, but thereafter it was contended by the assessee that the surrender was made under threat or coercion and that no incriminating material was found during the search action. The stand of the department was that the admission was voluntary and was not under a mistaken belief of fact or law and that the assistance had enough time to go through the facts of their case, law applicable in their case and take advice from their counsels and advisors before filing the letter of surrender of undisclosed/unaccounted income and that the admission by them was final and binding on them; The co-ordinate Jaipur Bench of the Tribunal, after overall appreciation of the fact and evidences before it, observed that the assessee's surrender was not based on any incriminating material and that the discloser being not voluntary and extracted by the department in creating a coercive situatio....
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....ible evidence, are later retracted by the concerned assessee's while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders. Yours faithfully, 12.5. A perusal of the above circular also shows that it is in the notice of the statutory controlling body of the Income Tax Authorities that the revenue officials are used to take confessional statements from the person searched under....
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....s a vis the facts in the case decided by the coordinate bench supra in group concern. We, therefore, respectfully following the same set aside the order of ld CIT(A) and direct the AO to apply profit of 5% on the sales proceeds of Rs. 99,72,36,896/- which comes to Rs. 4,98,61,845/- and delete the remaining addition of Rs. 94,73,75,051/-. 10. In the result the appeal of the assessee is partly allowed." 9. We have also perused decision by the Hon'ble High Court in ITAT/239/2024 in IA No. GA/2/2024 vide order dated 16th April, 2025, in the case of PCIT Vs. Tulsyan and Sons Private Limited(supra) affirming the order of the tribunal. In the said case the addition made by the ld. AO on account of sale of investment was deleted by the ld. CIT (A) and the Tribunal confirmed the order of the ld. Assessing Officer. The Hon'ble High Court while deciding the issue held as under: - We have heard Mr. Aryak Dutta, learned standing counsel assisted by Mr. Soumen Bhattacharjee, learned standing counsel for the appellant and Mr. J. P. Khaitan, learned senior advocate assisted by Mr. Pratyush Jhunjhunwalla, learned advocate for the respondent. The short iss....