TaxTMI 
TaxTMI 
2026 (6) TMI 350
X X X X Extracts X X X X
X X X X Extracts X X X X
....reassessment are liable to be quashed. 3. The brief facts of the case are that the assessee company was engaged in the business of trading and investment activities. The assessee had raised share capital/share premium during the financial year 2011-12. The money raised was utilized for investments in shares of other companies. The case of the assessee was selected for scrutiny for the assessment year 2012-13. During the course of assessment proceedings, the ld. AO issued notices u/s. 133(6) of the Act, which were complied with by subscribers with supporting evidences. After due verification, the assessment was framed u/s. 143(3) of the Act on 29.09.2014 with no addition in respect of share capital/share premium and thus accepting the returned income. The assessee purchased the investments during F.Y. 2011-12, which were sold during F.Ys. 2012-13 to 2013-14 and invested in quoted shares through stock exchange and small portion of investments was sold in F.Y. 2014-15, i.e. impugned assessment year. Due to change in shareholdings on March, 2019, the assessee became the part of Aggarwal group and an application for merger was filed on 22.12.2020 in the National Company Law Tribunal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terial was found during the said survey. The assessee also referred to survey documents available at page no.738 to 741 of the paper book. The assessee also raised the issue of approval u/s. 148B of the Act being combined and consolidated approval and not the separate approval for each year. The assessee also submitted that notices u/s. 148A(b)/148 of the Act were for sale of investments which were held by the assessee since earlier years and can not be subject matter of proceedings under section 148 of the Act.The ld. CIT (A) brushed aside the contention of the assessee that the assessee was not provided with complete information relied upon by the ld. AO by stating that copy of statement of Shri Abhishek Munka u/s. 132(4) of the Act being substantial evidence was provided to the assessee and thus, dismissed the appeal on the legal issue by upholding the reassessment notice u/s. 148 of the Act as well as the consequent assessment framed. 5. The appellant also submitted that the AO has not brought any corroborating material to link the alleged statement of Mr. Avishek Munka to the transactions undertaken by the appellant company. It was also submitted that the AO has merely reli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erused the provisions under old scheme vis a vis under new scheme in the Act and find that under the new scheme of search/survey, the AO has to issue notice u/s. 148 of the Act. In other words, there need not be any incriminating materials and whether there is any materials warranting additions that has to be examined by the AO during proceedings u/s. 147 of the Act. Therefore, we do not find any merit in the contentions of the assessee that the provisions of Section 148 of the Act for search conducted on or after 1.4.2021 cannot be considered in total oblivion of the fact that no incriminating material was found from the assessee during the course of survey u/s. 133A of the Act. We note that the plea of the assessee does not have force or merit as in this case as the requirement of any incriminating material is not there for re-opening the assessment and issuing notice u/s. 148 of the Act. In our opinion, the AO is under obligation to reopen the assessment the AO has in his possession the materials to the effect the income of the assessee has escaped assessment. In other words the existence of incriminating materials has to be examined during the assessment proceedings and not at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enue has also filed cross appeal raising 9 grounds challenging deleting the addition of Rs. 36,18,50,000 and Rs. 9,04,625/- by the ld. CIT(A) by wrongly holding that assessee to be accommodation entry provider as made by the AO u/s. 68 and 69C of the Act respectively. 10. The facts qua these additions made by the AO in the assessment framed have already been narrated and discussed in para 3 supra and are not being re-iterated. 11. In the appellate proceedings, the ld. CIT (A) partly allowed the appeal of the assessee by taking into account the submission of the assessee, the evidences furnished and also the finding of the ld. AO by treating all these three amalgamating companies including the assessee as shell company and recorded a finding that the funds received by these companies from sale of shares were further transferred and eventually reached in the hands of the ultimate beneficiary. Consequently, the ld. CIT (A) directed the ld. AO to apply .5% towards commission on the total sale consideration of sale of shares of Rs. 36,18,50,000/- and make the addition of Rs. 18,09,250/- accordingly. The addition made by the AO of Rs. 36,1859,000 and Rs. 9,04,625/- were deleted by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Tie-Up Private Limited also sold unlisted equity shares during the impugned financial year which were purchased by them in F.Y. 2011-12 relevant to A.Y. 2012-13. These amalgamating companies have been selling the unlisted equities in all the financial years and the department has accepted the sale of investment as genuine in the summary assessment proceedings. We have also observed in preceding para that merely because the buyer companies received funds from some other companies can not be a ground for doubting the genuineness of the transactions of purchase and sales of investments by the buyers and the assessee including the amalgamating companies respectively. 15. We note that the ld. CIT (A) has treated all these companies including the assessee as shell companies and deleted the addition on the ground that these were only pass through entities and directed the AO to make addition towards the commission income only. However, it was argued before us that these companies were doing genuine business of purchase and sale of shares/investments which was in the normal course of business and can not be treated as accommodation entries in any manner. We also find that the AO noted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de order dated 26.08.2025, wherein it has held as under:- "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 share capital /share premium was accepted. Thereafter the investments were made in private equity shares which were unlisted in A.Y. 2011-12. Similarly 2017-18 the case of the assessee was selected for scrutiny and investments were not dou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 of purchase and sale of shares/investments was regular feature of the assessee's business. This is also undisputed that the assessee compan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 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 proceeds have come in assessee's bank account through banking channel. 11.1. In its normal course of business, the assessee had made purc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 & 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 69,82,13,63 11.4. Based on the analysis of the above details, it is evident that entire sales is made from purchases & opening stock as under: Breakup of Sale of Shares Amount(Rs.) Sold out of Opening Investment 5,86,73,194 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 required details. Summary Statement of the replies made in response to notice u/s. 131 by various buyers (Sale of Shares) is tabulated below: SL No. CORPORATE ASSESSEE Page No. FY 2018-19 1 Bhootnath Commodities Pvt Ltd 1-262 Rs. 1,71,59,300 2 Bluestar Mercantile Pvt Ltd ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances 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 any incriminating material etc. found from the premises of the assessee during the course of search, statement of assessee recorded under section 132(4) would not have any evidentiary value. Similar view has been adopted by the Jaipur bench of the Tribunal in the case of "Shree Chand Soni vs. DCIT" (2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome 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 situation cannot be relied solely to be basis of addition as undisclosed income. The co-ordinate bench of the Tribunal while relying upon various case laws of the higher authorities observed that it is well settled legal position that merely on the basis of a statement which is not supported by the depart....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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 force, pressure or threat and that is why they have made it mandatory that additions solely on the basis on such statements should not be made and that corroborative evidences should be collected or obtained before making such additions. The circular of the CBDT is binding on the revenue officials. In the f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 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) affirmed 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 issue which falls for consideration is whether the learned tribunal was right in affirming the order passed by the Commissioner of Income Tax (Appeals)- 21, Kolkata [CIT(A)] dated 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 Office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sis for such direction to the ld. Assessing Officer. In other words, the ld. CIT (A) has just acted on the presumptions and surmises and thus, presumed that the assessee might have made some profits from sale by investments. In our opinion, the said direction by the ld. CIT (A) is without any substantive basis and therefore cannot be sustained. Accordingly, we set aside the order of ld. CIT(A) to the extent of this direction of making addition @ 5%. Accordingly, the cross objection of the assessee is allowed. 18.1.1. The issue is also squarely covered by the decision of Hon'ble Jurisdictional High Court in case of Principal Commissioner of Income-tax Central 1 vs. Tulsyan and Sons (P.) Ltd. [2025] 174 taxmann.com 37 (Calcutta)[16-04-2025] which has been followed by the coordinate bench while deciding the case in the case of DCIT Vs. Pawanputra Advertising Private Limited,(supra). We therefore, respectfully following the ratio laid down in the above decisions set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. 18.2. In the result, the appeal of the assessee is allowed. 18.3. The appeal of the assessee is allowed and appeal of the Revenue is ....