TaxTMI 
TaxTMI 
2026 (7) TMI 491
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....formation received by the Assessing Officer that the assessee derived income on trading in commodities and derivatives. The assessment u/s. 143(3) r.w.s.147 was accordingly completed on 28.03.2013 at an assessed income of Rs. 2,89,670/-, by making an addition of Rs. 2,87,645/-. Subsequently, the A.O. again re-opened the assessment by issuing notice u/s. 148 of the Act on 23.03.2017 after recording reasons to believe that income chargeable to tax at has escaped assessment after taking approval of the competent authority. In response to notice u/s. 148 of the Act, the assessee filed a return of income on 03.10.2017 disclosing total income of Rs. 2,89,670/-. Thereafter, statutory notice u/s. 143(2) was issued on 20.10.2017. Notices u/s 142(1) of the Act along with questionnaire were issued on 7.6.2017 and 1.9.2017 respectively. The assessee furnished written submissions along with the details/information called for by the AO. The objections filed by the assessee on 23.11.2017 to re-opening of assessments were also disposed off 24.11.2017. The AO noted that the assessee issued 60000 equity shares of face value of Rs. 10/- each at a premium of Rs. 482/- per share despite not having any ....
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....ein enquiries u/s. 133(6) were made by the A.O. earlier from such subscriber companies and the A.O. did not find any specific defect or discrepancy whatsoever vis-à-vis the information/details claimed to be received before forming a belief that income chargeable to tax had escaped assessment. We find that there is no whisper of the amount of Rs. 29,51,00,000/ in the reasons recorded and in the reassessment proceedings. The AO did not make any enquiry about the other subscriber companies from which the above share application money/share capital raised during the year. The assessment order does not mention of any such details of such subscriber companies and the transactions with those companies and also no details are given about the same in the assessment order. 5. We also note that the ld. CIT(A) while allowing the appeal of the assessee also discussed and relied on the various case laws such as the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. 320 ITR 561 (SC), decision of Hon'ble Supreme Court dated 14.08.2012 in the case of ACIT vs. Parixit Inds. Ltd., PCIT vs. Meenakshi Overseas Pvt. Ltd. (2017) 5 TMI 1428 (Del.). The ld. CIT(A) w....
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....which is received from M/s.SnowdropVincom Pvt. Ltd. But as contended by the appellant, in the original assessment proceedings, the A.O. had already made enquiries u/s. 133(6) with the above subscriber company M/s.SnowdropVincom Pvt. Ltd. which had also responded and furnished all the details called for and no adverse view was taken on the same. Therefore, the A.O. has merely acted on the basis of input from Investigation Wing, without reference to the assessment record and any further verification or application of mind and reasons recorded are also not based on any tangible material but merely on change of opinion and the reasons recorded and the issuance of notice u/s. 148 does not meet the jurisdictional requirement before issuance of notice u/s. 148. 9.3.16 I have considered the original assessment order u/s. 143(3) r.w.s.147 dated 28.03.2013 and the assessment order u/s. 143(3) r.w.s.147 dated 29.12.2017 under challenge in the instant appeal, the reasons recorded and the disposal of the objections raised by the appellant to the notice u/s. 148 during the assessment proceedings, the written submissions filed by the appellant and the various judicial pronouncements reli....
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....be annulled." 6. Considering the facts and circumstances as discussed above and the ratio laid down in the above decisions, we are inclined to uphold the order of ld. CIT(A) on the legal issue of wrong re-opening without substantive /tangible material and re-opening beyond four years from the relevant assessment year without satisfaction of proviso to section 147 of the Act. The ground no 4 is allowed. 7. The issue raised in the ground no. 2 and 3 of appeal is against the confirmation of addition of Rs. 29,51,00,000/- by the ld. CIT(A) as made by the AO on account of unexplained cash credit u/s 68 of the Act being share capital/share premium. 8. Even on merit also, the ld. CIT(A) allowed the appeal of the assessee. We note that the Assessing Officer had issued notices u/s 133(6) to all such share subscriber companies and the said subscribers companies had furnished the details such as copies of ITRs, PANs, financials, audit reports, bank account extracts etc. and no addition was made on the above issue in the original assessment completed on 28.03.2013 u/s 143(3)/147 of the Act. The case was again reopened after more than 4 years from the end of assessment year. We find th....
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....yering of funds, but there is no evidence brought out in the assessment order to controvert the documentary evidences furnished by the appellant. The AO has not mentioned any details of the any specific information received from FIU-IND in the reasons recorded or even in the assessment order; no details of any such suspicious bank accounts in which cash could be deposited before layering the funds and reaching the appellant has been brought out; no linkage of the same with the appellant company has been brought out; no further enquiries were caused with the share subscriber companies. Thus, the A.O. has also not made any reference to the documents on record in the original assessment proceedings and as furnished by the appellant in the reassessment proceedings now and no specific discrepancies was pointed out or any adverse inference drawn based on the aforesaid documentary evidences furnished before him and AO made no further enquiry/verification in the reassessment proceedings and not demonstrated as to how the appellant has not discharge his onus u/s. 68 and without issuing any show cause notice proceeded to make the above addition of Rs. 29,51,00,000/-. 10.5 In the cas....
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....on is offered, the Assessing Officer is bound to consider the same. Such consideration is guided by sound principles of law. The opinion so formed must be reasonable and based on materials and shall not be perverse. The extent of the power of the Assessing Officer while considering the materials produced by the assessee is very wide. It is a question of examining as to whether the apparent is real. The Assessing Officer is empowered to lift the corporate veil and examine the real nature of the transaction. In the process, he may exercise its power of examining the materials. He may require the assessee to produce further materials if so required. He may seek information from other sources on the basis of the material produced. In the process of enquiry, the assessee has no right of hearing. But the assessee has a right to challenge the conclusion arrived at on the basis of the enquiry made. The assessee may point out the perversity in the finding. It may question the validity of the process undertaken. It may point out that a particular material was not considered. It may also point out that the enquiry made was not reasonable or was half-heartedly done. The process of enquiry is s....
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....e case of the assessee stands on better footing as even when the summons u/s 131 of the Act or letters u/s 133(6) of the Act are not responded the addtion is uncalled for when the assessee has filed all the evidences qua the share subscribers. The case of the assessee finds support from the following decisions:- 10. The Ld. AR relied on the decision of the Hon'ble jurisdictional High Court in the case of PCIT vs. Balaka Vinimay Pvt Ltd (GA No. 2 of 2025) dated 21.07.2025. In this case also, the assessee and the share subscribers had furnished all the relevant details in support of the share application monies before the AO. The AO however disbelieved the explanation since there was non-compliance of summons u/s 131 by the directors of the share subscribers. Taking note of the practical difficulty that the assessee cannot be called upon to produce the share subscribers after a gap of 10 to 12 years, and having regard to the documents placed on record, the Hon'ble High Court dismissed the Revenue's appeal and upheld the order of this Tribunal deleting the addition u/s 68 by observing as under: ".....It is not in dispute that the assessee had filed complete det....
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....s and new shareholders would have taken their place. The learned Tribunal referred to the decision of the co-ordinate Bench in the case of True- Man Consultants Pvt. Ltd. vs ITO in ITA No. 1158/Kol/2023, wherein almost identical issue of unexplained share capital from various share subscribers came up for adjudication and after considering the factual aspect and following the judicial pronouncements, the appeal filed by the assessee was allowed by the Tribunal. The revenue preferred an appeal before this Court in ITAT/203/2024 and by order dated 25th April, 2025, the appeal filed by the revenue was dismissed. Thus, we find that the factual issues have been thoroughly adjudicated by the Tribunal apart from noting that the assessee had been put to multiple levels of scrutiny and the assessee was able to bring on record documents in support of their claim. Therefore, we are of the view that the addition made under Section 68 of the Act was rightly ordered to be deleted. For the above reasons, we find no ground to interfere with the order passed by the learned Tribunal. Accordingly, the appeal fails and the same is dismissed. The substantial questions of law are answe....
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.... Thus, we find that the facts have been examined by the Tribunal and the conclusion has been arrived at and therefore, no question of law, much less substantial questions of law, arises for consideration in this appeal." 12. The decision of the jurisdictional Hon'ble Calcutta High Court in the case of Principal Commissioner Of Income Tax 1 vs M/S Shipra Enclave Pvt Ltd ITAT 94 OF 2025 also squarely applies to the assessee. In this case the facts were that the assessee had raised share capital and premium from fifteen corporate entities. During scrutiny assessment, the assessee produced comprehensive documentary evidence including PAN details, Income-tax return acknowledgements, bank records, and audited financial statements of all subscriber companies. Despite the availability of such material, the Assessing Officer issued summons under Section 131 to the directors of the subscriber companies and, upon their non-appearance, treated the entities as "shell companies" and added 26.22 crore as unexplained cash credit under Section 68, which was affirmed by the CIT(A). The Tribunal reversed the addition after noting that all subscriber companies were active taxpayers who had ....
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.... had confirmed the transactions in response to notices issued under Section 133(6) of the Act. 6. We have heard Mr. Soumen Bhattacharjee, learned Advocate for the Revenue, and Mr. S.M Surana, learned Advocate for the respondent- assessee. 7. Mr. Bhattacharjee strenuously argued that the meagre income declared by the subscriber companies, when contrasted with the high premium paid to acquire the shares of the assessee, leads to an irresistible conclusion that the transactions were mere accommodation entries. He relied heavily on the decision of the Hon'ble Supreme Court in PCIT vs. NRA Iron & Steel (P) Ltd. and contended that the AO was justified in looking behind the "paper trail" to ascertain the true creditworthiness of the investors and genuineness of the transaction. 8. Per contra, Mr. Surana, learned Advocate for the assessee, submitted that as a regulated NBFC, the assessee's financial transactions are subject to stringent oversight by the RBI and the MCA. He pointed out that all fifteen subscribers were active assessees on the records of the Income Tax Department and had duly responded to the notices issued by the AO under Section 133(6) of....
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....lity" cannot be invoked as a tool to disregard a verified and audited paper trail. We also conclude that the ratio in NRA Iron & Steel is applicable only to "phantom" or "non-existent" entities found to be non-traceable upon field inquiry. It cannot be extended to active, traceable taxpayers simply because their investment decisions appear commercially improbable to the Revenue. Equating "traceable investors"with "phantom entities" is a leap in logic that cannot be countenanced. Furthermore, the valuation of shares is a matter of commercial wisdom. Unless the Revenue proves a "live link" showing that the funds originated from the assessee's own coffers, the AO cannot substitute his judgment for that of the marketplace. 13. Upon considering the submissions made on either side and perusing the materials on record, we find that the learned Tribunal has conducted a meticulous factual inquiry. The Tribunal has recorded a specific finding that the assessee had provided "Cast Iron" documentary evidence to establish the identity and creditworthiness of the subscribers. The audited balance sheets of these companies reflected a substantial net worth, which was far in excess of t....