ITO Vs Bluepearl Trading Company Private Limited (ITAT Mumbai)
The Revenue filed an appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai, challenging the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi, dated 19.11.2025, arising from an assessment order passed under Section 144 of the Income Tax Act, 1961, for Assessment Year 2022-23.
The assessee had filed its return of income on 03.11.2022 declaring a business loss of ₹1,98,134. During assessment proceedings, the Assessing Officer issued various notices, and the assessee furnished details and submissions from time to time. The assessment order itself reproduced the synopsis and information submitted by the assessee. Despite the material being available on record, the Assessing Officer made substantial additions.
Firstly, an addition of ₹2,13,30,000 was made under Section 69 by treating investments in unlisted equity shares as unexplained investments. Secondly, the Assessing Officer made an ad hoc disallowance of 10% of short-term borrowings aggregating to ₹263,43,09,943, resulting in an addition of ₹26,34,30,994. Consequently, the total income was assessed at ₹28,45,62,860 as against the returned loss of ₹1,98,134.
Before the CIT(A), the assessee demonstrated that the investments in unlisted equity shares were duly recorded in its books of account and reflected in the financial statements. After examining the record, the CIT(A) observed that Section 69 applies to investments not recorded in the books maintained by the assessee. Since the investments were already reflected in the books, invocation of Section 69 appeared prima facie untenable. However, instead of deleting the addition outright, the CIT(A) directed the assessee to furnish details regarding the immediate source of the investments and supporting evidence relating to the financial capacity and creditworthiness of the lenders, if any. The matter was restored to the Assessing Officer for examination of the fund flow and source of finance. The CIT(A) further directed that if any discrepancy or unexplained credit was found, it could be examined in accordance with law under Section 68.
