Calcutta HC Sustains Deletion of Section 69 Addition for Explained Disclosed Investments

PCIT Vs Kushmanda Financial Consultants Pvt. Ltd. (Calcutta High Court)

Core Issue. Whether the additions made under section 69 read with section 115BBE of the Income Tax Act, 1961, in respect of investments, loans and advances disclosed in the assessee’s balance sheet could be sustained where the ITAT, after examining the bank accounts and audited financial statements, found that the transactions were properly explained and represented balances carried forward from the preceding assessment year. The further issue was whether the Tribunal’s findings gave rise to a substantial question of law warranting interference by the High Court.

Facts of the Case. The assessee, M/s. Kushmanda Financial Consultants Pvt. Ltd., filed its return of income for Assessment Year 2018-19 declaring nil income. The case was selected for scrutiny under the Computer-Assisted Scrutiny Selection (CASS) system for verification of investments, loans, advances and other transactions. During the assessment proceedings, the Assessing Officer noticed credits of Rs. 1,69,69,098 and Rs. 1,68,47,661 in the assessee’s bank accounts and, alleging that the source of the credits had not been satisfactorily explained, treated an aggregate amount of Rs. 3,88,16,759 as unexplained money under section 69 of the Act.

The Assessing Officer also noticed investments in unlisted shares amounting to Rs. 6,74,64,000 and short-term loans and advances of Rs. 12,46,36,329 reflected in the assessee’s balance sheet. Holding that the source of these amounts had not been adequately explained, the Assessing Officer made a further addition of Rs. 19,21,00,329 under section 69 read with section 115BBE. The Commissioner of Income Tax (Appeals) upheld the assessment order, whereupon the assessee preferred an appeal before the Income Tax Appellate Tribunal, Kolkata.