ITAT Kolkata Deletes Section 68 Addition on Accepted Investment Transactions

Action Tie-up Pvt. Ltd Vs DCIT (ITAT Kolkata)

Section 68 Addition Deleted as Third-Party Statements Uncorroborate; Investment Sale Proceeds Cannot Be Taxed Under Section 68 Without Evidence: ITAT Kolkata

The appeals before the Income Tax Appellate Tribunal, Kolkata comprised cross appeals by the assessee and the Revenue for Assessment Years (AYs) 2015-16 and 2016-17 arising from the orders of the Commissioner of Income-tax (Appeals).

For AY 2015-16, the assessee challenged the reopening of assessment under Sections 147 and 148 of the Income-tax Act, 1961. The assessee, engaged in trading and investment activities, had raised share capital and share premium during FY 2011-12 and invested the funds in shares of other companies. The assessment for AY 2012-13 had earlier been completed under Section 143(3) after verification of the share capital and share premium through notices under Section 133(6), with no additions. Following a change in shareholding, the assessee became part of the Aggarwal Group, and amalgamation of certain companies with the assessee was approved by the National Company Law Tribunal with effect from 1 April 2020. A survey under Section 133A was conducted on the assessee during search proceedings on the Aggarwal Group. Subsequently, notices under Section 148A(b) and Section 148 were issued for AY 2015-16, treating sales of investments as non-genuine and making additions under Sections 68 and 69C.

The Commissioner (Appeals) upheld the reopening, holding that the Assessing Officer possessed information from the Investigation Wing uploaded on the Department’s Insight Portal. The assessee contended that no incriminating material had been found during the survey, that complete material relied upon had not been supplied, that approvals under Section 148B were defective, and that investments acquired in earlier years could not form the basis of reassessment. The Commissioner (Appeals) rejected these contentions and upheld the reassessment.

The assessee further argued that the Assessing Officer relied solely on the statement of Shri Abhishek Munka without any corroborating material linking the assessee to the alleged accommodation entries. According to the assessee, neither documentary evidence nor any cash trail connected it with the alleged transactions, and neither Shri Abhishek Munka nor Shri Sunit Sharma was examined by the Assessing Officer.

The Tribunal rejected the challenge to reopening. It held that under the new scheme applicable to searches and surveys, the existence of incriminating material was not a prerequisite for issuance of notice under Section 148. The Tribunal observed that the Assessing Officer was required to reopen the assessment where material indicated escapement of income and that the sufficiency of evidence was to be examined during reassessment proceedings rather than at the stage of issuing notice.

The Tribunal also rejected the assessee’s challenge based on Section 170 relating to amalgamation. It held that Section 170(1) operated independently and that Section 170(2A), inserted by the Finance Act, 2021, expanded the scope of successor liability rather than restricting the Revenue’s power under Section 170(1). Accordingly, the grounds challenging proceedings in the hands of the successor company were dismissed.

On the merits of the additions, the Commissioner (Appeals) had deleted additions under Sections 68 and 69C while directing that commission income at 0.5% of the sale consideration be assessed, treating the assessee and amalgamating companies as shell entities and pass-through entities. Both the assessee and the Revenue challenged this finding.

The Tribunal noted that the investments had been acquired in earlier years, accepted by the Department in scrutiny assessments under Section 143(3), and that notices issued under Section 133(6) during reassessment had been complied with by purchasers. It held that allegations regarding funds received by purchaser companies from other entities were not relevant in the absence of incriminating material against those companies. The Tribunal further observed that the subsequent striking off of purchaser companies by the Registrar of Companies could not render the earlier sales of investments non-genuine. It also noted that similar sales by the amalgamating companies had consistently been accepted by the Department in earlier years.

The Tribunal found that the sale proceeds had been received through banking channels, the investments originated from earlier years and had never been disputed at the time of acquisition, and the Department had consistently accepted similar sales of investments. It therefore disagreed with the Commissioner (Appeals)’ conclusion that the assessee and amalgamating companies were shell entities.

The Tribunal further held that no incriminating evidence corroborated the statements of Shri Abhishek Munka or Shri Sunit Sharma. It observed that mere statements lacked evidentiary value in the absence of corroborative material and that reliance on third-party statements without granting the assessee an opportunity for cross-examination violated the principles of natural justice. Referring to decisions including Andaman Timber Industries and Kishinchand Chellaram, it held that the additions sustained by the Commissioner (Appeals) could not be maintained.

The Tribunal also relied upon its earlier decision in DCIT v. Pawanputra Advertising Private Limited and noted that the facts were substantially similar. It further referred to the Calcutta High Court decision in Principal Commissioner of Income-tax Central-1 v. Tulsyan and Sons (P.) Ltd., where deletion of an addition under Section 68 relating to sale proceeds of investments had been upheld. Following those decisions, the Tribunal set aside the order of the Commissioner (Appeals) and directed the Assessing Officer to delete the addition.

For AY 2016-17, the Assessing Officer had similarly treated sales of investments by the assessee and amalgamating companies as unexplained cash credits under Section 68 and also made additions under Section 69C. The Tribunal held that the issues were identical to those decided for AY 2015-16 and applied the same reasoning. Accordingly, the assessee’s appeal was allowed and the Revenue’s appeal was dismissed.

Cases Discussed:

• Principal Commissioner of Income-tax Central 1 vs. Tulsyan and Sons (P.) Ltd. [2025] 174 taxmann.com 37 (Calcutta) [16-04-2025].
• PCIT Vs. Tulsyan and Sons Private Limited, ITAT/239/2024 in IA No. GA/2/2024, order dated 16 April 2025.
• DCIT Vs. Pawanputra Advertising Private Limited, IT(SS)A No. 144 & 145/KOL/2024, order dated 26.08.2025.
• Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015] 62 com 3 (SC) / [2016] 38 GSTR 117 (SC) / [2015] 52 GST 355 (SC) / [2015] 314 ELT 641 (SC) [02-09-2015].
• Kishinch and Chellaram vs. Commissioner of Income-tax [1980] 4 Taxman 29 (SC) / [1980] 125 ITR 713 (SC) / [1980] 19 CTR 360 (SC) [16-09-1980].

FULL TEXT OF THE ORDER OF ITAT KOLKATA

These cross appeals preferred by the assessee and by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-21, (hereinafter referred to as the “Ld. CIT(A)”] dated 21.04.2025 & 31.03.2025 for the AYs2015-16 & 2016-17 respectively.

A.Y. 2015-16

ITA No. 1416/KOL/2025 (Assessee)

ITA No. 1731/KOL/2025 (Revenue)

2. The issue in ground no.1 to 3 is against the reopening of assessment u/s 147 read with section 148 of the Income-tax Act, 1961 (hereinafter referred to as”the Act) by issuing notice u/s 148 of the Act, which is in respect of reopening of assessment not being in accordance with law and therefore, the notices issued and entire 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 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 for merger of M/S Pure Vanijya Private Ltd, M/S Attraction Tie Up Private Ltd, and Kavya Dealtrade Private Ltd(hereinafter referred to as “transferor Companies) with the assessee which was duly informed to the Assessing Officer. The application of merger was admitted on 22.7.2021 and necessary directions were given to intimate the department about the said merger. During the pendency of merger i.e. on 17.09.2021 a search and seizure proceedings were conducted on Agarwal group but only survey proceedings were conducted against the assessee u/s 133A of the Act and no incriminating material/documents were found during the said survey. The merger was approved by NCLT vide its order dated 09.03.2022 with effect from 01.04.2020 being the appointed date. Thereafter, the ld. AO issued notice u/s 148A(b) of the Act for the A.Y. 2015-16 on 11.08.2023 seeking to treat the sale of investments of ₹10,00,000/-as not genuine by referring to some alleged post search investigation. The ld. AO treated the sale of investments of ₹ 10,00,000/-as not genuine which were purchased in the F.Y. 2011-12 relevant to A.Y. 2012-13 by the assessee company. The AO also treated the sale of investments to the extent of ₹14.90 crores by Pure Vanjiya, and ₹21,81 crores by Attraction Tie-up Pvt. Ltd. as unexplained cash credit u/s 68 of the Act and added thereby making an addition of ₹36,18,15,000/- to the income of the assessee. The ld. AO also added the commission at the rate of 1.25% on the total sales value thereby making an addition of ₹9,04,625/- as unexplained expenditure u/s 69C of the Act to the income of the assessee in the assessment framed u/s 147 of the Act dated 30.01.2024.

4. In the appellate proceedings, the ld. CIT (A) confirmed the reopening of assessment by dismissing the appeal of the assessee by holding that the ld. AO has in his possession the information for issuance of show cause notice u/s 148A(b) of the Act and the same was based upon the investigation report uploaded by DDIT/ ADIT (Investigation) along with attachments in the insight portal of the Department which contained information relating to the assessee. The assessee submitted before the ld. CIT(A)that the re-assessment proceedings and the consequent order passed by the AO were bad in law since the notice referred to survey proceedings u/s 133A of the Act whereas no incriminating material 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 relied upon Mr. Avishek Munka’s statement whereas in such statement, Mr. Avishek Munka merely mentioned the name of Mr. Sunit Sharma having earned commission on accommodation entries. The AO did not even care to examine either Mr. Avishek Munka or Mr. Sunit Sharma to corroborate the said statement of Mr. Avishek Munka. Moreover, Mr. Avishek Munka’s statement merely mentioned to have earned commission but neither any incriminating evidences in the form of any document/ledger/letter/agreement connecting the appellant company to Mr. Munka had been brought on record to show that Mr. Avishek Munka was controlling such entities or the appellant company or all /some of such entities so named were under his influence or any cash trail has been discovered against the alleged accommodation entries so stated to have been provided by Mr. Munka. The A.R. of the appellant company took us to the statement of Mr. Avishek Munka dated 17.9.2021 [u/s 132(4)) particularly questions No. 13, 14, 15, 16, 17, 18, 19 & 20 of such statement and we find that the said Mr. Avishek Munka merely mentioned that he had given such accommodation entries in lieu of commission. However, we find that no questioning about any document/ ledger/ evidence or even any digital form of evidence to link such Mr. Avishek Munka with the appellant company. In absence of such evidence, AO’s mere reliance on the statement Mr. Avishek Munka has no legal sanctity particularly when AO did not examine such person himself i.e. Mr. Sunit Sharma. The statement of Mr. Avishek Munka which was also obtained during the search of 3rd person unconnected with the appellant company does not have any legal relevance particularly when no cash trail/ corroborating evidence was available and as such the reliance on the statement of such person by A.O/ CIT(A) cannot be considered as legally valid for purpose of making such addition in hands of appellant company.

6. After hearing the rival contentions and perusing the material on record, we find that the assessee has challenged the issuance of notice u/s.148 of the Act and also the assessment framed u/s.147/143(3) of the Act on the ground that the AO has failed to provide copy of the reasons recorded in the proceedings u/s.147 of the Act and also the addition made by the AO are not arising out of the survey conducted u/s.133A of the Act on the assessee. We have perused 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 the stage of issuance of notice u/s 148 of the Act.

7. The appellant has raised at Ground Nos. 4 &5 regarding the validity of the notice u/s 148A(b) and subsequent notice u/s 148 on the premise that notices and the consequent order in respect of the amalgamating companies for A.Y 2015-16 Pure Vanijya Pvt. Ltd. & Attraction Tie Up Pvt. Ltd. and for A.Y 2016-17 Pure VanijyaPvt. Ltd., Attraction Tie Up Pvt. Ltd.& Kavya Deal Trade Pvt. Ltd. is in violation of sec. 170 and such ground was raised by stating that the said amalgamating companies had independent existence during the year relevant to A.Y 2015-16 before its amalgamation w.e.f 01.04.2020. In such respect, the appellant contended that in terms of sec. 170 (2A) only where assessment or re-assessment is “pending” then only such proceedings can be in the hands of successor company i.e. name of Action Tie Up Pvt. Ltd. whereas in the case of the appellant company particularly the amalgamating companies (as mentioned above) no proceedings were pending on the date of amalgamation and hence proceedings initiated in the hands of the successor is bad in law.

8. We have considered the submissions of the appellant, however we find no substance in such argument particularly the appellant’s argument hinges on a narrow reading of “pendency” -suggesting that only a pending assessment qualifies for transfer to successor. However, sec. 170(1) independently provides that where the person carrying on a business is succeeded by another, the predecessor shall be assessed for the income up to succession and successor for income thereafter. This is the primary charging provision operating independently of sub-sec. 2A of sec 170. Indeed 170(2A) was inserted by Finance Act 2021 facilitating any proceedings of assessment or reassessment made in the name of predecessor during the period in which application for business reorganization [amalgamation or similar] and it expands scope of successor liability and does not restrict revenue’s power to assess u/s 170(1) and hence we disagree with the ground so raised in such respect. Consequently the ground no. 4 and 5 are dismissed.

9. The issue raised in ground no 6 of the assessee’s appeal is against the part confirmation of addition of ₹ 18,09,250/- by ld. CIT(A) by way of commission on accommodation entries @.5% on the total amount of ₹ 36,18,50,000/-. The revenue has also filed cross appeal raising 9 grounds challenging deleting the addition of ₹
36,18,50,000 and ₹ 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 ₹36,18,50,000/- and make the addition of ₹18,09,250/-accordingly. The addition made by the AO of ₹ 36,1859,000 and ₹ 9,04,625/- were deleted by the ld. CIT(A) on the ground that the assessee is pass through entity.

12. Now, the assessee has challenged the direction of ld. CIT (A) to apply .5% of the total sale considerations in the hands of the assessee treating the same as accommodation entries while the Revenue has challenged the deletion of 99.5% of the total sale consideration as deleted by the ld. CIT (A).

13. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is a company which belongs to Agarwal group and a search has been conducted on 17.09.2021 as noted herein above on the Aggarwal group. However, the assessee was subjected to survey action u/s 133A of the Act simultaneously. We note that the assessee had purchased some private equity shares of unlisted companies in F.Y. 2011-12 relevant to A.Y. 2012-13 part whereof were sold for a total consideration of ₹10 lacs during the impugned financial year. We also note that the assessment in the case of the assessee company for A.Y. 2012-13 had been framed under section 143(3) of the Act which was taken up for scrutiny proceedings for the reason of raising money by way of share capital/share premium and investment in private equities which were accepted by the ld. AO in the assessment framed u/s 143(3) of the Act. Similar was the position of investments purchased in earlier years and appearing in the books of accounts of the amalgamating companies which were sold during the impugned assessment and subsequent assessment years as noted hereinabove. Even during the assessment proceedings, the notices u/s 133(6)of the Act were issued to the purchaser of shares and most of the purchasing companies duly responded to the notices issued by the ld. AO by furnishing all the details and evidences as called for. So far as the allegation of the AO qua the funds transferred to such buyer companies from some other entities is concerned, the same is of no relevance as those companies have independent existence and no incriminating materials was available with the AO to implicate such companies were brought on record by the Assessing Officer. Merely because some of the purchasing companies were struck off by ROC/MCA in later years cannot be a criteria to treat the sale of investments as bogus.

14. We also note that the amalgamating companies namely; Pure Vanijya Private Limited and Attraction 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 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 that many of the purchaser companies were struck off and in many cases the addresses were not known. However, on the other hand, the counsel of the assessee argued that on the date of occurrence of transactions of purchases/ sale of shares, these companies were very much intact and subsisting. Therefore, the assessee is not responsible for what has happened in future to these companies.

16. We note that the money has transferred through banking channel into the hands of the assessee and similar was the position with regard to amalgamating companies and it is also undisputed that these investments had come from the earlier assessment years and were not disputed by the department in the year of purchases. Moreover, the consistent sale of investments of these companies are being accepted by the department. Therefore, for this reason, we are not in a position to agree to the conclusion drawn by the ld. CIT (A).

17. We also note that no evidence in the form of any incriminating nature has been brought on records by the revenue to corroborate the statements of Shri Abhishek Munka or Shri Sunit Sharma . Mere statement has no sanctity and revenue reliance on the same is misplaced and therefore we do find substance in the statement of Mr Munka and Mr. Sharma. Further such statements has no legal relevance for the reason that no cross examination was provided to the assessee despite the specific request to provide cross examination of Shri Abhishek Kumar Munka and Shri Sunit Sharma , we note that the ld. AO relied on the third party statement,without providing cross examination which is a clear violation of principal of natural justice as has been held by the Hon’ble Apex Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015] 62 com 3 (SC)/[2016] 38 GSTR 117 (SC)/[2015] 52 GST 355 (SC)/[2015] 314 ELT 641 (SC)[02-09-2015]. The case of the assessee is also squarely covered by the decision of Kishinch and Chellaram vs. Commissioner of Income-tax [1980] 4 Taxman 29 (SC)/[1980] 125 ITR 713 (SC)/[1980] 19 CTR 360 (SC)[16-09-1980]. Therefore, the addition made by the ld. AO and sustained by the ld. CIT (A) cannot be sustained.

18. The case of the assessee is also covered by the decision of the co­ordinate Bench in case of DCIT Vs. Pawanputra Advertising Private Limited, in IT(SS)A No. 144 & 145/KOL/2024, vide 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 ₹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 doubted at all. Thus it is clear that over all these years the investments were not doubted by the department. These investments made in the A.Y. 20111-12 were partly sold at cost by the assessee during the instant assessment year which realized ₹11,56,20,000/- which were accepted by the Revenue right from A.Y. 2011-12 till the instant assessment year. We have also noted that the assessee has filed before the ld. AO as well as before the ld. CIT (A) all the evidences qua the purchases and sale of shares. The assessee has filed all the evidences qua the purchasers such as ITRs, names, addresses, audited balance sheets, bank statements, confirmations, etc. proving the identity, creditworthiness of the purchasers and genuineness of the transactions. We note that even the purchasing companies have filed their evidences as called for by the ld. AO comprising all the evidences as stated above. The ld. CIT (A) has recorded a finding of fact that apart from the assessee , purchasing companies had also filed all the evidences before the ld. AO however the ld. AO had not brought on record any independent and substantive evidences pointing out any defect or deficiency in the said evidences. The ld. CIT (A) finally noted that the assessee has proved the identity and creditworthiness of the parties and also the genuineness of the transactions by filing all these documents and thus, discharged its initial burden. Besides, we note that nothing incriminating was found and seized during the course of search.

8. We observe that the ld. CIT (A) also noted that the department has accepted all these investments in the earlier assessment years, even in the scrutiny assessments and had not drawn any adverse interference. Therefore, we do not find any infirmity/anomaly in the appellate order of the ld. CIT (A), who has passed a very reasoned and speaking order after following the decision of Hon’ble Jurisdictional High Court in case of CIT VS. Dataware Private Ltd. (supra) as well as the decision of the co-ordinate benches on the same issue namely; M/s Swarna Kalash Commercial Pvt. Ltd. vs ACIT (supra) & M/s Ashtvinayak Sales Pvt. Ltd. vs ACIT (supra). We have perused the decisions in the above referred two decisions of the coordinate 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:-

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 company had raised share capital (including premium) amounting to Rs.119,84,67,000/- in financial year 2010-11, relevant to AY 2011-12 and the capital so raised in AY 2011-12 was invested in shares/securities and accounted for in the books of accounts which were audited and audited accounts are placed at page no. 102 to 111 of PB Vol.-1. We also note that the assessment for AY 2011-12 was framed u/s 143(3) of the Act vide order dated 17.03.2014 a copy of which is placed at page no. 276 and 277 of PB Vol. -1 and the neither the share capital/share premium nor the investments out of that source were doubted by the AO.

9.2. We also note that similar issue was involved in the case of M/S Swarna Kalash Commercial Pvt Ltd. Vs ACIT ,Central Circle -2(2), Kolkata, a group concern of the Rashmi Group of Companies ,which was also subjected to search u/s 132(1) of the Act in the same search proceedings. We note that the coordinate bench has decided the issue in favour of the assessee in ITA No. I.T.(S.S.)A.No.53/Kol/2022 A.Y.2019-20 vide order dated 01.09.2023 involving the same issue of addition of sale of shares/investments by the AO on the ground that identity and credentials of the purchasers of shares/investments were suspicious. The operative part of the order is extracted as under:

“6.We have considered the rival contentions and gone through the record. First we deal with the issue relating to the undated detailed order passed by the Assessing Officer even after the prescribed date of limitation for passing the assessment order for the assessment year under consideration which is other than the short cryptic order as reproduced above and which did not even bear any Document Identification Number, (in short “DIN”)as mandated vide CBDT Circular No.19 of 2019.

6.1. As mentioned in the said CBDT circular no. 19 of 2019 and as also further held by the Hon’ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. [2023[ 149 taxmann.com 238 (Del), any communication without mentioning of the DIN in its body is to be treated as non-est. Therefore, the subsequent undated assessment order and without any DIN mentioned in the order, and passed after the limitation period prescribed for passing of 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 proceeds have come in assessee’s bank account through banking channel.

11.1. In its normal course of business, the assessee had made purchases and sale of investments as under which is tabulated as under:

11.2. The shares were held by the assessee as investments and were sold at the cost of acquisition by the assessee. Hence, there is no profit/loss on such sale of investment. We also look at the movement of investment held by the assessee, which is tabulated below:

11.3. We also refer to the details of opening stock, purchases, sales and closing stock during the year, placed on record by the assessee:

11.4. Based on the analysis of the above details, it is evident that entire sales is made from purchases & opening stock as under:

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:

–

Further, according to the ld. Counsel, the only piece of evidence that is there in this case is the statement of Sri Sanjib Patwari who is one of the owners of the Rashmi group and Sri K K Verma is the accountant, recorded u/s 132(4) of the Act which have been relied upon by the Assessing Officer. These statements have been retracted the very next day by furnishing affidavits. Subsequent to retraction, no further cross-examination was conducted of these persons. The ld. Counsel has further submitted that even otherwise the addition 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 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” (2006) 101 TTJ 1028 (Jodhpur). The Hon’ble Delhi High Court in the case of “CIT vs. Harjeev Agarwal” in ITA No.8/2004 vide order dated 10.03.16 has observed that a statement made under section 132(4) of the Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. In the case of “Commissioner of Income Tax vs. Sunil Agarwal” (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the course of search, made a categorical admission under section 132(4) that the cash amount seized belonged to him and it represented undisclosed income not recorded in the books of accounts. The assessee did not immediately retract from the above admission but only during the assessment proceedings at a belated stage. In his retraction, the assessee stated that the surrender was made under a mistaken belief and without looking into books of account and without understanding law and that he had been compelled and perturbed by events of search and that the pressure of search was built so much that he had to make the surrender without having actual possession of the assets or unexplained investments or expenses incurred and that there was no such income as undisclosed. The Hon’ble Delhi High Court, after considering the fact and circumstances of the case, while dismissing the appeal of the revenue, observed that though the fact that the assessee may have retracted his statement belatedly, yet, it did not relieve the AO from examining the explanation offered by the assessee with reference to the books of account produced before him. Although, a statement under section 132(4) of the Act carries much greater weight than the statement made under section 133A of the Act, but a retracted statement even under section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement.

12.2 In the case of “Basant Bansal vs. ACIT” reported 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 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 department with cogent corroborative material cannot be a valid basis for sustaining such ad-hoc addition. The co-ordinate Jaipur Bench of the Tribunal (supra) further observed that the issue of existence of pressure, threat, coercion during search proceedings is to be judged by reference to the existing facts and circumstances, human conduct and preponderance of possibilities. During the search proceedings, record relating thereto being in exclusive custody of the searching officers, it is their wish and will which prevails during the fateful period. That it is almost impossible for the assessee to adduce demonstrative evidence of exerting such pressure. The co-ordinate bench of the Tribunal (supra) while holding so, apart from relying upon various decisions of the higher courts has also relied upon the decision of the Tribunal in the case of “Dy CIT vs. Pramukh Builders” (2008) 112 ITD 179 (Ahd.) wherein it has been held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, merely in the absence of proof of pressure, threat, coercion or inducement the statement cannot be held as conclusive and additions cannot be made by solely relying on a statement or a letter.

12.3. The case of the assessee, before us, is on better footing as in this case, there is no delay in retraction of the statement which was done on the very next day by filing affidavits before the Metropolitan Magistrate

12.4. Even the CBDT Letter No.286/2/2003-IT(Inv) dated Oct 3, 2003 in this respect read as under:

“To

The Chief Commissioners of Income Tax, (Cadre Contra) &

All Directors General of Income Tax Inv.

Sir,

Subject: Confession of additional Income during the course of search & seizure and survey operation – regarding

Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees 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 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 facts and circumstances of this case, when seen in the light of above case laws and CBDT circular, additions in this case cannot be said to be justifiably made.

13. All the above details when kept in juxtaposition, there remains nothing to cast an iota of doubt on the sale transaction of shares held by the assessee as investments which it undertook in the ordinary course of its business, more importantly, purchases having made in the current year also. Further, as rightly pointed out by the learned Counsel, both opening balance of investment in shares and the purchases made during the year have not been disputed or doubted by the authorities below so as to bring the entire sale consideration to tax.

14. At this stage, the ld. DR has submitted that the assessee has claimed that it has undertaken this sale transaction by selling the shares at the cost at which it had acquired them in AY 2006-07. At the same time, assessee submits that it has undertaken this transaction in the ordinary course of its business. The ld. DR has submitted that the conduct of business is always with a profit motive, more particularly when the assessee had held these shares for past several years and had also made purchases during the year, deploying its funds. There ought to be certain element of profit embedded in the sale transaction executed which must be brought to tax.

15. Considering the above submission of the ld. DR and taking a holistic view of the facts and circumstances of the case, we find it proper to consider net profit element @ 5% of the sale consideration i.e. 5% of Rs.17,05,60,000/- which comes to Rs.85,28,000/- be subjected to tax. We, accordingly delete the addition to the extent of Rs.16,20,32,000/-made u/s 68 of the Act and sustain the balance of Rs.85,28,000/- towards profit element on the impugned sale transaction of shares undertaken by the assessee.

16. In the result, appeal of the assessee is partly allowed.

9.4. It is clear from the above that the facts in the instant case before us are materially same vis 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) 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 Officer made the addition by invoking section 68 of the Act on the ground that the assessee failed to discharge its onus to establish identity, creditworthiness and genuineness of the transaction in respect of the money received through cash trail. The CIT(A) in course of hearing the appeal called for a remand report from the Assessing Officer and in the said remand report the Assessing Officer has in no uncertain terms accepted the receipt of the impugned sum on account of sale proceeds of investment. The Assessing Officer verified the investment sold which are shown in the balance-sheet for the financial year 2010-11 in Schedule-4 of the balance-sheet and after considering these facts it was stated that the assessee had sold shares held by way of the investment during the year to M/s. Shivshakti Communications and Investment Pvt. Ltd. and Carnation Tradelink Pvt. Ltd. and it is not a receipt of unsecured loan. This fact, apart from other factual details, were considered by the CIT(A) and by an elaborate order dated 10.5.2023 the appeal filed by the assessee was allowed. The tribunal on its part re-examined the factual position and took note of the findings rendered by the CIT(A) and concurred with the same. We also find that the tribunal has also examined thefactual position and took note of the remand report as called for by the CIT(A) which confirmed the alleged sum is on account of sale of investment and not otherwise.

Thus, we find no question of law much less substantial question of law arises for consideration in this appeal. Accordingly, the appeal fails and the same is dismissed. Consequently, the connected application stands closed.

10. Since, the facts of the case before us vis-à-vis, facts of the decisions cited above are substantially similar and therefore, we respectfully following the ratio laid down in the above decisions upheld the order of ld. CIT (A) on this issue by dismissing the appeal of the Revenue.

11. So far as the Cross Objection is concerned, we note that the assessee has challenged the direction of the ld. CIT (A) to the ld. AO to make an addition at the rate of 5% of the total sales consideration towards the net profit embedded in the sales consideration.

12. After hearing the rival contentions and perusing the materials available on record, we find that the ld. CIT (A) has not given any basis 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 dismissed.

A.Y. 2016-17

ITA No. 1200/KOL/2025 (Assessee)

ITA No. 1732/KOL/2025 (Revenue)

19. In A.Y 2016-17, the AO treated the sale of investment by appellant of Rs. 52.85 crore and the amalgamating company Pure Vanijya Pvt. Ltd., Attraction Tie Up Pvt. Ltd.& Kavya Deal Trade Pvt. Ltd. for Rs. 35.01 crore, 28.10 crore and 71.81 crore respectively as unexplained cash credit u/s 68 thereby making addition for such sums. On the line of the proceeding A.Y 2015-16, AO also added the commission @ 1.25% on the total sale value of such statement as unexplained expenditure u/s 69C and similarly framed the assessment order u/s 147 for A.Y 2016-17 as well.

20. The issue raised in these cross appeals are similar to one as decided by us ITA No. 1416/KOL/2025 in Assessee’s appeal and ITA No. 1731/KOL/2025 in Revenue appeal. Accordingly, our decision would, mutatis mutandis, apply to these appeals of assessee and Revenue in ITA Nos. 1200 & 1732/KOL/2025 respectively. Hence, the appeal of assessee is allowed and the appeal of the Revenue is dismissed.

21. In the result, the appeals of the assessee are allowed and the appeals of the Revenue are dismissed.

Order pronounced on 20.05.2026.