DCIT Vs Siddheshwari Vyapaar Pvt. Ltd. (ITAT Kolkata)
Borrowed Satisfaction Dooms Reopening: Pre-2013 Share Capital Case: No Proviso to 68, No Cross-Examination, No Addition
Kolkata ITAT ‘D’ Bench in DCIT vs Siddheshwari Vyapaar Pvt Ltd (ITA No.2280/Kol/2025, AY 2012-13, order dated 23-12-2025) dismissed Revenue’s appeal and upheld the CIT(A)’s order quashing reassessment and deleting ₹6.82 crore addition u/s 68 relating to alleged shell-entity share capital.
The assessee, an NBFC, had originally been assessed u/s 143(3). Reopening was initiated on the basis of Investigation Wing information, alleging fund-routing through certain entities. During reassessment, AO accepted most of the share capital but treated ₹6.82 crore from seven investors as unexplained, mainly due to non/partial compliance to summons u/s 131, despite extensive documentation on record.
CIT(A) quashed the reopening itself, holding that the reasons recorded were factually incorrect, vague and based on borrowed satisfaction, with no independent application of mind and no live link between material and belief of escapement. It was demonstrated that the alleged fund trail mentioned in the reasons did not exist on facts, and the assessee had no transaction with one of the entities named in the reasons. CIT(A) relied on a long line of authorities including Meenakshi Overseas, G&G Pharma, Signature Hotels and Insecticides (India).
ITAT affirmed these findings, holding that reopening founded solely on investigation reports, without verification and specificity, is invalid. On merits as well, Tribunal noted that the assessee had discharged the onus by filing PAN, ITRs, audited financials, bank statements, confirmations and ROC records of subscribers; several subscribers had even undergone 143(3) assessments accepting the transactions. Non-response by some investors could not justify addition u/s 68, particularly when no defect was found in the evidences.
ITAT further reiterated that the proviso to section 68 (source of source) inserted by FA 2012 is prospective and not applicable to AY 2012-13, following Gagandeep Infrastructure (Bom HC) and Lovely Exports (SC). Consequently, Revenue’s appeal was dismissed in toto.
Key takeaway:
