DCIT Vs Bankutramana Bullion and Diamond Pvt. Ltd. (ITAT Agra Bench)
Reopening Without Enquiry, Additions Without Evidence: Agra ITAT Upholds Deletion of ₹7.08 Crore Additions
Summary: The assessee-company was engaged in the business of bullion, dealing in gold & silver. The Revenue filed two appeals challenging the orders of the CIT(A) deleting additions aggregating to approximately ₹7.08 crore made in reassessment proceedings for AYs 2014-15 & 2017-18.
For AY 2014-15, the assessee filed its return declaring income of ₹20,66,451. The original assessment was completed u/s 143(3) after making only a minor addition of ₹50,000. Subsequently, based on suspicious transaction information, the assessment was reopened u/s 147.
The AO alleged that the assessee had received unsecured loans of ₹1,31,50,000 & share capital of ₹1,94,00,000. Holding that the assessee failed to establish the identity, creditworthiness & genuineness of the parties, the AO added both amounts u/s 68 r.w.s. 115BBE.
For AY 2017-18, the AO made additions of ₹3,40,00,000 as unexplained cash deposits & ₹1,42,50,000 as alleged accommodation entries. The CIT(A) deleted all the additions on factual as well as legal grounds. The Revenue therefore approached the Tribunal.
Issues before the Tribunal
The principal issue for AY 2014-15 was whether the CIT(A) was justified in deleting the unsecured loan & share capital additions when, according to the Revenue, the assessee had failed to discharge the burden imposed u/s 68.
For AY 2017-18, the issue concerned the deletion of cash deposits & alleged accommodation entries despite information received from the Investigation Wing.
A common jurisdictional issue was whether the reassessments could be sustained when the transactions had already been disclosed & examined during the original assessments, the AO had not identified any failure to disclose material facts, & the assessee’s objections to reopening were not disposed of through a speaking order.
Revenue’s contentions
The Revenue contended that the assessee had furnished only incomplete details regarding the unsecured loans & share capital. In particular, the bank statements of the lenders or investors were allegedly not produced. Therefore, their financial capacity & the genuineness of the transactions remained unproved.
It was argued that the CIT(A) had wrongly shifted the statutory burden from the assessee to the AO & deleted the additions despite insufficient evidence. The Revenue sought restoration of all additions made u/s 68 & section 115BBE.
Assessee’s submissions
The assessee relied upon extensive documentary evidence contained in paper books of 534 pages for AY 2014-15 & 846 pages for AY 2017-18. It certified that all these documents had already been produced before the AO & CIT(A), with no fresh evidence being introduced before the Tribunal.
For AY 2014-15, the assessee submitted confirmations, PAN details, addresses, ITR acknowledgements, ledger accounts & other particulars of lenders & shareholders. The loan & share capital were also disclosed in the audited financial statements & Form 3CD.
Crucially, the share capital of ₹1.94 crore did not represent a fresh receipt during the relevant year. It arose from the conversion of unsecured loans brought forward from the earlier year. Therefore, treating both the loan & its subsequent conversion into share capital as separate credits resulted in taxation of the same amount twice.
The assessee further submitted that the reasons for reopening were supplied only on 10 March 2022. Though objections were filed on 22 March 2022, the AO completed the reassessment without disposing of them as required by GKN Driveshafts (India) Ltd. v. ITO.
For AY 2017-18, the assessee explained that cash deposits of ₹3.40 crore arose from regular bullion sales & represented merely 0.264% of total sales of ₹1,284.41 crore. Regarding the alleged accommodation entry of ₹1.425 crore, the AO did not identify who paid the amount, when it was paid or where it appeared in the assessee’s bank accounts.
Tribunal’s findings & legal reasoning
The Tribunal found that the assessment orders did not meaningfully discuss the voluminous evidence furnished by the assessee. The AO merely recorded that the assessee had filed its computation, audit report & other documents, without identifying any specific defect.
In contrast, the CIT(A) had exhaustively examined the material & provided categorical factual findings. The unsecured loans & share capital were fully reflected in the audited accounts & had already been considered in the original scrutiny proceedings. There was no failure by the assessee to disclose fully & truly all material facts.
The Tribunal agreed that the share capital arose through conversion of earlier unsecured loans & that no fresh share capital was received during AY 2014-15. Consequently, no addition could be made as if a new credit had arisen during that year.
The AO was also granted opportunities during the appellate proceedings to furnish comments or a remand report, but failed to controvert the assessee’s evidence.
The Tribunal further held that failure to dispose of the objections to reopening violated the binding procedure laid down by the Supreme Court in GKN Driveshafts. The reassessments also appeared to involve re-verification of matters already examined rather than fresh tangible material establishing escapement of income.
For AY 2017-18, the cash deposits were supported by the scale of regular business sales, while the alleged accommodation entry was not traced to any specific payer, date or bank transaction. The Tribunal therefore found no factual or legal error in the CIT(A)’s orders & dismissed both Revenue appeals.
Practical implications
The ruling confirms that Investigation Wing information cannot substitute an assessee-specific enquiry. Before invoking section 68, the AO must examine the documents furnished & identify concrete deficiencies.
Conversion of an existing loan into share capital cannot be treated as a fresh cash credit in the year of conversion. Similarly, cash deposits arising from disclosed business turnover cannot be labelled unexplained without examining sales records & cash books.
The decision also reinforces that objections to reopening must be disposed of by a separate speaking order before completing reassessment. Most importantly, reassessment cannot become a mechanism for reviewing transactions already disclosed & examined during original scrutiny without fresh tangible material or failure of disclosure.
Cases Discussed
- GKN Driveshafts (India) Ltd. v. ITO [259 ITR 19 (SC)]
- Income-tax Officer v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC)
- Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC)
- Toyota Motor Corporation vs. Commissioner of Income Tax (2008) 306 ITR 52 (SC)
- Income-tax Officer v. Kayathwal Estate (P.) Ltd. [2022] 139 taxmann.com 317 (SC)
- Principal Commissioner of Income-tax v. Bairagra Builders (P.) Ltd. [2024] 164 taxmann.com 162 (Bombay)
- Alankar Promoters LLP v. Income-tax Officer [2024] 167 taxmann.com 594 (Delhi)
- Commissioner of Income-tax, Delhi-VI v. Usha Stud Agricultural Forms Ltd., 301 ITR 384 (Delhi)
- Deputy Commissioner of Income-tax Vs. Amod Petochem (P) Ltd., 307 ITR 265 (Gujarat)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, AGRA (DB) BENCH, AGRA
The facts and issues involved in both these appeals are almost identical, hence, for the sake of convenience and brevity, these appeals are being decided by this common order. The facts of ITA No. 570/Agr/2025 are only being narrated as under.
ITA No. 570/Agr/2025
2. This appeal is directed against the impugned order dated 17.10.2025 passed in appeal No NFAC/2013-14/10124985 by the ld. Commissioner of Income Tax (Appeals), NFAC(Delhi) [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), wherein ld CIT(A) has deleted the additions made by the assessing officer.
3. The facts in brief state that the appellant assessee is engaged in the business of bullion, dealing in both gold and silver. Assessee company filed return of income for A.Y. 2014-15 on 28.11.2014, declaring total income of Rs. 20,66,451/-. Subsequently the case was selected for scrutiny under CASS. The assessment was completed on 28.12.2016, assessing total income of Rs. 21,16,450/-. Some suspicious transactions were noticed and it was found that the assessee has taken unsecured loan of Rs. 1,31,50,000/- during F.Y. 2013-14 relevant to A.Y. 2014-15 and assessee was also found in receipt of share capital of Rs. 1,94,00,000/-. The case was reopened u/s 147 by issuance of notice u/s 148 of the Act dated 31.03.2021 after obtaining prior approval of the competent authority u/s 151 of the Act. Assessee filed return in compliance of notice u/s 148 of the Act on 02.09.2021, declaring original income. Statutory notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee, seeking details regarding above referred unsecured loan and receipt of share capital with documentary evidence. Assessee furnished computation of income and audit report etc., however, the assessing officer was not satisfied with respect to the identity and capacity of creditor, and genuineness of the transaction and added the said unsecured loan of Rs. 1,31,50,000/- and the share capital of Rs. 1,94,00,000/- as unexplained money in the total income of the assessee u/s 68 r.w.s 115BBE of the Act, vide assessment order dated 29.03.2022 passed u/s 147 of the Act.
4. Aggrieved, assessee preferred an appeal before ld CIT(A), who examined assessee’s case from factual and legal point of view. Ld CIT(A), after examining the case on merit, observed that the shares were issued by conversion of unsecured loan and there was no receipt of share capital during the year under consideration and deleted the additions made by the assessing officer. While examining the case from legal point of view, ld CIT(A) found that the reasons for reopening the assessment order u/s 147 of the Act were provided to assessee on 10.03.2022. The objections were filed against the reasons recorded on 22.03.2022, however, the assessing officer proceeded to complete the assessment without first disposing of the objections of the appellant assessee in view of the directions of Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [259 ITR 19 (SC)], wherein it was held as under:
“We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income Tax Act is issued, the proper course of action for the assessee is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the assessee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.”
5. Appellant revenue has preferred this appeal on the following grounds:
“1. “Whether the CIT(A) has erred in law and on the facts and in the circumstances of the case in deleting the additions of 1,31,50,000/- and ₹1,94,00,000/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961, by misapplying the settled legal position that the onus lies upon the assessee to independently establish the identity of the lender/investor, their creditworthiness, and the genuineness of the transactions.”
2. “Whether the CIT(A) has erred in law and on the facts and in the circumstances of the case in deleting the addition of 1,31,50,000/- made under section 68 of the Act, without appreciating that the assessee failed to discharge the statutory onus cast upon it, inasmuch as only partial and incomplete details were furnished and no bank statements of the alleged lender were produced to establish creditworthiness and genuineness of the transaction.”
3. “Whether the CIT(A) has erred in law and on the facts and in the circumstances of the case in deleting the addition of Rs. 1,94,00,000/- made under section 68 of the Act, by ignoring material evidence on record and without appreciating that the assessee failed to furnish bank statements and other primary evidences of the alleged investors.”
6. Perused the records and heard ld CIT(DR) for the appellant revenue and ld representatives for the respondent assessee.
7. On the basis of aforesaid grounds raised by the revenue, the main point for determination under appeal is as to whether ld CIT(A) has erred in deleting the addition of Rs. 1,31,50,000/- as unsecured loan and Rs. 1,94,00,000/- as share capital money added by the assessing officer u/s 68 r.w.s. 115BBE of the Act, ignoring the fact that lender’s identity, credit worthiness and genuineness was not established?
8. Ld CIT(DR) for the appellant revenue has submitted that the identity, credit worthiness and genuineness of the impugned transaction with respect to the said unsecured loan of Rs. 1,31,50,000/- and share capital of Rs. 1,94,00,000/- was not explained by the assessee. The impugned order cannot thus be sustained. Prayed to allow revenue’s appeal and confirm the assessment order.
9. Ld representatives for the respondent assessee has submitted that ld CIT(A) has rightly deleted the aforesaid additions after analyzing assessee’s entire documentary evidence and prayed to sustain the impugned order.
10. We notice that the appellant assessee has filed detailed paper books comprising 534 pages. The appellant assessee has certified that the documents contained in the paper book were all available before the assessing authority and the appellate authority as well. The assessee’s paper book does not contain any new evidence before this tribunal. We notice that the assessment order does not have any mention in respect of the various documentary evidences produced during the assessment proceedings. It simply observes that the assessee furnished only computation of income and audit report etc. The first appellate authority has, however, exhaustively discussed assessee’s entire documentary evidence produced during the assessment proceedings and has given categorical finding in respect of the issues involved. The relevant part of the impugned order is reproduced as under:
“7.1 I have carefully considered the facts of the case, grounds of appeal, assessment order passed by the assessing officer and written submissions uploaded by the appellant. The ground of appeal wise decision on the appeal preferred by the appellant is as follows-
The primary issue in dispute is the addition of Rs. 1,31,50,000/- on account of unsecured loan and Rs 1,94,00,000/- on account of share capital made by the Assessing Officer under section 68 of the Act, treating both the amounts as unexplained credits, and taxed under section 115BBE of the Act. The grounds of appeal no. 1 to 5 are interrelated and are adjudicated together. In these grounds, the appellant has submitted that:-
“1. The Learned Assessing Officer erred in law and on facts by reopening a completed assessment without proper application of mind and violated the principles laid down for reopening of assessment by various judicial pronouncements.
2. The Learned Assessing Officer erred in law as well as facts by not considering the submissions made in response to the show cause notice and by simply reproducing the show cause notice as assessment order thus failing to pass a speaking order.
3. The Learned Assessing Officer erred in law and on facts by making an addition unsecured loan of Rs. 1,31,50,000/- under section 68 of the Income Tax Act, 1961, without properly appreciating that the unsecured loan received by the assessee was duly supported by sufficient documentary evidence.
4. The Learned Assessing Officer erred in law and on facts in making an addition of share capital of Rs. 1,94,00,000/- under section 68 of the Income Tax Act, 1961, by treating the share application money as unexplained cash credit, without properly appreciating the fact that the share application was mere conversion of unsecured loan.
5. The Learned Assessing Officer erred in law and on facts by not disposing off the objections raised in response to the reasons recorded before issuing the notice u/s 148 of the Act.”
The facts reveal that the appellant is engaged in the regular business of trading in bullion and jewellery and the appellant had got it’s books audited as per Section 44AB of the Act and original proceedings u/s 143 (3) of the Act were completed on 27.12.2016 in which no additions on these two accounts were made after due verification and only a minor addition of Rs 50,000/- was made due to Kacha bills etc in ‘vehicle running and maintenance expenses’ head.
The appellant has argued that the complete details related to the unsecured loan and share capital were provided to the assessing officer during the course of original assessment proceedings and in this regards the details have been mentioned at various pages in paper book submitted also with their reference in written submission particularly at page iii and page xvii of the written submission of the appellant. Further, the complete details of loans and share capital was also available in the financial statements and form 3CD which was also available with the department. It is seen that there is no failure on the part of appellant to disclose fully and truly all material facts and the assessing officer has also not brought on record any material to controvert the arguments of the appellant at any stage, in reasons recorded by him or in assessment order or even during remand proceedings as discussed ahead, as to what was not disclosed by the appellant based on which the reassessment proceedings were initiated. The appellant has further submitted that the first proviso in section 147 of the Act as applicable at the time of issuance of notice provides that where an assessment under sub-section 3 of section 143 has been made for the relevant assessment year (as done in the instant case), no action shall be taken under section 147 of the Act after the expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year.
The appellant has quoted various case laws in this regard like the hon’ble SUPREME COURT OF INDIA in case of Income-tax Officer v. LakhmaniMewal Das (1976) 103 ITR 437 (SC) has held as under:
“Whether reasons for formation of belief contemplated by section 147(a) for reopening of assessment must have rational connection with or relevant bearing on formation of belief, and rational connection postulates that there must be direct nexus or live link between material coming to Income-tax Officer’s notice and formation of his belief that there has been escapement of assessee’s income from assessment in particular year because of his failure to disclose fully and truly all material facts – Held, yes Whether duty cast upon assessee is to make true and full disclosure of primary facts at time original assessment, and it is for Income-tax Officer to draw correct inference from primary facts -Held, yes Whether if Income-tax Officer draws inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment – Held, yes”
7.2 The reopening of the assessment on the basis of an STR and investigation regarding the unsecured loans and share capital has been contested by the appellant. The present reopening has been triggered by the allegation that the appellant has raised unsecured loans amounting to Rs 1,31,50,000/- and share capital amounting to Rs 1,94,00,000/-. The appellant has submitted that the information related to the unsecured loan and share capital was submitted before the assessing officer during the original assessment proceedings u/s 143(3) of the Act. The details related to the unsecured loans and share capital was also available in the financial statements of the appellant. The appellant has argued that the learned assessing officer has failed to apply his mind and has proceeded to open the assessment merely on the basis of information uploaded in insight portal. The learned assessing officer ignored the fact that the assessment had already been completed and the details related to the case were already verified.
The appellant has quoted various case laws in this regard likethe Hon’ble Supreme Court in case of [2010] 187 Taxman 312 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. has held that Assessing Officer has power to reopen, provided there is ‘tangible material’ to come to conclusion that there is escapement of income from assessment; reasons must have a live link with formation of belief. The concept of ‘change of opinion’ must be treated as an in-built test to check abuse of power by Assessing Officer.
Further, the appellant has also relied on various other judicial decisions which also are applicable in the present case which have been perused as submitted in written submission.
7.3 It is further seen that the assessing officer has failed to controvert the submissions of the appellant, as he has not given reasoning for not relying on the evidence submitted by the appellant. The assessing officer has to pass a speaking ordet after considering the submissions made by the appellant. The appellant has further submitted that in Toyota Motor Corporation vs. Commissioner of Income Tax (2008) 306 ITR 52 (SC), it was held by the Supreme Court:
“10. It is also necessary for the parties to know the reasons that have weighed with the adjudicating authority in coming to a conclusion. The order passed by the AO should be a self- contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law.
11. We find that the order passed by the AO is cryptic, to say the least, and it cannot be sustained. The Tribunal cannot substitute its own reasoning to justify the order passed by the AO when the AO himself did not give any reason in the order passed by him.”
7.4 In respect of the unsecured loans, the appellant has submitted that the details of the unsecured loans were submitted to the assessing officer during the course of present assessment also. The appellant has submitted that the unsecured loans were received in the regular bank account of the appellant and the appellant has also submitted confirmations and ITR of the lenders before the assessing officer.
The appellant, in response to the show cause notice, submitted the following submissions which was placed at page no 45 of the paper book as follows:
1. In above notice it is mentioned that assessee has not submitted any detail. It seems you have not considered the reply submitted as assessee on 23.03.2022 vide Acknowledgement No. 41019769123032022 along with the reply we have submitted the document in support of
Unsecured Loan
(1) Copy of unsecured loan holder
(2) Confirmation along with PAN, Address and Particular of amount
(3) ITR Acknowledgment
Share Capital
(1) Copy of Account
(2) Confirmation of Share holder
(3) List and there PAN No., Address, Etc.
The Above there documents has been uploaded on Portal along with other detail.
The Assessing Officer has failed to point out any defect in the submissions of the appellant despite various submissions and the fact that the issue has already been examined in the original assessment proceedings u/s 143(3) of the Act. Hence the appellant further submitted that no addition can be made of the unsecured loans in the proceedings u/s 148 of the act without bringing on record any substantial material.
The appellant has relied on the judgement of hon’ble Supreme court in case Income-tax Officer v. Kayathwal Estate (P.) Ltd.* [2022] 139 taxmann.com 317 (SC) the Hon’ble SUPREME COURT OF INDIA has held as under:
“Section 68, read with section 148, of the Income-tax Act, 1961 Cash credit (Unsecured loans) -Assessment year 2012-13 During year, assessee-company received unsecured loan of certain amount from one RS – Assessee filed its return of income and same was selected for scrutiny and an assessment order was passed – After four years, Assessing Officer issued a reopening notice on ground that loan transaction made by assessee with RS was a bogus transaction provided as an accommodation entry by RS, which was a paper concern company, managed by one PJ who was an accommodation entry provider – It was noted that assessee had furnished all details with respect to loan transactions as well as interest paid on loans during original scrutiny assessment – It had also submitted acknowledgement of return of income, bank statements of RS from whom loan was taken -Thus, information as mentioned in reasons recorded, could not be termed as tangible material as fact about loan was very much available with department at time of scrutiny assessment – Further, admittedly loan was subsequently paid back by assessee with interest after deducting TDS thereon -High Court by impugned order held that, on facts, it could not be said that assessee had withheld primary material and failed to disclose truly and fully all material fact during original assessment, thus, impugned reopening notice issued against assessee after four years from relevant assessment year was unjustified – Whether SLP filed against impugned order of High Court was to be dismissed – Held, yes [Para 2] [In favour of assessee]”
Further, the appellant has furnished following judgments in support of its arguments:
In the case of Principal Commissioner of Income-tax v. Bairagra Builders (P.) Ltd. [2024] 164 taxmann.com 162 (Bombay) the Hon’ble HIGH COURT OF BOMBAY has held as under:
“Section 68 of the Income-tax Act, 1961-Cash credit (Loans) – Assessment years 2007-08 and 2012-13- Assessee-company took unsecured loans from two companies On basis of statement of one PKJ recorded during search and seizure operation that he had provided accommodation entries to assessee, Assessing Officer treated said loans as fake – Whether since Assessee had submitted all ‘evidence to substantiate loans in question, including confirmation from creditors and loans were taken and repaid through banking channels, Assessing Officer was not justified in treating said unsecured loan as fake and making addition of interest paid on said loan to assessee’s income – Held, yes [Para 8] [In favour of assessee)”
In the case of Alankar Promoters LLP v. Income-tax Officer*[2024] 167 taxmann.com 594 (Delhi) the Hon’ble HIGH COURT OF DELHI has held as under:
“Section 68, read with section 147, of the Income-tax Act, 1961 Cash Credit (Reassessment) Assessment year 2012-13 Assessing Officer initiated reassessment proceedings in case of assessee-company on ground that amount shown outstanding as unsecured loan in balance sheet was unexplained and, thus, chargeable to tax under section 68 – It was found that assessee had in his balance sheet showed said unsecured loan of Rs. 5 lakhs and there was neither any allegation nor any material to even remotely suggest that assessee had earned income chargeable to tax, which was camouflaged as an unsecured loan and reflected in its books of account – Whether since there was no material to indicate that Assessing Officer had any ground to believe that loan was chargeable to tax under Act, impugned reassessment proceedings initiated beyond period of four years was to be set aside Held, yes [Paras 30 to 36] [In favour of assessee]”
7.5 The assessing officer made addition of Rs 1,94,00,000/- by alleging that the appellant had raised the share capital during the year. The appellant has submitted that the appellant had submitted in the original assessment proceedings as well as the present assessment proceedings that the share capital was raised by conversion of unsecured loan carried forward from last year and there was no fresh credits received by the appellant during the year. Thus, no addition can be made when no fresh credits is received during the year as per the ratios of following judicial decisions.
The Commissioner of Income-tax, Delhi -VI, vs. Usha Stud Agricultural Forms Ltd, 301 ITR 384 (Delhi), Hon’ble Delhi High court has held as under:
“Section 68 of the Income-tax Act, 1961 Cash credits Assessment year 1999-2000 – During assessment proceedings, Assessing Officer noticed that assessee had shown certain amount as advance from one ‘B’ – As assessee failed to file confirmation from B, Assessing Officer made addition of that amount under section 68 – On appeal, Commissioner (Appeals) deleted addition on ground that said cash credit was appearing in books of assessee over past four to five years and, thus, it was not fresh credit entry pertaining to relevant assessment year – Tribunal dismissed appeal filed by revenue -Whether finding recorded by Commissioner (Appeals) was a finding of fact and, as such, no fault could be found with order of Tribunal in endorsing decision of Commissioner (Appeals) – Held, yes”
In the case of Deputy Commissioner of Income-tax Vs. Amod Petochem (P) Ltd, 307 ITR 265 (Gujarat) Hon’ble Gujarat High court has held as under:
“Cash Credits appearing in books of predecessor entity on 16-1-1985, which was taken over by assessee, could not be assessed in hands of assessee when assessee was incorporated only on 14-2-1985. The Assessing Officer held that deposits amounting to Rs. 1,61,895 were not, explained satisfactorily by the assessee out of unsecured loans amounting to Rs. 8,24,895, and hence, he added the sum of Rs. 1,61,895 under section 68. The Tribunal allowed the assessee’s appeal for the reason that, admittedly, as noted by the Assessing Officer, credits were introduced in the books of account of the assessee-company on 16-1-1985 while it was undisputed that the assessee-company was incorporated on 14-2-1985. So, prior to 14-2-1985, the entity in whose case the credits were introduced, was a different and distinct entity from the assessee company.”
The appellant has also submitted that the confirmation and ITR of the parties to whom shares were issued were also submitted before the assessing officer and no discrepancy was pointed by the assessing officer and still the assessing officer proceeded to make addition by treating the share capital as unexplained u/s 68 of the Act without giving any cogent arguments for the same in the show cause notice or in the assessment order.
7.6 The appellant has further submitted that several written requests were made to the Ld. Assessing Officer seeking a copy of the reasons recorded for reopening the assessment under section 147 of the Income-tax Act, 1961. The reasons for reopening were eventually provided to the appellant at the end of the assessment i.e on 10.03.2022. The appellant submitted that detailed objections were filed against the reasons recorded vide its submission dated 22.03.2022( as perusal of paper book of appellant show this letter has been placed at paper book page number 59-60). The. assessing officer failed to dispose off the objections of the appellant and proceeded to complete the assessment without disposing off the objections of the appellant through a speaking order. It has been seen that nothing has been mentioned regarding submission and consequent disposal of objections in the assessment order too.
The assessing officer failed to comply with directions of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO [259 ITR 19 (SC)], wherein it was held as under
“We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.”
7.7 On the basis of above elaborate discussion, the issues that have eventually emerged are that the assessment for the year was already completed u/s 143(3) of the Act, and the appellant had submitted the details related to the unsecured loan to the assessing officer. The appellant had also submitted to the assessing officer that the shares had been issued by the conversion of the unsecured loans. The assessment order was passed after considering the unsecured loans and the share capital raised during the year making minor addition on some other account and on these issues after examination of records, the submission of the appellant was accepted by the assessing officer. Subsequently, a notice u/s 148 of the Act was issued by the assessing officer to verify the transactions already considered in the proceedings u/s 143(3) of the Act, and the assessing officer primarily relied on the report from the investigation wing only to initiate reassessment proceedings. The notice u/s 148 of the Act had been issued just for re-verification of already considered loans and share capital, as alleged by the appellant and which could not be controverted, at any stage by the assessing officer. The unsecured loans and share capital were duly reflected in the audited financial statements as well as in the assessment proceedings u/s 143(3) of the Act, so prima facie there was not any failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment. The assessing officer too in his reasons recorded has not pointed out any such failure on the part of the assessee in light of the Judgement in Hon’ble Supreme court in case of Income Tax officer Vs LakhmaniMewal Das as quoted by the appellant along with other judgments in this regard carrying same ratio as mentioned above. The appellant had submitted the details of unsecured loan to the assessing officer during the assessment proceedings and the assessing Officer failed to discuss the merits of the submissions of the appellant and proceeded to make addition without bringing any material on record. The assessing officer summarily rejected the submissions of the appellant in a non-speaking order without discussing the contents of the submissions of the appellant thereof as the perusal of Para 5 and 5.1 of the assessment order reveals. The appellant pointed out that the shares were issued by conversion of unsecured loan and there was no separate receipt of share capital during the year. The assessing officer did not appreciate that the addition of the amounts not credited in the bank account during the year could not have been made in the present proceedings specifically when the proceedings for AY 2013-14 were also open before the assessing officer where the veracity of claims of the appellant in this regard could be examined and accordingly decided. By making the addition of unsecured loans and share capital as well, the assessing officer has taxed the same amount twice, which is not as per the law.
It is further seen that the assessing officer failed to provide the reasons recorded while issuing notice u/s 148 of the Act despite repeated requests made by the appellant. The reasons were provided at the end of the assessment to the appellant and even then, the appellant had filed objections in respect of the reasons recorded by the assessing officer. The assessing officer failed to dispose of the objections of the appellant which is contrary to the ratio laid down by the Hon’ble Supreme Court in case of GKN Driveshafts (India) Limited and the principle of natural justice. (Page no. 56 to 60 of the paper book have been perused in this regard along with the relevant Para no 8.1 at Page xxviii of the written submission and the relevant letters of objections etc. have been examined and forwarded to assessing officer for comments as discussed in next Para). Further, the perusal of the assessment order shows that the assessing officer simply mentioned “considered but not found to be tenable” and added the amounts without giving any cogent reason in the assessment order for not accepting the reply of the appellant on these accounts.
Complete submissions of the appellant along with it’s contentions on merit of the case as well as legal arguments were forwarded to the Assessing officer along with the revised grounds of appeal and letter/reminders were issued on 04.08.2025, 27.08.2025 with final show cause notices on 09.09.2025 and 23.09.2025 for comments if any for which no reply has been received till date despite repeated detailed letters/reminders. In view of the totality of legal and factual position of the case and based on above discussion, the addition of Rs 1,31,50,000/- on account of unsecured loan and Rs 1,94,00,000/- on account of share capital made by the assessing is hereby deleted and the ground of appeal no 1 to 5 are allowed.”
11. We notice that in the instant case, the complete factual details of loans and share capitals were available in the financial statements and audit reports in Form 3CD. There was no failure on the part of the assessee to disclose any material facts, however, the assessing officer failed to bring on record any material even during the first appellate proceedings when the opportunity was granted by the ld CIT(A) to the assessing officer by way of remand report. Ld CIT(A), on the basis of the evidence available on record, rightly concluded that the shares were issued by conversion of the unsecured loans and there was no separate receipts of share capitals during the year under consideration. The unsecured loan and share capital was duly reflected in assessee’s audited financial statements even during the earlier assessment proceedings conducted u/s 143(3) of the Act. Ld CIT(A) also rightly concluded that there was non compliance of the directions issued by Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. (supra) as assessee’s objections against the reasons recorded were not disposed of before passing the assessment order. Ld CIT(A), thus, left no stone unturned before arriving at the conclusion to delete the impugned additions. The aforesaid point is accordingly determined in negative against the appellant revenue and in favour of the respondent assessee. The revenue’s appeal is thus liable to be dismissed.
ITA No. 571/Agr/2025
12. This appeal is directed against the impugned order dated 10.10.2025 passed in appeal No NFAC/2016-17/10124999 by the ld. Commissioner of Income Tax (Appeals), NFAC(Delhi) u/s. 250 of the Income Tax Act, 1961, wherein ld CIT(A) has deleted additions of Rs. 3,40,00,000/- as unexplained cash deposit and Rs. 1,42,50,000/- received from accommodation entries made vide assessment order dated 29.03.2022 u/s 147 of the Act. The voluminous documentary evidence consisting of 846 pages in assessee’s paper book are on record with assessee’s certification that the same were also filed during the assessment proceedings and during the first appellate proceedings as well.
13. In the facts of this case also, ld CIT(A) observed that the above said two additions were made by Assessing Officer without duly considering the reply of assessee which clearly stated that the cash of Rs. 3,40,00,000/- pertains to assessee’s business and was generated from sales and constituted merely 0.264% of total sales of Rs. 12,84,41,27,889/- during the year under consideration. As regards unexplained credit amounting to Rs. 1,42,50,000/-, the assessing officer simply relied on investigation wing and failed to ascertain the transaction of Rs. 1,42,50,000/- as to who and when paid the amount to assessee. Assessing Officer failed to point out this transaction in bank account of the assessee. Ld CIT(A) further found that assessing officer also failed to dispose of the objections of assessee against reason for reopening before passing assessment order. The aforesaid issues were also considered during the earlier assessment proceedings completed u/s 143(3) of the Act and the non-compliance of Apex Court’s direction in GK Driveshafts (India) Ltd. (Supra) etc. also exists in this case. Our findings as noted hereinabove shall mutatis mutandis apply in this case also. We do not find any error of fact or law in the impugned order passed by the ld CIT(A), thus, the impugned order is sustainable. This revenue’s appeal is also liable to be dismissed.
14. In the result, both the revenue appeals viz ITA No. 570/Agr/2025 and ITA No. 571/Agr/2025 stand dismissed.
Order pronounced in the Open Court on- 25.08.2026
