JAIN COMMODITY BROKING PVT. LTD.,KOLKATA vs. I.T.O., WARD - 3(1), KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 17.10.2025 for the AY 2012-13.

ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 3. The facts in brief are that the assessee filed the return of income on 28.09.2012, declaring nil income. Thereafter, notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued and duly served upon the assessee. The assessee furnished before the ld. AO the details as called for by the ld. Assessing Officer qua the subscribers alongwith all the evidences. The ld. AO observed from the documents furnished by the assessee that during the year the assessee has raised substantial capital by issuing 40,310 equity shares of face value of ₹10 each at a premium of ₹990/- per share to 26 share applicants. The assessee furnished the names, addresses, PANs, audited accounts, bank statements, confirmations, etc. qua the share subscribers. The AO also issued enquiry letters u/s 133(6) of the Act to all the subscribers, which were duly replied by all the share subscribers along with evidences as required by the AO. Summons u/s 131 of the Act were issued for physical appearance, which were complied with by furnishing all the details and evidences, however, there was no personal appearance by the directors of the subscriber companies. Thereafter, the ld. AO treated the amount of share capital or share premium of ₹4,03,10,000/- as unexplained cash credit on the ground that there was no compliance to the summons issued u/s 131 of the Act to the directors of the assessee company and therefore, the transactions remained unverified. Finally, the ld. AO added the same to the income of the assessee as unexplained cash credit u/s 68 of the Act.

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ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 4. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO on this issue on the ground that all these companies have no taxable income and their directors did not appear before the ld. Assessing Officer. The ld. CIT (A) also noted that assessee could not prove the three ingredients as envisaged u/s 68 of the Act, either in the assessment proceedings or in the appellate proceedings and therefore after relying on the decision of Hon'ble Apex Court in the case of in case of Pr. CIT (Central)-1 v. NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48/262 Taxman 74/412 ITR 161 (SC), confirmed the order of the ld. Assessing Officer.

ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 necessary details and evidences qua the subscribers were furnished. The case of the assessee is also squarely covered by the decision of the Hon'ble Calcutta High Court in the case of PCIT vs. Bright Commodeal Pvt Ltd (ITAT No. 162 of 2025) dated 28.08.2025, wherein, it was held as under:

"We have perused the reasons assigned by the learned Tribunal for allowing the assessee's appeal. It is seen that the assessing officer issued notice under Section 133 (6) of the Act to the investing companies and both the parties have complied with the said notice and furnished the requisite details. Summons under Section 131 of the Act was issued to the Director of the assessee company to be personally present and also to produce the Directors of the investing company for examination of genuineness of the transaction, identity and creditworthiness of the lenders. The Tribunal noted that the Directors appeared pursuant to the summons but the assessing officer wrongly recorded that the Directors of the assessee company failed to appear in response to the summons issued under 131 of the Act. Furthermore, the Tribunal examined the factual position and noted that the assessee has filed evidences as called for by the assessing officer in respect of the assessee as well as the investing companies. The evidences filed comprised of income tax retums, audited balance sheet, profit and loss account, audited report, bank statement and master data in respect of each of the subscribers. Furthermore, both the parties have submitted their reply pursuant to the notice issued under Section 133(6) of the Act. After noting these facts, the Learned Tribunal held that the assessing officer as well as the CIT(A) did not cause any verification or conduct any enquiry into the evidences which were filed by the assessee and merely harped on non- compliance of the summons issued under Section 131 of the Act, which is factually incorrect. Learned Tribunal placed reliance on the decision of the Hon'ble Supreme Court in CIT-Vs- Orissa Corporation Ltd. (1986) 159 ITR 78 (SC) as well as the decision of this Court in Crystal Networks Pvt. Ltd. -Vs- CIT, (353) ITR 171 (Cal). The Tribunal also noted the decision of the Co-ordinate Bench in the case of ITO -VS- M/S Cygnus Developers India Pvt. Ltd. (ITA/282/Kol/2012) wherein the factual position was also similar to that of the case of the assessee. Thus, we find that the facts have been examined by the Tribunal and the conclusion has been arrived at and therefore, no question of law, much less substantial questions of law, arises for consideration in this appeal."

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ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 6. The decision of the jurisdictional Hon'ble Calcutta High Court in the case of Principal Commissioner Of Income Tax 1 vs M/S Shipra Enclave Pvt Ltd ITAT 94 OF 2025 also squarely applies to the assessee. In this case the facts were that the assessee had raised share capital and premium from fifteen corporate entities. During scrutiny assessment, the assessee produced comprehensive documentary evidences including PAN details, Income-tax return acknowledgements, bank records, and audited financial statements of all subscriber companies. Despite the availability of such material, the Assessing Officer issued summons under Section 131 to the directors of the subscriber companies and, upon their non-appearance, treated the entities as "shell companies" and added 26.22 crore as unexplained cash credit under Section 68, which was affirmed by the CIT(A). The Tribunal reversed the addition after noting that all subscriber companies were active taxpayers who had responded to notices issued under Section 133(6) and confirmed the transactions which were conducted through banking channels. Before the High Court, the Revenue argued that the low income declared by the investors compared to the high share premium suggested accommodation entries, relying on the Supreme Court judgment in PCIT v. NRA Iron & Steel (P) Ltd. However, the Court held that the assessee had discharged its burden under Section 68 by establishing the identity, creditworthiness, and genuineness of the investors through strong documentary evidence. The Court further held that the non-appearance of directors could not invalidate documented transactions, especially when the AO had powers under Section 131 to Page 5 of 9

ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 enforce attendance. Distinguishing NRA Iron & Steel, the Court observed that the said judgment applies to phantom or non-existent entities, whereas the present investors were identifiable taxpayers who confirmed the transactions. Emphasizing that suspicion cannot replace evidence, the Court upheld the Tribunal's findings and dismissed the Revenue's appeal, holding that no substantial question of law arose. The Hon'ble’ble Court held as under:

ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 8. Per contra, Mr. Surana, learned Advocate for the assessee, submitted that as a regulated NBFC, the assessee's financial transactions are subject to stringent oversight by the RBI and the MCA. He pointed out that all fifteen subscribers were active assessees on the records of the Income Tax Department and had duly responded to the notices issued by the AO under Section 133(6) of the Act. 9. We have carefully considered the rival submissions and perused the materials on record. It is a settled legal position that to discharge the initial onus under Section 68, the assessee must establish the identity of the creditor, their creditworthiness, and the genuineness of the transaction. In the instant case, the leamed Tribunal conducted a meticulous factual inquiry and recorded a specific finding that the assessee provided a "Cast Iron" documentary foundation. The audited balance sheets of the subscribers demonstrated a substantial net worth, which was far in excess of the amounts invested. 10. Furthermore, we find that the AO's reliance on the non-appearance of the directors is misplaced and is not supported by the statutory scheme where robust documentary evidence isavailable. As held by this Court in PCIT vs. Sreeleathers [2022] 448 ITR 332 (Cal), the AO is vested with co-terminus powers under Section 131 of the Act to compel attendance. If the AO fails to exercise these powers, he cannot subsequently visit the consequences of such failure upon the assessee. Personal appearance of a director is not a statutory substitute for documented traceability in a corporate assessment, especially when the entities are active taxpayers. 11. Insofar as the reliance on NRA Iron & Steel is concerned, we find the facts of that case to be clearly distinguishable. In that case, the investors were found to be non-existent or "phantom" entities upon field inquiry. In the case before us, the investors are identifiable taxpayers who directly responded to notices u/s 133(6) and confirmed the transactions through banking channels. Equating "traceable investors" with "phantom entities" is a leap in logic that cannot be countenanced. Furthermore, the valuation of shares is a matter of commercial wisdom. Unless the Revenue proves a "live link" showing that the funds originated from the assessee's own coffers, the AO cannot substitute his judgment for that of the marketplace. 12. In view of the aforesaid discussion, we arrive at a definite conclusion that in a corporate assessment, documented traceability (comprising ITR acknowledgments, PAN details, and Bank Statements) through legitimate banking channels carries greater evidentiary weight than the subjective suspicion of an Assessing Officer. The "Test of Human Probability" cannot be invoked as a tool to disregard a verified and audited paper trail. We also conclude that the ratio in NRA Iron & Steel is applicable only to "phantom" or "non-existent" entities found to be non-traceable upon field inquiry. It cannot be extended to active, traceable taxpayers simply because their investment decisions appear commercially improbable to the Revenue. Equating "traceable investors"with "phantom entities" is a leap in logic that cannot be Page 7 of 9

ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 countenanced. Furthermore, the valuation of shares is a matter of commercial wisdom. Unless the Revenue proves a "live link" showing that the funds originated from the assessee's own coffers, the AO cannot substitute his judgment for that of the marketplace. 13. Upon considering the submissions made on either side and perusing the materials on record, we find that the learned Tribunal has conducted a meticulous factual inquiry. The Tribunal has recorded a specific finding that the assessee had provided "Cast Iron" documentary evidence to establish the identity and creditworthiness of the subscribers. The audited balance sheets of these companies reflected a substantial net worth, which was far in excess of the amounts invested in the assessee company. 14. We are convinced that the findings of the learned Tribunal are based on a meticulous factual inquiry. The Revenue has failed to produce any contrary material to disprove the documents filed. It is a settled position that suspicion, however strong, cannot take the place of evidence. We find no perversity in the findings of the learned Tribunal. 15. For the reasons aforementioned, we are of the view that no substantial question of law arises for consideration in this appeal. The findings of the learned Tribunal are based on a sound appreciation of facts and settled legal principles. 7. The case of the assessee is squarely covered by the decisions of Hon'ble Jurisdictional High Court in the cases of PCIT Vs. M/s Bright Commodeal Private Limited in ITAT/162/2025, IA No: GA/1/2025, GA/2/2025, vide order dated 28.08.2025, PCIT Vs. Devbhumi Vinimay Pvt. Ltd. in ITAT/16/2025, IA No.GA/2/2025, vide order dated 22.07.2025, PCIT Vs. Balaka Vinimay Private Limited in ITAT/131/2025, IA no. GA/1/2025, GA/2/2025 vide order dated 21.07.2025, PCIT Vs. Rajshree Integrated Cold Chain Pvt. Ltd., ITAT/286/2024, IA No.GA/2/2024, vide order dated 17.07.2025, PCIT Vs. One Point Commercial Pvt. Ltd., ITAT/27/2025, IA no.GA/1/2025, vide order dated 3.07.2025.

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ITA No. 3271/KOL/2025 Jain Commodity Broking Pvt. Ltd. ; A.Y. 2012-13 8. We therefore, respectfully following the above decisions, set aside the order of ld. CIT (A) and direct the AO to delete the addition. The appeal of the assessee is allowed.

Order pronounced on 16.09.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 16.09.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER,

Dy. Registrar Income Tax Appellate Tribunal, Kolkata

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