FOOTFLASH INFRASTRUCTURE (P) LTD.,KOLKATA vs. I.T.O., WARD - 5(1), KOLKATA

Q: Which sections of the Income-tax Act were involved?

Section 143(2), Section 144, Section 143(3)

ITA 1376/KOL/2026Status: DisposedITAT Kolkata19 August 2026AY 2017-20187 pages

AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee could not fully reconcile the figures related to investments and loans/advances with bank statements. The AO's addition of notional interest was also questioned as it was applied only for the current year without reassessment proceedings for prior years.

What were the facts?

The assessee's case was selected for limited scrutiny due to a low declared income compared to high loans/advances/investments. The Assessing Officer (AO) made an addition of Rs. 1,08,00,000/- on account of unexplained investments, citing an increase in investments without proper justification from the assessee.

What were the issues?

Whether the AO was justified in making additions for unexplained investments and notional interest income without complete reconciliation and proper justification. The issue of the AO applying notional interest without considering previous assessment years was also a key point.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 144,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

For Appellant: Shri Manoj Kataruka, AR

For Respondent: Shri Amuldeep Kaur, DR

Hearing: 16.07.2026Pronounced: 19.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No. 1376/KOL/2026 Assessment Year: 2017-18

Footflash Infrastructure (P) ltd. Vs. ITO, Ward 5(1) Aayakar Bhawan, P-7, 2, Lal bazar Street, 1st Floor, Chowringhee Square, Kolkata, Kolkata-700001, West Bengal West Bengal-700069 PAN No. AABCF9308C APPELLANT RESPONDENT

Assessee by : Shri Manoj Kataruka, AR Revenue by : Shri Amuldeep Kaur, DR

Date of hearing : 16.07.2026 Date of Pronouncement : 19.08.2026

O R D E R PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

This appeal is filed by the assessee against the orders passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld. CIT(A)] dated 06.03.2026, DIN & Order No: ITBA/NFAC/S/250/2025-26/1086943780(1). The assessee has raised following grounds of appeal:

2 ITA No. 1376/KOL/2026 Footflash Infrastructure (P) Ltd.; A.Y. 2017-18 “1) That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to uphold the action of the AO in making addition of Rs. 1,08,00,000/- on account of unexplained investments is contrary to the material evidences on record and the addition is erroneous, arbitrary, excessive and illegal. 2) That the order passed by the A.O. was arbitrary, excessive and illegal. 3) That the above grounds of appeal will be argued in detail at the time of hearing and the appellant crave leave to submit additional grounds of appeal, if any, and/or alter, verify, modify or rectify any grounds of appeal at or before the time of hearing.” 2. Briefly stated the facts of the case are that the assessee filed return of income on 22.08.2017 declaring total income of Rs. 1,852/-. The case was selected for scrutiny under CASS under the limited scrutiny criteria The reason behind selection of the case for scrutiny are as under:

(i.) low income in comparison to high loan/advance/investment in shares in balance sheet (ii) Expenses debited to P & L Account for earning exempt income as per the scheduled BP of ITR is consequently lower as compared to investments made to earn exempt income. Accordingly, notice u/s 143(2) of the Act dated 24.08.2018 was duly served upon the assessee. Subsequently, other statutory notices were issued to the assessee the assessee did not make compliance. Accordingly, there was no compliance from the assessee side. Accordingly, AO has started proceeding on the basis of material available before him and looking to the reasons for selection of scrutiny, the AO observed that current years investment is increased by Rs. 1,08,00,000/- but the assessee failed to justify the reason for increase in investments and gross non-compliance.

3 ITA No. 1376/KOL/2026 Footflash Infrastructure (P) Ltd.; A.Y. 2017-18 Accordingly, Rs. 1,,08,00,000/- was treated as unexplained investment. During the course of further observation the assessee had total loan/advance/investment of Rs. 3,54,54,330/- and income was calculated @ 12% as undisclosed interest income. Accordingly, assessed income was determined at Rs. 1,50,56,372/- and case was completed u/s 144 r.w.s. 143(3) of the Act dated 30.12.2019.

Aggrieved from the above order, the assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) issued various notice to fix the case for hearing on different dates but there was no response from the assessee side. Accordingly, he relied on the following judgments:

(i) Godhra Electricty Co. Ltd. 225 ITR 746 (SC) (ii) Poona Electric Supply Co. Ltd. V. C M 57 ITR 521 (SC) (iii) Ramodas Dossa and Co. Vs. CIT 29 ITR 1001 (Bom) (iv) K.P. Varghese 131 ITR 597 (SC)

Finally, assessee furnished written reply which is incorporated in his order, but he was not satisfied and he dismissed the appeal of the assessee.

Aggrieved from the above order, the assessee filed appeal before the ITAT.

The Ld. Counsel reiterated the submissions made before the lower authorities and he submitted that the assessee received advance of Rs.

4 ITA No. 1376/KOL/2026 Footflash Infrastructure (P) Ltd.; A.Y. 2017-18 10,80,000/- out of the loans granted earlier and he tried to reconcile from the bank statement credit entries and he further submitted that the case was selected for limited scrutiny. However, the AO has made addition on increase in advance and referred to the scrutiny notice which is placed at paper book 23A and he also referred to the financial statement. He further referred to page number 22 of the paper book and submitted that earlier advance was given to D V Traders Ltd. of Rs. 81,53,567/-. Thereafter, he referred to the bank statement where certain entries/appearing and further submitted that these amounts were received back and AO has made addition out of this outstanding balance for the previous year which is not correct.

On the other hand, the Ld. DR relied on the order of lower authorities and submitted that during the first appellate proceeding, the assessee was given ample opportunities but the assessee could not substantiate its case.

Considering the rival submissions and perusing the entire material available on record and orders of authorities below. We noted that case was selected under CASS for limited scrutiny on the above stated points which is clear from the notice u/s 143(2) of the Act dated 05/09/2018 DIN No. ITBA/AST/S/143(2)/2018/19/1011737235(2). We noted that from the assessment order the AO has made addition of Rs. 1,08,00,000/- on account of unexplained investment and undisclosed

5 ITA No. 1376/KOL/2026 Footflash Infrastructure (P) Ltd.; A.Y. 2017-18 interest income on investments made of Rs. 3,54,54,330/- @ 12% on notional basis. During the course of hearing before us, the Ld. Counsel tried to reconcile the advance given figures which is placed at paper book No. 23 which is long term loans as advances there is outstanding balance as on 31.03.2016 is Rs. 4,22,28,122/- and there is outstanding balance as on 31.03.2017 is Rs. 3,54,54,331/-. Resultantly, there is decrease in the investment of Rs. 67,73,791/- and we noted there is fresh loans to Ashwariya Telecom Pvt. Ltd. For Rs. 22,07,161/- and slight increase in loan of Bagnan Estate Pvt. Ltd. & Berry Alloys Ltd. whereas the AO has noted that there is increase in loans and advances by Rs. 1,08,00,000/- but on careful consideration of the figures available for current year and previous year, the assessee received back some of the loans and advances which were outstanding as on 31.03.2016 and the assessee counsel has drawn the reconciliation from the bank statement that advance given earlier have been received back but could not complete reconcile with the credit entries appearing in the bank statement. We also noted that the AO has applied 12% interest income on the advance outstanding as on 31.03.2017 of Rs. 3,54,54,330/-. We also observed at page number 22 there is increase in non -current investments by Rs. 1,08,00,000/- by way of investment in Ivory Exim Pvt. Ltd. for Rs. 50,00,000/- and Dignity Exim Pvt. Ltd. for Rs. 58,00,000/- total non current investment is outstanding as on 31.03.2016 is Rs.

6 ITA No. 1376/KOL/2026 Footflash Infrastructure (P) Ltd.; A.Y. 2017-18 1,50,8,95,400/- and balance as on 31.03.2017 which is Rs. 16,16,95,400/-.We noted that there is decrease in the long term loan and advances by Rs. 67,73,791/- and increase in the non current investments and we also observed that there is decrease in cash and cash equivalent by Rs. 41,13,952/- and the assessee counsel further submitted that the reason for increase in non current investment is increase because of decrease in long terms loans and advances and cash and cash equivalent, therefore, the source is explained. but the Ld. Counsel for the assessee could not complete reconcile the figures appearing in the bank statements .Considering the totality of the facts and circumstances of the case , we remit this issue back to the file of AO for verification/reconciliation of entry made in bank statement with the increase/decrease in investments and loans and advances as per schedule of the financial statements. Further, the AO has applied notional interest @ 12% on the outstanding loans and advances. On perusal of the Note No. 8, the assessee has shown revenue from operation as interest income on loan for Rs. 13,72,555/- for year ending 31.03.2016 and for 31.03.2017 it is showing Rs. 22,64,617/- but the AO has added notional income only for this year without referring to any agreements/ documents and no any reassessment proceeding is initiated for the previous assessment year. This issue is also remitted back to the AO for fresh decision. The AO is directed to give reasonable

7 ITA No. 1376/KOL/2026 Footflash Infrastructure (P) Ltd.; A.Y. 2017-18 opportunity of being heard to the assessee and decide the issue as per law. The assessee is directed to produce requisite documents in support of its claim and not seek unnecessary adjournments for early disposal of the case. In case of failure, no second leniency shall be granted to the assessee.

In the result, appeal of the assessee is partly allowed for statistical purpose.

Order pronounced on 19.08.2026. Sd/- Sd/-

(George Mathan) (Laxmi Prasad Sahu) (Judicial Member) Accountant Member Dated: 19.08.2026 AK, Sr. P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)

//True copy// By order

Manish Bhoi Dy. Registrar, Kolkata Benches

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