DCIT, CC-1(1), KOLKATA, KOLKATA vs. M/S. PADMAKAR MARKETING PRIVATE LIMITED, KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 13.12.2024 for the AY 2011-12.

ITA No.2965/KOL/2025 M/s Padmakar Marketing P Ltd; A.Y. 2011-12 stated in the condonation petition that the delay has occurred due to obtaining of administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay may be condoned. The ld. AR, on the other hand, did not oppose the condonation of delay. Considering the reasons cited before us, we are inclined to condone the delay and admit the appeal for hearing.

ITA No.2965/KOL/2025 M/s Padmakar Marketing P Ltd; A.Y. 2011-12 furnishing all the details and evidences as called for. Finally, assessment was framed by the Assessing Officer vide order dated 29.12.2018, passed u/s 147/ 143(3), wherein the addition of ₹1,04,50,000/- was made as unexplained cash credit under Section 68 of the Act and ₹90,650/- was made under Section 14A read with Rule 8D of the IT Rules, 1962.

“I have considered the grounds of appeal, statement of facts and submission of the appellant company as well as the order of the assessing officer framed in the light of the material available on record before the assessing officer during the assessment proceedings. The A/R of the appellate has submitted that during the previous year relevant to the assessment year under appeal (i.e. assessment year 2011-12), the appellant is inter alia engaged in investment activities and earned from the same. The appellant had filed the original return under section 139(1) of the Act, on 09.12.2011 declaring a total income of Rs. 1,59,650/-. The return of the appellant was duly processed under section 143(1) of the Act vide order dated 20.01.2012. Thereafter, the DCIT Central Circle 1(1) Kolkata on the basis of information received from DDIT (Inv)- Unit 3(1) issued notice under the provisions of section 148 of the Act dated 27-03-2018. Thereafter, statutory notices along with the questionnaire under section 143(2) and 142(1) were also issued to the appellant. In response to the aforesaid notice, the appellant duly e-filed the return of income declaring the original income as its income in compliance to the provisions of section 148 of the Act. In response to the aforesaid notices, the appellant made detailed submissions before the AO through its Authorised Representative on various dates and also filed various details/documents in support of its claim. The appellant inter-alia furnished the details of audited accounts, bank statements, details of the directors, details of the transactions with M/s. Orchard Vinimay Pvt Ltd, M/s Dolphin Shopper Pvt. Ltd., M/s Kalimata Supplier Pvt Ltd, details of transaction with the parties for the relevant period, etc. The appellant also mentioned that the addition made by the AO amounting to Rs. 1,04,50,000/- as unexplained cash credit was unsustainable since the same represented the normal transaction by the appellant. The appellant protested against the reopening by filing a letter with the AO. Thereafter, the AO completed the re- assessment proceedings and passed the order under the provisions of section

ITA No.2965/KOL/2025 M/s Padmakar Marketing P Ltd; A.Y. 2011-12 147/147(3) of the Act on 29.12.2018 wherein the AO has made an addition of Rs. 1,04,50,000/- & Rs.99,650/- representing the share application money received & sale transaction by the appellant, as unexplained cash credit under section 68 of the Act and U/s. 14A respectively. Aggrieved by which, the appellant is in present appeal. Ground No. 1 is directed against the action of the AO in initiating the re- assessment proceedings without any coherent reasons and without adhering to the specific conditions prescribed in the Act, which is erroneous, arbitrary and bad in law and thereby making an addition of Rs. 1,04,50,000/- & 99,650/- under section 68 & 14A of the Act. During the previous year relevant to the assessment year under consideration, the appellant had received share application money & sold shares to parties among the various parties it includes M/s. Orchard Vinimay Pvt Ltd., M/s. Dolphin Shopper Pvt. Ltd., M/s. Kalimata Supplier Pvt. Ltd. The details of transaction with the above-mentioned parties are as under:

Name of the Party Amount Remarks M/s Orchard 40,00,000 The appellant company has received the amount in Vinimay Pvt. Ltd. respect of share application money which has been duly reflected in the Audited Financial Statements. M/s Dolphin 30,50,000 The appellant company has received the amount in Shoppers Pvt. Ltd. respect of sale of shares which has been duly reflected in the Audited Financial Statements. M/s kalimata 34,00,000 The appellant company has received the amount in Suppliers Pvt. ltd. respect of share application money which has been duly reflected in the Audited Financial Statements. During the course of re- assessment proceedings, the AO had asked the appellant to submit the details of the nature of the business, details of the transactions with the three companies, details of the bank accounts maintained by the appellant and also asked the appellant to produce the directors of the three companies. The appellant submitted all the documents and with regard to the production of directors of M/s. Orchard Vinimay Pvt. Ltd., M/s. Dolphin Shopper Pvt. Ltd, M/s. Kalimata Supplier Pvt Ltdthe appellant stated. In this regard, we would like to state that the assessee company has undertaken the said transactions with all the 3 companies in FY 2010-11 ie. around 8 years back and since then it had hardly any contact or business dealing with them. It is therefore not possible for the assessee company to produce the directors of all the companies before you for examination within a very short span of 3 days allowed and that too includes holidays like Saturday and Sunday, in the festive season of Christmas and New Year. We would therefore request your goodself to allow the assessee company at least 2 weeks time to produce the parties or alternatively make verification from the parties directly by sending them notices u/s 133(6) of the Income Tax Act, 1961 through Postal Department."

ITA No.2965/KOL/2025 M/s Padmakar Marketing P Ltd; A.Y. 2011-12 The appellant brought my attention to the fact that the AO had blindly believed in the information received from the investigation unit without doing an independent. enquiry. Thus the main grievance of the appellant is challenging the validity of assessment on the ground that reasons recorded by the AO for reopening of the assessment lacks the individual application of mind by the AO and the same were recorded in a mechanical manner without carrying out any enquiry and were in fact based upon the borrowed satisfaction. The Ld. A/R drew my attention to the copy of reasons recorded, which is reproduced as under: "In the instant case, the assessee company filed its return of income at Rs.1,59,650/- on 09.12.2011 which was processed u/s. 143(1) of the I.T. Act on 20.01.2012.

Further, information has been received in this case. As per information received from the office of the DDIT (Inv.), Unit-3(1), Kolkata vide letter No. DDIT(Inv.)3(1)/2016-17/KSD/3546 dated 13/12/2016, Mr. Kripa Shankar Dubey as a director/ authorised signatory opened accounts in Ing Vyasa Bank. The total aggregate turnover in the accounts for the period from 01/04/2010 to 15/09/2010 was 294.79 crores. The average balance in all four accounts (518011047467, 518011047491, 518011048057 & 518011047315) during 2009-10 were 3.33 lakhs in contrast the average balance in these accounts for the period from April 2010 to August 2010 Rs. 15.44 lakhs The funds were received from clearing as well as by transfer from other firms. These were inter transfer to another set of firms or were moved out of the bank. The funds were in the range of Rs.2.75 lakhs to Rs.60 lakhs. Thus the turn over and average balance maintained in the accounts had no correlation. And it appears that the funds are being washed using the banking system. It was seen from the bank statements that the companies ie. Orchard Vinimay Pvt. Ltd. Kalimata Suppliers Pvt. Ltd. Dolphine Shoppers Pvt. Ltd. &Suniyojit Agencies Pvt. Ltd. received fund by transfer/clearing from various entities and funds have been debited by transfer/ clearing to various entities. It was also informed that many entitles who were getting funds amounting to Rs.51.84 crores approx from Orchard Vinimay Pvt. Ltd, Kalimata Suppliers Pvt. Ltd. Dolphine Shoppers Pvt. Ltd. &Suniyojit Agencies Pvt. Ltd. are shell/ paper companies and the real concerns have brought back there unaccounted income by layering of funds through this modus. It was also informed that the assessee, M/s. Padmakar Marketing Private Limited is one of the beneficiaries during F.Y. 2010-11 as the assessee received funds from the above-mentioned concerns as below:

Date of Receipt Amount Received by the Name of the party from assessee (in ₹) whom fund was received 03.04.2010 11,00,000 Dolphine Shoppers Pvt. ltd. 23.04.2010 34,00,000 Kalimata Suppliers Pvt. ltd.

ITA No.2965/KOL/2025 M/s Padmakar Marketing P Ltd; A.Y. 2011-12 30.04.2010 4,50,000 Dolphine Shoppers Pvt. ltd. 04.05.2010 15,00,000 Dolphine Shoppers Pvt. ltd. 20.07.2010 6,00,000 Orchard Vinimay Pvt. ltd. 27.07.2010 4,00,000 Orchard Vinimay Pvt. Ltd. 24.09.1010 30,00,000 Orchard Vinimay Pvt. Ltd. Total 1,04,50,000 In the instant case, the assessee company filed its return of income at Rs 1,59,650/- on 09.12.2011 which was processed u/s 143(1) of the IT Act on 20.01.2012 but no scrutiny assessment u/s 143(3) of the Act was made. Therefore, I have reason to believe that the assessee's income to the tune of Rs 1,04,50,000/- has escaped assessment and therefore, I believe that this is a fit case to reopen proceedings u/s 147 of the Act for the AY 2011-12." I observe from the perusal of the above reasons that in the AO has discussed the information received from the DDIT (Inv) Unit 3(1) Kolkata. The AO reassessed the income of the assessee under the provisions of section 147 of the Act making an addition of Rs. 1,04,50,000/- in the hands of assessee which is not sustainable. It is a decided law that the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the information received by AO from the DDIT (Inv). Nothing conclusive has been set out to enable how the conclusions flow there-from. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self-evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons, which is not available in the present case. I find merit in the contentions of the Ld. A/R that the AO has recorded the reasons based on the borrowed satisfaction without application of mind and without carrying out any enquiry into case. I also note that assessee filed Audited financial statement, bank statement etc. which substantiate the transaction. Thus, the AO noting in the reasons that the assessee's income has escaped income to the tune of Rs. 1,04,50,000/- is not correct. In my opinion, the AO has acted on the borrowed satisfaction without recording his own satisfaction and belief that income of the assessee has escaped assessment. The case of the assessee finds support from the decision of the Hon'ble Delhi High Court in the case of Pr. CIT v. meenakshi Overseas (P.) Ltd. reported in [2017] 82 taxmann.com 300/395 ITR 677 (Delhi). Thus, this ground is allowed.”

ITA No.2965/KOL/2025 M/s Padmakar Marketing P Ltd; A.Y. 2011-12 6. After hearing the rival contentions and perusing the materials available on record, we find that the ld. CIT (A) has quashed the assessment by deciding the legal issue that the reopening of assessment as been made by the ld. AO on borrowed satisfaction, without recording his own satisfaction by relying on the decision of Principal Commissioner of Income-tax-6 vs. Meenakshi Overseas (P.) Ltd. [2017] 82 taxmann.com 300 (Delhi)/[2017] 395 ITR 677 (Delhi)[26-05-2017]. The ld. CIT(A) quashed the assessment framed. The ld. CIT (A) also allowed the appeal of the assessee on merit by holding that assessee has raised capital from three parties, namely; M/s Orchard Vinimay Pvt. Ltd. of ₹40,00,000, M/s Dolphin Shoppers Pvt. Ltd. of ₹30,50,000, M/s kalimata Suppliers Pvt. ltd. of ₹34,00,000/-. The Learned CIT (A) noted that so far as the money received from the first party is concerned, i.e. M/s Orchard Vinimay Pvt. Ltd. of ₹40 lac, the same has been received on account of sale of shares held since March 2010 and only the shares were sold during the year. The Learned CIT (A) allowed the appeal of the assessee noting above by following the decisions of Hon'ble Delhi High Court in case of Principal Commissioner of Income-tax-6 vs. Meenakshi Overseas (P.) Ltd. (supra). Similarly, in the case of other two entities, the ld. CIT (A) noted that share application money received from them were duly explained with various evidences filed by the assessee before the ld. CIT (A) as well as the ld. Assessing Officer. Hence deleted the addition on merit. We note that the Revenue has only challenged the deletion of addition on merit whereas the quashing the assessment was not challenged. Therefore, we are inclined to

ITA No.2965/KOL/2025 M/s Padmakar Marketing P Ltd; A.Y. 2011-12 uphold the order of ld. CIT (A) wherein the legal issue was decided by quashing the reopening of assessment based on the borrowed satisfaction as discussed herein above. Even on merit, the ld. CIT (A) has passed a very well-reasoned and speaking order. Therefore, we are inclined to uphold the order of ld. CIT (A) by dismissing the appeal of Revenue.

Order pronounced on 22.07.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 22.07.2026 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, True Copy//

Asst. Registrar Income Tax Appellate Tribunal, Kolkata