DCIT, CENTRAL CIRCLE 1(1), KOLKATA, KOLKATA vs. KALPATARU HOUSE FIN & TRADING PRIVATE LIMITED, KOLKATA

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ITA 2314/KOL/2025Status: DisposedITAT Kolkata13 July 2026AY 2019-206 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, agreeing that the AO's addition was based on surmises and conjectures without concrete evidence. The Tribunal found no infirmity in treating the amount as trading receipts and taxing only the profit element.

What were the facts?

During a search operation, text messages indicating cash transactions aggregating to Rs. 2.45 crores were found. The assessee offered a 5% profit on these transactions, but the AO treated the entire amount as unexplained investment. The CIT(A) deleted the addition and allowed profit at 5.5%.

What were the issues?

Whether the entire cash receipts of Rs. 2.45 crores should be treated as unexplained investment or only the profit embedded therein as trading receipts.

Which sections of the Income-tax Act were involved?

Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH: KOLKATA

Before: Shri George Mathan&Shri Rajesh Kumar]

Aआयकर अपील�य अ�धकरण, कोलकाता पीठ “बी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA �ी जज� माथन, �या�यक सद�य एवं �ी राजेश कुमार, लेखा सट�य के सम� [Before Shri George Mathan, Judicial Member &Shri Rajesh Kumar, Accountant Member] I.T.A. No. 2314/Kol/2025 Assessment Year: 2019-20 DCIT, Central Circle-1(1), Kolkata Vs. Kalpataru House Fin & Trading Private limited

(PAN: AABCK 2172 R) ( अपीलाथ� ) Respondent / ��यथ� Appellant / Date of Hearing / सुनवाई 22.06.2026 क� �त�थ Date of Pronouncement/ 13.07.2026 आदेश उ�घोषणा क� �त�थ For the Appellant/ Shri Akkal Dudhwewala, FCA �नधा�रती क� ओर से For the Respondent/ Shri Sanjit Kumar Das, CIT DR राज�व क� ओर से

ORDER / आदेश Per Rajesh Kumar, AM: This is an appeal preferred by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-20, Kolkata (hereinafter referred to as the “Ld. CIT(A)”] dated 28.03.2025 for the AY 2019-20. 2. At the outset, we note that the appeal of the revenue is barred by limitation by 135 days. At the time of hearing the Ld. D.R explained the reason for delay in filing

2 I.T.A. No.2314/Kol/2025 Assessment Year: 2019-20 Kalpataru House Fin & Trading Pvt. Ltd. the appeal. The Ld. the counsel of the assessee did not raise any objection in condoning the delay. After hearing the rival contentions and perusing the materials available on record, we find that the delay is for bonafide and genuine reason, hence, we condone the delay and adjudicate the appeal.

3.

The sole issue raised in this appeal is against the order of the ld. CIT(A) deleting the addition of Rs.2,45,00,000/- made under Section 69A of the Act and instead estimating the taxable profit at 5.5% of the said amount. 4. Brief facts of the case are that, the assessee is a company which belongs to the Shyam Sel Group and is engaged in the business of trading of coal, shares and steel products etc. A search and seizure operation was conducted at the assessee’s premises on 17.01.2019. Later on it filed its return of income u/s. 139(1) of the Act for the relevant AY 2019-20 on 22.10.2019 declaring a loss of Rs.30,92,018/-. Subsequently, statutory notices u/s 143(2) and 142(1) were issued to the assessee and in compliance to such notices, the assessee made time to time compliances and submitted details and explanations as called for. The ld. AO noticed that, certain text messages exchanged between the Shri Kamal Tapadia, employee of the ShyamSel Group and one Mr. Sarabjit Pathak were impounded by the Investigating authorities and when enquired about its contents, it was explained that they related to cash transactions aggregating to Rs.2.45 crores. Before the ld. AO, the assessee filed a disclosure petition dated 26.04.2021 wherein it was stated that these text conversations related to trading receipts conducted in cash and therefore profit element of 5% of such amount was offered to tax. The ld. AO however was not agreeable to the submission of the assessee and was of the view that, the impugned receipt represented investment made by assessee company in cash loan and the same was received back during the year and thus added the amount of Rs.2,45,00,000/- by way of unexplained investment of the assessee. 5. Aggrieved by the said order, the assessee preferred an appeal before the ld. CIT(A) who allowed the appeal of the assessee on merits. We have gone through the order passed by the ld. CIT(A) and find that the ld. CIT(A) has passed an exhaustive

3 I.T.A. No.2314/Kol/2025 Assessment Year: 2019-20 Kalpataru House Fin & Trading Pvt. Ltd. order and thereafter allowed the appeal of the assessee. The operative portion of the order of the ld. CIT(A) in allowing the appeal is as under:- “After considering the assessment order and written submission of the appellant, I am of the view that, the appellant has received the said amount of Rs. 2.45 Crs from Sri Kamal Kapadia towards sales from trading activities. However, without bringing any material on record, the AO solely on surmises and conjectures held that the said amount received by the assessee is repayment of cash loan given by the assessee. The AO didn’t bring any evidence on record to substantiate that the appellant company had given cash loans or made investments to the tune of Rs. 2.45 Crs. In the absence of any finding or any material evidencing the suppression of investment, no addition can be made u/s 69 of the Act. The AO made addition of the entire sale proceeds, the entire sale proceeds could not be added, but only profit embedded in the sales could be added to the income. Sale proceeds could not represent the income of the assessee and only the excess of sale proceeds over cost incurred could form profits, which could be included in the income of the assessee. Appellant has offered profit at the rate of 5% of the total sale should be added to total income, in absence of any material on record to show that there was any unexplained investment made by the assessee which was reflected by the alleged unaccounted sales, I consider that only the GP@5.5% on the said sale proceeds can be brought to tax. Further judgement referred by the appellant above, it is evident that the courts have consistently been following the principle that even upon detection of money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. Hence in the given case, the AO has grossly erred in treating the entire amount as income. Further, decision of the Hon’ble Jurisdictional ITAT in case of M/s Shyam Sel & Power Limited (IT (SS)ANo. 109/KOL/2023) submitted by the appellant as under -

‘Ld. AO has grossly erred in making the addition u/s 69 on the basis of statement of Shri Deepak Agarwal which has been subsequently retracted by way of sworn Affidavit before the First Class Magistrate which have been filed before the DDIT(Inv). The said case is covered by the decision of the Hon’ble Jurisdictional ITAT in case of M/s Shyam Sel & Power Limited (IT (SS)A No. 109/KOL/2023) wherein the Hon’ble ITAT deleted the addition made by the AO towards the estimated profit of 8% on loan of Rs. 17.80 Crs based solely on the retracted statement. The relevant extract of the order of Hon’ble ITAT is produced herein – “…. Thus we note that the whole exercise is based upon the conjecture, surmises and presumptions despite the fact that the statements by both Shri Brij Bhushan Agarwal and Deepak Agarwal of the company have been retracted by way of sworn Affidavit before the First Class Magistrate which have been filed before the DDIT(Inv). We note that both officers of the deptt i.e. the DDIT(Inv) as well as the AO ignored the retractions made by the directors of the group in which they claimed that these confessions were forced during the course of search action and hence retracted. Thus the retractions believed by the AO to make addition has no evidentiary value. Besides we note that the documents seized from third party cannot be used against the assessee unless the copies of the same were provided to the assessee. We note that copes of the said documents were never provided. Therefore the income estimated by the AO on the

4 I.T.A. No.2314/Kol/2025 Assessment Year: 2019-20 Kalpataru House Fin & Trading Pvt. Ltd. above said cash loans was deleted as stated hereinabove. In our opinion, the addition cannot be made on surmises and conjectures without a substantive and concrete basis. We note that in the present case, the documents were not confronted to the assessee during the course of search and it was only a statement of Sanwaria was confronted to the director of the assessee company. Moreover estimation made by the AO on the belief that loans /transactions of Rs. 17,80,00,000/- were in cash whereas the CIT(A) recording a finding of fact that out of Rs. 17,80,00,000/- the loans were by cheques also. On the perusal of the aforesaid decision, it is evident that the addition cannot be made by assessing officer on conjecture, surmises and presumptions and solely on the retracted statement, without a substantive and concrete basis’’ Thus after considering the decision of Hon’ble ITAT in the case of M/s Shyam Sel & Power Limited (IT (SS)A No. 109/KOL/2023) and facts of the case it is evident that the addition cannot be made by assessing officer on conjecture, surmises and presumptions and solely on the basis of retracted statement, without any material evidence, substantive and concrete basis. Hence, addition of Rs. 2.45 crores is deleted and only profit element of 5.5% taxable on the entire receipts of 2.45 crores.”

6.

Being aggrieved the revenue has preferred the present appeal. 7. The ld. CIT, DR appearing for the Revenue assailed the action of the ld. CIT(A) in treating the impugned sum as trading receipt instead of refund of cash loan, as held by the ld. AO. He claimed that the person, Sri Pathak with whom the text messages were exchanged was an employee of a known finance broker of Kolkata and therefore, the ld. AO had rightly inferred that the impugned amount represented cash loan investment. Upon going through the text messages which were extracted at Page 4 of the assessment order, it is seen that, there is nothing contained therein which would suggest that the conversation related to any cash loan transaction. Instead, it only suggests receipt of cash by the assessee on different dates. It was enquired by us whether the Investigating authorities or the ld. AO had examined Sri Pathak to ascertain the nature of the transaction, to which the ld. CIT, DR answered in the negative. The ld. AR has rightly shown that, the employee who had send this text message had admitted in his statement recorded u/s 132(4) of the Act that the conversation related to cash transactions, which was later on explained as trading receipt. We find that there is nothing available on record to disprove the explanation offered by the assessee. Rather,

5 I.T.A. No.2314/Kol/2025 Assessment Year: 2019-20 Kalpataru House Fin & Trading Pvt. Ltd. it is observed that, the ld. AO had proceeded simply on a fanciful theory that the assessee would have given cash loan in earlier years and the impugned conversation related to refund of the same, though neither the contents of the text message(s) or the statement(s) of key persons suggested so. The Revenue was also unable to show us as to when was the loan advanced or on what terms etc., basis which the impugned amount was being sought to be categorized as cash loan. We thus are in agreement with the ld. CIT(A) that the action of the ld. AO was on surmises and conjectures and not on any substantive or concrete basis and that there was no evidence or material to show that the text message regarding receipt of sum(s) aggregating to Rs.2.45 crores represented refund of cash loan given earlier. Keeping in view the above discussion of the ld. CIT(A) and considering the facts available on record, we do not find any infirmity in the impugned order of the ld. CIT(A) and thus see no reason to interfere with the same.

8.

In the result, the appeal of the Revenue is dismissed. Order is pronounced in the open court on 13th July, 2026

Sd/- Sd/- (George Mathan / जज� माथन) (Rajesh Kumar/राजेश कुमार) Judicial Member/�या�यक सद�य Accountant Member/लेखा सद�य Dated: 13th July, 2026 SM, Sr. PS

6 I.T.A. No.2314/Kol/2025 Assessment Year: 2019-20 Kalpataru House Fin & Trading Pvt. Ltd.

Copy of the order forwarded to: 1. Appellant- DCIT, Central Circle-1(1), Kolkata 2. Respondent – Kalpataru House Fin & Trading Pvt. Ltd., 29, 1st Floor, G.C. Avenue, Kolkata-700013 3. Ld. CIT(A)- 20, Kolkata 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata

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