K.Y.S. SPONGE IRON PVT. LTD.,KOLKATA vs. I.T.O., WARD - 3(1), KOLKATA

For that the Ld. CIT(A) erred in law in confirming the addition of Rs. 1,09,44,750/- made U/s. 69C of the I. T. act, 1961 due to alleged bogus sale. However, Sec.69C of the act speaks about unexplained expenditure etc. nor unexplained sale/unexplained investment etc.

For that the Ld. CIT(A) and A.O. not brought any incriminating material or tangible material on record and corroborate the evidences. No corroborating evidences in form of statement money trail, cash refunded to the appellant, confirmation of the third part procured or brought on record by revenue, or any other evidence linking the assessee to the alleged payment in form of accommodation entries.

For that the Ld. CIT(A) as well as Ld. A.O. erred in law as well as the fact of the case due to no independent verification and/or investigation made during the assessment/appeal proceedings. They had fully relied on the information of investigation wings of Income Tax Department (Third party information).

For that the Ld. CIT(A) as well as the Ld. A.O. failed to consider written submissions, ground wise written submissions, additional ground of submissions, additional evidences, various citations, audited books of accounts, audited financial statements, bank statement, ledger accounts, stock book, cash flow statements, all sales and purchase bills, confirmation of the parties etc.

For that the Ld. CIT(A) as well as Ld. A.O. failed to understand that sale was made to Hariom Udyog (Prop. Ajay Kr, Sharma) PAN : CBIPS 1382J and (TIN)/VAT 20960808377; not to Jay Matadi Enterprise (Prop. Ajay Kr. Sharma) PAN : CBIPS 1382J and (TIN)/VAT 20960808377 i.e. same person but different unit. The name of said Hariom Udyog duly recorded in the bank statement of the appellant time to time as and when money was realized and the said bank statements were duly filed before the Ld. A O as per his requisition.

For that the Ld. A.O. as well as Ld. CIT(A), NFAC, failed to allow cross examination to Mr. Ajay Sharma (Prop. Hariom Udyog). violating the apex court judgment.

For that the appellant denied the liability on account of initiation of penalty U/s 271(1)(c) and interest charged U/s 234C etc.

For that the appellant craves leave to add, alter grounds of appeal on or before the date of hearing of this appeal.”

That during the assessment year 2015-16 return of income U/s 139 was filed on 30-09-2015 disclosing total income of Rs.2,97,800/- after adjustment of Sec.32, Sec 36 & Sec, 43B of the IT Act 1961 and set off of C/F business loss Rs.7,31,329/-. Thereafter, return was filed on 18-08-2022 disclosing the same income of Rs.2,97,800/- in terms of Notice U/s148 dated 30-07-2022. 3. That Notices U/s142(1) dated 09-01-2023, U/s 143(2) dated 19-04-2023 U/s 142(1) dated 01-05-2023 and show cause notice dated 16-05-2023 were replied in full (not part reply) through e-portal on 18-01-2023, 24-04-2023, 04- 05-2023, 12-05-2023, and 19-05-2023 respectively. The replies were made as per requisitions of Ld. A.O. in full, parawise and there was no part reply.

That the Ld. A.O. on the basis of information received from investigation wings of Income Tax, Jamshedpur, reopen the assessment without recording specific reason for re-opening the case which can be seen from the notice U/s148A(b) dated 21-05-2022, as a result the Ld. A.O. was confused whether the escapement of income was on account of either sales transaction or purchase transactions or both.

That during the assessment year under appeal the appellant sold sponge iron amounting to Rs. 1,10,12,597/- time to time to Hariom Udyog (Prop. Ajay Kr. Sharma), PAN:CIBPS 1382J & TIN/VAT 20960808377 and a sum of Rs, 1,09,44,760/- was realized from the said party through bank time to time. The name of Hariom Udyog was duly recorded in the bank statements time to time as and when the money were realized. The Bank statements were filed and on record and the matter was specifically intimated to the Ld. A.O.

That the Ld. A.O. without independent verification and/or investigation completed assessment relying on the information of the Income tax investigation wings, that Hariom Udyog and Jaimatadi Enterprise are two different units though proprietor Ajay Kr. Sharma is the same person having same PAN, i.e. PAN: CIBPS 1382J and TIN/VAT 20960808377. The Ld. A.O. also failed to understand due to lack of proper verification and/independent enquiry whether the transactions with the said party with the appellant were on account of sale or purchase. The Ld. CIT(A) also confirmed the view of Ld. A.O. without any enquiry/verification.

That during the course of assessment proceedings in support of sale transactions with Hariom Udyog (Prop. Ajay Kr. Sharma) following documents were filed in terms of specific requisitions of Ld. A.O.: (a) Copies of all sales bills, to Hariom Udyog (Prop. Ajay Kr. Sharma) showing date of sale, Nature of goods sold, quantity, rate, amount of duties and taxes and total amount of sales along with weighment slip for outgoing material showing nature of good, gross weight, Tare weight, Net weight and truck no. etc. (b) Ledger account in the books of appellant with Hariom Udyog (Prop. Ajay Kr. Sharma) for the Financial year 2014-15. (c) Copy of confirmation from the said Hariom Udyog regarding transaction recorded in their books of accounts and also confirmation from appellant company side regarding transaction with the said party. (d) Details of purchase, sales, bank statements, cash flow statement, cash book, audited financial statement, computation of total income etc. and other papers and documents as per requisitions of the Ld. A.O.

That the Ld. A.O. in his order of assessment U/s147 dated 26-05-2023 vide para 4.3 failed to understand that the transactions with the appellant company was with Hariom Udyog (Prop. Ajay Kr. Sharma) PAN: CBIPS 1382J and not with Jaimatadi Enterprise (Prop. Ajay Kr. Sharma), without any cogent evidence. However, Ajay Kr, Sharma having PAN: CBIPS 13892J is common both the cases. In spite of repeated request to the Ld. A.O. from the appellant's side the Ld. A.O. never made any independent verification/enquiry regarding the said matter. and no new material was brought on record.

That the Ld. A.O. and the Ld. CIT(A) confirmed the addition of Rs. 1,09,44,750/- made U/s.69C due to alleged bogus sale. However, Sec. 69C of the act speaks about unexplained expenditure etc. not unexplained sale/unexplained investment etc.

That the Ld. A.O. as well as Ld. CIT(A), NFAC, failed to allow cross examination to Mr. Ajay Kr. Sharma (Prop. Hariom Udyog) ignoring the apex court judgment.

That the Ld. A.O and Ld. CIT(A). relied on various citations regarding bogus purchase where separate independent enquiry/verification made by the income tax authorities. However, the present alleged issue is related to unaccounted sales where no separate enquiry/verification was done by the Ld. A.O. & CIT(A) and various citations relied by the appellant were not considered without any reason.” {Emphasis supplied}

Ground Nos. 2 to 6 relate to the addition of ₹1,09,44,750/- u/s 69C of the Act. The Ld. AR stated before us and it is mentioned in Ground No. 6 that the Ld. CIT(A) as well as the Ld. AO failed to understand that the sales were made to Hariom Udyog, Prop. Ajay Kr. Sharma, PAN: CBIPS1382J and not to Jay Matadi Enterprise, Prop. Ajay Kr. Sharma, PAN: CBIPS1382J and (TIN)/VAT 20960808377 i.e. to the same person but to his different proprietorship unit. It was stated that the name of Hariom Udyog is duly recorded in the bank statement of the assessee from time to time as well as the money was paid and the said bank statement were duly filed before the Ld. AO as per the requisition made in this regard. It was also submitted that the Ld. AO as well as the Ld. CIT(A) failed to allow cross-examination of Mr. Ajay Sharma, Proprietor Hariom Udyog. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld. It was also contended before us by the Ld. AR that Shri Ajay Kr. Sharma was the proprietor of both the proprietorship units viz., Jay Matadi Enterprise and Hariom Udyog. The assessee is a manufacturer of sponge iron and it had sold sponge iron to Hariom Udyog and not to Jay Matadi Enterprise. The Ld. AO examined the details related to Jay Matadi Enterprise. The assessee had produced the books of account, the stock statement, the bank statement in the ITA No(s). 230/KOL/2026 Assessment Year(s) 2015-16 course of the proceedings before the Ld. AO and reiterated that the sales were made to Hariom Udyog and not to Jay Matadi Enterprise. Our attention was drawn to paper book page 53, which is a report from the Investigation Wing for information value of ₹1,09,44,760/- and the information detailed therein contains the PAN name of Ajay Kumar Sharma and in column of General Documents, document name is mentioned as Ajay Kumar Sharma - Jai Mata Di Enterprises and also to pages 106 to 109 being the bank statements of UCO bank and BOB showing amounts received from Hariom Udyog Enterprise from time to time which mentions transactions from 02.04.2014 to 31.03.2015 and receipt of payments by the assessee. Our attention was also drawn by the Ld. AR to Page 105 of the paper book which is the confirmation of account of the assessee by M/s Hari Om Udyog relating to FY 2014-15 for total purchases of ₹1,10,12,597/-, payment of ₹1,09,44,760/- received, (which is the same amount as in the reasons recorded, but the addition of ₹1,09,44,750/- has been made in the computation of income), page 110 onwards of the paper book which is the audit report along with the balance sheet a balance sheet and page 133 for the sales and purchases made in support of the claim that the transactions were made to Hariom Udyog and not to Jay Matadi Enterprise and therefore, the conclusion that bogus sales/purchases were made to Shri Ajay Kr. Sharma is not correct.

The Ld. DR relied upon the order of the Ld. CIT(A) but could not controvert the assertions of the Ld. AR.

We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The grounds of appeal raised are argumentative. However, we note that the ITA No(s). 230/KOL/2026 Assessment Year(s) 2015-16 Ld. CIT(A) in respect of Ground Nos. 2, 3 and 4 has noted in para 9.2 that the assessee had made sales to Hariom Udyog, proprietor Shri Ajay Kr. Sharma instead of Jay Matadi Enterprise and whereas the information in possession of the Ld. AO was that the assessee had taken accommodation entry to the extent of ₹1,09,44,730/- from Shri Ajay Kr. Sharma, proprietor of Jay Matadi Enterprise through various shell companies. Neither the Ld. AO nor the Ld. CIT(A) has given the details of the transactions for the addition made even though the assessee had all along been claiming that no sales were made to Jay Matadi Enterprise. The Ld. AO has also failed to mention as to from whom the purchases were made and whether the accommodation entries related to purchases or to sales. Even the details of the transactions alleged to be made are not mentioned and the Ld. AO has not arrived at any conclusion whether the same relate to sale or purchase and the addition has been made under section 69C of the Act which relates to unexplained expenditure. In the absence of properly rebutting the contention of the assessee that the sales were not made as alleged by the Ld. AO and without giving the details of these transactions and even the dates of the transactions not being mentioned, the addition may not be sustained. Further, the amount alleged to be accommodation entries matches exactly with the amount received from the other entity of the purchaser, i.e. Hari Om Udyog, i.e. a sum of ₹1,09,44,760/-, therefore, the addition made on account of alleged accommodation entries and layering of transactions cannot be sustained. In view of the above, and in view of the detailed submissions made by the assessee as discussed in the preceding paragraphs, there does not appear to be any reason to concur with the findings of the Ld. CIT(A) as regards the confirmation of the addition of ITA No(s). 230/KOL/2026 Assessment Year(s) 2015-16 ₹1,09,44,730/- and the addition made by the Ld. AO and confirmed by the Ld. CIT(A) is hereby deleted and Ground Nos. 2 to 6 are allowed.

Since we have allowed the appeal on merits of the case, we are not inclined to go into the other legal and factual issues raised vide the remaining grounds of appeal.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 23rd June, 2026. [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 23.06.2026 Bidhan (Sr. P.S.)

K.Y.S. Sponge Iron Pvt. Ltd., M-4, Jawakusum Building, 34, C.R. Avenue, Kolkata, West Bengal, 700012. 2. I.T.O., Ward-3(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata, West Bengal, 700069. 3. CIT(A)-NFAC, Delhi.

CIT-

CIT(DR), Kolkata Benches, Kolkata.

Guard File. //// By order