BABA METALICS PRIVATE LIMITED,KOLKATA vs. ITO, WARD 5(4), , KOLKATA

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ITA 419/KOL/2025Status: DisposedITAT Kolkata20 May 2026AY 2012-1316 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the reopening of assessment was bad in law due to procedural defects and borrowed satisfaction. Regarding the share capital addition, the Tribunal held that the assessee had provided sufficient documentary evidence, including audited balance sheets of subscribers, to establish the identity, creditworthiness, and genuineness of the transactions.

What were the facts?

The assessee's assessment was reopened, and additions were made on account of unexplained share capital/premium. The assessee contended that all necessary documents were provided to establish the identity, creditworthiness, and genuineness of the transactions.

What were the issues?

Whether the reopening of assessment was validly done and whether the addition on account of share capital/premium was justified given the documentary evidence provided by the assessee.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 151,Section 144,Section 133(6),Section 68,Section 131,Section 143(3),Section 143(1),Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Narendra Kedia, AR
For Respondent: Shri Madanappa Raghuveer, DR
Hearing: 08.04.2026Pronounced: 20.05.2026

Per Rajesh Kumar, AM:

These are appeals preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 08.01.2025 for the AY 2012-13.

ITA No. 455/KOL/2025 2. At the time of hearing, the counsel of the assessee pressed ground no.3, which is extracted below:-

“3. Considering the facts and circumstances of the case and the applicable provisions of law, it is submitted that the Learned CIT(A) erred in concluding that the appellant failed to establish the identity, creditworthiness, and genuineness of the sums credited in the books of accounts. In contrast, all relevant and material documents, including responses from shareholders to notices issued u/s 133(6) of the Act, were duly furnished to the Ld. CIT (A) during appeal proceeding. Despite this, the Ld. CIT(A), grossly erred on confirming additions to the total income and displaying a predetermined bias,

4.

In the appellate proceedings, dismissed the appeal of the assessee.

5.

After hearing the rival contentions and perusing the materials available on record, we find that the notice u/s 148 of the Act was issued on 28.03.2019. The reasons were supplied to the assessee vide letter dated 15.10.2019, which is available at page no.3 of the paper book, which read as under:-

5.1. We note that the said reasons were relating to the different assessee i.e. M/s Balaji Polytex Industries Pvt. Ltd. Accordingly, the assessee pointed out to the ld. AO vide letter dated 02.11.2019, that copy of reasons recorded was not

5.2. We find from the perusal of the said reasons that the ld. AO who recorded the reasons on 23.04.2018, is Mr. John Kerketta, ACIT (OSD), Ward 5(4), Kolkata, whereas the notice u/s 148 of the Act was issued originally on 20.03.2019, by ITO Ward 5(4) Kolkata, Mr. Rose Mani Xess, which read as under:-

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5.3. Therefore, the said notice is issued u/s 148 of the Act was issued almost a year after recording rthe reasons and obtaining the approval which is bad in law and cannot be sustained.

5.4. Moreover, from the reasons recorded above it is clear that the AO has extracted the report received from the DDIT (Investigation) Unit1(3) Kolkata and thereafter merely by recording one line that “I have gone through the above information and details and I am satisfied that income of the assessee of ₹ 10,00,000/- has escaped assessment.” In our opinion the AO has not recorded his own satisfaction as to how the income has escaped assessment but relied on the DDIT report as it is. In our opinion the reasons have been recorded in a mechanical manner without application of mind by the AO which at best can be considered as borrowed

6.

The other ground raised are not being adjudicated at this stage and are being left open to be decided at later stage if need arises for the same.

7.

The appeal of the assessee in ITA No. 455/KOL/2025 is allowed.

ITA No. 419/KOL/2025 8. The only issue raised in the various grounds of appeal is against the confirmation of addition of ₹7,87,70,000/- by the

9.

The facts in brief are that the assessee filed the return of income on 27.08.2012, declaring total loss of ₹3,34,482/-, which was processed u/s 143(1) of the Act. Later, the case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and notice u/s 143(2) and 142(1) of the Act along with questionnaire were duly served upon the assessee. The assessee furnished before the ld. AO the details/ documents along with books of accounts which were test checked and verified by the ld. AO as stated in Para no.3. The ld. AO observed from the balance sheet that the assessee has issued 39,385 equity shares at a face value of ₹10 each at a premium of ₹1990/- thereby collecting total amount of ₹7,87,70,000/- as share capital/ share premium. The ld. AO also issued summon u/s 131 of the Act to two subscribers namely; Prateek Niketan Pvt. ltd. and Mojjika Steels Pvt. ltd. which were duly replied by the said parties. The ld. AO also issued notice u/s 133(6) of the Act to the share subscribers, which were also replied by the subscribers by furnishing all the necessary evidences and details as called for thereby confirming the transactions of investment in the assessee company. Thereafter, the ld. AO issued show cause notice which according to the ld. AO was not replied and finally, he treated the share capital/ share premium of ₹7,87,70,000/- as unexplained cash credit and added to the income of the assessee in the assessment framed u/s 143(3) of the Act dated 31.03.2015.

11.

After hearing the rival contentions and perusing the materials available on record, we find that undisputedly during the year the assessee has issued 39,385 equity shares face value of ₹10 each at a premium of ₹1990/- thereby collecting ₹7,87,70,000/- during the year. We note that assessee has furnished all the evidences qua the subscribers. We note that the assessee filed before the ld. AO the names, addresses, PANs of share subscribers including the equity shares allotted , premium received, total amount received, copies of bank statements, statement of sour of funds, copy of audited balance sheets along with confirmations. We also note that the notices were issued u/s 131 of the Act to two subscribers namely; Prateek Niketan Pvt. ltd. and Mojjika Steels Pvt. ltd., which were replied by the said subscribers. The copies of the summons along with reply were available at page no. 62 to 81. However, there was no personal appearance by the subscribers. The ld. AO also issued letters u/s 133(6) of the Act to nine subscribers which were replied by the subscribers by furnishing all the details and evidences such as copy of audited accounts, bank statements and confirmations etc. However, the ld. AO has not discussed about the issuance of notice u/s 133(6) of the Act, receiving of replies from the subscribers. Similarly, the ld. AO did not discuss anything about compliance made to summons u/s 131 of the Act by two subscribers who submitted their replies before the ld. AO along with evidences. Under these circumstances, we are of the view that the addition made by the ld. AO and as

11.1. The case of the assessee is also supported 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

3.

The factual matrix, as can be gleaned from the records, reveals that the respondent-assessee is a Non-Banking Financial Company (NBFC) duly registered with the Reserve Bank of India. For the relevant Assessment Year, its retum was selected for scrutiny specifically to examine the receipt of a large share premium. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had raised share capital and premium from fifteen corporate entities. 4. It is seen from the record that the assessee had placed before the AO a voluminous "Paper Book" containing all requisite documents, including PAN details, Income Tax Retum acknowledgments, and audited financial statements of all fifteen subscriber companies. Notwithstanding the availability of this documentary evidence, the AO issued summons under Section 131 of the Act to the directors of these companies. When they failed to appear personally, the AO proceeded to brand these companies as "shell entities" and added the entire amount of Rs 6,22,00,000/- as unexplained cash credit. This view was subsequently affirmed by the CIT (Appeals).

11.4. 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.

12.

In the result, the both the appeals of the assessee are allowed.

Order pronounced on 20.05.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 20.05.2026 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

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