A.P. TRADING & FINANCE COMPANY LIMITED,KOLKATA vs. ITO, WARD 1(1),, KOLKATA

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ITA 434/KOL/2026Status: DisposedITAT Kolkata13 May 2026AY 2018-20197 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that while the AO's findings were not directly challenged, the assessee disputed the enhancement of income by the CIT(A) as it went beyond the original assessment. Therefore, in the interest of justice, the assessee was granted another opportunity to present its case.

What were the facts?

The assessee company sold shares for Rs. 14,35,870, which the Assessing Officer (AO) treated as an unexplained cash credit under Section 68. The Commissioner (Appeals) confirmed this addition and also enhanced the income by disallowing a loss, exceeding the AO's assessment.

What were the issues?

Whether the sale proceeds of shares could be treated as unexplained cash credit, and whether the CIT(A) exceeded their appellate jurisdiction by enhancing the income beyond the AO's assessment.

Which sections of the Income-tax Act were involved?

Section 68,Section 250,Section 147,Section 144,Section 144B,Section 251(1)(a)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH AT KOLKATA

Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2018-19 dated 10.12.2025. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in treating the sale proceeds of shares amounting to Rs.14,35,870/- as unexplained cash credit under section 68 of the Act, despite having accepted the purchase of the very same shares as genuine in the appellate order passed under section 250 of the Act for the assessment year 2016-17. 2. On the facts and in the circumstances of the case and in law, the purchase of shares was accepted as a genuine transaction by the Ld. CIT(Appeals) in the order passed under section 250 of the Act for the assessment year 2016- 17, the Assessing Officer/Ld. CIT(Appeals) was not justified in the subsequent assessment year in making an addition of the entire sale consideration under section 68 of the Act by treating the sale proceeds of shares as unexplained cash credit.

3.

On the facts and in the circumstances of the case and in law, the Department is not justified in taking a contradictory stand by accepting the purchase of shares as genuine in one assessment year and, in another assessment year, treating the sale of the very same shares as unexplained and bogus.

4.

On the facts and in the circumstances of the case and in law, the appellant had duly discharged the onus cast upon it by submitting all relevant documentary evidences, including contract notes, demat statements, bank statements, and proof of payment of Securities Transaction Tax (STT), thereby establishing the genuineness of the share transactions. In absence of any cogent material, the addition made under section 68 of the Act merely on the basis of suspicion and pre-determination is unsustainable and bad in law

5.

On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) exceeded the scope of appellate juri iction by enhancing the income of the appellant through disallowance/addition of loss amounting to Rs.4,84,394/-, which did not arise from the assessment order passed by the Ld. Assessing Officer.

6.

On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) failed to appreciate that the powers of enhancement under section 251(1)(a) of the Act are confined to the "subject matter of assessment" and do not extend to bringing to tax a new source of income or disallowing a new item of loss which was not considered by the Ld. Assessing Officer in the assessment order.

7.

The appellant craves to add or amend ground or grounds of the Appeal on or before the date of hearing as may be allowed by the appellate authority.”

3.

Brief facts of the case are that the assessee is a company engaged in trading and financial activities and had filed the return declaring loss of ₹24,33,224/-. The assessment was reopened u/s 147 of the Act based on the information that the assessee had suspicious financial transactions relating to sale of shares of Appu Marketing and Manufacturing Ltd. (later renamed as Ejecta Marketing Ltd.). Statutory notices were issued and after examining the replies, the contract notes, the demat statements and bank details, the Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the transactions of purchase of 5,000 shares of Appu Marketing and Manufacturing Ltd. in FY 2015-16 for ₹33,53,262.50 and sale in FY 2017-18 relevant to the impugned AY 2018-19 for ₹14,34,433.97 for incurring a loss of ₹19,18,828/- constituted accommodation entries and the Ld. AO treated the receipt of ₹14,35,870/- as unexplained cash credit u/s 68 of the Act, the loss claimed was not considered and was stated as fictitious and the assessment was completed u/s 147 r.w.s. 144 r.w.s. 144B of the Act with an addition of ₹14,35,870/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who not only confirmed the addition of ₹14,35,870/- but also enhanced the income after issuing a notice 251(2) of the Act proposing enhancement of ₹4,84,394/- representing the balance loss of ₹19,18,828/- arising from purchase cost minus sale proceeds as the Ld. AO had treated only the sale proceeds as unexplained but had ignored the fictitious nature of the entire loss and the addition was enhanced by ₹4,84,394/- and the total addition of ₹19,20,264/- was sustained.

4.

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

5.

Rival contentions were heard and the submissions made have been examined.

6.

It was submitted by the Ld. AR that the purchases were genuine; therefore, the sale could not be held as non-genuine. The sale had taken place in the AY 2018-19 while the purchases had occurred in AY 2016- 17 and the addition has been made u/s 68 of the Act. It was stated that no return of income was filed in response to the notice u/s 148 of the Act. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld. However, the Bench drew the attention of the Ld. AR to page 7 sub-para 2.4 of para 3.6 of the assessment order which is extracted as under:

“2. The assessee's submission along with attachment (contract notes) has perused and considered, But the assessee’s claim has not found to be acceptable for the reasons:-

1.

In order to explain the genuineness of transaction in sale of 5000 shares of M/s Appu Marketing and Manufacturing Ltd (M/s Ejecta Marketing Ltd), the assessee has relied on contract notes, banking transactions and demat account solely to prove the genuineness of said transactions which cannot be accepted as the assessee should have furnished (1) copies of confirmation from BSE, (2) copies of financial and trading details & trends of M/s Ejecta Marketing Ltd for last two years (3) identity & creditworthiness of the party to whom the shares had sold.

2.

Further, it is not established by the assessee that as to why it has sold these shares on loss with copies of supporting documents and evident.

3.

The decision of the Hon'ble Mumbai ITAT on which the assessee has relied upon differs the facts of the assessee's case.

4.

As per record, the SEBI having considered all the facts and circumstances of the case, the material available on record, the factors mentioned in section 15J of the SEBI Act in exercise of power conferred upon u/s 15J of the SEBI Act, imposed a penalty of Rs. 500,000/- on Appu Marketing and Manufacting Ltd (Ejecta marketing Limited) u/s 15HA of the SEBI Act for violation of Regulation 3(a), (b)(c) (d), 4(1) and 4(2)9a) of PFUTP Regulations by establishing the trades of Appu Marketing and Manufacting Ltd (Ejecta marketing Limited) were non genuine in nature and created a misleading appearance of trading. In view of these facts, it is clear that the assessee had involved with the manipulated shares of above company.

3.

A transaction needs to be proved to be genuine by the assessee who substantially asserts the same but the assessee has failed to discharge, his onus to prove the genuineness of sales of 5000 share of M/s Ejecta Marketing Ltd. during the year under consideration. It is observed that the assessee has received Rs. 14,35,870/- from the sale of above penny stock and the actual source of transaction was unaccounted cash of the assessee and the assessee was a beneficiary of taking

entry by bogus sales of shares of above company.

4.

In view of all the above facts, an addition of Rs. 14,35,870/- requires to be made to the total income of the assessee u/s 68 of the Income tax Act, 1961.”

7.

It was conveyed to the Ld. AR that SEBI had imposed a penalty of ₹5 Lakh on Appu Marketing and Manufacturing Ltd. (Ejecta Marketing Ltd.) u/s 15HA of the SEBI Act for violation of Regulation 3(a), (b), (c), (d), 4(1) and 4(2)9a) of PFUTP Regulations by establishing the trades being non-genuine in nature and creating a misleading appearance of trading. The Ld. AR submitted that the assessee had not been granted proper opportunity in respect of the enhancement of income and the Ld. CIT(A) also exceeded the scope of appellate juri iction as the same did not arise from the assessment order passed by the Ld. AO. He requested that the assessee may be granted one more opportunity of being heard to explain the case before the Ld. AO as the assessment order was passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act and proper representation could also not be made before the Ld. CIT(A) as none had appeared before the Ld. CIT(A) during the course of the hearing.

8.

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). In view of the facts mentioned by the Ld. AO, apparently there is no reason to interfere with the finding of the Ld. CIT(A). However, since the assessee disputes the enhancement as not being the subject matter of the assessment and states that a new source of income cannot be brought or a new item of loss cannot be disallowed which was not considered by the Ld. AO and states that it has sufficient evidence for ITA No(s). 434/KOL/2026 Assessment Year(s) 2018-19 justifying the transactions, the Bench was of the view that in the interest of justice and fair play one more opportunity of being heard may be provided to the assessee. The Ld. AO shall grant an opportunity of being heard to the assessee and the assessee shall file necessary evidence in support of the claim that the transactions are genuine and thereafter the assessment shall be framed de novo.

9.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 13th May, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 13.05.2026 Bidhan (Sr. P.S.)

Copy of the order forwarded to:

1.

A P Trading & Finance Company Limited, 2nd Floor, P-39, Princep Street, Chandney Chowk, Kolkata, West Bengal, 700072. 2. ITO, Ward-1(1), Kolkata.

3.

CIT(A)-NFAC, Delhi.

4.

CIT-

5.

CIT(DR), Kolkata Benches, Kolkata.

6.

Guard File. //// By order

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