FLAME DEALERS PRIVATE LIMITED,KOLKATA vs. ITO, WARD 5(4),, KOLKATA

The assessee is in appeal before the Tribunal raising the following grounds of appeal: I. ITA No. 3065/KOL/2025; AY 2012-13:

We shall first take up ITA No. 3065/KOL/2025 for AY 2012-13 for adjudication. Brief facts of the case are that the assessee had not filed the return of income for AY 2012-13. The case was reopened on 18.01.2019 based on the information from the Investigation Wing that the assessee was a beneficiary of accommodation entries through the layering of funds. In response to the notice u/s 148 of the Act, the assessee filed the return of income declaring NIL income. During the assessment proceedings, the Assessing Officer (hereinafter referred to as Ld. 'AO') observed that the assessee had received share capital and share premium totalling to ₹33,06,12,000/- during FY 2011-12. The Ld. AO noted that the assessee had meagre income and nil expenses, had failed to produce the directors of the investor companies, and could not establish the identity, creditworthiness, and genuineness of the transactions. Consequently, the Ld. AO made an addition of ₹33,06,12,000/- u/s 68 of the Act and assessed the total income of the assessee at ₹33,06,12,000/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who observed that the assessee had failed to furnish adequate documentary evidence to support its claims regarding the identity, creditworthiness, and genuineness of the share applicants. Relying on various judicial pronouncements, including the decision of the Hon'ble Supreme Court, the Ld. CIT(A) held that the mere receipt of money through banking channels and filing of primary documents did not discharge the primary onus of the assessee u/s 68 of the Act, especially when the investor companies had meagre income and their directors were not produced for verification. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.

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

Rival contentions were heard and the submissions made have been examined. Our attention was drawn by the Ld. AR to page 4 of the assessment order in which the Ld. AO has mentioned that the assessee company had failed to discharge the onus and none of the directors or shareholders of the companies appeared before him, and, therefore, the identity, creditworthiness and the genuineness of the transactions could not be established. The Ld. AO has also mentioned that the company used for obtaining the unaccounted money are basically fake companies that exist for no other reason than to ‘layer’ the entries which are passed out to the beneficiaries as loan or share capital. He has noted that the unaccounted money is taken as loan or share capital or sale of investment or long-term capital gains/long-term capital loss and passed on to either such paper company for ‘layering’ of the transaction or directly to the beneficiary as loan or share capital and has made the addition. The assessee drew our attention to the order of the Tribunal in the case of Iris Clothings Limited vs. Deputy Commissioner of Income Tax, Central Circle 2(3), Kolkata in ITA No. 1015/KOL/2023 for AY 2013-14 order dated 02.01.2024, and stated that since the transaction was through bank, the identity was established. He submitted that in the case of PCIT vs M/s. NRA Iron and Steel Pvt. Ltd., 103 taxmann.com 48, relied upon by the Ld. AO, the Hon'ble Supreme Court has held that the inquiry must be done before the evidence filed is rejected. It was brought to the notice of the Ld. AR by the Bench that the Ld. AO had required the assessee to produce the directors before him and which was part of the inquiry and since none of the directors were produced, it could not be said that the Ld. AO did not conduct any inquiry before rejecting the submission of the assessee. The Ld. AR assured to produce the directors before the Ld. AO and requested that one more opportunity may be provided to the assessee.

The Ld. DR requested that the order of the Ld. CIT(A) may be confirmed.

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 the interest of justice and fair play, the Bench was of the view that the request of the assessee to produce the directors before the Ld. AO may be allowed. Therefore, the order of the Ld. CIT(A) is set aside and the issue is remanded to the Ld. AO for granting another opportunity of being heard, examine the evidence filed by the assessee and frame the assessment de novo. The assessee shall furnish all evidence and also produce the directors of the company, along with the required evidence in order to establish the identity, the creditworthiness of the share applicants, the justification for the share premium as well as the genuineness of the transaction, and also produce the directors of the investor company/companies before the Ld. AO for examination. In case the assessee fails to comply, the Ld. AO shall be at liberty to draw adverse inference. Hence, the grounds of appeal are partly allowed for statistical purposes.

In the result, the appeal filed by the assessee in ITA No. 3065/KOL/2025 for AY 2012-13 is partly allowed for statistical purposes.

As regards the ITA No. 3066/KOL/2025 for AY 2013-14, it was stated by the Ld. AR that the delay of 23 days was not condoned by the Ld. CIT(A). When asked to explain as to what was the reason for the delay, he stated that there was a death in the family of one of the directors, which caused the delay in filing the appeal, and the same had not been treated as a sufficient cause by the Ld. CIT(A) and the delay was not condoned. It was requested that the assessee may be granted one more opportunity so that proper submission may be made before the Ld. CIT(A) who may be directed to pass an order on merits in accordance with the provisions of section 250(6) of the Act. The appeal is also partly allowed for statistical purposes.

We have considered the submissions made. The Bench was of the view that on the reasons mentioned, the delay ought to have been condoned by the Ld. CIT(A) as there was a sufficient cause. After examining the facts of the case and the law, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the appeal to him for disposal of the grounds of appeal taken by the assessee on merits by passing a speaking order as required u/s 250(6) of the Act. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments and ITA No(s). 3065/KOL/2025, 3066/KOL/2025 Assessment Year(s) 2012-13, 2013-14 rule 46A of the I.T. Rules, 1962 shall also be followed and an opportunity of being heard may be provided to the Ld. AO, if required. Accordingly, the grounds taken by the assessee in the appeal are partly allowed for statistical purposes.

In the result, both the appeals filed by the assessee in ITA No. 3065/KOL/2025 for AY 2012-13 and ITA No. 3066/KOL/2025 for AY 2013-14 are partly allowed for statistical purposes. Order pronounced in the open Court on 2nd July, 2026. [Yogesh Kumar US] [Rakesh Mishra] Judicial Member Accountant Member Dated: 02.07.2026 Bidhan (Sr. P.S.)

CIT(A)-NFAC, Delhi.

CIT-

CIT(DR), Kolkata Benches, Kolkata.

Guard File. //// By order