DCIT, CC-1(1), KOLKATA, KOLKATA vs. M/S. KHOOBSURAT LIMITED, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER

ITA No.2969/KOL/2025 Assessment Year: 2012-13

DCIT, CC-1(1), Kolkata Vs. M/s Khoobsurat Limited West Bengal-700107 3rd Floor, Room No.310, 7A Bentinck Street, Kolkata-700001 [PAN: AABCK0685K] APPELLANT RESPONDENT

Appellant by : Shri A.N. Keshari AR Respondent by : Shri Sallong Yaden, Addl. CIT, Sr. DR

Date of hearing : 17.06.2026 Date of Pronouncement : 24.06.2026 O R D E R PER YOGESH KUMAR U.S., JUDICIAL MEMBER: This Appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeal) [“the Ld. CIT(A)”, for short], dated 28.02.2025 passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) for the Assessment Year 2012-13. 2. There is a delay of 218 days in filing the present appeal and the Department has filed the application along with affidavit for condonation of delay which is reproduced us under:-

ITA No.2969/KOL/2025 M/s Khoobsurat Limited.; A.Y: 2012-13 “2. With due respect this is to inform you that in the above-mentioned case, appeal order was received in the office of Principal Commissioner of Income Tax, 28.02.2025 Kolkata. Afterward Appeal Scrutiny Report was called for from the office of the Principal Commissioner of Income- Tax, Central-1, Kolkata. In this case utmost effort has been made to prepare all the desired ASRs including the present case during the crucial period of time-barring assessment which was finally submitted on 06.11.2025, in the office of the Additional Commissioner of Income- Tax, Central, Range-1, Kolkata. Thereafter, the Ld. PCIT, Kolkata has directed to file second appeal before the Hon'ble ITAT, which was received by this office on 28.11.2025. It is pertinent to mention here that the undersigned had huge workload related to assessment proceedings and other time barring related matter. Even after time -barring assessment, there was huge pressure of giving effect to CIT(A)'s order, giving effect to VSV 2020 cases, drafting & passing time-barring penalty order and preparing Remands report in several cases. Therefore, ASR could not be submitted on time. Therefore, the filing of appeal before Hon,ble ITAT was getting delay for 279 days and there is no malafide intention behind filing the appeal beyond the time allowed. In view of the above, your honour is requested to kindly condone 279 (Two hundred seventy-nine) days delay for filing of appeal.” The Ld. DR reiterated the averments made in the application for condonation of delay and sought for allowing the application for condoning the delay in filing the present Appeal. 3. Per contra, the Ld. AR submitted that, there is no sufficient cause to condone the inordinate delay of 218 days, thus sought for dismissal of the present Appeal on delay in latches. 4. We have heard both the parties and perused the material available on record on the issue of delay in filing the present appeal. The Revenue, in the application for condonation of delay has explained the circumstances that prevented it from filing the appeal before the Tribunal within the prescribed period of limitation.

ITA No.2969/KOL/2025 M/s Khoobsurat Limited.; A.Y: 2012-13 5. The Hon'ble Supreme Court time and again clarified that the delay in filing the appeal with sufficient cause should be looked into in a liberal way and shall condone the delay. In the landmark decision in Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC), the Hon'ble Supreme Court settled the law that the delay when supported by justifiable reasons, must make way for the cause of substantial justice. Considering the above facts and circumstances, we condone the delay of 218 days in filing the present appeal. 6. Brief facts of the case are that, Assessee filed return of income for the Assessment Year 2012-13 by declaring total income at Rs.68,75,230/- and the said return was assessed u/s 143(3) of the Act on 10.11.2014 by determining the total income at Rs.71,08,810/- Subsequently, based on the information received from Deputy Director of Income Tax (Investigation) Unit-IV(1), Kolkata in which mentioned that KCL Infra Project Limited formerly known as Kadamb Construction Limited is penny stock company, which has been used by different persons/ concerns including the assessee, for generating bogus STCL. Pursuant to the said information, a notice u/s 133 (6) of the Act has been issued to the assessee, calling upon to submit the details of transactions in the scrip of KCL Infra Project Limited. The Assessee replied to the notices issued by the Assessing Officer and made compliances. An Assessment Order came to be passed on

ITA No.2969/KOL/2025 M/s Khoobsurat Limited.; A.Y: 2012-13 06.12.2019 by making an addition of Rs.1,62,70,164/- on account of pre-arranged bogus loss in trading and also made addition on account of commission paid to broker on the bogus loss at Rs.4,84,730/-. Aggrieved by the Assessment Order dated 06.12.2019, Assessee preferred Appeal before Ld. CIT(A). The Ld. CIT(A) vide Order dated 28.02.2025, allowed the Appeal of the Assessee. As against the order of the CIT(A), the Department preferred the captioned Appeal on following grounds: - 1. That on the facts and circumstances of this case and in law, whether the Ld. CIT(A) is correct in holding that the issue of claim of share trading loss was already examined vide order under section 143(3) of the Act and there was no failure on the part of assessee in disclosing fully and truly the relevant facts, by ignoring the fact that the reopening of the assessment was based on fresh, credible and tangible information received from the Directorate of Investigation, Kolkata and the Ld. Pr. CIT granted approval u/s 151 of the Act after being satisfied with the reasons recorded for reopening of the case. 2. That on the facts and circumstances of the case and in law, whether the Ld. CIT(A) is correct in deleting the addition of Rs. 1,62,70,154/- claimed as trading loss by the assessee in collusion with the accommodation entry operator and also deleting the addition of Rs. 4,84,730/- being commission paid by the assessee to arrange such fictitious loss. 3. That on the facts and circumstances of the case and in law, whether the Ld. CIT(A) is correct in stating that the addition of Rs. 1,62,70,154/- claimed as trading loss on sale of penny scrip namely KCP Infra Project Limited was based on surmises and conjectures, by ignoring the statement of the Managing Director of M/s. KCP Infra Project Limited wherein he has accepted that this scrip was used to provide accommodation entries and information received from the Investigation Wing of the Department. 4. That on the facts and in the circumstances of this case, whether the Ld. CIT(A) was justified in relying merely on paper confirmations and trades through a recognized stock exchange, while ignoring the detailed dissemination report of the Investigation Wing highlighting the systematic tax evasion scheme among Clients & Stock Exchange Page | 4

ITA No.2969/KOL/2025 M/s Khoobsurat Limited.; A.Y: 2012-13 members and the findings of the Assessing Officer regarding the involvement of the assessee in fabricating losses under the garb of sale of penny scrips. 5. That on the facts and circumstances of this case and in law, whether the Ld. CIT(A) is correct in deleting the fictitious trading loss arranged through the accommodation entry operator, while ignoring the binding precedent of the Hon’ble jurisdictional High Court in the case PCIT v. Swati Bajaj [2022] 139 taxmann.com 352 (Calcutta) and the recent decision in PCIT v Zulu Merchandise Pvt. Ltd. (ITAT/88 of 2025 dated 01.08.2025). 6. That on the facts and circumstances of this case and in law, whether the Ld. CIT(A) is correct in accepting the unverified submission of the assessee, even though under Section 250(4) of the Act the Ld. CIT(A) has the inherent power to conduct such enquiries himself or direct the AO to do so in order to establish the finality of facts before deciding the appeal. 7. For that the monetary limit for filing appeal before Hon’ble ITAT as prescribed by the CBDT Circular No.09/2024 is not applicable in the present case as the case pertains to accommodation entries and falls under the exceptional clause in para 3.1(h) of the CBDT circular No 05/2024. 8. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing of this appeal.

ITA No.2969/KOL/2025 M/s Khoobsurat Limited.; A.Y: 2012-13 deleting the additions made by the Assessing Officer on merits as well. The Ld. DR relying on the Assessment Order, sought for reversal of the order of the Ld. CIT(A). 8. Per Contra, the Ld. AR relying on the order of the Ld. CIT(A) sought for dismissal of the Appeal filed by the Revenue. 9. We have heard the parties and perused the material available on record. The Ld. CIT(A) while deleting the addition made by the Assessing Officer held as under:- “5.4.1 So from the above fact, it can be found that the AO has reopened the case for reassessment after 4 years, in a case where assessment was already completed u/s. 143(3) of the Act, and the issue of claim of the share trading loss was already examined. As such was no failure on the part of assessee is disclosing fully and truly the relevant fact in this case. 5.4.2 Furthermore, as it is found that the assessee is in the regular business of share trading and has incurred losses and earned profits in its share transactions on a case to case basis. The AO had disallowed the claim of trading loss of Rs. 1,62,70,154/- without stating as how the assessee was involved in the share trading scam. Was its name was found mentioned in the list of person’s who had conspired to conduct the scam as such? Further, neither the investigation wing report nor the statements recorded of the various persons were provided to theappellant for cross examination to the assessee. 5.4.3 Hon’ble Supreme Court of India in the case of Omar sahdav Mohamed Saif(1959) 37 ITR 151 has held that no addition can be made on the basis of surmises, suspicions and conjectures. Further, from the assessment order, it can be seen that the AO did not bother to conduct any enquiry to establish its claim that assessee has entered into the transaction of purchase and sell of shares of M/s. KCL Infra Projects with a malafide intention and to take bogus entry of share trading loss. Rather, he has simply relied on the enquiry report of Investigation Wing. 5.4.4 Therefore, in view of the above facts and discussion, I find the addition made by AO based on the surmises and conjectures. As there is no evidence on record to establish that the assessee has deliberately taken the fictions trading loss by entering into any manipulation or scam. Rather the facts are available on record, which suggest that the Page | 6

ITA No.2969/KOL/2025 M/s Khoobsurat Limited.; A.Y: 2012-13 appellant assessee is in the business of share trading and investment and he has made several other transactions of purchase and sales of different other companies, in which he had made profits or incurred losses on case to case basis and depending upon the market situation. Hence, the addition made by the AO of Rs. 1,62,70,154/- is not tenable in the eye’s of law. Therefore addition of Rs. 1,62,70,154/- is deleted.” 10. From the above findings of the Ld. CIT(A), it is found that Assessing Officer has reopened the case of the Assessee for re-assessment after four years, in the case where re-assessment was already completed u/s 143(3) of the Act. Further, the issue of claim of share trading loss was already examined by the Assessing Officer in the original assessment proceedings. The Ld. CIT(A) found that there was no failure on the part of the Assessee in disclosing the fully and truly relevant facts. The Ld. CIT(A) has also observed that Assessee is in regular business of share trading and has incurred loss and earned profit in its share transaction on a case-to-case basis and further observed that the Assessing Officer has disallowed the trading loss of Rs.1,62,70,154/- without mentioning how the Assessee was involved in the share trading scam. The Ld. CIT(A) further found that the Assessing Officer not provided an opportunity to the Assessee to cross-examine the person who has given statement before the Investigation Wing, Kolkata. Further also submitted that, there is no evidence on the record to establish that Assessee had deliberately taken the fictions trading loss by entering into any manipulation or scam. On the contrary, there is a material to show that the Assessee is Page | 7

ITA No.2969/KOL/2025 M/s Khoobsurat Limited.; A.Y: 2012-13 in the business of share trading and investment and has made several other transactions and projects and sale of different companies in which Assessee had made profit or incurred loss on case-to-case basis depending upon the market situation. The Department has failed to bring any material to contradict the above findings of the Ld. CIT(A). Therefore, we find no error or infirmity in the order of the Ld. CIT(A) in deleting the addition. Accordingly, the grounds of Appeal of the Revenue are hereby dismissed. 11. In the result, Appeal of the Revenue is dismissed. Order pronounced on 24.06.2026. Sd/- Sd/- (RAKESH MISHRA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 24.06.2026 DP, PS Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR) //TRUE COPY//

ASSISTANT REGISTRAR KOLKATA BENCHES, KOLKATA