ASPECTIVE VANIJYA PVT. LTD.,,KOLKATA vs. DCIT, CENTRAL CIRCLE 4(3),, KOLKATA

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ITA 146/KOL/2026Status: DisposedITAT Kolkata18 May 2026AY 2013-201430 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged its initial onus by providing confirmations, bank statements, and ITR acknowledgments of the subscribers. The AO's reliance solely on the inspector's report without further investigation was deemed incorrect and unsustainable.

What were the facts?

The assessee company received share capital and premium aggregating to ₹73,35,98,115/-. The Assessing Officer (AO) treated this amount as unexplained cash credit under Section 68, relying on an inspector's report that the subscribers were not found at their given addresses.

What were the issues?

Whether the addition of share capital/premium as unexplained cash credit is justified when the assessee has provided documentary evidence, and the AO relied only on an inspector's report without further inquiry.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 142(1),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

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

For Appellant: Shri S.K. Tulsiyan
For Respondent: Shri Madanappa
Hearing: 08.04.2026Pronounced: 18.05.2026

Per Rajesh Kumar, AM:

These two appeals are preferred by the assessee against the separate orders of the Commissioner of Income Tax Appeal, Kolkata- 27, (hereinafter referred to as the “Ld. CIT(A)”] dated 20.11.2025 & 11.11.2025 for the AYs 2013-14 & 2015-16. Since both the appeals relate to the same assessee ,therefore for the sake of convenience, both the appeals are heard together and disposed off by this consolidated order. First of all we shall take ITA No. 146/Kol/2026 A.Y.2013-14.

2.

The only issue raised by the assessee in this appeal in the various grounds of appeal is against the confirmation of addition of ₹73,35,98,115/- by ld. CIT(A) as made by the AO in respect of Share Capital/Share premium by treating the same as unexplained cash credit u/s 68 of the Act.

3.

The facts in brief are that the assessee assessee-company filed its return of income on 30.09.2013 declaring total income of Rs. 10/-. The case of the assessee company was selected for scrutiny through CASS and notices u/s 143(2)of the IT Act, 1961 was issued on 02.09.2014 and was duly served upon the assessee. Subsequently notice u/s 142(1) of the IT Act, 1961 along with questionnaire were issued on different occasions to furnish the accounts/documents and in response of the same, the assessee submitted the requisite details/documents and replied to all the queries raised. The AO, on the basis of the details furnished by the assessee, noted that during the year under consideration, the assessee had received share capital and share premium aggregating to Rs. 73,36,00,000/- from various companies by issuing equity shares at a face value of ₹10/- at a premium of ₹ 714/-. The AO sent commissions u/s.131 of the Act to the Deputy Commissioner of Income Tax, Central Circle-4(3), Kolkata to verify the transactions and the DCIT deputed the Inspector in this regard, however, the Inspector reported that the subscribers were not found at the addresses given. Thereafter the AO after discussing the modus operandi of shell companies and the racket of accommodation entries in vogue , came to the conclusion that the share capital/share premium raised by the assessee is nothing but

5.

After hearing the rival contentions and perusing the material on record including the written submission filed by the assessee, we observe that during the year the assessee has raised share capital/share premium from five parties aggregating to ₹73,36,00,000/-. The assessee during the course of assessment proceedings filed before the AO the copies of confirmations, relevant bank statements, ITR Acknowledgments of the parties concerned/subscribers duly establishing the identity and creditworthiness of the parties and the genuineness of the respective transactions. Copies of the same are available from pages 16 to 323 of the paper book. We note that thereafter the AO commission u/s 131 of the Act was sent the Deputy Commissioner of Income Tax Central Circle-4(3) Kolkata for serving the summons and conducting the field enquiry. The said officer deputed the Inspector of Income Tax to serve summons and conduct enquiries, who submitted his report that these parties were not found on the given addresses. The AO thereafter on the basis of the Inspector’s report came to the

6.

We note from the submissions of rival parties and from the examination of the records before us that the assessee has raised similar share application/share capital from the same parties amounting to ₹29,71,00,000/- in the A.Y. 2012-13 the preceding assessment year. We also note that during the instant assessment year 2013-14 , the assessee received further share application money amounting to ₹73,36,00,000/- from the same share applicants and, therefore, aggregate of share capital/premium from the said subscribers comes to ₹103,07,00,000/-. The details of share capital/premium received in A.Y.2012-13 as well as in A.Y. 2013-14 are extracted below :-

11.

It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove: (a) Identity of shareholder; (b) Genuineness of transaction; and (c) Credit worthiness of shareholders.

12.

In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the AO to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc. can be furnished. 13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder.

8.

In any matter, the onus of proof is not a static one. Though in Section 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. 9. We have perused the decision in the case of Nemi Chand Kothari Vs. CIT (2003) 264 ITR 254 (Gau), wherein the Hon'ble Guwahati High Court has held that section 68 of the Income Tax Act has to be harmoniously interpreted with section 106 of the Evidence Act. The relevant observations of the Hon'ble High Court as under :-

"12. On a careful reading of section 106, we notice that what is the source from which an assessee has obtained the loan can be safely held to be a fact, which is actually within the special knowledge of the assessee; hence, it is the burden of the assessee to show the source(s) from which he has received the loans. Once the assessee discloses the source(s) from which he has received the loans, his burden under section 106 stands discharged and the onus, then, shifts to the Assessing Officer to show, if he wants to treat the loans as an income of the assessee from undisclosed source, that the transaction(s) between the assessee and the creditor is/are not genuine or that the creditor has no creditworthiness and/or that the money, which has been received by the assessee in the form of loans, actually belonged to the assessee himself. 10. The case of the assessee also finds supports from the decision of the Hon'ble Supreme Court in the case of CIT Vs. Orissa Corporation (P)

"Sec. 68 of 1961 Act was introduced for the first time in the Act. There was no provision in 1922 Act corresponding to this section. The section only gives statutory recognition to the principle that cash credits which are not satisfactorily explained might be assessed as income. The cash credit might be assessed either as business profits or as income from other sources." (Para 7) "It is not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established; butwhere the circumstances of the rejection were such that the only proper inference was that the receipt must be treated as income in the hands of the assessee, there is no reason why the assessing authority should not drave such an inference. Such an inference is an inference of fact and not of law. "(Para 10) "The assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the allowed loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions souglu for. "(Paras 13 & 15) 11. Similar ratio has been laid down by the Hon'ble Delhi High Court in the case of ITO v. Anant Shelters (P.) Ltd. [2012] 20 taxmann.com 153 wherein the Hon'ble High Court has held as under :-

7(vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of a/c of the

"Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 wax not sustainable." 13. It is also seen from the records before us that the assessment has been framed in the case of the assessee for A.Y.2012-13 vide order dated 27.03.2014 passed u/s.143(3) of the Act, wherein the issue of receiving share capital/premium was examined by the Assessing Officer after conducting inquiries and not a single discrepancy has been found and thus, the share capital/premium was accepted. Thereafter the Pr.CIT Circle-2 passed an order u/s.263 of the Act dated 22.03.2016 wherein he raised the issue of identity, genuineness and creditworthiness of shareholders and, thus, revised the assessment order. Further in the consequent proceedings the AO passed assessment order u/s.263/143(3) of the Act dated 28.05.2016 for A.Y.2012-2013 wherein the share capital and premium were again accepted after doing necessary verification. Therefore, we can reasonably conclude that once the opening

14.

So far as the inspector’s report is concerned, which is primarily relied upon by the AO on making the addition, we note that the enquiry was conducted by the AO behind back of the assessee and adverse inference was drawn against the assessee on the basis of the said report. We note that the said report/enquiries was never confronted to the assessee at any stage of the assessment proceedings which is in gross violation of principle of natural justice rendering the entire assessment proceedings as bad in law. We observe from the record that the assessee has discharged his onus as casts u/s.68 of the Act by furnishing the details/evidences of the subscribers including their confirmations, relevant bank statements, ITR Acknowledgments of the parties concerned duly establishing the identity and creditworthiness of the parties and the genuineness of the respective transactions copies of which are available in the paper book and, therefore, the assessee has sufficiently discharged its onus whereas the AO has proceeded to disbelieve and demolish the details/evidences provided by the assessee mereby on the basis of inspector’s report.

15.

We have also perused the provisions of Section 142(2) and 143(3) of the Act which lays down as to how the enquiries are to be conducted and the findings of the enquiry to be confronted to the assessee before being used against the assessee. The provision of Section 142(2) of the Act provides for the enquiry. Section 142(3) of the Act

16.

The coordinate bench of ITAT Delhi Tribunal in the case of ACIT, CC- 13, New Delhi v. Sur Buildcon (P.) Ltd. (BBN Transportation (P.) Ltd.), [2021] 133 taxmann.com 31 (Delhi Trib.), has directly addressed the obligation under Section 142 and held: "Section 142(3) mandates that the information/evidence collected pursuant to the enquiry conducted under section 142(2), which is proposed to be utilized during the assessment, shall first be put to the assessee to provide him/her with an opportunity of being heard before the same is even utilized to make an addition/disallowance under section 143(3). Where Assessing Officer failed to confront the address with the evidence he had gathered under section 142(2) and had directly gone on to pass the assessment orders under section 147/143(3) to

17.

Even if the AO’s allegation with respect to non-existence of the investor companies at the given addresses is correct but the same would not give the AO a right to invoke the provisions of Section 68 of the Act without any material that too when the assessee has filed sufficient documentary evidences establishing the share capital/share premium from the said parties which remained uncontroverted by the Assessing Officer. In our opinion the action of the revenue in treating the share capital/share premium as unexplained cash credit without any enquiry is bad in law and can not be sustained. The ratio laid down by the Hon'ble Delhi High Court in the case of CIT-II v. Kamdhednu Steel & Alloys Ltd. (2012) 19 taxmann.com 26 (Delhi) is squarely applicable to the case of the present assessee. The relevant observation of the Hon'ble Delhi High Court as under :-

"From the various decisions, it is clear that the initial burden lies on the assessee to explain the nature and source of the share application money received by the assessee It is also clear that the assessee has to satisfactorily establish the identity of the shareholders, the genuineness of the transaction and the creditworthiness of the shareholders. At the same time, it is also well established principle of law that in any matter, the ones brought is not a static one. Though initial burden is upon the assessee, once he proves the identity of credits/share application by either furnishing Permanent Account Numbers or copies of bank accounts and shows the genuineness of the transaction by showing that money in the banks is by

In the instant case, it is not in doubt that the assessee had given the particulars of registration of the investing/applicant companies, confirmation from the share applicants: bank accounts details and had shown payment through account payee cheques, etc. With these documents, it can be said that the assessee had discharged its initial onus. With the registration of the companies, their identity stands established, the applicant companies were having bank accounts, they had made the payment through account payee cheques. [Para 12/

No doubt, what the Assessing Officer observed may make him suspicious about such companies, either their existence, which may be only on papers and/or genuineness of the transactions, when he found that investing companies are not available at given addresses or that the issuance of the cheque representing share application money preceded by the deposit of cash in the bank account of these investment companies. [Para 13]

The important question which arises at this stage is as to whether on the basis of these facts, could it be said that it is the assessee which has not been able to explain the source and receipt of money. According to the assessee, he had given the required information to explain the source and was not obligated to prove source of the money. It is the submission of the assessee that even in case there is some doubt about the source of money in giving into coffers of the share applicants which they invested with the assessee, it would not automatically follow that the said money belongs to the assessee and becomes unaccounted money. The assessee appears to be correct on this aspect. Something more which was necessary and required to be done by the Assessing Officer was not done. The Assessing Officer failed to carry his suspicion to logical conclusion by further investigation. After the registered letters sent to the investing companies

The AO did not bother to find out from the office of the Registrar of companies, the addresses of those companies from where the registered letter received back undelivered. If the address was same at which the letter was sent or the Inspector visited and no change in address was communicated, perhaps it may have been one factor. In support of the conclusion which the AO wanted to arrive at, that, by itself, cannot be treated as the conclusive factor. The applicant companies have PAN and assessed to income tax. No effort was made to examine as to whether those companies were filing the income tax return and if they were filing the same, then what kind of returns those companies were filing. If there was no return, this could be another factor leading towards the suspicion nurtured by the AO. Further, if the returns were filed and scrutiny thereof reveals that such returns were for namesake. This could yet another be contributing factor in the direction the AO wanted to go. Likewise, when the bank statements were filed, the AO could find out the addresses given by those applicant companies in the bank, who opened the bank accounts and are the signatories, who introduced those bank accounts and the manner in which transactions were carried out and the and the bank accounts operated. This kind of inquiry would have given some more material to the Assessing Officer to find out as to whether the assessee can be convicted with the transactions which were allegedly bogus and or companies were also bogus and were treated for namesake. Just because the creditors/share applicants could not be found at the address given, it

In the instant case, it is projected by the revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of lending entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant in bank and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability [Para 17]

A delicate balance has to be maintained while walking on the tight rope of sections 68 and 69. On the one hand, no doubt, such kind of dubious practices are rampant and on the other hand, merely because there is an acknowledgement of such practice would not mean that in any of such cases coming before the Court, the Court has to presumethat the assessee in question are indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessee herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgments in laying down that the department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. [Para 18]

18.

Similarly, the Hon'ble Delhi High Court in the case of CIT Vs. Steller Investments Ltd. (1991) 192 ITR 287 (Del) has held as under:

“4. It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names share had been issued and the money may have been provided by some other persons. If the assessment of the persons, who are alleged to have really advanced the money is sought to be reopened, that would have madte some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself.”

The aforesaid decision was upheld by the Hon’ble Supreme Court in the case of CIT vs. Steller Investments Ltd. (2001) 251 ITR 263.

19.

Similarly,, the Hon'ble Delhi High Court in the case of CIT Vs Lovely Exports Pvt. Ltd. (2008) 229 ITR 263 has held that:

“In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/subscriber: (2) the genuineness of the transaction, namely,

Attention is further invited to the judgment of the Hon'ble Supreme Court in the case of CIT v. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) wherein the special leave petition filed by the Department against the order of the Hon'ble Delhi High Court was dismissed with the following remarks:

"We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the Assessee Company from

“We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment.” 21. Therefore, considering the facts of the assessee’s case in the light of the aforesaid decisions as discussed and extracted hereinabove, we are inclined to hold that the assessee has sufficiently proved the ingredients of the provisions of Section 68 of the Act particularly when the share capital/share premium had been accepted by the revenue for the assessment year 2012-2013 even in the assessment framed u/s.143(3) and 263/143(3) of the Act. Consequently, we set aside the order of the ld. CIT(A) and direct the AO to delete the addition. Accordingly, the appeal of the assessee is allowed.

ITA No.147/Kol/2026(A.Y. 2016-16)

22.

The issue in ground No.1 is against the confirmation of the addition made by the AO of ₹12,55,11,120/- being the aggregate unsecured loans taken from four loan creditors during the year as unexplained cash credit u/s.68 of the Act.

24.

Ld.CIT(A) in the appellate proceedings confirmed the addition by dismissing the appeal after taking into account the submission and contention of the assessee by observing and holding as under :-

“6.2. Discussion and decision:

6.2.1. I have gone through the asst. order and submissions of the assessee. On perusal of the same it is noticed that during the year under consideration, the assessee had taken fresh unsecured loans to the tune of Rs.12.55,11,120/- from four entities namely M/s Arihant Dealers Pvt. Ltd. (Rs.10,61,96,120/-), M/s Octal Suppliers (P) Ltd. (Rs.40,80,000/-), M/s Sangita Securities (P) Ltd., M/s SKG Flour Mills (P) Ltd. (Rs.71,00,000/-). During the asst. proceedings, the assessee was requested by the AO to provide the source of the credits made by these aforesaid entities and also to prove the financial capacity of these loan creditors. However, it is noticed that the assessee had not responded to the notices issued and had not explained the financial authenticity of the said loan creditors satisfactorily before the AO. Consequently, the AO had treated the fresh loan taken by the assessee (supra) of Rs. 12.55 crores as bogus and made the addition u/s 68 of the Act in the form of unexplained cash credit.

6.2.2. During the appellate proceedings, the assessee had contended that it had already taken loans from the aforementioned parties in the preceding years as

6.2.3. However, the submission and explanation of the assessee are not found logical and true to the facts. The financial parameters of the aforesaid four loan creditors had neither any consistent tangible activities to generate financial resources to survive nor any business rationale with credible operations. As an instance, if we go through the financials of M/s Arihant Dealers (P) Ltd. (ADPL), it is noticed that the said entity had authorized share capital at Rs. 15,00,000/- and its paid-up capital at Rs.12,90,000/-only who had credited by an abnormal and astronomical amount to the appellant assessee which is next to impossible in the taste of any probabilities. The aforesaid entity M/s ADPL has been shown as creditor by the appellant assessee to the extent of Rs.271,91,07,134/- on 01.04.2014 which has been inflated further credit by Rs. 10,61,96,120/- during the period (year) under consideration and closing credit balance in the books of appellant assessée in respect of Mis ADPL has been shown by Rs.280,46,03,254/- as on 01.04.2015. As per records from Ministry of Corporate Affairs (MCA). Its balance sheet was last filed on 31.03.2017. It was involved in wholesale on a fee

6.2.3.1. The appellant assessee has failed to provide further details regarding the source of fund of the loan creditor M/s. ADPL for making such fresh unsecured loans to the extent of Rs.10,61,96,120/- to the appellant assessee during the relevant financial year, at the appellate stage also, after taking so many years of time which could not be provided to the AO due to acute shortage of time as contended by the appellant assessee itself. Simultaneously, the appellant assessee has not shown an iota of interest to justify the creditworthiness of so- called loan creditor M/s. ADPL even after providing sufficient opportunities with the specific queries annexed with the hearing notice(s). Hence, other method of enquiries is sought and current status of the M/s. ADPL in MCA database confirms 'Strike Off'. It is further verified through www search in Google which confirms identically with all other details, discussed above, precisely and leaving no scope to check by way of issuing summon u/s.131 of the Act, 1961 at the appellate stage to adjudicate the issue of creditworthiness, genuineness as well as identity also. However, a screen-shot of the status of M/s. ADPL company, downloaded from zauba.com is annexed herewith for ready reference:

……………………………………………..

…………………………………

6.2.9. In the light of the aforesaid judicial pronouncements as well the provisions of the section 68 of Act and above discussed facts, it can be inferred that whether any sum credited in the accounts of the assessee through banking channel or not and whether any loan confirmation from such lending entities are present on record or not, whether any interest was paid against such loan or not, the "onus" to prove the identity, Genuineness & creditworthiness of the creditors and authenticity of the transaction is on the assesses but in the instant case this "onus" was not discharged by the assessee in an effective manner. It is to be reiterated that assessee has completely failed to give any explanation and/or to substantiate the creditworthiness & genuineness of the aforesaid lenders. The explanation offered was not found satisfactory as it was verified from Income Tax Returns of the creditors that the amount of funds transferred to the assessee in the form of unsecured loans were grossly disproportionate to their gross total income & known sources of income. Further, assessee also has failed to produce the Loan creditor parties, in spite of being duly requested, for examination and/or cross examination of the aforesaid money receipt transactions. Further, assessee has also has failed to explain and substantiate the sources of the funds of the lender & no explanation has offered in respect of credit entries in the account of lenders. Hence, the addition of Rs. 12,55,11,120/- is confirmed and subsequently the initiation of penalty proceedings u/s 271(1)(c ) of the Act is highly justified as there are inviolable inaccurate furnishing particulars of income on the part of the assessee for the year under consideration. Subsequently, these appeal grounds raised by the assessee are conclusively dismissed.”

25.

The ld. CIT(A) while dismissing the appeal relied on various decision such as CIT Vs. NR Portfolio (P) Ltd. [2014] 42 taxmann.com 339 (Delhi HC); CIT Vs. Precision Finance (P) Ltd. 208 ITR 465 (Calcutta- HC) and ACIT Vs. BST Infratech Ltd., 161 taxmann.com 668 (Cal).

27.

In our opinion, the loans taken from the group companies in the regular course of business from year to year and also repayment thereof cannot be treated as unexplained cash credit u/s.68 of the Act. For the sake of ready reference the facts qua the individual loan lenders are discussed in pages 6 & 7 of the written submission as under :-

29.

The issue raised in ground No.2 is against the confirmation of addition of ₹7,27,746/- made by the AO on account of interest on loan from JM Financial Products Ltd.

30.

After hearing the rival contentions and perusing the material on record including the submissions filed by the assessee, we find that the assessee has incurred interest expenditure on loan taken from JM Financial Products Ltd. and M/s Indian Infoline Finance Ltd. The copy of ledger accounts of both the parties are available at pages 112 to 116 of the paper book. We observe that these loans were taken for the purpose of financial investment activities which are part of the business activity. Therefore, the interest is incurred in connection with a running and operation of the business of the assessee and the same cannot be disallowed. Accordingly , we set aside the order of the ld.CIT(A) and direct the AO to delete the addition made. Ground No.2 is allowed.

31.

The issue raised in ground No.3 is with regard to upholding of disallowance of expenditure of ₹11,83,000/- incurred on legal & professional charges to defend the loan litigation cases lodged by IFCL before the Hon'ble Delhi High Court.

33.

We observe that the expenditure of legal and professional charges were incurred during the financial year in connection with High Court litigation by the assessee company. We note that the assessee has taken loan of ₹80 crores from IFCL. Due to some dispute between the assessee and IFCL, the IFCL recalled the entire loan amount. Therefore, litigation arose and then assessee had to file cases in Delhi High Court and, thus, these expenses are duly and exclusively expended for the purpose of business of the assessee. Consequently we set aside the order of the ld.CIT(A) and direct the AO to delete the addition. Ground No.3 is allowed.

34.

The issue raised in ground No.5 is against the disallowance/addition of ₹66,646/- over and above ₹5810/- suo moto disallowed bythe assessee u/s.14A of the Act read with Rule 8D of the Rules under the

35.

After hearing the rival contentions and perusing the material on record including the submissions filed by the assessee, we find that the assessee has received dividend income of Rs. 296/- only which was claimed exempt from tax u/s 10(34) of the Act. The assessee made suo moto disallowance of Rs. 5,810/- in its computation of income. In spite of the above, the Ld. A.O. mechanically proceeded to make disallowance u/s 14A of the Act without establishing any nexus between the expenditure incurred and exempt income earned during the relevant year and calculated the figure of disallowance of Rs. 72,456/- by applying the provisions of Rule 8D of the Rules r.w.s. section 14A of the Act. Similarly the added a sum of ₹72,456/- in the book profit u/s.115JB of the Act. We find that the assessee has already disallowed ₹5810/- whereas the income earned by the assessee is only ₹296/-. The assessee has already claimed exempt for dividend income u/s.10(34) of the Act and no further disallowance is called for. Similarly in the case of addition to the book profit u/s.115JB of the Act, we are of the view that the same cannot be added to the book profit u/s.115JB of the Act. Consequently, we set aside the order of the CIT(A) and direct the AO to delete the addition made on the above heads. The ground no. 5 is allowed.

Order pronounced in the open court on 18.05.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 18.05.2026 Copy of the Order forwarded to: 1. The Appellant BY ORDER, 2. The Respondent True Copy// 3. CIT DR, ITAT, 4. 5. Guard file. Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata

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