DIAMOND DEALTRADE LIMITED,,KOLKATA vs. ITO, WARD 12(1), KOLKATA,, KOLKATA

ITA 1823/KOL/2026Status: DisposedITAT Kolkata29 September 2026AY 2018-20194 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal considered the submission made by the assessee. In view of the fact that the quantum addition has been deleted by the Tribunal in a prior appeal (ITA No. 457/KOL/2023 for AY 2018-19 dated 22.04.2026), the penalty imposed is hereby cancelled. The reasoning is that the penalty was levied based on the addition made under Section 68, and once the addition itself is deleted, the basis for the penalty ceases to exist. The Tribunal did not explicitly address all grounds raised by the assessee, particularly those concerning limitation, service of notice under Section 143(2), and the merits of the share capital addition, as the cancellation of the penalty was based solely on the deletion of the primary addition. The operative direction is the cancellation of the penalty.

What were the facts?

The assessee, Diamond Dealtrade Limited, filed its return of income for Assessment Year 2018-19 declaring NIL income. The Assessing Officer (AO) observed an increase in share capital of ₹81,00,00,000/-. As the assessee failed to provide details to verify identity, creditworthiness, and genuineness of investors, the AO treated the entire amount as unexplained cash credits under Section 68 of the Income Tax Act, 1961, and assessed the total income at ₹81,00,00,000/-. Subsequently, a penalty of ₹4,86,00,000/- was levied under Section 271AAC(1). The assessee appealed to the Commissioner of Income Tax (Appeals)-NFAC, Delhi, who confirmed the AO's action. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the order of the Ld. CIT(A) is maintainable, given that the addition made in the assessment order was deleted by the ITAT in ITA No. 457/KOL/2023 for AY 2018-19 dated 22.04.2026. (Question of law) 2. Whether the Ld. CIT(A) erred in confirming the order imposing penalty which was barred by limitation. (Question of fact and law) 3. Whether the order of the Ld. AO is maintainable when the addition itself was not maintainable under Section 68. (Question of law) 4. Whether the Ld. CIT(A) erred in confirming the assessment when no notice under Section 143(2) was validly served on the assessee. (Question of fact and law) 5. Whether the Ld. CIT(A) is otherwise bad in law since the order imposing penalty was passed without considering the material on record proving the source of share capital contribution. (Question of law) 6. Whether the Ld. CIT(A) erred in confirming the order imposing penalty when the assessment order itself was bad in law. (Question of law) Assessee's contentions: The assessment proceeding in which the penalty was initiated has been quashed. The addition made in the assessment proceeding has been deleted by the ITAT, and therefore, the penalty should also be cancelled as the issue on which it was initiated no longer subsists. Revenue's contentions: Not recorded.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(2),Section 144,Section 144B,Section 250,Section 271AAC(1)

AI-generated summary — verify with the full judgment below

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

Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA

For Appellant: CA. प्रत्यर्थी के ओर से/

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 20.03.2026. ITA No(s). 1823/KOL/2026 Assessment Year(s) 2018-19 Dia

The order continues below.

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