NOVELTY TRADERS LIMITED,KOLKATA, WEST BENGAL vs. ITO, WARD 2(2), GUWAHATI

ITA 89/GTY/2026Status: DisposedITAT Guwahati22 September 2026AY 2015-168 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the appeal of the assessee. The Tribunal noted that the ROC, Shilong, had confirmed that the company's address was correct, it was filing annual returns, and had not been struck off. While an Income Tax Inspector reported the non-existence of the address, the Tribunal found that the AO's addition was only on the difference between the purchase and sale of shares (Rs. 2,48,15,000/-) and not on the total purchases and sales. The Tribunal reasoned that if the company was indeed a shell company used for money laundering, the addition should have been on the total purchases and sales, not just the difference. The partial addition made by the AO was therefore considered not acceptable. The Tribunal also noted that notices issued by revenue authorities were duly served at the assessee's given address, contradicting the inspector's report. Consequently, the Tribunal directed the AO to delete the addition.

What were the facts?

The assessee, Novelty Traders Ltd., filed its return of income for Assessment Year 2015-2016 declaring an income of Rs. 3,523/-. The case was selected for limited scrutiny. The Assessing Officer (AO) issued notices under sections 143(2) and 142(1) of the Income Tax Act, 1961. The AO, after seeking directions from the Addl. CIT, investigated the existence and business activities of the assessee company at its registered address. Reports from the ROC, Shilong, and Income Tax Inspectors indicated conflicting information regarding the company's address and existence. The AO treated the assessee as a shell company and made an addition of Rs. 2,48,18,523/- under section 69 of the Act on account of alleged bogus investments. The assessee appealed to the CIT(A), who dismissed the appeal. The assessee then appealed to the ITAT, which remitted the issue back to the CIT(A). The CIT(A) passed an order against which the assessee is in appeal again before the ITAT.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the addition of Rs. 2,48,15,000/- made by the AO on account of alleged bogus investments is justified? (Question of law and fact, related to Section 69 of the Income Tax Act, 1961). Assessee's Contentions: - The order of the CIT(A) is arbitrary and unjustified. - The AO mechanically upheld the additions without appreciating the facts and explanations. - The assessee has purchased and sold shares of various companies, and complete details were filed during assessment. - The AO wrongly treated the company as bogus/shell despite ROC confirming its existence and filing of balance sheets. - Notices issued by revenue authorities were duly served at the designated address. - The addition made by the AO is only on the difference between purchase and sale of shares, which is not justified if the company is treated as a shell. Revenue's Contentions: - The lower authorities' orders should be relied upon. - Reports from the Inspector and Shri Dipankar Chakraborty indicate the assessee's address does not exist. - The company is a paper/shell company, and the AO rightly made the addition. - Showing meager income and transactions through banking channels is not sufficient to prove genuineness. - The non-existence of the company at the given address raises doubts about its survival and the genuineness of transactions.

Which sections of the Income-tax Act were involved?

Section 69,Section 143(2),Section 142(1),Section 250,Section 147,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI

For Appellant: Shri Siddharth Agarwal, Advocate
For Respondent: Shri Santosh Kumar Karnani
Hearing: 15.09.2026Pronounced: 22.09.2026

PER LAXMI PRASAD SAHU, AM: This appeal is filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘the ld. CIT(A)’], dated 30.01.2026 vide DIN No. ITBA/NFAC/S/250/2025- 26/1085364000(1) on the following grounds of appeal:

“1. For that on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A) is arbitrary, unjustified and bad in law, inasmuch as the Ld. CIT(A) failed to appreciate the fact

The order continues below.

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