Pr. Commissioner Of Income Tax I vs. M/S Parametric Trading Pvt. Ltd.

NEUTRAL CITATION NO. 2025:MPHC-IND:22641

-1- ITA-120-2023 IN THE HIGH COURT OF MADHYA PRADESH AT INDORE BEFORE HON'BLE SHRI JUSTICE VIVEK RUSIA & HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI ON THE 12th OF AUGUST, 2025 INCOME TAX APPEAL No. 120 of 2023 PR. COMMISSIONER OF INCOME TAX I Versus M/S PARAMETRIC TRADING PVT. LTD.

Appearance: Shri Harsh Parashar alongwith Ms. Yashika Bondwal – Advocate for the petitioner.

ORDER Per: Justice Vivek Rusia

The present appeal under Section 260A of the Income Tax Act, 1961 has been preferred by the appellant / Principal Commissioner of Income Tax-I, Indore assailing the judgment and order dated 14.02.2023 passed by the learned Income Tax Appellate Tribunal, Indore Bench in ITA No. 543/Ind/2018 (Revenue Appeal) whereby the appeal preferred against the order dated 07.03.2018 of the Commissioner of Income Tax - II (Appeals), Indore dated 07.03.2018 was dismissed. 02. The respondent assessee is a Private Limited Company incorporated on 31.03.2007 under the Companies Act, 1956 and is engaged in the business of trading in pulses and other commodities. For the relevant assessment year 2011–12 , the assessee filed its original E- return of income electronically on 28.09.2011 declaring total income of ₹11,22,487/- and subsequently revised ITR was filed on 31.03.2013 declaring a revised total income of Rs.25,97,320/-. 03. The case was selected for scrutiny under the provisions of Signed by: DIVYANSH SHUKLA Signing time: 20-08-2025 11:37:51 Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:22641

-2- ITA-120-2023 Section 143(2) of the Act and a notice to that effect was issued to the assessee on 14.08.2013. However, owing to the alleged non-compliance with statutory notices and non-furnishing of requisite information and documents, the Assessing Officer proceeded to complete the assessment ex-parte under Section 144 of the Act. 04. In the course of assessment proceedings, the assessing officer upon independently obtaining the assessee’s HDFC Bank statement due to non-furnishing of the same by the assessee observed that deposits aggregating to ₹1,48,92,31,583/- for which no satisfactory explanation or corroborative evidence regarding nature and source was provided thus the entire amount was to be treated as unexplained cash credit under Section 68 of the Income-tax Act. 05. Further, the assessee’s declared Short-Term Capital Gain of Rs.13,53,564/- from sale of shares worth Rs.1,63,90,144/- purchased at Rs.1,50,23,897/- was re-characterized as business income in the absence of documentary proof substantiating the purchase and sale transactions or establishing their nature leading to an additional inclusion of ₹13,53,564/-. The Assessing Officer also added Rs.2,86,40,600/- received towards share capital and share application money under Section 68 holding that the assessee had failed to establish the identity, creditworthiness and genuineness of the investor companies. Thus the Assessing Officer vide order dated 31.03.2014 made the above substantial additions to the income of the assesse and assessed his total income to Rs.1,52,04,69,498/-. 06. Aggrieved by the said assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) - II, Indore. The CIT (A) upon considering the submissions of assessee and the remand report of the Assessing Officer partly allowed the appeal and deleted the two additions while maintaining one addition. Signed by: DIVYANSH SHUKLA Signing time: 20-08-2025 11:37:51 Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:22641

-3- ITA-120-2023 07. The learned CIT(A) observed that in respect of the addition of Rs.148,92,31,583/- under Section 68 for unexplained bank credits, the assessee had produced complete bank statements, ledgers, confirmations, explanations and the assessing officer had accepted that the entries were duly recorded and related to business advances or sales thus the addition was deleted. 08. Regarding the addition of Rs.13,53,654/- towards short-term capital gains the CIT(A) observed that the amount had already been declared in the return supported by contract notes, investment records and its inclusion again amounted to double taxation thus the addition was deleted. 09. However for the addition of Rs.2,86,40,600/- towards share capital and premium the CIT(A) held that the assessee had failed to prove the identity and creditworthiness of the subscribers or the genuineness of the transactions and that in absence of substantive business activity or justification for the large premium thus the explanation by a was found unsustainable and accordingly maintained this addition. Being dissatisfied with the said appellate order the Revenue preferred a second appeal before the Income Tax Appellate Tribunal, Indore Bench. 10. The Learned tribunal upon a comprehensive consideration of the submissions advanced by both parties and the remand report furnished by the Assessing Officer found no justification to interfere with the well- reasoned order of the Commissioner of Income Tax (Appeals). 11. The learned tribunal held that the objection by revenue to the admission of additional evidence under Rule 46A was without merit especially since no substantial argument was advanced on this ground during hearing. On merits the learned tribunal affirmed the deletion of Rs.23,67,56,210/- representing recovery of outstanding amounts from Signed by: DIVYANSH SHUKLA Signing time: 20-08-2025 11:37:51 Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:22641

-4- ITA-120-2023 A.Y. 2009–10 as these had already been recorded in the books in the earlier year and were merely cleared in the current year. The deletion of Rs.79,60,000/- being genuine advances and loans received from various parties and duly recorded in the assessee’s books was also upheld in view of the Assessing Officer’s acceptance in the remand proceedings. 12. The learned tribunal found no infirmity in the deletion of Rs.24,85,75,000/- received as advances against sale orders since these were established through bank entries and books of account as part of regular business transactions. In respect of Rs.76,43,79,291/- stated to be amounts received against advances earlier given the Learned Tribunal took note of confirmations from the concerned parties and the Assessing Officers own admission that the assessee had properly accounted for the transactions in its books. 13. The Learned Tribunal also upheld the deletion of Rs.13,53,654/- holding that the Assessing Officer had wrongly treated the amount as business income noting that the amount had already been declared as short-term capital gain supported by contract notes, bank records and the assessee’s balance sheet showing the shares as investments. Thus, the learned tribunal concluded that there was no merit in the appeal of revenue, all additions were found to be unsustainable and accordingly dismissed the appeals. 14. Challenging the concurrent findings of fact and law rendered by both the CIT (A) and the ITAT, the department has now approached this court by way of the present appeal contending that the learned Tribunal had erred in law by failing to appreciate that the assessee had not discharged its initial burden under Section 68 to establish the identity, creditworthiness, and genuineness of the transactions. The appellant further submitted that the learned tribunal committed perversity in affirming deletion of large additions made by the Assessing Officer Signed by: DIVYANSH SHUKLA Signing time: 20-08-2025 11:37:51 Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:22641

-5- ITA-120-2023 despite the absence of primary evidence from the assessee during the assessment stage. Thus the department has raised multiple substantial questions of law for consideration by this court. Submission of Appellant 15. Shri Harsh Parashar, learned counsel for the appellant revenue submitted that the impugned order of the learned Tribunal suffers from serious legal infirmities as the learned Tribunal failed to apply the settled principle under Section 68 of the Income Tax Act, 1961 and that the initial burden lies squarely on the assessee to establish the identity of the creditors, their creditworthiness and the genuineness of the transactions. 16. Learned counsel submitted that the non-production of primary evidence during the assessment proceedings could not be cured by furnishing documents for the first time before the appellate authority. Learned counsel submitted that the reliance placed by the CIT(A) and the Tribunal on the remand report was misplaced as the report itself was based on documents belatedly produced without any contemporaneous verification. Such acceptance of unverified material is contrary to law and dilutes the statutory mandate under Section 46 of the Income Tax Act. 17. Learned counsel with respect to the addition on account of Short- Term Capital Gain submitted that the learned tribunal erred in disregarding the Assessing Officer’s finding that essential evidences such as contract notes and Demat statements were not furnished at the relevant stage and without corroborative circumstances establishing commercial genuineness could not by itself justify deletion of the additions. 18. Thus on these grounds learned counsel prayed for setting aside of the concurrent findings of the CIT(A) and the Tribunal and for Signed by: DIVYANSH SHUKLA Signing time: 20-08-2025 11:37:51 Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:22641

-6- ITA-120-2023 restoration of the order of Assessing Officer in the interest of justice. 19. Learned counsel for the appellant has proposed the following substantial question of law: I. Whether on the fact and in the circumstances of the case, the ITAT was justified in law in sustaining the deletion of additions of Rs.23,67,56,210/-, Rs.79,60,000/-, Rs.24,85,75,000/- & Rs.76,43,79,291/- made U/s 68 — by making perversity of finding of facts in not appreciating that the assessee has not discharged initial onus of proving Identity, Creditworthiness of counter parties and Genuineness of transactions? II. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in sustaining the deletion of additions of Rs.23,67,56,210/-, Rs.79,60,000/-, Rs.24,85,75,000/- & Rs.76,43,79,291/- made U/s 68 — by ignoring the established law ―Substance will prevail over form‖. The ITAT ignored the fact that transactions were routed through banking channels, they cannot be termed as genuine? III. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in sustaining the deletion of addition of Rs.13,53,654/- made on account of treating Short Term Capital Gain as Business Income — by making perversity of finding of facts in ignoring the findings of the AO & of the Remand Report?

We have heard the learned counsel for the appellant at length on admission. 20. There is a concurrent finding recorded by learned CIT as well as ITAT. Initially, the Assessing Officer passed an order in favour of Revenue by adding the income of Rs.2,86,40,600/- on the basis of the HDFC Bank statement of the assessee, but the learned CIT called for the remand report from the Assessing Officer, which was given in favour of the assessee. Therefore, earlier order passed by the Assessing Officer has virtually been superseded by the remand report. Hence, now there is an order of Assessing Officer against the Revenue, meaning thereby all Signed by: DIVYANSH SHUKLA Signing time: 20-08-2025 11:37:51 Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:22641

-7- ITA-120-2023 3 Authorities / Tribunal have passed an order against the Revenue by recording concurrent findings. 21. All the substantial questions of law as proposed by the appellant are, in fact, questions of fact. The CIT has the power to pass an order under Rule 64A of the Income Tax Rules for calling the report from the Assessing Officer. The respondent / assessee produced the documents before the learned CIT, and after examining those documents assessing officer was directed to examine the creditworthiness and genuineness of the transaction and submit the report. 22. In view of the above, we do not find any substantial question of law involved in this appeal. Accordingly, this Income Tax Appeal stands dismissed without notice to the respondent.

(VIVEK RUSIA) (BINOD KUMAR DWIVEDI) JUDGE

JUDGE Divyansh Signed by: DIVYANSH SHUKLA Signing time: 20-08-2025 11:37:51 Signature Not Verified