KAPADIA REALTORS PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER 10(1)(3), MUMBAI

The brief facts of the case are that the assessee-company is engaged in the business of real estate activities involving owned or leased properties. The assessee filed its return of income declaring a total income of Rs.1,61,459/-. Subsequently, the Ld. AO received information from the Investigation Wing, Unit-V, Kolkata, in connection with the investigation conducted in the case of Shri Jagat Kumar Jain and others. As per the information received, certain amounts were deposited in the bank accounts of M/s. Shree Dealcom Pvt. Ltd. and M/s. Mangal Kalash Tie Up Pvt. Ltd., which were subsequently transferred to various entities. The Investigation Wing alleged that both companies were shell/dummy entities engaged in providing accommodation entries without carrying on genuine business activities. On the basis of the aforesaid information, the Ld. AO formed the belief that the assessee was a beneficiary of accommodation entries aggregating to Rs.50,00,000/- received from the aforesaid two companies in the form of share capital. Accordingly, the assessment was reopened by issuing notice under section 148 of the Act. During the reassessment proceedings, the Ld. AO treated the share capital received from the two companies as unexplained cash credits and made an addition of Rs.50,00,000/- under section 68 of the Act.

The Ld. AO further made an addition of Rs.1,00,000/- under section 69C of the Act towards alleged commission expenditure calculated at 2% of the accommodation entries, purportedly paid to the entry operator for arranging the transactions. Consequently, the reassessment was completed. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who upheld the additions made by the Ld. AO and dismissed the appeal. Being further aggrieved, the assessee has preferred the present appeal before the Tribunal.

The Ld. AR submitted that the assessee had filed a paper book comprising pages 1 to 70, which was placed on record. It was contended that the assessee had received share capital aggregating to Rs.50,00,000/- from M/s. Shree Dealcom Pvt. Ltd. and M/s. Mangal Kalash Tie Up Pvt. Ltd. through regular banking channels. In support of the genuineness of the transactions, the assessee furnished the following documents:- i. The Share application form ii. The Annual Return iii. Resolution passed for allotment shares iv. Copy of certificate issued by the Company Secretary regarding compliance of Share issue v. Copy of Bank Statement showing amount received by the assessee vi. Copy of Form 2 filed with ROC for allotment of shares including the list of allottees. vii. Fees of Payment.

The Ld. AR further contended that the Ld. AO had issued notices under section 133(6) of the Act to both the investor companies. In response thereto, both companies independently complied with the notices and furnished the requisite information and supporting documents. The replies dated 05.12.2019 were stated to have been placed at APB pages 69 to 70. Thus, the Ld. AR submitted that the identity of the investors, their creditworthiness and the genuineness of the transactions were duly substantiated by documentary evidence.

The Ld. AR further submitted that the transactions were supported by the banking records, corporate master data of the investor companies and documentary evidence establishing the allotment of shares. It was emphasised that the Ld. AO had neither brought any cogent material on record to disprove the documents furnished by the assessee nor demonstrated that the funds received represented the assessee's own unaccounted income.

The Ld. AR also placed reliance upon the decision of the Coordinate Bench of the ITAT-Kolkata in the case of Savera Commo Trade Pvt. Ltd. vs. ITO, Ward 5(3), ITA No.1719/Kol/2025, order dated 10.02.2026, wherein, according to the Ld. AR, the transaction involving one of the investor companies, namely M/s. Shree Dealcom Pvt. Ltd., was examined and accepted as genuine. Accordingly, it was contended that the addition of Rs.50,00,000/- made under section 68 of the Act, without properly appreciating or rebutting the documentary evidence, was unsustainable.

Per contra, the Ld. DR strongly supported the orders passed by the Revenue authorities. It was submitted that the Investigation Wing, Kolkata, had identified the investor companies as entities engaged in providing accommodation entries. The Ld. DR contended that the mere furnishing of incorporation documents, income-tax returns and bank statements would not, by itself, establish the financial capacity of the investors or the genuineness of the transactions.

The Ld. DR further submitted that the Ld. CIT(A) had examined the material available on record and had rightly upheld the addition under section 68 of the Act. In support of the submissions, the Ld. DR invited our attention to paragraphs 5.1.6 to 5.2 of the impugned appellate order which are reproduced as below:-

We have heard the rival submissions and perused the material available on record. We find that the principal controversy in the present appeal relates to the addition of Rs.50,00,000/- made by the Ld. AO under section 68 of the Act on account of share capital received from M/s. Shree Dealcom Pvt. Ltd. and M/s. Mangal Kalash Tie Up Pvt. Ltd. The Ld. AO treated the said transactions as accommodation entries on the basis of information received from the Investigation Wing, Kolkata. The Ld. CIT(A) upheld the addition by observing that the assessee had failed to satisfactorily establish the creditworthiness of the investor companies and the genuineness of the transactions. During the appellate proceedings before us, the Ld. AR submitted that certain additional documentary evidence, enclosed at APB pages 51 to 68, is essential for the proper adjudication of the dispute.

We find that the additional evidence furnished by the assessee includes the master data of the subscriber companies, copies of the share application forms, resolutions passed for allotment of shares, certificates issued by the Company Secretary regarding the issuance and allotment of shares, bank statements evidencing the transactions and copies of Form No. 2 filed with the Registrar of Companies (ROC) in respect of the allotment of shares. These documents are relevant for examining the identity and creditworthiness of the subscriber companies and the genuineness of the share capital transactions. Considering the nature of the dispute and the relevance of the additional evidence, we are of the considered view that the said documents deserve examination by the Ld. AO. Accordingly, in exercise of the powers conferred under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, the additional evidence furnished by the assessee is admitted for the limited purpose of facilitating proper adjudication of the issues involved in the present appeal.

We further find that the assessee has raised Additional Legal Grounds challenging the validity of the reassessment proceedings on the ground that the recorded reasons for reopening the assessment were not duly signed by the competent authority and that the requisite sanction contemplated under section 151 of the Act was absent. The assessee has also placed on record a copy of the recorded reasons for reopening the assessment [APB pages 21 to 22]. The assessee, vide letter dated 29.07.2019, requested the Ld. AO to furnish a copy of the recorded reasons for reopening the assessment, subsequent to the receipt of notice under section 148 of the Act. The Ld. AR contended that the recorded reasons were served upon the assessee by hand. However, the Ld. AR failed to produce any relevant entry in the assessment order sheet or any forwarding letter or acknowledgment evidencing the service of the recorded reasons upon the assessee or the assessee had filed any objection before the Ld. AO related to the discrepancy found in recorded reason. Since the aforesaid legal grounds involve examination of the original assessment records, including the recorded reasons and the statutory approval, we consider it appropriate to keep these legal grounds open for consideration before the Ld. AO. The Ld. AO shall examine the original records, verify whether the reasons were duly recorded and authenticated by the competent authority and ascertain whether the requisite sanction under section 151 of the Act was obtained prior to the issuance of notice under section 148 of the Act. The Ld. AO shall consider the objections raised by the assessee in accordance with the applicable statutory provisions and judicial precedents, without being influenced by any observations made herein on the merits of these legal grounds.

In view of the above facts and circumstances, we consider it appropriate to restore the disputed issues to the file of the Ld. AO for fresh examination and adjudication in accordance with law. The Ld. AO shall examine the additional evidence admitted under Rule 29 of the ITAT Rules, 1963, and verify the identity and creditworthiness of the investor companies and the genuineness of the share capital transactions. The Ld. AO shall also examine the consequential addition of Rs.1,00,000/- made under section 69C of the Act towards alleged commission expenditure, after considering the relevant evidence and the findings concerning the principal addition under section 68 of the Act. The additional legal grounds relating to the alleged absence of signatures on the recorded reasons and the requisite sanction under section 151 of the Act shall remain open for examination in accordance with law. Needless to say, the assessee shall be afforded a reasonable opportunity of being heard and of furnishing the necessary explanations and supporting documents. The Ld. AO shall pass a reasoned and speaking order after considering the evidence and submissions of the assessee. We have not expressed any opinion on the merits of the additions or the additional legal grounds, and all such issues are left open for examination in accordance with law.

In the result, the appeal of the assessee bearing ITA No. 4950/Mum/2025 is allowed for statistical purposes. Order pronounced in the open court on 13th day of October 2026.