Loading judgment…
Facts
The assessee, M/s Pearl Tracom Pvt. Ltd., appealed against the CIT(A)'s order confirming reassessment proceedings initiated under Section 148. The reassessment was based on information from a search action on the Agarwal Group, suggesting cash credits from sale of investments.
Held
The Tribunal held that the reassessment proceedings were validly initiated, dismissing grounds related to the validity of the notice u/s 148. However, it found merit in the assessee's contentions regarding the additions made under Sections 68 and 69C, noting the lack of incriminating evidence, violation of natural justice by not providing cross-examination, and prior acceptance of investments by the Revenue.
Key Issues
Validity of reassessment notice u/s 148 and additions made u/s 68 and 69C based on third-party statements and documents without cross-examination.
Sections Cited
148, 143(3), 147, 133A, 68, 69C, 133(6), 131, 234A, 234B, 234D, 148A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-21, (hereinafter referred to as the “Ld. CIT(A)”] dated 31.03.2025 for the AY 2019-20.
The assessee has raised following grounds of appeal:-
“1. For that in view of the facts and in the circumstances, Ld. CTT(A) erred in affirming the validity of the notice u/s 148 and the consequent order u/s 143(3) 147 and in view of the facts and in the circumstances the action of Ld. CIT(A) is wholly unjustified and not in accordance with the law and the facts in the matter and in view of the facts and in the circumstances it may be held accordingly.
Without prejudice to Ground No. 1 above, Ed. CIT(A) erred in affirming the validity of the impugned notice u/s 148 and the consequent order u's 143(3)/ 147 without appreciating the facts that the notice u/s 148 was issued under Clause (ii) to Explanation-2 to sec. 148 and the alleged documents impounded/found during survey u/s 133A documents did not indicate any alleged fund trail or cash deposit relating to share capital or sale of investment and as such the impugned notice and the 3.1. The facts in brief are that the assessee filed the return of income on 31.10.2019, declaring total income at ₹6,27,780/-. A search action u/s 132 of the Act was conducted on Agarwal Group and its associates by the director of Investigation, Kolkata on 17.09.2021, and on the subsequent dates. The assessee being one of the group companies was also covered under the search. The findings of the search team during search and post search proceedings of groups 3.2. In the appellate proceedings, the ld. CIT (A) confirmed the reopening of assessment by dismissing the appeal of the assessee by holding that the ld. AO has in his possession the information during the course of issuance of show cause notice u/s 148A(b) of the Act and the same is based upon the investigation report uploaded by DDIT/ ADIT (Investigation) along with attachments in the insight portal of the Department which contained information relating to the assessee. Finally, the ld. CIT (A) brushed aside the contention of the assessee that the assessee was not provided the complete information relied upon by the ld. AO by stating that copy of statement of Shri Mukesh Pansari u/s 132(4) of the Act being substantial evidences provided to the assessee and thus, dismissed the appeal on the legal issue by upholding the reassessment notice u/s 148 of the Act as well as the consequent assessment framed.
The issue raised inground no.4 is against the confirmation of additions of ₹47,12,62,150/- as made by the ld. AO u/s 68 of the Act in respect of sale of investments and ₹11,78,155/- u/s 69C of the Act in respect of commission paid which was treated as unexplained expenditure. The other ground raised in 5 to 12 are connecting to ground no.4.
4.1. As stated above the assessee has sold the investments in private equities to three parties during year thereby collecting ₹47,12,62,150/-. The facts qua this issue has already been discussed while deciding the legal issue hereinabove. The ld. AO treated this amount as unexplained cash credit u/s 68 of the Act on the ground that the assessee has failed to prove the three ingredients i.e. existence and creditworthiness of the parties and genuineness of the transactions. The ld. AO also added the commission at the rate of 0.25% on the above said amount which come to ₹11,78,155/- u/s 69C of the Act.
4.2. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee after taking into consideration the submission 4.3. We have heard the rival contentions and perused the materials placed before us. We find that the assessee is engaged in the business of financing and investment activity and during the year sold certain unlisted equity shares held as capital assets/ investments which were purchased in F.Y. 2011-12 relevant to A.Y. 2012-13. We find that these investments were disclosed in the audited balance sheets of the assessee in successive years and were subjected to detail scrutiny u/s 143(3) / 263 of the Act for A.Y. 2012- 13, wherein the entire share capital and investments were accepted by the department. We note that the sale consideration of ₹47,12,62,150/- were received by the assessee from three purchaser 4.3.1. We also note that the assessee has made similar transactions in the earlier assessment years .i.e. A.Y. 2013-14 to 2015-16 & A.Y. 2017-18 qua sale and purchase of shares which were never doubted and accepted by the Department through in the summary assessments and the same are extracted below for ready reference:
4.3.2. Appellant's A/R drew our attention to the alleged documents stated to have been found from Mr. Abhishek Munka (ie. AKM-42) and submitted that AO has observed and concluded that i. alleged document AKM-42 was not found at appellant's premises and rather it was at a 3rd party premises having neither any link with appellant nor any corroborative evidence in respect of such AKM-42 was brought on record by AO. ii. no questions have been raised in the sworn statement of Mr. Mukesh Pansari regarding such AKM-42. If revenue believed it to be "transaction" reflecting document revenue should have raised query about it at least in such statement of Mukesh Pansari. Indeed Ld. A/R took us through statement of Mr. Mukesh Pansari as well as Mr. Abhishek Munka nowhere appellant company has been named as beneficiary of any alleged accommodation entities. It was also observed that no questions have been raised about such AKM-42 raising serious doubt about it's corroborative value. iii. no corresponding evidences of cash deposit with any alleged shell co. etc. were found/discovered during such search at Jain Group / Mr. Mukesh Pansari/ Mr. Abhishek iv. such alleged documents AKM-42 does not mention appellant's name in any place and rather it mentions "Vinay” and rather allegation of any transaction should have been against such persons and not against appellant. v. appellant's A/R also drew attention to the fact that at the buyer companies were very much active for which it submitted master data of ROC and also assessment orders of such buyer companies for A.Y 2015-16 showing the genuineness of such transactions. Also, the fact that such companies duly responded to notices u/s 133(6) of the Act issued by the ld. AO which were also placed on record. vi. from all the above it is clear that the assertion by revenue regarding such alleged involvement of Abhishek Munka Mukesh Pansari and reliance particularly on AKM-42 is misplaced, misleading and self-servient. Revenue failed to conduct the necessary enquiries in respect of such AKM-42 at any stage earlier and indeed no reference of such document (ie. AKM-42) is found in such statement of that alone persons. Without such enquiry and corroborating evidences, such AKM-42 has no evidentiary value and hence the same deserves to be rejected. Moreover, no evidence of any cash exchange has been placed by revenue on record. Further the buyer companies were very much alive as seen from master data of ROC and they have also responded with regard to notice u/s 133(6). Therefore, AO's addition and action of CTT(A) are devoid of any truth.
4.3.4. The case of the assessee is also covered by the decision of the co-ordinate Bench in case of DCIT Vs. Pawanputra Advertising Private Limited, in IT(SS)A No. 144 & 145/KOL/2024, vide order dated 26.08.2025, wherein it has held as under:-
“7. We have heard the rival contentions and perused the materials available on record including the written submissions dated 21.04.2025 and paper books No. 1 (page No. 1 to 357), paper book no. 2 (page No. 1 to 354 and paper book 3 (Case Laws). We find that the only dispute is sale of part unlisted equity shares to various parties thereby realizing total sales consideration of ₹11,56,20,000/-. We note that the assessee raised money by issue of equity shares in A.Y. 2008-09 of Rs. 64,85,49,000/- . We also note that entire funds raised were invested in unlisted equity shares in AY 2011-12. We note that the case of the assessee was selected for scrutiny only for this reason and the money raised by the assessee was accepted by the department and no adverse interference was drawn. We note that in A.Y. 2010-11 also, the case of the assessee was selected for scrutiny and all the money share capital /share premium was accepted. Thereafter the investments were made in private equity shares which were unlisted in A.Y. 2011-12. Similarly 2017-18 the case of the assessee was selected for scrutiny and investments were not doubted at all. Thus it is clear that over all these years the investments were not doubted by the department. These investments made in the A.Y. 20111-12 were partly sold at cost by the assessee during the instant assessment year which realized ₹11,56,20,000/- which were accepted by the Revenue right from A.Y. 2011-12 till the instant assessment year. We have
We have heard the rival contentions and perused the materials as placed before us. The issue for adjudication before us is in respect of confirmation of addition by ld CIT(A) as made by the AO on the ground that the identity and credentials of the purchasers are suspicious. We observe that the assessee has been in the regular business of purchase and sales of investments over the years as corroborated by the materials placed before us. Even the sales proceeds received during the current financial year were in respect of sale of shares /investments partly out of opening balance and partly out of current purchases as is apparent from the following chart placed before us:-
9.1. The assessee has also filed movement of investments over the years which showed that the phenomenon of purchase and sale of shares/investments was regular feature of the assessee’s business. This is also undisputed that the assessee company had raised share capital (including premium) amounting to Rs.119,84,67,000/- in financial year 11.2. The shares were held by the assessee as investments and were sold at the cost of acquisition by the assessee. Hence, there is no profit/loss on such sale of investment. We also look at the movement of investment held by the assessee, which is tabulated below:
FY AY Opening Purchase Sales Amount Closing Balance byA.O. 2014-15 2015-16 63,42,00,000 63,42,00000 2015-16 2016-17 63,42,00,000 42,44,960 18,344,960 62,01,00,000 1,83,44,960 2016-17 2017-18 62,01,00,000 56,27,44,459 468,499,459 71,43,45,000 46,84,99,459 2017-18 2018-19 71.43.45,000 1,55,17,29,538 2,062,064,910 20,40,09,628 2,06,20,64,910 2018-19 2019-20 20,40,09,628 66, 47, 64, 007 170,560,000 69,82,13,635 17,05,60,000 Total 2,71,94,69,239 11.3. We also refer to the details of opening stock, purchases, sales and closing stock during the year, placed on record by the assessee:
SI Opening Purchases Sales Closing No Name of the Script Balance Balance Amount Amount Amount Amount I Bellona Supply Pvt. Ld. 1,24,57,344 0 1,24,57,344 0 2 P N Jewelers Pvt ltd 38,45,323 0 38,45,323 0 3 Rozela Tie Up pvt. Ltd. 3,64,33,053 0 3,64,33,053 0 4 Rashmi Cement Ltd. 0 1,57,32,000 0 1,57,32.000 5 CimmcoVinimay Pvt. Ltd. 13,32,04,353 53,71,44,701 0 67,03,49,05 4 6 Festive Vincom Pvt Ltd 28,01,625 0 0 28,01,625 7 GreenHillDealmark Pvt Ltd 26,14,850 0 0 26,14,850 8 SwabhimanCommosales Pvt 26,15,900 0 0 26,15,900 Ltd 9 Topline Business Pvt Ltd 41,00,205 0 0 41,00,205 10 VidyaBuildcon Pvt Ltd 0 2,50,00,000 2,50,00,000 0 11.5. It is also important to note that the AO has made enquiries from the buyers of the shares sold by the assessee by issuing summons u/s 131 of the Act who have responded and furnished the required details. Summary Statement of the replies made in response to notice u/s 131 by various buyers (Sale of Shares) is tabulated below:
Further, according to the ld. Counsel, the only piece of evidence that is there in this case is the statement of Sri Sanjib Patwari who is one of the owners of the Rashmi group and Sri K K Verma is the accountant, recorded u/s 132(4) of the Act which have been relied upon by the Assessing Officer. These statements have been retracted the very next day by furnishing affidavits. Subsequent to retraction, no further cross- examination was conducted of these persons. The ld. Counsel has further submitted that even otherwise the addition made by the Assessing Officer was far more than the alleged disclosure made by these persons in their retracted statements and hence, no cognizance in fact can be taken for the purpose of the addition. 12.1. We find force in the above contentions of the ld. Counsel in the facts and circumstances of the case. As laid down by the various Higher Courts of the country, the retracted statement can not be made sole basis for making the additions. The Jurisdictional Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Golden Goenka Fincorp Ltd. [2023]148 taxmann.com 313(Calcutta) has held that where assessing officer solely based on statement of assessee’s director recorded during search operation treated share application money received by assessee company as undisclosed income and made additions u/s 68 of the Act, since said statement was retracted and there was no cash trail or any other corroborative evidence or investigation brought on record by AO, impugned additions were liable to be deleted. Even the Hon’ble A.P. High Court in the case of “Naresh Kumar Agarwal” (2015) 53 taxmann.com 306 (Andhra Pradesh) has observed that where, in the absence of any incriminating material etc. found from the premises of the assessee during the course of search, statement of assessee recorded under section 132(4) would not have any evidentiary value. Similar view has been adopted by the Jaipur bench of the Tribunal in the case of “Shree Chand Soni vs. DCIT” (2006) 101 TTJ 1028 (Jodhpur). The Hon’ble Delhi High Court in the case of “CIT vs. Harjeev Agarwal” in vide order dated 10.03.16 has observed that a statement made under section 132(4) of the Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. In the case of “Commissioner of Income Tax vs. Sunil Agarwal” (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the course of search, made a categorical admission under section 132(4) that the cash
We have also perused decision by the Hon'ble High Court in ITAT/239/2024 in IA No. GA/2/2024 vide order dated 16th April, 2025, in the case of PCIT Vs. Tulsyan and Sons Private Limited(supra) affirmed the order of the tribunal. In the said case the addition made by the ld. AO on account of sale of investment was deleted by the ld. CIT (A) and the Tribunal confirmed the order of the ld. Assessing Officer. The Hon'ble High Court while deciding the issue held as under: - We have heard Mr. Aryak Dutta, learned standing counsel assisted by Mr. Soumen Bhattacharjee, learned standing counsel for the appellant and Mr. J. P. Khaitan, learned senior advocate assisted by Mr. Pratyush Jhunjhunwalla, learned advocate for the respondent. The short issue which falls for consideration is whether the learned tribunal was right in affirming the order passed by the Commissioner of Income Tax (Appeals)- 21, Kolkata [CIT(A)] dated 10.5.2023 by which the assessee’s appeal was allowed and the addition made under section 68 of the Act was deleted. The Assessing Officer made the addition by invoking section 68 of the Act on the ground that the assessee failed to discharge its onus to establish identity, creditworthiness and genuineness of the transaction in respect of the money received through cash trail. The CIT(A) in course of hearing the appeal called for a remand report from the Assessing Officer and in the said remand report the Assessing Officer has in no uncertain terms accepted the receipt of the impugned sum on account of sale proceeds of investment. The Assessing Officer verified the investment sold which are shown in the balance-sheet for the financial year 2010-11 in Schedule-4 of the balance- sheet and after considering these facts it was stated that the assessee had sold shares held by way of the investment during the year to M/s. Shivshakti Communications and Investment Pvt. Ltd. and Carnation Tradelink Pvt. Ltd. and it is not a receipt of unsecured loan. This fact, apart from other factual details, were considered by the CIT(A) and by an elaborate order dated 10.5.2023 the appeal filed by the assessee was allowed. The tribunal on its part re-examined the factual position and took note of the findings rendered by the CIT(A) and concurred with the same. We also find that the tribunal has also examined thefactual position and took note of the remand report as called for by the CIT(A) which confirmed the alleged sum is on account of sale of investment and not otherwise. Thus, we find no question of law much less substantial question of law arises for consideration in this appeal. Accordingly, the appeal fails and the same is dismissed. Consequently, the connected application stands closed.
Since, the facts of the case before us vis-à-vis, facts of the decisions cited above are substantially similar and therefore, we respectfully following the ratio laid down in the above decisions upheld the order of ld. CIT (A) on this issue by dismissing the appeal of the Revenue.
So far as the Cross Objection is concerned, we note that the assessee has challenged the direction of the ld. CIT (A) to the ld. AO to make an addition at the rate of 5% of the total sales consideration towards the net profit embedded in the sales consideration.
After hearing the rival contentions and perusing the materials available on record, we find that the ld. CIT (A) has not given any basis for such direction to the ld. Assessing Officer. In other words, the ld. CIT (A) has just acted on the presumptions and surmises and thus, presumed that the assessee might have made some profits from sale by investments. In our opinion, the said direction by the ld. CIT (A) is without any substantive basis and therefore cannot be sustained. Accordingly, we set aside the order of ld. CIT(A) to the extent of this direction of making addition @ 5%. Accordingly, the cross objection of the assessee is allowed.
4.3.5. The issue is also squarely covered by the decision of Hon'ble Jurisdictional High Court in case of Principal Commissioner of
In the result, the appeal of the assessee is allowed.
Order pronounced on 02.04.2026.