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Facts
The Revenue appealed against an order deleting an addition made by the AO regarding the sale of shares. The assessee filed a cross-objection challenging a direction to add 5% of the total sales consideration. The AO had treated sale consideration from certain parties as bogus cash credit under section 68, but the CIT(A) deleted this addition.
Held
The Tribunal held that the CIT(A) was correct in deleting the addition. The Tribunal noted that the share scrips themselves were not doubted, and many of the purchasing companies were active during the year of transaction, even if some were later struck off. The Tribunal relied on judicial precedents that if share purchases were accepted as genuine in earlier years, sales of such shares should not be added under section 68.
Key Issues
Whether the sale consideration received from the sale of shares to certain parties can be treated as bogus cash credit under section 68 of the Income-tax Act, 1961, when the purchase of shares was not doubted in prior years and the purchasing entities were active at the time of transaction.
Sections Cited
68, 132, 153C, 143(2), 142(1), 133(6)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
These are appeals preferred by the Revenue and CO by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-21 (hereinafter referred to as the “Ld. CIT(A)”] dated 28.10.2024 for the AY 2019-20.
The Revenue has challenged the order of ld. CIT (A) deleting the addition in respect of sale of shares to the tune of ₹4,68,45,000/- as made by the ld. AO u/s 68 of the Act of ₹5,63,50,000/- in respect of sale of shares. In the Cross Objection, the assessee has challenged the direction of ld. CIT (A) to make addition to the tune of ₹5% of the total sales consideration of ₹19,01,00,000/- which comes to ₹95,05,000/-, while the addition made by the ld. AO in respect of bogus sale of shares was deleted by the ld. CIT (A).
The facts in brief are that the assessee filed the return of income on 21.02.2020, declaring total income of ₹36,21,400/- . A search action u/s 132 of the Income-tax Act, 1961 was conducted on ‘Halder Group’ and its key personnel on 13.01.2021, and subsequent dates. During the course of said search, it was found that the assessee has made sale of shares though the search was not conducted on the assessee, but on its directors. Therefore, proceedings were initiated u/s 153C of the Act. The notice was issued to the assessee on 05.01.2022, u/s 153C of the Act, which complied with by the
In the appellate proceedings, the ld. CIT (A) deleted the addition made by the ld. AO after taking into consideration the reply and contentions of the assessee by observing and holding as under:-
“This ground agitates against the action of the Ld. AO in making addition of sale proceeds of shares amounting to Rs.5,63,50,000/-as unexplained cash credit under section68 of the Act. On perusal of the assessment order, it is observed that the Ld. AO has recorded that during the relevant F.Y., the appellant company received an amount of Rs.19,01,00,000/- from sale of shares. The Ld. AO has however made an addition of Rs.5,63,50,000/-out of the total sale proceeds of Rs.19,01,00,000/-. The details of the proceeds received by the appellant company on sale of shares to the tune of Rs.19,01,00,000/- is being reproduced below:
AUXINITE SUPPLIERS PVT. LTD. : FY 2018-2019 NO OF RATE SL NAME OF NAME OF PARTIES TO WHOM SCRIP WAS SOLD TOTAL DATE NO SCRIP PER CONSIDERATIO SHARE OF . S N SHAR SALE SOLD E Acumen 1 LcharajVinimay Pvt. Ltd. 4/11/18 1,600 250 4,00,000.00 VyapaarPvt.Ltd Gyaneshwar Agencies Pvt.Ltd. 5/4/18 4,400 250 11,00,000.00 . Gyaneshwar Agencies Pvt.Ltd. 5/8/18 20,000 250 50,00,000.00 Gyaneshwar Agencies Pvt.Ltd. 5/17/18 14,000 250 35,00,000.00 2 Lifewood Advisory Pvt.Ltd. 4/4/18 16,000 100 16,00,000.00 Dignity Exim Sl Name of parties Amount i) M/s. Softlink Securities (P) Ltd Rs.1,20,00,000/- ii) M/s. Avyayan (P) Ltd Rs.14,00,000/- iii) M/s. Analytical Dealer (P) Ltd Rs.50,00,000/- iv) M/s. Lifewood Advisory (P) Ltd Rs.16,00,000/- v) M/s. ManikalaVyapaar (P) Ltd Rs.25,00,000/- vi) M/s. AstaniranjanVincom(P) Ltd Rs.1,42,50,000/- vii) M/s. Coolhut Enterprises (P) Ltd Rs.21,00,000/- viii) M/s. RoscoVanijya (P) Ltd Rs.25,00,000/- ix) M/s. Parampita Tie-up (P) Ltd Rs.50,00,000/- x) M/s. NeelgaganCommodeal (P) Ltd Rs.63,00,000/- xi) M/s. Neelgagan Suppliers (P) Ltd Rs.14,00,000/- xii) M/s. Kalashdhan Bio Fuel (P) Ltd Rs.23,00,000/- Total Rs.5,63,50,000/- It is observed from the above table that the shares have been sold at par. It is also evident from the details of sale of shares made to the tune of Rs.19,01,00,000/- that the scrip or the share of the company held by the appellant as investment has not been doubted. For example, the appellant company has received an amount of Rs.81,50,000/- from M/s. AstaniranjanVincom(P) Ltd in respect of sale of shares of M/s Gemini InfrapropertiesPvt Ltd. Now the shares of M/s Gemini InfrapropertiesPvt Ltd was sold in the following manner:
SL NO. NAME OF SCRIP DATE OF RATE PER NO OF TOTAL SALE SHARES SOLD SHARE CONSIDERATION Gemini Infra Deserve Solutions Pvt.Ltd. 4/4/18 10,000 250 25,00,000.00 Properties Pvt.Ltd 4/4/18 6,000 250 15,00,000.00 Everstrong Enclave Pvt.Ltd. 5/5/18 4,800 250 12,00,000.00 Coolhut Enterprises Pvt.Ltd. Everstrong Enclave 5/5/18 18,000 250 45,00,000.00 Pvt.Ltd. KalashdhanBlo-Fuel 10/3/18 9,200 250 23,00,000.00 Pvt.ltd. SnowblueNirmanPvt.Ltd. 10/6/18 6,800 250 17,00,000.00 AstaniranjanVincomPvt.Ltd. 10/12/18 32,600 250 81,50,000.00 10/12/18 63,000 250 1,57,50,000.00 Deobhumi Distributors Pvt.Ltd. AvyayanPvt.Ltd. 10/13/18 5,600 250 14,00,000.00 In this case the sale of shares of M/s Gemini InfrapropertiesPvt Ltd made to some other companies such as M/s Deserve Solutions Pvt Ltd, M/s Everstrong Enclave Pvt Ltd, M/s SnowblueNirmanPvt Ltd to name a few, have not been doubted. It is the same case with the other 11 share purchasing companies, where the scrip has not been doubted by the Ld. AO, but the purchasing company has been doubted. Since the scrips have not been doubted, it is evident that the purchase of these scrips have not been doubted, all of which were purchased by the appellant during the earlier FY`s and not during the current FY: 2018-19. It is further perused from the assessment order that the Ld. AO while treating the sale of shares to the afore-mentioned share purchasing companies, has stated that the existence of these companies were dubious and that 3 companies out of these viz. M/s. AstaniranjanVincom(P) Ltd, M/s Coolhut Enterprises Pvt Ltd and M/s Softlink Securities Pvt Ltd were in strike-off status. The appellant during the course of appeal proceedings has filed copies of Form STK-7 in respect of these companies from which it is observed that the companies were struck off in the following dates from ROC:
SI. No. Name of the company Date of Strike off 1. M/s. AstaniranjanVincom(P) Ltd 11.02.2022 2. M/s Coolhut Enterprises Pvt Ltd 17.08.2021 3. M/s Softlink Securities Pvt Ltd 01.11.2019 It is evident that these companies were struck off from ROC much later than FY: 2018- 19 and therefore these companies were present and active during the FY: 2018-19, the year during which the transactions were made. Another contention of the Ld. AO was that the Departmental Inspector could not locate the existence of M/s Astaniranjan Vincom Pvt Ltd in the address available on records. In this regard, it is evident from the above table that the said company was struck off from ROC on 11.02.2022, whereas the assessment in the appellant`s case was completed by the Ld. AO on 27.12.2022. The said company was nevertheless in existence during the FY: 2018-19, the year in which transactions were made. Therefore merely because one of the share purchasing company was non-existent during the course of assessment proceedings, or 3 companies were in strike off status, the entire sale of shares to the above mentioned 12 companies amounting to 5.63 crores cannot be treated as bogus. In respect of the other 9 companies which have also been treated as dubious by the Ld. AO, it is observed that the appellant during the course of assessment proceedings as well as appeal proceedings has submitted that the notices under section133(6)
After hearing the rival contentions and perusing the materials available on record, we find that during the year the assessee has shown the sale of shares to various parties, thereby realizing
So far as the cross objection is concerned, the assessee has challenged the direction of the CIT (A) to the ld. AO to assess the profit element embedded in the total sale consideration at the rate of 5% thereby making addition of ₹95,05,000/-, wherein the ld. CIT (A) has acted on the presumptions and surmises without there being any material or evidences on record to show that the assessee has ,in fact, made any profit on the sale of these investments. We observe that there is no basis for the ld. CIT(A) to give the direction to make addition at 5% of the total sales consideration and consequently, the decision of the ld. CIT(A) cannot be sustained on this issue. The case of the assessee is squarely covered by the decision of Hon'ble Jurisdiction High Court in case of Principal Commissioner of Income-tax Vs. Tulsyan and Sons (P.) Ltd. [2025] 174 taxmann.com 37 (Calcutta)[16-04-2025]. We further find that the said decision of the Hon'ble Jurisdictional High Court has been followed in the case of ACIT v. Pawanputra Advertising (P.) Ltd. [IT (SS) Appeal Nos. 144 & 145 (Kol.) of 2024, dated 26-8-2025], wherein the addition of 5% sustained by the CIT (A) was deleted. The operative part of the same is 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 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 2010-11, relevant to AY 2011-12 and the capital so raised in AY 2011-12 was invested in shares/securities and accounted for in the books of accounts which were audited and audited accounts are placed at page no. 102 to 111 of PB Vol.-1. We also note that the assessment for AY 2011-12 was framed u/s 143(3) of the Act vide order dated 17.03.2014 a copy of which is placed at page no. 276 and 277 of PB Vol.-1 and the neither the sharecapital/share premium nor the investments out of that source were doubted by the AO. 9.2. We also note that similar issue was involved in the case of M/S Swarna Kalash Commercial Pvt Ltd. Vs ACIT ,Central Circle -2(2), Kolkata, a group concern of the Rashmi Group of Companies ,which was also subjected to search u/s 132(1) of the Act in the same search proceedings. We note that the coordinate bench has decided the issue in favour of the assessee in ITA No. I.T.(S.S.)A.No.53/Kol/2022 A.Y.2019-20 vide order dated 01.09.2023 involving the same issue of addition of sale of shares/investments by the AO on the ground that identity and credentials of the purchasers of shares/investments were suspicious. The operative part of the order is extracted as under: “6.1.We have considered the rival contentions and gone through the record. First we deal with the issue relating to the undated detailed order passed by the Assessing Officer even after the prescribed date of limitation for passing the assessment order for the assessment year under consideration which is other than the short cryptic order as reproduced above and which did not even bear any Document Identification Number, (in short “DIN”)as mandated vide CBDT Circular No.19 of 2019. 6.1. As mentioned in the said CBDT circular no. 19 of 2019 and as also further held by the Hon’ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. [2023[ 149 taxmann.com 238 (Del), any communication without mentioning of the DIN in its body is to be treated as non-est. Therefore, the subsequent undated assessment order and without any DIN mentioned in the order, and passed after the limitation period prescribed for passing of the assessment order cannot be taken cognisance of.
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 Breakup of Sale of Shares Amount(Rs.) Breakup of Sale of Shares Amount(Rs.) Sold out of Opening Investment 5,86,73,194 Sold out of Opening Investment 5,86,73,194 Sold out of Investment Purchased During the Sold out of Investment Purchased During the Year 11,18,86,806 Year 11,18,86,806 Total 17,05,60,000 Total 17,05,60,000 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 result, the appeal of the Revenue is dismissed and CO of the assessee is allowed.
Order pronounced in the open court on 02.04.2026.