ALCO SUPPLIERS PRIVATE LIMITED,GUWAHATI vs. ITO, WARD 1(1), KOLKATA

The ld AR submitted that the impugned investments in the unquoted equity shares were made by way of purchase by the erstwhile Transferee Company, Cogzenith Solutions Pvt. Ltd., in the year 2010- 11. The ld. AR submitted that these investments were then recorded in the books of the Transferee company, Alco Suppliers Pvt. Ltd., post- merger. The ld AR submitted that the assessee held on to such investments for a couple of years and, then it decided to liquidate the said investments bearing no yield in order to arrange funds for its business operations as it is a registered NBFC. That the sale of these investments was made at cost and were made through proper banking channels. The copies of the Sale Bills of such Investments, made during A.Y. 2022-23, are marked and annexed at Serial No. 8 (pages 117-160) of the Paper book along with the respective Ledger Accounts of the Purchasers in the books of the assessee company, marked and annexed at Serial No. 7 (pages 89-116) of Paper book. The ITR Acknowledgements, Audited Books of Accounts, Confirmation

The ld AR vehemently submitted and emphasized that the assessee company had also liquidated a portion of its investments in the unquoted private shares of the impugned companies (which were recorded as investments in the audited books of the assessee as a consequence of the amalgamation through NCLT) in the immediately preceding year as well, i.e., A.Υ. 2021-22. It was submitted that the case of the assessee for A.Y. 2021-22, based on the alleged information from the DDIT (Inv.), Unit 1(1), Kolkata, was subjected to proceedings u/s. 148A of the Act to examine the sale of such investments in that year whether it was a FIT case for issuance of Notice u/s. 148 of the Act. The ld. AR submitted that the proceedings were dropped by an order dated 26.06.2025 u/s. 148A(3) for A.Y. 2021-22 passed by Ld. I.T.O., Ward 1(1), Kolkata, exonerating the assessee by holding that the case of the assessee was "NOT FIT CASE" to issue a notice u/s. 148 of the Act for A.Y. 2021-22. The ld AR submitted that the Department itself examined the sale of investments held by the assessee company in the impugned private limited companies, merger related documents along with the Audit Reports and Assessment Orders for A.Y. 2010-11 (Year of Purchase of the Investments by the Transferee Company) and A.Y. 2018-19 of Cogzenith Solutions Pvt. Ltd. in proceedings u/s. 148A of the Act for the immediately preceding year, i.e., A.Y. 2021-22. That post investing investigative efforts in examining the tenacity of the alleged unverified information and the facts of the assessee's own case on the identical issue of the sale of investments for A.Y. 2021-22, the Department unequivocally considered the assessee's case NOT FIT for

The ld. AR submitted that the issue of Sale of Investments, held since prior years, is no longer Res Integra and finds binding force through pronouncements of the Jurisdictional High Court at Calcutta and Co- ordinate Benches of the Hon'ble ITAT, Kolkata, which squarely cover the case of the assessee. The ld. AR placed the reliance on the judgment of the Hon'ble Jurisdictional High Court in the case of PCIT- 1, Mumbai, vs Tulsyan and Sons Pvt. Ltd., ITAT/239/2024, order dated 16.04.2025. The ld AR submitted that the assessee’s case stands on a better footing, given that the purchase of the impugned investments were made by the Transferor Company, M/s. Cogzenith Solutions Pvt. Ltd., in 2010-11, which were not doubted by the Ld. Department and that the said company got merged with the assessee company in 2020 vide an NCLT Order of Amalgamation, wherein, the Income Tax Authorities have not objected to the scheme of amalgamation before the Hon'ble NCLT and allowed the assets of the Transferor Company to be taken over by the Assessee Company by virtue of the court approved amalgamation. Therefore, the addition made by the AO without reference to verified information and evidences without any tangible material and without application of

The ld. DR on the other hand vehemently opposed the argument of the ld. AR that the share of investments in the current year cannot be doubted as bogus if the investments were purchased by the amalgamating company in the A.Y. 2010-11 and those investments were accepted by the department even in the assessment proceeding which culminated under section 143(3). The ld. DR submitted that admittedly these investments were accepted in the earlier assessment years but that would not serve as a bar in the subsequent year when the sale of investments was made. It is also correct that in the preceding assessment year i.e. 2021-22, the proceedings u/s 148A were initiated, however, an order u/s 148A(3) was passed on 26.06.2025 by holding that it is not a fit case for issuance of notice u/s 148 of the Act. The ld. DR submitted that the act of the act cannot be taken as a restrain from doubting the sale of investments in the current year when there are cogent evidences before the department to treat them bogus on the basis of evidences available on record. The

We have heard the rival submissions and perused the materials available on record and find that the assessee company has sold its investments i.e. unlisted equity shares held in 16 unlisted private companies to other 24 entities/companies. The ld. AO during the course of assessment proceedings noted that the unlisted shares of private limited companies were nothing but bogus transactions and similarly, the purchasing companies were also bogus and shell entities. Coming to the background of the case, we note that M/s. Cogzenith Solutions Pvt. Ltd. was merged with the assessee company by the NCLT vide order dated 09.12.2020, who was holding the impugned investments of these unlisted equity shares prior to the merger with the assessee company. We also observe that consequent to the said amalgamation , the investment in unquoted equity shares of 16 private companies held by M/s. Cogzenith Solutions Pvt. Ltd. came to be acquired by the assessee by virtue of amalgamation. A copy of NCLT order is available at page no.55 to 75 of the Paper Book. We also note that before passing the order of NCLT has taken into consideration the representations by the regional director, official liquidator, Reserve Bank of India (RBI) and Income Tax Department by way of no objections filed to the said merger with the assessee company and only thereafter the NCLT approved the amalgamation vide order dated 09.12.2020. We note that the amalgamating company M/s. Cogzenith Solutions Pvt. Ltd. had acquired these shares of 16 private limited company in F.Y. 2010-11 and since then these investments were being shown in the books of the amalgamating company. We note that post amalgamation these investments were accounted for and shown in the books of account of the amalgamating

We observe from the facts before us and rival contentions that in the assessment year 2021-22, the AO initiated the reassessment proceeding u/s 148A of the Act to examine the sale of investments in that year pursuant to a information from the DDIT Investigation 1(1), Kolkata and the ld. ITO Ward 1(1), Kolkata, after taken into account the facts and details and after making enquiries, dropped the proceeding by passing an order u/s 148A(3) of the Act dated 26.06.2025 and thus, clearly held that it is not a fit case for issue of notice u/s 148 of the Act for A.Y. 2021-22. Therefore, department itself accepted the position with regard to sale of investments in A.Y. 2021-22 by holding that there is no escapement of income , then how the department can change its stand without there being any change in the facts and circumstances during the instant assessment year 2022-23 vis a vis assessment year 2021-22.

In the result, the appeal of the assessee is allowed.