NARAYAN BARTER PRIVATE LIMITED,KOLKATA vs. INCOME TAX OFFICER,WARD-6(1),KOLKATA, KOLKATA

Brief facts of the case are that the assessee company, M/s Narayan Barter Pvt. Ltd. filed its return of income for the AY 2011-12 on 27.09.2011 showing total income of ₹375/-. Subsequently, information was received by the Assessing Officer (hereinafter referred to as Ld. 'AO') from the Dy. Director of Income Tax (Investigation), Units- 3(1) and 4(3), Kolkata indicating that the assessee had received ₹81,50,000/- during the FY 2010-11. Based on this information, the Ld. AO noted that income of the assessee had escaped assessment and he reopened the assessment u/s 147 of the Act. Notices u/s 143(2) and 142(1) of the Act were issued and a show cause notice dated 07.12.2018 was also issued seeking explanation for the alleged unexplained cash credit. Since the assessee failed to provide satisfactory explanation regarding the identity, creditworthiness, and genuineness of the creditors and the transactions, the Ld. AO treated the amount as unexplained cash credit u/s 68 of the Act taxable at the rate of 30% u/s 115BBE of the Act. Penalty proceedings under section 271(1)(c) were also initiated for concealment of income of ₹81,50,000/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who considered the observation of the Ld. AO, the submissions of the ITA No(s). 2572/KOL/2025 Assessment Year(s) 2011-12 Narayan Barter Private Limited. assessee during the appellate proceedings and noted in respect of the reopening of the case as under: “During the appellate proceedings, the assessee submitted that the receipts represented bona fide sale transactions of investments and provided details of the cost and sale consideration, along with bank statements showing receipts through banking channels. The assessee argued that it had discharged the initial onus under section 68 by proving the identity of the creditors, the genuineness of the transactions, and the creditworthiness of the parties. Copies of sale bills and bank statements were also filed in support. The assessee contended that the AO acted without properly considering the submitted evidence and relied on assumptions rather than facts. Upon consideration, it is observed that the AO had correctly applied the provisions of section 68 and section 115BBE of the Income Tax Act. The AO's action of reopening the assessment was in accordance with the law, as information from the Investigation Wing constituted sufficient reason to believe that income had escaped assessment. The approval by the Principal CIT under section 151 cannot be equated with substantive verification of the merits; the responsibility of examining the genuineness and creditworthiness rested with the AO, which was carried out appropriately. The addition in the assessment order was supported by verifiable information from the Investigation Wing, and minor discrepancies in amounts mentioned in the reasons, assessment order, and computation sheet do not invalidate the addition. The case law relied upon by the assessee is not applicable to the facts of the present case, as it pertains to situations where adequate explanation is not disputed and verification is possible, whereas here the assessee failed to provide PAN and current addresses of the parties for independent verification under section 133(6). The transactions claimed by the assessee could not be independently verified, and no cogent evidence was provided to rebut the AO's conclusion. In view of the above, the contentions of the assessee in Grounds 1, 3, 7, and 8 are dismissed.”

1 The Ld. CIT(A) thus confirmed the reopening of the assessment.

Ground no.5:- In Ground 5 of the appeal, the assessee contended that the AO had wrongly concluded that there was no creditworthiness of the creditors and questioned the genuineness of the transactions without conducting any enquiry or seeking confirmation from the parties involved. The assessee argued that all receipts represented legitimate sale of investments, fully documented, and transmitted through banking channels. It further submitted that the AO had acted arbitrarily and without considering the documents submitted to substantiate the transactions. During appellate proceedings, the assessee submitted copies of sale bills, bank statements showing receipt of funds, and detailed information regarding the cost and sale consideration of investments sold to various entities. The assessee emphasized that all information required by the AO had been furnished, and that it had discharged the initial onus under section 68 by proving the identity of the creditors, the genuineness of the transactions, and the creditworthiness of the parties. The remand report submitted by the AO in response to the directions of the appellate authority observed that the assessee had failed to provide PAN numbers and current addresses of the parties involved, including Sanyam Merchandise Pvt. Ltd., Rudramala Vinimay Pvt. Ltd., Shivdarshan Commodeal Pvt. Ltd., and Starmark Wade Nade Link-But. Ltd. As a result it was not possible for the AO to independently verify the genuineness of the transactions by issuing notices under section 133(6). The AO concluded that in the absence of these critical details, the addition of Rs.81,50,000/- as unexplained cash credit under section 68 remained justified and legally sustainable. On examination, it is observed that the AO had acted strictly in accordance with the provisions of law. The AO was correct in treating the receipts as unexplained cash credit because the assessee did not furnish sufficient evidence to establish the identity, genuineness, and creditworthiness of the creditors to the satisfaction of the AO. The case law relied upon by the assessee is not applicable to the facts of the present case, as it pertains to situations where independent verification is possible and documentation is sufficient, whereas in this case, due to non-submission of PAN and current addresses, verification could not be carried out. Mere submission of bank ITA No(s). 2572/KOL/2025 Assessment Year(s) 2011-12 Narayan Barter Private Limited. statements and sale bills without enabling independent verification is insufficient to discharge the onus under section 68. In view of the above, the contention of the assessee in Ground 5 is dismissed. The reopening of the assessment and the addition of Rs. 81,50,000/- as unexplained cash credit under section 68 are upheld.

Ground no. 2:- The assessee may note that any apparent clerical mistakes, such as differences in the figures mentioned in the reasons recorded for reopening (Rs. 1,06,50,000/-), the assessment order (Rs. 81,50,000/-), and the computation sheet (Rs. 1,20,50,000/-), can be brought to the notice of the Assessing Officer through the proper statutory channel. Under the provisions of the Income Tax Act, 1961, the assessee is entitled to request rectification of such errors under Section 154 of the Act, which allows for the correction of any mistake apparent from the record in the assessment order. It is clarified that this procedure is intended to address mathematical or clerical discrepancies without affecting the substantive findings of the assessment. The assessee may submit a written application to the AO providing the relevant details and supporting documents seeking rectification of the numerical inconsistencies so that the records and computation are consistent and accurate. The AO is obliged to consider such rectification requests in accordance with the law and issue a corrected order if the mistake is found to be apparent from the record. Accordingly this ground is allowed.

In the result, the appellant's appeal is Partly allowed.”

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

None appeared on behalf of the assessee and the case was heard with the assistance of the Ld. DR. The Ld. DR stated that the assessee could not justify the creditworthiness of the creditors and therefore, the addition was rightly confirmed by the Ld. CIT(A).

We have considered the assessment order, the facts of the case and the statement of facts filed as also the finding of the Ld. CIT(A) and the submissions of the Ld. DR made before us. It is mentioned in the statement of facts filed before the Tribunal as under: ITA No(s). 2572/KOL/2025 Assessment Year(s) 2011-12 Narayan Barter Private Limited. “1. That the appellant is a Private Limited Company incorporated in 2007. One of its main objects is to deal in and trade with shares, securities, and financial instruments, to hold such investments either as capital assets or stock-in-trade, and to realize or dispose of the same in the ordinary course of business.

That during the year under appeal, the appellant company sold certain investments in shares of some companies and reinvested the proceeds in shares of other companies. All transactions were carried out in normal course of business through normal banking channels and duly recorded in the audited books of accounts.

That the return of income declaring 375/- was originally accepted; however, the assessment was reopened u/s 147 on the basis of information received from the DDIT (Inv.), Unit-3(1), Kolkata.

That the Assessing Officer alleged that an amount of 281,50,000/- received from its customers represented unexplained cash credits u/s 68, on the ground that the appellant failed to establish the identity, genuineness, and creditworthiness of the purchasers of shares.

That the appellant explained before the Assessing Officer and the Ld. CIT(A) that the amount represented sale proceeds of investments reinvested in other companies, duly supported by banking records and reflected in audited accounts. However, due to lapse of time (more than eight years of time has lapsed in between the date of transaction of sale and the date of enquiring by LAO) and closure of purchasers/customers offices, further details could not be furnished.

That the notice u/s 148 of the Act was allegedly issued on 26.03.2018; however, the same was never received by the appellant at its registered address prior to 31.03.2018, rendering the reopening invalid as per the provisions of the Act.

That Ld. CIT(A) is erred in sustaining the addition of 281,50,000/- u/s 68 r.w.s. 115BBE of the Act, merely endorsing the view of the Assessing Officer without proper appreciation of facts and evidence.

Thus being aggrieved with the order of Ld. CIT(A) the appellant preferred Second Appeal at this Forum amongst the following:”

The assessee has contended that it was holding shares, securities and financial instruments either as capital assets or stock-in-trade and to realize or dispose of the same in the ordinary course of business and during the year under appeal, the assessee had sold certain investments ITA No(s). 2572/KOL/2025 Assessment Year(s) 2011-12 Narayan Barter Private Limited. in shares of some companies and re-invested the proceeds in shares of other companies. It is also stated that the assessee explained before the Ld. AO as well as before the Ld. CIT(A) that the amount represented the sale proceeds of investments re-invested in other companies duly supported by banking records and reflected in audited accounts. However, due to lapse of time (more than 8 years of time had lapsed between the date of transaction of sale and the date of enquiring by the Ld. AO) and closure of purchasers/customers offices, the further details could not be furnished. The assessee has also questioned the service of the notice u/s 148 of the Act which was allegedly issued on 26.03.2018 but the same was never received by the assessee at its registered address prior to 31.03.2018, rendering the re-opening invalid as per the provisions of the Act. It is also alleged that the Ld. CIT(A) did not properly appreciate the facts of the case. In Ground No. 6, the assessee has prayed that the impugned order be quashed or alternatively, the matter be restored to the file of the Ld. AO for fresh adjudication after granting due opportunity to the assessee.

We have considered the facts of the case, the submissions made and the documents filed. The assessee challenges that the notice u/s 148 was never served before 31.03.2018. However, it is a settled law that the issuance of the notice has to be within the limitation period while the service can be made at any time as has been held as under in the case of R.K. Upadhyaya v. Shanabhai P. Patel [1987] 33 Taxman 229 (SC): The scheme of the 1961 Act so far as notice for reassessment is concerned, is quite different. What used to be contained in section 34 of the 1922 Act has been spread out into three sections, being sections 147, 148 and 149 in the 1961 Act. A clear distinction has been made out between 'issue of notice' and 'service of notice' under the 1961 Act. Section 149 prescribes the period of limitation. It categorically prescribes that no notice under section 148 shall be issued after the prescribed limitation has lapsed. Section 148(1) provides for ITA No(s). 2572/KOL/2025 Assessment Year(s) 2011-12 Narayan Barter Private Limited. service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitations, juri iction becomes vested in the ITO to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In the present case, admittedly, the notice was issued within the prescribed period of limitation as 31-3-1970 was the last day of that period. Service under the 1961 Act is not a condition precedent to conferment of juri iction in the ITO to deal with the matter but it is a condition precedent to making of the order of assessment. As the ITO in the instant case had issued notice within limitations, the appeal was to be allowed and the order of the High Court was vacated. Hence, Ground No. 2 of the appeal is dismissed.

1 The assessee also claims that the sale proceeds were from sale of investments in shares. However, no such details were filed before the Ld. AO nor even before the Ld. CIT(A) as in the absence of the addresses and PAN details, the notices u/s 133(6) of the Act could not be issued by the Ld. AO during the course of the remand report. The Bench was of the view that in order to be fair to both the assessee as well as the Ld. AO, the order of the Ld. CIT(A) may be set aside as the submission of the assessee that the sale proceeds were out of sale of shares has not been considered. Thus, the order of the Ld. CIT(A) is hereby set aside and the issue is remanded to the Ld. AO for making the reassessment afresh after granting an opportunity of being heard to the assessee. The assessee shall furnish the details of the year in which the investments were purchased, the complete details of sale of these investments including the details of receipt of the sale proceeds and also produce the purchasers of the investments justifying the genuineness of the transaction as well as the creditworthiness of the buyers and thereafter pass an order in accordance with law. On failure of the assessee to produce the required documents justifying the creditworthiness as well ITA No(s). 2572/KOL/2025 Assessment Year(s) 2011-12 Narayan Barter Private Limited. as the genuineness of the transactions relating to the sale of investments, the Ld. AO shall be at liberty to draw adverse inference. Hence, the grounds of appeal are partly allowed for statistical purposes.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 20th March, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 20.03.2026 Bidhan (Sr. P.S.) ITA No(s). 2572/KOL/2025 Assessment Year(s) 2011-12 Narayan Barter Private Limited. Copy of the order forwarded to:

CIT(A)-NFAC, Delhi.

CIT-

CIT(DR), Kolkata Benches, Kolkata.

Guard File. //// By order