DCIT, CENTRAL CIRCLE-4(3), KOLKATA, KOLKATA vs. BRGD SPONGE & IRON PRIVATE LIMITED , KOLKATA

ITA 1966/KOL/2025Status: DisposedITAT Kolkata26 February 2026AY 2016-1718 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal decided the issues as follows: Regarding the addition of ₹2,30,00,000/- on account of the sale of unlisted equity shares (Issue 1), the Tribunal found that the issue was squarely covered by the decision of a co-ordinate bench in the case of Shree Ramchandra Ingot India Pvt Ltd. Vs. DCIT, which dealt with similar facts involving investments held by amalgamating companies and accepted in earlier assessments. The Tribunal noted that the investments were accepted by the Revenue in the hands of the amalgamating companies in earlier assessment years. Consequently, the Tribunal set aside the order of the CIT(A) on this issue and directed the AO to delete the addition. The Revenue's appeal was dismissed, and the Assessee's ground no. 4 was allowed. Regarding the part-sustained addition of ₹11,50,000/- (5% of total sale value) (Issue 2), the Tribunal held that the CIT(A) had not provided any basis for this direction to add 5% of the total sales towards estimated profit. The Tribunal found this direction to be without substantive basis, based on presumptions and surmises, and therefore, unsustainable. The Tribunal set aside the order of the CIT(A) to this extent, allowing the Assessee's cross-objection. Regarding the addition of ₹31,00,000/- on account of non-genuine profit from bogus trades (Issue 3), the Tribunal noted that the Assessee had derived commodity profit of ₹31 lacs, which was credited to the profit and loss account and offered for tax. The Tribunal observed that the AO had not pointed out any defects in the documents furnished by the Assessee or brought on record any evidence to controvert the Assessee's submissions, relying solely on SEBI reports. The Tribunal held that the AO must conduct an independent enquiry and cannot solely rely on investigation wing/SEBI reports. The Tribunal set aside the order of the CIT(A) on this issue and directed the AO to delete the addition, allowing Assessee's ground no. 3.

What were the facts?

These are cross-appeals by the Revenue and the Assessee, BRGD Sponge & Iron Pvt. Ltd., against the order of the CIT(A) for Assessment Year 2016-17. The Revenue's appeal challenges the partial deletion of an addition of ₹2,18,15,000/- made by the AO, out of a total addition of ₹2,30,00,000/- under Section 68, concerning the sale of unlisted equity shares. The Assessee's appeal challenges the part-sustained addition of ₹11,50,000/-, being 5% of the total sale value, as arbitrary. The case was reopened based on information regarding reversal trades in illiquid stock options and later, regarding the sale of unlisted equity shares. The Assessee's business includes trading TMT bars. M/s Balgopal Tie up Pvt Ltd was amalgamated with the Assessee. A search action was conducted on the Assessee on 30.11.2022. The AO framed the assessment under Section 147/143(3), making additions including ₹2,30,00,000/- for the sale of unlisted equity shares by the amalgamating company.

What were the issues?

1. Whether the addition of ₹2,30,00,000/- on account of the sale of investments in unlisted equity shares by the amalgamating company, M/s Balgopal Tie-up Pvt Ltd, is sustainable under Section 68 of the Income Tax Act, 1961, considering the investments were accepted in earlier assessment years for the amalgamating entities. - Assessee's Contention: The unlisted shares were purchased by the amalgamating company in FY 2008-09, and these investments were accepted by the Revenue in AY 2008-09. The issue is covered by the decision of a co-ordinate bench in the case of Shree Ramchandra Ingot India Pvt Ltd. Vs DCIT. - Revenue's Contention: Each case has different facts, but the issue of sale of shares was decided by the bench in the referred case. The Revenue relied heavily on the AO's order and prayed for its restoration. 2. Whether the part-sustained addition of ₹11,50,000/- (5% of total sale value) by the CIT(A) on account of the sale of unlisted equity shares is arbitrary and without basis. - Assessee's Contention: The addition of 5% of the total sale value is without any basis and should be deleted. - Revenue's Contention: Not recorded. 3. Whether the addition of ₹31,00,000/- on account of non-genuine profit from bogus buy and sale of trades in illiquid stock options is sustainable under Section 68 of the Income Tax Act, 1961. - Assessee's Contention: The commodity profit of ₹31 lacs was offered to tax and supported by documents. The AO did not point out defects in the documents and relied solely on SEBI reports, which is not permissible. The case is covered by Sanjay Kumar Damjibhai Gangani Vs ACIT. - Revenue's Contention: The CIT(A) affirmed the AO's order on the ground that the assessee indulged in artificial trade volumes with few counterparties in illiquid stock options, resulting in non-genuine profits.

Which sections of the Income-tax Act were involved?

Section 68,Section 115JB,Section 147,Section 148,Section 148A,Section 139(1),Section 143(1),Section 143(2),Section 142(1),Section 132(1),Section 10(38)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Manish Rastogi, AR
For Respondent: Shri Manoj Kumar Pati, DR
Hearing: 03.02.2026Pronounced: 26.02.2026

Heard together (2 matters)

ITA No. 1966/KOL/2025
ITA No.1403/KOL/ 2025

Read from the judgment's own cause title. This page is filed under one of them.

Per Rajesh Kumar, AM:

These are cross appeals against the order of the Commissioner of Income-tax (Appeals), Kolkata-27 (hereinafter referred to as the “Ld. CIT(A)"] dated 15.04.2025 for the AY 2016-17. At the outset, we observe from the appeal folder in ITA No.

1966/KOL/2025 that there is a delay of 26 days in filing the appeal by the department filed.

in support of which condonation petition was It was stated in the condonat

The order continues below.

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