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Facts
The assessee raised share capital and premium amounting to ₹6,56,98,750 from three entities. The Assessing Officer (AO) treated this as unexplained cash credit and added it to the assessee's income, citing a past experience of cyclical fund rotation. The CIT(A) upheld the AO's order.
Held
The Tribunal found that the assessee had furnished all required documents, including confirmations, ITRs, audited accounts, and bank statements, to prove the identity, creditworthiness, and genuineness of the transactions. The AO had not conducted any independent inquiry or issued statutory notices to subscribers. The Tribunal also noted that the shares were issued at a premium as per Rule 11UA and the investing companies were active and compliant.
Key Issues
Whether additions made by the AO and confirmed by the CIT(A) on account of share capital and premium, as unexplained cash credit, are valid when the assessee has provided sufficient evidence and the AO has not conducted proper inquiries?
Sections Cited
68, 143(3), 133(6), 131, 56, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 21.11.2025 for the AY 2015-16.
The assessee during the course of hearing pressed ground no.2,3,4,5 & 6, which are against the order of ld. CIT (A) confirming the addition of ₹6,56,98,750/- as made by the ld. AO in respect of share capital/ share premium.
The facts in brief are that the assessee filed the return of income on 25th September, 2015, declaring loss of ₹3,88,781/-. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were issued, which were duly replied by the assessee.
In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO by noting that the assessee has failed to prove the three limbs of Section 68 of the Act and the assessee has issued shares at a very high premium without there being any justification for the same.
After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee raised share
We note that the ld. AO has only relied on a general modus operandi as stated in para no.2.5 and 2.6, wherein he noted that on the basis of past experience it is noticed that such type of routing of money in a cyclical manner and finally added the money in the hands of the assessee. Therefore, the addition made on the basis of presumption and surmises that these are bogus entities who invested in the assessee company, whereas the companies, are active and regularly filing their income tax returns as well as the ROC returns. Similarly, the ld. CIT (A) simply affirmed the order of the ld. AO without giving any coge3nt finding. So far as the source of money is concerned, the major money was raised from KLG Tradelink Pvt. Ltd. of ₹4,99,85,000/- out of total money received of ₹6,56,98,750/-. We note that the said company is a sister’s concern of the assessee
Consequently, respectfully the above the decisions of the Hon'ble Kolkata High Court, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17.02.2026.