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Facts
The assessee, a Private Limited Company, filed its return for AY 2018-19. During assessment, the AO treated ₹1,72,67,430 as unexplained cash credit under section 68 for shares held by Evergreen Retailers Private Limited, which was allegedly struck off. Additionally, cash payments exceeding ₹10,000 for sales promotion and entertainment expenses totaling ₹26,76,860 were disallowed under section 40A(3).
Held
The Tribunal held that the reliance on unofficial web portals instead of official MCA records for the share transaction was unsustainable. The alleged share transaction related to FY 2010-11 and could not be taxed in AY 2018-19. The disallowance under section 40A(3) was made mechanically without examining the evidence submitted by the assessee.
Key Issues
Whether the addition for unexplained cash credit based on unofficial web portal information is valid? Whether disallowance of expenses under section 40A(3) is justified without examining evidence?
Sections Cited
143(2), 142(1), 68, 115BBE, 40A(3), 143(3), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH KOLKATA
Before: SHRI SONJOY SARMA
आदेश / O R D E R
PER SONJOY SARMA, JM :
The present appeal and a stay application filed by the assessee arises against the order dated 14.08.2024 of the NFAC, Delhi (hereinafter referred to as the ‘CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (the ‘Act’).
SA No.14/KOL/2025 AVR Hotels & Resorts Pvt. Ltd.
Brief facts of the case are that the assessee is a Private Limited Company engaged in the business of trading and hotel operations. It filed its return of income for A.Y. 2018–19 declaring a total income of ₹9,40,973.The case was selected for scrutiny and notices under sections 143(2) and 142(1) of the Income-tax Act, 1961 were issued. During the assessment proceedings, the Assessing Officer noticed that Evergreen Retailers Private Limited, a shareholder of the assessee company, was holding 2,09,000 shares (64.19%) valued at ₹1,72,67,430.According to the Assessing Officer, Evergreen Retailers Private Limited was shown as struck off based on information obtained from a third-party web portal, and the assessee failed to prove the identity, genuineness, and creditworthiness of the said shareholder. Accordingly, the amount of ₹1,72,67,430 was treated as unexplained cash credit under section 68, read with section 115BBE of the Act. Further, the Assessing Officer observed that the assessee made cash payments exceeding ₹10,000 per day to a single person towards sales promotion expenses: ₹8,02,000 and entertainment expenses: ₹18,74,860 respectively totalling to ₹26,76,860, which was disallowed under section 40A(3) of the Act. The assessment was completed under section 143(3) vide order dated 19.04.2021, determining total income after additions and raising a demand of ₹1,97,04,090.
At the outset the Ld. AR fairly submitted that the appeal before the Tribunal was filed with a delay of 375 days. The assessee filed an affidavit explaining the reasons for delay. After considering the explanation, we are satisfied that there was
On the merit of the case the learned counsel for the assessee submitted that Evergreen Retailers Private Limited is an active company, as evidenced by Master Data from the MCA portal, Filing of Income-tax Returns up to A.Y. 2021, Annual return in Form 20B filed before ROC, Share certificates and statutory records. The Assessing Officer wrongly relied upon an unofficial web portal instead of the official MCA database, rendering the addition arbitrary and bad in law. No fresh shares were allotted during the relevant year. The shareholding structure of the assessee remained unchanged since Financial Year 2010–11. A comparative chart of share capital and reserves shows:- Financial year Assessment Number of Reserve In Rs. Year Shares 2014–15 2015–16 3,25,670 ₹2,36,43,800 2015-16 2016-17 3,25,670 ₹2,36,43,800 2016-17 2017-18 3,25,670 ₹2,36,43,800 Thus, no transaction occurred during A.Y. 2018–19, and any transaction of F.Y. 2010–11 cannot be taxed in A.Y. 2018–19. The valuation under Rule 11UA was wrongly applied, as no share transaction occurred during the year.
4.1 Regarding disallowance under section 40A(3), complete details and documentary evidence of payments were uploaded during assessment proceedings, but the Assessing Officer failed to consider the same, particularly during the COVID-19 period.
SA No.14/KOL/2025 AVR Hotels & Resorts Pvt. Ltd. 5. The learned Departmental Representative supported the orders of the lower authorities. However, he fairly submitted that the issues may require re-examination by the Assessing Officer.
We have carefully considered the rival submissions and material available on record. It is an admitted fact that the alleged share transaction relates to Financial Year 2010–11 and there was no fresh allotment or receipt of share capital during the relevant Assessment Year 2018–19. Moreover, transactions of earlier years cannot be taxed in a subsequent assessment year. If the transaction took place in F.Y. 2010–11, addition under section 68 cannot be made in A.Y. 2018–19, which is bad in law. Further, the reliance on unofficial web portals, ignoring official MCA records, renders the addition unsustainable. Accordingly, this issue is set aside to the file of the Assessing Officer to verify the year of transaction, and the status of Evergreen Retailers Private Limited based on official records. If it is found that the transaction pertains to F.Y. 2010–11, the addition of ₹1,72,67,430 shall be deleted. The assessee submitted payment details during assessment proceedings. The Assessing Officer did not examine the same and made disallowance mechanically. In the interest of justice, this issue is also restored to the file of the Assessing Officer to examine the evidences and decide the issue in accordance with law. The appeal of the assessee is allowed for statistical purposes. has already been disposed of and issues have been restored to the Assessing Officer, SA No. 14/Kol/2025 has become infructuous and is dismissed as such.
SA No.14/KOL/2025 AVR Hotels & Resorts Pvt. Ltd. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes wherein the stay application filed by the assessee is dismissed as infructuous.
Order pronounced in the open court on 12/01/2026.