M/S. BMS SALES PVT. LTD., ,PURULIA vs. DCIT, CENTRAL CIRCLE 3(1), , KOLKATA

32. Further we find that the PCIT has accorded the approval only as per the proviso (a) to Section 148A, without their being any positive finding about the escapement of income.

We also find that there is no incriminating material seized during the course of search with regard to any purchases & sale outside the books of accounts. Therefore, we hold that, despite the deeming fiction applicable to searched persons, the issuance of notice under Section 148 still requires the Assessing Officer to demonstrate that the information unearthed during search leads to escapement of income in the specific assessment year. The mere fact of search, in itself, is not sufficient reason to issue a notice. Failure to establish this connection would render the issuance of notice without proper approval u/s 151 as bad in law and unsustainable." [Copy of such order is enclosed at Annexure-1] iv) The AO at best could have initiated the proceedings w/s 153C for the alleged searches and alleged material evidences/ documents pertaining/relating to conducted on "Kesara Group"[on 30.11.2018) and on Anup Majee Group[on 5.11.2020] which the AO failed to issue and such addition cannot be made u/s 148 pursuant to search u/s 132(1). v) AO could not have travelled to other issues when the AO did not have any material on the basis of which the impugned 148 was initiated. vi) Deemed escapement of income without enquiry u/s 148A applied only for preceding 3 years and for travelling beyond 3 years, AO must issue notice u/s 148A which AO failed to do in this case and hence consequential proceedings and order so passed u/s 147 has become bad in law vii) Before issuing notice u/s 148 (for A.Y 2019-20) the conditions as specified in sec. 149(1)(b) were required to be satisfied and which is not satisfied in appellant's case. Such condition u/s 149(1)(b) are as follows:- a) AO is in possession books of accounts/other documents/evidence. b) Which reveal income chargeable to tax "represented in form of asset". AO didn't have any evidence / documents books and more so represented by "asset" out of impugned search on 1.4.2021 and as such issue of notice u/s 148 was void ab initio.

3. The only issue raised by the assessee on merits is against the confirmation of addition by ld. CIT (A) of ₹42,43,50,000/- as made by the ld. AO in respect of sale of investment during the impugned year.

3.1. The facts in brief are that the assessee filed the return of income on 25.10.2019, declaring total loss of ₹11,67,951/-. The assessee revised the return on 12.02.2020, offering the same income. The assessee is engaged in the business of investment activities. A search action u/s 132 of the Act was conducted on 17.09.2021and on subsequent dates on ‘Agarwal Group’ and its associate concerns by directorate of investigation , Kolkata.Simultaneously, survey u/s 133A of the Act was also conducted at the assessee company at 3.2. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO after taking into account the submissions and contentions of the assessee. The learned CIT(A) also called for a remand CIT(A) noted that the report from the AO which was duly 3.3. After hearing the rival contentions and perusing the materials available on record and also taking into account the submissions/ contentions of the assessee, evidences filed and the remand report called for in the appellate proceedings we note that the ld. CIT (A) discussed the Provisions of Section 68 of the Act. We note that the assessee has furnished all the evidences before the AO as well as before the learned CIT(A) qua the sale of investments. The ld. CIT (A) also referred to the notices issued u/s 133(6) of the Act by the ld. AO to the buyer companies and also discussed the replies filed by them in response to the said notices. The ld. CIT (A) noted that the replies received from the buyer companies was never forwarded to the assessee for seeking comments. We note that the ld. CIT (A) during the appellate proceedings sought a remand report which was filed on 06.03.2025. The ld. AO re-iteratedhis observations as made in the assessment order. The rejoinder was also called from the assessee which was duly filed. The ld. CIT (A) noted that the shares purchase companies were not having any business or revenue from operation and had returned negligible income for A.Y. 2019-20 as well as in the past assessment years. The ld. AR vehemently submitted that the investments were held since F.Y. 2009-10 with book value of ₹82,55,60,000/- were already subjected to scrutiny in the assessment proceedings for A.Y. 2010-11. The ld. AR submitted that the issue was examined at length by the ld. AO as the very purpose of the selection of scrutiny was recent share capital/ share 3.4. The ld. AR further submitted that these investments were consistently reflected into books of account and audited accounts till F.Y. 2017-18 relevant to A.Y. 2018-19. The ld. AR submitted that during the year the assessee has only sold a part of the investments to four buyer companies from whom the money was received through banking channel. The ld. AR also referred to the notices issued u/s 133(6) of the Act to these companies by the ld. AO and the fact that by the four companies were duly complied with the said notices by furnishing all the details/ evidences before the ld. AO. The ld. AR stated that the ld. AO has not even confronted these replies to the assessee whether they contain any adverse material against the assessee. The ld. AR submitted that the provisions of Section 68 of the Act are not applicable to the instant case as section 68 of the Act is applicable to the fresh unexplained cash credit and not to the realization of any existing assets. Therefore, the sale of existing assets cannot be treated as unexplained income of the assessee. The ld. AR submitted that the share purchase by the assessee of private unlisted companies were held as investment under the head capital asset shown under non-current asset investment till in the subsequent assessment years. The ld. AR also submitted that replies received from the respective buyer companies by the ld. AO u/s 133(6) of the Act with supporting evidences/ documents were never confronted to the assessee and the ld. AO ultimately came to the conclusion that the money received from the said four companies (as given in para 4.11 were unexplained cash credit while the very sale 3.5. The ld. AR also submitted that the assessee was never provided the statement of Shri Abhishek Kumar Munka, an entry operator which was recorded by DDIT(Inv.), unit-1(3), Kolkata during search on one Jain group(third party) on 24.09.2021 which was distinct and separate from the assessee, having no agreement with the assessee in F.Y. 2018-19 or earlier years.The ld. AR submitted that how the third-party statement could be used against the assessee to make the addition when the assessee was not allowed cross examination of the said person which is a mandatory requirement. Therefore, the same is in violation of principle of natural justice. In defense of his argument the ld. relied on the decision of Andaman Timber Industries Vs. CIT (2015) 10 TMI 442 (SC), PCIT vs. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta)/[2022] 448 ITR 332 (Calcutta)[14-07- 2022].

3.6. The ld. AR further submitted that the statement of Shri Abhishek Kumar Munka on 24.09.2021, nowhere mentioned the name of the assessee and in fact mentioned the name of the all those companies which has no connection with the assessee company in any manner whatsoever. The ld. AR submitted that the action of the ld. AO in partly accepting the sales made to the same four purchases companies in the hands of two entities as mentioned in para 4.11 infra and rejecting the sale of investments to the same four entitiesin the hands of the assessee is a clear-cut example of non-application 3.7. The ld. DR on the other hand strongly opposed the arguments of the ld. AR by submitting that the raising of fund as well as the investments thereof is nothing but part of accommodation entries received by the assessee . The ld. DR submitted that the mere acceptance of particular fact during assessment proceedings, would not ipso facto prove that the same could not be doubted in the subsequent year when the genuineness the transactions came to cloud. The ld. DR submitted that though admittedly these investments were accepted in A.Y. 2010-11 in the assessment proceedings in the order passed u/s 143(3)/ 147 of the Act but the same cannot be bar to treat the said investments as bogus when 3.8. We have heard the rival submissions and perused the materials available on record, including show notice issued u/s 148A(b)of the Act, order passed u/s 148A(d) of the Act and all the material available on the assessment records. We note that the show cause notice u/s 148A(d) of the Act was issued doubting the money received by the assessee during the A.Y. 2009-10 by issuing 8,25,560 equity shares of ₹1 each at a premium of ₹999 to allotee Companies and thereby receiving ₹82,55,60,000/-. Thereafter, the ld. AO discussed that ITRs of the allottee companies have zero fixed assets, rent paid, miniscule profitability and thereby raising serious concerns about the creditworthiness of the subscriber companies, especially when the assessee company was acquired by the Agarwal group and the address was changed.

3.9. The ld. AO thereafter noted that the assessee had sold investments to the tune of ₹68,94,40,000/- during the impugned financial year relevant to A.Y. 2019-20 and the detail of said nine purchase companies were also given in the show cause notice which is extracted below:-

SL Name of the Concerns to which investment sold F.Y. Amounts received No.

3.11. We also note that the AO accepted the sales of shares by DMP Vanijya Pvt Ltd and Hardco Commercial Pvt Ltd covered in the same search to the same four private companies as genuine while the sale to the same parties were treated as non genuine in the hands of the assessee as is apparent from the following table:-

Name of the Companies to Assessee DMP Vanijya Hardo Commercial whom the shares were sold Private Limited Private Limited Bluemotion Infotech Pvt. Ltd. ₹7,49,50,000 ₹7,24,00,000 ₹5,73,50,000 Everstrong Udyog Pvt. ltd. ₹7,65,00,000 ₹6,16,00,000 ₹6,44,00,000 Lifewood Agri Farming Pvt. Ltd. ₹15,83,00,000 ₹3,74,00,000 ₹5,04,00,000 Raghubar Commerce Pvt. Ltd. ₹11,46,00,000 ₹4,94,00,000 ₹3,63,00,000 Accepted/ rejected by the ld. Rejected Accepted Accepted AO 3.12. We note that these two companies were also covered under the same search andare group companies.Therefore, the action of the AO in treating the sale of shares in the hands of the assessee as non genuinecannot be sustained as being arbitrary and whimsical.

3.13. We note that the shares were held by the assessee company since A.Y. 2009-10 of total cost of ₹82,55,60,000/- and were being held since then till the date of sale during the impugned assessment year. We also note that the money raised by the assessee by way of issuing of share capital/ share premium to 24 companies and investment of the same in unlisted private equity shares were examined at length during the course of assessment proceedings and the same was accepted in the assessment famed u/s 143(3)/ 147 of the Act for A.Y. 2010-11. We also note that the 3.14. We further note that the statement of Shri Abhishek Kumar Munka was recorded u/s 131 of the Act on 24.09.2021 during the course of search on Jain Group which was distinct and separate from the assessee having no connection with the assessee, which was relied by the ld. AO without confronting the same to the assessee assessee or allowing any cross examination which is in violation of principle of natural justice as has been held in the case of Andaman Timber Industries Vs. CIT (2015) 10 TMI 442 (SC)&PCIT vs. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta)/[2022] 448 ITR 332 (Calcutta)[14-07-2022]. Even the AO did not bring any corroborating evidences as to the receipt of cash by Shri Abhishek Munka from the assessee company or for that matter from Deepak who is alleged to be main person of Aggarwal Group and without questioning Shri Abhishek Munka or Deepak on AKM 189(Pge 130) and therefore the said seized document has no relevance and is rather a dumb document. The mere matching of certain entries do not legally sanctify a document without other corroborating evidences which are missing Therefore, the addition made on the said statement and without cross-examination is not sustainable in the eyes of law. We also note that the sale of investments, which was out of share capital and was accepted by the department in A.Y. 2010-11, even in the scrutiny proceedings which culminated in assessment order u/s 143(3)/ 147 of the Act, can not be doubted in the year of sale. We also note that out of total sales of investments of Rs. 68,94,40,000/- made by the assessee during the year , the sale of shares/investments to the tune of ₹26,50,90,000/- were accepted. This shows total non application of mind by the AO during assessment proceedings. Therefore the action of the ld. CIT (A) in confirming the order of the ld. AO is not sustainable in the eyes of law. The case of the assessee find support from the decision of Hon'ble Jurisdiction High Courtin case of Tulsyan and Sons (P.) Ltd.(supra) wherein the Hon'ble Court has held as under:-

“We have heard Mr. Aryak Dutta, learned standing counsel assisted by Mr. Soumen Bhattacharjee, learned standing counsel for the appellant and Mr. J. P. Khaitan, learned senior advocate assisted by Mr. Pratyush Jhunjhunwalla, learned advocate for the respondent. The short issue which falls for consideration is whether the learned tribunal was right in affirming the order passed by the Commissioner of Income Tax (Appeals)- 21, Kolkata [CIT(A)] dated 10.5.2023 by which the assessee’s appeal was allowed and the addition made under section 68 of the Act was deleted. The Assessing Officer made the addition by invoking section 68 of the Act on the ground that the assessee failed to discharge its onus to establish identity, creditworthiness and genuineness of the transaction in respect of the money received through cash trail. The CIT(A) in course of hearing the appeal called for a remand report from the Assessing Officer and in the said remand report the Assessing Officer has in no uncertain terms accepted the receipt of the impugned sum on account of sale proceeds of investment. The Assessing Officer verified the investment sold which are shown in the balance-sheet for the financial year 2010-11 in Schedule-4 of the balance-sheet and after considering these facts it was stated that the assessee had sold shares held by way of the investment during the year to M/s. Shivshakti Communications and Investment Pvt. Ltd. and Carnation Tradelink Pvt. Ltd. and it is not a receipt of unsecured loan. This fact, apart from other factual details, were considered by the CIT(A) and by an elaborate order dated 10.5.2023 the appeal filed by the assessee was allowed. The tribunal on its part re-examined the factual position and took note of the findings rendered by the CIT(A) and concurred with the same. We also find that the tribunal has also examined the factual position and took note of the remand report as called for by the CIT(A) which confirmed the alleged sum is on account of sale of investment and not otherwise. Thus, we find no question of law much less substantial question of law arises for consideration in this appeal. Accordingly, the appeal fails and the same is dismissed. Consequently, the connected application stands closed.

3.15. The said decision of the Hon'ble High Court has been followed by the co-ordinate bench in the case of ACIT Vs. Pawanputra Advertising Private Limited in IT(SS)A Nos. 144 & 145/KOL/2024 and Ors. vide order dated 26.08.2025, the operative part of the same is extracted below:-

“7. We have heard the rival contentions and perused the materials available on record including the written submissions dated 21.04.2025 and paper books No. 1 (page No. 1 to 357) ,paper book no. 2 (page No. 1 to 354 and paper book 3 (Case Laws). We find that the only dispute is sale of part unlisted equity shares to various parties thereby realizing total sales consideration of ₹11,56,20,000/-. We note that the assessee raised money by issue of equity shares in A.Y. 2008-09 of Rs. 64,85,49,000/- . We also note that entire funds raised were invested in unlisted equity shares in AY 2011-12. We note that the case of the assessee was selected for scrutiny only for this reason and the money raised by the assessee was accepted by the department and no adverse interference was drawn. We note that in A.Y. 2010-11 also, the case of the assessee was selected for scrutiny and all the money share capital /share premium was accepted. Thereafter the investments were made in private equity shares which were unlisted in A.Y. 2011-12. Similarly 2017-18 the case of the assessee was selected for scrutiny and investments were not doubted at all. Thus it is clear that over all these years the investments were not doubted by the department. These investments made in the A.Y. 20111-12 were partly sold at cost by the assessee during the instant assessment year which realized ₹11,56,20,000/- which were accepted by the Revenue right from A.Y. 2011- 12 till the instant assessment year. We have also noted that the assessee has filed before the ld. AO as well as before the ld. CIT (A) all the evidences qua the purchases and sale of shares. The assessee has filed all the evidences qua the purchasers such as ITRs, names, addresses, audited balance sheets, bank statements, confirmations, etc. proving the identity, creditworthiness of the purchasers and genuineness of the transactions. We note that even the purchasing companies have filed their evidences as called for by the ld. AO comprising all the evidences as stated above. The ld. CIT (A) has recorded a finding of fact that apart from the assessee , purchasing companies had also filed all the evidences before the ld. AO however the ld. AO had not brought on record any independent and substantive evidences pointing out any defect or deficiency in the said evidences. The ld. CIT (A) finally noted that the assessee has proved the identity and creditworthiness of the parties and also the genuineness of the transactions by filing all these documents and thus, discharged its initial burden.

9.1. The assessee has also filed movement of investments over the years which showed that the phenomenon of purchase and sale of shares/investments was regular feature of the assessee’s business. This is also undisputed that the assessee company had raised share capital (including premium) amounting to Rs.119,84,67,000/- in financial year 2010-11, relevant to AY 2011-12 and the capital so raised in AY 2011-12 was invested in shares/securities and accounted for in the books of accounts which were audited and audited accounts are placed at page no. 102 to 111 of PB Vol.-1. We also note that the assessment for AY 2011-12 was framed u/s 143(3) of the Act vide order dated 17.03.2014 a copy of which is placed at page no. 276 and 277 of PB Vol.-1 and the neither the share capital/share premium nor the investments out of that source were doubted by the AO.

9.2. We also note that similar issue was involved in the case of M/S Swarna Kalash Commercial Pvt Ltd. Vs ACIT ,Central Circle -2(2), Kolkata, a group concern of the Rashmi Group of Companies ,which was also subjected to search u/s 132(1) of the Act in the same search proceedings. We note that the coordinate bench has decided the issue in favour of the assessee in ITA No. I.T.(S.S.)A.No.53/Kol/2022 A.Y.2019-20 vide order dated 01.09.2023 involving the same issue of addition of sale of shares/investments by the AO on the ground that identity and credentials of the purchasers of shares/investments were suspicious. The operative part of the order is extracted as under: “6.1.We have considered the rival contentions and gone through the record. First we deal with the issue relating to the undated detailed order passed by the Assessing Officer even after the prescribed date of limitation for passing the assessment order for the assessment year under consideration which is other than the short cryptic order as reproduced above and which did not even bear any Document Identification Number, (in short “DIN”)as mandated vide CBDT Circular No.19 of 2019. 6.1. As mentioned in the said CBDT circular no. 19 of 2019 and as also further held by the Hon’ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. [2023[ 149 taxmann.com 238 (Del), any communication without mentioning of the DIN in its body is to be treated as non-est. Therefore, the subsequent undated assessment order and without any DIN mentioned in the order, and passed after the limitation period prescribed for passing of the assessment order cannot be taken cognisance of.

11.1. In its normal course of business, the assessee had made purchases and sale of investments as under which is tabulated as under:

11.2. The shares were held by the assessee as investments and were sold at the cost of acquisition by the assessee. Hence, there is no profit/loss on such sale of investment. We also look at the movement of investment held by the assessee, which is tabulated below:

FY AY Opening Purchase Sales Amount Closing Balance byA.O. 2014-15 2015-16 63,42,00,000 63,42,00000 2015-16 2016-17 63,42,00,000 42,44,960 18,344,960 62,01,00,000 1,83,44,960 2016-17 2017-18 62,01,00,000 56,27,44,459 468,499,459 71,43,45,000 46,84,99,459 2017-18 2018-19 71.43.45,000 1,55,17,29,538 2,062,064,910 20,40,09,628 2,06,20,64,910 2018-19 2019-20 20,40,09,628 66, 47, 64, 007 170,560,000 69,82,13,635 17,05,60,000 Total 2,71,94,69,239 11.3. We also refer to the details of opening stock, purchases, sales and closing stock during the year, placed on record by the assessee: SI Opening Purchases Sales Closing No Name of the Script Balance Balance Amount Amount Amount Amount I Bellona Supply Pvt. Ld. 1,24,57,344 0 1,24,57,344 0 2 P N Jewelers Pvt ltd 38,45,323 0 38,45,323 0 3 Rozela Tie Up pvt. Ltd. 3,64,33,053 0 3,64,33,053 0 4 Rashmi Cement Ltd. 0 1,57,32,000 0 1,57,32.00 0 5 CimmcoVinimay Pvt. Ltd. 13,32,04,353 53,71,44,701 0 67,03,49,0 54 6 Festive Vincom Pvt Ltd 28,01,625 0 0 28,01,625 7 GreenHillDealmark Pvt Ltd 26,14,850 0 0 26,14,850 8 SwabhimanCommosales 26,15,900 0 0 26,15,900 Pvt Ltd 9 Topline Business Pvt Ltd 41,00,205 0 0 41,00,205 10 VidyaBuildcon Pvt Ltd 0 2,50,00,000 2,50,00,000 0 11 BadrinathMinning Pvt Ltd 59,36,974 75,250 60,12,224 0 12 Sankul Retailers Private 0 74,49,572 74,49,572 0 Ltd 13 Alok Financial Services 0 8,10,000 8,10,000 0 Pvt Ltd 14 Asankul Cosmetics Pvt Ltd 0 6,55,26,090 6,55,26,090 0 15 Daffodil Plaza Pvt Ltd 0 88,198 88,198 0 16 NAT Communication & 0 1,26,37,632 1,26,37,632 0 Marketing Pvt Ltd 17 Alok Pattanayak 0 3,00,000 3,00,000 0 Total 20,40,10,245 66,47,63,507 17,05,60,00 69,82,13,6 0 34 11.4. Based on the analysis of the above details, it is evident that entire sales ismadefrom purchases & opening stock as under:

Breakup of Sale of Shares Amount(Rs.) Breakup of Sale of Shares Amount(Rs.) Sold out of Opening Investment 5,86,73,194 Sold out of Opening Investment 5,86,73,194 Sold out of Investment Purchased During the Sold out of Investment Purchased During the Year 11,18,86,806 Year 11,18,86,806 Total 17,05,60,000 Total 17,05,60,000 11.5. It is also important to note that the AO has made enquiries from the buyers ofthe shares sold by the assessee by issuing summons u/s 131 of the Act who haveresponded and furnished the required details. Summary Statement of the replies madein response to notice u/s 131 by various buyers (Sale of Shares) is tabulated below:

10. Since, the facts of the case before us vis-à-vis, facts of the decisions cited above are substantially similar and therefore, we respectfully following the ratio laid down in the above decisions upheld the order of ld. CIT (A) on this issue by dismissing the appeal of the Revenue.

11. So far as the Cross Objection is concerned, we note that the assessee has challenged the direction of the ld. CIT (A) to the ld. AO to make an addition at the rate of 5% of the total sales consideration towards the net profit embedded in the sales consideration.

12. After hearing the rival contentions and perusing the materials available on record, we find that the ld. CIT (A) has not given any basis for such direction to the ld. Assessing Officer. In other words, the ld. CIT (A) has just acted on the presumptions and surmises and thus, presumed that the assessee might have made some profits from sale by investments. In our opinion, the said direction by the ld. CIT (A) is without any substantive basis and therefore cannot be sustained. Accordingly, we set aside the order of ld. CIT(A) to the extent of this direction of making addition @ 5%. Accordingly, the cross objection of the assessee is allowed.” 3.16. Considering the facts of the assessee’s case , we are of the considered view that the action of the AO cannot be sustained for following reasons: i) The statement/materials relied by the AO was not confronted to the assessee ii) accepting the raising of funds and investments in private equities were itself examined and accepted by the AO in A.Y. 2010-11 in the scrutiny proceedings particularly when the scrutiny was selected for verification of funds raised and investments thereof and iii) partly accepting the sale of shares during the instant under consideration and partly treating as non-genuine.

Order pronounced in the open court on 02.01.2026.