ARUN DISTRIBUTORS PVT. LTD.,KOLKATA V. ITO, WARD 7(1), KOLKATA

ITA 2602/KOL/2025

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Arun Distributors Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre, Delhi, which upheld the additions made by the Assessing Officer regarding share capital/share premium and disallowance under section 14A read with Rule 8D of the IT Rules, 1962. The Tribunal examined the documents and submissions made by the assessee, including details of the subscribing entities and the financial transactions involved. It was noted that the Assessing Officer did not issue notices under sections 133(6) or 131 of the Act for independent verification of the transactions, nor did they point out any deficiencies in the documents provided. The Tribunal also referenced several decisions by the Kolkata High Court that supported the assessee's position.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840954 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-11-2025
• Other Referred Cases: PCIT Vs. Goodview Marketing P. Ltd., PCIT vs. Kunjal Synergies Private Limited, PCIT vs. M/s Jealous Commercial private Limited, PCIT Vs. True man Consultants Pvt. Ltd., PCIT vs. Atlantic Dealers Pvt. ltd., PCIT Vs. Balaka Vinimay Private Limited, PCIT Vs. M/s Devbhumi Vinimay Pvt. Ltd.
• Laws Referred To: Income Tax Act, IT Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIB KUMAR PAUL
• Assessee Lawyers: ANIL KOCHAR
• Keywords: Set aside; Unexplained cash credit; Earning of tax free income; Rule 8D
• Section: 143(3); 68; 131; 133(6); 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.2602/KOL/2025 (Assessment Year: 2012-13) Arun Distributors Pvt. Ltd. 12B, Cossipore Road, Cossipore, Kolkata-700002, West Bengal Vs. ITO, Ward 7(1) Aaykar Bhawan, P-7, Chowringhee Square, Kolkata-700069, West Bengal (Appellant) (Respondent) PAN No. AACCA1879Q Assessee by : Shri Anil Kochar, AR Revenue by : Shri Sanjib Kumar Paul, DR Date of hearing: 20.01.2026 Date of pronouncement: 26.02.2026 O R D E R Per Rajesh Kumar, AM: 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 15.09.2025 for the AY 2012-13. 2. The issue raised in ground no.3 to 7 by the assessee is against the confirmation of addition by the ld. CIT (A) of ₹1,62,46,000/- as made by the ld. AO in respect share capital/ share premium. 2.1. The facts in brief are that the assessee filed the return of income on 11.09.2012, declaring total income of ₹24,05,093/-. The case of the assessee was selected for scrutiny under CASS and the notice u/s 143(2) and 142(2) of the Act along with questionnaire were issued and served upon the assessee. The assessee complied with the said Printed from counselvise.com Page | 2 ITA No. 2602/KOL/2025 Arun Distributors Pvt. Ltd.; A.Y. 2012-13 questionnaire by filing all the details comprising names, address, PAN, audited accounts, confirmation etc. of the subscribing entities. The assessee issued ₹1,62,460/- equity shares of ₹10 each at a premium of ₹90 thereby raising share capital of ₹1,62,46,000/- including share premium of ₹1,46,21,400/-. However, the ld. AO ,without pointing out any defect or discrepancy in the documents filed by the assessee, treated the share capital/ share premium as unexplained cash credit and added to the income of the assessee in the assessment framed u/s 143(3) dated 10.02.2015. Besides making the addition u/s 14A read with section 8D of the IT Rules, 1962 of ₹18,64,282/-. 2.2. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee after taking into consideration the reply/ submission of the assessee and after calling for the report from the ld. AO. The ld. CIT (A) noted that the assessee received share capital/ share premium of ₹1,62,46,000/- from sister concerns M/s Arun Distributors, a partnership firm in which the directors of the assessee companies were partners. Thereafter, the ld. CIT (A) noted that the assessee never argued that the ld. AO has not issued notice u/s 133(6) or 131 of the Act for independent verification of these transactions. The ld. CIT (A) referred the remand report dated 01.07.2025 and noted that the assessee had advanced substantial loans to the subscribers firm with an opening balance of ₹1,35,62,221/- and further, disbursement during the year ₹92,53,311/-. The ld. CIT (A) noted that thereafter the said firm subscribed the shares at huge premium of ₹90. The ld. CIT (A) also referred to the remand report wherein the ld. AO noted that the assessee deposited ₹20,24,000/- as cash in the bank account during the year and assessee has not filed any contemporaneous evidence Printed from counselvise.com Page | 3 ITA No. 2602/KOL/2025 Arun Distributors Pvt. Ltd.; A.Y. 2012-13 to prove the genuineness of the deposits and finally, the dismissed the appeal by holding that the assessee has failed to prove the three limbs of Section 68 of the Act. 2.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has filed before the ld. AO the names, addresses, copies of PAN ,bank account, audited accounts, confirmation from the subscriber which happened to be a partnership concern in which both the directors of the assessee company were partners. Therefore, the assessee raised this money by way of share capital/ share premium from the sister concern. We note that the ld. CIT(A) also called for remand report which was submitted by the Assessing Officer. The assessee has also filed reply to the said remand report. It was stated in the remand report that as noted by the ld. CIT(A) in para 8.3(i) that it is admitted that the assessee has advanced substantial money to this partnership firm in the earlier year amounting to ₹1,35,62,221/- and during the year as well of ₹92,52,311/-. The only basis for making the addition in the hands of the assessee is that the assessee has advanced money to this firm in the earlier year amounting to ₹1,35,62,221/- and during the year ₹92,52,311/-. We note that the ld. AO did not point out any defect or deficiency in the evidences furnished by the assessee nor did the ld. CIT (A). We also note that the ld. AO has not issued notice u/s 133(6) of the Act or summons u/s 131 of the Act in order to independently verify the transactions. Therefore, we cannot sustain the order of the ld. CIT (A) just upholding the order of ld. AO without any reasoning. If at all the addition was to be made , the AO could have proceeded against the subscriber whose details were filed by the assessee before the Assessing Officer. In view of these facts, we are in a position to sustain the order of the ld. CIT (A). The case of Printed from counselvise.com Page | 4 ITA No. 2602/KOL/2025 Arun Distributors Pvt. Ltd.; A.Y. 2012-13 the assessee is squarely covered by a series of decisions of the Kolkata High Court in case of PCIT Vs. Goodview Marketing P. Ltd. in ITAT/114/2025, GA/2/2025 vide order dated 3rd September, 2025, in case of PCIT vs. Kunjal Synergies Private Limited in ITAT/42/2025, IA No: GA/2/2025, in case of PCIT vs. M/s Jealous Commercial private Limited in ITAT/138/2025, IA No.GA/2/2025 vide order dated 28.10.2025, in case of ITAT/286/2024, IA No. GA/2/2025 vide order dated 17.07.2025, in case of PCIT Vs. True man Consultants Pvt. Ltd. in ITAT/203/2024, IA No.GA/I/2024, vide order dated 25th April, 2025, in case of PCIT vs. Atlantic Dealers Pvt. ltd., ITAT/41/2024, IA No. GA/2/2024 vide order dated 03.05.2024. in case of PCIT Vs. Balaka Vinimay Private Limited, ITAT/131/2025, IA No.GA/1/2025, vide order dated 21st July, 2025, in case of PCIT Vs. M/s Devbhumi Vinimay Pvt. Ltd. in ITAT/16/2025, IA No.GA/2/2025, vide order dated 22nd July, 2025. 2.3.1. Consequently, we set aside the order of ld. CIT (A) on this issue and direct the ld. AO to delete the addition. 3. The second issue raised by the assessee in ground nos.8 & 9, is against the order of ld. CIT (A) upholding the addition of ₹18,64,282/- as made by the ld. AO u/s 14A read with Rule 8D of the IT Rules. 3.1. After hearing the rival contentions and perusing the materials available on record, we find that in this case the ld. AO made an addition u/s 14A of the Act by invoking Rule 8D of the IT Rules. We also note that during the year the assessee has not received any exempt income from the investments. The ld. AO referred to the Circular no.5/2014, dated 11.02.2014 by CBDT, wherein it was clarified that Rule 8D read with section 14A of the Act provides for Printed from counselvise.com Page | 5 ITA No. 2602/KOL/2025 Arun Distributors Pvt. Ltd.; A.Y. 2012-13 disallowance of expenditure even if assessee has not earned any exempt income. We note that the said order is affirmed by the ld. CIT (A). In our opinion, the issue is settled issue now that where there is no exempt income, no disallowance is called for. Consequently, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. 4. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26.02.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 26.02.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "