ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5(1), KOLKATA, KOLKATA V. SANATAN MERCHANTS PRIVATE LIMITED, KOLKATA

ITA 2111/KOL/2024

AI Insights

The case involves the Income Tax Department (appellant) challenging the order of the CIT(A) which had allowed the appeal of Sanatan Merchants Pvt. Ltd. (respondent) by deleting the additions made by the Assessing Officer. The additions were initially made on the grounds that the loans taken and share application money received by the assessee were bogus. The CIT(A) found that the assessee had provided sufficient evidence to prove the genuineness of the transactions, including the financial stability of the lender companies and the proper banking channels used for the transactions. The tribunal agreed with the CIT(A)'s findings and dismissed the revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786635 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 15-10-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Bogus Share capital; Bogus loan; Bogus
• Section: 143(3); 133(6)

Judgement Text

"आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member ITA No.2111/Kol/2024 Assessment Year: 2015-16 ACIT, Circle-5(1), Kolkata….…………… ……………...……….……….……Appellant vs. Sanatan Merchants Pvt. Ltd...……......…………………….......……...…..…..Respondent Room No.567, 5th Floor, Marshall House, 33/1, NS Road, Kol-700001. [PAN: AADCS7439P] Appearances by: Shri Pradip Kumar Biswas, Addl. CIT- Sr. DR, appeared on behalf of the appellant. Shri Siddharth Agarwal, Advocate, appeared on behalf of the Respondent. Date of concluding the hearing : November 03, 2025 Date of pronouncing the order : November 19, 2025 ORDER Per Pradip Kumar Choubey, Judicial Member: This appeal filed by the revenue is directed against the order dated 06.08.2024 of the National Faceless Appeal Centre [‘CIT(A)’] passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). 2. Brief facts of the case are that assessee company filed its return of income declaring total income at Rs.31,41,530/- and the case of the assessee was selected for scrutiny and notice u/s 143(2) of the Act was issued. During the assessment proceedings, the Assessing Officer observed that the assessee has taken loan of Rs.1,77,00,000/- i.e. Rs. 40 Lacs from M/s Shreshth Builders Pvt Ltd, 1,02,00,000/- from M/s Vinjyoti Tracom Pvt Ltd and Rs. 35,00,000/- from Govind Tie Up. Notice u/s 133(6) was issued to M/s Shresth Builders Pvt Ltd which was duly replied by the said companies. However, the Assessing Officer completed Printed from counselvise.com ITA No.2111/Kol/2024 Sanatan Merchants Pvt. Ltd 2 the assessment u/s 143(3) of the Act assessing total income at Rs. 2,59,00,960/- after making additions of Rs. 1,77,00,000/- on account of bogus loan and Rs.50,00,000/- on account of bogus share application. 3. Aggrieved by the said order, the assessee filed an appeal before the CIT(A) wherein the appeal of the assessee has been allowed by deleting the additions of Rs.1,77,00,000/- and Rs.50,00,000/-. 4. Being dissatisfied, the revenue is in appeal before us challenging the very impugned order by raising the following grounds of appeal: Printed from counselvise.com ITA No.2111/Kol/2024 Sanatan Merchants Pvt. Ltd 3 5. The ld. AR supports the impugned order thereby submitting that the unsecured loan of Rs. 1,77,00,000/- were received from three companies namely M/s Shreshth Builders Pvt. Ltd amounting Rs.40,00,000, Vinjyoti Tracom Pvt. Ltd amounting 1,02,00,000 and Govind Tie Up Pvt. Ltd. amounting to Rs.35,00,000/-. The ld. AR also submits that the said loan transaction was done through account payee cheques and the same was refunded in subsequent years also by account payee cheques and loan confirmations were submitted and all the loan creditors are regularly assessed by Income Tax Authorities and are holder of MCA certificate and the loan transactions were done in normal course of business. His submission is that all the lender companies are NBFC registered under Reserve Bank of India and copy of Registration certificates were submitted before the Assessing Officer and interests after deducting TDS were paid lenders and PANs and addresses of lender companies were also submitted and the lender companies have sufficient net worth to give loan to the assessee company. In respect of addition on share application money of Rs.50,00,000/-, the ld. AR submits that the said share application money of Rs. 50,00,000/- received from Supreme Metal Trade Private Limited & Eminent Sales Private Limited and the same was received in previous year and the Assessing Officer wrongly added back the amount in the assessment year under consideration. He also submits that all the entities have MCA records, their PANs and the assessee submitted documentary evidences such as Audited Financial Statements, bank statement of parties showing the receipts of the said loan through proper banking channel, loan confirmation and all the parties were duly responded to notice u/s 133(6) of the Act. The ld. AR further submits that the ld. CIT(A) deleted both the addition after considering the documents submitted by the Printed from counselvise.com ITA No.2111/Kol/2024 Sanatan Merchants Pvt. Ltd 4 assessee and there is no infirmity in the impugned order of the ld. CIT(A) and the same may be upheld. 6. Upon hearing submission of the counsels of the respective parties and on perusal of the material available on record, we find that during the years, the unsecured loan of Rs. 1,77,00,000/- received by assessee during the year under consideration from the following parties: S.no Name & Address of the Lender Amount (Rs) 1 M/s Shreshth Builders Pvt Ltd 40,00,000 2 Vinjyoti Tracom Pvt Ltd 1,02,00,000 3 Govind Tie Up Pvt Ltd 35,00,000 Total 1,77,00,000 6.1 We further find that the assessee submitted documents such as certificate of NBFC with RBI and bank details of the lender companies and loan confirmations. We also find that all the loan creditors are assessed under Income Tax and are holder of MCA certificate and the loan transactions were done in normal course of business and the said loan transaction was done through account payee cheques and the same was refunded in subsequent years also by account payee cheques and also interests after deducting TDS were paid to lenders and PANs and addresses of lender companies were also submitted. We find that the assessee has submitted the details of repayment of the said loan through banking channels and copy of Audited Financial Statement of all the loan creditors, relevant bank statement reflecting the loan transaction, loan confirmations. We note that the assessee duly proved the genuineness of the loan transaction and the advancement of loan and the repayment of the loan has been carried out through proper banking channel and interests were paid after deducting TDS. We find all the Printed from counselvise.com ITA No.2111/Kol/2024 Sanatan Merchants Pvt. Ltd 5 lender companies have sufficient net worth to advance the said loan to the assessee company, the details are as under: Name of entity Investment/loan Net worth as on 31.03.2015 M/s Shreshth Builders Pvt Ltd 40,00,000 526,796,333 Vinjyoti Tracom Pvt Ltd 1,02,00,000 5,85,12,192 Govind Tie Up Pvt Ltd 35,00,000 105,063,030 6.2 Regarding the addition of share application money of Rs.50,00,000/-, we find that the said received from two entities namely M/s Supreme Metal Trade Private Limited & M/s Eminent Sales Private Limited was received in the immediately preceding year. 6.3 We find that the ld. CIT(A) has in his order has elaborately discussed both the issues and concluded as under: “3.4 APPELLATE FINDING: In view of aforesaid submissions made by appellant it is observed that in respect of unsecured loan of Rs. 1,77,00,000/- i.e. Rs. 40 Lacs from M/s Shreshth Builders Pvt Ltd, 1,02,00,000/- from M/s Vinjyoti Tracom Pvt Ltd and Rs. 35,00,000/- from Govind Tie Up the AO made additions merely on the basis of information received from Internal Investigation wings of Income Tax Department without considering the various documents furnished by the appellant during assessment proceedings. It is evident that all the entities from which appellant availed loan during the period under consideration are Corporate entities duly Active as on date as per the MCA records, further having PAN and therefore duly identifiable, appellant has filed various documentary evidence in support of existence, genuineness and creditworthiness of parties such as Audited Financial Statement together with ITR for AY 2015-16, Master data, relevant extracts from bank statement of party, relevant extracts from bank statement of assessee confirming receipt of loan through proper banking channel, confirmation letter from party, registration certificate confirming company registered as NBFC with RBI, further the loans from all the three parties is duly repaid in subsequent years. Thus, the appellant has furnished all the necessary detail and documents to prove the identity of lender and genuineness of loan transaction of Rs. 1,77,00,000 further the loans are duly repaid in subsequent years, and therefore the addition of Rs. 1,77,00,000 is hereby deleted. Therefore, ground Nos. 2 & 3 of the appeal are allowed..” … 4.2. APPELLATE FINDING: In view of aforesaid submissions made by appellant it is observed that in respect of alleged bogus share application Printed from counselvise.com ITA No.2111/Kol/2024 Sanatan Merchants Pvt. Ltd 6 money of Rs. 50,00,000/- received from Supreme Metal Trade Private Limited & Eminent Sales Private Limited, the AO made additions merely on the basis of presumption without considering the various documents furnished by the appellant during assessment proceedings. It is clearly evident that all the share application money received by the appellant were actually received in immediately preceding previous year whereas the AO wrongly added back the amount in the assessment year under consideration. Further, all the entities from which appellant received during the immediately preceding previous year are Corporate entities duly Active as on date as per the MCA records, further having PAN and therefore duly identifiable, appellant has filed various documentary evidence in support of existence, genuineness and creditworthiness of parties such as Audited Financial Statement together with ITR for AY 2015-16, Master data, copy of Form No. PAS-3 filed with Ministry of Corporate affairs clearly shows the detail of the said entities as allottee of the share capital, relevant extracts from bank statement of party, relevant extracts from bank statement of assessee confirming receipt of loan through proper banking channel, confirmation letter from party, further parties duly responded to notice u/s 133(6) of the Act. Thus the appellant has furnished all the necessary detail and documents to prove the genuineness of impugned transaction which had taken place in immediately preceding previous year and not during AY 2015-16 and accordingly, the amount of share application money cannot be added to the total income of the appellant in A.Y 2015- 16 legally. Therefore, ground Nos. 5, 6 & 7 of the appeal are allowed.” 6.4 Going over the discussion made above, we find that the ld. CIT(A) has elaborately discussed everything and thereafter, passed the impugned order in favour of the assessee. We, therefore, do not find any infirmity in the order of the ld. CIT(A) and the same is upheld. Accordingly, the appeal of the revenue is dismissed. 7. In the result, the appeal of the revenue is dismissed. Kolkata, the 19th November, 2025. Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member Dated: 19.11.2025. RS Printed from counselvise.com ITA No.2111/Kol/2024 Sanatan Merchants Pvt. Ltd 7 Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches Printed from counselvise.com "