AVINASH COMMERCIAL PRIVATE LIMITED,KOLKATA V. INCOME TAX OFFICER, WARD 1.1, KOLKATA, KOLKATA

CO 55/KOL/2025

AI Insights

The case involves Avinash Commercial Private Limited, which was assessed for unexplained investments amounting to Rs 1,91,00,000 under section 69 of the Income Tax Act, 1961. The Income Tax Officer (ITO) reopened the assessment and added this amount to the assessee's income, suspecting it to be a shell company used for laundering unaccounted income. The Ld. CIT(A) later deleted this addition, leading to an appeal by the Revenue. The Tribunal found that the assessee failed to explain the source of the investment, despite it being recorded in the books, and thus set aside the CIT(A)'s order for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775735 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-09-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 23-07-2025
• Other Referred Cases: Principal Commissioner of Income Tax (Central-2) Kolkata vs BST Infratech Limited, Principal Commissioner of Income-tax v. Swati Bajaj
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Reassessment proceedings; Unexplained investment; Income from undisclosed sources; Onus to prove; Principle of natural justice; Reason to believe; Penny stocks
• Section: 148; 143(3); 142(1); 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA Before SONJOY SARMA, JUDICIAL MEMBER & SRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Income Tax Officer, Ward-1(1), Kolkata Vs. Avinash Commercial Private Limited (Appellant) (Respondent) PAN: AAHCA4631R C.O. No.: 55/KOL/2025 Arising out of I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited Vs. Income Tax Officer, Ward- 1(1), Kolkata (Appellant) (Respondent) PAN: AAHCA4631R Appearances: Department represented by : Monalisha Pal Mukherjee, JCIT, Sr. DR Assessee represented by : Nihar Ranjan Biswal, C.A. Date of concluding the hearing : 30-July-2025 Date of pronouncing the order : 08-September-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: The appeal filed by the Revenue and the Cross Objections filed by the assessee are against the order of the Ld. Commissioner of Income Tax (Appeals)- NFAC, Delhi [hereinafter referred to as ‘the Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2012-13 dated 20.03.2024, which has been passed Printed from counselvise.com Page | 2 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. against the assessment order u/s 143(3) r.w.s. 147 of the Act, dated 14.12.2019. 1.1. The Registry has informed that the appeal filed by the Revenue is barred by limitation by 60 days. An application seeking condonation of delay has been filed by the Revenue stating as under: “1. The Ld. CIT(A), NFAC, Delhi has passed order in Appeal No. ITBA/NFAC/S/250/2024-25/1062976705(1) dated 20.03.2024 through ITBA. 2. The order of the Ld. CIT(A) has neither been communicated to this stakeholder, nor any alert on passing the order by the Ld. CIT(A) has been sent through SMS or through e-mail or through any other mode by the Departmental system network to this stakeholder. 3. Order of the Ld. CIT(A)s are downloaded from the Departmental system on manual checking basis. During the period from December, 2023 to April, 2024 this stakeholder was under pressure of disposing time barring matter. For this reason and due to non-availability of sufficient system resources, the searching of appeal order in ITBA system could not be done on regular basis. 4. The appellant submits that there were sufficient causes for non- presenting the appeal within due time and the appeal may kindly be heard on merit for the interests of revenue.” 1.2. Considering the application for condonation of delay and the reasons stated therein, we are satisfied that the Revenue had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication. 2. The Revenue is in appeal before the Tribunal raising the following grounds of appeal: “1. That on the fact and circumstances of the case, the Ld. CIT(A), NFAC, erred in passing the order by deleting the amount Rs 1,91,00,000/- as unexplained investment u/s 69 without verifying the genuineness, creditworthiness and identity of the transactions. Printed from counselvise.com Page | 3 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. 2. That the decision of the Ld. CIT(A)(NFAC) Delhi is contrary to the judgment of the Hon'ble Division Bench, High Court at Calcutta in ITAT/67/2024 (IA No GA/2/2024) in the case of Principal Commissioner of Income Tax (Central-2) Kolkata vs BST Infratech Limited. 3. That the appellant craves for leave to add, delete, amend or modify or modify any grounds before or at the time of appellate proceedings.” 2.1. The assessee has filed Cross Objections before the Tribunal on the following grounds: “1. For that, on the facts and circumstance of the case, the Ld. AO erred in law by completing the assessment u/s 147/143(3) without independent application of mind, without having any fresh material and without having due consideration of law towards “reason to believe”. Therefore, passing the order u/s 143(3)/147 is beyond Jurisdiction and liable to be set aside. 2. For that, on the facts and circumstance of the case, the Ld. AO erred in law by completing the assessment u/s 143(3)/147 without issuing the notice u/s 143(2). Therefore, passing the order u/s 143(3)/147 is beyond Jurisdiction and liable to be set aside. 3. For that, on the facts and circumstance of the case, the Ld. AO has not supplied the reasons for re-assessment to the assessee. The Ld. AO erred in law by completing the assessment u/s 143(3)/147 without issuing the reasons to the assessee. Therefore, passing the order u/s 143(3)/147 is beyond Jurisdiction and liable to be set aside. 4. For that, on the facts and circumstance of the case, the Ld. A.O. has erred in law by issuing a notice u/s 148 beyond the time limit as specified u/s 149. Therefore, issue of notice is beyond jurisdiction. Therefore, issue of notice u/s 148 is liable to be null and void. 5. For that, on the facts and circumstance of the case, the Ld. AO erred in law by completing the assessment u/s 143(3)/147 without following the faceless assessment scheme as required u/s 151A. Therefore, issue of notice u/s 148 and passing the order u/s 143(3)/147 is beyond Jurisdiction and liable to be set aside. 6. For that, on the facts and circumstance of the case, the Ld. Ld. ITO, Ward- 1 (3) erred in law in completing the assessment u/s 143(3)/147 when notice u/s 148 was issued by the Ld. ITO, Ward-1(1), Kolkata. Therefore, issue of notice u/s 148 is beyond Jurisdiction and liable to be set aside. 7. For that, the appellant may add, alter, amend any other grounds of appeal at time of hearing.” Printed from counselvise.com Page | 4 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. 3. Brief facts of the case are that the assessee company filed the return of income showing total income of ₹0 which was duly processed u/s 143(1) of the Act by the CPC, Bengaluru. In the Financial Year 2011-12 relevant to the assessment year 2012-13, the assessee had acquired 43,800 equity shares of Excellency Resorts Private Limited for consideration of ₹2,19,00,000/-. Information was received from the DDIT (Inv.), Unit-3(4), Kolkata regarding the assessee’s bank account wherein it was found that there were large value non-cash transactions during the FY 2011-12. During the spot enquiry at the registered address, the said company could not be traced. The Assessing Officer (hereinafter referred to as Ld. 'AO'), noted that the assessee company was nothing but a shell company which was incorporated and used for laundering unaccounted income and providing accommodation entry in lieu of commission to various beneficiaries. The Ld. AO found that M/s. Avinash Commercial Pvt. Ltd. had given a sum of ₹1,91,00,000/- to M/s. Excellency Resorts Pvt. Ltd., the source of which remained unexplained. Accordingly, the case was reopened and notice u/s 148 of the Act was issued and served to the assessee. The assessee company complied with the statutory notices but failed to produce the necessary documents to substantiate the receipt of ₹1,91,00,000/-. Therefore, the Ld. AO added the same to the total income of the assessee u/s 69 of the Act and assessed the total income of the assessee at ₹1,91,00,000/- u/s 143(3) r.w.s. 147 of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who, vide order dated 20.03.2024, allowed the appeal of the assessee by holding as under: “3.1 There are eight grounds of appeal in this case. Ground Nos. 1 & 8 are general in nature; hence no specific finding has not been given in case of those grounds. Ground Nos. 2, 3 & 4 pertains to validity of reassessment proceedings, inter alia, on the basis of non-supply of reasons for reopening Printed from counselvise.com Page | 5 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. of assessment, non-issue of notice u/s 143(2) of the Act and the assessment is barred by limitation. Ground Nos. 5 & 6 relates to the merits of addition of Rs. 1,91.00,000/- u/s 69 of the Act. Ground No.7 pertains to non-allowing of loss of Rs. 27,036/- by the Assessing Officer. 3.2 I will discuss the merits of the addition first and then will come to other grounds. The AO has made the addition u/s 69 of the Act which deals with unexplained investment. For the sake of ready reference, the said section has been reproduced below: - Section 69 “Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any. maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not. in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year\". 3.3 In other words the essential conditions for invoking the said section 69 are the following: • The assessee has made investment in the financial year immediately preceding the assessment year. • Also, such investments are not recorded in the books of accounts, if any, maintained by him for any source of income. • Either the assessee is unable to furnish explanation about the nature and source of the investments or the AO is of the opinion that the explanation offered by him is not satisfactory. If all the above conditions are satisfied, then the value of such investments may be deemed to be the income of the assessee of the financial year in which he has made the investments. 3.4 In the case at hand the second condition is not applicable. The investment has been recorded in the books of the assessee. The AO was not satisfied regarding the source of the investment made but the investment is recorded in the books of the assessee. There is no finding to the contrary that the investment is not recorded in the books. Hence the rigours of section 69 of the Act shall not be applicable in the case. Hence the addition deserves to be deleted. 3.5 Accordingly, Ground Nos. 5 & 6 are allowed. Since the addition has been deleted on merit, I have not given any specific findings relating to Ground Nos. 2, 3 & 4. Printed from counselvise.com Page | 6 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. 3.6 Ground No. 7 pertains to not allowing the credit of losses of Rs. 27,036/- . There is no reason given by the AO in the assessment order for not allowing the losses. Since the genuineness of the expenses made has not been questioned by the AO, I am of the opinion that s/he should have allowed the losses. Hence, the AO is directed to allow the losses claimed. Accordingly, this ground of appeal is allowed. 4. In the result, the appeal is allowed.” 4. Aggrieved with the order of the Ld. CIT(A), the Revenue has filed the appeal before the Tribunal. 5. Rival contentions were heard and the submissions made have been examined. 6. The Ld. DR submitted that no compliance was made before the Ld. AO and this was countered by the Ld. AR by saying that the assessee had changed the address and the changed address was not informed to the Ld. AO, therefore, the reply could not be filed. However, a perusal of the order of the Ld. CIT(A) shows that he has discussed the essential conditions for invoking section 69 of the Act and has granted relief merely because the transaction was recorded in the books of account, even though the source of the same was not explained. Such an approach is not correct. It was incumbent upon the assessee to furnish evidence for the source and the identity of the grater from whom money was received and to establish the genuineness of the transaction as even though the transaction was recorded in the books of account but the source of money advanced was not explained. The Ld. DR requested that the order of the Ld. CIT(A) may be set aside as despite the assessee not filing any details before the Ld. AO nor any such justification being made as regards the source of investment even before the Ld. CIT(A), the appeal was allowed. Printed from counselvise.com Page | 7 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. 7. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). We find merit in the argument of the Ld. DR that the genuineness of the transaction could not be explained. Even though the investment was recorded in the books of account, but the source of investment was not known and it was incumbent upon the assessee explain the same. Merely because a transaction is recorded in the books of account does not explain the source of the same nor does not become a genuine transaction. Moreover, the Ld. CIT(A), merely has merely reproduced the submission of the assessee and granted relief without giving his reasons for the relief. The assessee is stated to be a shell company and, therefore, it was incumbent upon it to explain the source of the money received which was subsequently invested. It has been held in the case of Principal Commissioner of Income-tax v. Swati Bajaj [2022] 139 taxmann.com 352 (Calcutta) as under: • “The report submitted by the Investigation department could not be thrown out on the grounds urged on behalf of the assessees. The assessees have not been shown to be prejudiced on account of non- furnishing of the investigation report or non-production of the persons for cross examination as the assessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue, the statements do not indict the assessee. That apart, the investigation has commenced targeting the individuals who dealt with the penny stocks and after examining the modus seeing the cash trail the report has been submitted recommending the same to be placed before the DGIT (Investigation) of all the States of the country. It is thereafter the concerned Assessing Officers have been informed to consider as to the bona fideness and genuineness of the claims of LTCG/LTCL of the respective assessees qua the findings which emanated during the investigation conducted on the individuals who dealt with the penny stocks. Therefore, the assessments have commenced by the Assessing Officers calling upon the assessee to explain the genuineness of the claim of LTCG/LTCL made by them. In all the assessment orders, substantial portion of the investigation report Printed from counselvise.com Page | 8 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. has been noted in full. A careful reading of the same would show that the assessee has not been named in the report. If such be the case, unless and until the assessee shows and proves that she/he was prejudiced on account of such report/statement mere mentioning that non-furnishing of the report or non-availability of the person for cross examination cannot vitiate the proceedings. The assessees have miserably failed to prove the test of prejudice or that the test of fair hearing has not been satisfied in their individual cases. In all the cases, the assessees have been issued notices under sections 143(2) and 142(1) they have been directed to furnish the documents, the assessee have complied with the directions, appeared before the Assessing Officer and in many cases represented by Advocates/Chartered Accountants, elaborate legal submissions have been made both oral and in writing and thereafter the assessments have been completed. Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the inquiry which is being conducted by the Assessing Officer in scrutiny assessment under section 143(3). The assessee were conscious of the fact that they have not been named in the report, therefore made a vague and bold statement that the non- furnishing of report would vitiate the proceedings. Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public domain as has been downloaded and produced by the revenue, nothing prevented the assessees who are ably defended by the Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessees have not made out any case. [Para 65] • To prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrips of very little known companies. Furthermore, in all the cases, there were minimum of two brokers who Printed from counselvise.com Page | 9 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, the methodology adopted by the revenue cannot be faulted. [Para 69] • A holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, the court cannot loose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. The revenue was not privy to such peculiar trading activities as they appear to have been done through the various stock exchanges and it is only when the assessees made claim for a LTCG/STCL, the investigation commenced. As pointed out the investigation did not commence from the assessee but had commenced from the companies and the persons who were involved in the trading of the shares of these companies which are all classified as penny stocks companies. Therefore, the argument of the assessee that the copy of the investigation report has not been furnished, the persons from whom statements have been recorded have not been produced for cross examination are all contention which has to necessarily fail. To reiterate, the assessee was not named in the report and when the assessee makes the claim for exemption the onus of proof is on the assessee to prove the genuinity. Unfortunately, the assessees have been harping upon the transactions done by them and by relying upon the documents in their hands to contend that the transactions done were genuine. Unfortunately, the test of genuinity needs to be established otherwise, the assessees are lawfully bound to prove the huge LTCG claims to be genuine. In other words if there is information and data available of unreasonable rise in the price of the shares of these penny stock companies over a short period of time of little more than one year, the genuinity of such steep rise in the prices of shares needs to be established and the onus is on the assessee to do so as mandated in section 68. Thus, the assessees cannot be permitted to contend that the assessments were based on surmises and conjectures or presumptions or assumptions. The assessee does not and cannot dispute the fact that the shares of the companies which they Printed from counselvise.com Page | 10 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. have dealt with were insignificant in value prior to their trading. If such is the situation, it is the assessee who has to establish that the price rise was genuine and consequently they are entitled to claim LTCG on their transaction. Until and unless the initial burden cast upon the assessee is discharged, the onus does not shift to the revenue to prove otherwise. It is incorrect to argue that the assessees have been called upon to prove the negative in fact, it is the assessees duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity. The assessees cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. The assessees have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of the companies whose shares the assessee has dealt with, the genuineness of the price rise which is undoubtedly alarming that to within a short span of time. [Para 73] • While it may be true that assessees could have been regular investors, investors could or could not have been privy to the information or modus adopted. What is important is that it is the assessee who has to prove the claim to be genuine in terms of section 68. Therefore, the assessee cannot escape from the burden cast upon him and unfortunately in these cases the burden is heavy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time and more importantly after a period of 17 to 22 months, thereafter has been a steep fall which has led to huge claims of STCL. Therefore, unless and until the assessee discharges such burden of proof, the addition made by the Assessing Officer cannot be faulted. [Para 75]” 8. Since the assessee could not prove the genuineness of the transactions nor the source of money received, we do not agree with the view of the Ld. CIT(A) in deleting the addition. Therefore, in the interest of justice and fair play, we set aside the order of the Ld. CIT(A) and remit the appeal to him to be decided afresh, who shall allow an opportunity of being heard to the assessee and also grant an opportunity of representing the case and be heard to the Ld. AO as per rule 46A of the Printed from counselvise.com Page | 11 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. Income Tax Rules, 1962, if required, and thereby pass an order in accordance with law. For statistical purposes, the appeal of the Revenue is allowed. 8. In the result, the appeal of the Revenue is allowed for statistical purposes. 9. As regards the cross objections filed by the assessee, since the assessee did not file the required documents before the Ld. AO and the objections filed before him were duly addressed and no further legal remedy appears to have been taken by the assessee on the rejection of the objections by the Ld. AO, nor the Ld. AR could not establish as to how the cross objections are sustainable, therefore, they are liable to be dismissed. However, as the Revenue’s appeal is allowed and the order of the Ld. CIT(A) has been set aside to be done afresh, the assessee shall be at liberty to raise all these objections in the course of the appeal before the Ld. CIT(A). Hence, the cross objections filed are partly allowed for statistical purposes. 10. In the result, the appeal of the revenue is allowed while the cross objections of the assessee are partly allowed for statistical purposes. Order pronounced in the open Court on 8th September, 2025. Sd/- Sd/- [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 08.09.2025 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 12 I.T.A. No.: 1603/KOL/2024 Assessment Year: 2012-13 Avinash Commercial Private Limited. Copy of the order forwarded to: 1. Income Tax Officer, Ward-1(1), Kolkata. 2. Avinash Commercial Private Limited, P-22, Ground Floor, Swallow Lane, Kolkata, West Bengal, 700001. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Printed from counselvise.com "