DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), KOLKATA, KOLKATA V. AXIS OVERSEAS LIMITED, KOLKATA

ITA 2425/KOL/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, CC 1(1), Kolkata as the appellant and Axis Overseas Limited as the respondent. The primary issues in the appeal were the deletion of additions made by the AO regarding unsecured loans, purchases of raw jute, and notional interest on advances. The CIT (A) had earlier allowed the appeals of the assessee, which the Revenue challenged. The Tribunal examined the evidence, including the responses to notices under section 133(6) of the Act, and found that the CIT (A)'s decisions were well-founded and supported by judicial precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 790595 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 29-11-2024
• Other Referred Cases: PCIT-9, Kolkata vs. M/s Sreeleathers, Principal Commissioner of Income Tax vs. Overtop Marketing (P.) Ltd., Greensaphire Infratech (P.) Ltd. vs. Income-tax Officer, Amar Natvarlal Shah vs. Asstt. CIT, Pranav Vikas (India) Ltd. vs. Asstt. CIT Circle 14(1), Morvi Industries Ltd. vs. CIT (Central), Lal Mohan Krishna Lal Paul vs. CIT, Anil Kumar Singh vs. CIT, Hi-Tech Residency (P.) Ltd. vs. Principal Commissioner of Income Tax-4, Tulsyan and Sons (P.) Ltd. vs. Principal Commissioner of Income-tax Central 1, Gunny Dealers Ltd. vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.N. BARNWAL
• Assessee Lawyers: SIDDHARTH AGARWAL
• Keywords: Question of law; Unexplained cash credit; Bogus purchase; Onus to prove; Earning of tax free income; Loose papers; Assessment record; Notional interest; Deemed to accrue or arise in india; Rule 8D; Bogus
• Section: 271(1)(c); 68; 133(6); 69C; 40A(3); 14A; 133A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.2425/KOL/2024 (Assessment Year: 2013-14) Dy. Commissioner of Income Tax, CC 1(1), Kolkata Aaykar Bhawan Poorva, 3rd Floor, Kolkata-700107, West Bengal Vs. Axis Overseas Limited 21A, Shakespeare Sarani, Kolkata-700107, West Bengal (Appellant) (Respondent) PAN No. AAGCA7497L Assessee by : Shri Siddharth Agarwal, AR Revenue by : Shri P.N. Barnwal, DR Date of hearing: 13.11.2025 Date of pronouncement: 03.12.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-20(hereinafter referred to as the “Ld. CIT(A)”] dated 14.08.2024 for the AY 2013-14. 2. At the outset, we observe from the appeal folder that there is a delay of 47 days in filing the appeal by the department and in support of this a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay may be condoned. The Printed from counselvise.com Page | 2 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 ld. AR, on the other hand, did not oppose the condonation of delay. Considering the reasons cited before us, we are inclined to condone the delay and admit the appeal for hearing as the reasons cited are bonafide and sufficient. 3. The issue raised in ground no.1 is deletion of addition of ₹8,07,00,000/- by the learned CIT (A) as made by the learned AO on account of unsecured loans taken by the assessee during the year. 3.1. The facts in brief are that the learned AO on perusal of the balance sheet observed that the assessee company has shown unsecured loans of ₹31.73 crores from various companies. The learned AO noted that the assessee during the year has also taken loans from two parties namely; Rubycam Vyapar Pvt. Ltd. amounting to ₹6.50 crores and M/s Limelight Dealers Pvt. Ltd. amounting to ₹2.20 crores.The learned AO noted that though the assessee filed the evidences qua these loan creditors, however, the inspector deputed to verify the credentials of the loan creditors but could not locate the whereabouts of these companies. Accordingly, the show cause notice is given on 18.03.2016 to the assessee and the assessee replied on 22.03.2016, submitting that these companies are not bogus and furnished the new addresses of the said companies. The AO issued notices u/s 133(6) of the Act to the loan creditors which were duly served. The said loan creditors also responded to these notices. The learned AO noted thereafter that on the basis of documents submitted by these parties, it was observed that they have not advanced any money to the assessee as is apparent from the balance sheets and accordingly, treated his loans as bogus and added the Printed from counselvise.com Page | 3 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 same to the income of the assessee as unexplained cash credit u/s 68 of the Act. 3.2. In the appellate proceedings, the learned CIT (A) allowed the appeal of the assessee by observing and holding as under:- “4.3.2(a) I have carefully considered the facts of the case and the submission of the appellant. The AO in the assessment order has stated that the assessee has shown unsecured loan of Rs. 31.73 crore taken from various companies of Kolkata. As per the AO enquiries were conducted in the cases of two lender parties namely; Rubycam Vyapar Pvt. Ltd. who had given 6.50 crore and M/s Limelight Dealers Pvt. Ltd. who had given Rs. 2.20 crore of unsecured loan to the assessee. But, As per AO, notices sent u/s 133(6) of the Act were returned unserved. Further, enquiry were also conducted, through ITI, and the Income Tax Inspector did not locate the office premises of these companies. The AO, further stated that another notices u/s 133(6) of the Act were issued to these two concerns to verify the transaction related to purchase of jute with the assessee company and this time the notices were duly received and submissions were made by the above companies on 21.03.2016. The AO has mentioned that on perusal of the documents for the F.Y. 2012-13 of these companies, it is found that they have not shown any loan to Axis Overseas Ltd. in their audited balance sheet for the year. So the AO held the said loan as non-genuine and bogus. Therefore, the addition of Rs. (6,50,00,000 + 2,20,00,000 =8,70,00,000) were made to the total income u/s 68 of the Act. 4.3.2(b) However, the appellant in his submission has stated that although the AO has stated that enquiry were conducted by the ITI in the assessment proceeding for the verification of addresses of the said two companies but on perusal of the order sheet of the assessment proceeding, no mention of any such enquiry report was found. The appellant has further stated that even from perusal of para 2.2 of the Assessment Order, it can be seen that request was made by the director of the company in his submission dated 22.03.2016 to the AO, to provide the opportunity to cross examine the inspector about the details of addresses where, notices u/s 133(6) were returned unserved. But the AO did not provide such opportunity and the request of the appellant was denied. Furthermore, details of the new addresses was also provided to the AO in the submission dated 22.03.2016. But no enquiry was conducted on the said addresses. 4.3.2(c) The appellant further stated that the AO has wrongly stated that both the parties have not shown any loan to the Axis Overseas Ltd. in their audited balance sheet. Whereas fact is that both the parties i.e. M/s Limelight Dealers Pvt. Ltd. and M/s Rubycam Vyapar Pvt. Ltd. have shown the transaction of loan with the assessee as their sundry debtors in their balance sheets. Further, the assessee has shown the said amount, part as unsecured loan and part as sundry creditors in the balance sheet. The details furnished by the appellant regarding the details shown in thebalance sheet of Printed from counselvise.com Page | 4 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 both the lender parties and in the balance sheet of the assessee company are as under:- • Justification based on factual position of the case: 4.3.2(d) The appellant has further stated that both the companies have confirmed the balances of the assessee. Further, with regard to the classification of sundry creditors partly as unsecured loan by the assessee company, the appellant has stated that it is quite obvious that both appears in the liability side of the balance sheet and mere act of switching of the same from current liability to unsecured loan account give rise to no income, much less undisclosed income. The appellant stated that these are merely the book entries and no new funds or any other assets have been introduced in the appellant’s accounts. Furthermore, the appellant has also contested the finding of the Assessing Officer that notices u/s 133(6) were not complied with by the parties. As per appellant, both the entities have made full compliance to the notices u/s 133(6) of the AO. This fact has been accepted by the AO in the Assessment Order itself. 4.3.2(e) Further, the appellant stated in its submission, that the assessee had furnished all the details relating to the transaction to the AO including the account confirmations from the parties. Not only that both the parties had replied to the notices Printed from counselvise.com Page | 5 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 of the AO issued u/s 133(6) of the Act. The Appellant has cited judgements of Hon’ble Calcutta High Court in the PCIT-9, Kolkata vs. M/s Sreeleathers wherein the Hon’ble Jurisdictional High Court has held as under:- “4. Before we examine the correctness of the order passed by the Tribunal and consider whether a substantial question of law arises for consideration in this appeal we need to take note of Section 68 of the Act. This provision deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The crucial words in the said provision are “assessee offers no explanation”. This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income Tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to Section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. In Srilekha Banerjee & Ors. Versus CIT 4, it was held that if the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source [CIT Versus Mohanakala (P) 5]. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds (Lal Mohan Krishna Lal Paul Versus CIT 6 and Anil Kumar Singh Versus CIT 7).” [2023] 148 taxmann.com 94 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income tax v. Overtop Marketing (P.) Ltd. 4.3.2(f) Therefore, In view of the above facts and considering the case relied upon by the appellant, I do not find merit in the addition made by the AO of Rs. 8,70,00,000/- u/s 68 of the Act. As apparent, while making the addition, the AO has only failed to point out any defect in the details furnished by the assessee. Besides this, he even failed to bring any adverse material on records to justify his claim, that the said transaction is bogus in nature. Further, as per the details furnished by the appellant, it is clear that the AO has acted on the wrong facts because both the lender companies had shown the said transactions with assessee in the accounts under the head “Sundry Debtors” and they have furnished the accounts confirmations as well. Hence, the Printed from counselvise.com Page | 6 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 additions made by the AO of Rs. 8,70,00,000/- is found without merit and therefore it is deleted.” 3.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has been purchasing. jute from these parties. Besides, the assessee has raised money by way of unsecured loans from these parties, the details whereof are given by the learned CIT (A) in the appellate order as extracted hereinabove. We note that the assessee has furnished all the evidences qua these parties before the AO. Initially there was some mistake in the addresses of these parties so the notices issued u/s 133(6) of the Act could not be served. The assessee furnished the correct addresses to the AO qua the loan creditors later on. The learned AO again issued notices u/s 133(6) of the Act, which were served and duly replied by these parties. The learned AO noted on the basis of balance sheets that the loans taken by the assessee from these parties were not shown in their balance sheets by them. However, on the other hand, the learned CIT(A) has recorded a clear-cut finding that the assessee was purchasing jute from these parties besides taking unsecured loans. The ld CIT(A) recorded a finding in para 4.3.2(c) in the appellate order that the amount of loans taken from these parties were shown under the head of sundry debtors by the loan creditors whereas the assessee has shown the amount of unsecured loan and sundry creditors separately. The learned CIT (A) after relying on the decision of PCIT vs. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta)/[2022] 448 ITR 332 (Calcutta)[14-07-2022], allowed the appeal of the assessee. After perusing the order of learned CIT (A) and the facts on record, we are inclined to hold that the learned CIT (A) has Printed from counselvise.com Page | 7 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 passed a very reasoned order which does not require any interference at our end. Accordingly, we upheld the same on this issue by dismissing the ground no.1 of the Revenue’s appeal. 4. The issue raised in ground no.2 is deletion of addition of ₹3,13,83,298/- being 10% of the total purchases. 4.1. The facts in brief are that during the assessment proceedings, the learned AO observed from the reply received from M/s Rubycam Vyapar Pvt. Ltd. and M/s Limelight Dealers Pvt. Ltd. that assessee had purchased raw jute from these parties and noted that assessee has not paid any transportation cost. Accordingly, a show cause notice was given to the assessee to establish the genuineness of sales and purchases of Jute which was replied by the assessee. The learned AO observed that the assessee could not prove the genuineness of the purchases made with the documentary evidences like transportation bills, challans, gate passes, bills and vouchers and therefore, these purchases from the above parties were non- genuine. The learned AO also noted that the assessee has purchased jute amounting to ₹15,37,85,137/-, from M/s Rubycam Vyapar Pvt. Ltd. and ₹50,97,47,245/- from M/s Limelight Dealers Pvt. Ltd. The learned AO estimated the income by applying GP @ 10% on the said purchases thereby making an addition of ₹3,13,53,298/- u/s 69C of the Act read with section 115BB of the Act. 4.2. The learned CIT (A) in the appellate proceedings allowed the appeal of the assessee by observing and holding as under:- “4.2.2(a) I have duly considered the facts of the case and the submission of the appellant. The AO in the assessment order has stated that the Assessee Company has Printed from counselvise.com Page | 8 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 made the substantial investment in shares amounting to Rs. 1,89,40,836/- in the current year, relevant to the A.Y. 2013-14. Therefore, the AO calculated the amount of expenditure non-allowable u/s 14A Read with Rule 8D of Rs. 2,42,335/- and made the addition to the total income. The appellant in his submission has stated that the Hon’ble Supreme Court in the case of PCIT-2 v. Caraf Builders and Construction Pvt. Ltd. (2019) 112 taxmann.com 322 (SC) has held that disallowances u/s 14A cannot exceed the exempt income of relevant year. The appellant has stated that since the assessee company has earned exempt income to the tune of Rs. 8,774/- in the relevant year. Therefore, the addition made on account of disallowances u/s 14A is to be restricted to Rs. 8,774/- only. 4.2.2(b) I find merit in the submission of the appellant and relying on the judgement of Hon’ble Supreme Court as cited above and other cases mentioned in the submission of the appellant. The disallowance u/s 14A of the Act is restricted to Rs. 8,774/-. Hence, the assessee gets relief of Rs. 2,33,561/- on this ground. 1. Ground No 8: Addition made u/s 68 as unexplained cash credit in respect to Loan amounting to Rs 8,70,00,000/-: 2. The appellant made following submission on ground no. 8:- “Justification based on assessment records and order sheet: 1. The very basis of the addition rest upon the inspector report. The Ld A.O has laid immense emphasis on the inspector report however there is no mention of such report anywhere in the order sheet maintained by the A.O. The additions were made on the basis of the departmental inspector being deputed for verification of address. Now this false allegation is very much evident from Para 2.2 where in spite of assessee’s request to cross examine the inspector, the Ld AO denied the request and additions were made. This shows no enquiry through inspector was conducted and hence there was no inspector report available on records. This is further supported by the certified copy of order sheet obtained by the assessee wherein there is no noting of any inspector report having been obtained by Ld AO. Hence the additions are merely result of surmises and prenotion of Ld. AO supported by wrong findings and allegations taking help of inspector report which was never obtained. 1. While obtaining the certified copy of assessment folder, on going through the records obtained it was seen that one Inspector report dt 01st March 2016 was kept in the file. It is pertinent to note that Ld AO in his order passed dt 31.03.2016 has stated that due to assessment being time barring, cross examination of Inspector could not be provided. If the Inspector report was actually available on 01.03.2016, the Ld AO had enough time to provide the cross-examination opportunity to the assessee. Further there was no mention of this Inspector’s report in the certified copy of Order Sheet which is maintained during the course of assessment by Ld AO. Hence the veracity of Inspector report is very much doubtful and it cannot be the basis of making additions inspite of the fact that 133(6) compliance was done by the alleged parties. Printed from counselvise.com Page | 9 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 • Justification based on factual position of the case: 1. The assessee M/s Axis Overseas Limited has shown creditors balances partly under loan and partly as sundry creditor whereas the said entities have shown the same as sundry debtor balance in their respective books of accounts. Both the companies have confirmed the balances of the assessee. With regard to the classification of Sundry Creditors partly as Unsecured Loan by assessee company, it is quite obvious that both appears on the liability side of the balance sheet and the mere act of switching of the same from current liabilities to unsecured loan cannot give rise to income, much less undisclosed income. These are merely the book entries and no new funds or any other asset has been introduced in the appellant's accounts which could be considered an attempt for legalizing its undisclosed income. 2. For the purpose of invoking provisions of Sec 68, classification of assets or liabilities into other sub heads does not hold any relevance. Sec 68 is invoked where any sum is found credited and assessee is not able to substantiate the transaction genuineness. The Ld AO in instant case without understanding the nature of transactions has made additions u/s 68 as cash credit. Sec 68 clearly states as under – Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Printed from counselvise.com Page | 10 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: 1. The Ld. AO has made false allegations against the assessee by doubting the genuineness of alleged entities even though full compliance to Notice issued u/s 133(6) were made by both the entities. The facts were also accepted by the Ld AO in the assessment order. Merely different classification of a transaction by different entities cannot lead to invoking provisions of Sec 68 of the Act. 2. The only reliance placed by Ld AO in making the said additions u/s 68 was on departmental inspector report deputed by Ld AO to verify the existence of said entities, the veracity of which is doubtful as already explained above. This shows the malicious intention of Ld AO wherein he placed his entire reliance in disbelieving the transactions and relying on the suspicious Inspector report which never existed and was result of Ld AO own imagination. 3. The assessee has duly discharged its initial onus cast upon it by proving the identity of the loan creditors. Further the loan lenders have also confirmed the said transactions through compliance to Notice issued u/s 133(6). The only issue was classification of balance into various sub-heads which the Ld AO unable to understand and made arbitrary additions based on whims and surmises. 1. The Ld. AO has duly analyzed the audited financials but kept mum on the ledgersubmitted by said parties which clearly evidences the transactions shown by assessee in the respective books of alleged entities. The Ld AO while verifying has to strictly consider the ledger which reflects the alleged transactions with assessee. But Ld AO failed to do so and made additions simply on assumption and stating false facts of Inspector report and verification. Copy of acknowledgment of submission made by these entities are enclosed herewith for your perusal. [Marked Annexure-3] 2. Without disputing the ledger submitted by the said entities in respect to transactions undertaken with assessee company, Ld AO remarked that identity, genuineness and creditworthiness of loan creditor is not proved. But the Ld AO failed to demonstrate how the identity, genuineness and creditworthiness of said entities are not proved. 3. It is pertinent to note that both the entities have duly accepted transactions with assessee company. In their respective submissions made, they have endorsed the Printed from counselvise.com Page | 11 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 copy of ledger of assessee in their books of accounts evidencing the identical balance shown by assessee. The Ld AO simply cannot ignore the evidences without bringing any defect into record that the transactions were not genuine based on his own whims. • Reliance is placed on the following judicial rulings: • [2018] 96 taxmann.com 403 (SC) SUPREME COURT OF INDIA Principal Commissioner of Income Tax-4 v. Hi-Tech Residency (P.) Ltd. High Court deleted said addition holding that assessee had discharged its onus of establishing identity, genuineness and creditworthiness of both investors as well as lenders SLP against said order was to be dismissed - Held, yes Jurisdictional HC in case of PRINCIPAL COMMISSIONER OF INCOME TAX – 9, KOLKATA VERSUS M/S. SREELEATHERS wherein Calcutta High Court has dismissed the appeal of Revenue on the ground that if all limbs of Sec 68 are fulfilled and proper compliances are made by assessee, then no additions u/s 68 can be made by Ld AO. Para 4 of the said order is reproduced below: 4. Before we examine the correctness of the order passed by the Tribunal and consider whether a substantial question of law arises for consideration in this appeal we need to take note of Section 68 of the Act. This provision deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The crucial words in the said provision are “assessee offers no explanation”. This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income Tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to Section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. In Srilekha Banerjee & Ors. Versus CIT 4, it was held that if the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source [CIT Versus Mohanakala (P) 5]. The explanation given by the Printed from counselvise.com Page | 12 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds (Lal Mohan Krishna Lal Paul Versus CIT 6 and Anil Kumar Singh Versus CIT 7).” [2023] 148 taxmann.com 94 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income tax v. Overtop Marketing (P.) Ltd. Where assessee-company had discharged onus to prove identity, creditworthiness and genuineness of its loan transactions with various companies by providing income-tax acknowledgements, audited accounts, etc. and some lender companies had also replied to notice issued on them under section 133(6), since Assessing Officer failed to discharge his onus to prove them wrong, impugned additions made under section68 treating loan amount as unexplained cash credit was to be deleted [2022] 140 taxmann.com 308 (Amritsar - Trib.) IN THE ITAT AMRITSAR BENCH Greensaphire Infratech (P.) Ltd. v. Income-tax Officer Whether amendment in section68 by Finance Act, 2012 with effect from 1-4-2013 is prospective in nature and thus applicable from assessment year 2013-14 - Held, yes - Assessee-company during year increased its share capital by way of share capital and share premium - Assessing Officer not being satisfied about identity and genuineness of allottees of shares of assessee deemed share capital and share premium as income of assessee by invoking provisions of section68 and added same to taxable income - It was noted that share capital and share premium are on capital account and could not be considered as income of assessee - Whether since identity of subscribers to share capital stood established, addition as made by Assessing Officer under section 68 deserved to be deleted - Held, yes” 4.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee purchased raw Jute from two parties namely Rubycam Vyapar Pvt. Ltd. and M/s Limelight Dealers Pvt. Ltd besides taking unsecured loans from them amounting to ₹6.50 crore and ₹2.20 crore respectively. The learned AO made the addition on the ground that neither the suppliers nor the assessee provided the copies of transportation bills, challans, Gate passes, bills and vouchers etc. Accordingly, the AO held that the purchases made from these parties aggregate to ₹31,35,32,980/- were non-genuine and added 10% of the said purchases u/s 69C of the Act. During the appellate proceedings, the learned CIT (A) noted Printed from counselvise.com Page | 13 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 that the purchases were not bogus as the learned AO has not doubted the sales and considered the same as genuine. The learned CIT (A) observed that if the purchases are not genuine then the corresponding sales cannot be genuine. The learned CIT (A) relied on the decision of Hon'ble Supreme Court in case of Principal Commissioner of Income-tax Central 1 vs. Tulsyan and Sons (P.) Ltd. [2025] 174 taxmann.com 37 (Calcutta)[16-04-2025]. The learned CIT (A) accordingly, held that the purchases from these parties are genuine and the AO has failed to bring any material on record to justify the said estimation. Accordingly, we fully agree with the conclusion drawn by the learned CIT (A) and consequently uphold the decision of learned CIT (A) on this issue. The ground no.2 of Revenue’s appeal is dismissed. 5. The issue raised in ground no.3 is against the deletion of addition of ₹9,20,00,000/- by the learned CIT (A) as made by the learned AO on account of share and securities of unlisted companies. 5.1. The learned AO during the course of assessment proceedings observed that the assessee has sold its current investments comprising share/ securities of unlisted companies to different entities. Accordingly, the assessee was called upon to explain this sale of securities and also show caused to as to why the same should not be added u/s 68 of the Act. The assessee replied on 30.06.2016, by furnishing the details of purchases and their balance sheets, copies of ITRs etc. bills etc. The learned AO noted that the purchasers of shares/ securities of these unlisted companies from the assessee did not show these purchases in the Profit and Loss Printed from counselvise.com Page | 14 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 account and accordingly, held these sales to be bogus. The assessee also provided the names, addresses of the purchasers and amount of shares sold to them alongwith details of sales consideration. The learned AO issued notices u/s 133(6) of the Act to these companies but most of the parties did not reply and were returned back. Finally, the amount was added u/s 68 of the Act to the income of the assessee. 5.2. In the appellate proceedings, the learned CIT (A) deleted the addition after taking into account the reply/ submission of the assessee. The learned CIT (A) noted that in fact sales of investment were made to the tune of ₹4,70,00,000/- and the learned AO has wrongly taken the same as ₹9,20,00,000/-. The learned CIT (A) further noted that the purchasers of these shares of unlisted private companies were accepted by the department in the preceding assessment years and the learned AO has failed to prove on record as to how the purchase parties are not genuine. With these observations, the learned CIT (A) deleted the addition. 5.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee during the year has sold certain shares / securities in unlisted companies to various parties. The assessee during the course of hearing before the learned AO as well as before the learned CIT (A) provided the names, addresses, the shares sold, amount realized and received through banking channel. We note that the notice u/s 133(6) of the Act were not responded by these parties but the facts remains that these investments were purchased by the assessee in the earlier Printed from counselvise.com Page | 15 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 assessment years and were accepted by the Revenue. In our opinion, when the investments were accepted in the preceding assessment years, the same cannot be doubted when these were sold in the current assessment year. The case of the assessee find support from the decision of Principal Commissioner of Income-tax Central 1 vs. Tulsyan and Sons (P.) Ltd. [2025] 174 taxmann.com 37 (Calcutta)[16-04-2025]. The Hon'ble High Court while deciding the issue 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.” Printed from counselvise.com Page | 16 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 5.4. We therefore respectfully following the ratio laid down by the Hon'ble High Court uphold the order of learned CIT (A) on this issue. Hence the ground no.3 of the Revenue’s appeal is dismissed. 6. The issue raised in ground no.4 is against the deletion of addition of ₹82,00,861/- as made by the learned AO u/s40A(3) of the Act. 6.1. The facts in brief are that the survey u/s 133A of the Act was conducted on the premises of the assessee during which incriminating documents with ID marks AOL/1 to AOL/15 were impound. The learned AO observed from these documents that cash payments were made relating to purchases of raw jute by the assessee amounting to ₹82,00,861/- which were contained in this paper book and the vouchers did not contain the addresses of the sellers as well as details of transportations etc. According to the learned AO, the assessee could not reconcile the purchase bills with the regular books of account which prima facie showed that these are the bogus purchases having made of more than ₹20,000 in a single day to a single party in cash. Consequently, the learned AO made an addition of ₹82,00,861/- u/s 40A(3) of the Act. 6.2. In the appellate proceedings, the learned CIT (A) deleted the addition by observing and holding as under:- “4.7.2(a) I have duly considered the facts of the case and the submission of the appellant on this ground. Vide ground no. 12 the appellant has contested the decision of AO in making addition of Rs. 82,00,861/- u/s 40A(3) of the Act, on the basis of impounded document marked as AOL/08. 4.7.2(b) Further, regarding the addition of cash purchases of Rs. 82,00,861/- u/s 40A(3), the AO has stated in para 5.2 of the Assessment Order that as per the impounded documents marked as AOL/08, it was found that the assessee has made a purchase of Raw Jute in the cash exceeding Rs. 20,000/- in a day to a single party. Printed from counselvise.com Page | 17 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 The AO has stated that the impounded document AOL/08 is a bunch of cash vouchers in which no details of sellers, transportations are mentioned. All these vouchers are hand written in the same format without mention of date. As per AO, the assessee did not reconcile the impounded documents with purchase bills and regular books of accounts. As per AO, the bills were prima facie appears to be bogus. Further, the AO has also stated that in the post survey enquiry the statement of director of M/s Axis Overseas Ltd. Mr. Aditya Sharda was recorded on 05.02.2013 where he also could not explain the said incriminating documents. The AO disallowed the amount of Rs. 82,00,861/- calculated on the basis of cash vouchers impoundedand marked as AOL/08 u/s 40A(3) of the IT Act. The Appellant in its submission has stated that the AO has erroneously added the amount of Rs. 82,00,861/- u/s 40A(3) of the Act. Because the AO himself has stated in the assessment order that the said documents did not have details of seller, details of transportation and appear to be handwritten without any date. This observation of the AO clearly shows that documents were nothing but dumb documents and no addition can be made on the basis of dumb documents. Furthermore, when the AO himself has stated in the assessment order that no date was mentioned on the said vouchers found and impounded in the survey, then how the Assessing Officer can presume that the said documents relates to transactions in the F.Y. 2012-13. In this regard, the AO has cited the judgement of Hon’ble Ahmedabad Tribunal:- Reliance is placed in the case of Amar Natvarlal Shah v. Asstt. CIT [1997] 60 ITD 560 (Ahb-Trib) wherein it has been held that No decoding is permissible on suspicion, surmise, conjecture and imagination. Furthermore, the appellant has stated that the AO himself has contradicted his statement to justify the addition. He has alleged that impounded documents represent cash vouchers of purchases. The assessee was unable to reconcile these purchase bills with its regular books of accounts. However, the AO has made the addition u/s 40A(3) of the IT Act by disallowing the purchases to the tune of Rs. 82,00,861/-. The appellant has stated that when the AO himself has stated that the said vouchers/bills were not accounted for in the books of accounts, then how can the same be disallowed u/s 40A(3) of the Act. Therefore, In view of the above discussion, I find the addition made by AO on account of disallowance u/s 40A(3) of the Act of Rs. 82,00,861/- not sustainable in the eyes of law as the same has been made without examining the proper facts of the case. Hence, the addition of Rs. 82,00,861/- is deleted. 1. Ground No 13: Notional Interest income on interest free advances to the tune of Rs 2,67,75,667/-: 1. The appellant has made following submission on ground no. 13. 1. “The assessee has given trade advances to the tune of Rs 22,31,30,558/-. The assessee has made elaborate explanation in respect of advances (interest free) given which are in the course of normal business of the assessee. However, the Ld AO made additions simply on the basis that similar additions were made in earlier Printed from counselvise.com Page | 18 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 years in respect to assessee, where the case was decided against the assessee by stating as under: Therefore, it is evident from the above extract that Assessee lost this issue before the Ld. CIT(A) in previous appeals. So, for the sake of consistencyin department stand on the issue and since the assessee is in further appeal before ITAT Kolkata, this issue is also considered in AY 2013-14 against assessee. Since, assessee could not submit any details the notional interest is calculated @ 12% on the whole total advance for AY 2013-14 amounting to disallowance of Rs. 2,67,75,667/-. Penalty U/s 271(1)(c) is being initiated separately for concealment of income by way of furnishing inaccurate particulars of income. So, for sake of consistency in department stand on the issue, addition of notional interest is made @ 12% amounting to Rs 2,67,75,667/- on total advances of Rs 22,31,30,558/-. 1. It is pertinent to note that on similar issue of notional interest on interest free advances, the Hon’ble CIT(A) -6, Kolkata has granted relief to the assessee vide its order for AY 2014-15 dt 04-03-2019. Copy of the said order passed in favour of assessee is enclosed for your reference. [Marked Annexure - 4] 2. Furthermore, there is no finding by the Ld AO that assessee company has actually received the interest or that the interest had accrued to assessee and the same was not reflected in books of accounts. The only finding recorded was that in the assessee case similar addition were made in earlier years and hence to follow consistency of departmental action, additions are made on notional income. 1. One of the basic concepts of taxation is that a person can be taxed in respect of his real or actual income, and not in respect of notional income that one could possibly have earned 2. There is no provision in law which taxes the hypothetical income or notional income. Even the Ld AO was not aware of any such provisions of tax or relevant Section, to tax notional interest and thus failed to mention under which section of the Act the notional interest is added by him. It is trite law that only real income is to be assessed to tax unless expressly provided under the Act. No statutory provision has been stated by Ld AO which mandate addition of notional interest. Reliance is placed on following judicial running: Where it is decided not to charge interest and it was not charged, there can be no inference of income on notional basis - Pranav Vikas (India) Ltd. v. Asstt. CIT Circle 14(1), (ITAT Delhi). 1. It is pertinent to note that under the Income Tax Act, for any income to be chargeable it must fall under any of the 5 heads of income as per provisions laid Printed from counselvise.com Page | 19 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 down in the said Act. Any notional income based on own whims and imagination of Ld AO cannot be brought to tax. There is no provision under the Income Tax Act empowering the Income Tax authorities to include in the income, notional interest which was not due or not collected and not accrued on hypothecation basis. 2. What can be taxed under the Income Tax Act is “income”. The word \"income\" is defined in section 2(24) in an inclusive manner. Thus, income to be taxable has to strictly fall under any of the limbs of Sec 2(24) of the I T Act. Since there is no provision for taxing notional income which has not accrued to assessee but is only result of hypothetical belief of Ld AO, the same is not taxable in the hands of assessee 1. Under the Income Tax Act, tax is to be levied on the real income which is accrued to the assessee. Except in the case of house property, where notional income is taken into account, no other income is considered on notional basis but taken on real income theory. Thus, to be taxable the income must fall under any Sections under the Act. Even in cases when deemed income is taxable under the Act, it is not on hypothecation or assumption basis but is based on the specific provisions of the Act creating chargeability to tax such income. 2. The Supreme Court while deciding what is actual income in the case of Morvi Industries Ltd. v. CIT (Central) 6 , adapted the dictionary meaning of the word \"accrue\" and held that income can only “accrue” when it becomes “due” i.e. when it becomes legally recoverable irrespective of whether it is received or not and “accrued income” is that income which the assessee has a legal right to receive. Thus, until the amount is “due”, no tax can be levied since there is no “real income”. 3. From the above it is clear that what can be taxed as income is the real income earned and accrued to the assessee. No provision in the Act empowers the Ld AO to tax notional income on hypothecation basis. Reliance is placed on following: The Supreme Court in the case of Poona Electric Supply v. Ld. CIT(Appeals) (1965) 57 ITR 21 (SC) held that “income-tax is a tax on the real income, i.e., the profits arrived at on commercial principles subject to the provisions of the Income-tax Act”. Supreme Court in Godhra Electricity Co. Ltd. V. CIT (225 ITR 746 (SC) laid down this ratio and held that under the Income Tax Act, the income chargeable to tax should be the income that was received or was deemed to be received and the computation of such income is to be made in accordance with method of accounting regularly employed by the appellant. Further, if income does not result at all, there cannot be tax. Printed from counselvise.com Page | 20 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 Thus, the subject matter of tax is always income which should be real income and not hypothetical or notional. If an assessee does not earn income then an assessing officercannot compel him to earn such income and cannot make addition of income based entirely on his subjective notion as what constitutes fair return on investment. In the absence of any specific provision under the Act which taxes the so-called notional income on advances could be brought to tax, impugned additions made are not sustainable in the eyes of law.” 6.3. After hearing the rival contentions and perusing the materials available on record and decision relied on by the counsel in the case of M/s Gunny Dealers Ltd. Vs. ITO in ITA No. 1373/KOL/2023 for A.Y. 2012-13 vide order dated 27.06.2024, we find that the learned AO has recorded a finding that the assessee has made purchases of raw jute from various parties exceeding 20,000/-. In our opinion, the purchase of jute is covered under Rule 6DD of Income Tax Rules, 1962 as held by the co-ordinate Bench in the above decision extracted below:- “8.5 Now, coming to the observations of the CIT(A), who by referring to some extracts from the website of ‘National Jute Board’ has observed that producers/sellers have to undertake a process known as retting to extract jute fibre before it is being sold in the primary market to the weaving mills concerned. We note that most of the crops are to be processed before being brought for sale in the market. Merely because the concerned growers/producers undertake some processing for making the crop fit for sale in the market, that does not change the8.5 Now, coming to the observations of the CIT(A), who by referring to some extracts from the website of ‘National Jute Board’ has observed that producers/sellers have to undertake a process known as retting to extract jute fibre before it is being sold in the primary market to the weaving mills concerned. We note that most of the crops are to be processed before being brought for sale in the market. Merely because the concerned growers/producers undertake some processing for making the crop fit for sale in the market, that does not change thenature of the crop and it does not mean that it is no more an agricultural produce. Moreover, it has not been doubted by the Assessing Officer that the assessee had purchased raw jute, the term ‘raw jute’ itself means that it is the raw crop which is brought by the farmers/producers, at the factory premises of the assessee. This observation of the CIT(A) stating that the crop brought by the farmers/producers was no more an agricultural produce, is not tenable and the same is rejected. In view of this, the raw jute produce by the assessee duly comes within the exception carved out in section 6DD(e)(i).” Printed from counselvise.com Page | 21 ITA No.2425/KOL/2024 Axis Overseas Limited; A.Y. 2013-14 6.4. We also note that the learned CIT (A) has recorded a finding that the learned AO has noted in the assessment order that assessee has not accounted for these bills in the books of account, then addition u/s 40A(3) of the Act would not be sustainable. Therefore, considering these facts and circumstances , we do not find any infirmity in the order of learned CIT (A) and accordingly, uphold the same by dismissing the appeal of the Revenue. The ground no.4 is allowed. 7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 03.12.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 03.12.2025 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 "