DEPUTY COMMISSIONER OF INCOME TAX, KOLKATA V. PHPL PROPERTIES PVT. LTD., KOLKATA

ITA 1714/KOL/2024

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax against PHPL Properties Pvt. Ltd. concerning the assessment year 2013-14. The primary issues revolved around the additions made under section 68 of the Income Tax Act, 1961, which pertained to unexplained credits in the form of share capital and share premium received by the assessee from certain investor companies. The AO had initially added these amounts to the income of the assessee, suspecting them to be mere accommodation entries. However, the CIT(A) later deleted these additions, leading to the Revenue's appeal. The Tribunal, after considering the arguments and evidence presented, decided to remand the matter back to the AO for a detailed examination of the genuineness of the transactions and the creditworthiness of the investor companies.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791808 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 12-08-2024
• Other Referred Cases: Commissioner of Income-tax, Delhi-V vs. N.R. Portfolio (P.) Ltd., CIT vs. Nipun Builders & Developers (P.) Ltd., Balgopal Merchants (P.) Ltd. vs. Principal Commissioner of Income-tax, Commissioner of Income-tax, Kolkata-II vs. Trinetra Commerce & Trade (P.) Ltd., Principal Commissioner of Income-tax (Central)-2 vs. BST Infratech Ltd., PCIT vs Outcome Buildcom P. Ltd., ITO vs Outcome Buildcom P. Ltd., PCIT vs Snowwhite Infrastructure P Ltd., ITO vs Snowwhite Infrastructure P Ltd., PCIT vs Shreen Hire Purchase P Ltd., ITO vs Shreen Hire Purchase P Ltd., Principal Commissioner of Income Tax, Central-1, Kolkata vs Malicom VSFT Gloves Pvt. Ltd., Principal Commissioner of Income Tax-1, Kolkata vs True Man Consultants Private Limited, Principal Commissioner of Income Tax-2, Kolkata vs M/s Vish Realty Solutions Private Limited, DRB Exports (P) Ltd vs. Commissioner of Income Tax, Kol-II
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Reassessment proceedings; Unexplained cash credit; Income from undisclosed sources; Onus to prove; Gift; Search and seizure; Accommodation entries; Block assessment; Bogus Share capital; Penny stocks; Bogus
• Section: 144; 143(3); 142(1); 271(1)(c); 153A; 68; 133(6); 139; 234B; 14A; 133A; 115JB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA Before SRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER & SRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 Deputy Commissioner of Income Tax, Kolkata Vs. PHPL Properties Pvt. Ltd. (Appellant) (Respondent) PAN: AAGCP5155Q Appearances: Department represented by : P.N. Barnwal, CIT, DR. Assessee represented by : A.K. Tulsyan, FCA & Rabin Maheshwari, AR. Date of concluding the hearing : 09-October-2025 Date of pronouncing the order : 09-December-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is against the order of the Commissioner of Income Tax (Appeals)-21, Kolkata [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2013-14 dated 26.12.2023, which has been passed against the assessment order u/s 153A/143(3) of the Act, dated 31.03.2016. 1.1. The Registry has informed that the appeal filed by the Revenue is barred by limitation by 170 days. A petition seeking condonation of delay has been filed by the Revenue giving sequence of events. It is submitted that there was a delay in filling of the Appeal by 158 days. Therefore, it has been requested to condone the delay in filing appeal for the sake of substantial justice. Considering the application for Printed from counselvise.com Page | 2 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 2 of 20 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 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. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 1,23,50,000/- made by the AO under section 68 of the Act despite the assessee falling to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 2. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 61,750/- made by the AO for payment of commission in lieu of providing accommodation entry? 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,23,50,000/- made by the AO under section 68 of the Act derived by the assessee from the pre-arranged transactions, since the Investor companies could not be traced at their recorded address. Therefore, there were strong indications that the so-called share applicants were mere paper entities and did not have the requisite capacity to advance the impugned amount. Hence, the assessee was a beneficiary of accommodation entry through private placements with paper entities, which is in the nature of organized tax evasion, and comes under exception as per clause (h) of section 3.1 of CBDT circular no. 5/2024 dated 15/03/2024, falling under the category of cases involving organized tax evasion including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries. 4. The department craves the right to add, alter, amend or withdraw any ground of appeal before or at the time of hearing.” 3. Brief facts of the case are that a search and seizure action u/s 132(1) of the Act was conducted at the assessee’s premises on 07.11.2013 and on subsequent dates and survey operation u/s 133A of the Act was also conducted on the same date and/or on subsequent dates at the premises of the Dollar group. The assessee filed its return Printed from counselvise.com Page | 3 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 3 of 20 of income on 30.09.2013 showing total income of ₹9,49,590/-. A notice u/s 153A of the Act was issued which was served upon the assessee and in response to which the assessee filed the return of income showing total income of ₹9,49,590/- which was the same as that originally declared in the return filed u/s 139 of the Act. Notices u/s 143(2) and 142(1) of the Act were issued. The assessee had issued 35,000 number of shares at a face value of ₹ 10/- and raised share capital of ₹3,50,000/- with share premium of ₹2,24,00,000/- at a premium of ₹640/- per share. On perusal of the list of investors, it was seen that the majority of share subscription had come from Parivartan Enclave Pvt. Ltd. (“PEPL”) and Parivartan Residency Pvt. Ltd. (“PRPL”) having office at 7, Burnt Salt Gola Lane, Howrah. The Assessing Officer (hereinafter referred to as Ld. 'AO') carried out investigation for ascertaining the genuineness of the share transactions and issued notice u/s 133(6) of the Act to the investor companies at the above address but in case of Parivartan Enclave Pvt. Ltd. and Parivartan Residency Pvt. Ltd. notices came back with most of the remark “Not found”. In the course of post search investigation, the Investigation Wing carried out investigation to verify the physical existence and to serve summon on the above referred investor companies by deputing departmental Inspector but both the companies could not be traced out at the recorded address. Subsequently, during the course of assessment proceedings that departmental Inspector was also deputed to make the spot enquiry regarding the physical existence of the investor companies i.e. PEPL and PRPL to serve summons on the directors of the above referred investor companies, but the Inspector’s report dated 04.02.2016 revealed that the above referred two investor companies had no existence at their recorded address. M/s. Parivartan Enclave Pvt. Printed from counselvise.com Page | 4 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 4 of 20 Ltd. at invested ₹71,50,000/- and M/s. Parivartan Residency Pvt. Ltd. invested ₹52,00,000/- in the shares of the assessee company. During the course of block assessment proceedings, the assessee company was asked to produce the director of each investor company who had subscribed in shares of the assessee company, in order to prove the genuineness, creditworthiness and existence of the investor companies, but the assessee failed to produce the directors of both the companies. However, supporting documents with regard to share subscriptions made by the two applicants were filed. After considering the facts of the case and the judicial pronouncements in this regard, a sum of ₹1,23,50,000/- being the credits found in the case of Parivartan Enclave Pvt. Ltd. and Parivartan Residency Pvt. Ltd. were held as own money of the assessee company shown in the garb of share capital/share premium and added back to the total income of the assessee u/s 68 of the Act. Another sum of ₹61,750/- on account of commission to the entry operators was also added and the sum was treated as commission paid out of unaccounted income. Another sum of ₹4,100/- towards preliminary expenses written off was added back to the income of the assessee which was related to the issue of raising of share capital and the total income was computed at ₹1,33,84,730/- and the book profit u/s 115JB of the Act was also computed at ₹9,68,880/- vide order u/s 153A/143(3) of the Act dated 31.03.2016. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who examined the facts of the case, the findings of the Ld. AO and partly allowed the appeal of the assessee by deleting the additions of ₹1,23,50,000/- and ₹61,750/- made by the Ld. AO. The discussion and findings of the Ld. CIT(A) are as under: Printed from counselvise.com Page | 5 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 5 of 20 “I have carefully examined the impugned assessment order, the submissions of the appellant, the citations relevant to this appeal as well the other material on record. Thereafter, this appeal, ground-wise, is being disposed as under: Ground 1 This ground agitates against the action of the AO in making addition u/s 68 of a sum of Rs. 1,23,50,000/- on account of share application money received on the ground that the share applicants were not found at the given address. During the year under consideration the assessee company had raised share capital & premium amounting to Rs.1,23,50,000/-. The assessee company received share capital and premium of Rs. 71,50,000/- from M/s Parivartan Enclave Pvt. Ltd. and Rs. 52,00,000/- from M/s Parivartan Residency Pvt. Ltd. respectively. In the course assessment proceedings details of share capital raised i.e., name & address of the share applicants, no of shares allotted and amount along with Form No-2 filed with ROC were submitted before the AO by the appellant. The appellant has in his submission has stated that the share application money was received through proper banking channels, and that the share holder companies had sufficient fund in their books of account for the purpose of investment & the investments are reflected in their books of account. The appellant has submitted the Bank account statements of the shareholders to confirm that the transactions were made through banking channels. On perusal of the assessment order, it is observed that the AO made the additions on the following grounds. i. The share subscribers were not found in the given address ii. The assessee did not produce the director of the subscriber company. iii. Share applicant companies disclosed meagre income The documents submitted by the appellant have been perused. From the audited books of account of the two share subscriber companies, viz. the following facts emerge: Name of the Share Subscriber Company Total own funds as on 31.03.2013 1. M/s Parivartan Enclave Pvt. Ltd. Rs. 2,21,37,520/- 2. M/s Parivartan Residency Pvt. Ltd. Rs. 2,21,95,421/- Printed from counselvise.com Page | 6 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 6 of 20 The appellant in its submission has stated that in the case of Parivartan Residency Pvt. Ltd. (herein-after referred as PRPL), assessment u/s 144 for AY 2012-13 was completed on 19.03.2015 making addition of Rs.2,22,00,000/-, which was entire share capital raised during the FY 2011-12 (AY 2012-13). The Hon'ble ITAT D' Bench Kolkata vide order dated 27.02.2019 in ITA No. 449/Kol/2018. set aside the issue to the file of assessing officer for fresh adjudication. In pursuance to the said order of Hon'ble ITAT. the AO in the case of PRPL has completed the assessment and passed order u/s 143(3)/254 dated 30.12.2019, accepting the genuineness of the share capital and investment. Similarly in case of Parivartan Enclave Pvt. Ltd. (herein-after referred as PEPL'), assessment u/s 144 for AY 2012-13 was completed on 19.03.2015 making addition of Rs.2,21,50,000/-, which was entire share capital raised during the FY 2011-12 (AY 2012-13). The Hon'ble ITAT ‘D’ Bench Kolkata vide order dated 27.02.2019 in ITA No. 44&'Kol/2018, set aside the issue to the file of assessing officer for fresh adjudication. In pursuance to the said order of Hon'ble ITAT. the AO in the case of PEPL has completed the assessment and passed order u/s 143(3)/254 dated 30.12.2019. AO accepting the genuineness of the share capital and investment. In both these, cases orders were passed by the AO u/s 143(3) wherein these companies had duly complied and appeared before the AO. The appellant has also adduced evidences such as ROC data from MCA to establish that these share subscriber companies are active as on date and are filing income tax returns regularly. Copies of bank statements have also been filed by the appellant to establish that these transactions were made through banking channel. In view of these discussions. I find that since both the share subscriber companies appeared before the AO recently in the set aside assessment proceedings and made the necessary compliance, the identity of these companies cannot be placed under doubt. Similarly the fund inflow of both these companies during the F.Y: 2011-12. has also been accepted by the AO during the course of set aside assessment proceedings, and it was these funds only which were invested by these share subscriber companies in the appellant company during the F.Y:2012-13, no doubt can be raised on the source of these funds as well as the share subscribing companies creditworthiness during the relevant year. The transactions were also made through banking channels and therefore these transactions are nevertheless genuine. Owing to the above discussion. I cannot agree with the contention of the AO that the identity, creditworthiness and genuineness of the transaction were Printed from counselvise.com Page | 7 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 7 of 20 not proved. The addition of Rs. 1,23,50,000/- therefore cannot be sustained and stands deleted. This ground is allowed. Ground 2 agitates against addition of commission on share capital to the tune of Rs.61,750/-. As per the adjudication made in Ground No. 1. the share capital cannot be held to be bogus, and therefore question of making addition towards commission on bogus share capital does not arise. The addition made on this count also stands deleted. This ground is allowed Ground 3 raised against interest charged u/s 234A & 234B is consequential in nature and is disposed off with directions to the AO to recompute these interests as per law at the time of giving effect to this order. Ground 4 against initiation of penalty u/s 271(1)(c) has not been pressed by the appellant. This ground is therefore dismissed. Ground 5 is general in nature and needs no adjudication and does not need further adjudication. In the result, the appeal is partly allowed.” 4. The appeal was accordingly partly allowed by the additions made on account of share capital and share premium were deleted. 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. In the course of the appeal before us, it was argued by the Ld. DR that neither the ITIs could trace out the companies post search as well as during the course of the assessment proceeding nor the directors of the companies were produced and none of the three ingredients could be identified. The Ld. DR relied upon the decision of the Hon'ble Delhi High Court in the case of Commissioner of Income- tax, Delhi-V vs. N.R. Portfolio (P.) Ltd. [2013] 29 taxmann.com 291 (Delhi)/[2013] 214 Taxman 408 (Delhi)/[2013] 263 CTR 456 (Delhi)[21-12-2012] as well as in the case of CIT vs. Nipun Builders & Developers (P.) Ltd. [2013] 30 taxmann.com 292 (Delhi)/[2013] 214 Taxman 429 (Delhi)/[2013] 350 ITR 407 (Delhi)/[2013] 256 CTR 34 Printed from counselvise.com Page | 8 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 8 of 20 (Delhi)[07-01-2013] and also in the case of Balgopal Merchants (P.) Ltd. vs. Principal Commissioner of Income-tax [2024] 162 taxmann.com 465 (Calcutta)/[2024] 468 ITR 136 (Calcutta)[13-05- 2024] and Commissioner of Income-tax, Kolkata-II vs. Trinetra Commerce & Trade (P.) Ltd. [2016] 75 taxmann.com 70 (Calcutta)[15-09-2016] and Principal Commissioner of Income-tax (Central)-2 vs. BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta)/[2024] 468 ITR 111 (Calcutta)[23-04-2024]. Our attention was drawn to paras 7 and 8 of the order in the case of N.R. Portfolio (P.) Ltd. (supra) which are reproduced as under: “7. In the present case, the assessee claimed that it received Rs. 35 lakhs from seven share applicants. Its assessment was reopened. The assessee did not attend the reassessment proceedings, and suffered an adverse order. On its moving an appeal, the Commissioner sought a remand report. The remand report, an exhaustive 41 page document, discusses threadbare the opportunities granted to the assessee, to establish the identity and creditworthiness of the share applicants. The report highlights, among other facts, the following salient features: (1) Share applications were received on 18.2.2004 but the shares were sent to the parties only on 15.6.2004; (2) The share applicants did not attend the proceedings despite summons under Section 131; most of the notices were received unserved; (3) The assessee, which was a stock broker, did not show any transactions in that activity, but was receiving dividends. However, it did not declare any dividend, to its investors. Its financial condition was such that there was no need to infuse fresh share capital; (4) The assessee's bank accounts showed large amounts of cash debits and credit entries. 8. This court is conscious of a view taken in some of the previous decisions that the assessee cannot be faulted if the share applicants do not respond to summons, and that the state or revenue authorities have the wherewithal to compel anyone to attend legal proceedings. However, that is merely one aspect. An assessee's duty to establish that the amounts which the AO proposes to add back, under Section 68 are properly sourced, does not cease Printed from counselvise.com Page | 9 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 9 of 20 by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant's PAN particulars, or bank account statement, surely its relationship is closer than arm's length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be re- opening of such investor's proceedings. That apart, the concept of \"shifting onus\" does not mean that once certain facts are provided, the assessee's duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68. This court recollects the robustness with which the issue was dealt with, in A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), in the following terms: - \"Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed income. In the absence of such evidence, it is argued, the finding is erroneous. We are unable to agree. Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations, one being a gift of Rs. 80,000 and the other being receipt of Rs. 42,000 from business of which he claimed to be the real owner. When both these explanations were rejected, as they have been it was clearly upon to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. The conclusion to which the Appellate Tribunal came appears to us to be amply warranted by the facts of the case. There is no ground for interfering with that finding, and these appeals are accordingly dismissed with costs.” Printed from counselvise.com Page | 10 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 10 of 20 6. Our attention was also drawn to the decision of Hon'ble Calcutta High Court in the case of Balgopal Merchants (P.) Ltd. vs. Principal Commissioner of Income-tax [2024] 162 taxmann.com 465 (Calcutta)/[2024] 468 ITR 136 (Calcutta)[13-05-2024]. 7. The Ld. AR on the other hand, argued that in the case of share applicants, the share capital introduced in the case of the company was accepted vide order u/s 143(3) of the Act and the only disallowance made was u/s 14A of the Act. The Ld. AR has filed copy of the order of the Hon'ble Tribunal in the case of M/s. Parivartan Enclave Pvt. Ltd. in ITA No. 448/KOL/2018 for AY 2012-13 order dated 27.02.2019 vide which the assessments were remanded to the Ld. AO for fresh verification and has also filed a copy of the order dated 30.12.2019 u/s 143(3)/254 of the Act and the total income assessed at ₹6,498/- only. Similarly, in the case of Parivartan Residency Pvt. Ltd. in ITA No. 449/KOL/2018 for AY 2012-13 order dated 27.02.2019 the proceeding was set aside to the Ld. AO and vide order dated 30.12.2019 u/s 143(3)/254 of the Act income was assessed at ₹6,625/- only. Both the assessments are for AY 2012-13 and while in the case of the assessee the assessment order is dated 31.03.2016 in which the addition has been made on account of the company not being traced at the given address and the identity and genuineness of the transaction not being established, the fact remains that there is no discussion in both these assessment orders of the investor companies regarding investment in the assessee company so as to concur with the findings of the Ld. CIT(A) that the amount assessed in AY 2012-13 was the same amount which was invested in the subsequent assessment year in the assessee company vide issue of share capital. Further, there is no discussion in both these assessment orders made subsequent to the directions of Printed from counselvise.com Page | 11 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 11 of 20 Hon'ble Tribunal that the share capital invested in the assessee company was examined and was found to be genuine or the share capital and premium received was examined by the Ld. AO of the investor companies. The assessee has issued 35,000 shares at a face value of ₹10/- and premium of ₹640/- per share. The Ld. AR filed a copy of both the orders in support of the claim that since the source of share capital in the case of the investor company had been accepted, therefore, no addition in the case of the assessee is justified. The Ld. AR as also relied upon the following case laws which have also been examined and considered: i) PCIT vs Outcome Buildcom P. Ltd. (ITAT/3/2024 (Calcutta) dated 03.05.2024) ii) ITO vs Outcome Buildcom P. Ltd. (ITA 652/Kol/2020 dated 03.07.2023) iii) PCIT vs Snowwhite Infrastructure P Ltd. (ITAT/108/2024 (Calcutta) dated 15.05.2024) iv) ITO vs Snowwhite Infrastructure P Ltd. (ITA 565/Kol/2020 dated 19.04.2023) v) PCIT vs Shreen Hire Purchase P Ltd. (ITAT/196/2024 (Calcutta) dated 20.12.2024) vi) ITO vs Shreen Hire Purchase P Ltd. (ITA 22/Kol/2021 dated 08.08.2023) vi) Principal Commissioner of Income Tax, Central-1, Kolkata vs Malicom VSFT Gloves Pvt. Ltd. (Earlier Known as VSFT Quilts and Pillows Pvt Ltd. (ITAT/264/2024 (Calcutta) dated 09.06.2025 vii) Principal Commissioner of Income Tax-1, Kolkata vs True Man Consultants Private Limited (ITAT/2023/2024 (Calcutta) dated 25.04.2025) viii) Principal Commissioner of Income Tax-2, Kolkata vs M/s Vish Realty Solutions Private Limited (ITAT/74/2025 (Calcutta) dated 10.07.2025 8. The Ld. DR, on the other hand, submitted that post-search, an assessment u/s 143(3)/153 of the Act dated 31.03.2016 was made which was not final and another order u/s 143(3)/254 of the Act was made on 30.12.2019. Printed from counselvise.com Page | 12 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 12 of 20 9. The Ld. AR insisted that the assessee is still existing at the address but the Ld. DR said that this was a clear case where the decisions in the case of BST Infratech Ltd. (supra) and Balgopal Merchants (P.) Ltd. (supra) were applicable since the notices issued u/s 133(6) of the Act came unserved, the directors did not appear for cross examination before the Ld. AO. The Ld. DR also relied upon the case of Trinetra Commerce & Trade (P.) Ltd. (supra). On the other hand, the Ld. AR relied upon the decision of the Hon'ble High Court and the Tribunal specifically in the case of DRB Exports (P.) Ltd. vs. Commissioner of Income Tax, Kol-II [2018] 93 taxmann.com 490 (Calcutta)[07-05-2018]. The Ld. DR was required to file the written submission containing the arguments which are as under: “1. In this case an appeal has been filed by the department against the order of the Ld. CIT(A) The department has raised the following grounds of appeal: Ground No1. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 1,23,50,000/- made by the AD under section 68 of the Act despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? Ground No 2. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 61,750/- made by the AO for payment of commission in lieu of providing accommodation entry? Ground No 4. The department craves the right to add, alter, amend or withdraw any ground of appeal before or at the time of hearing. 2. In this case, in the order under section 153A/143(3) dated 31.03.20216, an addition of Rs.1,23,50,00/- was made under section 68 as unexplained credit being the amount of share capital received from alleged paper companies along with Rs. 61,750/- on account of commission paid to entry operators for receiving the above entry, which has been deleted by the Ld. CIT(A) necessitating the appeal by the department. It may kindly be noted that this is a case of abated assessment. The findings in the case are summarised as below: Printed from counselvise.com Page | 13 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 13 of 20 i) The share capital has been received at a huge premium. Shares of F.V. Rs. 10/- were issued at a premium of Rs. 640/-. ii) During post search investigation the share subscribing companies namely Parivartan Residency Pvt. Ltd. And Parivartan Enclave Pvt. Ltd. were found to be non-existing at the address provided. iii) During the course of assessment proceedings the departmental Inspector through spot enquiry reported that the said Companies could not be traced at the above address. (Pg 2, 2nd para of assessment order). iv) 133(6) notices issued to the share subscribing Companies were returned unserved with the remark not found\". (Page 2 last stanza and continued in page 3 of assessment order), v) The Assessee was given an opportunity to produce the Directors but failed and merely filed only the documents with regard to share applicant companies. vi) On perusal of the Profit & Loss and balance sheet of the share subscribing Companies it is noticed that the said Companies do not have any significant business activity during the year. The reserve of the share subscribing Companies on account of operating profit is either negative or a very miniscule amount. The share subscribers did not have their own profit- making apparatus and were not involved in any real business activity. Share subscribing Companies have very meagre and insignificant income and does not have the profit-making apparatus to subscribe to such huge share capital. The Ld. CIT(A) has deleted the addition observing mainly as follows: i) Both the share subscribing Companies appeared before the A.O. recently in set aside proceedings for A.Y. 2011-12. ii) The source of investment is out of share capital raised in A.Y. 2011-12. iii) The share capital raised by the above two Companies in A.Y. 2011-12 have been accepted by the A.O. in set aside proceedings. In this connection besides the argument forwarded, the various case law cited by the undersigned in the course of hearing is detailed below: i) As far as the claim of the Assessee that the share application money received by the share subscribing companies were subject to scrutiny and no addition was made by the respective A.O., I would like to submit as follows: In case of paper companies, although the same money is rotated through a number of shell companies, once the capital is created, such companies are Printed from counselvise.com Page | 14 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 14 of 20 sold to the prospective buyer and each such company is a saleable entity on the basis of share capital lying in their balance sheet. The Hon'ble Calcutta High Court while adjudicating on a similar issue in the case of [2016] 75 taxmann.com 70 (Calcutta) Commissioner of Income-tax, Kolkata- il vs. Trinetra Commerce & Trade (P) Ltd in the headnote has held as follows: ‘Where funds belonging to one had been routed to assessee company in respect whereof assessee company failed to offer any explanation, addition of funds in hands of assessee company could again be made in spite of fact that addition was already made in hands of K.’ ii) ITO Ward 5(2), Kol v. Sayaji Marketing Pvt Ltd, ITA No. 282/Kol/2014 & CO No. 39/Kol/2018 In this case addition already made against one of the Companies which was a part of the chain of Shell Companies was again confirmed against another Company involved in the chain iii) CIT v. N.R. Portfolio (P.) Ltd. dated 22.11.2013 [2014] 42 taxmann.com 139 (Delhi) on the issue of creditworthiness and genuineness of share application money in para 19 of the order has held as follows: \"19. On the question of creditworthiness and genuineness, it was highlighted that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit-making apparatus and were not involved in business activity. They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction. The beneficiaries, including the respondent- assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of investment, was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money or give loan would certainly seek return or income as consideration. These facts are not adverted to and as noticed below are true and correct. They are undoubtedly relevant and material facts for ascertaining creditworthiness and genuineness of the transactions\" Again, in para 23 of the order the Hon'ble Court has observed as follows: 23. The contention that the Revenue must have evidence to show circulation of money from the assessee to the third party is fallacious and has been repeatedly rejected, even when Section 68 of the Act was not in the statute. In A. Govindarajulu Mudaliar v. CIT (1958) 34 ITR 807 (SC), Supreme Court observed that it was not the duty of the Revenue to adduce evidence to show Printed from counselvise.com Page | 15 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 15 of 20 from what source, income was derived and why it should be treated as concealed income. The assessee must prove satisfactorily the source and nature of cash received during the accounting year. Similarly observations were made in CIT v. M. Ganapathi Mudaliar [19641 53 ITR 623 (SC), inter alia holding that it was not necessary for the Revenue to locate the exact source. This principle was reiterated it. CIT v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC), wherein the contention that the Assessing Officer should indicate the source of income before it was taxable, was described as an incorrect legal position.\" iv) CIT v. Navodaya Castles (P.) Ltd dated 25.08.2014 (2014) 50 taxmann.com 110 (Delhi) on the issue of creditworthiness and genuineness of Share application money in para 30 of the order while relying on the order in the case of N R. Portfolio discussed supra has held as follows: “30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos, or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them.” It is further to be noted that LP filed against the above order was dismissed by the Hon'ble Apex Court. v) PCIT vs BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta) on the issue of creditworthiness and genuineness of Share application money in para 31 to 34 of the order while relying on the order in the case of N R Portfolio discussed supra has held as follows: “31. In our view it is not required to show that the money which came to the assessee is ill gotten and what is required to be seen is whether the transaction was genuine. It may be true that the identity of the investor company has been established as they are registered with the Registrar of Companies and they are regularly assessed to income tax. Assuming without admitting that at the relevant point of time when the investor companies invested in the Printed from counselvise.com Page | 16 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 16 of 20 assessee company by purchasing shares at high premium, they had sufficient funds in the bank accounts, the question would be as to whether this by itself will establish the creditworthiness of the investor companies. This is a fit case where the doctrine of \"source of source\" or \"origin of origin\" should be made applicable. We say so because the CIT(A) has brought the evidence and the materials on record which manifestly show the involvement of the assessee as the Directors of the five investors companies and the Director of the assessee company Mr. Gopal Kumar Agarwala are all closely related. 32. One of the directors of the Gainwell Textrade Private Limited is brother- in-law of Gopal Kumar Agarwala. One of the directors of Lucky Trading Private Limited is the wife of the brother-in-law of Mr. Agarwala and the other director is the maternal uncle. Mr. Gopal Kumar Agarwala himself is one of the director in Pavapuri Mercantile Private Limited and another director is the sister of Mr. Agarwala One of the directors of HIL Engineering Private Limited is the brother-in-law of Mr. Agarwala and one of the Directors of Mubarak Cosmetics Private Limited is the wife of Mr. Agarwala. Thus, the facts clearly show that the doctrine of \"origin of origin\" has to be applied in the case on hand and this transaction. The pattern of remittances made to the five investor companies and immediately exercise has been rightly done by the CIT(A) by lifting the veil and enquiring into the real nature of the thereafter to the assessee company clearly shows that the shares subscriptions were collected as a part of pre-meditated plan which has been conceived by the assessee. 33. The tribunal fell in error in holding that the CIT(A) has not pointed out any doubt or discurbancy with regard to the identity of the investors. The learned tribunal has posed a wrong question which has led to a wrong answer. The question is not whether the identity of the investor has to be established but the question was whether the investor had requisite creditworthiness and whether such creditworthiness was a make belief situation by means of a circular transaction and if the same had been established. The learned tribunal has held that the findings rendered by the CIT(A) that the assets in the form of investments have been created through rotating of money in between the group companies and the assets mainly consists of cash and cash equivalents are not enough to prove that any unaccounted money of the assessee has been introduced in the assessee compony warranting addition under section 68 of the Act. This finding in our opinion upon consideration of the facts is perverse. Printed from counselvise.com Page | 17 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 17 of 20 34. The CIT(A) has made an elaborate exercise to assess the creditworthiness of the investor companies as well as the genuineness. All the investor companies are group companies and the directors are closely related to the director of the assessee company and the director Mr. Agarwala himself is one of the directors in one of the investor companies namely Pawapuri Mercantile Private Limited and the spouse of Mr. Agarwala is the director of Mubarak Cosmetics Private Limited, an investor company. Therefore, on a deeper scrutiny of the factual position would show that the investor company did not have a genuine creditworthiness and consequently the transaction has to be held to be not genuine. As held in N.R. Portfolio (P.) Ltd. (supra) whether or not the onus is discharged depends on facts of each case as well as it depends on whether the two parties are related or known to each other, the manner or mode by which the parties approach each other, the quantum of money, the object and purpose for which payment/investment was made. As held earlier certificate of incorporation of the companies, payment by banking channel etc. cannot tantamount to satisfactory discharge of onus and the facts of the case on hand speaks for itself as it is obvious. Thus, the principle of Preponderance of Probabilities applies with full force to the case on hand which leads to the irresistible conclusion that the finding rendered by the CIT(A) is legal and valid.' vi) DRB Exports (P) Ltd v CIT, Kol-II (2018) 93 taxmann.com 490 (Calcutta) Held: Where AO made addition under section 68 in respect of increase in share capital of assessee-company, in view of fact that addresses of most of purported shareholders were identical and they could not be traced out despite notice issued under section 131, Tribunal was justified in confirming impugned addition. 4. In view of the above facts and circumstances of the case and the various case laws as cited by the undersigned, the assessment order passed under section 153A/143(3) dated 31.03.2016 be upheld.” {emphasis supplied} 10. We have considered the rival submissions made and have also gone through the decisions. The Ld. AR submitted that in the case of the investors in the set aside proceeding, no addition on account of share capital was made. A perusal of the order of the Hon'ble Tribunal shows that the matter was remanded to the Ld. AO as the assessee had contended that no notices were ever received by the assessee from the Printed from counselvise.com Page | 18 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 18 of 20 first appellate authority. Further an affidavit was filed and argued that the Ld. AO refused to record the presence of the authorized representative who appeared before him on behalf of the assessee. It was submitted that the assessee (share investor) was ready to provide all the details in respect of substantial addition made by the Ld. AO on account of introduction of share capital and prayed the Bench to remand the matter to the file of the Ld. AO for fresh adjudication to which the Ld. DR had no objection. The matter was accordingly remanded to the Ld. AO for fresh verification. However, the perusal of the assessment order made u/s 143(3)/254 of the Act dated 30.12.2019 shows that there is detailed discussion regarding disallowance u/s 14A of the Act but there is no discussion whatsoever regarding examination of the source of the share capital invested with the assessee. Further, the orders for AY 2012-13 and in the case of all the investor companies and the assessee’s case is of AY 2013-14, therefore, it is not corelated as what is the source of the share capital. Since the directors were required to be produced but had not been produced and it appears that in the case of the applicant the source is share capital along with share premium received by the investor companies, therefore, in light of the judicial pronouncements relied upon by the Ld. DR, the matter needs examination. The Ld. AR submitted that the directors could be produced for cross examination before the Ld. AO. Since the share capital has been raised by the assessee, the onus is on the assessee to establish the identity, the source of credits and genuineness of the transactions by producing the directors of the investor companies before the Ld. AO for cross examination since they are the witnesses of the assessee. The Ld. AO shall examine the source of share capital invested in the company in view of the decision of the Printed from counselvise.com Page | 19 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 19 of 20 Hon'ble Calcutta High Court relied upon by the Ld. DR in the cases of BST Infratech Ltd. (supra) and Balgopal Merchants (P.) Ltd. (supra) and other decisions mentioned in the preceding paragraphs and thereafter, pass an order in accordance with law. In case the assessee fails to produce the directors, the Ld. AO shall be at liberty to draw and adverse inference. Hence, the order of the Ld. CIT(A) is hereby set aside and the matter is remanded to the Ld. AO for making the assessment afresh in accordance with law after considering the submission of the assessee and examination of the directors of the investor companies along with the source of the credits so as to establish that the transactions were genuine. 11. In the result, the appeal filed by the Revenue is partly allowed for statistical purposes. Order pronounced in the open Court on 9th December, 2025. Sd/- Sd/- [Pradip Kumar Choubey] [Rakesh Mishra] Judicial Member Accountant Member Dated: 09.12.2025 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 20 I.T.A. No.: 1714/KOL/2024 Assessment Year: 2013-14 PHPL Properties Pvt. Ltd. Page 20 of 20 Copy of the order forwarded to: 1. Deputy Commissioner of Income Tax, Kolkata. 2. PHPL Properties Pvt. Ltd., 32 J L Nehru Road, Kolkata, West Bengal, 700071. 3. CIT(A)-21, Kolkata. 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 "