GODAVARI DEALCOM (P) LTD,KOLKATA V. A.C.I.T., CENTRAL CIRCLE - 3(2), KOLKATA

ITSSA 111/KOL/2024

AI Insights

The case involves Godavari Dealcom (P) Ltd, which appealed against the order of the Commissioner of Income Tax (Appeals)-21, Kolkata, confirming the addition of Rs.25,00,000 as unexplained cash credit under section 68 of the Income Tax Act. The addition was initially made by the Assessing Officer, who deemed the sale of investments/shares as bogus. The Tribunal, referencing several precedents and a CBDT circular, concluded that the transactions were genuine as they were conducted through banking channels and the investments were recorded in earlier years without dispute. The Tribunal emphasized that mere retraction of a statement under pressure during a search operation, without corroborative evidence, cannot be the sole basis for making additions under section 68.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361259 (ITAT-KOLKATA)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2019-2020
• Other Referred Cases: M/s Swarna Kalash Commercial Pvt. Ltd. vs. ACIT, Principal Commissioner of Income Tax Vs. Golden Goenka Fincorp Ltd., Naresh Kumar Agarwal vs. CIT, Shree Chand Soni vs. DCIT, Commissioner of Income Tax vs. Sunil Agarwal, Basant Bansal vs. ACIT, PCIT vs. Ramniwas Ramjivan Kasat
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: FILING RETURN OF
• Keywords: Set aside; Question of law; Corroborative evidences; Unexplained cash credit; Unexplained investment; Retraction; Search and seizure; Accommodation entries; Block assessment; Liquidation; Bogus
• Section: 142(1); 132; 153A; 68; 133(6); 133A

Judgement Text

" आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOMETAX APPELLATE TRIBUNAL “A”BENCH KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Sonjoy Sarma, Judicial Member I.T.(SS)A. No.111/Kol/2024 Assessment Year: 2019-20 Godavari Dealcom (P) Ltd.…………………...............................……….……Appellant AG-112, Suite No.804&805, Salt Lake City, Kol-91. [PAN:AADCG3246N] vs. ACIT, C.C-3(2), Kolkata.............…..….…..….........……........……...…..…..Respondent Appearances by: Shri Rajeeva Kumar, Advocate, appeared on behalf of the appellant. ShriRaja Sengupta, CIT-DR,appeared on behalf of the Respondent. Date of concluding the hearing :May 08, 2025 Date of pronouncing the order :May 22, 2025 ORDER Per Rajesh Kumar, Accountant Member: The present appeal was filed by the assessee for the assessment year 2019-20 against the order dated 19.07.2024 of the Commissioner of Income Tax (Appeals)-21, Kolkata [hereinafter referred to as ‘CIT(A)’] u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. At the time of hearing, the ld. counsel for the assessee pressed ground no.2 which is against the confirmation of addition of Rs.25,00,000/- by the ld. CIT(A) as made by the Assessing Officer u/s 68 of the Act by holding the sale of investments to be bogus and not genuine. 3. Brief facts of the case are that the assessee filed its return of income on 30.10.2019 by declaring total income as Nil. A search action was carried out at the residential and office premises of “Health Care Group” on 05.02.2021 and accordingly notice u/s 153A of the Act was issued on I.T.(SS)A. No.111/Kol/2024 Assessment Year: 2019-20 Godavari Dealcom (P) Ltd 2 28.10.2021 which was duly complied by the assessee by filing return of income on 22.11.2021 declaring total income at Nil. The case of the assessee was selected for scrutiny and statutory notices and notice 142(1) of the /Act including questionnaire were issued and served upon the assessee. During the course of assessment proceedings, it was found that the assessee was a beneficiary of accommodation entries to the tune of Rs.25,00,000/- received from sale of investments/shares. The Assessing Officer also issued notice u/s 133(6) of the Act to the parties who purchased the shares in order to verify the transactions. However, no reply was received from the purchaser and thereafter, the Assessing Officer show-caused the assessee as to why the liquidation of investment/transactions amounting to Rs.25,00,000/- should not be treated as bogus and be not added to the total income of the assessee, which was also replied by the assessee. Thus, the Assessing Officer, by brushing aside the reply of the assessee ,treated the sale of investments by the assessee of Rs.25,00,000/- as unexplained cash credit u/s 68 of the Act and added the same to the total income of the assessee in an assessment framed u/s 153A dated 30.03.2022. 4. In the appellate proceedings, the ld. CIT(A) confirmed the addition by holding that the assessee could not establish the identity and creditworthiness of the buyer concern, M/s Regius Barter Pvt. Ltd. Though the assessee submitted copies of ITR, audited books of accounts, audited accounts but the sources of the funds were not submitted in the hands of the said M/s Regius Barter Pvt. Ltd. 5. After hearing the rival submissions and perusing the materials available on record, we find that the during the year, the assessee sold certain investments in shares to M/s Regius Barter Pvt. Ltd. which were brought in the financial year 2009-10 and were duly shown in the books of accounts of the assessee. We note that 10000 shares of M/s Right I.T.(SS)A. No.111/Kol/2024 Assessment Year: 2019-20 Godavari Dealcom (P) Ltd 3 Choice Vyapaar Pvt. Ltd. & 15,000 shares of M/s SRDB Advisory Services Pvt. Ltd. were sold during the F.Y 2019-20 at Rs.10,00,000/- and Rs.15,00,000/- respectively to M/s Regius Barter Pvt. Ltd. We note that these transactions were accepted by the department in the earlier assessment years and therefore if investments made in the earlier assessment year, are not disputed in the year of purchase ,then the same cannot be disputed when the sales were made. We also note that the transactions were made through banking channels. The case of the assessee finds support from a decision of the Coordinate Bench of the Tribunal in the case of M/s Swarna Kalash Commercial Pvt. Ltd. vs. ACIT inI.T.(SS)A. No.53/Kol/2022 wherein, in similar circumstances, the issue has been decided in favour of the assessee. The operative part of the said order is extracted as under: “12.1. We find force in the above contentions of the ld. Counsel in the facts and circumstances of the case. As laid down by the various Higher Courts of the country, the retracted statement cannot be made sole basis for making the additions. The Jurisdictional Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Golden Goenka Fincorp Ltd. [2023]148 taxmann.com 313(Calcutta) has held that where assessing officer solely based on statement of assessee’s director recorded during search operation treated share application money received by assessee company as undisclosed income and made additions u/s 68 of the Act, since said statement was retracted and there was no cash trail or any other corroborative evidence or investigation brought on record by AO, impugned additions were liable to be deleted. Even the Hon’ble A.P. High Court in the case of “Naresh Kumar Agarwal” (2015) 53 taxmann.com 306 (Andhra Pradesh) has observed that where, in the absence of any incriminating material etc. found from the premises of the assessee during the course of search, statement of assessee recorded under section 132(4) would not have any evidentiary value. Similar view has been adopted by the Jaipur bench of the Tribunal in the case of “Shree Chand Soni vs. DCIT” (2006) 101 TTJ 1028 (Jodhpur). The Hon’ble Delhi High Court in the case of “CIT vs. HarjeevAgarwal” in ITA No.8/2004 vide order dated 10.03.16 has observed that a statement made under section 132(4) of the Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. In the case of “Commissioner of Income Tax vs. Sunil Agarwal” (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the I.T.(SS)A. No.111/Kol/2024 Assessment Year: 2019-20 Godavari Dealcom (P) Ltd 4 course of search, made a categorical admission under section 132(4) that the cash amount seized belonged to him and it represented undisclosed income not recorded in the books of accounts. The assessee did not immediately retract from the above admission but only during the assessment proceedings at a belated stage. In his retraction, the assessee stated that the surrender was made under a mistaken belief and without looking into books of account and without understanding law and that he had been compelled and perturbed by events of search and that the pressure of search was built so much that he had to make the surrender without having actual possession of the assets or unexplained investments or expenses incurred and that there was no such income as undisclosed. The Hon’ble Delhi High Court, after considering the fact and circumstances of the case, while dismissing the appeal of the revenue, observed that though the fact that the assessee may have retracted his statement belatedly, yet, it did not relieve the AO from examining the explanation offered by the assessee with reference to the books of account produced before him. Although, a statement under section 132(4) of the Act carries much greater weight than the statement made under section 133A of the Act, but a retracted statement even under section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. 12.2 In the case of “Basant Bansal vs. ACIT” reported in (2015)63 taxmann.com 199 (Jaipur Trib.), the assessee therein, during the search and seizure action u/s 132 of the Act, offered a summary discloser of income as undisclosed and the department accepted the summary surrender of income and thereafter advance tax for the said surrendered of income was also deposited, but thereafter it was contended by the assessee that the surrender was made under threat or coercion and that no incriminating material was found during the search action. The stand of the department was that the admission was voluntary and was not under a mistaken belief of fact or law and that the assistance had enough time to go through the facts of their case, law applicable in their case and take advice from their counsels and advisors before filing the letter of surrender of undisclosed/unaccounted income and that the admission by them was final and binding on them; The co-ordinate Jaipur Bench of the Tribunal, after overall appreciation of the fact and evidences before it, observed that the assessee’s surrender was not based on any incriminating material and that the discloser being not voluntary and extracted by the department in creating a coercive situation cannot be relied solely to be basis of addition as undisclosed income. The co-ordinate bench of the Tribunal while relying upon various case laws of the higher authorities observed that it is well settled legal position that merely on the basis of a statement which is not supported by the department with cogent corroborative material cannot be a valid basis for sustaining such ad-hoc addition. The co-ordinate Jaipur Bench of the Tribunal (supra) further observed that the issue of existence of pressure, threat, coercion during search proceedings is to be judged by reference to the existing facts and circumstances, human conduct and I.T.(SS)A. No.111/Kol/2024 Assessment Year: 2019-20 Godavari Dealcom (P) Ltd 5 preponderance of possibilities. During the search proceedings, record relating thereto being in exclusive custody of the searching officers, it is their wish and will which prevails during the fateful period. That it is almost impossible for the assessee to adduce demonstrative evidence of exerting such pressure. The co-ordinate bench of the Tribunal (supra) while holding so, apart from relying upon various decisions of the higher courts has also relied upon the decision of the Tribunal in the case of “Dy CIT vs. Pramukh Builders” (2008) 112 ITD 179 (Ahd.) wherein it has been held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, merely in the absence of proof of pressure, threat, coercion or inducement the statement cannot be held as conclusive and additions cannot be made by solely relying on a statement or a letter. 12.3. The case of the assessee, before us, is on better footing as in this case, there is no delay in retraction of the statement which was done on the very next day by filing affidavits before the Metropolitan Magistrate 12.4. Even the CBDT Letter No.286/2/2003-IT(Inv) dated Oct 3, 2003 in this respect read as under: “To The Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Sir, Subject: Confession of additional Income during the course of search & seizure and survey operation – regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered I.T.(SS)A. No.111/Kol/2024 Assessment Year: 2019-20 Godavari Dealcom (P) Ltd 6 during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully,” 12.5. A perusal of the above circular also shows that it is in the notice of the statutory controlling body of the Income Tax Authorities that the revenue officials are used to take confessional statements from the person searched under force, pressure or threat and that is why they have made it mandatory that additions solely on the basis on such statements should not be made and that corroborative evidences should be collected or obtained before making such additions. The circular of the CBDT is binding on the revenue officials. In the facts and circumstances of this case, when seen in the light of above case laws and CBDT circular, additions in this case cannot be said to be justifiably made. 13. All the above details when kept in juxtaposition, there remains nothing to cast an iota of doubt on the sale transaction of shares held by the assessee as investments which it undertook in the ordinary course of its business, more importantly, purchases having made in the current year also. Further, as rightly pointed out by the learned Counsel, both opening balance of investment in shares and the purchases made during the year have not been disputed or doubted by the authorities below so as to bring the entire sale consideration to tax. 14. At this stage, the ld. DR has submitted that the assessee has claimed that it has undertaken this sale transaction by selling the shares at the cost at which it had acquired them in AY 2006-07. At the same time, assessee submits that it has undertaken this transaction in the ordinary course of its business. The ld. DR has submitted that the conduct of business is always with a profit motive, more particularly when the assessee had held these shares for past several years and had also made purchases during the year, deploying its funds. There ought to be certain element of profit embedded in the sale transaction executed which must be brought to tax. 15. Considering the above submission of the ld. DR and taking a holistic view of the facts and circumstances of the case, we find it proper to consider net profit element @ 5% of the sale consideration i.e. 5% of Rs.17,05,60,000/- which comes to Rs.85,28,000/- be subjected to tax. We, accordingly delete the addition to the extent of Rs.16,20,32,000/- made u/s 68 of the Act and sustain the balance of Rs.85,28,000/- towards profit element on the impugned sale transaction of shares undertaken by the assessee. 5.1 Similarly, the Hon’ble Gujarat High Court in the case of PCIT vs. RamniwasRamjivan Kasat reported in [2017] 82 taxmann.com 458 (Gujarat) has held as under: I.T.(SS)A. No.111/Kol/2024 Assessment Year: 2019-20 Godavari Dealcom (P) Ltd 7 “4. Having heard learned counsel for the Revenue on this issue, we are in agreement with the Tribunal. As facts recorded by the Tribunal would suggest, the shares were purchased by the assessee during the period relevant to the Assessment Year 2005-2006. The return for the said year was scrutinized by the Revenue. The Assessing Officer did not disturb the investment. It would therefore later on not be open to the Assessing Officer to make addition with the aid of Section 68 of the Act when such shares were sold on the premise that the purchasers themselves were bogus. No question of law therefore arise on this issue.” 6. Considering the facts as discussed above in the light of the aforesaid decision, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete the addition. 7. In the result, the appeal of the assessee is allowed. Kolkata, the 22nd May, 2025. Sd/- Sd/- [Sonjoy Sarma] [Rajesh Kumar] JudicialMember Accountant Member Dated: 22.05.2025. RS Copy of the order forwarded to: 1. Godavari Dealcom (P) Ltd 2. ACIT, C.C-3(2), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches "