M/S. LOOKLINE VINCOM PVT. LTD., ,KOLKATA V. ITO, WARD 6(2), , KOLKATA

ITA 461/KOL/2025

AI Insights

The case involves M/s Lookline Vincom Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre, Delhi, concerning the assessment year 2018-19. The primary issues in the appeal were the legality of the reopening of the assessment under section 148 of the Income-tax Act, 1961, and the additions made to the income on account of alleged unexplained cash credits and excessive salary payments. The Tribunal found that the reopening of the assessment was procedurally correct but disagreed with the additions made by the Assessing Officer regarding the unexplained cash credits and the disallowance of salaries, leading to a partial allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713039 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: Indian Education Society vs. ACIT- Circle1, Mumbai and Ors. in Writ Petition No. 11683 of 2023, ACIT, Circle-33 vs. Debdas Dutta ITA No. 1595/Kol/2014, Animesh Sadhu vs ACIT in ITA No. 11/Kol/2013, S.A Builders v. CIT (Appeals), [2007] 288 ITR 1 (SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: MONAJ KATARUKA; ISSUE OF NOTICE US
• Keywords: Set aside; Opportunity of being heard; Unexplained cash credit; Fair market value; Onus to prove; Valuation report; Competent authority; Share purchase agreement
• Section: 148; 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 461/KOL/2025 (Assessment Year: 2018-19) M/s Lookline Vincom Pvt. Ltd. 14-C, M.D. Road, 4 th Floor, Kolkata-700007 Vs. Income Tax Officer-6(2), Ward 6(2), Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069, West Bengal (Appellant) (Respondent) PAN No. AACCL2244C Assessee by : Shri Monaj Kataruka, AR Revenue by : Ms. Ranu Biswas, DR Date of hearing: 15.05.2025 Date of pronouncement: 30.07.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 23.01.2025 for the AY 2018-19. 02. The issue raised in first ground of appeal is against the order of ld. CIT (A) confirming the action of the ld. AO of re-opening the assessment by issuing notice u/s 148 of the Income-tax Act, 1961 (the Act), which is a illegal and bad in law. 03. The facts in brief are that the assessee filed the return of income on 13.10.2018, declaring total income at ₹27,720/-. Later on the notice Printed from counselvise.com Page | 2 ITA No. 461/KOL/2025 M/s Lookline Vincom Pvt. Ltd.; A.Y. 2018-19 u/s 148 of the Act dated 06.04.2022 was issued and duly served upon the assessee. The said notice were complied with by the assessee by filing the return of income on 10.04.2022, declaring the same income as in the original return of income. Thereafter, the statutory notices including the questionnaire were issued, which were served upon the assessee. The case of the assessee was reopened on the ground that the assessee has received ₹17,00,000/- from M/s Eclcat Constructions Pvt. Ltd during the financial year which is a shell company and therefore, lacks genuineness and creditworthiness. The above facts were stated in the notice issued u/s 148A(b) of the Act dated 17.03.2022. Thereafter, the assessee submitted the reply to that notice vide letter dated 04.04.2022, a copy of which is available at page no. 16 of the Paper Book submitting therein that assessee received a sum of ₹17 lacs from M/s Eclcat Constructions Pvt. Ltd. in lieu of sale of equity shares which has been received through banking channel and duly disclosed in the books of accounts. The assessee also furnished the sales bill and relevant portion of the bank statement evidencing the receipt of funds. It was submitted that order u/s 148A(b) of the Act was issued on 17.03.2022 mentioning wrong facts as assessee has not received any money without consideration. It was further stated in the notice issued that there was no allegation of any income having been escaped. Thereafter the order u/s 148A(d) of the Act was passed on 06.04.2022, therein a copy of which is available at page no. 17. It was stated in the said order that a credible information was received stating that assessee company has received ₹17 lacs from M/s Eclcat Constructions Pvt. Ltd., which remained unexplained and undisclosed. It was also stated that on going through the return filed by the assessee it was found that this transactions / income has not been included in the ITR and offered to tax. Thereafter, it was stated that the assessee Printed from counselvise.com Page | 3 ITA No. 461/KOL/2025 M/s Lookline Vincom Pvt. Ltd.; A.Y. 2018-19 was allowed an opportunity of being heard as per the provisions of Section 148A(b) of the Act with prior approval of the competent authority, wherein the assessee was given a show cause notice as to why the amount received it bank account from M/s Eclcat Constructions Pvt. Ltd. to the tune of ₹17 lacs should not be treated as income chargeable to tax, which is escaped assessment within the meaning of 147 of the Income-tax Act, 1961 (the Act). Thereafter, the ld. AO simply recorded that the money received from the shell company is liable to be treated u/s 68 of the Act and recorded the reasons that the assessee has failed to include the same in the return of income and thus, it has escaped assessment and accordingly, notice issued u/s 148 of the Act. During the assessment proceedings, the assessee filed before the ld. AO all the details/ evidences qua the said sale of shares by the assessee to M/s Eclcat Constructions Pvt. Ltd. i.e the Copy of bank account, computation of total income, etc. and it was also stated it is not an unsecured loan received from the said party. The assessee also furnished the details comprising ITR, Certificate of incorporation, bank statement, audited accounts of M/s Eclcat Constructions Pvt. Ltd., to substantiate the identity, creditworthiness of the parties and genuineness of the transactions. Finally, the ld. AO in Para 5.1, rejected the contention of the assessee and treated the amount received as accommodation entry recorded by the assessee as sale of shares in the bank of accounts and added to the income u/s 68 of the Act. The ld. AO also made one more addition of ₹73,50,000/- by making adhoc disallowance out of salary paid during the year. The ld. AO noted that salaries paid to 34 employees/ persons is excessive keeping in view the business profile of the company and therefore allowed the salary only for three employees while the remaining salary was disallowed. Printed from counselvise.com Page | 4 ITA No. 461/KOL/2025 M/s Lookline Vincom Pvt. Ltd.; A.Y. 2018-19 04. In the appellate proceedings, the ld. CIT (A) dismissed the appeal on legal issue by observing and holding as under: - “6.1. In Grounds of Appeal No. 1, 2 and 3 [As per Para 3 above] 6.1.1. Please refer to Para 3 for the above grounds. 6.1.2. The above ground pertains to 148A. On examining Order u/s 148A(d), it is seen that an opportunity of being heard was granted to the appellant by issue of notice u/s 148A(b) dated 17.03.2022, as per which a Show Cause Notice was issued to the appellant after prior approval from the Competent Authority and the appellant was issued a show cause as to why notice why notice u/s 148 should not be issued based on the information available with the Ld. AO. The Show Cause Notice was served on the appellant and the appellant was asked to submit the reply on or before 30.03.2022. The appellant submitted reply as per which it admitted on receiving the amount of Rs. 17,00,000/- from M/s Eclat Construction Pvt. Ltd. It was noted by the Ld. AO that as this amount was received from Shell Company, it is liable to be treated as income u/s 168 of Income Tax Act, 1961. The appellant failed to include this income in his return of income and this is an Accommodation Entry given to the beneficiaries, which is layered through several Bank Accounts of the Shell Company to provide benefit to the beneficiary: 6.1.3 In view of the above narration of facts it is clear that the Ld. AO has followed the procedure as laid down in the Income Tax Act. The appellant quoted the decision of Indian Education Society vs. ACIT- Circle1, Mumbai and Ors. in Writ Petition No. 11683 of 2023 dated 04.05.2023 placed with the same issue has admitted the Writ by stating that there was prima facie merits in the argument of the appellant. The above decision quoted by the appellant is considered and the appellant has not brought out as to how the Facts of the Case quoted are similar to appellant's case and hence, it is not clear as to how the above Case Law is applicable to the appellant. 6.1.4. In view of the discussion of the facts and circumstances, I have no doubt in my mind that the case has been validly re-opened by the Ld. AO and after following the due process of law and after seeking necessary approvals, had passed an Order u/s 148A(d) and issued notice u/s 148. Thus, the Grounds raised by the appellant in this regard are rejected.” 05. After hearing the rival contentions and perusing the materials available on record, we find that the ld. AO issued notice u/s 148A(b) dated 17.03.2022, after the ld. AO received information from the investigation wing that the assessee company has received various amounts in the bank account from the shell company which are non-existent and have no creditworthiness. Thereafter it was noted that the assessee has received ₹17 lacs from M/s Eclcat Constructions Pvt. Ltd. which is a shell Printed from counselvise.com Page | 5 ITA No. 461/KOL/2025 M/s Lookline Vincom Pvt. Ltd.; A.Y. 2018-19 company and lacks genuineness and creditworthiness. We note that thereafter, the assessee replied the said notices vide written submission dated 04.04.2022, wherein it was submitted that the assessee received ₹17 lacs from M/s Eclcat Constructions Pvt. Ltd. on account of sale of equity shares and the payments were received through banking channels. The assessee filed all the necessary documents qua the payments received and also in respect of purchase of shares i.e. M/s Eclcat Constructions Pvt. Ltd. comprising copy of ITR, audited accounts, confirmation etc. We also note that in the annexure attached to notice u/s 148A(b) of the Act there has been no whisper about the escapement of income. Thereafter the ld. AO passed the order u/s 148A(d) of the Act dated 06.04.2022, wherein it has been stated that the assessee was given show cause notice and the same was replied. Thereafter in the third last para of the order, the ld. AO simply noted that the amount received from the shell company is liable to be treated as income u/s 68 of the Act. The ld. AO thereafter noted that the assessee has received ₹17 lacs from M/s Eclcat Constructions Pvt. Ltd. in his bank account and failed to include the same in their return of income. Thereafter, simply discussing the modus operandi of the shell companies, the AO noted that ₹17 lacs is required to be added in the income of the assessee and it is a fit case for issuance of notice. Thus, we find that there is infirmity in the procedure followed by the ld. AO in reopening the case and accordingly, the legal issue raised by the assessee is dismissed. 06. The issue raised in ground no.4 is against the confirmation of addition of ₹17 lacs by the ld. CIT (A) as made by the ld. AO on account of sale of investments. 07. The facts in brief are that during the year the assessee company sell 6800 equity shares of M/s Visionniketan Pvt. Ltd. at ₹250, thereby Printed from counselvise.com Page | 6 ITA No. 461/KOL/2025 M/s Lookline Vincom Pvt. Ltd.; A.Y. 2018-19 receiving total consideration of ₹17.00 lacs. The assessee has filed all the evidences in respect of the said transactions comprising sale bill, ledger account, bank statement, share certificate and audited accounts of M/s Eclcat Constructions Pvt. Ltd. as well as valuation report, mentioning the fair market value of the shares. However, the ld. AO simply doubted that M/s Eclcat Constructions Pvt. Ltd. is a shell company with poor financials and treated the transactions as unexplained cash credit. We note that the ld. AO has not taken any steps to verify these transactions on his own and also not commented on the evidences filed by the assessee. The AO has not issued any notice u/s 133(6) of the Act or 131 of the Act and simply jumped to the conclusion that money was received from the shell company which is not correct and against the facts on record. 08. The ld. CIT (A) also simply dismissed the appeal of the assessee on this issue by holding that that the assessee has failed to discharge its burden to prove and held that the assessee has introduced his own money into the books in the curb of sale of investments. 09. In our opinion, the assessee has discharged the burden by furnishing all the evidences before the ld. AO as well as before the ld. CIT (A) but both the authorities below have not commented on the evidences filed by the assessee. In these circumstances, we are not in a position to sustain the addition. We note that the ld. CIT (A) has not given any finding as to how the assessee has introduced his own money into its books of accounts and simply acted on presumption and surmises. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground no. 4 is allowed. Printed from counselvise.com Page | 7 ITA No. 461/KOL/2025 M/s Lookline Vincom Pvt. Ltd.; A.Y. 2018-19 010. The second issue raised is against the confirmation of addition of ₹73,53,000/- by the ld. CIT (A) as made by the ld. AO on account of disallowance of salaries. 011. The facts in brief are that the ld. AO noted that the assessee has paid salaries to 34 employees which in his opinion is excessive and unreasonable keeping in view the profile of the company. Thus, the ld. AO allowed salary of three employees aggregating to ₹7,20,000/- while the salary relating to remaining 31 employees were disallowed and added to the income. 012. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO by observing and holding as under: - “6.3.2. It was noticed by the Ld. AO that the appellant has received interest income of Rs. 83,31,165/- from 19 Parties/Entities. Against this, the appellant has claimed salaries of Rs. 80,70,000/-. The appellant filed list of 34 persons to whom salary was paid at an average rate of Rs. 2,20,000 to 2,40,000/-. The Ld. AO was of the view that when the appellant was just receiving interest from 19 Parties/Entities then why does the Company need 34 persons for such a work. The Ld. AO asked for details such as: a. Details of work assigned to each employee. b. Performance of duty done by each employee. C. Mode of Payment made to examine the actual payment of salary. The appellant could not produce the above details to the Ld. AO. During the appellate proceedings also, in his submission, the appellant has just quoted the following decisions, ACIT, Circle-33 vs. Debdas Dutta ITA No. 1595/Kol/2014 dated 15-12-2017 and Animesh Sadhu vs ACIT in ITA No. 11/Kol/2013 dated 12.11.2014. No details as enumerated above have been submitted by the appellant during the appellate proceedings and hence, I find no reason to interfere in the Order passed by the Ld. AO. Also, the Decision quoted by the appellant are pertaining to additions made on estimate basis which is not the case in the present addition and hence, the above decision have not been considered. 6.3.3. In view of the above discussion of facts and circumstances, this ground is rejected” 013. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has employed these employees on Printed from counselvise.com Page | 8 ITA No. 461/KOL/2025 M/s Lookline Vincom Pvt. Ltd.; A.Y. 2018-19 regular basis and these employees were being paid salaries constantly from the earlier assessment years. Both the authorities below have not point out any defect in the payments made by these employees and simply acted on the presumption that the salary is excessive and unreasonable. It is the domain of the assessee how to run the business and how many employees are to be employed in the company and the tax authorities have no role to play in the running of the business of the assessee. The ld. AO cannot be allowed to step into the shoe of the businessman. The case is squarely covered by the decision of Hon'ble Apex Court in case of S.A Builders v. CIT (Appeals), [2007] 288 ITR 1 (SC). Accordingly, we are inclined to set aside the order of CIT (A) and direct the ld. AO to delete the addition. 014. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 30.07.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 30.07.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata Printed from counselvise.com "