SANATHAN TEXTILES LTD.,SILVASSA V. DCIT, CIRCLE 11(1), KOLKATA

ITA 2342/KOL/2025

AI Insights

Sanathan Textiles Ltd. appealed against the order of the Commissioner of Income Tax (Appeals) which had confirmed the additions made by the Assessing Officer under section 69A of the Income Tax Act, 1961, alleging that the company had received unexplained money amounting to Rs.2,35,29,487 through accommodation entries. The Tribunal noted procedural issues in the handling of the case, particularly the lack of opportunity for the assessee to cross-examine third-party statements and the need for a detailed examination of the evidence provided by the assessee, which included commercial invoices and bank statements. The Tribunal also considered the legal arguments regarding the validity of the notice issued under section 148 of the Act, which was contested based on recent Supreme Court rulings.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 846132 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Kolkata
• Assessment Year: 2015-2016
• Appeal Filed On: 16-10-2025
• Other Referred Cases: Union Of India VS Rajiv Bansal, Union Of India Vs. Ashish Agarwal, Precision Finance, Calcutta High Court in Precision Finance
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PASSING A SPEAKING
• Keywords: Set aside; Opportunity of being heard; Revised return; Accommodation entries; Cancellation of registration; Bogus
• Section: 147; 148; 142(1); 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘D’ BENCH AT KOLKATA Before SHRI SONJOY SARMA, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No(s).: 2342/KOL/2025 Assessment Year(s): 2015-16 Sanathan Textiles Ltd. Vs. DCIT, Circle-11(1), Kolkata (Appellant) (Respondent) PAN: AAJCS6021P Appearances: Assessee represented by : S.S. Gupta, FCA. Department represented by : S.B. Chakraborthy, Addl. CIT, Sr. DR. Date of concluding the hearing : 12-February-2026 Date of pronouncing the order : 27-March-2026 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the Assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [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 2015-16 dated 18.08.2025. The assessee sought adjournment which was withdrawn. 2. The Assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. For that the Orders passed by the lower authorities are arbitrary, erroneous, without proper reasons, invalid and bad-in-law, to the extent to which they are prejudicial to the interests of the appellant. 2. For that the Ld. CIT (A), NFAC ought to have considered that the original scrutiny assessment proceedings for the A. Y. 2015-16 were completed u/s 143 (3) of the Income Tax Act, 1961 by the JAO accepting the return of total income for the A. Y. 2015-2016 and has erred in confirming the action of the A. O. for subsequent re-assessment proceedings u/s 147 Printed from counselvise.com Page | 2 ITA No.: 2342/KOL/2025 Assessment Year: 2015-16 Sanathan Textiles Ltd. initiated without bringing any independent, reliable and corroborating evidences brought on record by the Id. A. O. in support of his arbitrary inferences that the genuine transactions of appellant were accommodation entries as per reasons of re-opening assessment as furnished by A. O. 3. For that the Ld. CIT (A), NFAC has grossly erred in considering the fact that reasons for re-opening assessment as stated by the A. O. was merely based on information received from Police Inspector, Police Station, Salabatpura, Surat on 29.01.2021 regarding interception of Cash amounting to Rs.39,72,200/- from the custody of two Individuals namely, Shri Rizwanahmed Raeesahmed Ansari (PAN AEQPA3090L) and Shri Unnesh Mohammed Naim Ansari (No PAN) while riding on a motor cycle. Subsequently, the said Cash was seized by warrant u/s 132A of the I. T. Act by DIT (inv.), Surat on 05-03-2021 i. e. during the f. y. 2020 - 2021. However, the assessee Company time and again submitted that it has never ever entered into any transactions whatsoever with the said individuals against whom proceedings were initiated namely, Shri Rizwanahmed Raeesahmed Ansari (PAN AEQPA3090L) and Shri Unnesh Mohammed Naim Ansari (No PAN) or M/s Sai Textiles. 4. For that the Ld. CIT (A), NFAC has erred in confirming the action of the A. O. relying on the statement given by the third party, namely, Shri Rizwanahmed Raeesahmed Ansari (PAN AEQPA3090L) during the f. y. 2020-2021 that they were also providing accommodation entries as well and the re-assessment proceedings were initiated against the assessee in respect of the A. Y. 2015-2016 on the basis of an incomplete enquiry which was not concluded since the party was untraceable since questioned and completely ignoring the fact that the assessee has not entered into any transactions whatsoever with these Individuals and / or M/s Sagar Textile Prop. Shahid Rahij Ansari PAN APJPA7865B during the said f. y. 2020-2021. 5. For that the Ld. CIT (A), NFAC erred in confirming the action of the A.O. in making addition of Rs.2,35,29,487/- u/s 69A of the Income Tax Act, 1961 for the reason of subsequent cancellation of CST registration on 31- 03-2015 whereas the transactions with the said party M/s Sagar Textile Prop. Shahid Rahij Ansari PAN APJPA7865B of Kumbha Circle, Shiv Mandir Ke Piche, Bhilwara, Rajasthan, a registered Dealer having VAT TIN No. 08521057906 and CST No. 08521057906 were entered by the appellant Company before 31-03-2015. 6. For that the Ld. CIT(A), NFAC ought to have properly considered all the facts, relevant details and supporting documents like Commercial Invoices, Insurance, Excise Invoices, Lorry Receipts, Bank Statements etc. submitted by the Appellant in support of transactions for sale of manufactured yarn totalling Rs. 3,88,00,210/-made to M/s Sagar Textile Prop. Shahid Rahij Ansari PAN APJPA7865B during the f. y. 2014 2015 Printed from counselvise.com Page | 3 ITA No.: 2342/KOL/2025 Assessment Year: 2015-16 Sanathan Textiles Ltd. and ought not to have summarily rejected these legitimate documentary evidences as well as the contentions raised by the appellant in respect of the issues involved in appeal. 7. For that the Ld. CIT (A), NFAC ought to have appreciated the fact that the Assessing Officer had not provided any opportunity at all to the appellant to cross-examine the untested statements recorded of third party, namely, Sri Deepak Goyal, Director of M/s Starmint Fields Pvt. Ltd. and Rizwan Ahmed Raees Ahmed Ansari which have both been recorded at the back of the assessee Company having no relation, direct or indirect, with the assessee Company. 8. For that the appellant craves leave to amend, alter, modify, substitute, add to, abridge and / or rescind any or all of the above Grounds.” 2.1 The assessee has filed additional grounds of appeal on 13.01.2026 as under: “1. \"That the Ld. Assessing Officer erred in law as well as in facts in making the assessment u/s. 147 r/w section 144B of the Income Tax Act, 1961 in as much as in view of the facts and circumstances of the case assessment u/s. 147 r/w. 144B was not at all called for and is contrary to the law laid down by the Hon'ble Supreme Court in the Case of Union Of India VS Rajiv Bansal 449 ITR 46,92 (SC)\" 2. \"That the Ld. AO erred in law as well as in facts in omitting to consider and follow the provisions of first proviso to sec 149 and not following the directions of Hon'ble Supreme Court in the case of Union Of India Vs. Ashish Agarwal 444 ITR 1(SC) in as much as in view of the facts and circumstances of the case no such notice u/s. 148 as issued on 31-07- 2022 could have been issued” 3. Brief facts of the case are that the assessee is a company and had filed its return of income declaring NIL income. The assessee company is engaged in the business of manufacturing of polyester oriented yarn, texturizing and twisting yarns and cotton yarn. According to the information available with the Department, the assessee allegedly availed accommodation entries amounting to ₹2,35,29,487/- through M/s. Sai Textiles and M/s. Sagar Textiles, which were found to be paper concerns. Notice u/s 148 of the Act was Printed from counselvise.com Page | 4 ITA No.: 2342/KOL/2025 Assessment Year: 2015-16 Sanathan Textiles Ltd. issued to the assessee which was treated as show cause notice u/s 148A(b) of the Act in response to which the assessee filed its reply and also filed its revised return of income. Further, notices u/s 143(2) and 142(1) of the Act were issued which were also complied with by the assessee. The Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the assessee company had failed to prove the genuineness of the transaction and the accommodation entries amounting to ₹2,35,29,487/- received by the assessee remained unexplained and were added to the total income of the assessee as unexplained money u/s 69A of the Act and assessed u/s 143(3)/147 of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who vide order dated 18.08.2025 dismissed the appeal of the assessee by holding as under: “2.1 The AO's enquiry did not rest only on cancellation status or GSTIN but was rooted in physical, documentary, and banking investigation, which proved non-existence of business activity. Subsequent cancellation and inactivity, while indicative, were supported by Inspector's reports and non-response to statutory notices. The inability of the counterparty to be traced at the declared address, together with the pattern of bank account operations, indicates that the transactions were not genuine and the claim of valid sales is not substantiated beyond the documents self-generated by the assessee. 2.2 As rightly found by the AO, mere submission of self-generated invoices, lorry receipts, and evidence of RTGS payments do not establish genuineness, especially when the buyer is proved to be a paper entity and cannot be traced, and when the flow of funds is circular, as observed by the bank account trail. The AO has clearly established, consistent with judicial precedents, that banking compliance and book entries alone cannot bestow legitimacy on a transaction if the counterparty is not a real business. The Hon'ble Calcutta High Court in Precision Finance (supra) and other courts have reinforced this principle. Moreover, the fact that regulatory authorities (Excise/Sales Tax) did not object does not bind income-tax proceedings, which are independent and can rely on fresh evidence absent in those proceedings. Printed from counselvise.com Page | 5 ITA No.: 2342/KOL/2025 Assessment Year: 2015-16 Sanathan Textiles Ltd. 2.3 The AO's decision for reopening was based on concrete information from law enforcement and the Investigating Wing, corroborated by banking evidence, non-response to summons, Inspector's report, and non- existent business establishment at declared addresses. The assessee had the opportunity to respond to every show-cause and did not specifically request cross-examination during the course of assessment, nor did he provide any rebuttal evidence. Furthermore, the statements of third parties serve as a basis for further investigation; the ultimate decision relied on both documentary findings and independent enquiries, and not merely the statements alone. Therefore, the addition of 2,35,29,487/- made u/s 69A is hereby sustained in full. The appeal is dismissed.” 4. Aggrieved with the order of the Ld. CIT(A), the Assessee has filed the appeal before the Tribunal. 5. Rival contentions were heard and the submissions made have been examined. It was stated by the Ld. AR that in view of the decision of Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)/[2024] 301 Taxman 238 (SC)/[2024] 469 ITR 46 (SC)[03-10-2024] the notice issued u/s 148 of the Act dated 31.07.2022 was invalid as a deeming provision does not apply for AY 2015-16. TOLA was applicable for AY 2014-15 and AY 2015-16 only and the notice should have been issued following the new provisions. Therefore, the notice issued on 31.07.2022 was invalid. The Ld. DR, on the other hand argued that the surviving period would apply. As regards the addition made the assessee had made a detailed submission before the Ld. CIT(A) stating that sufficient evidence was filed before both the authorities, but the same were not considered. The payments were made through RTGS which are also not considered. The transaction were held as bogus merely because the notices could not be served and the registration of the Printed from counselvise.com Page | 6 ITA No.: 2342/KOL/2025 Assessment Year: 2015-16 Sanathan Textiles Ltd. parties was cancelled subsequently, while the transactions had been carried out much earlier. It was stated that the notices under section 133(6) of the Act and the cancellation of registration by the GST Department took place much after the transactions had been carried out and therefore, the same do not make the transactions as non- genuine. The assessee has sufficient evidence for proving the genuineness of the transactions. 7. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The Bench noted that the additional ground of appeal raised before the Bench was never raised before the Ld. CIT(A) and as has been rightly pointed out by the Ld. DR, the same requires calculation of the surviving period on the facts of the case to arrive at a decision relating to limitation as per the decision in the case of Rajeev Bansal (supra) read with the decision in the case of Union of India v. Ashish Agarwal [2022] 138 taxmann.com 64 (SC). After examining the facts of the case and the law, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the appeal back to him for disposal of the grounds of the appeal taken by the assessee by passing a speaking order and to decide the appeal afresh as the submission of the assessee on the merits have also not been properly appreciated. The assessee shall be at liberty to raise all legal issues before the Ld. CIT(A). Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of the grounds of appeal and shall not seek unnecessary adjournments and rule 46A of the I.T. Rules, 1962 shall also be followed and an opportunity of being heard may be provided Printed from counselvise.com Page | 7 ITA No.: 2342/KOL/2025 Assessment Year: 2015-16 Sanathan Textiles Ltd. to the Ld. AO, if required. Accordingly, the grounds taken by the assessee in its appeal are partly allowed for statistical purposes. 9. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 27th March, 2026. Sd/- Sd/- [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 27.03.2026 Bidhan (Sr. P.S.) Printed from counselvise.com Page | 8 ITA No.: 2342/KOL/2025 Assessment Year: 2015-16 Sanathan Textiles Ltd. Copy of the order forwarded to: 1. Sanathan Textiles Ltd., SRV No.187/4/1/2, Near Surangi Bridge, Surangi, Silvassa S.O., Silvassa, Dadra And Nagar Haveli, 396230. 2. DCIT, Circle-11(1), Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata Printed from counselvise.com "