[Cites 5, Cited by 0]
Calcutta High Court
Principal Commissioner Of Income Tax-2 vs M/S Express Tradelink Pvt. Ltd on 4 February, 2026
Author: Rajarshi Bharadwaj
Bench: Rajarshi Bharadwaj
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION
ORIGINAL SIDE
ITAT 95 OF 2025
IA NO: GA 2 OF 2025
PRINCIPAL COMMISSIONER OF INCOME TAX-2, KOLKATA
VS
M/S EXPRESS TRADELINK PVT. LTD.
BEFORE:
THE HON'BLE JUSTICE RAJARSHI BHARADWAJ
AND
THE HON'BLE JUSTICE UDAY KUMAR
For the Appellant : Mr. Soumen Bhattacharjee, Ld. Adv.
Mr. Ankan Das, Ld. Adv.
Mr. Raunak Seal, Ld. Adv.
Ms. Shradhya Ghosh, Ld. Adv.
For the Respondent : Mr. Subhas Agarwal, Ld. Adv.
Mr. Rajarshi Chatterjee, Ld. Adv.
Mr. Amit Shaw, Ld. Adv.
Hearing concluded on : 05.01.2026
Judgment on : 04.02.2026
Uday Kumar, J:-
1. This appeal, preferred by the Revenue under Section 260A of the Income
Tax Act, 1961 ("the Act"), is directed against the order passed by the
Income Tax Appellate Tribunal (ITAT), "B" Bench, Kolkata, dated 8th
February, 2024, in ITA No. 43/Kol/2021 for the Assessment Year 2009-
10. The Revenue has primarily challenge the deletion of an addition of Rs.
7,26,50,000/- made by the Assessing Officer (AO) under Section 68 of the
Act on account of unexplained share capital and share premium.
2. The revenue has proposed the following substantial questions of law for
consideration:
i. Whether the Learned ITAT has committed substantial error in law
in deleting the addition of Rs 7,26,50,000/- on account of
unaccounted cash credit of share capital and premium, ignoring
the facts that the assessee failed to prove the identity of the
alleged shareholders, their creditworthiness and also the
genuineness of the whole transaction?
ii. Whether the Learned ITAT has committed substantial error in law
in coming to the conclusion that the assessee had discharged the
initial onus which lay upon him in terms of section 68 of the
Income Tax Act, 1961?
iii. Whether the Learned ITAT has committed substantial error in law
in appreciating the facts in proper prospective while concluding in
favor of the assessee?
iv. Whether the Learned ITAT has committed substantial error in law
in not following the judicial Principles laid down in the matter of
Pr. CIT (Central)-2, Kolkata Vs M/s BST Infratech Ltd.
Ι.Τ.Α.Τ./67/2024 dated 23.04.2024 which is an earlier decision of
Hon'ble High Court having a Precedence value.
v. Whether the Learned ITAT has committed substantial error in law
in giving the verdict in favor of the assessee where the matter of
unaccounted cash credit of share capital and premium under
section 68 of the Act is involved which attracts the Exceptional
Clause as stated in para 3.1h of Board's Circular dated 5/2024
dated 15/03/2024?
vi. Whether the Learned Tribunal has committed substantial error in
law by not considering the principles laid down in the Doctrine of
"source of source" and Doctrine of "origin of origin" while passing
the impugned order?
3. We have heard Mr. Soumen Bhattacharjee, the learned Advocate for the
Revenue and Mr. Subash Agarwal, the learned Advocate for the
respondent-assessee.
4. The focal point of the Revenue's grievance is that the learned Tribunal
failed to appreciate the "Test of Human Probability." It is contended that
the nine subscriber companies, while being income-tax assessees,
declared meagre income which bore no rational proportion to the high
share premium paid. Further, the Revenue places heavy reliance on the
non-appearance of the directors of these companies in response to
summons issued under Section 131 of the Act.
5. We have carefully perused the records and the findings of the learned
Tribunal. It is observed that the respondent-assessee had placed a
voluminous "Paper Book" before the authorities, which included PAN
details, share application forms, allotment advices, bank statements, ITR
acknowledgments, and audited financial statements of all nine corporate
subscribers.
6. The law on Section 68 is no longer res integra. Once the assessee offers a
reasonable explanation supported by "Cast Iron" documentary evidence
of identity and banking flow, the initial statutory onus stands discharged.
The burden then shifts squarely to the Revenue. The AO cannot merely
brush aside audited balance sheets and PAN details as "paper
compliance" without bringing on record contrary evidence to impeach the
veracity of such documents.
7. A significant portion of the Revenue's argument rests on the non-
appearance of the subscribers' directors. We reiterate our settled view
that personal appearance is not a statutory substitute for documented
financial traceability. The AO is vested with co-terminus powers under
Section 131. If the AO fails to utilize these powers to compel attendance
or to seek verification from the creditors' respective Assessing Officers,
the Revenue cannot visit the consequences of such investigative failure
upon the assessee. Suspicion, however strong, cannot replace evidence.
8. Regarding the Revenue's reliance on the decision of the Hon'ble Supreme
Court in PCIT vs. NRA Iron & Steel (P) Ltd., we find the same to be
fundamentally misplaced. That case dealt with "phantom" entities where
notices were returned unserved. In the present case, the investors are
traceable taxpayers who confirmed the transactions through Section
133(6) responses. To equate "traceable investors" with "phantom entities"
is a leap in logic that this Court cannot countenance.
9. Furthermore, for the Assessment Year 2009-10, the "Source of Source"
doctrine remains inapplicable as the proviso to Section 68, introduced by
the Finance Act, 2012, is prospective. The Tribunal noted that the
subscribers possessed substantial Net Worth (Reserves and Surplus) far
exceeding the investment amounts, thereby satisfying the
creditworthiness test.
10. In a corporate assessment, documented traceability through legitimate
banking channels carries greater evidentiary weight than the subjective
suspicion of an officer. Terms like "money laundering" or "round-tripping"
should not be used casually without specific, corroborative evidence
showing a "live link" that the funds originated from the assessee's own
coffers. No such evidence has been brought on record by the Revenue.
11. In the result, we find no perversity in the findings of the learned
Tribunal. The findings are based on a sound appreciation of facts and
settled legal principles. Consequently, no substantial question of law
arises for consideration.
12. The appeal being ITAT 95 of 2025, filed by the Revenue stands dismissed,
and the connected stay application, IA NO: GA/2/2025, also stands
dismissed.
13. There shall be no order as to costs.
14. Urgent certified copy of this judgment, if applied for, be issued to the parties on
usual terms.
I AGREE
(RAJARSHI BHARADWAJ, J.) (UDAY KUMAR, J.)
