ITAT Deletes Rs 1.44 Crore Unexplained Investment Addition Under Section 69, Says Investments Were Recorded in Books:

The ITAT Kolkata Bench has deleted an addition of Rs 1.44 crore made under Section 69 of the Income Tax Act, 1961, holding that the provision applies where investments are not recorded in the books of account. The Tribunal observed that the assessee, Jagriti Investment Pvt. Ltd., had duly recorded the disputed transactions in its books.

The case pertained to Assessment Year 2016-17. The assessee had received Rs 70 lakh from M/s Polygon Tradecom and Rs 74 lakh from M/s Prajapati Commosale Pvt. Ltd. on April 21, 2015. According to the assessee, the amounts were paid to these entities for purchasing unquoted shares.

The assessment was reopened based on information available on the Income Tax Department’s Insight portal, which categorised the case as a high-risk CRIU/VRU case. The concerned tax authorities had collected the information during the course of the search operation conducted on March 8, 2022, under Section 132 of the Act, on the premises linked to Shri Kailash Kumar Patwari and other persons. The investigation report indicated that the two entities were allegedly involved in providing accommodation entries.

Relying on the investigation report, the Assessing Officer (AO) treated the entire investment amounting to Rs 1.44 crore received by the assessee as unexplained under Section 69 and made an addition of the entire amount to the assessee's income. When the aggrieved assessee approached the first appellate authority, i.e., the Commissioner of Income Tax (Appeals) [CIT(A)], the impugned addition was sustained.

On appeal, the Income Tax Appellate Tribunal (ITAT) noted that the assessee had recorded both transactions in its books as purchases of unlisted equity shares. The tribunal held that "the provisions of section 69 of the Act are applicable where the assessee has not recorded the investments in the books of accounts and not otherwise. But in the present case the assessee has duly recorded the transactions into the books of account as purchase of new unlisted equity shares from these two entities. Therefore, the order passed by the ld. AO and as sustained by the ld. CIT (A) are wrong and cannot be sustained."

Accordingly, the ITAT Kolkata set aside the appellate order and directed the Assessing Officer to delete the Rs 1.44 crore addition. The assessee’s appeal was allowed.