ITAT Kolkata: Section 68 Addition Remanded as Assessee Claims Share Sale Proceeds; Reopening Upheld Despite Service Challenge

Key Facts and Tribunal Findings

The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, partly allowed the appeal of Narayan Barter Pvt. Ltd. for Assessment Year 2011–12, remanding the issue of addition under Section 68 to the Assessing Officer while upholding the validity of reassessment proceedings. The assessee had declared nominal income of ₹375 but was subjected to reassessment under Section 147 based on information from the Investigation Wing indicating receipt of ₹81.50 lakh. The Assessing Officer treated the amount as unexplained cash credit under Section 68 read with Section 115BBE, citing failure to establish identity, creditworthiness, and genuineness of the parties.

The assessee contended that the receipts represented sale proceeds of investments in shares, reinvested in other companies through banking channels. It argued that transactions were duly recorded in audited books and supported by bank statements. However, due to lapse of time and closure of counterparties, it could not furnish PAN and address details necessary for independent verification. The CIT(A) upheld both the reopening and the addition, relying on the absence of verifiable details and inability of the Assessing Officer to issue notices under Section 133(6).

Before the Tribunal, the assessee also challenged the validity of reassessment on the ground that notice under Section 148 was not served within the prescribed time. The Tribunal rejected this contention, holding that issuance of notice within limitation is sufficient to confer jurisdiction, while service is not a precondition for validity of reopening. On the substantive issue, the Tribunal noted that the assessee’s claim of sale of investments had not been adequately examined. In the interest of justice, it set aside the order of the CIT(A) and remanded the matter to the Assessing Officer for fresh adjudication.

Legal Analysis

The Tribunal reaffirmed the distinction between “issue” and “service” of notice under Section 148, holding that jurisdiction is validly assumed upon issuance within limitation. On Section 68, the decision underscores that the burden to establish identity, genuineness, and creditworthiness remains critical. However, where a plausible explanation supported by primary records exists but has not been fully examined, remand is appropriate to ensure adjudication on merits.

The ruling reflects a balanced approach, sustaining procedural validity while reopening factual examination of the addition.