Authority: Calcutta High Court, Special Jurisdiction (Income Tax)

Order Date: 07 August 2026

Case Overview

  • Parties: Appellant – Ajitnath Suppliers Private Limited (private limited company) and its director; Respondent – The Principal Commissioner of Income Tax‑1, Kolkata and others.
  • Nature of proceedings: Appeal under Section 260A of the Income Tax Act, 1961 (ITAT 120 of 2026) challenging the Income Tax Appellate Tribunal’s order dated 23 June 2025 (ITA No. 334/Kol/2025).
  • Background: For AY 2018‑19, the assessee filed its return on 31 Oct 2018 reporting total income of ₹34,96,733. The assessing authority, based on a report alleging “paper conduit” entities, levied an ex‑parte addition of ₹1,23,50,000 under Section 68, resulting in a total tax demand of ₹1,81,74,868. The CIT(A) dismissed the appeal ex‑parte on 19 Dec 2024, violating Section 250(6). The ITAT set aside the CIT(A) order but conditioned remand on payment of ₹1,00,000 to Legal Aid Services within 60 days, with a self‑executing clause that non‑payment would automatically confirm the CIT(A) order.
  • The appellant failed to pay the cost, leading to automatic confirmation of the ₹1.23 crore addition. The appellant filed a memorandum of appeal on 23 Apr 2026, seeking condonation of a 154‑day delay (GA No. 1 of 2026) and a stay of the ITAT order (GA No. 2 of 2026).
  • Substantial questions of law raised: (i) Whether the Tribunal erred by making the CIT(A) order automatically confirm on non‑payment of cost; (ii) Whether imposing a heavy monetary pre‑condition violates the right of appeal; (iii) Whether the Tribunal should have remanded unconditionally; (iv) Whether the addition under Section 68 is sustainable.

Final Outcome

  • The Court allowed ITAT 120 of 2026 in part and disposed of GA No. 2 of 2026.
  • The ITAT’s order dated 23 June 2025 is modified: the cost of ₹1,00,000 is reduced to ₹25,000 and the automatic‑confirmation clause is quashed.
  • The appellant must deposit ₹25,000 with Legal Aid Services, High Court, Calcutta within four weeks of receiving the judgment and produce proof before the CIT(A).
  • Assessment proceedings for AY 2018‑19 are restored unconditionally to the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, for a fresh de novo adjudication.
  • The appellant must appear on the first hearing before the CIT(A) and cooperate fully, submitting all books, bank statements, and evidence regarding the unsecured loan.
  • The CIT(A) is directed to consider the documentary evidence and pass a reasoned speaking order in compliance with Section 250(6) within 12 weeks of receipt of the judgment copy.
  • No coercive recovery steps for the ₹1,23,50,000 addition may be taken until the fresh appellate order is passed.
  • GA No. 1 of 2026 (delay condonation) is allowed; the 154‑day delay is deemed sufficient cause.

Topics: Tax Litigation, Judicial Review, Procedural Justice