SUMIT AGGARWAL,DELHI vs. ITO WARD 36 (1), NEW DELHI

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ITA 4169/DEL/2026Status: DisposedITAT Delhi06 August 2026AY 2018-196 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that if an assessee is found to be providing accommodation entries, only the commission earned on such transactions is taxable. The Tribunal reduced the estimated commission income to 0.15% of the alleged accommodation entry value.

What were the facts?

The assessee, engaged in scrap iron trading, filed his return of income. The AO initiated reassessment proceedings under Section 148A and 148, alleging unexplained credit entries and treating them as accommodation entries. The AO made an addition of INR 1,48,38,000/- as commission income.

What were the issues?

Whether the entire transaction value or only commission income is taxable when accommodation entries are provided, and what is a reasonable rate for estimating such commission income.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 147,Section 143(2),Section 142(1),Section 151(ii),Section 250,Section 131(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI

Before: SHRI S. RIFAUR RAHMAN & SHRI VIMAL KUMAR

For Respondent: Ms. Harpreet Kaur Hansra, Sr. D.R
Hearing: 25.06.2026Pronounced: 06.08.2026

PER S. RIFAUR RAHMAN, AM:

The assessee has filed appeal against the order of the learned CIT(A) NFAC, Delhi [“ld. CIT(A)”, for short] dated 12.03.2026 u/s 250 of the Income Tax Act, 1961 (for short ‘the Act’).

2 ITA No. 4169/Del/2026 Sumit Aggarwal 2. After considering the facts the issue himself given back AO only, the assessee has raised ground no. 2 with the plea that the notice issued u/s 148 of the Act without obtaining approval from specified authority as per section 151(ii) of the Act.

3.

Aggrieved with the above order, the assessee is in appeal before us raising the following grounds of appeal:

“1. On the facts and circumstances of the case, the orders passed by Ld. CIT(A) is bad both in eyes of law and on facts. 2. That the Ld. AO has erred in law and on facts in issuing the notice under section 148 of the Act without obtaining approval from specified authority as prescribed under section 151(ii) of the Act. 3. That the Ld. CIT(A) has erred in law and on facts by confirming the alleged commission income of INR 1,48,38,000/- at the rate of 3% of the debit and credit entries appearing in the bank statement of the appellant. 4. That the Ld. CIT(A) has erred in law by not providing reasonable opportunity of being heard to the assessee. 5. That the appellant reserves the right to add, modify, alter, amend or delete any of the grounds.”

4.

At the time of hearing, the ld. AR of the assessee brought our notice that the appeal is arising out of Assessment Order dated 20.03.2024 passed u/s 147 r.w.s. 1448 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") by the Assessment Unit, Income Tax Department (hereinafter called "the Ld. AO") for the A.Y. 2018-19. That the assessee is the proprietor of Shree Shyam Enterprises and is engaged in trading of scrap iron during the relevant assessment year and duly filed his return of income declaring total income at Rs. 12,23,890/-. The assesse was

3 ITA No. 4169/Del/2026 Sumit Aggarwal issued a notice under section 148A(b) of the Act, dated 21.03.2022, wherein, on the basis of alleged STR report, not provided to the assessee, it was alleged by the Ld. AO that there was unexplained credit to the tune of Rs. 24,73,00,000/- received by the assessee. The assessee raised objections to issuance of notice under 148A(b) of the Act and requested time to collate data in order to sufficiently explain the sale ledger and invoices. The Ld. AO, disregarded the request of the assessee and proceeded to pass an order u/s 148A(d) of the Act on 03.04.2022 with prior approval of PCIT-12, Delhi, whereby, the Ld. AO deemed the case of the assessee to be a fit case for issuance of notice u/s 148 of the Act. Consequently, notice under section 148 of the Act was issued on 03.04.2022. Thereafter, statutory notice u/s 143(2) of the Act and notices under section 142(1) of the Act were issued which were duly responded to and the detail as called for was provided by the assessee. The Ld. AO proceeded to issue a show cause notice, dated 29.02.2024, whereby Ld. AO gave a final opportunity to the assessee to respond as to why the transactions should not be considered accommodation entry and addition of Rs. 1,48,38,000/- should not be made to the income of the assessee being commission income. The Ld. AO without providing sufficient time to the assessee to respond to the show cause notice and without considering the evidence produced during the assessment proceeded to pass an assessment order u/s 147 of the Act dated 20.03.2024 whereby the addition of

4 ITA No. 4169/Del/2026 Sumit Aggarwal 1,48,38,000/- was made to the income of the assessee. That assessee has grievance against said addition, hence this appeal is being preferred. 5. Further submitted that where the assessee is treated as an accommodation entry provider, only commission income earned on such transactions can be brought to tax, and not the entire transaction value or inflated percentage estimates. The estimation of commission al 3% is excessive and not supported by judicial precedents in similar cases involving entry operations or business entities engaged in the business of scrap. In identical matters, various Benches of the Hon'ble ITAT have consistently held that only commission income is taxable in such cases and the same should be restricted to a reasonable range, generally between 0.10% to 0.15%, depending upon the facts and nature of routing of transactions. In this regard, reliance is placed on the decision of the Hon'ble ITAT, Delhi Bench in Shri Ram Prakash Bhatia vs DCIT, ITA Nos. 1477 to 1481/Del/2024 (order dated 24.12.2025), wherein the Hon’ble Tribunal, while treating the Assessee as an accommodation entry operator, held that only commission income is liable to be taxed and directed estimation of income at 0.15% of the total credit entries, observing that such rate takes care of multiple routing of transactions and nature of entry operations. The said judgment is enclosed herewith and marked as Annexure-1. Further support is drawn from the decision of the Hon'ble ITAT, Kolkata Bench in DCIT, Central Circle-4(4), Kolkata vs Odyssey Securities Pvt. Ltd., ITA No. 1099/Kol/2025 (order dated

5 ITA No. 4169/Del/2026 Sumit Aggarwal 26.08.2025) wherein the Hon'ble Tribunal upheld estimation of commission income at 0.10% of total turnover, holding that where assessee is engaged in providing accommodation entries, only commission income is to be assessed and estimation at 0.10% is reasonable based on material on record and statements recorded during survey. The said judgment is enclosed herewith and marked as Annexure-2.

6.

On the other hand, the ld. DR relied on the detail findings of the ld. CIT(A).

7.

Considered the rival submissions and materials placed on record. We observed that the statement of the assessee recorded u/s 131(1A), the bank accounts operated by him which are in his own name and which are in the name of others. Keeping in view, the entirety of the accommodation entries, we do not hesitate to hold that the assessee was found to be providing accommodation entries, that being the case, the assessee was involved only to earn commission income in these transactions. The co-ordinate bench held in the case of Shri Ram Prakash Bhatia (supra) that only commission is liable to tax and held that 0.15% may be estimated over the total credit. Therefore, we are inclined to direct the AO to estimate 0.15% of the alleged accommodation entry may be sustained. Accordingly, the grounds raised by the assessee is partly allowed.

6 ITA No. 4169/Del/2026 Sumit Aggarwal 8. In the result, the appeal filed by the assessee is partly allowed.

Order is pronounced in the Open Court on 06.08.2026

Sd/- Sd/- (VIMAL KUMAR) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 06.08.2026 *GP/Sr.PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(E) 4. CIT 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

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