ENNORE PROCON PVT LTD,MUMBAI vs. INCOME TAX OFFICER 6(2)(4), MUMBAI

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ITA 4170/MUM/2024Status: DisposedITAT Mumbai07 July 2026AY 2012-1323 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's additional grounds of appeal. It found that the reassessment proceedings were initiated in violation of the first proviso to Section 147 of the Act and that the Assessing Officer relied on borrowed satisfaction without independent application of mind.

What were the facts?

The assessee challenged reassessment proceedings initiated based on information from the Investigation Wing regarding suspicious transactions of M/s. Raves Trades Pvt. Ltd. The information suggested M/s. Raves Trades Pvt. Ltd. was a paper company routing funds for commission, with directors being untraceable and business addresses being fictitious.

What were the issues?

Whether reassessment proceedings were validly initiated without independent application of mind by the Assessing Officer and in compliance with the first proviso to Section 147.

Which sections of the Income-tax Act were involved?

Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SANDEEP GOSAIN & GIRISH AGRAWAL

PER SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. incomeTaxofficer6(2)(4) vide DIN: ITBA/NFAC/S/250/2023- 24/1060276743(1) dated 10-Jul-2024 for the Assessment Year 2012-13.

2.

At the outset, we noticed that an application for admission of additional grounds has been filed by the assessee. The Assessee has raised the following additional grounds:

1.

In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of Ld. Assessing Officer of initiating the reassessment proceedings in gross violation of first proviso to section 147 of the Act.

2.

In the facts and circumstances of the case and in law, the Learned CIT(A) has erred upholding the action of Ld. Assessing Officer in issuing notice under section 148 on borrowed satisfaction merely relying on the basis of alleged information received without any independent application of mind thereon.

3.

In the facts and circumstances of the case and in law, the Learned CIT(A) has erred upholding the action of Ld. Assessing Officer in initiating the reassessment proceedings on the basis of vague, ambiguous, unclear and incorrect reasons recorded for reopening.

2.1. After going through the same and hearing the parties, we found that the said additional grounds are legal in nature and require no factual verification. Accordingly, we allow the request of the assessee and admit the additional grounds raised by the assessee to be adjudicated on merits.

3.

First of all, we take up Additional Ground Nos. 1 to 3 raised by the assessee, as these additional grounds are interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in upholding the action of the AO in initiating reassessment proceedings. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

4.

We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that information was received by the AO from the Investigation Wing to the effect that there was dissemination of STR in the case of Awadesh Kumar Singh and Mahipal H. Singh. The grounds of suspicion reported in the STR against the suspects are as under:

1.

"M/s. Raves Trades Pvt. Ltd., a private limited company, opened CBCA a/c no. 720 on 11.05.2011 at Mumbai phoenix mill compound branch The names of directors are Mr. Mahipal H Singh and Mr. Awadesh Kumar Singh, having address in Valsad and Silvassa respectively. The company registration No. is U51900DN2010PTC000326 dated 18.04.2010 issued Silvassa. The occupation of these two directors is given as business and service respectively. The nature of business is given as Traders, Retailers, Wholesaler, Importer, Exporter. 2. Credits into this account are mostly by way of credit from 9CBCA accounts maintained with the branch in different names and addresses, which are engaged in various business like Agro products, Holding, Agriculture, Designing, Assembling, Textiles, Real estate, etc., majority of which are situated in Silvassa. 3. Mr. Awadesh Kumar Singh, one of the directors of the said company is also a Director in one CBCA a/c. 681 commented herein. Credits into the account are from the accounts listed in Annexure B, which are ranging from Rs. 35,000/- to Rs. 23 crores, debits in the account are by way of RTGS to various accounts maintained with other banks in the names as appearing in the linked accounts and other accounts. Accounts listed in Annexure B such as CBСА 657,646,681,648 have received amounts by way of RTGS remittance from UTI Bank (Br. UTIB0000004) and CITI bank (Br. CIT10100000) whose client is Indian Infoline, a financial services provider. Mahor part of receipts in respect of accounts CBCA 2222-3458 and 1015 are from UTI Bank(Br. UTIB0000004) from client A C Choksi share Brokers. 4. The nature of business the company is carrying on and the corresponding receipts into the account of the company from linked accounts as also the credits into the linked accounts does not commensurate with the nature of activity of company, Raves Trades Pvt. Ltd. 5. CTR (Cash Transaction Report) database identified one additional bank account. Account No. 3390301111362(ASAHI FIBRES LTD-PAN match -AAĄCA4327K in ICICI Bank Ltd.(Unit-Bank of Rajasthan Ltd.) Mumbai Lower Parel."

Further in the said information it is stated that as per III report, it was gathered that the address of M/s. Raves Trades Pvt. Ltd. at 203, Janvi Park, B/h Panchayat Bhavan, Masat Road, Silvassa is a 1 RK flat and occupied by small family since last 4 years and no one in the apartment knows that name of company m/s. Raves Trades Pvt. Ltd. As per the field enquiries made shri Awadesh Kumar Singh and Shri Mahipal Singh, Directors of M/s. Raves Trade Pvt. Ltd., are not traceable. They are not available on the given addresses. On enquiry it is found that they are not known by neighbours. It is further stated in the said information that the company M/s. Raves Trade Pvt. Ltd. was incorporated on 08.04.2010. As per ITD data base the following information has been gathered for A.Y. 2012-13.

Accordingly, it is informed in the said information that on perusal of the bank account of M/s. Raves Trade Pvt. Ltd., it is seen that large funds are being credited in this account from various concerns and the same are transferred to other various concerns on the very same day. The total of such transactions for the F.Y. 2011-12 relevant to A.Y. 2012-13 are running upto 223 Crores On the turnover of Rs. 223 Crores, the company has offered income of Rs. 25,304/-. The company is not running its business from the address given on the bank account. The directors of the company are also not available on the given addresses and on enquiry it was found that they are not known to neighbours. It is further stated in the said information that in these circumstances, it seems that the company is engaged in routing of funds and providing accommodating entries for the group concerns. On further verification, it appears that the entities are involved in routing of funds alongwith the subject company have their allegiance to "Tayal Group", who previously owned the "Bank of Rajasthan".

It is further mentioned in the information that the ITR for A.Y.2012-13 has been e-filed by the M/s. Raves Trades Pvt. Ltd. which shows that the said assessee company has shown share capital of only Rs. 1,00,000/- and there was no borrowings as loan and advances in the balance sheet except a meagre balance of Rs. 1,79,971/-. On further perusal of return for A.Y. 2012-13 it is seen that the assessee has shown Sales/Gross receipts of Rs. 2,23,74,76,158/- and purchases hve been shown at Rs. 2,23,72,15,837/-, whereas there are no other expenses except a miniscule salary and wages expenses of Rs. 1,67,363/-. The information received from DDIT(Inv.) shows that there was transaction of Rs.28,48,60,422/, during F.Y.2011-12, between assesses and M/s Raves Trade Pvt Ltd. The Investigation Wing Vapi has further stated that it is surprising and highly improbable that a company having turnover of Rs. 223.73 Crores is not even having any assets or has not been incurring any expenditure for running its business. It is further stated that the majority of the companies from whom the funds are received in the bank account of M/s. Raves Trades Put Ltd are similar, having capital of just Rs. 1,00,000/- with no noticeable fixed assets and also showing huge turnovers with only a meagre expenditure for running their businesses. These companies are also not found to be running any business from the address mentioned in their return and many out of them have common address as their address as per return, which itself is an insufficient/incomplete address. The above said information is fresh evidences on record which shows that M/s Raves Trades Pvt Ltd. is merely a paper company operating only for the purpose of giving accommodation entries for commission. The Assessee company, during AY 2012-13, has made transaction for an amount of Rs 28,48,60,422/- with M/s Raves Trades Pvt Ltd being accommodation entry. It is crystal clear that these accommodation entries are obtained on account of long-term capital gain/short-term capital gain/loss/purchase of shares/loan and advances/purchase of material was to camouflage for routing unaccounted money through dubious method by unholy nexus with the entry operator/rigger. Further accommodation entry is a predetermined move which had sole aim to bring back unaccounted money in the disguise of exempt income/reduce taxable income with bogus losses. Further, above information as well as findings of Investigation wing available on record of assessee company for A.Y.2012-13 are most crucial evidence leading to the conclusion that capital gain earned/loss incurred/share purchase/loan and advances/expense is not allowable as (genuine Junder the Act. This accommodation entry cannot also be considered as sales amount since wherever there are transactions on account of accommodation entry, there would always no genuine business transaction as well as no genuine business trading. Accordingly, in the case of assessee there is clear cut escapement of income of Rs 28,48,60,422/ for AY 2012-13 whereas assessee company has offered to tax only income of Rs.31,845/- at the time of filing its ITR for A.Y.2012-13.

5.

Thus, on the basis of the said information, the reasons were recorded and, after seeking due approval from the prescribed authority, notice under Section 148 of the Act was duly issued and served upon the assessee.

6.

The assessee has failed to substantiate as to how the reassessment proceedings were in violation of the provisions of Section 147 of the Act and could not prove that the AO had issued the notice on borrowed satisfaction. In this regard, we notice that the Investigation Wing is one of the wings of the Income Tax Department and had shared the information collected by it after thorough investigation. Such information was collected by public officers during the discharge of their official functions. Therefore, in our view, any information shared by the Investigation Wing, collected by public officers during the discharge of their official duties and shared with the AO, who is also a public officer discharging official duties, carries a presumption of correctness and is sufficient to form a reasonable belief for initiating reassessment proceedings.

7.

It was for the assessee to rebut the presumption attached to the said information, however, the assessee has not produced any contrary evidence. Therefore, we find no reason to conclude that there was any violation of the provisions of the Act in initiating reassessment proceedings by the AO on the basis of the information received from the Investigation Wing.

8.

Accordingly, the issuance of notice under Section 148 of the Act cannot be said to be based on borrowed satisfaction. Therefore, the initiation of reassessment proceedings was in accordance with law. Consequently, the additional Grounds Nos. 1 to 3 raised by the assessee stand rejected.

Now we proceed to decide the original grounds raised by the assessee on merits.

9.

Ground Nos. 1 to 5 are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in upholding the additions made by the AO. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

10.

We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. Before we proceed further, it is necessary to evaluate the order of the Ld. CIT(A) passed while dealing with these grounds raised by the assessee. The operative portion of the same is contained in Paras 6.1 to 6.43 and the same is reproduced herein below:

6.0 DECISION:

6.1 primary facts:

6.1.1 In this case, information vide letter No. Vapi/ADIT(Inv.)/Unit-1/STR - AKS/2018-19/dated 18/03/2019 received on official email on 22.03.2019.

6.1.2 The brief of the same is that there was dissemination of STR in the case of Shri Awadesh kumar Singh and Shri Mahipal H Singh, STR No. 1000048601. The grounds of suspicion reported in the STR against the suspect are as under:

"M/s. Raves Trades Pvt. Ltd., a private limited company, opened CBC A a/c no. 720 on 11.05.2011 at Mumbai phoenix mill compound branch. The names of directors are Mr. Mahipal H Singh and Mr. Awadesh Kumar Singh, having address in Valsad and Silvassa respectively.

The company registration No. is U51900DN2010PTC000326 dated 18.04.2010 issued at Silvassa. The occupation of these two directors is given as business and service respectively. The nature of business is given as Traders, Retailers, Wholesaler, Importer, Exporter.

2.

Credits into this account are mostly by way of credit from 9CBCA accounts maintained with the branch in different names and addresses, which are engaged in various business like Agro products, Holding, Agriculture, Designing, Assembling, Textiles, Real estate, etc., majority of which are situated in Silvassa.

3.

Mr. Awadesh Kumar Singh, one of the directors of the said company is also a Director in one CBCA a/c. 681 commented herein.

Credits into the account are from the accounts listed in Annexure B, which are ranging from Rs. 35,000/- to Rs. 23 crores, debits in the account are by way of RTGS to various accounts maintained with other banks in the names as appearing in the linked accounts and other accounts.

Accounts listed in Annexure B such as CBCA 657,646,681,648 have received amounts by way of RTGS remittance from UTI Bank (Br. UTIB0000004) and CITI bank (Br. CITIO100000) whose client is Indian Infoline, a financial services provider.

Major part of receipts in respect of accounts CBCA 2222-3458 and 1015 are from UTI Bank (Br. UTIB0000004) from client A C Choksi share Brokers.

6.1.3 Accordingly, it is informed in the said information that on perusal of the bank account of M/s. Raves Trade Pvt. Ltd., it is seen that large funds are being credited in this account from various concerns and the same are transferred to other various concerns on the very same day.

6.1.4 The total of such transactions for the F.Y. 2011-12 relevant to A.Y. 2012-13 are running upto 223 Crores.

6.1.5 On the turnover of Rs. 223 Crores, the company has offered income of Rs. 25,304/-(net profit by TO ratio is 0.000011)

The company is not running its business from the address given on the bank account.

6.1.6 The directors of the company are also not available on the given addresses and on enquiry it was found that they are not known to neighbours.

6.1.7 It is further stated in the said information that in these circumstances, it seems that the company is engaged in routing of funds and providing accommodating entries for the group concerns.

On further verification, it appears that the entities are involved in routing of funds along with the subject company have their allegiance to "Tayal Group", who previously owned the "Bank of Rajasthan".

6.1.8 It is further mentioned in the information that the ITR for A.Y.2012-13 has been e-filed by the M/s. Raves Trades Pvt. Ltd. which shows that the said assessee company has shown share capital of only Rs. 1,00,000/- and there was no borrowings as loan and advances in the balance sheet except a meagre balance of Rs. 1,79,971/-.

6.1.9 On further perusal of return for A.Y. 2012-13 it is seen that the assessee has shown Sales/Gross receipts of Rs 2,23,74,76,158/- and purchases have been shown at Rs. 2,23,72,15,837/whereas there are no other expenses except a miniscule salary and wages expenses of Rs. 1,67,363/-

6.2 The information received from DDJT(Inv.) shows that there was transaction of Rs.28,48,60,422/-, during F.Y.2011-12, between assessee and M/s Raves Trade Pvt Ltd.

6.3 The Investigation Wing Vapi has further stated that it is surprising and highly improbable that a company having turnover of Rs. 223.73 Crores is not even having any assets or has not been incurring any expenditure for running its business.

6.4 It is further stated that the majority of the companies from whom the funds are received in the bank account of M/s. Raves Trades Pvt Ltd are similar, having capital of just Rs. 1,00,000/- with no noticeable fixed assets and also showing huge turnovers with only a meagre expenditure for running their businesses. and also sh agre expend

6.5 Assessee vide letter dated 08.11.2019 requested for reasons for reopening. Vide letter dated 15.11.2019 it has been made clear to the assessee that this office has already issued reasons for reopening on 10.06.2019 through ITBA system which was duly delivered to the assessee and the assessee was asked to comply to all the notices u/s. 142(1) of the IT Act, 1961. Further notice u/s. 142(1) was issued on 16.11.2019 asking for various details and submissions and explanations.

6.6 The assessee submitted details and copy of ledger account of Rave Trade Pvt. Ltd. and stated that the transaction made with Raves are absolutely genuine and these are purely commercial transactions.

6.7 The assessee filed return against notice u/s. 148 which was similar to the original return of income , whereinupon examination of its statements, it is seen that assesse has recorded Sales of Rs. 578150685/- and purchase of Rs.848559317/, whereas the expenses debited does not reflect any expenses pertaining to business like transportation charges, loading and unloading charges, VAT details, etc, only a meagre salary of Rs. 1,59,878 and workmen and staff welfare expense of Rs.6981, conveyance expenses of Rs.5478, telephone expenses of Rs.4980 other expenses of 47214 are shown in the P&L account which clearly shows its unusual nature and not doing actual business as the expenses should have been appropriate in that case.. Moreover the opening and closing stock is shown at NIL.

6.8 The Balance sheet shows a share capital of Rs. 1.00.000/- which is very meagre. Therefore, it is highly improbable that a company having a such a big turnover is not even incurring any expenditure for running its business. Also, the trade receivable is shown at Nil which shows that the assessee is not doing any actual business.

6.9 It is very strange that a company having such huge turnover has no befitting expenditure and which kind of business would have a purchase of 848559317/- and sale of 578150685/- with poultry expenses. Even if it is trading of fabrics the appellant should have produced the purchased bill but nothing has been produced for examination as the amount is in 84 crores odd.

6.10 Multiple debits and credits and credit entry would arise out of sale of fabric and the debit entry would arise out of purchase of fabric.

6.11 The Purchase is higher than the sales (578150685-84855937) and the resultant extra purchases and this should result in losses.

6.12 Upon examination of RAVES TRADE PRIVATE LIMITED, the following information is gathered:

6.12.1 Raves Trade Private Limited is a Non-govt company, incorporated on 08 Apr, 2010. It's a private unlisted company and is classified as'company limited by shares'.

6.12.2 Company's authorized capital stands at Rs 1.0 lakhs and has 100.0% paid- up capital which is Rs 1.0 lakhs. Raves Trade Private Limited last annual general meet (AGM) happened on 28 Sep. 2017. The company last updated its financials on 31 Mar 2017 as per Ministry of Corporate Affairs (MCA).

6.12.3 Raves Trade Private Limited is majorly in Trading business from last 13 years and currently. company operations are active. Current board members & directors are MAHIPAL H SINGH, AWADHESHKUMAR N SINGH, SANTOSH FULLKANT JHA, IRSHAD IKHALAKH SAYYAD and VISHAL DNYANESHWAR KADU.

6.12.4 Company is registered in Ahmedabad (Dadar Nagar Haveli) Registrar Office. Raves Trade Private Limited registered address is A-1, FLAT NO. 303, ANAND NAGAR TOKARKHADA KHANVEL ROAD SILVASSA DADRA & NAGAR HAVELI DN 396230 IN.

This is the information available on Zauba.

6.13 On checking the webspace it is seen that the company is based in Ahmedabad with the registration date of 08.04.2010 and AGM last held on 28.09.2017. On the activity part, it says Agar wholesale(include specialised wholesale) not covered in previous category and wholesale in a variety of goods without any particular activity.

6.14 From the same address of the Raves trade as in A-1, Flat no. 303, Anand Nagar, Tukkar Khada, Khane welse road, Dadar & Nagar Haveli. It shows 3 other companies run from the same address.

1- Raves trade pvt. Ltd.

2- Athwart Trading Pvt. Ltd.

3- Udit textile Pvt. Ltd.

6.15 It appears the company has vaque activities and no substantial activity is seen for such a high turnover.

6.16 If there is such high trade volumes among the activities should be demarcated clearly as the activity of the company no such thing has been provided.

6.17 Absence of such a concern on verification

A notice u/s. 133(6) was also issued to Raves Trade Pvt. Ltd. on 23.11.2019 at two addresses viz. 203, Janvi Park, B/h Panchayat Bhavan, Masat Road, Silvassa, and Al, Flat No. 3030 Anand Nagar Tokarkhada, Khanvel Road, Silvassa.

The notices issued has been retuned back by postal authorities. Notice u/s. 133(6) was issued to State Bank of India calling for bank details and statements of the assessee. Reply was received from State Bank of India on 01.11.2019 wherein it was seen that on various dates assessee has paid total amount of Rs. 28,48,60,332/- to Raves Trade Pvt. Ltd. Further notice u/s. 142(1) was issued on 23.11.2019 asking the assessee for details of sales and purchases from M/s. Raves Trade Pvt. Ltd.

6.17 In response, to notice u/s. 142(1) the assessee vide submission dated 11.11.2019 submitted that company had purchased 812395.37kgs of fabrics worth Rs. 28,48,60,332/- from M/s Raves Trade Pvt Ltd and made payment for the same and these transaction are duly recorded in the books of accounts of the company. A copy of ledger account has been filed. Further submitted that the transaction made by the assessee company with M/s Raves Trade Pvt. Itd is absolutely genuine and the allegation of accommodation entries is not correct as teh appellant stated.

Further, Notice u/s. 133(6) was issued to M/s Raves Trade Pvt Ltd which has not been complied to Summons issued u/s. 131 to Shri Mahipal Hukum Singh and Awdesh Kumar Nagendra Singh, Director of M/s.Raves Trade Pvt. Ltd. was not been complied with.

6.18 Further the assessee vide notice u/s. 142(1) dated 04.12.2019 was specifically asked to produce the party/directors of M/s. I'ves Trade Pvt. Ltd. Till date the assessee have not produced the party/directors.

6.19 When the AO has issued notices u/s 133(6) during the assessment stage, all the questions were returned back unserved which shows no existence of the company at the given address. In another case a 1 BHK house was found

6.20 Further in the said information it is stated that:

As per ITI report, it was gathered that the address of M/s. Raves Trades Pvt. Ltd. at 203, Janvi Park, B/h Panchayat Bhavan, Masai Road, Silvassa is a 1 BHK flat and occupied by small family

Since last 4 years and no one in the apartment knows that name of company m/s. Raves Trades Pvt. Ltd.

As per the field enquiries made shri Awadesh Kumar Singh and Shri Mahipal Sing, Directors of Mis. Raves Trade Pvt Ltd., are not traceable.

They are not available on the given addresses. On enquiry it is found that they are not known by neighbours. It is further stated in the said information that the company M/s. Raves Trade Pvt. Ltd. was incorporated on 08.04.2010. As per LTD data base the following information has been gathered for A.Y. 2012-13.

All the letters have come back unserved.. The existence of business not get blank reports u/s 133(6) inquiries: at such a high turnover should

6.21 133(6) Notices issued details:

SI. Name & addresss Notice issue date

No. Raves Trade Pvt. Ltd

1 . addresses viz. 203, Janvi Park, B/h Panchayat Bhavan, Masat Road, Silvassa, 23.11.2019 and Al, Flat No. 3030 Anand Nagar Tokarkhada, Khanvel Road, Silvassa.

6.22 The Bombay High Court while discussing the nature and significance of cash credits in Orient Trading Co. Ltd v. CIT [1963] 49 ITR 723 (Bom) held that when cash credits appear in the accounts of an assessee, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himself as to the true nature and source of the amounts entered therein and if after investigation or enquiry he is satisfied that there is no satisfactory explanation as to the said entries, he would be entitled to regard them as rSection68 of the Act provides that where any sum is found to be credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of that previous year.

6.33 The onus of satisfactorily explaining such credits remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory then the sum is added.

6.34 Burden of proof is a legal standard that requires parties to demonstrate that a claim is valid or invalid based on facts and evidence presented. Burden of proof is typically required of one party in a claim, and in many cases the party that is filling a claim is the party that must demonstrate that the claim is valid and carry the burden of proof.

6.35 Section68 is a charging section and it is also a deeming provision. Unless the following circumstances exist, the Revenue cannot rely on section68 of the Act.

(a) Credit in the books of an assessee maintained for the year.

(b) The assessee offers no explanation or if the assessee offers explanation and if the Assessing Officer is of the opinion that the same is not satisfactory, the sum so credited is chargeable to tax as "income from other sources".

6.36 On accommodation entry providers;

AN examination of return of income and account statements as per return of income it is seen that as discussed above in the table, it appears that there are very unusual figures under different heads which do not satisfy us of any reasonable activity or definite adventure in nature of trade being carried on. The only activity that may be carried on appears to be as an entry provider.

6.37 In understanding of the process is to bring the money back in this manner is commonly known in business parlance as Jamakharchi entries or accommodation entries. This is a well organized racket controlled and conducted by persons known as entry providers. it appears that the modus explains that it is an organized rackets for providing accommodation entries to the willing tax evaders.

6.38 The method of providing accommodation entry entails breaking up large amounts of money into smaller, less-suspicious amounts. In India, this smaller amount has to be below Rs. 50,000/- as deposit of cash below this amount does not require providing PAN of the depositors. The money is then deposited into one or more bank accounts either by multiple people or by a single person over an extended period of time. Also, even larger amounts are deposited in the banks with PAN numbers of individuals who are mostly illiterate and work for these entry operators for small salary or commission.

6.39 The money is then routed through paper companies controlled by these operators. These companies are incorporated by taking care of all formalities such as registering with ROC but having only postal addresses with no real office or employees.

6.40 The directors of such companies are again individuals who are mostly illiterate or semiliterate and work for the entry operators for small salaries or commission. At first sight, most of these companies would pass of as finance, investment or technology companies. But as the entry operators would secretly admit, these are only paper companies used to route the unaccounted income and, at the same time, clean hoards of unaccounted income for their clients.

6.41 These companies used for routing the unaccounted money are basically fake companies that exist for no other reason than to 'layer' the entries or pass it on to the beneficiary as loan or share capital. They take in unaccounted money as "loan or share capital" and pass it on to either another such paper company for 'layering' of the transaction or directly to the beneficiary as loan or share capital. They simply create the appearance of legitimate transactions through fake entries of loans or share capital in their books of account.

6.42 As has been exposed from time to time through search and seizure operations by the department, such entry operators controls hundreds of bank accounts for depositing cash and hundreds of companies for routing the entries. Limited resource and infrastructure of the Registrar of Companies (ROC) perhaps makes it easier for them to incorporate large number of such paper companies without any difficulty. The process, prima facie, may appear very simple but it is extremely difficult to expose the whole chain of money deposited and 'layers' through which it is routed back to the beneficiary. The biggest problem is that there is no effective deterrence to curb the activities of these entry operators. Even conducting search and seizure operations against them have not really worked as a deterrence and such operations often ended up in disclosure of 'unaccounted commission income' of these entry operators which definitely could not be the purpose of conducting search and seizure operations against these operators.

6.43 The judicial pronouncements relied upon, inter alia, include

11.

After considering the entire facts of the present case and going through the order of the Ld. CIT(A), we noticed that information was received from the Investigation Wing that M/s. Raves Traders Pvt. Ltd. is a paper company operating only for the purpose of providing accommodation entries for commission. It was further reported that, during the year under consideration, the assessee company had entered into transactions amounting to Rs. 28,48,60,332/- with M/s. Raves Traders Pvt. Ltd., which were alleged to be accommodation entries. Thus, it was alleged that such accommodation entries were obtained on account of LTCG/STCG/loss/purchase of shares/loans and advances/purchase of material to camouflage the routing of unaccounted money through dubious methods in nexus with entry operators by way of predetermined routes, with the sole aim of bringing back unaccounted money in the guise of exempt income or reduced taxable income by claiming bogus losses. The crucial evidence relied upon was that the capital gains earned/losses incurred were not genuine and that the alleged accommodation entries could not be regarded as genuine sales, since wherever there are accommodation entries, there can be no genuine business transactions or trading.

12.

Although the assessee has taken a specific stand that it had purchased fabric worth Rs. 28,48,60,332/- from M/s. Raves Traders Pvt. Ltd., when notice under Section 133(6) was issued to M/s. Raves Traders Pvt. Ltd. on 23.11.2019 at two addresses, namely, 203, Janvi Park, Behind Panchayat Bhavan, Masat Road, Silvassa, and A-1, Flat No. 3030, Anand Nagar, Tokarkhada, Khanvel Road, Silvassa, the notices were returned unserved by the postal authorities. Notice under Section 133(6) was also issued to the State Bank of India calling for the bank details and statements of the assessee. A reply was received from the State Bank of India on 01.11.2019, wherein it was seen that, on various dates, the assessee had paid a total amount of Rs. 28,48,60,332/- to M/s. Raves Traders Pvt. Ltd. Further, notice under Section 142(1) dated 23.11.2019 was issued asking the assessee to furnish details of the sales and purchases made with M/s. Raves Traders Pvt. Ltd.

13.

In response to the notice under Section 142(1), the assessee, vide submission dated 11.11.2019, submitted that it had purchased 8,12,395.37 kgs. of fabric worth Rs. 28,48,60,332/- from M/s. Raves Traders Pvt. Ltd. and had made payment for the same. It was further submitted that these transactions were duly recorded in the books of account of the company, and a copy of the ledger account was also furnished. The assessee further contended that the transactions entered into with M/s. Raves Traders Pvt. Ltd. were genuine and that the allegation of accommodation entries was incorrect.

14.

Apart from the above, we also noticed that the Inspector of the Department visited the address of M/s. Raves Traders Pvt. Ltd. at 203, Janvi Park, Behind Panchayat Bhavan, Masat Road, Silvassa, and reported that a family had been occupying the said premises for the last four years and that no one in the apartment was aware of the existence of the said company.

15.

Therefore, considering the totality of the facts and circumstances discussed above, we also noticed that the genuineness of the transactions could not be verified, as the notices issued by the Department under Section 133(6) of the Act were not complied with. Even the summons issued to Shri Mahipal Hukum Singh and Shri Awdesh Kumar Nagendra Singh, Directors of M/s. Raves Traders Pvt. Ltd., were not complied with. Further, vide notice under Section 142(1) dated 04.12.2019, the assessee was specifically asked to produce the party/directors of M/s. Raves Traders Pvt. Ltd.; however, till date, the assessee has failed to produce the said party/directors.

16.

The assessee filed its return in response to the notice under Section 148, which was identical to the original return of income. It is seen therefrom that the assessee had recorded sales of Rs. 57,81,50,685/- and purchases of Rs. 84,85,59,317/-. However, the expenses debited did not reflect any expenditure pertaining to business operations, such as transportation charges, loading and unloading charges, VAT expenses, etc. Only a meagre salary of Rs. 1,59,878/-, workmen and staff welfare expenses of Rs. 6,981/- , conveyance expenses of Rs. 5,478/-, telephone expenses of Rs. 4,980/-, and other expenses of Rs. 47,214/- were shown in the Profit and Loss Account, which clearly indicates that the company was merely an entry provider and was not carrying on any actual business. Moreover, both the opening stock and closing stock were shown as Nil. The Balance Sheet disclosed a share capital of only Rs. 1,00,000/-, which is insignificant considering the huge turnover reported. Therefore, it is highly improbable that a company having such a large turnover would not incur any expenditure for carrying on its business. Further, trade receivables were also shown as Nil, which further indicates that no actual business activities were being carried out.

17.

The above circumstances clearly support the findings of the DDIT (Inv.), Unit-1, Vapi, that M/s. Raves Traders Pvt. Ltd. was an entry provider. Considering the above findings and the material brought on record by the Investigation Wing in respect of M/s. Raves Traders Pvt. Ltd., and also considering the efforts made by the AO to verify the genuineness of the transactions entered into by the assessee company with M/s. Raves Traders Pvt. Ltd., it stands established that the transactions with M/s. Raves Traders Pvt. Ltd. were accommodation entries and that the said company had never carried on any business from the addresses furnished by it and was merely a bogus entry provider.

18.

Therefore, all these facts go to show that M/s. Raves Traders Pvt. Ltd. was not carrying on any actual business but was created and existed only as a conduit. Accordingly, the amount of Rs. 28,48,60,332/- paid by the assessee to M/s. Raves Traders Pvt. Ltd. was treated as unexplained money in the hands of the assessee. Thus, the additions were rightly made under Section 68 of the Act.

19.

Even otherwise, no new facts, circumstances, or documents have been placed on record by the assessee in order to controvert or rebut the findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Accordingly, we dismiss the grounds raised by the assessee and uphold the order of the Ld. CIT(A) in sustaining the additions.

20.

In the result, appeal filed by the Assessee stands dismissed.

Order pronounced in the open court on 07.07.2026.

Sd/- Sd/- GIRISH AGRAWAL SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 07.07.2026 RY-Sr PS Copy to: ENNORE PROCON PVT LTD, KAMAT INDUSTRIAL ESTATE 1 PRABHADEVI, MUMBAI-400025, MAHARASHTRA

INCOME TAX OFFICER 6(2)(4), INCOME TAX OFFICER 6(2)(4) AAYAKAR 2 BHAWAN MK ROAD, MUMBAI-400020, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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