INCOME TAX OFFICER 13(1)(1) MUMBAI, MUMBAI vs. NIRNAY COMMODITIES AND DERIVATIVES PVT LTD, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI

BEFORE SHRI OM PRAKASH KANT, AM AND MS. KAVITHA RAJAGOPAL, JM ITA Nos.2962, 3010, 3011 & 3013/Mum/2024 (Assessment Years: 2011-12, 2012-13, 2013-14,& 2012-13)

Income Tax Officer-13(1)(1), M/s. Nirnay Commodities And Room No.215, Derivatives Pvt. Ltd., AayakarBhawan, 26B,Dattani Apartment, Vs. 2nd Floor, ChitabhaiPatel Road, Mumbai-400020 Kandiwali East, Maharashtra -400101 PAN:AAGCM2014D (Appellant) : (Respondent)

Assessee by : Shri Rajesh Mehta, CA & Shri Apurva Mehta, CA Respondent by : Shri Amol Kirtane,CIT-DR & Shri Swapnil Choudhari, Sr. DR

Date of Hearing : 10.02.2026 Date of Pronouncement : 06.05.2026

O R D E R Per Kavitha Rajagopal, JM:

The captioned appeals are filed by the Revenue challenging the order of the

Learned Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], National

Faceless Appeal Centre (‘NFAC’ for short) passed u/s 250 of the Income Tax Act, 1961

(“the Act” for short) relevant to assessment years (“AY” for short) 2011-12, 2012-13,

2013-14,& 2012-13.

additions for the relevant AYs tabulated herein under:

AY Assessment Appellate Order Addition Deleted Addition Order u/s 68 by the Ld. confirmed by

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. CIT(A) the Ld. CIT(A) as Commission Income 2011-12 U/s 143(3) 31.03.2024 Rs.27,36,17,764/- Rs.6,84,044/- ITA r.w.s. 147 of the 0.25% as No.2962/M/2024 Act dated Commission 26.12.2018 Income AY 2012-13 U/s 143(3) 31.03.2024 Rs.29,61,46,275/- Rs.37,01,828/- ITA r.w.s. 147 of the being 1.25% No.3010/M/2024 Act dated 27.12.2019 AY 2012-13 U/s 143(3) 31.03.2024 Rs.4,16,77,284/- Rs.1,04,193/- ITA r.w.s. 147 of the being 0.25% No.3013/M/2024 Act dated 26.12.2018 AY 2013-14 U/s 143(3) 31.03.2024 Rs.1,34,58,520/- Rs.1,68,231/- ITA r.w.s. 147 of the being 1.25% No.3011/M/2024 Act dated 27.12.2019

No.2962/M/2024 for AY 2011-12 as a lead case for the sake of convenience.

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition u/s 68 of the I.T. Act of Rs.27,36,17,764/ (on protective basis) when the Director of assessee company, Shri Lavekush Gadiya had accepted that assessee company have provided bogus accommodation entries to various entities, thereby the nature of transaction are non-genuine transactions?

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. 5. Brief facts of the case are that the assessee company was a private limited

company incorporated on 12.10.2009 under the Erstwhile Companies Act, 1956 in the

name and style of Mega Money Commodities Pvt. Ltd. and had subsequently changed its

name to Nirnay Commodities & Derivatives Pvt. Ltd. The assessee company e-filed its

return of income dated 30.09.2011 declaring total income at Rs.5,530/- for the year under

consideration and the same was processed u/s 143(1) of the Act. The assessee’s case was

reopened u/s 147 of the Act vide notice u/s 148 of the Act dated 30.03.2018 for the

reason that the assessee company was providing accommodation entries to various

entities, as per the information received from Dy. Director of Income Tax (Inv.)-2, Indore

and pursuant to the enquiries conducted where it was found that Shri Lavekush Gadiya,

the director of the assessee company was providing accommodation entries to various

parties/entities through his company where it was found that Rs.27,36,17,764/- was

credited in several bank accounts of the assessee company which were subsequently

transferred to various parties/entities alleged to be beneficiaries of such accommodation

entries through cheques/RTGS. Notice u/s 148 & 142(1) of the Act were issued by the

Ld. Assessing Officer (“Ld. AO” for short)but returned unserved with a remark “left”.

Notice u/s 143(2) of the Act dated 19.12.2018 was issued to the assessee. The Ld. AO

also issued notice u/s 133(6) of the Act to various banks specified in the report of the

investigation wing of Indore. After duly considering the assessee’s submission the Ld.

AO passed the assessment order dated 26.12.2018 u/s 143(3) r.w.s. 147 of the Act

determining the total income at Rs.27,36,23,290/- after making an addition of

Rs.27,36,17,764/- u/s. 68 of the Act as unexplained credits, on the ground that the source

of the credit entries were not explained by the assessee and as the assessment in the case

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. of the alleged beneficiaries was not crystallized the same was added in the hands of the

assessee on protective basis.

appellate authority who vide order dated 31.03.2024 deleted the impugned addition on

the ground that since the director of the assessee company Shri Lavekush Gadiya had

offered 1% of the impugned amount towards accommodation entry as commission

income in his return of income which was accepted by the Department and hence the

same cannot be again added in the hands of the assessee company as unexplained credit

u/s 68 of the Act on protective basis.

challenging the impugned order.

director of the assessee company Shri Lavekush Gadiya had admitted to the fact that the

assessee company was providing accommodation entries to various beneficiaries where

he has duly explained the modus operandi vide an affidavit which stated that various

bank accounts were opened in different names on behalf of the assessee company for the

purpose of providing accommodation entries for which commission income @ 1% to

1.25% was earned. The Ld. DR further stated that the Ld. CIT(A) has erred in deleting

the impugned addition where the real beneficiaries of the accommodation entry provided

by the assessee company was not taxed for the reason that neither in the case of the

assessee nor in the case of the director of the assessee company the complete details of

the beneficiaries were provided to the Department. The Ld. DR also stated that the issue 4

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. of reassessment in the case of the director of the assessee company was only with regard

to the commission income and not pertaining to section 68 addition as wrongly

misinterpreted by the Ld. CIT(A). The Ld. DR contended that in the absence of the

details of the beneficiaries being provided the entire credit has to be added in the hands of

the assessee and not just the commission income which was held by the Hon’ble

Jurisdictional High Court in the case of Principal Commissioner of Income Tax vs.

Buniyad Chemicals Ltd. (2025) 172 taxmannn.com 462 (Bombay). The Ld. DR relied

extensively on the said decision along with other catena of decisions.

controverted the same and contended that the said addition was made in the hands of the

assessee on protective basis where the director of the assessee company had already

offered the commission income of 1% which was accepted by the Revenue in his case.

The Ld. AR further contended that the Ld. CIT(A) had already upheld commission

income @ 0.25% on the entire transaction value on substantive basis. The Ld. AR

further stated that the assessee company did not have any real business activities and

were merely paper companies incorporated by Shri Lavekush Gadiya for the purpose of

providing accommodation entry to various parties in the form of bogus Long Term

Capital Gain which are exempt u/s 10(38) of the Act, commodity profit including various

other transactions. The Ld. AR further stated that the director of the assessee company in

his statement recorded u/s 131 of the Act had accepted the fact that the assessee company

being an accommodation entry provider earns net commission of Rs.250/- per lakh and

beyond this, the assessee has no financial interest in the impugned transactions. The Ld.

AR prayed that the order of the Ld. CIT(A) be upheld for the reason that the director of 5

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. the assessee company had already declared 1% commission on the impugned transaction

and that the same cannot be taxed again in the hands of the assessee company. The Ld.

AR relied on a catena of Tribunal decisions along with the decision of Hon’ble

Jurisdictional High Court in the case of Principal Commissioner of Income-tax-14 vs.

Alag Securities (P.) Ltd. [2020] 117 taxmann.com 292 (Bombay) which had upheld the

Tribunal’s decision of charging commission @ 0.15%.

record. It is an undisputed fact that the assessee company is merely a paper company for

the purpose of providing accommodation entries to various entities for a certain

percentage of commission. It is also evident from the assessee’s written submission as

well as the statement of the director of the assessee company which is placed as

Annexure-2 to the paper book filed by the Ld. AR where this fact has been admitted by

the assessee. Consequently, the Ld. CIT(A) deleted the impugned addition and restricted

the same only to 0.25% of the total transaction value of Rs.27.36 crores stating that the

Department had accepted the commission income offered by the director of the assessee

company Shri Lavekush Gadiya amounting to Rs.27,36,177/- being 1% on the total

transaction value where the addition in the hands of the assessee company is made only

on protective basis. On perusal of the assessment order of the assessee company it can be

inferred that the Ld. AO had made an addition u/s 68 of the Act on the entire credit

entries of Rs.27.36 crores stating that the assessment in the case of alleged beneficiaries

are not yet crystallized and since the assessee has not explained the source of the credit

entries the same was added in the hands of the assessee on protective basis. The relevant

extract of the assessment order is cited herein under for ease of reference: 6

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. “3.7 The assessee's reply has been considered after taking into consideration the report of the Investigation Wing, Indore, the assessee's submission from time to time, the reply to the show cause. The same is considered, but not acceptable for the following reasons:-

(i) Since the assessment in the case of alleged beneficiaries is not yet crystallised and the assessee company being involved in such dubious transaction and moreover on the facts mentioned in the Dy. Director of Income (Investigation)-II, Indore report dated 14.03.2018, the source of the credit entries of Rs.27,36,17,764/- could not be explained by the assessee and the same is treated as unexplained credit entries.

ii) In view of the above, the unexplained credits appearing in assessee's books are nothing but credits taxable u/s 68 and accordingly, the entire amount of Rs.27,36,17,764/- is treated as unexplained credits u/s 68 and added to the total income of the assessee on protective basis. Penalty proceedings u/s 271(1)(c) are initiated separately for concealing the particulars of income.

the hands of the beneficiaries of the accommodation entries provided by the assessee and

not in the hands of the director of the assessee company. The Ld. CIT(A) on the other 7

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. hand deleted the addition stating that substantive addition was made in the hands of the

director Shri Lavekush Gadiya and deleted the addition in the hands of the assessee

company as being protective in nature. This, according to us, is not justifiable for the

reason that neither in the case of Shri Lavekush Gadiya nor in the case of the assessee, we

do not find complete details of the beneficiaries to whom the assessee company is said to

have provided accommodation entries. On perusal of the assessment order in both the

cases of the assessee as well as the director of the assessee company, there are no details

of the beneficiaries emanating and further the assessee has not filed the same neither

before us nor before the lower authorities. In the absence of furnishing of the details of

the beneficiaries who have availed accommodation entries through the assessee company,

which fact is also not disputed, the decision of the Hon’ble Jurisdictional High Court in

the case of Buniyad Chemicals Ltd. (supra) would squarely be applicable. The facts of

the said case are identical to the present case in hand where even in that the assessee has

admitted that it is merely an accommodation entry provider and the receipts and

payments appearing in the bank accounts are of the customers to whom the assessee

provided accommodation entries. The details of such customers were not provided to the

Ld. AO and the Ld. CIT(A) restricted the addition to 0.37% as rate of commission on

those transactions where the assessee identifies the beneficiary failing which the same

would be added as unexplained cash u/s 68 of the Act. The Tribunal by following its

earlier order restricted the commission income to 0.15%. The Revenue preferred an

appeal before the Hon’ble High Court wherein it was held that when the assessee has

failed to explain the details of the credits reflecting in the disclosed and undisclosed bank

accounts maintained by the assessee the same can be ascertained as unexplained income

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. of the assessee and not that of the parties to whom the assessee has provided

accommodation entries. It then rejected the assessee’s contention that since there were

many deposits the assessee was unable to identify as to which customer had deposited

money in its bank account. Further, the assessee in the said case had failed to prove by

documentary evidences that such credits appearing in the bank account was already

assessed in the hands of the beneficiaries and once the same has not been added in the

hands of the beneficiaries, the oral contention without documentary evidences made on

behalf of the assessee could not be accepted. It further held that the Tribunal was not

justified in restricting the addition only to the extent of 0.15% of the total deposits where

the assessee has failed to identify the beneficiaries. Further, the Hon’ble High Court held

that adopting such casual approach to a serious matter of rampant tax evasion on the basis

that the issue was covered, without examining the factual aspect, being a final fact

finding authority was said to be unwarranted. The decision in case of Alag Securities

Ltd. (supra) relied upon by the Ld. AR was also distinguished in the said case. The

Court reiterated that unless the assessee furnishes details of the beneficiaries the

unaccounted credits can never be brought to tax by the Revenue neither in the hands of

the beneficiaries nor the assessee to whom such account belongs to which would cause

grave injustice to the Revenue. We also draw support from the decision of the Hon’ble

High Court of Delhi in the case of Commissioner of Income Tax vs. DK Garg (2017) 84

taxmann.com 257 (Delhi) which is also a case of admitted accommodation entry

provider whose claim was to be taxed only on a composite “peak credit”. Here, again the

Hon’ble High Court held that the assessee, in order to claim the benefit of “peak credit”

should come with clean hands by explaining the source of all deposits in his accounts

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. with sufficient details as to identify the creditors by looking into from where money has

come, along with corresponding destination of the payments to whom the assessee has

paid back the money, through the concerned bank accounts of the creditors. This, the

Hon’ble High Court held that, was the primary onus on the assessee to disclose all details

and failure to explain the source of deposit and corresponding destination would attract

section 68 of the Act. From the above observation, we are of the considered view that the

Ld. CIT(A) has failed to consider the issue in accordance with the provisions of section

68 of the Act and had merely deleted the impugned addition on the ground that the

director of the assessee company had offered commission income @ 1% of the total

transaction value, without taking into consideration the fact that the details of the

beneficiaries were not disclosed by the assessee both in the present assessee’s case as

well as in the case of the director of the assessee company and had misinterpreted the

same to be protective addition in the hands of the assessee and substantive addition to be

in the hands of the director of the assessee company rather than the beneficiaries of the

accommodation entries provided by the assessee. We are conscious of the fact that a

protective addition is unsustainable once the substantive addition on the same income is

confirmed. Meaning thereby to say that when a substantive assessment is finalized then

the protective assessment becomes redundant. Also when there is no corresponding

substantive addition existing or has been made in anyone else’s hands then the protective

addition is legally sustainable. The very purpose of this concept is to “protect” the

interest of the Revenue. Hence, in the present case the credits found in the bank account

are not ascertainable as to who is liable to pay tax on the same i.e. whether the assessee or

the beneficiaries and it is not a case where there is a debate as to whether it is the assessee

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. or the director of the assessee company who is liable to be taxed on the unexplained

credits u/s 68 of the Act. The Ld. CIT(A) has also failed to consider the principles laid

down by the Hon’ble High Courts where it is mandatory on the part of the assessee to

discharge its primary onus in explaining the source of the credits by providing all the

relevant details of the beneficiaries to whom the assessee company has provided

accommodation entries for the purpose of evading tax.

order is not in accordance with law and is liable to be set aside. We, therefore, set aside

the order of the Ld. CIT(A) with the direction that the assessee should disclose the details

of the beneficiaries to whom accommodation entries were provided and the same has to

be assessed in the hands of the beneficiaries and further to that extent the Ld. CIT(A) is

directed to decide this issue in accordance with the decision of Buniyad Chemicals Ltd.

(supra) and if the commission income which was already offered by the director of the

assessee company pertains to the same transaction the same is to be deleted in the hands

of the assessee, as it would tantamount to double taxation on the same commission

income which was already offered by the director of the assessee company. If the

assessee fails to furnish complete details of the credits and in the absence of the details of

the beneficiaries, the unexplained credits in the bank accounts should be added in the

hands of the assessee u/s 68 of the Act as unexplained credits in accordance with the

proposition laid down by the Hon’ble Jurisdictional High Court in the case of Buniyad

Chemicals Ltd. (supra). Hence, the Ld. CIT(A) is directed to adjudicate all these issues

afresh and pass a denovo order on the merits of the case and in accordance with law.

ITA No.2962/Mum/2024 &Ors. M/s. Nirnay Commodities And Derivatives Pvt. Ltd. Therefore, the grounds of appeal raised by the Revenue are hereby allowed on the above

terms.

appeals i.e. ITA No.3010, 3011 & 3013/Mum/2024 as well, for the reason that the basis

of the assessment in all these years is the lead assessment order of AY 2011-12 on

identical facts where the Ld. AO in these cases relied on the assessment order of AY

2011-12 and hence these appeals filed by the Revenue are also hereby allowed.

Order pronounced in the open court on 06.05.2026

Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai; Dated: 06.05.2026 * Kishore, Sr. P.S. Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai