ITO-19(2)(4) MUMBAI., MUMBAI vs. PRATIBHA KALPESH JADHAV, MUMBAI

The Revenue is aggrieved by the action of the learned CIT(A) in deleting the addition of Rs.5,34,44,801/- made by the Assessing Officer on account of alleged accommodation entries by way of bogus purchases purportedly made from M/s. Supeema Advisory Pvt. Ltd. during the relevant previous year.

Briefly stated, the facts borne out from the record are that the assessee had filed her return of income on 31.10.2017 declaring total income of Rs.5,19,460/-. Subsequently, based on information received through the departmental ITBA Insight Portal, the Assessing Officer formed a belief that the assessee had allegedly obtained accommodation entries in the guise of purchases from M/s. Supeema Advisory Pvt. Ltd. amounting to Rs.5,34,44,801/- during the financial year relevant to the assessment year under consideration. Based upon such information, proceedings under section 147 were initiated.

During the course of reassessment proceedings, the assessee categorically denied having entered into any transaction whatsoever with M/s. Supeema Advisory Pvt. Ltd. It was specifically submitted that neither any purchases were made from the said concern nor any business dealings had ever taken place with it. In order to verify the information

In response to the notice issued under section 133(6), M/s. Supeema Advisory Pvt. Ltd. categorically denied having entered into any transaction with the assessee. Thus, the enquiry conducted by the Assessing Officer himself did not support the information reflected in the departmental database. However, despite such categorical denial by the alleged counterparty and despite there being no other material brought on record to establish the existence of any purchase transaction, the Assessing Officer proceeded to make an addition of Rs.5,34,44,801/- on the premise that M/s. Supeema Advisory Pvt. Ltd. was allegedly engaged in providing accommodation entries and that the assessee was one of the beneficiaries thereof.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). After examining the assessment records, submissions of the assessee and the material available on record, the learned CIT(A) observed that though the Assessing Officer had attempted to verify the information by issuing notice under section 133(6), the alleged supplier itself had denied any transaction with the assessee. The learned CIT(A) further noted that apart from the

Before us, the learned Senior Departmental Representative strongly relied upon the assessment order. However, despite specific queries from the Bench, no material was brought to our notice demonstrating the existence of any purchase transaction between the assessee and M/s. Supeema Advisory Pvt. Ltd. The assessee remained unrepresented. Nevertheless, having regard to the nature of the controversy and the material available on record, we proceeded to adjudicate the appeal on merits after hearing the learned Departmental Representative and examining the entire record.

We have carefully considered the rival contentions, perused the orders of the authorities below and examined the entire material available on record. The controversy involved in the present appeal lies within a very narrow compass. The sole basis for making the impugned addition of Rs.5,34,44,801/- is information appearing in the departmental Insight Portal

It is a settled proposition of law that an addition can be sustained only when there exists tangible and credible material establishing the factual foundation of the charge sought to be levelled against an assessee. Mere suspicion, conjecture, probability or information generated through an electronic database cannot substitute legal evidence. The burden initially lies upon the Revenue to establish the existence of the primary facts giving rise to a taxable event. Only when such foundational facts are demonstrated does the burden shift upon the assessee. In the present case, the

What further renders the assessment order vulnerable is that the enquiry conducted by the Assessing Officer himself completely negates the very premise on which the addition has been made. In response to the notice issued under section 133(6), the alleged supplier categorically denied having entered into any transaction with the assessee. Thus, the only direct piece of evidence gathered by the Assessing Officer during the course of assessment proceedings was contrary to the assumption on which the reassessment proceedings were founded. Once such denial had come on record, the Assessing Officer was duty bound to undertake further investigation and bring some independent material demonstrating that the denial was false or that the transaction had nevertheless taken place. Strangely, no such exercise appears to have been undertaken.

We find that there is absolutely no material brought on record to establish the existence of any transaction between the assessee and the alleged entry provider. There are no purchase invoices, no ledger accounts, no confirmations, no bank trail evidencing movement of funds, no transportation documents, no delivery challans, no stock records, no

The entire approach adopted by the Assessing Officer appears to proceed on an erroneous assumption that once a concern is identified by the Investigation Wing or by a departmental database as an entry operator, every person whose name may appear in connection with such concern automatically becomes a beneficiary of accommodation entries. Such an approach is fundamentally contrary to settled principles governing assessment proceedings. Even assuming that a particular concern was engaged in providing accommodation entries to certain parties, an addition in the hands of a particular assessee can be sustained only when there exists specific and credible evidence demonstrating that the assessee was one of the beneficiaries of such activity. General allegations can never substitute specific evidence.

Another disturbing feature emerging from the assessment order is the complete absence of independent application of mind. The information generated through the departmental portal appears to have been accepted as conclusive without subjecting the same to any meaningful verification. The purpose of assessment proceedings is not merely to reproduce information received from another wing of the Department but to ascertain whether such information withstands factual and legal scrutiny. The Assessing Officer acts as a quasi judicial authority entrusted with the duty of determining taxable income on the basis of objective material and evidence. Once the enquiry conducted under section 133(6) itself yielded a result contrary to the information available on the portal, a much deeper scrutiny and investigation was expected before fastening a tax liability of more than Rs.5.34 crores upon the assessee.

We also find considerable force in the reasoning adopted by the learned CIT(A). The learned CIT(A), after examining the assessment records and the material available on record, has correctly observed that the Assessing Officer failed to establish any nexus whatsoever between the assessee and the alleged accommodation entry provider. The findings recorded

In our considered opinion, the present case is a classic illustration where information generated through an intelligence mechanism, which could have legitimately triggered an enquiry, has ultimately been treated as conclusive proof without any supporting evidence. The distinction between information and evidence is well recognised in law. Information may justify initiation of investigation; however, it is evidence alone which can justify an addition. In the present case, the investigation yielded no evidence against the assessee. On the contrary, the only enquiry conducted by the Assessing Officer supported the assessee’s stand that no transaction had taken place with the alleged concern. What is equally noteworthy is that not only had the assessee consistently denied having entered into any transaction with the said concern, but even the enquiry conducted by the Assessing Officer himself and verification of the records failed to reveal the existence of any such transaction. The learned CIT(A), after appreciating these undisputed facts, recorded a categorical finding that the

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