AJAY KUMAR, ITO 28(1)(1), MUMBAI, MUMBAI vs. AMANKUMAR BIRMARAM PRAJAPAT , MUMBAI

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ITA 8149/MUM/2026Status: DisposedITAT Mumbai07 October 20269 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(Appeals) and dismissed all grounds raised by the Revenue. The Tribunal found that the addition of ₹1,13,087/- was based on an assumption that the assessee must have earned commission because his PAN was used in accommodation-entry transactions. However, there was no material showing the payment or receipt of such commission, nor independent evidence of the assessee's active participation in the accommodation-entry activity for consideration. The Tribunal noted that the Assessing Officer himself observed that the main commission income had already been assessed in the hands of Shri Bhanwarlal Jain and no new evidence was found during the present proceedings. The addition was made solely by following the treatment in earlier assessment years, which the Tribunal found insufficient when no fresh evidence establishing income earned during the relevant year was found. The Tribunal referred to its own decisions in Mahalaxmi Gems Pvt. Ltd. and Meenaxi Diamonds Pvt. Ltd. (and connected cases) which held that commission income already assessed substantively in the hands of the main operator (Shri Bhanwarlal Jain) could not be sustained on a protective basis in the hands of entities controlled by him. The Tribunal concluded that the Revenue could not substitute general information about the Bhanwarlal Jain Group's modus operandi for evidence of income in the hands of this specific assessee. The assessee had provided an explanation, furnished bank statements, denied transactions, and placed supporting circumstances on record. Therefore, the Revenue was required to establish by some material that the assessee had acted as an entry provider for consideration and had actually earned commission. Since no such material was brought forth, the deletion of the addition by the CIT(Appeals) was upheld.

What were the facts?

The Revenue (Department) filed an appeal against the order of the CIT(Appeals) for Assessment Year 2014. The assessee, Amankumar Birmaram Prajapat, an employee of the Bhanwarlal Jain Group, had his PAN linked to accommodation entries totaling ₹15,07,83,309/- based on information from an Investigation Wing search. The Assessing Officer initiated reassessment and, despite the assessee claiming his PAN was misused by his employer and providing bank statements showing no such transactions, estimated commission income at 0.075% of the transaction value, leading to an addition of ₹1,13,087/-. The CIT(Appeals) deleted this addition, finding no direct or corroborative evidence of commission receipt by the assessee.

What were the issues?

1. Whether the CIT(Appeals) erred in deleting the addition of ₹1,13,087/- made by the Assessing Officer, despite the Investigation Wing establishing the assessee as a linked beneficiary of accommodation entries managed by the Bhanwarlal Jain Group (Section 68 of the Income Tax Act, 1961). 2. Whether the CIT(Appeals) failed to appreciate that the estimation of commission income at 0.075% was based on the Investigation Wing's findings linking the assessee's PAN to the organized network of accommodation entries operated by the employer group. 3. Whether the CIT(Appeals) was justified in concluding no direct or corroborative evidence of commission receipt, despite the Investigation Wing's findings regarding the systemic use of employee PANs for routing accommodation entries. 4. Whether the CIT(Appeals) erred in characterizing the assessee's contention of PAN misuse as credible without independent verification that transactions were unauthorized and no benefit accrued to the assessee. 5. Whether the CIT(Appeals) erroneously shifted the burden of proof onto the Revenue, whereas the assessee should have discharged the initial burden given the search findings linking him to the beneficiary list. 6. Whether the CIT(Appeals) erred in failing to treat information from the Investigation Wing as a live link to the assessee's income, especially in light of similar commission income additions sustained in previous assessment years. 7. Whether the CIT(Appeals)'s reliance on the principle that income tax liability requires actual accrual is misplaced in hawala/accommodation entry investigations. 8. Whether the CIT(Appeals) ignored the legal precedent that such commission income is taxable in the hands of the conduit/employee even if the primary benefit is enjoyed by the employer. 9. Whether the CIT(Appeals) erred in law by failing to appreciate that the assessment under Section 147 read with Section 144/144B was based on sufficient material. Revenue's Contentions: The Revenue argued that the CIT(Appeals) erred in deleting the addition, as the Investigation Wing had established the assessee's link to accommodation entries. They contended that the estimation of commission was based on these findings and that the assessee's claim of PAN misuse was not sufficiently substantiated. The Revenue also argued that the burden of proof lay with the assessee and that the CIT(Appeals) misapplied the principle of actual accrual in accommodation entry cases. They relied on previous assessment years' treatment and the general modus operandi of the Bhanwarlal Jain Group. Assessee's Contentions: The assessee contended that he was merely an accountant whose PAN was misused by his employer without his knowledge or consent. He stated that the transactions did not appear in his bank accounts or records and that he had neither undertaken nor benefited from them. He relied on a police complaint, a representation to the Prime Minister's Office, and his statement to the Income-tax Department. He also requested the statement of Shri Bhanwarlal Jain and seized material. The assessee pointed out that the material relied upon by the AO was not supplied to him.

Which sections of the Income-tax Act were involved?

Section 68,Section 147,Section 144,Section 144B,Section 251(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI SIDDHARTHA NAUTIYAL & SHRI MAKARAND VASANT MAHADEOKAR

आदेश / ORDER

PER SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:

This appeal is filed by the Department against the order of Ld. CIT (A) vide DIN: ITBA/NFAC/S/250/2026-27/1088898362(1) dated 08-May-2026 for the Assessment Year 2014. The Department has raised the following grounds of appeal:

1) Whether on the facts and in the circumstances of the case and in law the Ld CITA erred in deleting the addition of 113087 made by the Assessing Officer despite the Investigation Wing establishing that the assessee was a linked beneficiary of accommodation entries managed by the Bhanwarlal Jain Group

2) Whether on the facts and in the circumstances of the case and in law the Ld CITA failed to appreciate that the estimation of commission income at 0.075 percentage was based on findings of the Investigation Wing which established a nexus between the assessees PAN and the organized network of accommodation entries operated by the employer group 3) Whether the Ld CITA was justified in concluding that there was no direct OR corroborative evidence of commission receipt while failing to reconcile this with the findings of the Investigation Wing regarding the systemic use of employee PANs for routing massive accommodation entries 4) Whether on the facts and in the circumstances of the case and in law the Ld CITA erred in characterizing the assessees contention of misuse of PAN by employer as credible without requiring independent verification OR evidence to prove that the transactions were strictly unauthorized and that no benefit whatsoever accrued to the assessee 5) Whether the Ld CITA correctly applied the law by deleting the addition OR if the order erroneously shifts the burden of proof onto the Revenue to prove the actual receipt of income whereas the initial burden given the search and seizure findings linking the assessee to the beneficiary list should have been discharged by the assessee through concrete evidence 6) Whether on the facts and in the circumstances of the case and in law the Ld CITA erred in failing to treat the information received from the Investigation Wing as a live link to the assessees income especially in light of the fact that similar commission income additions were sustained in the assessees own assessment for previous years AY 2011-12 and 2012-13 7) Whether the Ld CITAs reliance on the principle that income tax liability requires actual accrual is misplaced in the context of hawala OR accommodation entry investigations WHARE the modus operandi involves concealing the true nature of transactions through third party conduits 8) Whether on the facts and in the circumstances of the case and in law the Ld CITA ignored the legal precedent established in related cases that such commission income is in fact taxable in the hands of the conduit the employee even if the primary benefit of the transaction is enjoyed by the main operator the employer 9) Whether the Ld CITA erred in law by failing to appreciate that the assessment under section 147 rws 144 OR 144B was based on sufficient material and that the deletion of the addition undermines the Revenues ability to effectively combat organized tax evasion and hawala activities

2.

The brief facts of the case are that the assessee, an individual, filed his return of income for A.Y. 2014-15 on 06.11.2014 declaring total income of ₹1,23,040/-. Subsequently, the Assessing Officer received information from the Investigation Wing, Mumbai from the search proceedings in the case of Shri Bhanwarlal Jain Group. According to the information, Shri Bhanwarlal Jain and his son were operating several concerns in the names of their employees for providing accommodation entries of bogus purchases and unsecured loans. The information further stated that the assessee was one of the persons whose name appeared in such transactions and accommodation entries of ₹15,07,83,309/- were linked with his PAN. The Assessing Officer thereafter initiated re- assessment proceedings.

3.

During the reassessment proceedings, the assessee submitted that he was only an accountant working with the Bhanwarlal Jain Group and his PAN had been used by his employer without his knowledge or consent. He furnished his bank statements and stated that none of the transactions of ₹15,07,83,309/- appeared in his bank accounts or in his records. He also relied upon a complaint made to the police on 03.12.2019, a representation made to the Prime Minister's Office and his statement recorded by the Income-tax Department on 23.10.2018. In that statement, the assessee had stated that his employer had retained his PAN card and he had neither undertaken nor benefited from the transactions which were carried out in his name. The assessee also specifically requested the Assessing Officer to provide the statement of Shri Bhanwarlal Jain and the seized material relied upon for making the allegation against him.

4.

The Assessing Officer thereafter issued a show-cause notice proposing to treat ₹15,07,83,309/- as unexplained credit and also proposed to tax commission income on the said accommodation entries. The assessee again stated that he had not undertaken the transactions and pointed out that no corresponding entries were found in his bank accounts or records. The assessee also placed reliance on the assessment orders for A.Ys. 2011-12 and 2012-13 and the orders passed by the Tribunal in the Bhanwarlal Jain group cases. The Assessing Officer did not make any addition of ₹15,07,83,309/- under section 68 of the Act. The Assessing Officer held that the commission arising from the accommodation- entry business had already been assessed in the hands of Shri Bhanwarlal Jain and also observed that no new evidence or fact had been found during the present proceedings. However, following the treatment adopted in the assessee's earlier assessments for A.Ys. 2011-12 and 2012-13, the Assessing Officer estimated commission income in the assessee's hands at 0.075% of ₹15,07,83,309/- and made an addition of ₹1,13,087/-. The Assessing Officer accordingly assessed the total income at ₹2,36,127/- .

5.

The assessee carried the matter in appeal before the learned CIT(Appeals). Before the learned CIT(Appeals), the assessee reiterated that he was only an employee of the Bhanwarlal Jain Group and his PAN had been misused without his knowledge. He submitted that no material had been brought on record to show that he had actually carried out the stated transactions or had received any commission. He also pointed out that the material found during the search and the statement relied upon by the Assessing Officer had not been supplied to him despite his specific request.

6.

The learned CIT(Appeals), after considering the assessment order and the material placed on record, observed that the addition of ₹1,13,087/- was based only upon information received from the Investigation Wing and on an estimate of 0.075% of the transaction value. The learned CIT(Appeals) noted that no direct or corroborative evidence had been brought on record to establish that the assessee had actually earned or received any commission. This amount was found credited in the assessee's bank account or reflected in his books. The learned CIT(Appeals) also took note of the assessee's explanation that he was merely an employee and his PAN had been used by his employer. He further observed that the accommodation-entry business and the related commission had already been examined in the hands of the principal operator, Shri Bhanwarlal Jain. In the absence of any independent material showing accrual or receipt of commission income by the assessee, the learned CIT(Appeals) held that the addition was based merely on presumption and deleted the addition of ₹1,13,087/-. The appeal of the assessee was accordingly allowed by CIT(Appeals).

7.

The Department is in appeal before us against the order passed by the learned CIT(Appeals) deleting the addition of ₹1,13,087/-.

8.

We have heard the rival contentions and perused the material on record. The issue before us is whether merely because transactions aggregating to ₹15,07,83,309/- were reported by the Investigation Wing as having been routed by the Bhanwarlal Jain Group by using the assessee's PAN, the assessee could be presumed to have earned commission at 0.075% on those transactions. On the facts before us, we are unable to accept the case of the Revenue.

10.

At the outset, there is a basic inconsistency in the addition. The information recorded for reopening described the assessee as a beneficiary of accommodation entries provided by the Bhanwarlal Jain Group. However, while completing the assessment, the Assessing Officer proceeded on an altogether different footing and treated the assessee as a person providing accommodation entries and earning commission therefrom. There is no independent material in the assessment order which establishes this change in the character attributed to the assessee. No bank entry, document, account, correspondence, receipt of cash or other material has been identified to show that the assessee actually received commission of ₹1,13,087/- or any other amount.

11.

The assessee, on the other hand, had furnished his bank statements and had consistently stated that he was only an employee of the group. He had also placed on record his earlier statement recorded by the Income-tax Department on 23.10.2018 in which he had specifically stated that his PAN had been retained and used by his employer and he had received no benefit from the transactions. He had also lodged a police complaint and had made representations to the authorities. These facts may not, by themselves, establish misuse of the PAN, but once such an explanation was given and the assessee's own bank accounts did not contain the transactions, some material was required to establish that commission had in fact accrued to or had been received by him. No such material has been brought before us.

12.

The Assessing Officer himself has observed in paragraph 4.1 of the assessment order that the main commission income arising from the accommodation-entry activity had already been assessed in the hands of Shri Bhanwarlal Jain. The Assessing Officer further observed that no new evidence or fact had been found during the present proceedings. Despite this finding, he made the addition only because commission at 0.075% had been assessed in the assessee's hands in earlier years. In our view, an addition for the year under consideration cannot be sustained merely by following the treatment given in an earlier assessment when the Assessing Officer himself accepts that no fresh evidence has been found establishing that the assessee earned the income during the relevant year.

13.

In Mahalaxmi Gems Pvt. Ltd. v. ACIT, ITA No. 329/Mum/2022 for A.Y. 2015-16, along with Mahavir M. Jain v. ACIT, ITA No. 352/Mum/2022 and RamniwasChoyal v. ACIT, ITA No. 360/Mum/2022, order dated 26.07.2022, the Mumbai Tribunal held that where commission income arising from accommodation entries had already been assessed on substantive basis in the hands of Shri Bhanwarlal Jain, the same income could not again be sustained on protective basis in the hands of the entities/persons controlled by him. The Tribunal noted that protective additions for A.Ys. 2008-09 to 2014-15 had been deleted and that, in Shri Bhanwarlal Jain’s own case in ITA No. 2669/Mum/2018 and connected appeals, order dated 06.08.2021, the commission income had been estimated and assessed substantively in his hands. The Tribunal further held that the Revenue could not, on one hand, treat the concerned entities as accommodation-entry providers controlled by Shri Bhanwarlal Jain and, on the other hand, treat their diamond trading activities as genuine for estimating gross profit. It was also held that the CIT(A) could not convert a protective addition into a substantive addition without issuing an enhancement notice under section 251(2) of the Act. Accordingly, the additions were deleted and the appeals of the assessees were allowed.

14.

In Meenaxi Diamonds Pvt. Ltd. v. ACIT, ITA No. 310/Mum/2022, along with Roshan Gems Pvt. Ltd. v. ACIT, ITA No. 311/Mum/2022, Meridian Jewellery Pvt. Ltd. v. ACIT, ITA No. 356/Mum/2022 and Milan & Co. v. ACIT, ITA No. 382/Mum/2022, all relating to A.Y. 2015-16, order dated 15.09.2023, the Mumbai Tribunal followed its earlier decisions in A2 Jewels v. ACIT, ITA No. 487/Mum/2022, dated 10.11.2022 and Bhanwarlal M. Jain v. DCIT, ITA No. 2669/Mum/2018, dated 06.08.2021. The Tribunal held that since the commission income from the accommodation-entry activity had already been assessed on substantive basis in the hands of Shri Bhanwarlal Jain, the same income could not again be assessed on protective basis in the hands of the concerns controlled by him. It also noted that similar protective additions for A.Ys. 2008-09 to 2014-15 had already been deleted. Accordingly, following the earlier Coordinate Bench decisions, the Tribunal deleted the protective commission additions and allowed the appeals of all the assessees.

15.

We are therefore unable to accept the Revenue's contention that the burden was entirely upon the assessee merely because his PAN figured in the information received from the Investigation Wing. The assessee did explain his position, furnished his bank statements, denied the transactions in his statement before the Department and placed supporting circumstances on record. Once the Revenue sought to tax a specific amount as commission income, it was necessary to establish by some material that the assessee had acted as an entry provider or conduit for consideration and had actually earned such commission. General information regarding the modus operandi of the Bhanwarlal Jain Group may justify investigation, but it cannot substitute evidence of income in the hands of this particular assessee.

16.

Considering the facts in their entirety, we find that the learned CIT(Appeals) has correctly appreciated the evidence. The addition of ₹1,13,087/- is based on an assumption that because the assessee's PAN was used in accommodation-entry transactions, he must necessarily have earned commission at 0.075%. There is no material showing payment or receipt of such commission and there is no independent evidence to show that the assessee actively participated in the accommodation-entry activity for consideration. The substantive commission arising from the group activity has also been assessed in the hands of Shri Bhanwarlal Jain. We therefore find no reason to interfere with the order of the learned CIT(Appeals) deleting the addition. Accordingly, the order of the learned CIT(Appeals) is upheld and all the grounds raised by the Revenue are dismissed.

17.

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

Order pronounced in the open court on 07.10.2026

Sd/- Sd/- MAKARAND VASANT MAHADEOKAR SIDDHARTHA NAUTIYAL ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 07.10.2026 Krk, Sr. PS Copy to: AJAY KUMAR, ITO 28(1)(1), MUMBAI, ROOM NO 329, VASHI RAILWAY STATION, 1 TOWER NO 6, 400703, MUMBAI-400703, MAHARASHTRA AMANKUMAR BIRMARAM PRAJAPAT , 115, SARDAR COMPLEX, MINI BAZAR, 2 VARACHHA ROAD, SURAT, GUJARAT, INDIA - 395006, MUMBAI-395006, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE

ABHINAV ANANT TRUE COPY Digitally signed by ABHINAV ANANT GAVANDE GAVANDE Date: 2026.10.13 15:11:35 +05'30' ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., MUMBAI

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