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Facts
The revenue appealed against the CIT(A) orders concerning AY 2011-12 and 2012-13, where the CIT(A) treated the assessee as a conduit and not a beneficiary for accommodation entries amounting to Rs. 50,06,180/- and Rs. 68,11,700/- respectively. The AO had initially treated the entire amount as bogus accommodation entries.
Held
The Tribunal held that neither the AO nor the CIT(A) had complete facts regarding the transactions, including details on payment, nature, utilization of funds, and repayment. Consequently, it was impossible to determine if the assessee was a beneficiary or a conduit.
Key Issues
Whether the assessee acted as a conduit or beneficiary for accommodation entries and the adequacy of evidence to determine this.
Sections Cited
147, 144, 250
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Before: SHRI SANDEEP GOSAIN & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 17.03.2025 घोर्णध की िधरीख/Date of Pronouncement 18.03.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- These appeals are filed by the revenue against the orders of the Learned Commissioner of Income-tax (Appeals), Mumbai-51/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 14.10.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Years [A.Ys.] 2011-12 & 2012-13.
& 6539/Mum/2024 A.Y. 2011-12 & 2012-13 Narendra K Rawal (HUF) 2. The revenue has raised the following grounds of appeal: AY 2011-12
1. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating assessee as conduit and not a beneficiary of accommodation entry, thereby confirming the addition to 1% as against total addition of Rs. 50,06,180/- made by AD on account of non- genuine unexplained transaction with Shri. Vipul Bhatt, an entry operator, who has controlled, managed and operated almost 347 bogus entities and assessee was found beneficiary of bogus transactions?
2. Whether on the facts and circumstances of the case and in law, the ld. CITIA) has erred in treating assessee as conduit and not a beneficiary of accommodation entry of Rs. 50,06,180/- without considering the fact that, Mr. Vipul bhatt, in his statement on oath has admitted that he is an entry operator and that controlled, managed and operated as many as 347 bogus entities which were used by for providing bogus accommodation entries for commission and the name of assessee was found to be one of beneficiary, indulged in shame transaction ?"
3. Whether on the facts and circumstances of the case and in law, the Id.CIT(A) has erred in treating assessee as conduit and not a beneficiary of accommodation entry of Rs. 50,05,180/-without appreciating the fact that during the re-assessment proceedings the Appellant has failed to prove with documentary evidences that he was not a beneficiary of accommodation entries of bogus transaction, but was only used as a conduit by the Shri. Vipul Bhatt, and has only received compensation, as commission in the shadow of such transactions?"
4. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred in holding that percentage of commission @ 1% on whole amount of accommodation entries of Rs. Rs. 50,06,180/-, is attributable to the assessee on account of acting as a conduit without appreciating the fact that was found to be one of beneficiary, indulged in shame transaction?"
5. The tax effect involved in the instant case is Rs. 21,25,250/-, which is below the prescribed limit as per CBDT's Circular F.No. 279/Misc.142/2007-JTJ(Pt) amended vide No 09/2024 dated 17.09.2024 However, this case falls under one of the exceptions specified in paragraph 3.1 (hl of the above stated Circular, wherein it is stated that in cases involving "Organized Tax Evasion" including cases of accommodation entry of bogus purchases, the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.
6. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary.” AY 2012-13 “1. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating assessee as conduit and not a beneficiary of accommodation entry, thereby confirming the addition to 1% as against total addition of Rs. 68,11,700/- made by AG on account of non-genuine & 6539/Mum/2024 A.Y. 2011-12 & 2012-13 Narendra K Rawal (HUF) unexplained transaction with Shri. Vipul Bhatt, an entry operator, who has controlled, managed and operated almost 347 bogus entities and assessee was found beneficiary of bogus transactions? 2. Whether on the facts and circumstances of the case and in law, the id. CIT(A) has erred in treating assessee as conduit and not a beneficiary of accommodation entry of Rs. 68,11,700/-without considering the fact that, Mr. Vipul bhatt, in his statement on oath has admitted that he is an entry operator and that controlled, managed and operated as many as 347 bogus entities which were used by for providing bogus accommodation entries for commission and the name of assessee was found to be one of beneficiary, indulged in shame transaction? 3. Whether on the facts and circumstances of the case and in law, the id. CIT(A) has erred in treating assessee as conduit and not a beneficiary of accommodation entry of Rs. 68,11,700/-without appreciating the fact that during the re-assessment proceedings the Appellant has failed to prove with documentary evidences that he was not a beneficiary of accommodation entries of bogus transaction, but was only used as a conduit by the Shn. Vipul Bhatt, and has only received compensation, as commission in the shadow of such transactions?"
4. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred in holding that percentage of commission 1% on whole amount of accommodation entries of Ra 58,11,700/-, is attributable to the assessee on account of acting as a conduit without appreciating the fact that was found to be one of beneficiary, indulged in shame transaction?"
The tax effect involved in the instant case is Rs. 21,25,250/-, which is below the prescribed limit as per CBDT's Circular F.No. 279/Misc.142/2007-TU(Pt) amended vide No 09/2024 dated 17.09.2004. However, this case falls under one of the exceptions specified in paragraph 3.1 I of the above stated Circular, wherein it is stated that in cases involving "Organized Tax Evaston" including cases of accommodation entry of bogus purchases, the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.
6. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary.”
Brief facts of the case are that the assessee had filed return declaring income of Rs. 2,60,537/- on 04.09.2012 for AY 2011-12. Subsequently, based on information receipt from the Investigation Wing, Mumbai, the case was reopened on the ground that the assessee has availed accommodation entries from the bogus entities of Shri Vipul Vidhur Bhatt Group on which a search was & 6539/Mum/2024 A.Y. 2011-12 & 2012-13 Narendra K Rawal (HUF) conducted on 05.02.2016. Based on statements recorded of Shri Vipul Vidhur Bhatt, during the course of the search, Ld. AO came to the conclusion that the assessee has taken accommodation entries from the group entities totalling to Rs. 50,06,180/-. This amount was, therefore, treated as bogus accommodation entries and added to the assessee’s income vide order u/s 144 r.w.s 147 dated 22.11.2018.
Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 24.10.2024, Ld. CIT(A) held that Ld. AO is not correct in treating the assessee as a beneficiary and not a conduit as stated by Shri Vipul Bhatt in his statement on the basis of which the entire addition has been made. Accordingly, Ld. CIT(A) held that 1% of the accommodation entries provided through the assessee who was acting as a conduit should be taxed to income. The addition was, thus, restricted to Rs. 50,062/- (i.e. 1% Rs. 50,06,180/-_ and the balance was deleted. Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal.
5. It has been argued by the Ld. DR that there was no basis for Ld. CIT(A) to hold that the assessee was a conduit and not a beneficiary of accommodation entries of Rs. 50,06,180/-. No documentary evidence was furnished by the assessee before Ld. AO and Ld. CIT(A) to establish that he was not a beneficiary & 6539/Mum/2024 A.Y. 2011-12 & 2012-13 Narendra K Rawal (HUF) of accommodation entries but was only a conduit and had received only 1% commission as compensation for the same.
Ld. AR, on the other hand, has strongly relied on the order of Ld. CIT(A) and argued that the entire case of Ld. AO is based on the statement of Shri Vipul Vidhur Bhatt and no evidence has been brought on record to establish that the assessee is a beneficiary of the bogus accommodation entries.
We have heard the rival submissions and perused the material available before us. It is seen that neither before the Ld. AO nor during the appellate proceedings before Ld. CIT(A), the complete facts relating to the impugned transaction have been brought on record. In the absence of the requisite details and supporting documentary evidences regarding the mode of payment, nature of the transactions, utilisation of the funds received by the assessee and repayment thereof, it is not possible to decide whether the assessee was a beneficiary or merely a conduit. We, accordingly, deem it appropriate to restore the matter to the Ld. AO for examination of the nature of the transaction in question after giving due opportunity to the assessee. The assessee is also directed to furnish necessary documents in support of its claim before the Ld. AO. Accordingly, the appeal is allowed for statistical purposes.
& 6539/Mum/2024 A.Y. 2011-12 & 2012-13 Narendra K Rawal (HUF)
AY 2012-13 8. The grounds taken in this year are identical, therefore, this year is also restored to Ld. AO for a fresh decision after examination of relevant details and documents as in AY 2011-12. Needless to add, the assessee should also submit the requisite material in support of his contentions. Accordingly, this appeal is also allowed for statistical purposes.
In the result, both the appeals of the revenue are allowed for statistical purposes. Order pronounced in the open court on 18.03.2025.