NARAYANLAL BHANAJI PRAJAPATI,AHMEDABAD vs. THE ACIT, CENTRAL CIRCLE-2(3), AHMEDABAD

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in directing AO to make the addition substantively, which was originally made by AO only on protective basis.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) erred in enhancing the assessment by treating protective addition as substantive without giving any notice as substantive. Asst. Year –2021-22 - 2–

It is therefore prayed that the above addition/disallowance made by the assessing officer may please be deleted.

Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

The brief facts of the case are that the assessee filed his return of income for the Assessment Year 2021-22 declaring total income of ₹8,44,560/-. The assessee had shown income from house property, business income, capital gains and income from other sources. During the year, the assessee had also declared brokerage income of ₹3,00,000/- and commission income of ₹2,65,000/-. A search and seizure action under section 132 of the Income-tax Act, 1961 ("the Act") was conducted in the case of the Political Parties and Charitable Organisations (PPCO Group) on 02.02.2021 and subsequent dates. During the course of the search, the residential premises of Shri Champak Narayanlal Prajapati, the son of the assessee, were also covered. Certain incriminating materials and digital data were found and seized during the course of search which as per the Ld. AO related to the assessee. Consequently, proceedings under section 153C of the Act were initiated and the case of the assessee was centralized for assessment.

During the course of assessment proceedings, the Assessing Officer noticed that the assessee had declared brokerage income of ₹3,00,000/- and commission income of ₹2,65,000/- aggregating to ₹5,65,000/-. The assessee was asked to furnish details regarding the nature and source of the said income along with supporting evidences. In response, the assessee submitted that the brokerage and commission income had been earned from supplying cloth and providing GST billing services on commission basis. However, the Assessing Officer observed that the assessee failed to furnish any Narayanlal Bhanaji Prajapati vs. ACIT Asst. Year –2021-22 - 3–

The Assessing Officer further noted that during the course of the search, certain bogus invoices aggregating to ₹11,57,11,453/- were found which were related to accommodation entries provided through bogus billing. The assessee, in his statement recorded during the course of search proceedings, admitted his involvement in providing such accommodation entries and explained the modus operandi. The Assessing Officer noted that the assessee had claimed that he earned commission at the rate of 0.05%, whereas the statement of the assessee’s son indicated that the commission earned on bogus billing transactions was at the rate of 0.25%. Based on the seized material and statements recorded during search proceedings, the Assessing Officer estimated commission income at 0.25% of the total bogus billing amount and computed the commission income at ₹2,89,278/-. Since substantive addition on this account had already been made in the hands of the assessee’s son, the Assessing Officer made the addition of ₹2,89,278/- in the hands of the assessee on protective basis. Asst. Year –2021-22 - 4–

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals). With respect to Grounds No. 1 and 3 relating to the addition of ₹5,65,000/- under section 68 of the Act and application of section 115BBE of the Act, the learned CIT(Appeals) observed that the assessee had declared the brokerage and commission income in the return of income itself and the same formed part of the business income of the assessee. The learned CIT(Appeals) held that the Assessing Officer had made the addition under section 68 of the Act without bringing any material on record to demonstrate that the income declared by the assessee was false or fictitious. The learned CIT(Appeals) also observed that the income had already been disclosed in the return of income and therefore the addition made by the Assessing Officer resulted in double addition. Accordingly, the learned CIT(Appeals) directed the Assessing Officer to delete the addition of ₹5,65,000/-.

With regard to Ground No. 2 relating to the addition of ₹2,89,278/- made on protective basis, the learned CIT(Appeals) examined the seized material and the statements recorded during search proceedings. The learned CIT(Appeals) noted that the bogus invoices were found from the possession of the assessee and that the assessee had admitted his involvement in providing bogus billing accommodation entries. The learned CIT(Appeals) further observed that the son of the assessee had explained the rates of commission applicable for various accommodation entry activities and had specifically stated that commission on bogus billing was charged at the rate of 0.25%. The learned CIT(Appeals) therefore held that the estimation of commission income at the rate of 0.25% was justified. However, considering the fact that the incriminating material was found from the Narayanlal Bhanaji Prajapati vs. ACIT Asst. Year –2021-22 - 5–

The assessee is in appeal before us against the order passed by the CIT(Appeals) dismissing the appeal of the assessee.

We have carefully considered the rival submissions and perused the material available on record including the assessment order and the order passed by the learned CIT(Appeals). The primary issue raised in the present appeal relates to the addition made on account of commission income arising from bogus billing accommodation entries and the findings recorded by the learned CIT(Appeals) in confirming the same.

From the material available on record, it is evident that the incriminating material relating to bogus invoices was found during the course of search proceedings and such invoices were found from the possession of the assessee. The assessee in his statement recorded under section 131(1A) of the Act during the course of search proceedings had clearly admitted that the invoices were bogus and that he was involved in facilitating accommodation entries in lieu of commission income. The seized documents indicated that bogus billing transactions aggregating to ₹11,57,11,453/- had been facilitated through the said accommodation entry mechanism by the assessee. The learned CIT(Appeals) has examined the seized material and the Narayanlal Bhanaji Prajapati vs. ACIT Asst. Year –2021-22 - 6–

The learned CIT(Appeals) has further noted that the son of the assessee had explained the specific rates of commission applicable for various accommodation entry transactions and had clearly stated that the rate of commission for bogus billing entries was 0.25%. The learned CIT(Appeals), after considering the seized documents and the statements recorded during search proceedings, found that the activity involved in the present case was clearly that of bogus billing accommodation entries and therefore the rate of commission of 0.25% adopted by the Assessing Officer was reasonable and justified. The learned CIT(Appeals) has also correctly observed that since the incriminating material was found from the possession of the assessee and the assessee himself had admitted the transactions, the addition ought to be made substantively in the hands of the assessee instead of on protective basis.

We find that the findings recorded by the learned CIT(Appeals) are based on a proper appreciation of the facts and evidence available on record. Asst. Year –2021-22 - 7–

It is a settled legal position that admissions made during the course of search proceedings constitute an important piece of evidence and unless the same are demonstrated to be incorrect or involuntary, such admissions carry considerable evidentiary value. In this regard, reliance may be placed on the decision of the Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala [1973] 91 ITR 18 (SC) wherein it was held that an admission is an extremely important piece of evidence though it is open to the person making the admission to show that it is incorrect. In the present case, the assessee has not brought any material to demonstrate that the statement recorded during search proceedings was incorrect or that the seized documents did not relate to him.

Further, the Hon’ble Supreme Court in the case of CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) has held that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality of the transaction and are not bound to accept the apparent as real. Similarly, the Hon’ble Supreme Court in Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) has held that the test of human probabilities can be applied to determine the genuineness of a transaction.

Applying the above principles to the facts of the present case, it is evident that the explanation offered by the assessee regarding the commission income is not supported by any documentary evidence whereas the seized material clearly establishes the involvement of the assessee in providing accommodation entries. Asst. Year –2021-22 - 8–

In view of the above discussion and considering the detailed findings recorded by the learned CIT(Appeals), we are of the considered view that there is no infirmity in the order of the learned CIT(Appeals) so as to warrant any interference by this Tribunal. The conclusions reached by the learned CIT(Appeals) are based on cogent reasoning and proper appreciation of the evidence on record.

Accordingly, the appeal filed by the assessee is dismissed. This Order is pronounced in the Open Court on 12/03/2026 (NARENDRA P. SINHA) JUDICIAL MEMBER Ahmedabad; Dated 12/03/2026