AMEE GOVINDBHAI PATEL,MEHSANA vs. THE INCOME TAX OFFICER ,WARD-1,, MEHSANA

In this case, information was received from ACIT Central-1, Surat vide letter No. SRT/ACIT/CC-I/AG/20I8-19 dated 08.03.2019. As per information during the course of commission enquiry u/s. I31(1)(3) of the Act in the case of Shri Amit Jayantital Shah, who has made cash deposits in 133 saving bank accounts of Indian Bank, Patan, it was admitted by Sim Amit Jayantilal Shah that he had deposited cash in these bank accounts by obtaining authority letters from account holders. During enquiry it was found that Amit Shah is an entry operator who used to provide accommodation entries of unsecured loans, bogus purchases, expenses, etc. Details of bank accounts operated by him alongwith his brother were obtained from the bank and it was found that the assessee Amee Govindbhai Patel is one of the beneficiary.

As per information the assessee has made transaction for an amount of Rs.42,50,000/- which were as transfer/remitted through voucher transfer on different dates during the F.Y. 2015-16 relevant to A.Y. 2016-17. The above information was verified in this office, it was noticed that assessee has received an amount of Rs.42,50,000/- as transfer/remitted through voucher transfer on different dates. On verification of return of income Hied by the assesses it is seen that the total income for A.Y. 2016-17 was declared at Rs.4,72,220/-. Thus the nssessee was having undisclosed Amee Govindbhai Patel vs. ITO Asst.Year –2016-17 - 4 - income which was not declared in the return of income filed, m view of above facts it can be inferred that assessee was having unaccounted money which was laundered and introduced in the form of unsecured loans, bogus purchases, expenses, etc. The assessee ought to have disclosed income received by oil means by filing return of income for the year under consideration.

From the above facts & discussion, it is noted that me lessee was in possession of unaccounted income which was above taxable limit. The assessee ought to have disclosed fully and truly all the material and facts related to Income. As assessee did not disclosed the correct income in the return of income filed. 1 have a reason to believe that the income of Rs.42.50,000/- escaped assessment on account of failure on the pan of assesses to fully and truly disclosed all the material and facts related to her income for A.Y. 2016-17.

Assessee has tiled return of income in this case but no scrutiny assessment u/s. 143(3) of the IT Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s, 147 is reason to believe which has been recorded above. It is pertinent to mention here that in this ease the assessee has filed return of income for the year under consideration but no assessment as stipulated u/s.2(40) of the IT Act was made and the return of income was only processed u/s. 143(1) of the IT Act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s. 148 of Income Tax Act, 1961 is to be obtained separately from the Principal Commissioner of Income Tax as per the provision of 151 of the Income Tax Act, 1961.”

As is evident from the above the Investigation Wing of the Department had passed on information to the Assessing Officer of the assessee to the effect that one Shri Amit Jayantilal Shah had utilized 133 savings bank accounts of Indian Bank, Patan, for the purposes of providing accommodation entries of unsecured loans, bogus purchases, expenses etc. All the cash deposits were made at Adajan Branch, Surat of Indian Bank. In the statement recorded under Section 131(1A) of the Act, Shri Amit Jayantilal Shah had admitted that he had deposited cash in all these bank accounts by obtaining authority letters from account holders. The inquiry Amee Govindbhai Patel vs. ITO Asst.Year –2016-17 - 5 - conducted by the Investigation Wing had revealed that Shri Amit Jayantilal Shah was an entry operator providing accommodation entries. During the course of inquiry proceedings, in the case of Amit Jayantilal Shah, some information in the case of the assessee Amee Govindbhai Patel was also revealed, which was shared by the Investigation Wing with the Assessing Officer of the assessee. As per the information, the Assessing Officer noted, that the assessee had made transaction for an amount of Rs. 42,50,000/- which were as transferred or remitted through vouchers transfer on different dates during the impugned year. On the basis of this information the Assessing Officer found that the assessee was having undisclosed income which was laundered and introduced in the form of unsecured loans and accordingly he formed belief of escapment of income of the assessee for the impugned year.

The information which was shared by the Investigation Wing with the Assessing Officer and formed part of the reasons recorded by the Assessing Officer is as under (Paper Book pages 8 & 9-10 reproduced at page 4 of the assessment order):

On perusal of the above information shared by the Investigation Wing of the Department with the AO of the assessee, undoubtedly it reveals the assessee to have received cheques on various dates from persons mentioned on the right side of the detail i.e. Gautam Setilal Kobi, Santosh Chhedilal Pandit, Dipakbhai Valjibhai Chauhan, Paras Ishvarbhai Shah, Bhavsar Traders (Prop. G M Bhavsar) etc. The information also provides details of account no.s of the said persons , which were allegedly Amee Govindbhai Patel vs. ITO Asst.Year –2016-17 - 7 - part of the 133 accounts used by Amit J. Shah for providing accommodation entries. It also gives the cheque no’s through which amounts were transferred to the assessee on various dates.Further ,more pertinently it also mentions clearly the repayment to the parties from whom amounts was received, by RTGS transfer made by Amee Govindbhai Patel ,the assessee before us. For example, the first entry in the above detail dated 25.06.2015 being a debit entry in the name of Amee Govindbhai Patel reveals an amount of Rs. 5,00,028/- to have been given or paid to Amee Govindbhai Patel by Gautam Setilal Kobi through his bank Account No. 624202182 vide cheque No. 12980. The next entry dated 11.03.2016, mentioning voucher transfer, shows a credit of Rs. 5,00,000/- in the name of Amee Govindbhai and reflects transfer by the assessee of the impugned amount back to Gautam Setilal Kobi in his bank Account No. 624202182 by way of RTGS.

Thus, evidently the information specific to the assessee which was revealed by the inquiry and the investigation done by the Department on Amit Jayantilal Shah was that, from the bank accounts purportedly used by Amit Jayantilal Shah for providing alleged accommodation entries,the assessee had received amounts and the said amounts were also “returned”.

The facts presented by the assessee to the AO during assessment proceedings corroborate the above, of the assessee having received amounts / unsecured loans from the said persons and having returned the Amee Govindbhai Patel vs. ITO Asst.Year –2016-17 - 8 - same to them also. The detail so furnished by the assessee to the AO is reproduced at Page 5 of the assessment order in tabulated form as under:

As is evident from the above, the assessee confirmed receipt of amounts from the said parties as also return of the said amounts, while establishing genuineness of the transaction of loans received from the impugned parties, submitting confirmation of the parties to the transactions, filing their ITRs and bank statements as evidence.

Thus, it stands as a matter of fact, that the assessee had both received amounts from the impugned parties and had also returned back the amounts to the said parties. This fact emanates, as noted above, both from the information received by the AO from the Investigation Wing and as per the details submitted by the assessee also duly confirmed by the said

The entire case of the Revenue is that the assessee had received accommodation entries from the said parties bank accounts camouflaged as loans. In the light of the admitted fact that the assessee had returned back the amounts received ,we fail to understand how the assessee in any way could be said to be the beneficiary of accommodation entry arranged through these accounts allegedly operated by Amit J. Shah, more particularly when the modus operandi revealed by inquiry conducted by the investigation Wing was that cash received from beneficiaries was deposited in these accounts which was returned back to the beneficiaries by way of issuing cheques as unsecured loans or share capital etc. Having converted his unaccounted income into accounted money, why would the beneficiary then return back this money.

In the circumstances as in the present case where the amounts have undoubtedly been returned back, the assessee cannot be said to have benefitted in any way. The entire case of the Revenue against the assessee treating it as beneficiary of accommodation entry fails on account of the fact of the alleged accommodation entry having been returned by the assessee. There can be no question, in such circumstances of treating the amount so received by the assessee as an accommodation entry. Even the Ld. DR was unable to explain how in such circumstances the assessee could be said to have benefitted by an accommodation entry. The Hon’ble Jurisdictional High court in the case of CIT-Rajkot Vs Ayachi Amee Govindbhai Patel vs. ITO Asst.Year –2016-17 - 10 - Chandrashekhar Narsangji TA 992 of 2013 dated 02-12-13 has held that no addition is called for u/s 68 of the Act where the credits are found to be repaid subsequently. The Hon’ble High courts findings in this regard at para 6 of its order is as under:

On merits, therefore, we hold that there is no case at all made out by the Department that the assessee was the recipient / beneficiary of an accommodation entry provided by accommodation entry provider identified as Amit J. Shah.

For the aforementioned reasons we also hold that the jurisdiction assumed by the AO for reopening the case of the assessee is not in accordance with law and is bad. As noted above the information in the possession of the AO itself revealed the amounts received by the assessee from the accounts allegedly operated by Amit J. Shah, to have been returned back to the account holders. As held above by us the assessee in such circumstances could not have been said to be the beneficiary of any Amee Govindbhai Patel vs. ITO Asst.Year –2016-17 - 11 - accommodation entry. On the basis of this information the AO, therefore, could not have formed any belief of the income of the assessee having escaped assessment so as to reopen the case of the assessee u/s 147 of the Act. We draw support from the decision of the Hon’ble jurisdictional High court in the case of Amee Mahasukhlal Parekh L/h Mahasukhlal Navnidhlal Parekh Vs. ITO C/SCA/18254/2022 Dt. 23-09-24 wherein it was held that where the information of repayment of credit was available with the AO, the reason for reopening the case of the assesee itself was bad since there was no escapment of income at all. The relevant findings in this regard are as under:

In the result, the appeal of the assessee is, therefore, allowed in above terms. This Order pronounced in Open Court on 18/09/2025