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Facts
The assessee declared a total income of Rs.2,07,333/- for A.Y. 2012-13. Subsequently, the AO received information alleging that the assessee was a beneficiary of accommodation entries amounting to Rs.6,53,712/- from entities managed by Shri Jignesh Shah, leading to the reopening of the case under Section 147 and an addition of the said sum to the assessee's income. The assessee contested this, stating the bank account linked to the alleged entry did not belong to them.
Held
The CIT(A) found that the bank account cited by the AO for the alleged accommodation entry did not pertain to the assessee. The Tribunal affirmed this, concluding that the AO's satisfaction for reopening the assessment under Section 147 was a 'borrowed belief' due to failure to verify crucial facts and dispose of assessee's objections, thus rendering the reassessment void ab initio. On merits, the Tribunal agreed that no addition was warranted as the accommodation entry was not conclusively proved against the assessee.
Key Issues
Whether the reassessment proceedings initiated under Section 147 were valid given the AO's failure to verify incorrect information regarding the assessee's bank account, and whether the deletion of the accommodation entry addition by the CIT(A) was justified.
Sections Cited
250, 147, 143(1), 132, 148, 143(2), 142(1), 143(3)
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA
A/w. CROSS OBJECTION No. 59/Ahd/2025 (िनधा�रण वष� / Assessment Year : 2012-13) बनाम/ Income Tax Officer Vipul Jagdishbhai Patel Ward-2(1)(2), Ahmedabad (HUF) Vs. A-302, Aryan-2, Nr. Kabir School, B/h. St. Xaviers School, Naranpura, Ahmedabad, Gujarat - 380013 & Vipul Jagdishbhai Patel Income Tax Officer (HUF) Ward-2(1)(2), A-302, Aryan-2, Nr. Kabir Ahmedabad School, B/h. St. Xaviers School, Naranpura, Ahmedabad, Gujarat - 380013 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAGHV7848P (Appellant / Cross Objector) .. (Respondent) Assessee by : Shri Kirit P Shah, A.R. Revenue by : Shri Nitin Kulkarni, Sr. DR Date of Hearing 19/08/2025 Date of Pronouncement 27/08/2025 O R D E R The present appeal of the Revenue and Cross Objection of the assessee are against the order of the Ld. Commissioner of Income Tax (Appeals), ADDL/JCIT (A)-1, Siliguri (hereinafter referred to as “CIT(A)”), dated 30.03.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relate to Assessment Year (A.Y.) 2012-13.
A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 2 – 2. The appeal of the assessee is delayed for filing by 16 days. The AO has explained the cause of delay as being preoccupied in pressing matters including time barring matters, High Court matters and others. Considering the smallness of the delay, we consider it fit to condone the delay. Order was pronounced in the open Court.
The facts relating to the case before us are that the assessee for the impugned year had declared total income of Rs.2,07,333/-. Subsequently, the AO came in possession of information that the assessee was beneficiary of accommodation entry from the entities managed and controlled by an accommodation entry provider, Shri Jignesh Shah. The quantum of accommodation entry alleged to have been taken by the assessee amounted to Rs.6,53,712/-. Basis this information, the AO reopened the case of the assessee and made addition of the impugned sum to the income of the assessee in the order passed u/s.147 of the Act.
The Ld. CIT(A) considered the facts of the case and the submissions made by the assessee before him and found that the information in the possession of the AO did not relate to the assessee at all. He found that the bank account in which the accommodation entry was allegedly noted in the information, to have been provided to the assessee by the accommodation entry provider, did not pertain to the assessee. He noted the assessee to have pointed out this factual infirmity in the information to the AO immediately on receipt of the copy of reasons recorded for reopening of the case of the assessee. He noted the AO to have A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 3 – not acted on this submission of the assessee. He further noted from the documents in his possession that the assessee had demonstrated to be operating from a different bank account and the bank account noted by the AO in which the alleged accommodation entry was provided did not relate to the assessee at all. The Ld. CIT(A) noted that the information in the possession of the AO was that the assessee had received accommodation entry from an entity AA Plus Share Brokers Pvt. Ltd. in a particular bank account amounting to Rs.6,53,712/-. The Ld. CIT(A), however, found that the assessee entered into a transaction with AA Plus Share Brokers Pvt. Ltd. and the gross total transaction with the said entity was only Rs.1,93,149/-, that too in a different bank account and the impugned amount had been offered to tax by the assessee as income from other sources. Noting the above facts, he held that the primary allegation against the assessee, of having received accommodation entry from Shri Jignesh Shah, remained unproved and accordingly, deleted the addition made in the hands of the assessee. The detailed finding of the Ld.CIT(A) in this regard are contained at Para 5 of his order as under:
“5.0 Decision:- In the present case, the assessee(HUF) filed his return of income for the year under consideration on 09.07.2012 declaring total income at Rs.2,07,333/- and the same was processed u/s 143(1). Specific information was received from DDIT(Inv.) Unit-1(3), Ahmedabad about the assessee that the concern is one of the beneficiaries who received accommodation entries from Jignesh Shah, through Piyushkumar C Dhandhara, accommodation an entry provider of Ahmedabad. It is pertinent to mention that a search operation u/s 132 was conducted by DDIT(Inv.), Unit-1(3), Ahmedabad on 11.09.2018 in the case of Sanjay Sah and Jignesh Shah. The documents seized from the above persons included details including seizure of unaccounted cash of Rs.19.37 crore alongwith incriminating digital as well as documentary evidences. Investigating agencies put forward a A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 4 – list of companies/individuals/concerns through which accommodation entries to various persons were arranged and provided. AA Plus commodity broking pvt Ltd was mentioned as one of the companies managed and controlled for this purpose by Jignesh Shah. The assessee was reported to be in receipt of the benefit of accommodation entry through AA Plus Share Brokers Pvt. Ltd on 24.08.2011 to the tune of Rs.6,53,712/- during financial year 2011-12. Consequently, reason was recorded and after taking the approval of the competent authority, notice u/s 148 was issued on 30.03.2019. In compliance, ITR was e-filed on 07.05.2019. After providing the reason to believe as recorded by the AO, notice u/s 143(2), u/s 142(1) and show cause notice were issued. Finally, the entire amount was added to the total income of the appellant in the form of unexplained cash credit. This appeal has been instituted challenging the addition made u/s 143(3)/147. At the outset, the appellant has stated that notice u/s 148 was issued in a mechanical manner and without making any enquiry. Subsequent addition was made by the AO without any application of his mind. According to the appellant, AO went on to complete the reassessment without disposing his objections put forward against the notice u/s 148 which makes the entire proceedings vitiated in the eyes of the law. In the matter of the facts of the case, the appellant has asserted that the HDFC bank account bearing number 226101100618 does not belong to him and the fact was conveyed to the AO during the process of hearing. In fact, his correct HDFC bank account no. is 02371000070334 he and has not received any credit from AA Plus Share Brokers Pvt. Ltd. on 24.08.2011. The said information was duly submitted to the AO during the process of assessment but the same was brushed aside and addition of Rs. 6,53,712/- was made in a routine and mechanical manner. The action of the AO, according to the appellant, is devoid of proper reasoning and meticulous application of mind. Placing reliance on a number of case laws including the judgment given by the Supreme Court in the case of GKN Driveshafts (India) Ltd. v/s ITO (259 ITR 19), the appellant has requested deletion of the addition made during reassessment. Examination of the assessment order reveals that AO has relied solely on the report sent by the investigation wing. In that report, account no the beneficiary was given to be 226101100618 stated to be belonging to the present appellant. However, the fact is brought on record that the assessee had denied the onus and liability of having this account at all. In fact, his HDFC bank account the copy of which was submitted in this office bore a different number. The same had been submitted to the АO as well. However, there is no mention of the fact that how the amount the his credited in a different bank account came to be subjected to addition in the hands of the assessee. There is no evidence of any written record in assessment order which can pinpoint without any degree of doubt that the bank account of the beneficiary as entered in the reason recorded before issue of notice u/s 148 actually belongs to the assessee. In other words, when the assessee had denied after being provided with the copy of the reason to believe that the said bank account was not and someone might have misused his name, further enquiry should have been done with respect to the HDFC account mentioned in the reason. To put it more clearly, when the entire transaction involving the receipt of Rs. 6,53,712/- in the form of accommodation entry had been flatly denied the assessee, detailed enquiry should have been done about actual ownership of the HDFC bank account mentioned in the reason recorded before issue of notice u/s 148. Thereafter, objection raised in A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 5 – this regard should have been properly disposed before assessing him at a higher income after making addition of the impugned amount. Copy of the letter submitted to the AO on 07.05.2019 reads as under: 'Moreover, your assessee fully disown the transaction done on 2410812011 for an amount of Rs. GS37121- through the beneficiary account# 226101100618 (as per your annexure to the approval letter) because the said bank account does not belong to your assessee. In a nut shell, your assessee has never entered into any such transaction on the day, of an amount and in the account allegedly stated in your notice' Further on 28.11.2019, the above denial was repeated and copy of the ledger in the name of AA Plus Share Brokers Pvt. Ltd., copy of HDFC bank account etc, were produced in affirmation of his claim that no such amount has been received in the HDFC bank account no. 02371000070334 which belongs to the assessee. The same has been recorded in the assessment order as under: 'In response to the same, the assessee has submitted details vide letter dated 28.11.2019 through ITBA mail. The assessee vide email letter dated 28.12.2019, has denied to have any transaction with such entity and also stated that the assessee does not negate the probability of misusing his name by AA Plus Share Brokers Pvt. Ltd. and disowns the transactions done with the entity. In this connection, is it to state that the above information received from the DDIT(Inv), Unit-1(3), Ahmedabad with the cogent evidence from the search proceedings the in Shri Jignesh shah and others, accommodation entry provider group of ahmedabad' In the above stanza, AO has referred to the existence of some cogent evidence received from the investigation wing but it remains to be stated how the evidence can be reliably used against the assessee when there is no mention of the bank account number of the assessee in the whole assessment order. This indirectly confirms the claim raised in this appeal. Non mention of the bank account number in which the assessee(HUF) allegedly received the benefit of accommodation entry in the form of credits into his HDFC bank account in the assessment order exposes the lack of documentary evidences to counter the contrary claims put forward by the assessee. In fact, after briefly alluding to the flat denial made by assessee with respect to the receipt of alleged accommodation entry from AA Plus Share Brokers Pvt. Ltd., AO has proceeded to reproduce the findings of the report forwarded by the investigation wing. The report contains the list of companies, proprietary concerns, individuals, entry providers etc which were managed and controlled by Jignesh Shah for the purposes of providing the benefit of accommodation entry to various interested parties and individuals. In the said report, name of AA Plus Share Brokers Pvt. Ltd. is found included from which the assessee had allegedly received the benefit of accommodation entry amounting to Rs. 6,53,712/-. Towards the end of the report as contained in the assessment order, detailed modus operandi of the various type of accommodation entry are given by way of a statement on oath of Jignesh Shah, recorded on 16.11.2018. However, in the extract of the report as appearing in the assessment order, it is nowhere written that the present appellant had indeed received the impugned amount credited into his HDFC bank account in the form of accommodation entry. After making elaborate discussion on the report submitted by the A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 6 – investigation wing, AO has concluded that bogus accommodation entry of Rs. 6,53,712/- received from AA Plus Share Brokers Pvt. Ltd. managed and controlled by Shri Jignesh Shah is liable to be added to the total income in the form of unexplained cash credit. From the above description of facts, it becomes obvious that there is no evidence of receipt of credit amounting to Rs. 6,53,712/- in the HDFC bank account of the assessee. From the documentary evidences submitted in this office, it transpires that the appellant has entered into gross total transaction of Rs. 1,93,149/- only with AA Plus Share Brokers Pvt. Ltd. and the amount was duly offered to tax in the form of income from other sources. Clearly, the amount mentioned as received in the form of accommodation entry could not be verified from the HDFC bank account number 02371000070334 and there is also no finding in the assessment order that the concerned bank account mentioned in the reason to believe recorded during reassessment actually belongs to the assessee. There is also no mention of any account statement of the HDFC bank account number 226101100618 which in the said amount of Rs. 6,53,712/- has been received by way of credit from the entry provider. Thus, the primary allegation that the appellant(HUF) has received the benefit of accommodation entry through banking channel from the entry providers controlled and managed by Jignesh Shah has not been conclusively proved in the process of reassessment. Considering the facts and circumstances the of case, the submission made in this appeal is accepted and AO is directed to deleted the addition of Rs. 6,53,712/- made during scrutiny assessment u/s 143(3)/147. Other grounds are technical ones and since the appellant has got relief on account of the core ground of addition of Rs. 6,53,712/-, there is apparent reason to adjudicate them separately.”
Having so decided the issue on merits, the Ld. CIT(A) did not deal with the grounds raised by the assessee.
Aggrieved by the same, the Revenue has come up in appeal before us challenging the deletion of addition by the Ld. CIT(A) of accommodation entry of Rs.6,53,712/- allegedly received by the assessee, while the assessee in its CO has challenged the validity of the assessment framed in the present case u/s.147 of the Act.
The grounds raised in the appeal by the Revenue and by the assessee in CO are as under:
A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 7 – (Revenue’s Appeal)
"Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the addition of Rs. 6,53,712/- made on account of bogus accommodation entry received from AA Plus Share commodity broking Pvt. Ltd., without appreciating the facts of the case?"
Whether on the facts and in the circumstances of the case and in law, the Id.CIT(A) has erred in ignoring the fact that the assessee has transacted with AA Plus Share commodity broking Pvt. Ltd, managed and controlled by Shri Jignesh Shah, an accommodation entry provider?"
3. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary." 4. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored?" CO No.59/Ahd/2025 (By Assessee)
“1. (a) On the facts and circumstances of the case and in law, A.O Ahmedabad has erred in issuing Notice u/s 148 and passing reassessment order u/s 147 which is bad in law and is illegal. (b) The A.O. has erred in issuing Notice u/s 148 without jurisdiction as existence of the belief that income has escaped assessment within the meaning of substantive provision of sec. 147 was absent. (c) The A.O. had erred in issuing notice u/s 148 on the basis of information received from DDIT (Inv.), Unit- 1(3), Ahmedabad vide email dt. 22/03/2019 regarding accommodation entry provider, without verifying the authenticity of the information. (d) The Assessing Officer had erred in issuing Notice u/s 148 merely by acting mechanically on the information supplied by the Investigation wing about the accommodation entries without applying his own mind. Assessing Officer had not examined and corroborated the information received from the investigation wing before recording his own satisfaction of escaped income and initiating reassessment proceedings. [Smt. Paramjit Kaur vs. CIT, Jalandhar [311 ITR 38 (Punjab & Haryana HC)] (e) The A.O erred in forming the belief that there is escapement of income on the ground that the appellant had received accommodation entry of Rs. 6,53,712/- in HDFC Bank account no 00060340017268 through entry provider Jignesh Shah, even though the Appellant had specifically confirmed that the said HDFC Bank account is not belonging to him and his HDFC Bank Account no is 02371000070334. (f) The A.O. erred in issuing Notice u/s 148 even though there is no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that the income chargeable to tax has escaped assessment. 2. (i) The A.O. erred in not applying his mind to the objections raised by the Appellant vide letter dated 07/05/2019 as per which it had been specifically confirmed that the bank account referred in the 'Statement showing reasons of the reopening of the Assessment does not belong to the Appellant and there is no escapement of income. (Kapadia Money Changers (P) Ltd. v/s. ACIT) (2019) 108 taxmann.com 275 (Guj) (Para 10) (ii) The A O. erred in not following the principles laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v/s ITO (259 ITR 19) as per which it has been specifically laid down that A.O. is bound to dispose off the objections raised by the assessee by passing a speaking order.
3. The principal CIT erred in giving sanction for issue of notice u/s 148 mechanically, without applying his mind to the material relied on by the A.O.”
We have heard both the parties and gone through the order of the Ld. CIT(A).
The addition made in the hands of the assessee by the AO relates to alleged accommodation entry received by the assessee from an entity managed and controlled by Shri Jignesh Shah an accommodation entry provider, vis M/s AA Plus Share Brokers Pvt. Ltd., amounting to Rs.6,53,712/-, in the alleged HDFC bank A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 9 – account of the assessee, being No.226101100618. The Ld. CIT(A) has found assessee’s bank account to be different and the said bank account to record transaction with AA Plus Share Brokers Pvt. Ltd. to the tune of Rs.1,93,149/-, which was all returned to tax by the assessee as income from other sources. He has noted the assessee to have demonstrated before him, that his bank account in HDFC Bank Account was No. 02371000070334 and not the one recorded in the reasons forming belief of escapement of income by the AO. The Ld. CIT(A) has also noted that the assessee at the very beginning of the proceedings itself, on receipt of reasons recorded by the AO, had categorically denied the bank account alleged to be belonging to the assessee and the Ld. CIT(A) further went on to confirm this fact by noting that the assessee’s bank account was a different one as noted above by me.
As the above facts noted by the Ld. CIT(A) have remained uncontroverted before me by the Ld. DR, in the light of the same, I shall now proceed to adjudicate both the appeals of the assessee in its CO and that of the Department. Considering the fact that the reasons recorded for reopening of the case of the assessee contained a fact which was incorrect and which was a very vital fact pertaining to the assessee having allegedly received accommodation entry in his bank account, which bank account was incorrectly recorded in the reason and considering that the assessee had pointed out this to the AO immediately on receipt of copy of reasons recorded and the AO still went ahead form his belief of escapement of income of the assessee so as to assume jurisdiction to reopen the case of the assessee, It is abundantly A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 10 – clear that the AO did not apply his mind to the information in his possession and his satisfaction of escapement of income of the assessee was nothing but a borrowed satisfaction. When the assessee had categorically pointed out to the AO that the bank account mentioned in the reasons did not pertain to him, the AO ought to have inquired into this aspect and only thereafter, proceeded to form belief of escapement of income of the assesse, if any on account of an alleged accommodation entry received by him. But, in the present case, the AO did not do any such exercise. He simply reiterated the information which was passed on him by the DDIT without verifying the facts stated therein despite the assessee pointing out the factual inaccuracies therein. Undoubtedly, the belief of the AO of escapement of income of the assessee was a borrowed belief without application of any mind and for this reason alone, the jurisdiction assumed by the AO to reopen the case of the assessee is vitiated. We, therefore, hold that the order passed u/s.147 of the Act is without jurisdiction and void ab initio.
The CO of the assessee is, therefore, allowed for the above reasons.
As for the merits of the case, the findings of the Ld. CIT(A) that the bank account in which the AO noted the assessee to have received accommodation entry did not belong to the assessee at all, has remained uncontroverted before us. In the light of the same, I find no reason to disagree with the Ld. CIT(A) that even on merits there was no case for making any addition in the hands A/w. CO No. 59/Ahd/2025 [Vipul Jagdishbhai Patel (HUF)] A.Y. 2012-13 - 11 – of the assessee on account of any alleged accommodation entry received by it.
In view of the above, appeal filed by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed and CO filed by the assessee is allowed.
This Order pronounced on 27/08/2025
Sd/- (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 27/08/2025 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,