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Facts
The assessee filed her return of income for AY 2012-13. The Assessing Officer (AO) reopened the case under Section 147 based on information that the assessee received accommodation entries through share trading. The AO made an addition of Rs. 1,30,96,000/- on account of alleged bogus transactions with Arihant Enterprise Ltd. (AEL).
Held
The Tribunal held that the AO was incorrect in treating the transactions with AEL as accommodation entries. The Tribunal noted that AEL was a group concern managed by the assessee and her family during the relevant period, and similar transactions were accepted as genuine in other related cases. The addition was deleted.
Key Issues
Whether the transactions between the assessee and Arihant Enterprise Ltd. constituted accommodation entries and if the addition made by the AO was justified.
Sections Cited
147, 143(3), 263
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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA
O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of National Faceless Appeal Centre, Delhi (in short ‘the CIT(A)’) dated 27.01.2025 for the Assessment Year (A.Y.) 2012-13.
The brief facts of the case are that the assessee had filed her return of income for the A.Y. 2012-13 on 31.07.2012 declaring total income of Rs.3,54,680/-. Subsequently, the Assessing Officer had received an information from DDIT (Inv.) Unit-1(3), Ahmedabad that the assessee was one of the beneficiaries of accommodation entry taken through share trading activities. Therefore, the Assessing Officer had reopened the case under Section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) after recording proper reasons. The assessment was completed under Section 143(3) read with Section 147 of the Act on 30.12.2019 at total income of Rs.1,34,50,680/-.
Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided vide the impugned order and the appeal of the assessee was dismissed.
Now, the assessee is in second appeal before us. The following grounds have been taken in this appeal: -
On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming initiation of re-assessment proceedings u/s.147 of the Act.
2. On the facts and circumstances of the case as well as low on the subject, the learned CIT(A) has erred in confirming initiation of re-assessment proceedings u/s 147 of the Act solely on the basis of information received from the DDIT(Inv.) 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs.1,30,96,000/- on account of unexplained income. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs.1,30.96,000/- on the grounds that transactions conducted with Arihant Enterprise Ltd. are bogus. 5. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs.1,30,96,000/- without considering that Arihant Enterprise Ltd. was registered on 12.09.1994 and it was run by family of appellant up to accounting year 2014-15 by doing genuine business. 6. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs.1,30,96,000/- without considering that Mr. Jignesh Shah was neither a member/director/employee nor he was associated with the com Arihant Enterprise Ltd. in any manner whatsoever during the year under consideration.
Assessment Year: 2012-13 Ami Dhiren Shah vs. ITO Page 3 of 8 7. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs.1,30,96,000/- without considering that all the transactions were done through account payee cheques and assessee has famished several documentary evidences including bank statements, confirmations, audit reports, financial statements and details of evidences regarding change in the Management of Arihant Enterprise Limited.
8. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming addition of Rs.1,30,96,000/- being total credit transactions of Rs.37,11,000/- and total debit transactions of Rs.93,85,000/- alleging that the same are bogus transactions.
9. Without prejudice to the above grounds, facts the on and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in not allowing set off of debit and credit transactions.
It is therefore prayed that the above addition/disallowance made by the assessing officer may please be deleted.
11. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.
5. The first two grounds taken by the assessee pertain to reopening of the case under Section 147 of the Act. These grounds were not pressed by the Ld. AR during the course of hearing and hence the same are dismissed.
Ground nos.3 to 10 pertain to addition of Rs.1,30,96,000/- in respect of accommodation entry taken by the assessee. The Assessing Officer had received an information that a search was conducted in the case of Shri Jignesh Shah, an accommodation entry provider on 11.09.2018. Shri Jignesh Shah had admitted that he was running multiple concerns for providing accommodation entries and one such concern was M/s. Arihant Enterprise Limited (now – Briya Enterprise Limited). It transpired that the assessee Smt. Ami Dhirenbhai Shah, Proprietor of M/s. Arihant Enterprise had taken accommodation entry from M/s Arihant Enterprise Ltd., Assessment Year: 2012-13 Ami Dhiren Shah vs. ITO Page 4 of 8 (hereinafter referred as ‘AEL’). AEL was maintaining a bank account with Tamil Nadu Mercantile Bank, in which there was total credit of Rs.37,11,000/- and total debit of Rs.93,85,000/- from Arihant Enterprise (Proprietor Smt. Ami Dhirenbhai Shah). The Assessing Officer had treated the entire transaction of Rs.1,30,96,000/- (Rs.93,85,000/- + 37,11,000/-) as accommodation entry and made addition as unexplained income of the assessee.
Shri Hardik Vora, Ld. AR of the assessee submitted that at the relevant point of time, AEL was a group company and the family members of the assessee were the Directors of the company till the financial year 2014-15. Shri Dhiren C. Shah, the husband of the assessee, was also one of the Directors of AEL. Subsequently, the Directors had changed w.e.f. 16.07.2014 and the company was taken over by the new management. The Ld. AR explained that all the transactions between AEL and Arihant Enterprise (proprietorship concern of the assessee), made during the year were internal group transfers and there was no inkling of any accommodation entry. He submitted that the accommodation entry cannot be taken from a group concern and, therefore, the Assessing Officer was not correct in treating the normal business transactions undertaken with a group company as accommodation entry. The Ld. AR further submitted that the assessee’s case for A.Y. 2013-14 was also reopened under Section 147 of the Act to examine the accommodation entry taken from Shri Jignesh Shah. However, in the assessment order for the A.Y. 2013-14, no addition was made by the Department on account of any accommodation entry and the returned income of the assessee was accepted. He further submitted that proceedings under Section 263 of the Act was initiated in the case of Shri Assessment Year: 2012-13 Ami Dhiren Shah vs. ITO Page 5 of 8 Dhiren C. Shah, husband of the assessee, for the A.Ys. 2013-14 and 2014-15 to examine the accommodation entries taken from AEL. However, the Ld. PCIT had dropped the proceedings under Section 263 of the Act., after recording a finding that during the year under consideration AEL was a group concern. The Ld. AR submitted that the Revenue cannot take different stand in different years or in different cases, on the basis of the same fact. Considering that no addition in respect of accommodation entry was made in the assessee’s own case in A.Y. 2013-14 as well as in the case of Sh. Dhiren C. Shah, the husband of the assessee, the addition as made by the Assessing Officer in the current year requires to be deleted.
Per contra, Shri Amit Pratap Singh, Ld. Sr. DR relied upon the orders of the lower authorities.
We have carefully considered the facts of the case and the submission of the assessee. In the reasons as recorded by the Assessing Officer, it is mentioned that Shri Jignesh Shah had filed an affidavit on 18.10.2018 that he was providing accommodation entries through AEL. The Assessing Officer was not correct in reopening the case of the assessee for the A.Y. 2012-13 without verifying as to since when Shri Jignesh Shah was providing accommodation entries through this company. The Assessing Officer had mechanically reopened the case and made the addition without carefully considering the facts and the submissions of the assessee. Further, the AO had made addition for debit as well as credit transactions as appearing in the bank accounts, which also was not correct. The assessee had submitted that during the year under consideration, AEL was only a group concern and the assessee’s husband was one of the Directors of the said accompany. It was in the F.Y. 2014-15 that the Directors of AEL were changed and the management and control of the company was transferred to outside the group. This fact has been acknowledged by the Ld. PCIT, Ahmedabad-1 in his order under Section 263 of the Act dated 26.03.2024 in the case of Shri Dhiren C. Shah for the A.Y. 2013-14, a copy of which has been brought on record in the paper book filed by the assessee. The finding given by him in this respect is reproduced below: -
I have carefully and thoroughly gone through submission of the assessee. The assessee has contended that he was chairman or Arihant Enterprise since 12.09.1994 to 03.03.2015. During this period, he, as a proprietor of Arihant Iron Traders, has transacted with the company in his personal capacity. The assessee has stated that he has resigned from the company, left the management and control of the company. The assessee has closed all the bank accounts of the company in which he was authorized signatory. The assessee has submitted various documents including copy form No. DIR 11 and DIR 12 submitted before the ROC so as to prove his resignation from the company. The assessee further submitted that transaction made by the assessee with Arihant Enterprise Ltd. were genuine as it was owned, controlled and managed by the assessee only. This entity Arihant Enterprise Ltd. was later managed by outsider party. The assessee has submitted that during the year under reference, the company was not managed by Shri Rajiv Shah, therefore, the transactions were genuine. Considering the submission of the assessee, documents made available and discussion with AR, it is held that during the year under consideration the assessee was operating the company Arihant Enterprise Ltd., which later on changed hand w.e.f. 03.03.2015. Since the assessee was managing the company during the year under reference, there is no involvement of Shri Rajiv Shah, entry operator. Hence, the very foundation of the proceedings u/s.147 of the Act i.e. para 3 of reasons for reopening inasmuch as “the assessee has received accommodation entry from paper/dummy company controlled and managed by Shri Rajiv Shah amounting to Rs.79,62,000/- for F.Y. 2012-13 relevant to A.Y. 2013-14”, becomes inoperative. Looking to the facts of the case, submission of the assessee, documents made available and reasons for reopening, the present proceedings are hereby concluded as ‘dropped’. (Emphasis supplied) 10. The Ld. PCIT had given a categorical finding that the transactions made with AEL during this year were genuine transactions. In fact, the Assessment Year: 2012-13 Ami Dhiren Shah vs. ITO Page 7 of 8 case of Shri Dhiren C. Shah for the A.Y. 2012-13 was also reopened under Section 147 of the Act on the basis of the same information on which the case of the assessee was reopened for this year. However, the Department had accepted the genuineness of the transactions made by Sh. Dhiren C Shah with AEL in the A.Y. 2012-13 and no addition in respect of any accommodation entry was made in his case. Similarly, the Revenue had also accepted genuineness of the transactions with AEL in the assessee’s own case in the A.Y. 2013-14 which was also reopened on the basis of the same information. Considering the fact that AEL was a group concern and the transactions made with this company was accepted as genuine in the assessee’s own case in the subsequent year as well as in the case of Shri Dhiren C. Shah, we are of the considered opinion that the Revenue was not correct in treating the total transactions made by the assessee with AEL in the current year as accommodation entry. The assessee had duly explained that all the transactions were internal group transactions and there was no iota of evidence to hold them as accommodation entry. Therefore, the addition of Rs.1,30,96,000/- on account of accommodation entry in respect of transactions with AEL is deleted. The grounds taken by the assessee are allowed.
In the result, the appeal of the assessed is partly allowed.
Order pronounced in the open Court on this 4th June, 2025.