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Facts
The Department-Revenue filed an appeal challenging the order of the CIT(A) which allowed the assessee's appeal and deleted an addition of Rs. 72,28,950/-. The addition was made by the Assessing Officer (AO) on the grounds that the assessee had indulged in bogus profit of other clients through accommodation entries.
Held
The Tribunal held that the AO did not provide any documentary evidence or specific details regarding the alleged fictitious profits or losses. The AO also failed to provide reasons for rejecting the assessee's submissions and did not allow cross-examination, thus violating principles of natural justice. The CIT(A) was justified in setting aside the assessment order.
Key Issues
Whether the addition made by the AO based on alleged accommodation entries is sustainable without proper evidence, specified transactions, and adherence to natural justice principles.
Sections Cited
250, 148, 143(2), 133(6), 68, 69, 142, 147
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A-Bench” JAIPUR
Before: SHRIGAGAN GOYAL, AM & SHRI NARINDER KUMAR, JM
vk;dj vihyla-@ITA No. 304/JPR/2025 fu/kZkj.k o"kZ@AssessmentYear : 2012-13 Income Tax Officer cuke Sangeeta Gangwal Vs. War-6(4), B-159, Kirti Nagar, Tonk Road, Jaipur. Jaipur. LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.:AIAPG9939J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Tarun Mittal, C.A. jktLo dh vksj ls@Revenue by: Mrs. Anita Rinesh, JCIT, Sr. DR lquokbZ dh rkjh[k@Date of Hearing :21/07/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 21/07/2025 vkns'k@ORDER Per: NARINDER KUMAR, JUDICIAL MEMBER .
Department-Revenue has filed present appeal, challenging order dated 17.12.2024, passed by Learned CIT(A), National Faceless Appeal Centre, Delhi, u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), as thereby the appeal filed there by the assessee was allowed and addition of Rs. 72,28,950/- was deleted.
Sangeeta Ganwal, Jaipur 2. The assessee was before Learned CIT(A), as she felt dissatisfied with the assessment order dated 17.12.2019, relating to the assessment year 2012-13. The Assessing Officer made addition of Rs. 72,28,950/- and re- computed the income of the assessee, on the ground that the assessee was found to have indulged in bogus profit of other clients, without any actual transaction, that is to say, by way of accommodation entries.
3. Arguments heard. File perused.
4. It is case of the department that an information was received from DDIT(Investigation), Unit-3(1), Kolkata-700069, that the assessee had indulged in taking fictitious profits and losses created by some broker by misusing the client code modification facility in commodity transaction on NMCE, of Rs. 72,28,950/-, from SLA commodities and Derivatives Pvt. Ltd.
On the basis of above information, notice u/s 148 of the Act was issued to the assessee on 27.03.2019, whereupon the assessee filed return of income declaring her income of Rs. 2,61,570/-. Thereafter, notice u/s 143(2) of the Act was issued to the assessee on 02.12.2019. At page 2 of the assessment order, there is a table about the notices with their date of issuance and the dates of hearings .
Sangeeta Ganwal, Jaipur The Assessing Officer observed in the assessment order that despite service of the said notices, the assessee did not file any reply or submission.
6. Consequently, the Assessing Officer proceeded further and made above said addition of Rs. 72,28,950/- due to the aabovesaid reason that the assessee had indulged in taking bogus profit of other client without actual transaction.
7. When the assessee challenged above said assessment order, Learned CIT(A), NFAC allowed the appeal and set aside the only addition made by the Assessing Officer.
Learned CIT(A) recorded following reasons while allowing the appeal:- “6. Decision I have carefully examined the submission of the appellant as reproduced in the preceding paragraph and the facts emanating from the A.O's order, wherein addition has been made. From the submissions of the assesse during assessment proceedings and appellate proceedings, following facts have been clearly. emerged.- 1. Despite asking for source of information and documentary evidences like contract note, statements etc. Assessing Officer has not provided any of the relevant details to the assesse. Assesee has specifically asked for reasons recorded, but, Assessing Officer has not given copy of reasons, despite clear directive of Hon'ble Supreme Court in case of GKN Driveshafts.
Sangeeta Ganwal, Jaipur 2. Assessee has submitted all the relevant details available with her related to income shown by her in her IT Return such as bank statement, copy of contract note showing income of Rs. 1,50,375/- and other relevant details. But, Assessing Officer has not raised any objection on these details and indirectly accepted them. The very base, on the basis of which this case was reopened was missing.
3. Assessing Officer has even issued notice u/s. 133(6) to M/s. SLA Commodities and Derivatives Pvt Ltd., on 02.11.2019, during assessment proceedings, but no reply has been received from them.
From the perusal of the assessment order it is evident that Assessing Officer himself is not clear, as to whether there are fictitious profits or fictitious losses of Rs.72,28,950/-, Nowhere, in the assessment order or questionnaire issued to assessee, Assessing Officer has ever mentioned any details related to these fictitious profits or losses, such as in which scrip it is being done or date of transaction or mode of payment etc. Further, Assessing Officer has not even mentioned under which addition has been made as to whether Section 68 or 69. It clearly shows that Assessing Officer himself was not clear about the applicability of section, as there was no proof or documentary evidence regarding these fictitious profits or losses of Rs. 72,28,950/-, with him.
5. Assessee has made all submissions, to the extent possible before Assessing Officer and repeatedly asked for documentary evidences regarding fictitious profits or losses, but Assessing Officer has not given any of the information and reasons to assesse.
Assessing Officer, in assessment order, has simply rejected all the submissions made by assesse by saying that "in compliance to the above show cause notice, the assesse submitted her reply/submissions, but the same was not found to be satisfactory." Assessing Officer has not given any reasoning as to why he has rejected assessee's submission.
Assessee has not been given any opportunity to cross-examine the person, on whose statements case has been reopened. This is clear violation of principles of natural justice.
Sangeeta Ganwal, Jaipur Further, during appellate proceedings, assesse has put reliance on number of judicial pronouncements, as enumerated below:- 1. Principal Commissioner of Income Tax v.Ramaiah (2019) 103 Taxman 202 S.L.P dismissed.(S.C)
2. CIT v. Jagat Talkies Distribution 398 ITR 0013 (Delhi) 3. GKN Driveshaft Pvt. Ltd. 259 ITR 19(SC) 4. Andaman Timber Industries v. CCE Accordingly, considering all the above factual matrix and judicial pronouncements, it is clear that the very basis, on which case was reopened was missing and Assessing Officer has not followed directions given by Supreme Court in case of GKN Driveshafts, in absence of which whole assessment is liable to be quashed. Further, assesse has submitted all the details available with her and Assessing Officer has not found any fault with them. Hence, I hereby direct Assessing Officer to give relief to the assesse on all the three grounds and accordingly delete the addition of Rs.72,28,950/- 1. In result, appeal of the assesee is hereby Allowed.”
Contentions 9. Ld. DR for the department has submitted that the transaction, by way of client code modification was pre-arranged and carried out in collusion with the brokers, but Learned CIT(A) fell in error in deleting the addition without properly appreciating the fact that the assessee had not furnished any material in support of her claim.
Sangeeta Ganwal, Jaipur In support of her contention, Ld. DR has relied on the assessment order, and also submitted copy of contract note dated 20.05.2011 between the assessee and SLA Commodities and Derivatives Pvt. Ltd.
On the other hand, Ld. AR for the appellant has submitted that the Assessing Officer made addition even without properly appreciating the reply furnished by the assessee to the notices. Ld. AR has also submitted that this is case where the assessment order came to be passed without any enquiry by the Assessing Officer, and by simply relying on the information received from Investigation Unit of the department, at Kolkata. Accordingly, Ld. AR has submitted that Learned CIT(A) was justified in setting aside the assessment order, while allowing the appeal filed by the assessee, and further that present appeal filed by the department also deserves to be dismissed, same being without any merit. Discussion 11. Paper book submitted on behalf of the assessee begins with ITR furnished by the assessee, as regards assessment year 2012-13. It was submitted on 31.07.2012. Page 1A of the said paper book reveals that in the statement of total income, annexed to ITR for the said assessment year, the assessee Sangeeta Ganwal, Jaipur reflected in para 1.5 under the head “income from other sources” a sum of Rs. 1,50,375/- towards F & O profit . As per computation of total income, under the head “income from other sources” chapter IV- F, the above said amount of Rs. 1,50,375/- was profit on Commodity Trading.
As per Annexure to the notice issued under sub section (1) of Section 142 of the Act, (page 8 of the paper book), the assessee was alleged to have made transactions of multi commodity during the assessment year 2012-13, but she did not disclose the same in her return of income for the said assessment year. Accordingly, the assessee was called upon to submit following information:- “1. During the year under consideration, you taken the accommodation entries as bogus loss/profit/sale/purchase of the shares and commodities on NMCE from the SLA Commodities & Derivatives Pvt. Ltd. earning/creating the fictitious profits and losses by some brokers. Please submit the relevant details related to the transactions.
2. Please submit the statement of D-mate account for the financial year 2011-1 3. Please submit the trading account/ledger of the transactions made by you during the year under consideration.
Please submit the statement of all the bank accounts which were maintained by you during the year under consideration.
Please submit the statement of all the bank accounts which are being maintained by you in the current year.
Please submit the details of income from other sources of Rs 2,61,566/- submitting the relevant documents/evidences for verification of the same.”
Sangeeta Ganwal, Jaipur 13. In her response dated 05.11.2019, to the notice dated 02.11.2019 issued u/s 142(1) of the Act, the assessee alleged to have already disclosed profit of Rs. 1,50,750/- under the head “income from other sources”, in her return of income, as profit on commodity trading. In this regard, she also submitted computation of income. For ready reference, she also submitted copy of D-mat account, while submitting that the said account did not disclose any such transaction.
As per show cause notice dated 02.12.2019, issued by the department to the assessee, assessment proceedings u/s 147 of the Act were initiated on the basis of information available with the department that during the year under consideration that she had taken accommodation entry to the tune of Rs. 72,28,950/-, as bogus loss/profit/sale/purchase of shares and commodity while paying unaccounted cash/income for the said transaction entry through broker, namely, M/s SLA Commodities & Derivatives Pvt. Ltd. It was also mentioned in the show cause notice that the assessee had not disclosed said income in her return of income for the purpose of taxation. The assessee furnished her reply dated 06.12.2019 to the said notice u/s 148 of the Act, and sought for following information and documents from the department.:-
Sangeeta Ganwal, Jaipur “(i) Copy of contract note of broker (ii) Copy of bill of broker (iii) Copy of Global Report (iv) Copy of ledger account in the books of broker (v) Mode of payments made by broker viz cheque No., date, amount and name of bank in which it has credited. (vi) Calculation sheet of accommodation entry as bogus loss/profit/sale/purchase of shares and commodities of Rs. 72,28,950/-. How this figure have been arrived.”
The assessee also made a request to the Income Tax Officer/Assessing Officer to call for the broker and provide her an opportunity of cross examination. Ld. AR for the assessee submitted during the arguments that none of the above said documents were made available by the department to the assessee.
As noticed above, the Assessing Officer initiated assessment proceedings u/s 147 of the Act on the basis of information received from DDIT(Investigation) Unit,-3(1), Kolkata. The information was that the assessee had got accommodation entry, as regards fictitious profits and losses, got created with the assistance of some brokers by misusing the client code modification facility in the commodity trading and SLA Commodities and Derivative Pvt. Ltd. was named to have provided said accommodation entry.
Sangeeta Ganwal, Jaipur But, from the assessment order it does not transpire as to whether, after receipt of the above said information from DDIT (Investigation )Unit, Kolkata, the Assessing Officer conducted any enquiry to verify the information so received. As noticed above, in the notice u/s 142(1) of the Act, reliance was placed on general information that the assessee had taken accommodation entry as bogus loss/profit/sale/purchase of the shares and commodities on NMCE, from SLA Commodities and Derivative Pvt. Ltd. earning/ creating fictitious profits and losses by some brokers. No specific transactions were mentioned in the notice u/s 142(1) of the Act. Even in the show cause notice dated 02.12.2019, the Assessing Officer did not specify if accommodation entry pertained to bogus profit or sale or purchase of shares or commodities. It appears that some vague information was received by the department from its Investigation Unit. Otherwise, in case of bogus loss or profit, the same would have been specified in the information. In the given situation, the Assessing Officer was required to conduct enquiry, before initiating proceedings u/s 147 of the Act, but it appears that no such enquiry was conducted by the Assessing Officer.
Sangeeta Ganwal, Jaipur 16. As is available from the paper book, and as mentioned above, the assessee submitted two responses i.e. one to the notice dated 02.11.2019, issued u/s 142(1) of the Act and 06.12.2019 and in response to the show cause notice dated 02.12.2019. However, still the Assessing Officer observed in the second paragraph, at page 2 of the assessment order that the assessee had not filed any reply or submission. This goes to suggest that the assessment order came to be passed without considering the replies submitted by the assessee.
As noticed above, while furnishing return of income, the assessee specified in the computation of total income that she had earned profit of Rs. 1,50,375/- on commodity trading. She reflected this amount under the head “income from other sources”. The Assessing Officer did not specify in the assessment order as to on the basis of which document/material , he arrived at the conclusion that the assessee had procured an accommodation entry to the tune of Rs. 72,28,950/-, whereas on the other hand, the assessee submitted her statement of bank account, copy of contract note depicting income of Rs. 1,50,375/-and other relevant details, as discussed by Learned CIT(A) in sub para 2 of para 6 of the impugned order.
Sangeeta Ganwal, Jaipur In the given situation, Learned CIT(A) rightly observed that the Assessing Officer did not raise any objection regarding said details provided by the assessee, and further that the very basis in reopening was missing.
Learned CIT(A) also observed in the impugned order that the Assessing Officer had issued notice u/s 133(6) to M/s SLA commodities and Derivatives Pvt. Ltd., but no reply from received from the said company to the notice. The Assessing Officer should have further pursued the matter to secure presence of the representative of said company for effective adjudication of the issue involved. There is nothing on record to suggest as to what further steps were taken by the Assessing Officer, after the said company did not furnish any reply to his notice u/s 133(6) of the Act to ensure their appearance.
While allowing the appeal, Learned CIT(A) rightly observed that neither in the questionnaire nor the assessment order, the Assessing Officer mentioned about details reflecting fictitious profits or losses. In other words, no mention was made in the assessment order or in the questionnaire if the assessee had invested in any scrip, and if so, on which date any such transaction took place and the mode of payment.
Sangeeta Ganwal, Jaipur Learned CIT(A) rightly observed that the Assessing Officer did not refer to any documentary evidence regarding fictitious profits or losses to the tune of Rs. 72,28,950/-. Accordingly, we are of the considered view that the Learned CIT(A) was justified in setting aside the assessment order. Result 20. In view of the above discussion and findings, we do not find any ground to set aside the impugned order passed by the Learned CIT(A), whereby the appeal filed by the assessee challenging the addition made on the aforesaid allegation of accommodation entry to avail the fictitious profits or losses, was allowed. Consequently, this appeal is hereby dismissed. File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 21/07/2025. Sd/- Sd/- ¼xxu xks;y½ ¼ujsUn dqekj½ (GAGAN GOYAL) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 21/07/2025 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- ITO, Ward-6(4), Jaipur. 1.