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Facts
The assessee, an individual engaged in wholesale trading of feed and maize, faced reassessment due to suspicious bank transactions identified as accommodation entries involving M/s. Anil Group. The Assessing Officer initially added 8% of the turnover, which the CIT(A) subsequently reduced to 2% of the total accommodation entries, leading to the present appeal.
Held
The tribunal confirmed that the transactions were accommodation entries and, considering the facts and previous ITAT rulings, estimated the profit at 1.5% of the total accommodation entries of Rs. 17,41,39,105/-. This revised estimation by the tribunal is to be applied to all three assessment years in question.
Key Issues
1. Validity of reopening of assessment proceedings. 2. Correct estimation of commission income on accommodation entries facilitated through the assessee's bank account.
Sections Cited
143(3), 147, 148, 133(6), 144B, 250, 44AB, 271, 234B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
: 406 to 408/Ahd/2025 Asst. Years: 2013-14 to 2015-16 Gopal Mathurdas Parikh (IND) The ITO, 9, Tulsibag Society, Ward-1(2)(1), Yamunakunj Bunglow, Vs Ahmedabad Opp: Doctor House, Ellisbridge Ahmedabad-380006 PAN: ABEPP0574B (Appellant) (Respondent) Assessee Represented: Shri Mehul K. Patel, Advocate Revenue Represented: Shri Alpesh Parmar, CIT-DR & Shri Rajenkumar Vasavada, Sr. D.R. Date of hearing : 06-01-2026 Date of pronouncement : 08-01-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
These three appeals are filed by the assessee as against separate appellate orders all dated 31.01.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment orders passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years 2013-14, 2014-15 and 2015- to 408/Ahd/2025 A.Ys.. 2013-14 to 2015-16 2 Gopal Mathurdas Parikh. vs. ITO respectively. Since common issue is involved in all these appeals, the same are disposed of by this common order for the sake of convenience. relating to the Asst. Year 2013-14 is taken as the lead case. Brief facts of the case is that the assessee is an individual engaged in the business of wholesale trading in Feed and Maize Products for cattle food. Assessee filed his Return of Income for the Asst. Year 2013-14 on 21-09-2013 declaring total income of Rs.5,36,545/-. Regular assessment was completed u/s. 143(3) of the Act on 31-08-2015 assessing the total income at Rs.6,38,616/-. Subsequently the case was reopened on the ground that the credits and debits entries reflecting in the bank account no. 5111500003258 held by the assessee in Nutan Nagrik Sahkari Bank were reported as suspicious. As per the bank statement substantial credits from M/s. Anil Group of Companies were transferred on the same day to other companies of the same group. It is seen that Rs. 1,15,00,000 received from M/s Anil Tradecom Ltd was transferred to Anil Bioplus, Anil Nutrients and Anil Products on the same day. Such daily transactions were frequently appearing in the bank statement. As per ROC data, Anil Tradecom Limited was a trader in maize and its products. However, M/s Anil Bioplus Limited (ABL) was engaged in manufacturing and marketing of Enzymes (supplying to Textile, Food & Beverages, and Paper industries), Anil products manufactured silica gel bags, plastic packaging products and plastic mouldings and Anil nutrients manufactured refined petroleum products. So payments to these companies were definitely not for maize and feed products. to 408/Ahd/2025 A.Ys.. 2013-14 to 2015-16 3 Gopal Mathurdas Parikh. vs. ITO Even if these companies do sell maize, they could have directly sold it to their sister concerns instead of selling through the assessee. It is clear that money was being routed through assessee's bank account and is a classic case of accommodation entry. Therefore the assessment was reopened issuing notice u/s. 148 of the Act.
2.1. In response assessee filed his Return of Income and replied to the notices issued by the A.O. and reassessment was completed by making addition at 8% of the entire turnover of Rs.59,64,28,565/- as against the profit element of 0.03% admitted by the assessee. Thus the assessing officer estimated the business income of the assessee at Rs.4,53,14,285/- and demanded tax thereon.
3. On appeal against the reassessment order, Ld. CIT(A) estimated the gross profit at 2% of total accommodation entries amounting to Rs.17,41,89,105/- appearing in the Nutan Nagrik Sahakari bank account and thereby partly allowed the appeal of the assessee by observing as follows: “4.2.2 The appellant submitted that even if the transaction is mere accommodation entry, the alleged credits and debits did not prove any unaccounted income as without purchase transaction corresponding sale transaction is not possible. As per the assessment records and STR, total credits in bank account no 5111500003258 held by the assessee in Nutan Nagrik Sahkari Bank was Rs.17,41,39,105. The appellant has not given any contrary figure either. However, the AO proceeded to make percentage addition @ 8% of the entire turnover of Rs. 59,64,28,565 instead of the actual amount routed through the bank account by the entities who failed to respond to notices issued u/s 133(6). The appellant has accounted these transactions as part of total turnover in the P & L account. Almost all amounts credited in the above account were transferred out. In the case of Ajay Kumar Aggarwal to 4009/Del/2017, Delhi ITAT held that, when the AO himself his alleging that the assessee is providing accommodation entry then if the debit and credit side of account is taking together then only a very small amount would remain that is element of commission income accrued to the assessee. In our humble view the entire to 408/Ahd/2025 A.Ys.. 2013-14 to 2015-16 4 Gopal Mathurdas Parikh. vs. ITO
amount of credit entries cannot be added to the taxable income of the assessee ignoring the debit side entries and as when the assessee is receiving cash and issuing cheques then said cheque of almost same amount then the assessee cannot be held beneficiary of entire amount or entire amount of credit entries treating the same as unexplained. 4.2.3 As per above discussions, the appellant had facilitated accommodation entry through bank account routing. Once the debit and credit side of bank account is taken together, then only a very small amount remained which was the element of commission income accrued to the assessee. The appellant was showing only 0.03% as net profit. The jurisdictional ITAT, Ahmedabad bench has held in order dated 28/09/2022 in the case of Nexus Software Ltd in Appeal Number: that, we do not find any infirmity in the findings of the Id. CIT(A) that the assessee is an entry provider only and was involved in accommodation entry business and has been rightly taxed at 0.5% for commission income on the deposits in the bank account. In the case of Arydeep Developers Pvt. Ltd. (Appeal Number:
ITAT Ahmedabad held that, in the light of the above facts and finding that assessee have not executed any work except providing accommodation entries, looking to the meager income shown by the assessee it will be reasonable to estimate the commission income earned by the assessee @ 4% of contract price. Following the guidance range given by the jurisdictional tribunal, it is held that the appellant is liable for 2% commission of total accommodation entries amounting to Rs. 17,41,39,105 appearing in the bank account. The assessee has already admitted 0.03% on the entire turnover. So 0.03% of 17,41,39,105 i.e. Rs.52,242 shall be reduced from total income and 2% of 17,41,39,105 i.e. Rs.34,82,782 shall be added. Net addition would be Rs.34,30,540 instead of 8% of total turnover calculated by the AO. As a result, the appeal is partly allowed.”
Aggrieved against the appellate order, assessee is in appeal before us raising the following Grounds of Appeal:
The learned AO and Hon. CIT (A) have erred in law and on facts of the case in reopening the assessment u/s.147 of the Act. That the learned AO has grossly misdirected himself in law and in facts, in reopening of the case u/s. 147/148, by not appreciating the assessee's contentions in correct perspective that reopening was made on borrowed opinion and without satisfaction by the AO as no inquiry or verification done by the learned AO.
On the facts and in the circumstances of the case and in law, the order passed by the learned AO and confirmed by Hon. CIT (A) is bad in law and void ab initio and the filing of learned AO in this regard are perverse and erroneous. It is contended that the Id. AO passed the assessment order to 408/Ahd/2025 A.Ys.. 2013-14 to 2015-16 5 Gopal Mathurdas Parikh. vs. ITO against the doctrine of "audi alterm partem", violating the principle of natural justice and not giving the proper opportunity for submission i.e. show cause notice and draft order 144B was issued on the same date 25- 3-22 and reply is to be filed within 3 days on 28-3-22, therefore the assessment order ought to held as bad in law and deserves to be annulled.
That the order of the learned AO and confirmed by Hon. CIT (A) making the addition arbitrary, whimsical, capricious, perverse, based on no evidence or irrelevant material or irrelevant evidence, and against the law and facts of the case.
4. The assessment proceedings u/s. 143(3) of the Act was passed by the AO assessing total income of Rs. 6.38.616/- and thereafter the learned AO had passed order u/s. 143(3) r.w.sec. 147 of the Act finalizing by making addition of Rs. 4,53,14,285/- being 8% of total turnover of Rs. 59,64,28.565/- and thereafter the order passed by the Hon. CIT (A) determining total income of 34,28,782/- being 2% commission of total credits of Rs.17,41,39,105/-appearing in credit side of NUTAN NAGRIK CO. OP.BANK A/c. No. 5111500003258 considering the credit transactions in the said bank as alleged mere accommodation entries and on the wrong footing as hereunder and also the Order passed u/s. 147 of the Act by the learned AO as well as the Hon. CIT (A) u/s. 250 by the presents this appeal against the same on the following amongst other grounds: i) The amounts credited in NUTAN NAGRIK CO. OP BANK A/c. No. 5111500003258 of the assessee which were reported suspicious. ii) The assessee failed to provide confirmation letter from the parties to whom purchase and sales was made during the year under consideration. iii) Mere filing of ledger accounts and cash and bank book does not absolve the assessee from discharging the burden of proof to establish the genuineness of transactions entered into with these tented parties. iv) There are unexplained debit, credit and cash deposits pertaining to the parties mentioned in para 3 as reflected in the account held with Nutan Nagrik Sahakari Bank Ltd. v) No response from the parties to whom notices u/s.133(6) have been issued. vi) Verification report from VU was received on 2/3/2022 stating that in spite of being given sufficient opportunity, the assessee has failed to prove the genuineness of the transactions made by them with the assessee. vii) The assessee has already admitted 0.03% of the entire turnover. to 408/Ahd/2025 A.Ys.. 2013-14 to 2015-16 6 Gopal Mathurdas Parikh. vs. ITO
On the fact and circumstances of the case as well as in Law, the Learned Income-tax Officer and the Hon. CIT(A) has erred in passing the order u/s. 143(3) r.w.sec.147 r.w.sec. 1448 of the Act hurriedly without making adequate enquiries and application of mind, without verifying the fact during the course of assessment proceedings and without considering the detailed replies on various dates explaining all the entries reflected in the bank as filed by your appellant before him during the course of assessment proceedings u/s. 143(3), reassessment proceedings and appellate proceedings of the act.
7. That having regard to the facts and circumstances of the case, the learned as well as Hon. CIT (A) has erred in law and on facts in assuming jurisdiction in passing the order u/s. 143(3) r.w.sec. 147 r.w.sec. 144B of the Act without disturbing the opening stock, purchase and sales, closing stock and rejected books of accounts which were regularly maintained and duly audited u/s. 44AB of the Act and without independent enquiry has been made by learned AO. The learned AO has no evidence to come to a conclusion that the assessee had earned undisclosed profit. Therefore, the assessment made by the learned AO on surmises and conjectures is invalid and untenable.
On the facts and in the circumstances of the case and in law the Id. AO has erred in making addition without having any evidence that prove cash trail in respect of appellant's transaction with the companies mentioned in the order. Unless and until the documentary evidences as filed by the assessee to prove the identity, genuineness and creditworthiness is not controverted or disproved by the AO by bringing some material on record, the onus which lay on the assessee stood discharged and the addition made could not be sustained.
9. The Learned AO has erred in law and in facts in initiating the penalty proceedings u/s. 271 of the Income Tax Act, 1961.
10. The learned AO has erred in charging interest u/s. 234B of the I.T. Act.
11. Your appellant prays to leave to add, amend, modify, cancel and/or substitute all or any of the grounds before the final hearing of the appeal with the permission of the Hon'ble appellate authority.
Ld. Counsel Shri M.K. Patel appearing for the assessee in support of the grounds raised
before us submitted that the 2% estimation made by the Ld. CIT(A) is not correct, considering the admitted net profit of 0.03% declared by the assessee. Therefore requested to modify the order passed by Ld. CIT(A). to 408/Ahd/2025 A.Ys.. 2013-14 to 2015-16
7. Gopal Mathurdas Parikh. vs. ITO
6. Per contra Ld. D.Rs. appearing for the Revenue supported the order passed by Ld. CIT(A) and requested to confirm the addition made by the Ld. CIT(A).
We have given our thoughtful consideration and perused the materials available on record. Though the grounds of appeal
are exhaustive and argumentative, Ld. Counsel appearing for the assessee confined that the estimation of 2% net profit determined by the Ld. CIT(A) is on the higher side and also not seriously argued the grounds on reopening of assessment. It is undisputed fact that the assessee has made accommodation entries to M/s. Anil Tradecom groups through his bank account with Nutan Nagrik Sahakari Bank Ltd., wherein the total credit was Rs. 17,41,39,105/. Since the entities failed to response to the summons issued u/s. 133(6) of the Act, the A.O. made addition at 8% of the entire turnover instead of the actual amount routed through the bank account. However, Ld. CIT(A) considered the debit and credit sides of the bank account together and estimated the net profit at 2%, considering the assessee has already admitted 0.03% on the entire turnover. In the above factual backgrounds of the case, we deem it fit to estimate the profit at 1.5% of Rs. 17,41,39,105/- shall be found more reasonable and direct the Jurisdictional Assessing Officer to determine the income of the assessee accordingly. Thus the grounds raised by the assessee are partly allowed. to 408/Ahd/2025 A.Ys.. 2013-14 to 2015-16
8. Gopal Mathurdas Parikh. vs. ITO & 408/Ahd/2025 Asst. Years 2014-15 & 2015-16
There is no change in facts in and 408/Ahd/2025 relating to the Asst. Years 2014-15 and 2015-16. Therefore the decision made in will be squarely applicable to the facts of the case in other two years wherein the assessing officer is directed to compute the income at 1.5%.
In the result, both these appeals are also partly allowed.
In the combined result, all the appeals filed by the assessee are partly allowed.
Order pronounced in the open court on 08 -01-2026