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Facts
The assessee received an amount of Rs. 2,00,38,060/- from a co-operative credit society. The Assessing Officer (AO) treated this receipt as a bogus accommodation entry. The Commissioner of Income Tax (Appeals) deleted this addition.
Held
The Tribunal held that the Revenue failed to discharge its onus of proving that the amount received was an accommodation entry. The assessee had provided evidence of sales and accounted for the receipts as sale consideration through banking channels, which the Revenue could not disprove.
Key Issues
Whether the amount received by the assessee from the Society was a genuine sale consideration or a bogus accommodation entry, and if the onus to prove the genuineness was discharged.
Sections Cited
250, 148, 143(2), 142(1), 133(6), 68
AI-generated summary — verify with the full judgment below
PER SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER:
The present appeal is filed by the Revenue against the impugned order dated 21.10.2024, passed under section 250 of the Income Tax Act, 1961 (in short ‘Act’) by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”], for the A.Y. 2015-16. Cross objection is filed by the assessee which is in support of the order of the Ld.CIT(A).
Since the appeal filed by the Revenue and the cross objection filed by the assessee are relating to similar issue, both were clubbed and consolidated order is being passed.
In the above cited appeal, only one issue is to be adjudicated i.e., whether the amount received by the assessee company from M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Limited (hereinafter in short “SRMUCS” or “the Society”) is to be treated as bogus accommodation entry as concluded by the Ld. Assessing Officer [hereinafter in short “Ld. AO"]. The Ld. CIT(A) deleted the said addition for the reasons mentioned in his Appellate Order. Aggrieved by the deletion made by the Ld. CIT(A), the Revenue filed an appeal before the ITAT stating that the Ld. CIT(A) is not correct in deleting the addition because the Ld. AO has received information from the Investigation
Page No. 2 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited Wing of the Income Tax Department stating that the same is an accommodation entry. A search and seizure operation was conducted by the Investigation Wing on SRMUCS and huge cash was deposited in the bank account of SRMUCS and then the money was transferred to various parties and the present assessee is one of the beneficiary of such an entry.
The facts of the case are as follows, in brief: a) As mentioned above, a search and seizure operation was conducted in the case of SRMUCS where the Investigation Wing found that huge money amounting to crores was deposited into the bank account of that society by various persons and from there the money is flown into the accounts of several persons spread all over the country. The present assessee M/s. Sudha Agro Oil and Chemical Industries Limited also received an amount of Rs.2,00,38,060/- from SRMUCS. From the record available with ITAT (show-cause notice issued by Ld. AO), it is observed that this SRMUCS received huge cash/cheques/DD from various persons and subsequently they were transferred to bullion merchants, payment of customs duty and sometimes cash was withdrawn too. It was also mentioned that (after examining the persons concerned with SRMUCS) there was no proper KYC by Society, cash was deposited directly or through layering of transactions through multiple channels. These amounts
Page No. 3 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited received were transferred through NEFT/RTGS etc., to various non- genuine entities and some non-exiting entities and sometimes cash was handed over to operators. Enquiries revealed that some persons have stated that their names were utilised without their knowledge with respect to deposits made. Thus, the SRMUCS was used as a conduit to transfer the unaccounted money, concluded by Ld. AO in his show-cause notice. b) Based on the above information received from the Investigation Wing, the Ld. AO has issued a notice under section 148 of the Act mentioning the reasons for reopening and in response to this notice, the assessee has filed a return of income admitting the same income which is filed earlier. In other words, the assessee has not changed the returned income in pursuance of the notice issued by the Department. Subsequently, the assessment proceedings started and notices under section 143(2) and 142(1) of the Act were issued by the Revenue to the assessee asking him to explain the transactions of receipt of money from SRMUCS. c) In pursuance of the notices issued, the assessee filed replies along with the evidences stating that in the usual course of business, they sold goods to two parties and they have received the sale proceeds through banking channels. The assessee has mentioned that they are not aware of Page No. 4 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited the sources of the “Society” nor did they enquire about the source of the money received from “Society” because the money is being sent to them towards the sale proceeds of the goods through banking channels, i.e., credited to their bank account. The amount received from the Society was treated as sale consideration of the goods and the same was properly accounted in their audited books of accounts. Since the amount received as sale consideration, it was already offered as income, making the addition again as accommodation entry is not correct, replied the assessee. d) The assessee has filed the particulars of sale bills, GST paid, description of the goods which were sold and proof to show that the sales and sale consideration was already recorded in their books of accounts. e) Since the amount was already offered as income, making an addition again amounts to double taxation and the same is not permissible in the eyes of law, it was stated by the assessee. f) Not satisfied with the explanation of the assessee, the Ld. AO made an addition stating that the assessee did not furnish the information in the early stages of re-assessment proceedings and hence the Ld. AO was not left with the option for conducting any enquiry to verify the genuineness of the documents filed by the assessee by way of issuing any summons to the society or notices under section 133(6) of the Act. The Ld. AO has also Page No. 5 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited mentioned that the assessee failed to submit the notarized affidavit of the entity confirming the fact that all the cheques were issued by SRMUCS on its behalf against the purchases made by it from the assessee during the A.Y. 2015-16. Since the assessee has not discharged the onus of proof conclusively, the evidences filed by the assessee before the Ld. AO were disregarded and an addition was made by the Ld. AO while concluding the assessment stating that the money received from the “Society” is only an accommodation entry.
Aggrieved by the decision made by the Ld. AO, an appeal was filed before the First Appellate Authority i.e., Ld. CIT(A) stating that they have filed all the necessary evidences relating to the sales made to the two parties, the VAT paid, “C” Form issued by State Government, the sale proceeds received from “Society” was admitted as income while filing the original return of income itself and hence the amount added by Ld. AO amounts to double addition. While adjudicating the appeal at Para 5, the Ld. CIT(A) has mentioned that the Ld. AO failed to enquire into the genuineness of documents filed by the assessee company relating to way bills generated by the VAT Department, ‘C’ Form issued by Commercial Tax Department etc. Without verifying them, the Ld. AO has simply rejected them as self-serving documents and the same is not correct because they were all issued by State Government and not prepared by assessee company. The Ld.CIT(A) has further stated that the Ld. AO without rejecting the books and Page No. 6 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited without declaring the sales as bogus, the amount received cannot be added. It was mentioned by Ld. CIT(A) that the customers of assessee company cannot file affidavits confirming the transaction because they were not in touch with them now, as seven years elapsed. No effort/independent verification was made by Ld.AO. Since the sales were accepted by Revenue as genuine, the amount received as sale consideration cannot be treated as accommodation entry and hence the addition made by Ld. AO was deleted by Ld. CIT(A). Agreeing with the submissions of the assessee, the Ld. CIT(A) has deleted the addition.
As the addition made by the Ld. AO was deleted by the Ld. CIT(A), the Revenue is aggrieved and filed the instant appeal. The main grounds taken by the Revenue in this case are that, a) The Ld. CIT(A) has got plenary powers of the Ld. AO and he should have examined the case if Ld. AO failed to bring the sufficient material on record. In such case the obligation to conduct proper enquiry shifts to the Ld. CIT(A) and the addition cannot be simply deleted by the Ld. CIT(A) adjudicating that the Ld. AO was not able to bring sufficient material on record. From the ground of appeal, it is observed that Revenue is aggrieved because the “Society” could not explain the sources of the said deposits in their bank account.
Page No. 7 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited b) Another ground taken by the Revenue before the ITAT is that assessee is one of the beneficiary of the accommodation entry as per the information received from the Investigation Wing of Department. Since the explanation offered by the assessee was not satisfactory that these deposits were received from the society in the regular course of its business transactions, the action of the Ld. AO is correct and the addition should have been upheld.
During the proceedings before the ITAT, Ld. Departmental Representative [hereinafter in short “Ld. DR”] has argued extensively and the summary of Revenue’s arguments are as follows: a) The assessee could not prove that the money received from “Society” is towards the sale proceeds of the goods supplied to the two parties mentioned by them. b) The “Society” could not explain the sources of receipt and depositing the money into their bank account. Since the “Society” could not explain the deposits of the money into its bank account, the consequent transfer of money to the assessee should be treated as accommodation entry.
Page No. 8 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited c) The assessee could not explain the reason for receipt of the sale proceeds from the “Society”, when the goods were sold to two different parties and the vital link that assessee’s customers deposited the money with “Society” and that money was paid by “Society” to assessee Company. Hence the money received from the “Society” should not be treated as sale consideration of the goods claimed to have been sold by the assessee to those two parties. d) The assessee could not file “notarized affidavit” from the society stating that the money which was sent by them to the assessee was only due to sale consideration of the goods which were sold. e) Despite being asked, the assessee could not file the notarized affidavit of the entity confirming the fact that all the cheques amounting to Rs.2,00,38,060/- were issued by the “Society” on its behalf against the purchases made by it from the assessee during the A.Y. 2015-16. f) The Ld. CIT(A) also erred in not appreciating the fact that the assessee has failed to discharge its onus of proving the genuineness of the total deposits of Rs.2,00,38,060/- in its bank
Page No. 9 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited account received from the “Society” during the A.Y. 2015-16 and hence the addition made under section 68 of the Act should be confirmed.
On the other hand, assessee has filed the cross objection supporting the order of the Ld. CIT(A). The Ld. Authorised Representative [hereinafter “Ld.AR”] of the assessee has filed detailed paper book and argued that the addition was correctly deleted by the Ld. CIT(A) for the following reasons: - a) All the sale bills, GST paid, goods sent to the two parties were filed before the Ld. AO and also the Ld. CIT(A). The Department was at liberty to enquire into the genuineness of the sales of goods and in that context no investigation was done by the Department to disprove the assessee’s contentions.
b) The assessee is not required to prove the sources of the money received from the society because they received the money through banking channels and the parties to whom the goods were sold, informed them that the money is being sent to them as sale proceeds for the goods sold to them. c) If the “Society” could not explain the source of the money deposited in its books of accounts, the assessee should not be Page No. 10 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited punished for the same, because the “Society” from whom they received money is not under their control. d) It was argued that, assessee company is not aware of the relationship between the parties to whom the goods were sold and the “Society” which was searched by the Department. As far as they are concerned, the assessee has sold the goods and they received the money as sale consideration which was sent to them by banking channels. There was no reason to suspect the “receipt of money” because it was sale consideration and it was received through banking channels. Apart from that, the receipt is part of their total receipts admitted in their regular return of income. e) The assessee never failed in producing any document which was required by the Revenue and promptly filed all the replies and filed necessary documents required by the department. If the Department has not conducted any enquiry, it is not the fault of the assessee, it was argued by the Ld.AR of the assessee. f) The assessee has filed the PAN and also confirmation letters from the parties to whom the goods were sold. In the Page No. 11 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited paper book filed, the Ld.AR of the assessee demonstrated the quantitative details of the goods sold. Ld.AR of the assessee has argued that the assessee has immediately replied to the show- cause notice given by the department. For example, the notice was issued by the department on 22.12.2021 and the same was replied within a week or so. Ld.AR of the assessee has argued and demonstrated that Page No. 70 to 80 of the paper book shows the details submitted relating to sales and the amount received as sale consideration. These details were furnished before the Ld.AO as well as before the Ld. CIT(A). g) It is only after being satisfied with the various replies, the Ld.CIT(A) has deleted the addition made by the Ld. AO and submitted that ITAT may confirm the order of the Ld. CIT(A) and do the justice.
After hearing extensively from both the parties and perusing the detailed paper book filed by the Ld.AR of the assessee, the Bench decides that, Revenue could not prove that the money received by the assessee is an accommodation entry. The evidences filed by the assessee are staring at the Department to show that sales were made in the regular course of business of the assessee and the Revenue could not prove that the money received from the “Society” is not the Page No. 12 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited sale consideration of the goods, but as an “accommodation entry”. From the paper book filed by the assessee, it is observed that all the details relating to sales, VAT paid, the copies of sales invoices show the quantitative details of the goods sold were filed before the lower authorities. The Revenue could not give any reason for coming to the conclusion that the money received by the assessee is an accommodation entry, but not the sale proceeds as argued by the assessee. The onus lies on the Department when the addition is made towards unexplained money. The Department could not disprove any of the contentions of the assessee that the money received by the assessee as unexplained. The assessee is not expected to prove the sources of the money received from the “Society” because the “Society” which sent the money to the assessee was not under their control. The assessee has furnished all the particulars to whom the goods were sold, copies of sales invoices, the quantitative details of the sales etc., before the lower authorities. When there is no delay on the part of the assessee to file the details, the Department cannot have a grievance that they do not have time to conduct further enquiries. Even the First Appellate Authority which has got the power to conduct any enquiry or call for the Remand Report, has not taken any action in this regard. The Ld. CIT(A) was satisfied with the details furnished and the explanation offered by the assessee and hence no further enquiries was caused by the Ld.CIT(A) also. Even otherwise also, when there is no dispute that money was received through banking channels and the receipts were admitted in the Page No. 13 C.O. No. 18/VIZ/2025 Sudha Agro Oil and Chemical Industries Limited regular books of assessee making the same addition as “accommodation entry” amounts to double taxation. In view of the same, the order of the Ld. CIT(A) is confirmed and the addition made by the Ld. AO is deleted.
In the result, appeal filed by the Revenue is dismissed and the cross objection being supporting the order of Ld. CIT(A), filed by the assessee is allowed.
Order pronounced in the open court on 13th February, 2026.