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Facts
The Revenue appealed against the CIT(A)'s order deleting additions made by the AO on account of alleged accommodation entries for share capital and commission. The assessee had filed a cross-objection.
Held
The Tribunal held that the CIT(A) correctly deleted the additions as the transactions represented purchases supported by VAT invoices and payments made through banking channels, and Section 68 was not applicable. The Tribunal also noted the assessee's undertaking before the High Court regarding limitation, which led to the reversal of the CIT(A)'s decision on limitation grounds.
Key Issues
Whether the additions made by the AO under Section 68 on account of alleged accommodation entries for purchases were justified. Whether the CIT(A) erred in deleting these additions.
Sections Cited
147, 148, 148A, 143(3), 68, 246A, 139(1)
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Income Tax Appellate Tribunal, DELHI BENCH “A”NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI M BALAGANESH
सुनवाईक�तारीख/ Date of hearing: 17.09.2025 30.09.2025 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Revenue and cross objection by the assessee against the order of the Ld. CIT(Appeals)-NFAC, Delhi dated 3.4.2024 for the AY 2013-14. In the Revenue’s appeal the following grounds were raised: -
1. “Whether on the facts and circumstances of this case, the Ld. CIT(A) erred in deleting the addition of Rs.83115448/- made by the AO on account of assessee’s own fund invested towards the share capital/share application money/share premium are nothing but accommodation entry from the non descript entities considering the document submitted such as VAT returns, production summary, purchase summary of new material etc. by appellant before Ld. CIT(A).
2. Whether on the facts and circumstances of this case, the Ld. CIT(A) erred in deleting the addition of Rs.16,62,309/- made by the AO on account of accommodation entry assessee incurred for obtaining expenditure at the rate of 2% as commission paid to entry operator considering addition as a result of accommodation entry of Rs.8,31,15,448/-.
3. Whether on the facts and circumstances of this case, the Ld. CIT(A) erred in holding the assessment order passed u/s 147 dated 27.3.2022 to be illegal and erroneous, ignoring the fact that the assessee had itself undertaken in the writ petition before the Hon’ble High Court against the notice issued u/s 148A(b) dated 2.6.2022 that if such proceeding are dropped, the assessee will not challenge legality of notice issued u/s 148 dated 31.3.2021 that the notice was issued or dispatched beyond the limitation period.
4. Whether the Ld. CIT(A) has erred in allowing the appeal of the assessee by holding that the assessment made u/s 147 on 27.3.2022 is in violation of principle of natural justice by ignoring the fact that the reasons for reopening the case had been provided to the assessee before the completion of assessment proceedings u/s 147.
5. The appellant craves leave to add, alter, amend, modify or delete all or any of the grounds of appeal at any time before or during the hearing of this appeal.”
The Ld. DR strongly supported the order of the Assessing Officer submitted that the assessee company had entered into fictitious transactions with various companies as listed out by the AO at page 5 and in the course of enquiry proceedings before Investigation Wing, identity and genuineness of the transactions remained unproved and therefore the AO has rightly treated such transactions as an unexplained cash credits u/s 68 of the Act. Since the bogus entries taken by the assessee is nothing but equal amount of cash has been paid to entry operators and thereupon cheque of equal amount was taken as recorded by the AO in the assessment order. Therefore, he strongly supported the order of the AO in treating Rs.8,31,15,488/- as an unexplained cash credit of the assessee.
3. On the other hand, the Ld. Counsel for the assessee strongly supported the orders of the Ld. CIT(Appeals).
4. Ld. Counsel for the assessee further made his submissions as under:
“4. The CIT (A) has observed that the AO has made addition of Rs.8,31,15,448/- U/s 68 of the Act as if the assessee has taken accommodation entries from these impugned entities. The AO has failed to appreciate that 3 the provisions of section 68 of the Act are not applicable where the amount in question represents purchases and the outstanding credit balance represent trade creditors. The provision of section 68 can only be invoked where any sum is found credited in the books of accounts of an assessee, maintained for any previous year. The appellant has neither taken any loan nor accepted any deposit from the impugned parties, but has actually made payment to such parties on account of the raw material. Section 68 which is deeming provision, is applicable only when the sum is found credited in the books of the assessee, and the assessee is not able to explain the nature and source or such credit. In this case there is no such credit and actually payment has been made by the assessee to such entities, hence the provision of section 68 are not applicable, at all.
5. The CIT (A) has observed that in this case, no discrepancy in the document submitted by the assessee has been highlighted and actually, the assessee has submitted all requisite documents (a) confirmed ledger account, (b) Copies of bank statements of the vendors, (c) Copy of Bank Statement of assessee company, (d) quantitative purchase summary of copper wire/rods, (e) Summary of production and duty, (f) Status of entities as downloaded from MCA website etc.
6. The CIT (A) has observed that if the purchases from the above impugned vendors are treated as bogus as alleged by the AO, the impugned purchases which is around 50% of total purchases of material by the assessee has to be reduced from the total quantity of material purchased/consumed production of finished goods which is required for admitted sale executed by the assessee during the year.
The CIT (A) has observed that the AO has failed to appreciate that it is incumbent on his part to first verify the correctness of the information received, cross-check the same with reference to the facts of the assessee already available on record, independently analyze the same and then, come to a prima facie case/belief of any escapement of income on the part of the assessee. He has failed to appreciate that the information as received 4
from the wing can be useful for making enquiry before issuance of notice U/s 148 but the assessment cannot be framed exclusively relied upon such information without making further enquiry.”
Heard rival submissions, perused the orders of the authorities below. In this case assessment u/s 147 r.w.s. 143(3) of the Act was completed on 27.03.2022 pursuant to notice issued u/s 148 dated 31.03.2021. Subsequently, the Department proceeded to issue notice u/s 148A(d) pursuant to the decision of the Hon’ble Supreme Court in the case of Ashish Agarwal. The assessee filed a writ petition before the Hon’ble Delhi High Court in the case in W.P.(c) 13679/2022 and CM Appeal Nos. 41688-89/2022 against the notice/order passed u/s 148A(d) and the notice issued u/s 148 dated 28.07.2022 on the ground that the assessment for the assessment year under consideration i.e. 2013-14 was already reopened u/s 147 and the reassessment was completed on 27.03.2022 pursuant to the reassessment notice dated 31.3.2021 issued u/s 148 of the Act. The assessee contended that the notice issued u/s 148 dated 28.7.2022 and the order passed u/s 148A(d) cannot stand as there cannot be a reassessment of the same allegations. On hearing both the parties, the Hon’ble High Court disposed of the writ petition observing as under:
“Learned counsel for the petitioner states that pursuant to the directions of the Supreme Court in Union of India. Ashish Agarwal, 2022 SCC OnLine SC 543, the Petitioner was issued notices dated 2nd June, 2022 and 6th July, 2022 under Section 148A(b) of the Act alleging that petitioner had received accommodation entries of Rs.8,31,15,448/- from various entities. She states that the reassessment proceeding for the Assessment Year under consideration had already concluded vide reassessment order dated 27th March, 2022 passed under Section 147 of the Act pursuant to the reassessment notice dated 31 March, 2021 issued under [the erstwhile] Section 148 of the Act. She further states that the Petitioner has filed an appeal before the Commissioner of Income Tax (Appeals) ['CIT(A)'] against the assessment order dated 27th March, 2022 whereby an addition of Rs.8,31,15,448/- has been made to the income of the Petitioner on account of income from undisclosed sources under Section 68 of the Act. She emphasises that there cannot be a reassessment of a reassessment on the same allegations. Issue notice. Mr. Zoheb Hossain, learned Senior Standing Counsel for Revenue accepts notice. He has handed-over the following instructions received by him from the ITO, Ward-4(1), Delhi:- "Sir. As per discussion with the Ld. PCIT-1, Delhi the followings are the instruction in the above said case:-
On 21.09.2022, on query by the Court, the Ld. Standing Counsel for the Respondent Revenue had prayed for some time to obtain instructions as to whether the Revenue would be inclined to pursue the reassessment order dated 27.03.2022 u/s 147 of the Income Tax Act, 1961, or pursue the subsequent notice dated 02.06.2022 u/s 148A(b) of the Act.
2. The petitioner at Para 4.9 of the Writ Petition has disclosed that it has already filed an appeal before the Commissioner of Income Tax (Appeals) in Form 35 on 13.04.2022 u/s 246A of the Income Tax Act, 1961 against the reassessment order dated 27.03.2022.
Sr. Standing Counsel for Revenue has returned with instructions today that if the petitioner states that it has not taken or will not take a plea in any proceeding that the notice dated 31.03.2021 was issued or dispatched beyond the limitation period, or on or after 01.04.2021. then the Revenue, without prejudice to the rights and contentions in any other case, is agreeable to proceeding with the final assessment order dated 27.03.2022 and dropping the subsequent proceedings initiated by way of notice dated 2.6.2022 issued under Section 148A(b) of the Income Tax Act, 1961.
It may be clarified that the present stand of the Revenue will not, in any manner, prejudice the stand of the Revenue in any other case and the above concession has been given only for effective adjudication and disposal of the present case alone.
5. In light of the above, the writ petition may be disposed of with liberty to the petitioner to approach the CIT(A) on any ground except the ground of limitation of notice dated 31.3.2021.
Regards, Jitender Nath ITO, Ward 4(1), Delhi.” Learned counsel for the petitioner undertakes that the petitioner has not taken and will not take the plea in any proceeding that the notice dated 31" March, 2021 was issued or dispatched beyond the limitation period, or on or after 01 April, 2021. 7
In view of the aforesaid and with consent of the parties, the impugned order under Section 148A(d) of the Act and the notice under Section 148 of the Act, both dated 28th July, 2022 are set aside and the present writ petition along with pending application stands disposed of. It is clarified that the present case is based on concession of the Respondent-Revenue and is confined to the present case only. MANMOHAN, J
MANMEET PRITAM SINGH ARORA, J”
Therefore, as could be seen from the above, the respondent- assessee has given an undertaking before the Hon’ble High Court stating that the assessee has not taken or will not take the plea in any proceeding that the notice dated 31.3.2021 was issued or dispatched beyond the limitation period on/or after 1.4.2021. Based on such undertaking given by the assessee before the Hon’ble High Court the notice issued u/s 148 dated 28.7.2022 and the order passed under 148A(d) of the Act were set aside by the Hon’ble High Court.
7. Thus, in view of the above undertaking given by the assessee before the Hon’ble High Court the Assessee should not have raised/agitated the validity of notice issued u/s 148 of the Act dated 31.3.2021. The plea raised by the assessee before the Ld. CIT(A) on limitation of notice u/s 148, in our opinion should not have entertained by the Ld. CIT(A) since it is contrary to the undertaking given by the Assessee before the Hon’ble High Court. In the circumstances, the decision rendered by the Ld. CIT(A) holding that the assessment pursuant to the notice issued u/s 148 dated 31.3.2021 is barred by limitation, is hereby reversed by allowing ground nos. 3 & 4 of grounds of appeal of the Revenue.
Coming to ground nos. 1 & 2 of grounds of appeal of the Revenue, we find that the Ld. CIT(A) considering the submissions and evidences filed by the assessee deleted the addition observing as under:
9. On careful perusal of the Ld. CIT(A) findings, we do not see any good reason to interfere since the findings are based on evidences furnished by the assessee which proved beyond doubt that all these are outstanding trade creditors recorded in the books of account supported by purchase bills, vouchers etc. for which payments were made through banking channels sales against these purchases recorded in the books of account reflected in the VAT returns filed before the Sales Tax Authorities. Thus, we sustain the order of the Ld. CIT(A) in deleting the addition made u/s 68 on merits. Ground nos. 1 and 2 raised by the Revenue are rejected.
Ld. Counsel for the assessee, at the time of hearing submitted the cross objection filed by the assessee is not pressed. In view of the submissions of the Ld. Counsel for the assessee the cross objection filed by the assessee is dismissed as not pressed.
In the result, appeal of the Revenue is partly allowed as indicated above and the cross objection of the assessee is dismissed.
Order pronounced in the open court on 30.09.2025