Delhi ITAT Holds Genuine Sales Cannot Be Taxed as Bogus Merely Due to Buyer’s Alleged Entry Provider Status

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Sanjeev Kumar Vs ACIT has delivered an important ruling on the treatment of sales to entities branded as “accommodation entry providers”. The Tribunal has deleted an addition of ₹15.90 lakh made under Section 68 of the Income Tax Act 1961, emphasising that a duly documented sale transaction cannot be disregarded merely because the purchasing party is suspected by the Department to be engaged in issuing accommodation entries.

The order clarifies the evidentiary burden on an assessee in such cases and restricts arbitrary use of Section 68 where all primary documents, statutory filings and banking records establish a real and verifiable sale.

Background of the Dispute

Information Trigger and Reassessment

  • Information was received by the Assessing Officer (AO) from DIT(System)/CBIC indicating that M/s Sonu Monu Telecom Centre Pvt. Limited was allegedly in the business of providing accommodation entries by issuing bogus purchase/sale bills.
  • According to that information, the assessee, Sanjeev Kumar, was alleged to be a beneficiary of such bogus entries to the extent of ₹15.90 lakh.
  • On this basis, the AO initiated reassessment proceedings and issued notice under Section 148 for the relevant assessment year 2018-19.

Nature of Allegation in Reopening

Initially, the notice issued under Section 148A(b) proceeded on the basis that the assessee had engaged in bogus purchases amounting to ₹14,20,100, allegedly claimed to inflate expenses.

However, the factual record indicated something different:

  • The assessee had not recorded any purchases from M/s Sonu Monu Telecom Centre Pvt. Limited.
  • The transaction in question was actually a sale made by the assessee to this entity, amounting to ₹15.90 lakh.

Despite this, during the reassessment, the AO treated the sale as unexplained and made an addition of ₹15.90 lakh under Section 68, on the premise that the transaction was not proved to be genuine.

Order of the CIT(A)

Aggrieved by the reassessment order, the assessee carried the matter before the CIT(A):

  • The Section 250 appellate order dated 29.01.2026 passed by NFAC, Delhi, confirmed the addition.
  • The CIT(A) primarily endorsed the AO’s finding without undertaking a deeper independent evaluation of the extensive evidence placed on record by the assessee.

This led to the appeal being filed before the ITAT, Delhi.

Grounds Raised Before the ITAT

The assessee challenged both the jurisdictional foundation of the reassessment as well as the merits of the addition. The key contentions were:

  1. Invalid assumption of jurisdiction

    • The reassessment was triggered based on erroneous information alleging bogus purchases, whereas the actual transaction was a sale.
    • It was argued that reopening on such incorrect factual premises reflected non-application of mind by the AO while issuing notice under Section 148.

  2. Improper issue of notice under Section 148

    • The assessee contended that the AO acted mechanically on third-party information without verifying whether the alleged purchases even existed in the books.