Accommodation Entry Addition Remanded for De Novo Review by AO Based on Investigation Wing Inputs
Background of the Dispute
The matter concerns an appeal filed by Oracle Granito Limited against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2019-2020. The order was passed under Section 250 of the Income Tax Act, 1961.
The central issue is an addition of Rs.2,00,184/-, which the Assessing Officer (AO) treated as income received by the assessee in the nature of accommodation entries allegedly routed through a concern named “Radhika & Brothers”, described as an associate concern of Sanjay Govindram Agarwal.
According to information circulated by the Investigation Wing, “Radhika & Brothers” was identified as being engaged in providing accommodation entries, and the assessee was alleged to have benefited from such entries to the extent of Rs.2,00,184/-. Acting on this intelligence, the AO reopened the assessment.
Reopening of Assessment under Section 147
The AO invoked the provisions of Section 147 of the Income Tax Act, 1961 on the basis of the Investigation Wing report. The reopening was premised on the allegation that:
- The assessee had received accommodation entries totaling Rs.2,00,184/-; and
- Such entries were credited through “Radhika & Brothers,” linked to an alleged entry operator.
Note
The validity of reopening was not directly adjudicated by the Tribunal in this order; the focus was on the manner in which the addition was made and the material relied upon.
Findings During Assessment Proceedings
Assessee’s Denial
During reassessment, the assessee categorically denied having received any accommodation entries as alleged. Specifically, the assessee’s stand was that no such sum of Rs.2,00,184/- was received from any party in the form of accommodation entries.
AO’s Reliance on Bank Credits
Despite the denial, the AO referred to three specific credit entries appearing in the assessee’s bank account, all dated 28/06/2018, which were received by cheque clearing from “Radhika & Brothers”:
- Rs.2,75,518/-
- Rs.2,87,619/-
- Rs.12,173/-
These three entries were treated by the AO as relevant to the information received from the Investigation Wing.
However:
- The AO did not bring any supporting material on record to demonstrate that any additional amount beyond these three entries had been received from “Radhika & Brothers”;
- There was no specific correlation drawn between the total figure mentioned in the Investigation Wing report and the individual transactions, apart from a general reference.
Addition Made by AO
Despite the above limitations, the AO proceeded to:
- Treat the entire sum of Rs.2,00,184/- (as mentioned in the Investigation Wing inputs) as unexplained income in the nature of accommodation entries; and
- Add this amount to the assessee’s total income for AY 2019-20.
This was done even though:
- The three bank entries cited by the AO were of different amounts (Rs.2,75,518/-, Rs.2,87,619/- and Rs.12,173/-);
- There was no clear demonstration on record that the figure of Rs.2,00,184/- had actually moved through the assessee’s bank account in the manner alleged.