ITAT Delhi Remands Accommodation Entry Matter Back to NFAC Citing Non-Compliance with Section 250(6) Mandate
Overview of the Case
In a significant ruling concerning procedural compliance in appellate proceedings, the Delhi "A" Bench of the Income Tax Appellate Tribunal examined an appeal filed by Bholenath Foods Limited against the order issued by the Income Tax Officer for Assessment Year 2012-13. The core issue revolved around an addition amounting to Rs.1.35 crore made by the Assessing Officer on grounds of purported accommodation entries and non-genuine purchase transactions.
The Tribunal found substantial procedural irregularities in the manner the National Faceless Appeal Centre had disposed of the assessee's appeal, ultimately setting aside the appellate order for fresh adjudication with proper adherence to statutory requirements under section 250(6) of the Income-tax Act.
Background Facts and Assessment Proceedings
Bholenath Foods Limited operates as a private limited company engaged in trading activities related to food grains. For the relevant assessment year 2012-13, the company submitted its income tax return on September 13, 2012, declaring total returned income of Rs.1,31,83,635/-.
Initiation of Reassessment
The reassessment machinery was set in motion based on information obtained during survey operations conducted under section 133A of the Income-tax Act. The Investigation Wing at Faridabad carried out a survey at the premises of one Shri Ram Prakash Bhatia on August 8, 2014. During the survey, Shri Ram Prakash Bhatia provided a statement under oath wherein he admitted to operating multiple proprietorship concerns established specifically for the purpose of facilitating accommodation entries.
In his recorded statement, Shri Ram Prakash Bhatia specifically acknowledged that Jai Bharat Foods represented one such proprietorship entity created by him for issuing bogus purchase bills without actual delivery or supply of goods. According to the investigation findings, the assessee had made payments totaling Rs.81,50,586/- to Jai Bharat Foods during the financial year 2011-12.
The payment details were recorded as follows:
Date-wise Payment Breakup:
- February 3, 2012: Rs.20,00,000/-
- February 7, 2012: Rs.30,00,000/-
- February 8, 2012: Rs.25,00,000/-
- March 13, 2012: Rs.6,50,586/-
Reassessment Proceedings Under Section 147
Based on the information received from the Investigation Wing, the Assessing Officer recorded reasons for reopening the assessment case under section 147 of the Income-tax Act. After obtaining necessary approval from the Principal Commissioner of Income Tax, a notice under section 148 dated March 29, 2019 was dispatched to the assessee.
The assessee responded by filing a return pursuant to the section 148 notice and requested a copy of the recorded reasons, which was duly provided. Subsequently, formal notices under section 143(2) dated November 12, 2019 and multiple notices under section 142(1) were issued to the assessee.
In response to these notices, the assessee maintained that genuine purchase transactions of food grains had been conducted with Jai Bharat Foods, for which total payment of Rs.1,35,19,962/- was made. The assessee submitted the ledger account of M/s Jai Bharat Foods as supporting documentation.
Assessment Officer's Findings
The Assessing Officer observed certain discrepancies in the transaction timeline. Specifically, while the purchases from Jai Bharat Foods were allegedly made from December 2011 onwards, the corresponding payments commenced only from January 30, 2012. Despite the assessee's contentions regarding the genuineness of purchases, the Assessing Officer rejected these submissions based on:
- The investigation conducted by the Investigation Wing
- The sworn statement of Shri Ram Prakash Bhatia recorded during survey proceedings
Consequently, the Assessing Officer made an addition of Rs.1,35,19,962/- to the assessee's returned income, treating these transactions as non-genuine accommodation entries under section 68 of the Income-tax Act.
Appellate Proceedings Before CIT(A)/NFAC
Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), which was subsequently handled by the National Faceless Appeal Centre.
NFAC's Observations
The appellate authority noted that notices were issued on five separate occasions to the assessee, yet only partial submissions were made in response to the notice dated August 26, 2024.