ITAT Delhi Deletes Protective Additions in Accommodation Entry Case; Revenue’s Appeals Dismissed

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed all appeals filed by the Income Tax Department against BRR Securities Pvt. Ltd. for Assessment Years 2014-15 to 2017-18. The tribunal also dismissed the cross-objections filed by the company after they were not pressed during the hearing.

The case arose after a search operation conducted on the Jain Brothers group, namely Anand Kumar Jain and Naresh Kumar Jain, in December 2015. During the search, authorities seized electronic records and documents that allegedly showed that several companies, including BRR Securities Pvt.Ltd, were employed in routing money through accommodation entry transactions.

The material so seized was used by the Assessing Officer (AO) to initiate proceedings under Section 153C of the Income Tax Act against BRR Securities. The AO alleged that BRR Securities had received an amount of more than Rs 4,12,37,962 from the entities controlled by the Jain Brothers and had acted as a conduit for the transfer of the funds to various beneficiaries. Consequently, the AO made a protective addition of Rs 4,12,37,962 under Section 68 as unexplained cash credits and also added Rs 1,03,095 as commission @ 0.25% on the total credits as income of the assessee on a substantive basis.

On appeal, the CIT(A) deleted both additions. The CIT(A) observed that BRR Securities was merely a conduit company and not the actual beneficiary of the funds. The appellate authority further noted that substantive additions relating to these transactions had already been made and confirmed in the hands of Anand Kumar Jain and Naresh Kumar Jain, who were found to be controlling the affairs of the company.

While hearing the Revenue’s appeal, the ITAT relied on its earlier decision in the case of VKS Properties Pvt. Ltd., where identical facts involving the Jain Brothers group had been examined. In that case also, the Tribunal had held that once substantive additions had been made in the hands of the real operators of the accommodation entry network, no separate protective addition could survive in the hands of the conduit company.

The Tribunal agreed with the findings of the CIT(A) and held that since the substantive additions and related commission income had already been assessed in the hands of Anand Kumar Jain and Naresh Kumar Jain, there was no justification for making protective additions in the hands of BRR Securities Pvt. Ltd.

Accordingly, the ITAT upheld the order of the CIT(A) and dismissed the Revenue’s appeals for all four assessment years. The cross-objections filed by the assessee company were also dismissed as not pressed. As a result, all appeals filed by the Revenue, as well as all cross-objections filed by BRR Securities Pvt. Ltd. for Assessment Years 2014-15 to 2017-18, stand dismissed.