ITAT Deletes Unexplained Money Addition After Finding No Evidence of Accommodation Entries:

The assessee filed his income tax return for Assessment Year 2012–13 on October 11, 2012, declaring total income of Rs. 3,26,000. Subsequently, the AO received information from the Investigation Wing in connection with a search conducted in the case of Shri Jignesh Shah, alleging that the assessee had obtained accommodation entries amounting to Rs. 7,85,600 from M/s. Vinit Enterprise.

Based on this information, the AO issued a notice under Section 148 of the Income Tax Act on September 30, 2019. As the assessee did not comply during the reassessment proceedings, the AO completed the assessment under Sections 144 read with 147 of the Act on November 29, 2019, determining the total income at Rs. 75,07,759. The assessee challenged the assessment before the CIT(A) which partly allowed the appeal. 

The assessee argued before the Tribunal that the addition relating to M/s. Vinit Enterprise was based on an incorrect repetition of a single entry of Rs. 98,200 on eight occasions, resulting in the alleged aggregate amount of Rs. 7,85,600. It was argued that the AO had not produced any supporting evidence establishing the existence of eight independent transactions or proving that the alleged entries were accommodation entries. The Tribunal observed that the reasons recorded for reopening the assessment did not specify the dates on which the alleged amounts were received from M/s. Vinit Enterprise. The assessment order also lacked particulars such as cheque numbers, corresponding bank entries and other material establishing actual receipt of the alleged amounts.

The Tribunal further observed that there was no material demonstrating that the transaction was an accommodation entry, that the assessee had paid cash to obtain it, or that the transaction was merely a paper arrangement. Accordingly, the addition could not be sustained solely on the basis of information received from the Investigation Wing without supporting evidence. The Tribunal  held that the addition of Rs. 7,85,000 relating to the alleged accommodation entry from M/s. Vinit Enterprise was unsustainable and directed its deletion. Accordingly, the Tribunal deleted the remaining additions and allowed the assessee's appeal.