ITAT Sets Aside Relief Granted to Assessee in Rs 20 Lakh Accommodation Entry Case due to Non Confrontation of Additional Evidence 

The Income Tax Appellate Tribunal (ITAT) Delhi found that the CIT(A) granted relief without confronting the additional evidence and inquiry conducted under Section 133(6) to the AO. Consequently, the appellate order was set aside and the matter was remanded for fresh adjudication in accordance with law.

MAS Advisory Services Pvt. Ltd. had filed its return of income for assessment year 2019-20 declaring nil income. Based on information generated from search operations conducted under Section 132 on Galaxy Group and entry operators Deepak Agarwal and Himanshu Verma, the Revenue initiated reassessment proceedings under Section 147. According to the department, the assessee had received an accommodation entry of Rs 20 lakh through Pine View Portfolio Consultants Pvt. Ltd., which is an entity controlled by the entry operators. The AO treated the amount as unexplained income under Section 69A and further made an addition of Rs 60,000 under Section 69C presuming a commission for obtaining the accommodation entry.

The CIT(A) independently issued a notice under Section 133(6) to Pine View Portfolio Consultants Pvt. Ltd. and, after examining its financial statements and bank accounts, concluded that the identity and creditworthiness of the company are established. Holding the transaction to be genuine, the CIT(A) deleted the additions of Rs 20 lakh under Section 69A and Rs 60,000 under Section 69C.

The Tribunal observed that extensive investigations conducted by the department had revealed a network of more than 300 shell entities operated by Deepak Agarwal and Himanshu Verma for providing accommodation entries in exchange for cash and commission. Pine View Portfolio Consultants Pvt. Ltd. was one such entity.

It noted that the assessee claimed to have furnished a reply dated 20 March 2024 before the AO however, the reply had not been considered while framing the reassessment order. Despite this, the CIT(A) proceeded to grant relief without forwarding the additional material to the AO. The Tribunal further observed that the CIT(A) had conducted an independent inquiry under Section 133(6) and relied upon the responses received from Pine View Portfolio Consultants Pvt. Ltd. but failed to confront the AO with the results of such an inquiry. According to the Tribunal, this amounted to a violation of the principles of natural justice under Section 250(2)(b) of the Income Tax Act.

The Tribunal also noted that several aspects surrounding the transaction made after issuance of notice under Section 148 and the findings emerging from search proceedings regarding shell entities and accommodation entries had not been properly examined by the CIT(A).

The Tribunal set aside the appellate order and restored the matter to the file of the CIT(A) for a fresh adjudication. Thus, the appeal filed by the Revenue was allowed for statistical purposes.