ITO Vs Kamala Nayan Vala (ITAT Kolkata)
Section 68 addition cannot survive when alleged accommodation entry is neither reflected in assessee’s bank account nor supported by transaction details: Kolkata ITAT
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal has upheld the deletion of an addition of ₹14.01 lakh under Section 68, holding that information received from the Investigation Wing cannot, by itself, establish that the assessee received an accommodation entry when the Department failed to produce the relevant bank transaction or any evidence showing the credit in the assessee’s account.
The Tribunal noted that the assessee had specifically denied having any transaction with the alleged entry provider and had asked the AO to furnish the transaction details. Despite this, neither the AO nor the Revenue before the Tribunal produced any document connecting the assessee with the alleged entry.
Reassessment based on Investigation Wing information
The assessee’s case was reopened on the basis of information received from the DDI (Investigation), Unit 4(2), Kolkata.
According to the information, M/s Bhawani Enterprises, a proprietary concern of Shri Raju Bharti, was not filing income-tax returns but was operating bank accounts through which cash was deposited and accommodation entries were thereafter provided by cheque.
The Investigation Wing allegedly identified the assessee as one of the beneficiaries of such accommodation entries. It was alleged that the assessee had received ₹14,01,379 during FY 2011-12 from M/s Bhawani Enterprises.
Relying upon this information, the AO reopened the assessment and made an addition of ₹14.01 lakh under Section 68, treating it as unexplained money received from an undisclosed source.
Assessee specifically denied the transaction
During the reassessment proceedings, the assessee filed a letter dated January 17, 2019, categorically denying that she had entered into any transaction with M/s Bhawani Enterprises.
The assessee also requested the AO to provide a copy of the alleged transaction stated to have taken place through an ICICI Bank account. This was important because the assessee’s defence was not merely that the source of the credit was explained; her case was that no such credit was received at all.
However, the AO did not provide:
- The relevant bank statement of M/s Bhawani Enterprises;
- The cheque or instrument through which the amount was allegedly transferred;
- The assessee’s bank account in which it was allegedly credited;
- The date and particulars of the purported transaction; or
- Any other material establishing a financial link between the assessee and the alleged entry provider.
Despite the specific denial and request for evidence, the AO proceeded to make the addition solely on the strength of the Investigation Wing information.
CIT(A) deleted the addition
Before the CIT(A), the assessee produced her bank account details and a bank reconciliation statement. She reiterated that no amount of ₹14.01 lakh had been received from M/s Bhawani Enterprises.
The CIT(A) found that the AO had not placed on record any specific bank account details or other documentary evidence showing that the alleged amount was credited to the assessee’s account.
In the absence of proof of the foundational fact—namely, the receipt of the alleged credit—the CIT(A) held that the addition could not be sustained and deleted it.
Revenue’s contention before the Tribunal
The Revenue contended that the Investigation Wing had provided specific and credible information showing that M/s Bhawani Enterprises was engaged in accommodation-entry transactions and that the assessee was one of the beneficiaries.
It was argued that the CIT(A) had deleted the addition merely on the basis of the bank statement furnished by the assessee, without conducting an independent verification of the Investigation Wing information.
The Revenue accordingly sought restoration of the addition.
Information about an entry provider is not proof of receipt by the assessee
The Tribunal found that the assessee had denied the transaction at the assessment stage itself. She had also specifically requested the AO to furnish the details of the alleged transfer.
The AO neither supplied those details to the assessee nor brought them on record. Even during the proceedings before the Tribunal, the Department could not produce any document showing that the assessee had actually received ₹14.01 lakh from M/s Bhawani Enterprises.
The Tribunal effectively distinguished between two separate propositions:
- M/s Bhawani Enterprises may have been engaged in providing accommodation entries; and
- The particular assessee must be proved to have received an entry from that concern.
Even if the first proposition was accepted, it did not automatically establish the second. The Revenue was still required to identify the actual transaction and demonstrate that the alleged amount was credited to the assessee.
Since the Department failed to establish this basic nexus, the Tribunal found no error or infirmity in the CIT(A)’s order deleting the addition. The Revenue’s appeal was accordingly dismissed.
Author’s comments
The ruling highlights an elementary but important requirement of Section 68: before asking an assessee to explain the nature and source of a credit, the Department must first establish that the relevant amount was actually credited in the assessee’s books or account.
General information that a particular concern was engaged in providing accommodation entries may constitute material for initiating an enquiry. It cannot, however, substitute proof that the assessee before the AO was an actual beneficiary.
Where the assessee specifically denies the transaction and asks for its particulars, the AO must disclose and examine the relevant material. An addition cannot be sustained by merely repeating the conclusion contained in an Investigation Wing report without producing the underlying bank entry, cheque details or other evidence connecting the alleged entry provider with the assessee.
The decision is also significant from the perspective of natural justice. Material relied upon against an assessee must ordinarily be supplied to the assessee so that it can be effectively rebutted. Here, the requested transaction details were not furnished, and the Department could not produce them even before the Tribunal.
In short, the reputation or conduct of the alleged entry provider cannot, by itself, establish unexplained income in the hands of the assessee. The Revenue must prove the transaction as well as its nexus with the assessee.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, KOLKATA
This Appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) (‘Ld. CIT(A)’ for short) dated 10.02.2026, passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) pertaining to the Assessment Year 2012-13.
2. There is a delay of 43 days in filing the Appeal. The Revenue filed an application for condonation of delay. For the reasons stated in the application for condonation of delay, the delay of 43 days in filing the present Appeal is hereby condoned.
3. Brief facts of the case are that, the case of the Assessee was reopened and an Assessment order came to be passed u/s 143(3) r.w.s. 147 of the Act by making an addition of Rs.14,01,379/- u/s 68 of the Act on the ground that the said amount received by the Assessee remained unexplained and treated the same as unexplained money from undisclosed source of the Assessee. Aggrieved by the Assessment Order dated 02.12.2019, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) order dated 10.02.2026, allowed the Appeal of the Assessee by deleting the addition. As against the order of the Ld. CIT(A), the Revenue preferred the present Appeal.
4. The Ld. DR vehemently submitted that the addition has been made based on the specific and credible information received from Investigation Wing of the Department that, in the case of M/s Bhawani Enterprises, it was revealed the accommodation entry transactions in the name of the Assessee and the Ld. CIT(A) only based on the bank statement produced by the Assessee, without conducting any independent verification deleted the addition. Thus, by relying on the order of the Assessing Officer, sought for allowing the Appeal.
5. Per contra, the Ld. AR submitted that at no point of time Assessee had any transactions with the said entity M/s Bhawani Enterprises. Further submitted that the Assessee has specifically requested the Assessing Officer vide letter dated 17.01.2019 to provide the copy of the alleged transactions with M/s Bhawani Enterprises in ICICI Bank, wherein the Assessee has specifically denied any such transactions from the said entity. The Ld. CIT(A) rightly deleted the addition as the addition has been made without there being any material against the Assessee to prove that the Assessee had received an unaccounted amount of Rs.14,07,379/- from M/s Bhawani Enterprises. Thus, relying on the findings and the conclusion of the Ld. CIT(A), sought for dismissal of the Appeal of the Revenue.
6. We have heard the parties and perused the material available on record. The case of the Assessee was reopened based on the information was received from DDI [Investigation] Unit-4(2), Kolkata that M/s Bhawani Enterprises Proprietor concern of Sri Raju Bharti was not filing income tax return, but number of transactions were found where by depositing cash in his account to provide accommodation entries by Cheque was carried out by the said entity and Assessee is one of beneficiary to the extent of Rs.14,01,379/- during the F.Y. 2011-12 from the said concern. During the assessment proceedings, Assessee vide letter dated 17.01.2019, denied having any transactions with M/s Bhawani Enterprises with the ICICI Bank to the tune of amount of Rs.14,01,379/- and also sought for the copy of the relevant transaction alleged by the Assessing Officer. However, the Assessing Officer has not provided the copy of the alleged transactions made by the Assessing Officer with M/s Bhawani Enterprises. During the first Appellate proceedings, Assessee has furnished bank re-conciliation statement, copy of the bank account details and once again contended that the Assessee never received a sum of Rs.14,01,379/- as alleged by the Assessing Officer. The Ld. CIT(A) observed that in the absence of any specific bank account details or evidence brought on record by the Assessing Officer for having credited the above sum into the Assessee’s bank account, the addition could not be sustained, accordingly delete the addition. Even before us, the Department has not produced any document to show that Assessee had indeed received the said amount of Rs.14,01,379/- from M/s Bhawani Enterprises. In view of the same, we find no error or infirmity in the order of the Ld. CIT(A).
Accordingly, the Appeal of the Revenue is dismissed.
Order pronounced on 11.09.2026.
