ITAT Delhi deletes Accommodation Entry Addition of ₹11.54 Cr – Suspicion not Proof

ACIT Vs Jagat Projects Ltd (ITAT Delhi)

ITAT Delhi Rejects Revenue’s Claim of Accommodation Entry: ₹11.54 Cr Addition deleted- Loan Transactions Held Genuine – Suspicion Can’t Replace Proof- Reassessment & Addition Quashed

Assessee, engaged in rice & paddy trading, filed return declaring income of ₹2.30 crore. In search & investigation proceedings involving KRBL group, the department alleged that Index Securities & Research Pvt. Ltd. (ISRPL) was a paper company providing accommodation entries. Based on directors’ statements & bank trail, AO reopened assessment u/s 147 & treated ₹11.54 crore loan transactions with ISRPL as unexplained income.

CIT(A)’s Findings:

• The reopening u/s 148 was held invalid since reasons were based solely on unsubstantiated statements without independent enquiry. Revenue did not contest this finding before ITAT, making the reassessment itself a nullity.
• On merits also, CIT(A) held that Jagat Projects had regular running account with ISRPL. During AY 2010-11, it received ₹11.63 crore & repaid ₹24.69 crore, leaving net receivable of ₹13.06 crore.
• The transactions were routed through banking channels; the company disclosed the loans in audited statements & earlier assessments u/s 153A had already considered them.
• Source of funds in ISRPL (share capital & premium) had been upheld by appellate authorities & confirmed by Delhi High Court. Once taxed, such funds could not be treated again as accommodation entries.
• No corroborative evidence was brought to show cash dealings or commission element; mere statements of paper directors without cross-verification could not justify addition.

Tribunal’s Decision:

• The Tribunal upheld CIT(A)’s detailed reasoning, observing that:
• The addition was based only on suspicion & third-party statements, not on tangible evidence.
• Continuous running account & mutual fund flow between Jagat Projects & ISRPL negated the allegation of a one-time accommodation entry.
• Once the source of funds stood explained in ISRPL, subsequent application as loans could not be disbelieved without cogent proof.
• It relied on CIT Vs. K.V. Pilliah & Sons (SC) & Global Vantedge Pvt. Ltd. (Delhi HC) to affirm that concurrence with CIT(A) was sufficient where reasoning is sound.
• Accordingly, the appeal of Revenue was dismissed & deletion of ₹11.54 crore addition was confirmed.

FULL TEXT OF THE ORDER OF ITAT DELHI