KKH Infrastructure Private Limited Vs ACIT (ITAT Delhi)
Reopening Based on Incorrect Reading of Entry Operators’ Statements Invalid: Delhi ITAT
The Delhi Bench of the Income Tax Appellate Tribunal has quashed reassessment proceedings against KKH Infrastructure Private Limited and My Choice Agencies Private Limited, holding that the recorded reasons rested on incorrect factual assumptions about search statements.
The Tribunal found that the statements relied upon did not identify the relevant entities as accommodation-entry providers in the manner alleged by the Assessing Officers. Consequently, the factual foundation for reopening under Sections 147 and 148 could not be sustained.
The common order was pronounced on 11 November 2026 by Judicial Member Satbeer Singh Godara and Accountant Member Sanjay Awasthi in ITA Nos.3031 and 3032/Del/2026, concerning Assessment Year 2013-14.
Background of the Dispute
Both companies challenged separate orders dated 13 January 2026 passed by the CIT(A)-29, New Delhi, arising from reassessment proceedings.
Their principal legal ground questioned the validity of reopening itself. They argued that the Assessing Officers had proceeded on an incorrect understanding of statements recorded from alleged entry operators.
The Revenue defended the proceedings, maintaining that the statements established the involvement of accommodation-entry entities and supported the resulting additions.
The Tribunal examined this jurisdictional challenge before considering the merits of the disputed credits and alleged commission expenditure.
₹3.50 Crore Funding Allegation Against My Choice Agencies
In the case of My Choice Agencies Private Limited, the recorded reasons stated that the company had acquired 50% shareholding in PSS Agro & Investments Private Limited after allegedly obtaining accommodation entries from three entities.
The amounts attributed to these entities were ₹1.80 crore from Real Vyapaar Private Limited, ₹70 lakh from Shubhshree High Rise Private Limited, and ₹1 crore from Careful Engineering Private Limited, aggregating ₹3.50 crore.
The reopening reasons relied on a search statement attributed to Praveen Agarwal, treating it as an admission that these companies provided accommodation entries.
The Revenue submitted that the Assessing Officer had consequently added the disputed credits and the alleged commission component to the assessee’s income.
₹1.75 Crore Loan Questioned in KKH Infrastructure’s Case
The connected dispute concerned a ₹1.75 crore loan advanced to KKH Infrastructure Private Limited by Obedient Tradelink Private Limited.
The order recorded that this lender was also the other 50% investor in PSS Agro & Investments Private Limited.
For reopening KKH Infrastructure’s assessment, the Department relied on a statement attributed to Manpreet Piplani. It treated the lender as an accommodation-entry provider on the strength of that statement.
The assessee disputed this interpretation and argued that the admission relied upon did not establish the factual proposition recorded by the Assessing Officer.
Statements Did Not Support the Recorded Allegations
On examining the reopening reasons in My Choice Agencies’ case, the Tribunal found that Praveen Agarwal had not identified the three relevant companies as accommodation-entry providers.
The entities actually named in the statement were different from those relied upon in the recorded reasons.
The Tribunal found a similar defect in KKH Infrastructure’s case. The statement attributed to Manpreet Piplani did not clearly establish that the relevant lender was merely an accommodation-entry entity.
The Bench therefore rejected the Revenue’s submission that the recorded statements supported the factual basis of both reopenings.
The defect concerned the accuracy of the material relied upon, rather than simply a disagreement over the eventual tax treatment of the transactions.
Unsupported Search Statements Were Insufficient
The Tribunal also referred to the CBDT instruction dated 10 March 2003, concerning statements recorded during search proceedings.
It emphasised that merely recording a search statement, without supporting evidence, did not provide a sufficient foundation in the circumstances before it.
The Bench additionally noted that the lender questioned in KKH Infrastructure’s case had not been similarly questioned as an accommodation-entry provider in My Choice Agencies’ case, despite its investment in the same company.
This formed part of the factual context supporting the Tribunal’s rejection of the Department’s position.
The decision thus required the alleged admission to be examined against what the statement actually said and which entities it identified.
Incorrect Facts Undermined Reassessment Jurisdiction
Relying on CIT v. Renee Singh, reported at 11 taxmann.com 310 (Delhi), the Tribunal held that assumption of reassessment jurisdiction on incorrect facts could not be sustained.
The Assessing Officers had relied on alleged admissions concerning the relevant entities, but examination of the statements did not support those admissions.
The Tribunal accordingly quashed both reopenings. Its decision rested on the failure of the recorded factual foundation for invoking Sections 147 and 148.
It did not independently determine the genuineness of every disputed credit after a full examination on merits.
Both Appeals Allowed
The Tribunal allowed both assessees’ appeals. Once the reassessment proceedings were quashed, the remaining arguments concerning the additions and alleged commission became infructuous.
The ruling highlights the need for precision when using third-party search statements to reopen an assessment. An allegation that a particular entity supplied accommodation entries must be supported by the material actually relied upon. A statement concerning different entities cannot sustain reopening merely because it discusses accommodation-entry activity generally.
Cases Discussed
- CIT v. Renee Singh — (2011) 11 taxmann.com 310 (Delhi High Court): Reassessment jurisdiction cannot be assumed on incorrect facts.
FULL TEXT OF THE ORDER OF ITAT DELHI
These twin assessees namely M/s KKH Infrastructure Private Limited and M/s My Choice Agencies Private Limited have instituted their instant as many appeals ITA Nos. 3031 & 3032/Del/2026; for assessment year 2013-14, against the Commissioner of Income Tax ITA No. 3032/Del/2026 (Appeals)-29 (for short, “CIT(A)”), New Delhi’s separate Order Nos. 10142/2012-13 & 10141/2012-13) dated 13.01.2026, involving proceedings u/s 147 of the Income Tax Act, 1961; hereinafter referred to as, “the Act”; respectively.
Heard both the assessees and the departments at length. Case files perused.
2. It transpires during the course of hearing that the learned counsel representing both the assessees raises his first and foremost legal ground challenging validity of the impugned reopening itself. That being the case, our attention is invited to the latter assessee M/s My Choice Agencies Private Limited, reopening reasons recorded by the learned Assessing Officer inter alia indicating that it had acquired 50% shareholding in M/s PSS Agro & Investments Private Limited after allegedly availing funds/accommodation entries from three entry providers M/s Real Vyapaar Private Limited, M/s Shubhshree High Rise Private Limited and Careful Engineering Private Limited to the tune of Rs. 1.8 crores, Rs. 0.7 Crores and Rs. 1 Crores; respectively, totaling to Rs. 3.5 Crores in question. We wish to emphasize here that the other investor to the extent of 50% in M/s PSS Agro & Investments Private Limited herein happens to be Obedient Tradelink Private Limited who advanced loan of Rs. 1.75 crores to the former assessee M/s KKH Infrastructure Private Limited. We further wish to clarify that the learned departmental authorities invoked the very section 148 reopening mechanism against this former assessee as well alleging M/s Obedient Tradelink Private Limited as an accommodation entry provider as per the search statement recorded from the party concerned. There is further no quarrel between the parties that the learner Assessing Officer’s reopening reasons in M/s My Choice Agencies Private Limited extract the search statement of one Mr. Praveen Agarwal, that he had admitted the above said three entities as providing accommodation entries only. The factual position is hardly any different in case of M/s KKH Infrastructure Private Limited herein as similar search statement admission is attributed to Shri Manpreet Piplani’s specific reply to the learned departmental authorities’ questionnaire duly reproduced in the reopening reasons. It is in this factual backdrop that the assessee is on the ITA No. 3032/Del/2026 one hand submit that we ought to quash the impugned reopening since based on incorrect assumption of facts whereas the Revenue strongly supports the same for the reason that the learned Assessing Officer(s) in both these cases recorded the same going by the concerned entry operator’s statement, duly admitting all the four parties herein (supra) as providing loan entries and engaged in accommodation entry business. The Revenue accordingly submits that the learned Assessing Officer had added Rs. 3.50 and Rs. 1.75 (crores) as unexplained/credits as well as the alleged commission component embedded therein as these twin assessees’ respective incomes.
3. We have given our thoughtful consideration to the assessees’ and the Revenue’s respective stands against and in support of validity of the impugned twin re-openings. We find no reason to sustain the same. We wish to clarify here at the cost of repetition that all what learned Assessing Officer(s) had done in both these assessee’s cases is to refer to the concerned entry operator’s statements that all the above four entities are merely accommodation entry providers. The assessee at this stage takes us to the learned Assessing Officer’s reopening reasons in case of M/s My Choice Agencies Private Limited at page 7 wherein the concerned entry operator had nowhere admitted that M/s Real Vyapaar Private Limited, M/s Shubhshree High Rise Private Limited and Careful Engineering Private Limited as accommodation entry providers as the entities named in the said statement read different names. The factual position is hardly any different in reopening reasons recorded for KKH Infrastructure Private Limited wherein Mr. Piplani had nowhere made it clear that M/s Obedient Trademark Private Limited is an entry providing accommodation entity only. It would indeed apt in our opinion to refer to the CBDT’s landmark circular issued way back on 10.3.2003 that mere recording of such search statements; in absence of any supportive evidence, does not carry any significance under the provisions of the Act. This is indeed coupled with the fact that M/s Obedient Trademark Private Limited has nowhere been questioned as an accommodation entry provider entity in case of this ITA No. 3032/Del/2026 latter assessee M/s My Choice Agencies Private Limited despite the fact that it acquired 50% of the stake in M/s PSS Agro & Investments Private Limited(supra).
4. It is in this factual backdrop that we hereby quote CIT versus Renee Singh (2011) 11 taxmann.com, 310 (Delhi) that assumption of such section 148/147 reopening jurisdiction on incorrect facts couldn’t be concurred with both in law as well as on facts. We thus quash both these re-opening(s) as initiated in these two assessees’ respective cases in very terms. Ordered accordingly.
All other remaining pleadings on merits between both these assessees on the one hand and the department, on the other hand are hereby rendered infructuous.
5. These twin assessees’ as many cases ITA No. 3031 & 3032/Del/2026 are allowed. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 11-Nov-2026.
