ITAT Remands Case as CIT(A) Ignored Survey Findings on Accommodation Entries

ITO-4(3)(1) Vs NIBR Bullion Pvt. Ltd. (ITAT Mumbai)

ITAT sets aside CIT(A) order for improper evaluation of evidence and remands and restores the matter

Summary: In , the Income Tax Appellate Tribunal set aside the order of the Commissioner of Income Tax (Appeals) in the case of ITO-4(3)(1) Vs NIBR Bullion Pvt. Ltd. and restored the matter to the Assessing Officer for fresh adjudication. The dispute arose from transactions between the assessee and M/s Swastic Corporation, where a survey under Section 133A revealed that the proprietor, Shri Bijal Ashok Shah, had admitted to providing accommodation entries alongside genuine business transactions. He explained that sale bills were issued without actual delivery of goods, goods were sold in the grey market, and cash was returned after deducting commission, with such entries marked as “E” in Tally records. Based on these findings, the Assessing Officer reopened the assessment and made additions under Section 68, citing lack of confirmations, transport details, delivery challans, and discrepancies in invoices. Although the CIT(A) deleted the additions on the basis of invoices, ledger accounts, bank statements, and a later retraction of the statement, the Tribunal held that documentary records alone do not establish genuineness when surrounding evidence indicates otherwise. It further observed that an unsubstantiated delayed retraction cannot dilute the evidentiary value of the original statement, and that treatment of the amount as purchases in books or non-addition in the hands of the alleged entry provider was not decisive. Holding that the Tally data and survey findings required deeper examination, including the possibility of bogus purchases and profit suppression, the Tribunal remanded the matter for fresh consideration in accordance with law.

Facts:

• The assessee company was found to have entered into transactions with M/s Swastic Corporation during the relevant assessment years. Based on information received from the Investigation Wing and on the basis of survey conducted under Section 133A in the case of M/s Swastic Corporation on 14.01.2017, it was noticed that the assessee had received accommodation entries. The Assessing Officer reopened the assessment and made additions treating the impugned transactions as unexplained credits under Section 68.
• During the course of survey proceedings, the statement of Shri Bijal Ashok Shah, proprietor of M/s Swastic Corporation, was recorded on oath. In his statement, he categorically admitted that he was engaged not only in genuine business transactions but also in providing accommodation entries. He explained the modus operandi in detail, stating that sale bills were issued without actual delivery of goods, the goods were retained and sold in the grey market, and cash was returned to the concerned parties after deducting commission. It was also found that such accommodation entries were recorded in the Tally data by marking them with the reference “E”.
• The Assessing Officer, after examining the material, observed that the assessee failed to furnish essential evidences such as confirmation from the party, transportation details, delivery challans and other supporting documents to substantiate the genuineness of the transactions. Further, discrepancies were noted in the invoices and delivery documents, and accordingly, the Assessing Officer held that the transactions were not genuine and made additions under Section 68 treating the same as accommodation entries.
• The Ld. CIT(A), however, deleted the additions mainly on the ground that the assessee had furnished documentary evidences such as invoices, ledger accounts and bank statements and also on the reasoning that the statement of Shri Bijal Ashok Shah was subsequently retracted. The Ld. CIT(A) further observed that the addition under Section 68 was not justified as the amount represented purchases recorded in the books and no addition was made in the case of M/s Swastic Corporation.

Issues:

• On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer ignoring the findings of survey action u/s 133A wherein it was admitted that accommodation entries were provided.
• The Ld. CIT(A) has erred in not appreciating that the statement of Shri Bijal Ashok Shah clearly established that bogus accommodation entries were provided along with genuine business.
• The Ld. CIT(A) has erred in accepting the retraction without appreciating that such retraction does not have evidentiary value.
• The Ld. CIT(A) has erred in deleting the addition without properly appreciating the material found during survey and defects pointed out by the Assessing Officer.

Observations:

• The Tribunal observed that the addition made by the Assessing Officer was based on the findings of survey conducted under Section 133A in the case of M/s Swastic Corporation, wherein the proprietor had admitted to providing accommodation entries. The modus operandi explained was specific, detailed and supported by the entries found in the Tally data wherein such transactions were marked distinctly, constituting tangible and incriminating material.
• It was further observed that the Ld. CIT(A) failed to properly appreciate the evidentiary value of the material gathered during survey. The Tribunal held that mere furnishing of documents such as invoices and bank statements does not establish the genuineness of transactions when the surrounding circumstances and material evidence indicate otherwise.
• The Tribunal held that the Ld. CIT(A) erred in accepting the retraction without examining whether it was supported by credible evidence, and that a retraction made after a considerable lapse of time and without substantiation cannot dilute the evidentiary value of the original statement recorded during survey proceedings.
• The Tribunal further held that the reasoning of the Ld. CIT(A) that the addition under Section 68 is not sustainable as the amount represents purchases recorded in the books is fundamentally flawed, as the genuineness of the transaction must be examined independently of its accounting treatment.
• It was also observed that the finding regarding non-addition in the hands of M/s Swastic Corporation was misplaced, since the assessment proceedings of the assessee and the entry provider are independent, and taxability cannot be determined based on treatment in another case.
• The Tribunal noted that the Ld. CIT(A) had not examined the crucial aspect of Tally data wherein the impugned transactions were specifically marked as accommodation entries, which constituted a vital piece of evidence going to the root of the matter.
• It was further observed that the issue required deeper examination, including from the perspective of bogus purchases and profit estimation, and that the matter had not been properly examined either by the Assessing Officer or by the Ld. CIT(A) in its entirety.
• In the interest of justice, the Tribunal set aside the orders of the Ld. CIT(A) and restored the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer was directed to examine the Tally data, the entries marked as “E”, and the nature of transactions with M/s Swastic Corporation, and determine whether the same represent accommodation entries, bogus purchases or genuine transactions. The issue was directed to be decided afresh in accordance with law after providing reasonable opportunity of being heard to the assessee and all the appeals filed by the Revenue were allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These appeals filed by the Revenue are directed against separate orders passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), all dated 06.10.2025 for A.Ys. 2014-15, 2015-16 and 2016-17. Since identical issues are involved in all the three appeals arising out of similar set of facts and identical findings of the Ld. CIT(A), these appeals are heard together and are being disposed of by this consolidated order.

2. The Revenue has raised identical grounds in all the years, which, in substance, read as under:

“(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer ignoring the findings of survey action u/s 133A wherein it was admitted that accommodation entries were provided.

(ii) The Ld. CIT(A) has erred in not appreciating that the statement of Shri Bijal Ashok Shah clearly established that bogus accommodation entries were provided along with genuine business.

(iii) The Ld. CIT(A) has erred in accepting the retraction without appreciating that such retraction does not have evidentiary value.

(iv) The Ld. CIT(A) has erred in deleting the addition without properly appreciating the material found during survey and defects pointed out by the Assessing Officer. ”

3. At the time of hearing, none appeared on behalf of the assessee. Therefore, the appeals are being disposed of ex parte qua the assessee after hearing the Ld. CIT(DR) and perusing the material available on record.

4. The brief facts of the case, as emanating from the assessment records, are that the assessee company was found to have entered into transactions with M/s Swastic Corporation during the relevant assessment years. Based on information received from the Investigation Wing and on the basis of survey conducted u/s 133A in the case of M/s Swastic Corporation on 14.01.2017, it was noticed that the assessee had received accommodation entries. The Assessing Officer reopened the assessment and made additions treating the impugned transactions as unexplained credits u/s 68.

5. During the course of survey proceedings, the statement of Shri Bijal Ashok Shah, proprietor of M/s Swastic Corporation, was recorded on oath. In his statement, he categorically admitted that he was engaged not only in genuine business transactions but also in providing accommodation entries. He explained the modus operandi in detail stating that sale bills were issued without actual delivery of goods, the goods were retained and sold in the grey market, and cash was returned to the concerned parties after deducting commission. It was also found that such accommodation entries were recorded in the Tally data by marking them with the reference “E”. These facts are borne out from the assessment record and survey findings placed on record.

6. The Assessing Officer, after examining the material, observed that the assessee failed to furnish essential evidences such as confirmation from the party, transportation details, delivery challans and other supporting documents to substantiate the genuineness of the transactions. Further, the Assessing Officer noted discrepancies in the invoices and delivery documents and held that the transactions were not genuine. Accordingly, additions were made u/s 68 treating the same as accommodation entries.

7. The Ld. CIT(A), however, deleted the additions mainly on the ground that the assessee had furnished documentary evidences such as invoices, ledger accounts and bank statements and also on the reasoning that the statement of Shri Bijal Ashok Shah was subsequently retracted. The Ld. CIT(A) further observed that the addition u/s 68 was not justified as the amount represented purchases recorded in the books and no addition was made in the case of M/s Swastic Corporation.

8. The Ld. CIT(DR) vehemently argued that the order of the Ld. CIT(A) is erroneous and not sustainable in law. It was submitted that the Ld. CIT(A) has completely ignored the crucial findings of the survey conducted u/s 133A and the categorical admission made by Shri Bijal Ashok Shah regarding the accommodation entries. It was further submitted that survey action is not a routine exercise and is conducted based on specific information, and therefore, the findings arising out of such survey cannot be lightly disregarded. The Ld. CIT(DR) also submitted that the retraction made subsequently does not carry any evidentiary value in absence of any corroborative material and relied upon judicial precedents including the decision in the cases of:-

• J. Pavunny Vs. AC Central Excise,
• Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala,
• CIT Vs. O. Abdul Razak and
• CIT Vs. Roshan Lal Sancheti.

9. We have carefully considered the submissions of the Ld. CIT(DR) and perused the material available on record. It is an undisputed fact that the addition made by the Assessing Officer is based on the findings of survey conducted u/s 133A in the case of M/s Swastic Corporation, wherein the proprietor had admitted to providing accommodation entries. The modus operandi explained by him is specific, detailed and supported by the entries found in the Tally data wherein such transactions were marked distinctly. These facts constitute tangible and incriminating material.

10. We find that the Ld. CIT(A) has failed to properly appreciate the evidentiary value of the material gathered during survey. The deletion of addition has been made primarily on the basis of documentary evidences furnished by the assessee and the subsequent retraction of statement. However, it is settled law that mere furnishing of documents such as invoices and bank statements does not establish the genuineness of transactions when the surrounding circumstances and material evidence indicate otherwise.

11. The Ld. CIT(A) has also erred in accepting the retraction of the statement without examining whether such retraction was supported by any credible evidence. It is well settled that a retraction made after a considerable lapse of time and without substantiation cannot dilute the evidentiary value of the original statement recorded during survey proceedings. The judicial precedents relied upon by the Ld. CIT(DR) clearly support this proposition.

12. Further, we find that the Ld. CIT(A) has observed that the addition u/s 68 is not sustainable as the amount represents purchases debited in the books of account and no addition has been made in the hands of M/s Swastic Corporation. In our considered opinion, this reasoning is fundamentally flawed. The nature of the addition is not determined merely by accounting treatment but by the genuineness of the underlying transaction. If the transaction itself is found to be non-genuine or accommodation entry, the mere fact that it is recorded as purchase does not render it genuine.

13. The observation of the Ld. CIT(A) regarding non-addition in the hands of M/s Swastic Corporation is also misplaced. The assessment proceedings in the case of the assessee and the alleged entry provider are independent, and the taxability in the hands of one cannot be decided based on the treatment in the hands of the other. What is required to be examined is whether the assessee has been able to establish the genuineness of the transaction, which, in the present case, remains doubtful in view of the survey findings.

14. We further note that the Ld. CIT(A) has not examined the crucial aspect of Tally data wherein the impugned transactions were specifically marked as accommodation entries. This constitutes a vital piece of evidence which goes to the root of the matter. The failure to consider such material renders the findings of the Ld. CIT(A) incomplete and unsustainable.

15. From the material on record, it emerges that the assessee may have obtained accommodation bills with a view to inflate purchases and thereby suppress profits. In such circumstances, the issue requires a deeper examination not only from the perspective of section 68 but also from the angle of bogus purchases and profit estimation.

16. Considering the totality of facts and circumstances of the case, we are of the view that the matter has not been properly examined either by the Assessing Officer or by the Ld. CIT(A) in its entirety. While the Assessing Officer has made the addition u/s 68, the Ld. CIT(A) has deleted the same without appreciating the full evidentiary matrix, particularly the survey findings and Tally data.

17. In the interest of justice, we deem it appropriate to set aside the orders of the Ld. CIT(A) on this issue and restore the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall examine the Tally data, the entries marked as “E”, the nature of transactions with M/s Swastic Corporation, and determine whether the same represent accommodation entries, bogus purchases or genuine transactions. The Assessing Officer shall decide the issue afresh in accordance with law after providing reasonable opportunity of being heard to the assessee.

18. In the result, all the appeals filed by the Revenue are allowed for statistical purposes.

Order pronounced in the open court on 07/04/2026.