Kolkata ITAT: ₹36.53 Crore Accommodation Entries Taxable Only at 0.15% Commission

DCIT Vs Clubside Dealcom Private Limited (ITAT Kolkata)

Kolkata ITAT: Conduit/Shell Company Cannot Be Taxed on Entire ₹36.53 Crore Accommodation Entries – Only 0.15% Commission Income Taxable

The assessee had raised ₹36.53 crore by issuing 1,82,650 equity shares of ₹10 each at a premium of ₹1,990 per share to 39 subscribers. During assessment, it furnished names, addresses, PANs, audited financial statements and bank statements of the subscribers. All the subscribers also responded to notices under Section 133(6) and furnished details regarding their business, source of investment, ITRs, share applications, allotment letters and banking transactions.

However, the directors of the subscriber companies were not produced in response to summons under Section 131. The AO therefore held that identity, creditworthiness and genuineness were not established and added the entire ₹36.53 crore as unexplained cash credit under Section 68.

The CIT(A) noticed a fundamental contradiction in the Department’s stand. In assessments for AYs 2013-14 to 2019-20 under Sections 153C/143(3), the Department itself had characterised the assessee as a “Jama Kharchi/paper/shell company” and a pass-through entity providing accommodation entries, and had treated its share capital, premium, investments and loans/advances as NIL. Yet, for AY 2012-13, the Department sought to treat the very same company as the beneficiary of accommodation entries and tax the entire ₹36.53 crore in its hands.

The ITAT agreed that the assessee was essentially a conduit/accommodation-entry provider and not the ultimate beneficiary. It relied, inter alia, on the Delhi High Court ruling in PCIT v. Vijay Conductors India Pvt. Ltd., which held that Section 68 addition of the entire accommodation entry cannot be made in the hands of a conduit entity.

The Tribunal, however, disagreed with the CIT(A) to the extent that he had deleted the entire addition without bringing any commission income to tax. Since an accommodation-entry operator earns income for providing such entries, the appropriate course was to estimate the commission/brokerage element rather than tax the entire flow of funds.

Accordingly, the ITAT held that no Section 68 addition could be made in respect of the entire ₹36.53 crore because the assessee was not the beneficiary of those amounts. Instead, it directed the AO to estimate taxable commission income at 0.15% of the total share capital/share premium accommodation entries.

Thus, instead of taxing ₹36.53 crore, only approximately ₹5.48 lakh (0.15%) would be brought to tax as estimated commission income. The Revenue’s appeal was partly allowed.

Key takeaway: Where the Department itself treats an assessee as a “Jama Kharchi”/shell company merely providing accommodation entries, it cannot simultaneously treat that conduit as the beneficial owner of the entire funds routed through it. The gross accommodation entries cannot be taxed under Section 68 in the conduit’s hands; only the income actually earned from providing those entries—here estimated at 0.15% commission-is taxable.

Cases Discussed:

• Himanshu Verma Vs. DCIT (ITAT), ITA No. 1627 to 1629/DEL/2015 and Ors. vide order dated 15.03.2019
• PR COMMISSIONER OF INCOME TAX vs VIJAY CONDUCTORS INDIA PVT. LTD (Delhi High Court), ITA 683/2015 dated 29-09-2015
• M/s Omni Farms Pvt.Ltd., Vs. Deputy Commissioner of Deputy Commissioner of Income Tax (ITAT), ITA No.3477/Del/2013 dated 28 – 012015
• Sanjay Kumar Garg Vs. ACIT, (2011) 12 taxmann.com 294 (Del)
• K. Gupta, Income Tax Settlement Commission, Principle Bench, New Delhi
• Manoj Aggarwal Vs DCIT, (2008) 113 ITD 377 (Del)(SB)
• M/s Goldstar Finvest (P) Ltd. Vs. ITO, ITA No. 4625/Mum/2005 Vs ITO

FULL TEXT OF THE ORDER OF ITAT KOLKATA

This is an appeal preferred by the Revenue against the order of the Commissioner of Income -tax (Appeals), Kolkata 26, (hereinafter referred to as the “Ld. CIT(A)”] dated 04.09.2025 for the AY 2012-13.

2. At the outset, we observe from the appeal folder that there is a delay of 3 days in filing the appeal by the department in support of which a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approval s from the competent authorities, which took quite a long time and accordingly, the delay may be condoned. The ld. AR, on the other hand, did not oppose the condonation of delay. Considering the reasons cited before us, we are inclined to condone the delay and admit the appeal for hearing.

3. The issue raised in ground no.1 is against the order of ld. CIT (A) deleting the addition of ₹36,53,00,000/- on the ground that in the subsequent years the assessee was treated as Jama karchi paper/ shell company and the entire assets and liabilities was treated as nil u/s 153C of the Act and it amounts to impermissible practice of approbating and reprobating. The other grounds are supportive to ground no.1.

4. The facts in brief are that the assessee filed the return of income on 30.09.2012, declaring total income at ₹37,304/ -. The case of the assessee was selected for scrutiny and notices u/s 143(2) and 143(1) of the Act along with questionnaire were duly issued and served upon the assessee. The ld. AO noted from the perusal of the return income of the assessee that assessee has raised fresh share capital of ₹18,26,500/- and share premium of ₹36,34,73,500/ – by issuing equity shares during the year. Accordingly, the AO was called upon the to furnish the details of share capital capital/share premium and assessee furnished the evidences/ details of share subscribers along with evidences to prove the identity and creditworthiness of the subscribers and genuineness of the transactions. The ld. AO in order to independently verify the transactions issued notices u/s 133(6) of the Act to the share subscribers. All the share subscribers replied the said notices along with information/ details / evidences as desired by the ld. Assessing Officer. The assessee also submitted the complete details before the ld. AO comprising names, addresses, audited balance sheets, bank statements, etc. The ld. AO in order to verify the transactions also issued summons u/s 131 of the Act to the Directors of the assessee company calling upon them to produce the director of the share holding companies on 24.02.2015, so that the statement s could be recorded but none appeared before the ld. AO for examination in compliance to summons u/s 131 of the A ct. The ld. AO accordingly, held that since, there is no compliance, the identity and creditworthiness of the share applicants could not be established. Thereafter, the ld. AO by applying the theory of Preponderance of probability and by relying on various decisions came to the conclusion that the share capital/ share premium remained and added the same to the income of the assessee unexplained cash credit u/s 68 of the Act in the assessment framed u/s 143(3) of the Act dated 24.03.2015.

5. Aggrieved assessee preferred an appeal before the ld. CIT (A) and the ld. CIT (A) allowed the appeal of the assessee on this issue by observing and holding as under:-

“I have carefully considered the assessment order, Ground of appeal raised, the submissions made by the appellant, and the material placed on record. The appellant has taken various grounds of appeal which cover both legal objections, challenging the validity of the assessment proceedings, as well as grounds on merits, contesting the additions made by the AO, METAX DE

2. In the present case, the assessment of the appellant was completed under Section 143(3) of the Income -tax Act, 1961. During the course of the assessment proceedings, the Assessing Officer made an addition of 36,53,00,000 under Section 68 of the Act, being the share capital and share premium received on the issue of 1,82,650 equity shares of the appellant company at a face value of 10 per share and a premium of 1,990 per share, from 39 share applicants. The Assessing Officer sought to verify the identity, creditworthiness, and genuineness of the said transactions. Although the share applicants had furnished their responses and documents in compliance with the notices under section 133(6) of the Act issued to them, they did not appear in response to summons issued under Section 131 of the Act. Further, the appellant company also failed to produce the directors of the subscriber companies before the Assessing Officer. In view of the above, the Assessing Officer treated the entire amount of share capital and share premium aggregating to 368.53.00.000 as unexplained cash credit and added the same to the income of the appellant company under Section 68 of the Act.

3. In its submissions, the appellant has filed a detailed written Submission supported by documentary evidences in support of its claim. It has further contended that the assessments of the appellant for Assessment Years 2013 – 14 to 2019-20 were completed under Sections 153C/143(3) of the Income – tax Act. In those assessment orders, the Assessing Officer had categorically treated the appellant company as a Jama Kharchi / paper / shell company and further alleged that all the transactions recorded in the bank accounts of the appellant represented pre-arranged, bogus accommodation entries. On the basis of such observations, the Assessing Officer treated the share capital, share premium, investments, and loans & advances of the appellant company as NIL assessment year, the Assessing Officer has taken a completely contrary stand by The appellant has argued that in the impugned treating the appellant as the beneficiary of accommodation entries, whereas in the assessment orders for the subsequent years he himself has held the appellant to be merely a Jama Kharchi / paper / shell company. It has been submitted that the Assessing Officer cannot take inconsistent and contradictory stands in different assessment years with respect to the same assessee, as such a view is wholly arbitrary and violative of the principle of consistency recognised in law.

4. On perusal of the assessment orders of the appellant for Assessment Years 2013-14 to 2019-20, it is noted that the assessments had been completed under Section 153C/143(3) of the Income-tax Act, 1961. In those orders, the Assessing Officer himself had categorically treated the appellant company as a ‘Jama Kharchi / paper /shell company’ and observed that the transactions recorded in the bank accounts of the appellant represented pre -arranged bogus accommodation entries. On the basis of such findings, the AO had taken the share capital, share premium, as well as the investments and loans & advances of the appellant company at NIL.

4.1 However, in the present case, the Assessing Officer has adopted an entirely inconsistent approach. The appellant company had received share capital and share premium aggregating to 36,53,00,000 from 39 different subscribers during the year under consideration. All the subscribers had duly complied with the notices issued under Section 133(6) of the Act by filing their responses; however, they did not personally appear before the Assessing Officer. On this basis, the Assessing Officer proceeded to add the entire amount under Section 68 of the Act, alleging that the appellant had introduced its own unaccounted cash in the guise of bogus share application money routed through various subscriber companies. While framing the present assessment, the Assessing Officer treated the appellant as the beneficiary of the sum of 36,53,00,000 and brought the same to tax in its hands. This finding, however, stands in complete contradiction to the Assessing Officer’s subsequent stand in later assessment years, wherein he himself has categorically held that the appellant company was merely a “Jama Kharchi/paper company with no real business activity of its own. Such contradictory findings recorded by the same authority in different assessment years are inherently self-contradictory and run contrary to the settled principle of consistency in tax proceedings.

5. In my view, In my respectful submission, the Assessing Officer (AO) has erred in treating the appellant as the beneficiary of the sum of 36,53,00,000 received as share capital and share premium from 39 subscribers. In the subsequent assessments completed for Assessment Years 2013 -14 to 2019- 20 under Section 153C of the Act, the AO himself has categorically held that the appellant company was merely a “Jama Kharchi / paper / shell company and, on that basis, treated the entire assets and liabilities of the appellant as nil, without making any addition in its hands.

It is, therefore, evident that the Assessing Officer has adopted inconsistent and contradictory Stand in different years with respect to the same assessee. While in the present assessment framed under Section 143(3) of the Act, the appellant has been alleged to be the beneficiary of accommodation entries, in subsequent years the Assessing Officer has held the appellant to be merely a conduit or “Jama Kharebi company. Such selective and inconsistent application of mind is inherently contradictory and amounts to the impermissible practice of approbating and reprobating at the same time. The methodology adopted by the AO, being rudimentary and mechanical, clearly fails the test of judicial consistency, reasonableness, and fairness expected in quasi-judicial proceedings.

Hence, the sum of Rs. 36,53,00,000/ – added by the AO in this year is deleted.

Hence, the appeal of these grounds are allowed.”

6. After hearing the rival contentions and perusing the materials available on record, we note the undisputed facts as culling out of the records are that during the year the assessee has raised share capital/ share premium aggregating to ₹36,53,00,000/- by issuing 1,82,650/- equity shares of face value of ₹ 10 each at a premium of ₹1990 per share to 39 share applicants. We note that the assessee during the course of assessment proceedings furnished all the details and evidences comprising names, address es, PAN Nos., audited balance sheets and the bank statements etc. in respect of the subscribers to prove the transactions of share subscription. We note that the ld. AO also issued notice u/s 133(6) of the Act to all the share subscribers which were duly responded by filing all the details and information as called for by the ld. AO comprising the nature of business and transactions of the subscribers and the sources of investments in the share of the assessee company, list of directors along with memorandum, list of directors, copies of audited balance sheets and ITRs, copies of share application and allotment letters, the details of payments along with bank statements and sources of funds. The ld. AO also issued summons u/s 131 of the Act to the directors of the assessee company to produce the directors of the share subscribers for verification and for recording of statement which were not complied with. The ld. AO accordingly, treated the amount of share capital/ share premium as unexplained cash credit u/s 68 of the Act on the ground that the identity and creditworthiness of the subscribers and the genuineness of the transactions could not be verified as the summons were not complied. Thereafter, we note that the ld. CIT (A) while, allowing the appeal of the assessee, examined all the facts and details on record and also referred to the assessment order passed in the case of the assessee for A.Y. 2013-14 to A.Y. 2019-20 and noted that the assessments were completed u/s 153C of the Act/ 143(3) of the Act in which the ld. AO had categorically treated the appellant as Jama Karchi/ paper / shell company and observed that transactions recorded in the books of accounts are accommodation entries only as the assessee is a pass through entity. The ld. CIT (A) noted that AO,s stand is not consistent with the stand taken by the department in the subsequent assessment years. The ld. AO has added the entire share capital/ share premium to the income of the assessee despite the fact that notices u/s 133(6) of the Act were duly responded. The ld. CIT (A) therefore held that the assessee company is nothing but a Jama Karchi company and not having its own funds. The ld. CIT (A) for this reason allowed the appeal of the assessee by directing the ld. AO to delete the addition on the issue that has adopted in consistent and contradictory stand in different years with respect to the same assessee. The ld. CIT (A) observed that selective and inconsistent stand is contradictory and amounts to impermissible practice of approbating and reprobating and thus allowed the appeal. In our opinion, the order passed by the ld. CIT (A) holding that the assessee is a jamakarchi / paper/ shell company on the basis of assessment s framed by the ld. AO from A.Y. 2013-14 to 2019-20 appears to be correct as the assessee is apparently admitted the transactions of giving an accommodating entr ies. However, we are not convinced with the finding of the ld. CIT (A) to the extent of deleting the entire addition. In our opinion, the some income has to be estimated by way of commission on the accommodation entries. Therefore, it would be reasonable if a rate of o.15% is applied on the amount of share capital/ share premium on the estimated basis. Moreover, the case of the assessee is squarely covered by the decision of Hon’ble Delhi High Court in case of Pr. Commissioner of Income Tax Vs. Vijay Conductors India Pvt. ltd. in ITA 683/2015 and Ors. vide order dated 29.09.2015, wherein it has been held that the section u/s 68 of the Act cannot be applied, where the assessee is a conduit entity. Similarly, the case of the assessee is squarely covered by the decision of the co – ordinate bench in case of Himanshu Verma Vs. DCIT in ITA No. 1627 to 1629/DEL/2015 and Ors. vide order dated 15.03.2019, wherein the co -ordinate bench has held as under:-

“5. We have carefully considered the rival submissions in the light of material placed before us. We find that Ld. CIT(A) while deciding the appeals has also called for the assessment records and has rendered a finding that the assessee in response to several quarries raised by the AO had furnished the replies. Referring to the observation of AO in the assessment order, it is observed by Ld. CIT(A) that the entire case of AO is that the assessee is an accommodation entry operator and such fact was also admitted by the assessee himself. The assessee has admitted that he is engaged in the activity of providing accommodation entries to various beneficiaries through the entities controlled and managed by him. Thus, Ld. CIT(A) has concluded that the assessee is an entry operator which cannot be disputed. Ld. CIT(A) has also referred to the relevant portion of the statements of the assessee to conclude that the assessee is an accommodation entry provider. It is in this view of the situation she has held that the assessee is an accommodation entry operator. The AO has also reproduced post search statement of the assessee which is recorded on 14-04-2012 wherein the assessee in answering to question No. 9 has stated that he was receiving cheques and RTGS from the company in the shape of loans etc. which were deposited in different companies account which were maintained by him. He also stated that the cash was also being received which was deposited in the bank account of firms, proprietary concerns managed and controlled by him. Similarly, he has also stated that he was receiving cheques and RTGS from companies against the sale, which were being deposited in different bank accounts of the firms and companies managed and controlled by him. Further, the AO has also referred to the statement of the assessee recorded on 29 -03-2012, wherein in response to question No. 10, it was stated by the assessee that whenever any company/concern wishes to take accommodation entries from him through various CAs operating in this field, the cash was received from them to give the entries through cheques from any of the entities controlled by him on which commission is received in the range of 0.75% to 1.75%. In answer to question No. 12, it was also stated that he was receiving such commission in cash. Further, the fact of receiving commission has also been confirmed through the evidence found in the shape of laptop of the assessee which was seized and marked as annexure A -37, which according to AO as per observation in his assessment order, has revealed that assessee was receiving brokerage/commission at the rate of 1% to 1.50%. The AO has also listed out 88 entities in the assessment order which are managed and controlled by the assessee. The AO has also listed out 203 bank accounts of these entities through which such accommodation entries have been provided by the assessee. All these fact establish beyond doubt that the assessee has been acting only as a conduit to provide accommodation entries to the beneficiaries which are identifiable through the bank accounts of the entities controlled and managed by the assessee for providing accommodation entries. No material has been brought on record by the AO to show that any money owned by the assessee was utilized to provide the accommodation entries. In this view of the situation we are of the considered opinion that Ld. CIT(A) did not commit any error while rendering the findings that the assessee was an accommodation entry operator. Further, Ld. CIT(A) has also recorded a contradiction in the action of the AO on the ground that while the AO is making addition of commission in the hands of the assessee for providing such entries then, again he is adding the entire entries in the case of the assessee and by making such addition the AO has illogically presumed that the assessee had deposited his own cash while providing the entries to the beneficiaries. In respect of the disclosure/surrender made by seven Chandigarh based beneficiaries, the AO himself has granted the benefit. Further, Ld. CIT(A), while arriving at the conclusion that the assessee is an entry provider and the cash deposited in bank accounts of different entities (which the AO has tabulated on page 64 of the assessment order amounting to Rs. 235,96,03,074) for different years for issueing cheques do not belong to the assessee but moneys of the beneficiaries to whom cheques were issued (list of such beneficiaries is tabulated by the AO on pages 107 -120 of the assessment order) who received the cheques from the assessee’s group entities. Ld. CIT(A) has also observed that it is incorrect on the part of AO to allege that the assessee did not provide him with the trail of events leading to the beneficiaries as the AO was in possession of entire information including tally accounts, bank statements, names of entities used as intermediaries, names of the beneficiaries etc. from which the AO himself has culled out every specific and precise information and incorporated the scanned copies in the assessment order. Ld. CIT(A) has also found that the case law relied upon by assessee in the cases of Sanjay Kumar Garg Vs. ACIT (2011) 12 taxmann.com 294 (Del) and S.K. Gupta order U/S 245D(4) of the Act, Manoj Aggarwal Vs DCIT (2008) 113 ITD 377 (Del)(SB) and M/s Goldstar Finvest (P) Ltd. Vs. ITO ITA No. 4625/Mum/2005 Vs ITO supports the case of the assessee that in the case of entry provider the income to be assessed would be only the premium/ brokerage/ commission received by him and not the cash deposited in their hands. We have also gone through these decisions relied upon by Ld. CIT(A) in his impugned order, wherein it was held that in the case of assessee who is the entry provider, addition could not be made in respect of entries but only of commission. In addition to the decision relied upon before CIT(A) Ld. AR has also placed reliance upon following decisions which also confirm the aforementioned view:-

A. M/s Omni Farms Pvt.Ltd., Vs. Deputy Commissioner of Deputy Commissioner of Income Tax in ITA No.3477/Del/2013 dated 28 – 012015

This is consolidated order of ITAT dated 28-01-2015 in respect of nine assessees. The issue before Tribunal was that whether addition equal to entry provided by an entry provider can be made in the hands of such entities. The ITAT after referring to several decisions has come to the conclusion that no such addition can be sustained in the hands of the entry provider. The relevant paras are re-produced below:-

“17. Thus, there is an order of the Settlement Commission as well as the Additional Commissioner of Income Tax under Section 144A holding that Shri S.K. Gupta was providing accommodation entries, he used various companies as conduit for providing the accommodation entries, cash was received through mediators from the persons who wanted to avail the accommodation entries, such cash was deposited in the bank account of the conduit companies and thereafter, cheque of the similar amount was being issued to the beneficiaries (i.e. the person who wanted to avail the accommodation entry) within a day or so. The Assessing Officer himself in the assessment order has accepted these facts. Considering the totality of these facts and the logical consequences of the order of the Settlement Commission as well as of Additional CIT under Section 144A, we have no hesitation to ITA-3477/D/2013 & 8 others 19 hold that the addition under Section 68 cannot be made in the case of the conduit companies. Therefore, we delete the addition made under Section 68 in the case of all the nine companies, which are admittedly conduit companies of Shri S.K. Gupta.

18. In the result, all the appeals of the assessees are allowed. Decision pronounced in the open Court on 28th January, 2015”

B. PR COMMISSIONER OF INCOME TAX vs VIJAY CONDUCTORS INDIA PVT. LTD in ITA 683/2015 dated 29-09-2015 Hon’ble Delhi High Court in the case of Pr. Commissioner of Income Tax Vs Vijay Conductors India Pvt. Ltd vide order dated 29 -09-2016 has held the order of ITAT ob observation in para 8 as under:-

8. It is not in dispute that the Respondent Assessees are the conduit entities and not the beneficiaries. Consequently, the order of the ITAT deleting the addition under Section 68 of the Act in their hands does not suffer from any legal infirmity.

5.1 In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we are of the considered view that Ld. CIT(A) did not commit any error in holding that Assessing Officer was not right in taxing the total turnover of the entries as an unexplained cash credit in the hands of the assessee, who is an entry provider and since the beneficiaries are identified, the entire amount should be brought to tax in the respective hands of the beneficiaries. Hence, the order of the Ld. CIT(A) is a well reasoned order and, therefore, we affirm the findings of the Ld. CIT(A) on the deletion of addition of Rs. 83,71,29,511/-, Rs. 195,01,14,122/- and Rs. 599,94,54,170/- in respect of Assessment years 2010 -11, 2011-12 and 201213 respectively and accordingly the grounds pertaining to this addition in all these assessment years in all the 03 appeals filed by the Revenue are dismissed.

6. As regards other issue relating to rate of commission in the hands of the assessee which has been held to be an entry operator. We find that the AO has estimated such commission 1.5% of the entries provided by the assessee to different entities. The assessee has agitated this addition before CIT(A) and reliance was placed on the following decisions to contend that the addition to the extent of 1.5% as commission is excessive:-

6.1 Ld. CIT(A) after considering submissions of the assessee, has concluded that addition of commission to the extent of 0.80% is justified and accordingly she has sustained the addition to the extent of 0.80%. The assessee in his appeals is agitating the assessment of commission at 0.80% and against that the department in its appeal is agitating the deletion remaining part of the commission i.e. 0.70%.

6.2 We have heard both the parties and perused the records. We note that the entries provided by the assessee are mix-match of three types of entries as disclosed by the assessee in his statement recorded on 14 -04-2012(post search). The rate of commission is not uniform in respect of these three types of entries. Therefore, to upheld the addition to the extent of 1.50% is not justified on the facts of the case more particularly when AO has not brought any material on record to justify the addition to this extent. In our opinion, looking in to the facts of the case and the decisions relied upon, Ld. CIT(A) is justified in taking commission rate 0.80%. Therefore, we decline to interfere in a such well reasoned finding of Ld. CIT(A), hence, we uphold the findings of the Ld. CIT(A) on the issue in dispute and accordingly these grounds relating to the determination of rate of commission by the assessee as well as by the department are dismissed.

6.3 In view of above observations, the Ground-3 in respect of A.Y. 2010- 11 and 2011-12 and Ground-4 of appeal for A.Y. 2012-13 in Revenue’s Appeals are dismissed and Ground -1 of assessees appeal for all the three years are dismissed.

7. As regards Ground-3 of Departmental Appeal in respect of A.Y. 2012- 13, we have noticed that Ld. CIT(A) has discussed these issues in paras 11 to 13 of the impugned order. Ld. CIT(A) has reproduced the submission made by the assessee before her which can been seen in para 12 and these submission are also reproduced in the above part of this order. Ld. CIT(A) has rendered the decision in para 13. She has noted the fact that the subject matter of balance in the bank account was on account of pay -orders, the details of which have been given in the table described in para 13 of the impugned order. The assessee also furnished the copy of returns filed by such concerns along with balance sheets etc., which are part of the replies submitted by the assessee before Ld. CIT(A) and documents in this regard are filed at pages 50 to 130. The basis of relief granted by the Ld. CIT(A) is that the assessee has been able to produce not only the copy of acknowledgment of return filed by those concern but also the audited balance sheet of these concern. It was also noticed by Ld. CIT(A) that the deposit in those accounts also belong to external parties and the balance were also claimed by them for example the reference is made to the Ceebco, Ujjwal Micro finance Pvt. Ltd., M/s Ujjwal Rral Services Ltd. and M/s Dhanpur Engineering Ltd. from where it was noticed that several crores of Rupees were circular transaction and these were not cash deposit but were properly accounted for in the accounts of those entities for which the audited financial statements were also submitted to the assessing officer. The details of these entries have been culled out in Annexure-3 submitted before Ld. CIT(A) at pages 138 of the paper book and the details that these entries were properly accounted for was also submitted. Reference in this regard can be made to the documents enclosed in the paper books from pages 131 to 141. Further, Ld. CIT(A) has also listed out the seized amount of Rs. 29,09,62,065/- which is seized from bank accounts and has observed that this cannot be assessed as income of the assessee on account of unexplained cash deposits as the same was turnover/entries. The balance amount remaining for which the assessee could not submit the audit reports and details which are listed out in para 13.1.4 is total to Rs. 2,64,68,506/- + Rs. 50,00,000/- cash has been sustained to a sum of Rs. 3,16,45,506/ -. The department in its appeal is agitating the deletion of a sum of Rs. 25,952,11,221/- and assessee in his appeal is seeking set off of the said amount of Rs. 3,16,45,506/- against the commission income.

8. We have heard both the parties and perused the material referred to before us and also submitted the paper book which consists submissions made before CIT(A). Through the submissions made before AO and CIT(A), the assessee has been able to explain that the amount added by the AO of a sum of Rs. 29,11,56,727/- was not on account of unexplained credit in the bank accounts. Ld. CIT(A) has listed out the amount from various bank accounts in para 13 which are found to be the turnover of accommodation entries relating to the entities who have furnished the return of income as well as audited accounts which are relied upon and Ld. CIT(A) has observed that the same cannot be treated as unexplained deposits in the hands of the assessee. After perusing the findings of the Ld. CIT(A), we do not find any infirmity in the findings of Ld. CIT(A), therefore we decline to interfere in the deletion of amount of Rs. 25,95,11,221/- and hence, uphold the order of the Ld. CIT(A) on the issue in dispute.

9. As regards the claim of the assessee regarding set off of the remaining addition of Rs. 3,16,45,506/- against the commission income, we find no merits in such claim of the assessee. Therefore. This ground of the assessee is also dismissed.

10. In the result all the appeals filed by the Revenue and Assessee are dismissed.”

7. Considering the above facts and circumstances and the ratio laid in the above decisions, we are of the view that the no addition can be made u/s 68 of the Act in respect of accommodation entries, as the assessee is not beneficiary of the amounts and therefore only the commission income can be added on such accommodation entries. Accordingly, we modify the order of ld. CIT (A) and direct the ld. AO to estimate the income at rate of 0.15% of the total amount of share capital / share premium and add the to the income of the assessee. Consequently, the appeal of the Revenue is partly allowed.

8. In the result, the appeal of the Revenue is partly allowed.

Order pronounced on 14.08.2026.