Edynamics Solutions Limited Vs Assessing Officer (ITAT Delhi)
Paper Companies, Real Tax – Entry Operators Beware – Tribunal Clears Path for 100% Additions- 2% Commission Theory Rejected: ITAT Endorses Substantial Tax on Bogus Entries
Delhi Tribunal dismissed the appeal of Assessee by upholding CIT(A)’s finding that the company was merely a facilitator of accommodation entries with no genuine business activity. Tribunal affirmed taxation of large-scale banking transactions routed through the assessee’s accounts.
Background
- Assessee filed return on 28.03.2013 declaring ₹5.25 lakh.
- Based on Investigation Wing reports, it was found that Assessee received ₹1.33 crore accommodation entries from Skylark Group & other paper entities.
- AO reopened assessment u/s 147 & completed reassessment u/s 143(3)/147 on 31.12.2019, making additions of ₹80.31 lakh & ₹90.29 lakh.
CIT(A)’s Findings
- Examined Axis Bank & HDFC Bank accounts, which showed huge credits & debits of ₹40.15 crore with negligible balances.
- Concluded that Assessee conducted no genuine business and only provided entries on commission basis.
- Held that mere addition of 2% commission was insufficient, relying on Gujarat HC judgment in N.K. Proteins Ltd. (affirmed by SC) which supported 100% disallowance of bogus transactions.
- Estimated 50% of total credits & debits (₹200.78 crore) as taxable income in hands of Assessee.
- Dismissed appeal on 30.01.2024.
ITAT Proceedings
- Assessee failed to appear despite multiple hearings (Aug 2024, Nov 2024, Jan 2025, Jul 2025 & final hearing on 27.08.2025).
- Revenue supported orders of AO & CIT(A).
Tribunal’s Decision
- Confirmed that Assessee was a mere conduit for passing funds with no real economic activity.
- Endorsed reliance on N.K. Proteins Ltd. principle that bogus transactions cannot be partly taxed; substantial additions are justified.
- Found Assessee’s grounds untenable & devoid of merit.
- Appeal dismissed.
Key Takeaway
Tribunal reaffirmed that where Assessee is engaged only in providing accommodation entries without actual business, Revenue is justified in taxing the underlying transactions substantially, rather than restricting addition to a small commission percentage. The ruling underscores that entry operators cannot escape with minimal taxation on notional commission.
FULL TEXT OF THE ORDER OF ITAT DELHI
