NKS Holdings Pvt. Ltd. Vs ACIT (ITAT Delhi)
SFIO Report Alone Cannot Justify ₹1000 Cr Addition: ITAT Remands for Commission Income Estimation- Accommodation Entry Allegation – Tribunal Restricts Taxation to Commission, Not Entire Share Capital- Reopening Upheld but Addition of Full Share Premium Quashed
Delhi Tribunal partly allowed the appeal of the Assessee by deleting the huge addition of ₹1000 crores made u/s 68 & remitting the matter to AO to compute only commission income as in similar cases.
Assessee had filed return declaring a small loss of ₹47,507/-. Subsequently, based on the Serious Fraud Investigation Office (SFIO) report, AO reopened the assessment u/s 147/148 alleging that Assessee & other group companies were engaged in circular rotation of funds aggregating ₹1000 crores to inflate their balance sheets. AO added the entire sum of ₹1000 crores received as share capital & premium from three entities – Avail Financial Services (₹300 crores), Carewell Exim Pvt. Ltd. (₹350 crores) & Solomon Holdings Pvt. Ltd. (₹350 crores). CIT(A) confirmed the reopening & upheld the addition, branding the investing companies as paper entities.
Before Tribunal, Assessee contended that reopening was mechanical & based solely on SFIO report without AO’s independent satisfaction. It was also argued that no valid notice u/s 143(2) was issued after filing return in response to notice u/s 148. Most importantly, Assessee pointed out that in other group companies covered by the same SFIO investigation, no such huge additions were sustained; at best, only commission income between 0.15% to 0.50% was taxed for providing accommodation entries. Thus, addition of entire ₹1000 crores was arbitrary & inconsistent.
