ACIT, CC-25, Delhi vs Laxmi Publications (P) Ltd.

PER SUDHIR KUMAR, JM:

This is appeal filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals)-29, New Delhi dated 22/9/2025 for Assessment Year 2018-19.

The revenue has raised the following ground of appeal:

The brief facts of the case are that assessee e-filed the return on 27.10.2018 declaring total income of Rs. 4,31,18,950/-. A search action u/s. 132 of the Act was conducted on Galaxy Group, Sh. Deepak Agarwal, entry provider and Sh. Himanshu Verma, entry provider on 17.11.2021. During the search and post search, it has been gather that Sh. Deepak Agarwal and Sh. Himanshu Verma are involved in providing various types of accommodation entries to large number of beneficiaries through various paper companies managed and controlled by them in lieu of commission. Both are engaged in providing accommodation entries in the form of unsecured loans, share capital, share premium, purchase and sales etc. on a huge level by utilizing web of bank accounts in different banks in the name of paper companies / entities. On examination of digital data seized from the premises of Sh. Deepak Agarwal and Sh. Himanshu Verma, many incriminating documents related to non-descript entities and their directors, in the form of bank account details, income tax credentials, unsigned board resolutions, what’s app chats giving instructions for fund transfer from various non-descript entities and list of beneficiaries were found. Further summons were issued to directors of various non-descript companies. Most of the directors did not comply with the summons issued to them. AO noted that assessee is amongst the beneficiaries of the accommodation entries from the non-descript entities controlled and managed by Sh. Deepak Agarwal and sh. Himanshu Verma. Documents seized during the search contains information which shows that the assessee has obtained accommodation entry amounting to Rs. 1,00,00,000/-during FY 2017-18 relevant to AY 2018-19 from the entity, M/s Ess Bee Cyber Space Pvt, which is paper /shell company controlled and managed by Sh. Himanshu Verma. Accordingly, after getting approval from the competent authority u/s. 148/149 /151 of the Act, a notice u/s. 148 of the Act was issued to the assessee on 22.3.2024 and assessee was required to file its return of income u/s. 148 of the Act. In response to notice u/s 148 of the Act, the assessee has filed its return of income u/s. 148 on 1.4.2024 declaring total income of Rs. 4,31,18,950/-. Further, notices u/s. 143(2) & 142(1) of the Act were also issued through ITBA to the assessee. In response to the same, assessee filed submissions and also furnished the incriminating material in the form of ledger copies and copy of note sheet initiating assessment proceedings u/s. 147. Accordingly, a show cause notice was issued to the assessee asking to file the details in respect of transactions of Rs. 1,00,00,000./- during FY 2017-18 relevant to AY 2018-19 from the entity, M/s Ess Bee Cyber Space Pvt. And also show caused as to why Rs. 1,00,00,000/- should not be treated as assessee’s unexplained credit in case of non-filing of submission in this respect alongwith the documentary evidence. Accordingly, AO noted that assessee has taken unsecured loan of Rs. 50,00,000/- from a non-descript companies which has not genuine business and has no creditworthiness, thus, the amount of Rs. 50,00,000/- is unexplained credit in the books of accounts. Thus, the amount of Rs. 50,00,000/-was added to the total income of the assessee u/s. 68 of the Act. Further, AO noted that the rate of commission was charged @3% on accommodation entries, thus, the amount of Rs. 1,50,000/- being @3% of Rs. 50,00,000/- was also added to the total income of the assessee u/s. 69C of the Act.

In first appeal, the Ld. CIT(A) allowed the appeal of the assessee. Aggrieved, revenue is in appeal before us.

Ld. Sr. DR vehemently supported the order of the Assessing Officer and reiterated the contentions raised in the grounds of appeal.

On the other hand, Ld. AR of the assessee relied upon the order of the Ld. CIT(A).

We have heard both the sides and perused the records. We note that the Assessing Officer made an addition of Rs. 50,00,000/- treating the amount received from M/s Ess Bee Cyber Space Pvt. Ltd. as unexplained credit u/s 68, this addition was mainly based on the conclusion that M/s Ess Bee Cyber Space Pvt. Ltd. is a paper company controlled by known entry providers, Sh. Deepak Aggarwal and Sh. Himanshu Verma, involved in providing accommodation entries. The AO relied on information seized during search operations, including Whats App chats, call details, statements obtained from persons allegedly connected to entry operations, and ledger extracts from non-descript entities. The AO further noted that many of the companies involved have no genuine business, non-existent addresses, and dummy directors. In view of above, AO held the transaction as fictitious accommodation entry and added it u/s 68 of the Act to the total income of appellant and also added 3% of the total addition u/s. 69C of the Act. Before the Ld. CIT(A), the assessee challenged the addition made by AO and submitted that the amount of Rs. 50,00,000/- received from M/s Ess Bee Cyber Space Pvt. Ltd. was part of a genuine transaction involving the sale of immovable property situated at G-87, Site-5, Kasna Industrial Area, Gautam Budh Nagar, Greater Noida, and not an accommodation entry. In support of its claim following evidences are made part of its detailed submission by assessee the assessee has produced a duly executed Agreement of Understanding between the appellant and M/s Ess Bee Cyber Space Pvt. Ltd., clearly evidencing the terms of property sale and the conditions regarding the deposit amount with specific timeframes for the arrangement of a real buyer or forfeiture of part of the deposit. The assessee has also submitted all corroborative documents including bank statements of M/s Ess Bee Cyber Space Pvt. Ltd., its Income Tax returns acknowledgment, ledger confirmation, and correspondence establishing the bonafide of the transaction. The assessee has also demonstrated that M/s Ess Bee Cyber Space Pvt. Ltd. successfully arranged a real buyer, M/s KOP Machinery Pvt. Ltd., for the said property and the refund of the deposit amount took place in accordance with the agreement. Documentary evidence pertaining to the sale deed and correspondence between the parties were placed on record, firmly establishing a substantive commercial transaction. It was the claim of the assessee that the AO did not provide any concrete evidence linking the assessee’s transaction with accommodation entries other than the general allegation based on third-party materials and dossiers against entry providers. The only fact is that M/s Ess Bee Cyber Space Pvt. Ltd. was alleged to be a paper company does not establish the transaction with the assessee. However, the addition was made by AO is on secondary information and presumptive inferences drawn from inferences against the entry providers, without establishing any direct link connecting the assessee’s receipt of Rs. 50,00,000/- to accommodation entries. The only presence of a company named M/s Ess Bee Cyber Space Pvt. Ltd. in seized data does not establish that all transactions are accommodation entries. Moreover, the assessee has furnished an executed agreement for the sale of immovable property corroborated by payment receipts, bank account statements, acknowledged tax filings of M/s Ess Bee Cyber Space Pvt. Ltd., and confirmation of ledger accounts, which collectively establish the transaction’s commercial reality. Thus, the addition is merely based on the AO’s presumption that the sum was an accommodation entry from a shell company. However, the assessee has produced a detailed agreement for sale of immovable property supported by bank statements, ledger confirmations, and documents evidencing materialization of the deal with a genuine buyer, to establish the veracity of this genuine commercial transaction. The AO’s rejection based on suspicion/presumption is untenable, hence, the addition was rightly been deleted by the Ld. CIT(A), hence, we affirm the action of the Ld. CIT(A) in deleting the addition in dispute and reject the ground raised by the revenue.

In so far as addition of Rs. 1,50,000/- u/s. 69C made on account of unexplained commission at a rate of 3% paid to avail accommodation entries to the tune of Rs. 50,00,000/- from M/s Ess Bee Cyber Space Pvt. Ltd. during the year is concerned, we note that the Assessing Officer has made this addition, due to the fact that as assessee has paid the commission to entry provider who involved in accommodation entries. However, we observed in preceding paragraphs of this order, that when no accommodation entry is actually availed by the assessee during the year, such addition of consequential commission, lacks merit and cannot be sustained. In view of this factual matrix, we uphold the action of the Ld. CIT(A) on this issue and accordingly reject the ground raised by the revenue.

Since we have dismissed the appeal of the Revenue on merits, the other grounds have become academic and thus need not be adjudicated.

In the result, Revenue’s Appeal is dismissed.

Order pronounced in the Open Court on 12-8-2026.