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Judgment
ORDER
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER : This captioned appeal has been filed by the Revenue against the order of the learned Commissioner of Income Tax (Central)-29, New Delhi [‘CIT(A)’ in short] dated 10.09.2025 arising from the assessment order dated 19.12.2018, passed by the ACIT, Central Circle-26, New Delhi (hereinafter referred to as the "AO") under section 153C r.w.s 153A/143(3) of the Income Tax Act,1961 (hereinafter referred to as the "the Act") for Assessment Year 2016-17.
The grounds raised by the Revenue are as under :
1.“That the Ld. CIT(A) erred in law and on facts in holding that the assessment made u/s 153C r.w.s. 153A/143(3) of the lncome-tax Act, 1951 was without jurisdiction, ignoring the fact that a proper satisfaction note was recorded and incriminating documents relating to the assessee were found during the course of search in the case of Sh. Kaushal Kumar and others.
2.That the Ld. CIT(A) erred in deleting the addition of Rs.2,55,56,737/- made by the Assessing Officer u/s 68 of the Act, without appreciating that the assessee failed to substantiate the nature and source of the credit entries appearing in its bank account, and that the transactions were mere accommodation entries lacking any business rationale.
3.That the Ld. CIT(A) erred in deleting the addition of Rs.63,892/-made on account of commission income, without verifying whether the same transactions were considered in the hands of Sh. Naresh Jain and Sh. Anand Jain, and ignoring the fact that entities engaged in accommodation entry operations invariably earn commission or facilitation income.
4.That the order of the CIT (A) is erroneous and is not tenable on facts and in law.
5.That the grounds of appeal are without prejudice to each other.
6.That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal.”
Brief facts of the case are that the return u/s 139 of the Act was e-filed by Assessee on 30.03.2017 declaring income of Rs.1,78,970/-for the year under consideration. A search and seizure operation u/s 132 of the Act was conducted on 17.12.2018 in the case of Sh. Kaushal Kumar and others. During this operation, incriminating documents pertaining to assessee were found. The case of assessee was centralized and after recording the satisfaction note by AO of the searched person on 22.03.2018, the notice u/s 153C of the Act dated 28.03.2018 was served upon assessee. After providing opportunity of being heard to assessee, the assessment u/s 153C r.w.s. 153A/143(3) of the Act was completed by AO on 19.12.2018 at assessed income of Rs. 2,57,99,599/- after making addition(s) of Rs. 2,55,56,737/- u/s 68 of the Act on account of unexplained credit entries and Rs. 63,892/- as undisclosed commission income being 0.25% of the total credits of Rs.2,55,56,737/-.
Aggrieved, assessee was in appeal before the ld CIT(A). The ld. CIT(A) allowed the appeal of the assessee.
Aggrieved Revenue is now in appeal before us.
The ld. DR vehemently argued that the ld. CIT(A) has wrongly held that no incriminating material was found.
Per contra, ld. Counsel for the assessee stated that the ld. CIT(A) has recorded the facts that there is no change in circumstances or facts of the case for the year under consideration i.e. AY 2016-17 and therefore, he deleted the addition made under section 153C of the Act.
We have heard the rival submissions and perused the material available on record. We find that the addition on account of accommodation entries is made in the hands of the assessee on protective basis. In such facts and circumstances, the CIT(A) found the assessee as conduit company of entry operators Anand Jain and Naresh Jain which were used for routing of unaccounted income of beneficiaries. The CIT(A) has given a finding of fact that the assessee is not a beneficiary of the accommodation entry and the additions, on account of accommodation entries as well as the commission income, has been made in the hands of Anand Jain and Naresh Jain. The CIT(A) has held, for AY 2015-16 as under:
"6.3I have considered the facts and circumstances of the case, submission of the appellant and perused the order of the AO. The AO in the assessment order has claimed to have identified the names of beneficiaries and already disseminated the information to the assessing officers of the beneficiaries. Accordingly, the credits received by the appellant cannot be treated as unexplained credit in its hands since, the said transactions are mere arrangement of funds/routing of unaccounted income of the beneficiaries to whom the said funds were transferred through the bank of the appellant company in lieu of commission. In this regard, on perusal of the bank statement and ledger of the appellant company it is evident that the funds have flown in following manner...
6.4.From the above transactions, it is noticed that the appellant company has received funds from various concerns as mentioned above and thereafter amounts were transferred to the above-mentioned companies/concerns immediately, the appellant company is not beneficiary company. The above arrangement of funds is nothing but part of modus operandi of the accommodation entry provider to introduce the unaccounted funds of the beneficiaries in their respective bank accounts. Further, the AO also in the assessment order has observed that the appellant company was a conduit company operated by Sh. Naresh Jain and Anand Jain to provide accommodation entries to various beneficiaries and said beneficiaries have already been identified. Accordingly, when the beneficiaries were identified, the addition in such cases can at best be that of commission earned on such accommodation entries. But as far as charging of commission is concerned, it has been held in the case of Sh. Anand Jain and Sh. Naresh Jain that they were entry operators who were managing and controlling various shell concerns including the appellant for providing accommodation entries in lieu of commission. Accordingly, taking that logic there is no question of charging of commission income in the hands of the appellant company, since nothing has been earned by the company in this regard. Therefore, I am of the view that no further addition can be made in the hands of appellant company under the facts as discussed above as additions on account of commission has already been made in the cases of Sh. Anand Kumar Jain and Naresh Kumar Jain.
6.5.Under these circumstances, the protective addition made by the AO of Rs. 79,92,000/- is directed to be deleted.
7.In ground nos.12 and 13, the appellant has challenged the addition made by the AO of Rs. 19,980/-. The AO in the assessment order has made an addition on account of commission income of Rs. 19,980/- @0.25% on the total credits of Rs. 79,92,000 /- received from various parties.
7.1.In this regard, it has already been held in para 6.4(supra) that as far as charging of commission is concerned, it has been held in the case of Sh. Anand Jain and Sh. Naresh Jain that they were entry operators who were managing and controlling various shell concerns including the appellant for providing accommodation entries in lieu of commission. Accordingly, taking that logic there is no question of charging of commission income in the hands of the appellant company, since nothing has been earned by the company in this regard. Having held that these two persons were operating these companies including the appellant, I am of the view that no further addition on account of commission is warranted in the hands of appellant company under the facts as discussed above. Therefore, the addition made on account of commission of Rs. 19,980/- is directed to be deleted. “
The CIT(A) further notes that there is no change in circumstances or facts of the case for the year under consideration of AY 2016-17, and deleted the addition. We note that the ld. DR has not controverted the CIT(A)’s finding that addition for the year under consideration is not sustainable u/s 153C of the Act. In such factual matrix, we are of the considered view therefore, that there is no reason to interfere with the order of the CIT(A). Hence, appeal is dismissed.
In the result, appeal filed by the Revenue in ITA No.8877/Del/2025 is dismissed.