Deputy Commissioner Of Income Tax vs ICMC Projects P. Ltd.

PER VIKAS AWASTHY, JM:

This appeal by the Revenue is directed against the order of Commissioner of Income-tax (Appeals)-29, New Delhi (hereinafter referred to as ‘the CIT (A)’) dated 27.08.2025, for the Assessment Year 2019-20.

Shri Manoj Kumar, representing the Department submitted that assessment in the case of assessee for AY 2019-20 was reopened following due procedure consequent to the information received after search u/s.132 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) on Galaxy Group, Shri Pradeep Indra Prasad Agarawalla, and entry providers Deepak Agarwal and Himanshu Verma. The documents seized during search conducted on 17.11.2021 contained information that suggests the aforesaid persons are engaged in providing accommodation entries and the assessee is one of the beneficiary of the accommodation entries provided by the said parties. M/s. ALPS Management Solutions P. Ltd. and M/s. LTE Info Technologies P. Ltd. are the companies operated by Deepak Agarwal for providing accommodation entries. The assessee had taken accommodation entry of Rs.12,50,000/- from each of the above paper companies. The ld. DR reiterating findings of the Assessing Officer (AO) submitted that the CIT(A) has erred in deleting the addition of Rs.25,00,000/- without considering the fact that the purported business transactions carried out by the assessee with M/s. ALPS Management Solutions P. Ltd. and M/s. LTE Info Technologies P Ltd. are in fact accommodation entries and not the real transactions. He thus, prayed for reversing findings of the CIT(A) and upholding the assessment order.

Per contra, Ms. Anupam Goyal appearing on behalf of the assessee supported the impugned order. The ld. AR submitted that the assessee is engaged in the business of works contract of interior and furnishing works and is also engaged in manufacturing and trading of furniture. During the period relevant to assessment year under appeal, the assessee had received advance of Rs.12,50,000/- from M/s. ALPS Management Solutions P. Ltd. against purchase order dated 10.05.2018 (at page 28 of the paper book) and equal amount of advance was received by the assessee from M/s. LTE Info Technologies P Ltd. against purchase order on 29.04.2018 (at page 31 of the paper book). Subsequently, M/s. ALPS Management Solutions P. Ltd. cancelled the order vide letter dated 05.10.2018 as the assessee could not comply with the purchase order. The cancellation letter is at page 29 of the paper book. The assessee refunded the advance received from the said company in October 2018. In the case of M/s. LTE Info Technologies P Ltd. the assessee had issued letter of regret for non compliance of the purchase order. Thus, the amount received as advance aggregating to Rs.25,00,000/- against the aforesaid two purchase orders was refunded by the assessee within the same financial year i.e. within the period of 3 to 4 months from the date of advance received. The amount received by the assessee from the aforesaid parties was in the normal course of business through banking channel and amount received as advance was also refunded to the said parties after the cancellation of purchase order. The ld. Counsel for the assessee referred to Bank Statement to show that Rs.12,50,000/- was refunded to M/s. LTE Info Technologies P Ltd. on 18.09.2018 and M/s. ALPS Management Solutions P. Ltd. Rs.12,50,000/-was refunded on 11.10.2018. During the course of assessment proceedings, the assessee had discharged its onus in proving identity creditworthiness of the parties and genuineness of the transaction. The ld. AR reiterated findings of the CIT(A) prayed for dismissing the appeal of the Revenue.

Both sides heard, orders of the authorities below examined. The AO had made addition of Rs.25,00,000/-in the case of assessee in respect of transaction of Rs.12,50,000/-each with M/s. ALPS Management Solutions P. Ltd. and M/s. LTE Info Technologies P Ltd. The contention of the Revenue is that the aforesaid two entities are paper companies and are engaged in providing accommodation entries and the assessee is one of the beneficiary of bogus entries provided by the said company. Thus, the AO made addition of Rs.25,00,000/- u/s.68 of the Act. Further, the AO made addition of Rs.75,000/- on the presumption that the assessee must have paid certain commission to the said companies for providing accommodation entries.

A perusal of documents placed on record by the assessee reveals that the amounts received by the assessee from M/s. ALPS Management Solutions P. Ltd. and M/s. LTE Info Technologies P Ltd. was in respect of purchase orders received by the assessee from the respective companies. Later on, the said purchase orders were cancelled and the amount received as advance by the assessee from the said companies was repaid back through banking transactions. The fact of receipt of advances from the aforesaid companies through banking channel and repayment of the same amount within a period of four months’ time to the respective companies through banking transaction is not disputed by the department. Thus, the amount received by the assessee from the above two companies was repaid within the same financial year within a span of four months from the date of receipt.

An accommodation entry is a bogus financial transaction to bring unaccounted cash in the legitimate stream of income. The entities which are engaged in providing accommodation entries charge commission to convert unaccounted money into regular stream of income. One of the mode of operation of entry provider is, the beneficiary pays unaccounted cash to the accommodation entry provider, and the entry provider transmits equivalent amount to the beneficiary through banking channels. The accommodation transaction is one-sided entry, the money comes to the beneficiary through banking channels but is not repaid. In the instant case, it is evident from documents on record that the amount received by the assessee through banking transactions is shortly repaid by the assessee to the parties from whom the amount was received. Thus, such transactions cannot be regarded as bogus transaction.

The CIT(A) has given a categoric finding that the assessee has discharged its onus in proving identity, creditworthiness of the creditors and genuineness of the transaction. The assessee had furnished PAN details, copies of income tax returns, financial statements, confirmations, purchase order, cancellation letters and bank statements to prove identity, creditworthiness and genuineness of the transaction. Once, the three conditions set out u/s.68 of the Act are satisfied, no addition u/s.68 of the Act can be made.

The Revenue has not been able to controvert findings of the CIT(A). I find no reason to interfere with the well-reasoned findings of the First Appellate Authority. Accordingly, the same are upheld.

In the result, appeal of the Revenue is dismissed being devoid of any merit.