INCOME TAX OFFICER, WARD-3(2)(4), MUZAFFARNAGAR, MUZAFFARNAGAR V. SHAH NAWAZ RANA, MUZAFFARNAGAR

ITA 2865/DEL/2024

AI Insights

The case involves an appeal by the Income Tax Officer, Ward 3(2)(4), Muzaffarnagar against Shah Nawaz Rana concerning the assessment year 2016-17. The primary issue was the addition of Rs. 11,21,91,653 to the appellant's income, which was treated as unexplained cash credit under section 68 of the Income Tax Act, 1961. The additions were based on information that the appellant had received accommodation entries and engaged in bogus billing. However, the Commissioner of Income-tax (Appeals) found that the appellant was not involved in any business activities and had no transactions with the entities implicated in the accommodation entries. The Tribunal concurred with the CIT(A)'s findings, emphasizing the lack of evidence directly linking the appellant to the alleged financial misconduct.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793307 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Appeal Filed On: 06-06-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH KUMAR
• Assessee Lawyers: ANIL KUMAR JAIN
• Keywords: Unexplained cash credit; Bogus purchase; Accommodation entries; Bogus
• Section: 147; 148; 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.2865/Del/2024 Assessment Year: 2016-17 ITO, Ward 3(2)(4), Muzaffarnagar. Vs Shah Nawaz Rana, 786, Meerut Road, New Rana House, Muzaffarnagar (UP). PAN: ABTPR6568E (Appellant) (Respondent) Assessee by : Shri Anil Kumar Jain, Advocate Revenue by : Shri Mahesh Kumar, CIT-DR Date of Hearing : 16.09.2025 Date of Pronouncement : 24.09.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the ld. First Appellate Authority or ‘the FAA’, for short) dated 22.04.2024, passed in appeal No.NFAC/2015- 16/10135264 arising out of the appeal before it against the order dated 30.03.2022 passed u/s 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter Printed from counselvise.com ITA No.2865/Del/2024 2 referred as ‘the Act’) by the ITO, Ward-3(2)(4), Muzaffarnagar (hereinafter referred to as the Ld. AO). 2. On hearing both the sides, we find that the assessee has shown source of income as MLA pension from UP Government and, further, income from rent and income from legal consultancy as an Advocate and the assessee was not dealing in any business activity from AY 2016-17. The assessee has claimed that he was not associate/related with UP Bone Mills Pvt. Ltd. The ld. AR has placed on record a copy of record of ROC showing that the assessee had resigned from the said company five years before the relevant assessment year. 3. We find that the AO had made additions on account of accommodation entries in terms of credits taken in capital account or sales account by means of transfers and an addition on account of bogus billing of purchase accounts to the income of the assessee while the ld.CIT(A) has taken into consideration all the factual aspects to delete the additions. The relevant findings of the ld.CIT(A) are reproduced below:- “7.1 The sole ground of appeal is against the action of the Assessing Officer in making an addition of Rs. 11,21,91,653/- under section 68. On examination of the material on record it is seen that the appellant is an individual and had filed his ITR for assessment year 2016-17 on 17/02/2017 declaring total income of Rs.2,39,000/-. The appellant’s case was reopened u/s 147 and notice u/s 148 issued for reasons recorded as under: “As per information, the survey action was conducted on 27.04.2018 on M/s Sarvroopey Vyapar Pvt Ltd at Sec 23 Dwarka and M/s Shashi Sales & Marketing Pvt Ltd, Astral Food Pvt Ltd & Rabik Exports Ltd at G-10 Padma Tower, Rajendra Place, Delhi. Information in this case was received that during demonetization huge amount of cash was deposited in Printed from counselvise.com ITA No.2865/Del/2024 3 the bank accounts of these entities. However, during the course of survey and from post survey proceedings it was found that there were two main persons namely Smt. Rani Sharma and Shri Yash Pal Gupta, who were involved in providing accommodation entries of sale & purchase bills to various beneficiaries from many paper entities. All these entities were managed and controlled by Shri Yash Pal Gupta and his associates. These entities were involved in providing accommodation entries to the beneficiaries. Bank statements of various entities controlled by Yash Pal Gupta were obtained and it was found that there have been huge cash deposits since 01.04.12 in these accounts and it was also found that cash so deposited was immediately being transferred through layering to other entities controlled by Yash Pal Gupta and ultimately to the beneficiaries. During the course of survey statements of Shri Yash Pal Gupta and his associates were recorded on oath. In these statements they accepted that entities controlled by them are involved in providing accommodation entries in lieu of cash provided by beneficiary. It was also found that these entities were regularly receiving credits from certain entities whereas there was no stock with these entities and they weren’t doing regular business. These entities were taking bogus purchase bills from these parties, which require bills of purchase or bills of sale orentries in capital account. The paper entities, controlled by Yash Pal Gupta were used to raise the bills and money was transferred from the account of beneficiaries to the account of paper entity to show that payment was made. Once the money was received in the account of paper entity it was immediately withdrawn by the associates of Shri Yash Pal Gupta in the form of cash and it was handed over to the beneficiary party. There wasn’t actual transfer of any material. During the course of survey no physical stock was found neither any Godown for stock was maintained. This fact was also confronted with Shri Yash Pal Gupta while recording his statement. In reply, he stated that he maintained no physical stock for any of these entities. Rani Sharma is director in many companies and also has five proprietorship concerns in her name. She is having two identities (two PANs) one in the name of Raj Rani Sharma and other in the name of Rani Sharma. She was director in the companies controlled by Shri Yash Pal Gupta by the name Raj Rani Sharma and she is also running her own companies with partnership of Late Ashok. (i) On perusal of details of those beneficiaries which were identified to have taken accommodation entries in terms of credit taken in capital account or sales account by means of bank transfers, it is seen that the assessee has made the following transactions:- Sr. No. Name of beneficiary PAN 2015-16 Total 1. UP BONE MILLS PVT LTD ABTPR6568E 10,80,53,390 10,80,53,390 Printed from counselvise.com ITA No.2865/Del/2024 4 (ii) On perusal of details of those beneficiaries who have identified to have taken route of bogus billing on purchase accounts wherein cash has been withdrawn and returned bank, it is seen that the assessee has made the following transactions:- Sr. No. Name of beneficiary PAN 2015-16 Total 1. UP BONE MILLS PVT LTD ABTPR6568E 41,38,263 41,38,263 Analysis of Information collected/received/Findings of AO: The information so received wasanalysed. It was noted that the assessee taken accommodation entries in the nature of fictitious loan,fictitious Share Premium, Fictitious Sale total amounting to Rs. 10,80,53,390/- during the year under consideration. Further, the assessee has identified to have taken bogus purchases amounting to Rs.41,38,263/- during the year under consideration. The return filing profile of the assessee was examined. On perusal of ITR of the assessee, it is found that the assessee is an individual and ITR has been filed on 17/02/2017 declaring total income ofRs.2,39,000/- under the head Salary, House property, Business & Profession. It is evident from the report of investigation wing and the information so received and analysis thereupon, leads to conclusion that above mentioned entries amounting to Rs. 11,21,91,653/- during the year under consideration represents undisclosed income of the assessee. Thus, the assessee concealed his income of Rs.11,21,91,653/- as the same has not offered for taxation in his ITR”. 7.2 In response to the notice u/s.148 of the Income Tax, Act 1961, the appellant filed return of income on 30/09/2021 declaring total income at Rs 2,39,000/-. In response to subsequent notices, it was submitted that his source of income was from Ex MLA pension from UP Govt. and that he is not associated / related with U P Bone Mills Pvt. Ltd. and is not having any business transaction with U P Bone Mills Pvt. Ltd. during A.Y. 2016-17. Further the appellant stated his ignorance of any transactions within U P Bone Mills Pvt. Ltd. and Smt. Rani Sharma and Shri Yashpal Gupta entities. In view of the above, the AO-NFAC made further enquiry from the Jurisdictional Assessing Officer to verify the claim of the assessee. The Jurisdictional Assessing Officer is stated to have replied as under: “it is submitted that the case of Sh. Shah Nawaz Rana PAN ABTPR6568E for A.Y, 2016-17 was reopened on the basis of information flagged on system (pertains to PAN ABTPR6568E). On perusal of information/ case related information (copy attached) which was flagged on system, it is seen Printed from counselvise.com ITA No.2865/Del/2024 5 that in related person details mentioned as PAN ABTPR6568E, Name U P BONE MILLS PVT LTD. On perusal of flagged information/details mentioned at serial no. 653 of page no. 45 and at serial no362 of page no. 55, it is seen that name of the beneficiary mentioned as UP BONE MILLS PVT LTD with PAN ABTPR6568E. PAN ABTPR6568E on which information flagged on system pertains to Sh.Shah Nawaz Rana. Therefore, all the details regarding transactions and other information ITBA insight portal module can be utilized in this case.” 7.3 It is noted that as per the information available, the beneficiary of the accommodation entries for sale/purchase bills was a company named UP Bone Mills Pvt Ltd but the PAN given was that of the appellant who is stated to be having income from Pension from UP Govt., Professional receipts as an Advocate and Agricultural Income. In the course of assessment proceedings, it was submitted that assessee was not dealing in any business in his name so no books of account were maintained nor Balance sheet, P&L a/c etc prepared during the A.Y.2016-17. The ITR and computation of Income A.Y.2016-17 and bank statements were provided in support of his contentions. The A.O however, stated that as the case was getting time barred on 31.03.2022 he was “constrained to finalize the assessment on protective basis in the hands of assessee, relying on the material available on record in order to avoid revenue loss.” He accordingly treated the amount of Rs.11,21,91,653/- as unexplained cash credit u/s.68 of the Income Tax Act, 1961 and added it to the total income of the assessee. 7.4 In this context it is pertinent to note two important points regarding the information on the basis of which the appellant’s case was reopened: 1. It was unearthed during survey in the case of a third party and was with regard to availing of accommodation entries in the form of credit taken in capital account or sales account by means of bank transfers bogus billing on purchase accounts wherein cash was withdrawn and returned bank; 2. As per the above information, though the PAN was identified as the appellant’s PAN, the name was of a company, i.e an entirely different entity. Firstly, from the very nature of the accommodation entries that the beneficiaries were availing of, it can be inferred that only persons engaged in business activities could benefit from such accommodation entries in the form of bogus purchase bills or credit in capital account. Admittedly the appellant is not involved in any business activity. There is no information on record nor any facts brought on record by the A.O that would indicate that the appellant is involved in any such business or has any income other Printed from counselvise.com ITA No.2865/Del/2024 6 than as disclosed in his return of income. Neither do his bank statements show any transactions that would point in such a direction. Secondly, the name of the beneficiary as per the information received is “UP Bone Mills Pvt Ltd.” The only link with the appellant is the PAN ABTPR6568E which is indeed admitted to be his. The possibilities of an error in reporting a PAN which consists of 10 alphanumeric characters of which a difference in even one character can mean a different entity, are far greater than that of reporting a wrong name. In any case, the modus operandi of the accommodation entry operators in this case rules out the possibility of a non-business entity availing of its services. There is in effect, no evidence to indicate that the appellant has in fact availed of any such accommodation entries. This being the case, it can be seen that the only link between the appellant and the information on the basis of which his case was reopened is the PAN, which in the absence of any other supporting material, in my opinion, does establish any substantive link between the two, much less lead to the conclusion that the appellant had such undisclosed income. The laudable intention of avoiding loss of Revenue cannot be a reason to bypass logical reasoning and rational assessment of the material facts. As there is no real or coherent material to establish or even reasonably indicate that the appellant had availed of such accommodation entries to the tune of Rs. 11,21,91,653/- during the year under consideration, the action of the A.O in treating the same as undisclosed income of the assessee u/s 68 is not justified and the addition is hereby deleted. The appellant’s ground of appeal is allowed. 8. In the result, the appeal filed by the appellant is allowed.” 3. We are of the considered view that the aforesaid findings of the ld.CIT(A) require no interference. Thus, where no books of account were maintained nor Balance sheet, P&L a/c etc prepared during the A.Y.2016- 17, the heads and nature of additions in itself do not call for making additions in the hands of an individual. Ld. AO seems to have fallen in error in dawning conclusions based merely on PAN records though the PAN was Printed from counselvise.com ITA No.2865/Del/2024 7 identified as the appellant’s PAN, the name was of a company, i.e an entirely different entity. 4. The appeal of the Revenue has no substance and the same is dismissed. Order pronounced in the open court on 24.09.2025. Sd/- Sd/- (MANISH AGARWAL) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 24th September, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "