The present appeal before the Income Tax Appellate Tribunal, Delhi Bench, arose from reassessment proceedings initiated against the assessee company for Assessment Year 2011-12, wherein the Assessing Officer treated the assessee as a shell entity allegedly engaged in providing accommodation entries and made an addition of commission income at 1.75%.

The Tribunal noted that the original assessment for the relevant year, as well as prior years, had already been completed under Section 143(3) read with Section 153C pursuant to a search conducted on the S.K. Jain Group, during which no adverse material or incriminating evidence was found against the assessee. The reassessment proceedings were initiated solely on the basis of Investigation Wing inputs and an SFIO report, both of which pertained largely to periods prior to the relevant assessment year.

It was further observed that the alleged transactions attributed to the assessment year under consideration were factually incorrect and that the Assessing Officer failed to rebut the assessee’s detailed reconciliation demonstrating that only a negligible portion of the transactions related to AY 2011-12. Importantly, no independent verification or fresh tangible material was brought on record to substantiate the allegation of accommodation entries.

The Tribunal also took judicial notice of the fact that the Ministry of Corporate Affairs, relying on the same SFIO report, had initiated winding-up proceedings against the assessee before the Hon’ble NCLT, which were dismissed by a reasoned order on merits. The dismissal was subsequently affirmed by the Hon’ble NCLAT, and the appeal against the said order was rejected by the Hon’ble Supreme Court, thereby granting finality to the finding that the assessee could not be characterized as a shell company.

In addition, the consistent declaration of substantial profits and payment of taxes by the assessee in subsequent assessment years further negated the allegation of it being a mere accommodation entry provider.

In view of the absence of fresh incriminating material, the impermissible change of opinion, and the binding effect of judicial findings by higher forums, the ITAT upheld the order of the Commissioner (Appeals) and held that the reassessment and consequential addition were unsustainable in law.
Accordingly, the Revenue’s appeal was dismissed and the addition was deleted.

Source Link- https://itat.gov.in/public/files/upload/1767355617-swCHPB-1-TO.pdf

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