Delhi High Court
Pr. Commissioner Of Income Tax, Delhi-7 vs Third Generation Traders Pvt. Ltd on 23 May, 2025
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~17 to 22
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 23.05.2025
(17)
+ ITA 137/2025 & CM APPL. 28221/2025
PR. COMMISSIONER OF INCOME TAX, DELHI-7 .....Appellant
Through: Mr. Puneet Rai, Sr. Standing Counsel
with Mr. Ashvini Kumar, Mr.
Rishabh Nangia, Mr. Gibran, Jr.SCs
& Mr. Nikhil Jain, Ms. Srishti
Sharma, Advocates for Income Tax
Deptt.
versus
THIRD GENERATION TRADERS PVT. LTD. .....Respondent
Through: None.
(18)
+ ITA 138/2025 & CM APPL. 28223/2025
PR. COMMISSIONER OF INCOME TAX, DELHI-7 .....Appellant
Through: Mr. Puneet Rai, Sr. Standing Counsel
with Mr. Ashvini Kumar, Mr.
Rishabh Nangia, Mr. Gibran, Jr.SCs
& Mr. Nikhil Jain, Ms. Srishti
Sharma, Advocates for Income Tax
Deptt.
versus
THIRD GENERATION TRADERS PVT. LTD. .....Respondent
Through: None.
(19)
+ ITA 139/2025 & CM APPL. 28225/2025
PR. COMMISSIONER OF INCOME TAX, DELHI-7
.....Appellant
Through: Mr. Puneet Rai, Sr. Standing Counsel
with Mr. Ashvini Kumar, Mr.
Rishabh Nangia, Mr. Gibran, Jr.SCs
& Mr. Nikhil Jain, Ms. Srishti
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:27.05.2025 ITA 137/2025 & Connected Matters Page 1 of 9
16:08:48
Sharma, Advocates for Income Tax
Deptt.
versus
THIRD GENERATION TRADERS PVT. LTD. .....Respondent
Through: None.
(20)
+ ITA 140/2025 & CM APPL. 28469/2025
PR. COMMISSIONER OF INCOME TAX, DELHI-7 .....Appellant
Through: Mr. Puneet Rai, Sr. Standing Counsel
with Mr. Ashvini Kumar, Mr.
Rishabh Nangia, Mr. Gibran, Jr.SCs
& Mr. Nikhil Jain, Ms. Srishti
Sharma, Advocates for Income Tax
Deptt.
versus
THIRD GENERATION TRADERS PVT. LTD. .....Respondent
Through: None.
(21)
+ ITA 141/2025 & CM APPL. 28474/2025
PR. COMMISSIONER OF INCOME TAX, DELHI-7 .....Appellant
Through: Mr. Puneet Rai, Sr. Standing Counsel
with Mr. Ashvini Kumar, Mr.
Rishabh Nangia, Mr. Gibran, Jr.SCs
& Mr. Nikhil Jain, Ms. Srishti
Sharma, Advocates for Income Tax
Deptt.
versus
THIRD GENERATION TRADERS PVT. LTD. .....Respondent
Through: None.
(22)
+ ITA 142/2025 & CM APPL. 28477/2025
PR. COMMISSIONER OF INCOME TAX, DELHI-7 .....Appellant
Through: Mr. Puneet Rai, Sr. Standing Counsel
with Mr. Ashvini Kumar, Mr.
Rishabh Nangia, Mr. Gibran, Jr.SCs
& Mr. Nikhil Jain, Ms. Srishti
Signature Not Verified
Signed By:NEELAM
SHARMA
Signing Date:27.05.2025 ITA 137/2025 & Connected Matters Page 2 of 9
16:08:48
Sharma, Advocates for Income Tax
Deptt.
versus
THIRD GENERATION TRADERS PVT. LTD. .....Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE TEJAS KARIA
VIBHU BAKHRU, J. (ORAL)
1. The Revenue has filed the present appeals, inter alia, impugning a
common order dated 20.09.2024 passed by the learned Income Tax
Appellate Tribunal [ITAT] in a batch of appeals arising from separate
orders passed by the Commissioner of Income Tax (Appeals) 29, New Delhi
[CIT(A)], in respect of Assessment Years [AYs] 2012-13 to AY 2017-18. A
tabular statement setting out the details of the present appeals for the
respective AYs are as under:
Item Nos. ITA Nos. Assessment Declared
Years Income
17. ITA 2012-13 Rs.1,02,560/-
18. ITA 2015-16 Rs.3,49,901/-
19. ITA 2016-17 Rs.3,49,901/-
20. ITA 2017-18 Rs.54,888/-
21. ITA 2014-15 Rs.1,96,570/-
22. ITA 2013-14 Rs.1,19,060/-
2. The respondent [Assessee] filed its income tax returns for the
respective assessment years declaring the income as noted above. On
17.12.2015, search and seizure operations were conducted at the residential
premises of one Sh. Kaushal Kumar, who is stated to be an employee of one
Sh. Anand Kumar Jain and one Sh. Naresh Kumar Jain [Jain Brothers] at
his residence at H. No.151, Pocket-13, Sector-20, Rohini, Delhi. It is stated
that during the course of the search, incriminating papers and documents
were found pertaining to the Assessee. Based on the same, on 29.12.2017,
the Assessing Officer [AO] of the searched person recorded his satisfaction
that the documents found during the course of the search belonged to or
contained information relating to the Assessee. Pursuant to the same, the AO
issued a notice dated 30.12.2017 under Section 153C of the Act.
3. The Assessee responded to the said notices reiterating its returns of
income. Thereafter, the AO issued notices under Section 142(1) of the Act
and the assessment proceedings culminated in the assessment orders
whereby the AO made an addition of the credits of the amounts received by
the Assessee during the previous years relevant to AYs 2012-13 to AY
2017-18 under Section 68 of the Act on protective basis and also an addition
in regard to commission income on substantive basis. The AO concluded
that the Assessee was used as a conduit for routing accommodation entries.
The Jain Brothers were using the Assessee as their vehicle routing funds to
the ultimate beneficiaries. The amounts were credited in the accounts of the
Assessee and thereafter paid to the other entities under the control of the Jain
Brothers, which in turn had transmitted the same to the ultimate
beneficiaries. The Assessee was used to layer the funds, which were
received in cash and introduced in other companies under the control of the
Jain Brothers for onward payment to the ultimate beneficiaries.
4. In the aforesaid circumstances, the amounts, which were credited in
the bank accounts of the Assessee were added as unexplained credits under
Section 68 of the Act. The AO also reasoned that there would be
commission charges payable on account of routing accommodation entries
and accordingly, computed the Assessee's commission income at the rate of
0.25% and made the additions accordingly.
5. The Assessee appealed the said assessment orders before the CIT(A).
The CIT(A) allowed the appeals principally on the ground that the Assessee
was stated to be a shell company, therefore, did not have any real income.
The CIT(A) also noted the substantive addition had been made in the hands
of the beneficiaries. Once such addition had been made, the same amount
could not have been added in the hands of shell companies.
6. The learned ITAT upheld the said decision. The relevant extract of the
impugned order is set out below:
"8. As could be seen from the aforesaid observations of learned
first appellate authority, since, the real beneficiaries, who have
availed the accommodation entries were identified, the substantive
additions have been made at their hands. That being the case,
protective additions made at the hands of the assessee cannot
survive.
9. While considering identical nature of dispute arising in the case
of similarly situated companies, allegedly managed and controlled
by Jain Brothers, the Coordinate Bench in the cases of DCIT Vs.
M/s. Shivji Garments Pvt. Ltd. (supra) and ACIT Vs. M/s. Zed
Enterprises (P) Ltd. (supra) has upheld the decision of learned
first appellate authority in deleting the addition. The factual
position being identical in the present appeals, we do not find any
infirmity in the decision of learned first appellate authority in
deleting the additions. Grounds are dismissed."
7. In the aforesaid context, the Revenue has projected a similar set of
questions for consideration of this Court, albeit with varied amounts. We
consider it apposite to set out the questions of law as projected in ITA
No.137/2025 in respect of AY 2012-13. The same are set out below:
"A. Whether on the facts & in the circumstances of the case,
the Hon'ble ITAT has erred in law & on facts by deleting the
addition of Rs. 9,54,01,729/- made on account of undisclosed
sources u/s 68 for unexplained entries in bank account ignoring
the fact that assessee has failed to produce any concrete and any
additional evidences in support of its contention?
B. Whether on the facts & in the circumstances of the case,
the Hon'ble ITAT has erred in upholding the deletion of Rs.
2,38,504/- @ 0.25% made on account of unaccounted commission
by the Ld. CIT(A) ignoring the fact that this commission charged
@ 0.25% by the conduit concern i.e. the assessee company was
used for running the business of facilitating accommodation
entries was not disclosed?
C. Whether the Hon'ble ITAT was correct in ignoring the
decision of the Hon'ble Apex Court in the case of Lalji Haridas
vs. ITO (1961) 43 ITR 387 (SC), and judgment of Hon'ble Gujrat
High Court in the case of CIT, Gujarat II vs. Surendra Gulab
Chand Modi (1983) 140 ITR 517 (Guj), wherein it is held that
protective assessment results in only a paper demand which is not
enforceable as long as the assessment remains protective, hence
no prejudice is caused to the assessee against such a Protective
Assessment till such matters attain finality by the Hon'ble High
Court or Hon'ble Supreme Court?"
8. The present appeals were listed on 09.05.2025 and this Court had
noted that the assessment orders passed were vague and did not clearly set
out the entries, which were held to be accommodation entries.
9. In view of the aforesaid observations, Mr. Rai, the learned counsel for
the Revenue requested some time to examine the assessment records. He has
now handed over a tabular statement indicating the credit and debit balances
in the bank accounts of the Assessee during different financial years. The
said tabular statement is set out below:
Sr Name of the Bank A/c no FY Credit Balance Debit Balance
No Assessee/ Name
Company
14 Third HDFC 1347847 2011-12 8,78,82,934.00 8,77,95,000.00
Generation Bank 0000061
Traders Pvt.
Ltd.
HDFC 2012-13 13,03,58,676.00 13,04,45,708.00
Bank
HDFC 2013-14 9,10,42,513.00 9,09,78,059.18
Bank
HDFC 2014-15 7,17,31,282.00 7,16,85,000.00
Bank
HDFC 2015-16 25,80,59,142.00 25,81,62,970.68
Bank
HDFC 2016-17 9,81,43,905.00 9,76,79,582.00
Bank
HDFC 2017-18 12,18,51,126.00 12,21,35,980.00
Bank
10. The above tabular statement clearly indicates that the Assessee's
opening balances and closing balances are substantially the same. There is
only a minor variation between the credit balance and the debit balance of
the Assessee in the bank account. This also supports our understanding of
the assessment order, which although not clear, indicate that the Assessee
was used as pass-through entity for extending accommodation entries to the
ultimate beneficiaries.
11. It is also noted that no cash deposits are made in the bank accounts of
the Assessee. The amounts received by the Assessee were from different
entities, which according to the Revenue were also used for routing the
undisclosed income of the beneficiaries.
12. It is the Revenue's case that the Jain Brothers were, at the material
time, the accommodation entry operators who had introduced the funds and
routed the same through banking channels to the ultimate beneficiaries.
Apparently, the Jain Brothers also had done so on certain commission.
13. It is clear from the above, the commission for providing entries to
beneficiaries would be the real income of Jain Brothers and there is no
material to indicate that the Assessee had earned any commission income.
This is so because, according to the AO, the Assessee company was a
conduit operated by Jain Brothers.
14. It is also apparent that there was income in the hands of the Assesee
and it was merely a conduit. The credit, which has been introduced in the
books of the Assessee was matched by a debit to the other entities used to
route the funds to the ultimate beneficiaries. In the aforesaid context the
CIT(A) and the learned ITAT had held that the unexplained credits were
liable to be taxed in the hands of the beneficiaries. And, since the same had
been done, there is no occasion of taxing the channels through which the
amounts were routed.
15. We find no infirmity with the said view. No substantial questions of
law arise for consideration. The appeals are accordingly dismissed.
VIBHU BAKHRU, J
TEJAS KARIA, J
MAY 23, 2025/ 'A'
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