Circular Funds from Benami Account Deemed ‘Accommodation Entry’| AAAR

Case Details: Shivam Enterprises v. Assistant Commissioner of Income-tax - [2025] 176 taxmann.com 914 (SAFEMA - New Delhi)

Judiciary and Counsel Details

• G.C. Mishra and BALESH KUMAR, Member
• Ankush Mangal, Vijay Pal Dalmia and Aditya Dhar, Advs. for the Appellant. 
• Manmeet S. Arora, SPP for the Respondent.

Fact of the Case

During the demonetization period, the assessee, Shivam Enterprises, received substantial amounts via cheques from a bank account maintained in the name of M/s Rishi Hardware (RH).
Based on information received, a survey operation under section 133A of the Income-tax Act was conducted at the premises of one Ashwini Kumar Kapoor (AKK), where it was unearthed that large cash deposits totalling Rs. 2.45 crores had been made in the RH account, which was later used to issue cheques in favour of the assessee.
Upon detailed investigation, it was found that RH was a fictitious entity, having no tax filings or business operations, and the said bank account was fraudulently opened using a forged PAN, a photo of an unknown individual, and falsified address documents. The cash was deposited by Manish Bagga, an employee of AKK, on the direct instructions of AKK, and the account was clandestinely operated by AKK himself. The assessee claimed that the payments were in consideration for sales made to RH, but no credible evidence of delivery of goods was furnished, and the invoices were found to be fabricated.
The Initiating Officer referred the case to the Adjudicating Authority (AA) under the Prohibition of Benami Property Transactions Act, 1988 (PBPTA), which confirmed the provisional attachment of assets under section 24(4).
The matter reached before the Tribunal.

Tribunal Held

The Tribunal held that the arrangement represented a classic case of ‘Accommodation entries’ and satisfied all three limbs of section 2(9)(A) of the PBPTA namely, the property (bank account) was held by one person (RH), the consideration was provided by another (Shivam Enterprises), and the property was held for the benefit of the person providing such consideration. It was further observed that the entire structure was sham, the bank account was used only as a layering mechanism, and the alleged sales lacked commercial substance.
The Tribunal held that the burden of verifying the genuineness of the bank account could not override clear evidence of fabrication, collusion, and misuse of identity documents. It also rejected the assessee’s claim that the transaction was merely a tax violation under the Income-tax Act, and distinguished all judicial precedents cited by the assessee as factually inapplicable.
Therefore, the Tribunal upheld the findings of the AA, holding the RH account as benami property, Shivam Enterprises as the beneficial owner, and AKK as the benamidar, and decided the matter in favour of the revenue.

List of Cases Reviewed

• V N Nandhini Devi v. K. Visakh Dy. CIT [FPA/PBPT/57/CHN/2018, dated 17-10-2018] (para 35),
•  Hari Krishna Kanoi v. Appropriate Authority [1993] 71 Taxman 413/[1994] 207 ITR 743 (Cal) (para 36),
• First ITO v. M.R. Dhanalakshmi Ammal [1978] 112 ITR 413 (Mad),
•  Binapani Paul v. Pratima Ghosh [Civil Appeal No. 8098 of 2004, dated 27-4-2007] and
• Jaydayal Poddar v. Mst. Bibi Hazra AIR 1974 SC 171(para 37) – distinguished

List of Cases Referred to

• V N Nandhini Devi v. K. Visakh Dy. CIT [FPA/PBPT/57/CHN/2018, dated 17-10-2018] (para 6),
• Hari Krishna Kanoi v. Appropriate Authority [1993] 71 Taxman 413/[1994] 207 ITR 743 (Cal) (para 11),
• First ITO v. M.R. Dhanalakshmi Ammal [1978] 112 ITR 413 (Mad) (para 12),
• Binapani Paul v. Pratima Ghosh [Civil Appeal No. 8098 of 2004, dated 27-4-2007] (para 12) and
• Jaydayal Poddar v. Mst. Bibi Hazra AIR 1974 SC 171 (para 12).