Supreme Court upholds ₹25 Lakh Accommodation‑Entry Reassessment against Agroha Fincap [Read Judgement]

In a recent ruling, the Supreme Court has dismissed Agroha Fincap Ltd’s challenge to a Delhi High Court judgment that upheld a ₹25 lakh tax reassessment linked to alleged accommodation entries, transactions used to disguise unaccounted cash as legitimate share capital.

The company had declared an income of only ₹40,720 for the Assessment Year 2009‑10. Later, the Investigation Wing reported that Agroha Fincap had received ₹25 lakh through RTGS transfers from shell entities of the S.K. Jain Group, identified as entry operators. The Assessing Officer reopened the case under Sections 147 and 148 of the Income-tax Act, treating the amount as an unexplained credit under Section 68.

The Income-tax Appellate Tribunal (ITAT) accepted this argument and quashed the reassessment, holding that the approval was merely ritualistic and not in line with the Delhi High Court’s earlier ruling in N.C. Cables Ltd., which required a meaningful application of mind before reopening assessments.

The Delhi High Court reversed the ITAT’s order. The bench held that the approval in Agroha’s case was not merely mechanical. It distinguished N.C. Cables Ltd., where the word “approved” alone was used, from the present case, where the approving authority had explicitly recorded satisfaction by writing “Yes, I am convinced it is a fit case for reopening of assessment under Section 147 by issuing notice under Section 148.”

The High Court concluded that the ₹25 lakh represented unexplained accommodation entries routed through shell companies and reinstated the reassessment order dated 28 November 2016. High court observed that “The Tribunal has clearly erred in not appreciating the above language used by the Competent Authority while granting approval. Hence, the impugned order dated 07.07.2023 passed by the ITAT allowing the appeal filed by the Respondent/Assessee is untenable and is liable to be set aside”.

Finally, the Supreme Court bench, Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, dismissed Agroha Fincap’s appeal, observing that there was “no reason to interfere” with the High Court’s judgment.

Accordingly, the petition was dismissed

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