Accommodation Entry Exception Trumps Tax Limits: Delhi High Court

The Delhi High Court has affirmed its stance that tax appeals involving "accommodation entries" remain maintainable regardless of the monetary tax threshold prescribed by the Central Board of Direct Taxes (CBDT). In a recent decision, the Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar dismissed a review petition filed by M/s Agroha Fincap Ltd., clarifying that cases of tax evasion fall squarely within exempted categories.

Background of the Dispute

The dispute originated from the Revenue's appeal against M/s Agroha Fincap Ltd. Regarding tax assessments. During the proceedings, the respondent argued that the appeal should be dismissed because the tax effect was below the Rs. 1 crore monetary limit established by existing CBDT circulars.

In its review petition, the respondent contended that the Court had overlooked the maintainability of the appeal based on these monetary limits. Furthermore, the respondent sought a remand to the Income Tax Appellate Tribunal (ITAT), claiming that several grounds of appeal remained unadjudicated.

The Court’s Reasoning

The High Court rejected the arguments, emphasizing that the Revenue’s case specifically concerned "accommodation entries." Under the current regulatory framework—specifically circular number 09/2024 dated September 17, 2025—cases involving organized tax evasion, such as bogus capital gains, losses through penny stocks, and accommodation entries, are explicitly exempted from the monetary threshold restrictions.

Addressing the request for a remand, the Bench noted that the respondent had failed to press other grounds before the ITAT, choosing instead to focus solely on the validity of approval granted under Section 151 of the Income Tax Act. Consequently, the Court found no justification for a remand.

Key Observations

The judgment clarifies the scope of the CBDT’s exception criteria:

• On the Exception (h) applicability: "In any case, having considered the record, it is clear that the case of the appellant/Revenue before the Assessing Officer and also the CIT (Appeals) was of accommodation entry. If that be so, the case surely falls within the exception (h)."
• On the ITAT's findings: "It follows that the appeal filed by the respondent/assessee was only pressed on the aspect of the approval under Section 151 of the Income Tax Act, 1961 as being defective, mechanical and without application of mind and nothing more."
• Final Conclusion: "In view of the above, we are of the view that the order dated 05.10.2025 does not call for any review. The review being bereft of merits is dismissed."

Practical Implications

This ruling reinforces that the judiciary will not allow technical monetary thresholds to impede the prosecution of cases involving deliberate tax evasion techniques like accommodation entries. For practitioners, the decision serves as a reminder that legal arguments not raised or pressed before the ITAT are deemed abandoned, limiting the scope for future remand requests in appellate courts.