The main legal point established in the judgment is the burden of proof on the Assessee to establish the identity, creditworthiness, and genuineness of the share capital transactions, as per the provisions of Section 68 of the Income Tax Act, 1961, and various legal principles and judgments related to the same.

Sanjeev Sachdeva, J.

1. This is an appeal under Section 260A(1) of the Income Tax Act, 1961 (for short “the Act”) filed by the Revenue against the order of the Income Tax Appellate Tribunal dated 14.10.2011 in ITA No.3650/DEL/2011 for the Assessment Year 2002-03.

2. Vide order dated 07.11.2012, the following substantial question of law was framed:-

“Whether on the facts and circumstances of case, the Income Tax Appellate Tribunal was correct in law in deleting the addition of Rs. 3,43,00,000/- u/s 68 of the Income Tax Act, 1961 holding the same to be camouflage transactions / accommodation entries?

3. The Assessee had filed the return for the Assessment Year 2002-03 declaring nil income. The return was processed under Section 143(1) of the Income Tax Act.

4. On the basis of the information received from the Investigation Wing of the Income Tax Department, notice under Section 148 was issued to the Assessee. The proceedings were sought to be opened on the basis of the information unearthed by the Investigation Wing of the Income Tax Department, wherein it came to their knowledge that a huge money laundering racket was being run by a few persons and bogus accommodation entries were being provided. As per the information of the Investigation Wing, accommodation entries were being provided in lieu of payment in cash of equivalent amount plus commission being paid thereon to the entry operators. The Investigation Wing during the investigation came across names of various individuals, who were operating as entry providers and also various parties, who were taking such accommodation entries. The name of the Assessee also figured as one of the parties involved in taking such accommodation entries.

5. In response to the notice under Section 148, the Assessee issued a letter dated 06.04.2009 submitting that the return filed on 30.09.2002 may be treated as the return filed in response to the notice under Section 148. The Assessee filed the said letter also inquiring about the reasons for reopening of the case were duly provided to the Assessee vide letter dated 12.10.2009 and the same are as under:-

“The Investigation wing of the Income Tax Department had unearthed a huge money laundering mechanism wherein it was established that bogus accommodation entries were being provided. These accommodation entries are received in lieu of payment of cash of equivalent amount plus commission thereon to the entry operator. For obvious reasons, these cash transactions are not routed through the books of account of the Assessee. In this case, information has been received from Directorate of Income Tax, (Investigation), New Delhi that during the relevant assessment year, this Assessee had received the following cheque amount(s) in the nature of accommodation entry:

“TABLE”

Therefore, I have reason to believe that an income of Rs.2,92,12,400/- plus commission @ 2% thereon amounting to Rs.5,84,248/-, totalling to Rs.2,97,96,648/- has escaped assessment during the assessment year. On the basis of this information, I have reason to believe that the incomes described above have escaped assessment and that the case is fit for issuing Notice U/s of the I.T.Act, 1961”.

6. The Assessee, vide letter dated 21.10.2009, filed the objections to the initiation of proceedings under Section 147 of the Income Tax Act. The objections were disposed of against the Assessee on 21.10.2009. One of the grounds taken by the Assessee was that certain entries mentioned in the reasons recorded were duplicate entries and were figuring in two or three places and on account of this, the amount mentioned in the reasons was inflated. The Assessee before the Assessing Officer submitted a list of parties out of the parties mentioned in the reasons for reopening and claimed that these parties had invested money towards acquisition of share capital in the Assessee amounting to Rs.1,50,00,000/-. The list of the parties is as under:-

7. The Assessing Officer during the rea