Accommodation entry conduit receipts cannot be taxed twice; only real commission and proven undisclosed investment may be added.

Where a company functions only as a conduit for accommodation entries, the gross routed share capital, share premium and related bank credits are not taxed again in its hands under section 68; only the commission element is taxable. Amounts used for land-related payments, stamp duty, registration, intermediary payments and similar outgoings cannot be added a second time when the same sums have already been assessed in the hands of the actual contributors or payers. A claimed payment for purchase of the company is not taxable in the company's hands where the evidence shows it was, if at all, paid by the acquirers. The balance of registered land consideration was not treated as undisclosed investment under section 69B in the absence of evidence of understatement or off-book payment.

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Issues: (i) Whether share capital and share premium received through the assessee's bank account, while acting as a conduit for accommodation entries, could be assessed in the assessee's hands under section 68 of the Income-tax Act, 1961, or only the commission income was taxable; (ii) Whether bank credits and land-related expenditures, including stamp duty and registration outgoings, could be assessed again in the assessee's hands when the same funds were already assessed in the hands of the individual contributors; (iii) Whether the alleged payment of Rs. 30,00,000 for purchase of the assessee-company from the previous owner was taxable in the assessee-company's hands; (iv) Whether commission payments and incidental payments to intermediaries and third parties connected with the land transaction could be sustained as additions in the assessee's hands; (v) Whether the balance of the registered sale consideration for the land could be treated as undisclosed investment under section 69B of the Income-tax Act, 1961.

Issue (i): Whether share capital and share premium received through the assessee's bank account, while acting as a conduit for accommodation entries, could be assessed in the assessee's hands under section 68 of the Income-tax Act, 1961, or only the commission income was taxable.

Analysis: The assessee-company was found to have been used as a paper entity for routing accommodation entries. The material on record showed that the funds received as share capital and share premium were immediately passed on to other entities and that the closing bank balance was negligible. The underlying activity was the provision of accommodation entries for commission, and the assessee was not shown to be the real beneficiary of the routed funds. In such a case, taxing the entire gross receipts as unexplained cash credits would ignore the actual character of the transaction and the principle of real income.

Conclusion: The addition under section 68 was not sustainable in the assessee's hands; only the commission element was liable to be taxed.

Issue (ii): Whether bank credits and land-related expenditures, including stamp duty and registration outgoings, could be assessed again in the assessee's hands when the same funds were already assessed in the hands of the individual contributors.

Analysis: The credits and expenditure were traced to the contributions of the persons who had financed the land transaction and related costs from their own sources. Those amounts had already been assessed in the hands of the respective individuals in their own proceedings. The same sums could not be taxed again in the assessee-company's hands merely because they moved through the company's bank account for making payments connected with the land deal.

Conclusion: The additions on account of bank credits and land-related expenditure were deleted.

Issue (iii): Whether the alleged payment of Rs. 30,00,000 for purchase of the assessee-company from the previous owner was taxable in the assessee-company's hands.

Analysis: The payment, if any, was made by the persons acquiring the company and not by the company itself. The amount was in the nature of acquisition cost or commission attributable to the purchasers, and the evidence did not justify fastening that liability on the company. The same transaction had also been covered in the hands of the actual payers in their respective assessments.

Conclusion: The addition of Rs. 30,00,000 was deleted.

Issue (iv): Whether commission payments and incidental payments to intermediaries and third parties connected with the land transaction could be sustained as additions in the assessee's hands.

Analysis: The disputed payments, including commission to the intermediary and small payments to other participants, formed part of the overall financing and expenditure pattern of the land transaction. The same amounts had already been considered and assessed in the hands of the individual persons who provided the funds or made the payments. Once the source and taxability of those sums stood reflected in those individual assessments, a second addition in the assessee-company's hands was unwarranted.

Conclusion: The additions on this account were deleted.

Issue (v): Whether the balance of the registered sale consideration for the land could be treated as undisclosed investment under section 69B of the Income-tax Act, 1961.

Analysis: The land purchase was duly recorded in the assessee's books at the value reflected in the registered sale deeds, while the unpaid portion of the consideration was shown as an outstanding liability. No cogent evidence was brought to show any understatement of consideration or any payment outside the books. The fact that the land was still not delivered in possession also undermined the inference that the entire balance had been paid as unexplained investment.

Conclusion: The addition under section 69B was not sustainable and was deleted.

Final Conclusion: The assessee succeeded on the substantive issues, the protective additions could not survive once the related sums stood assessed in the hands of the actual contributors, and the Revenue's challenge failed.

Ratio Decidendi: Where funds are merely routed through a company as a conduit for accommodation entries and the same amounts are already assessed in the hands of the actual contributors or payers, the gross routed amounts cannot again be taxed in the company's hands as unexplained credits, investments, or expenditure; only the real income element, if any, can be brought to tax.

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