Going One Step Further: Curbing the Menace of Accommodation Entries

Abstract

Modernization of tax evasion through accommodation entries remains a constant headache for the Income Tax Department. In a response to the same, the threshold required to establish genuineness of the transaction, identity and creditworthiness of the creditor has increased manifold which has also led to an amendment in Section 68 of the Income Tax Act. In this tussle between the judiciary and legislature, it is the assessee who suffers. Therefore, through this paper, an attempt is made to find out where the duty of the assessee ends to establish genuineness of the transaction, identity and creditworthiness of the creditor. It is first discussed how accommodation entries are treated under the Income Tax Act and the consequential duty of the assessee. During the indagation, it is noted that an amendment has been made recently in the relevant provisions and therefore, the rationale behind the amendment is scrutinized along with its consequences. The objective of the paper is not only to understand what the assessee must do, but also what the assessing officer must do to curb the menace of accommodation entries and therefore, after examining the duties of the assessee, we move to the obligations of the assessing officer, both statutory and moral. A careful consideration of judicial precedents throughout the paper is also present to shed more light upon the appropriate principles of law .