CHANDRA BHAWAN,KAUSHAMBI vs. ADDL./JOINT/ACIT/ITO, NFAC, DELHI

A.Y. 2016-17 Chandra Bhawan, vs. Income Tax Officer, Chak Guraini, Baish Kanti, Kaushambi- Ward-2(5), Kaushambi 212206 Present Address 39A/L/2, Om Prakash, Sabhasad Marg, Kalindipuram, Prayagraj-211011 PAN:AHJPB4378C (Appellant) (Respondent) Assessee by: Sh. Mayank Arora, Advocate Revenue by: Sh. A.K. Singh, Sr. DR Date of hearing: 14.11.2024 Date of pronouncement: 29.11.2024 O R D E R PER NIKHIL CHOUDHARY, A.M.: These two appeals have been filed against the orders of the ld. CIT(A), NFAC under section 250 of the Income Tax Act, 1961 on 19.01.2024 (for the assessment A.Y. 2016-17 Chandra Bhawan year 2016-17) and 27.10.2023 (for the assessment year 2017-18). As the issue involved in both these appeals is common, the appeals are being taken up for disposal by way of a common order. Since, the assessment order in the case of assessment year 2016-17 has been passed on 22.12.2018 and pre-dates the order in assessment year 2017-18, it is being taken up first for disposal.

2. The grounds of appeal

preferred by the assessee in this appeal are as under:- “1. Because the Learned Commissioner of Income Tax (Appeals), NFAC has erred to pass ex-parte Appellate order without considering the facts and circumstances of the case and has simply confirmed the order passed by the Ld. Assessing Authority.

2. Because the appellant was not given any proper opportunity of being heard since the appellant was not aware of the online service of notices. No email was received by the appellant for any hearing of the notice.

3. Because the Learned Commissioner of Income Tax (Appeals), NFAC has failed to appreciate the fact that the appellant belongs to a middle class family and it is not possible for him to collect and deposit cash for Rs. 5,96,20,250-00 in his bank account which is extremely high and beyond the caliber and even imagination of the appellant.

1. Because the Learned Commissioner of Income Tax (Appeals), NFAC has erred to pass ex-parte Appellate order without considering the facts and circumstances of the case and has simply confirmed the order passed by the Ld. Assessing Authority.

2. Because the appellant was not given any proper opportunity of being heard since the appellant was not aware of the online service of notices. No email was received by the appellant for any hearing of the notice.

3. Because the Learned Commissioner of Income Tax (Appeals), NFAC has failed to appreciate the fact that the appellant belongs to a middle class family and it is not possible for him to collect and deposit cash for Rs. 5,96,20,250-00 in his bank account which is extremely high and beyond the caliber and even imagination of the appellant.

4. Because the Learned Commissioner of Income Tax (Appeals), NFAC has failed to appreciate the fact that the appellant is a victim of bank fraud done by AXIS A.Y. 2016-17 Chandra Bhawan Bank, S. C. Lal Road, Prayagraj, wherein two SB A/cs having numbers 914010031097645 & 914020031846606 were illegally opened in his name without any of his knowledge and permission.

5. Because the Learned Commissioner of Income Tax (Appeals), NFAC has erred to ignore that the Appellant has submitted the documents regarding criminal proceedings U/s 156 (3) of the Indian Penal Code against the bank before the Chief Judicial Magistrate, Allahabad and therefore it is itself very much evident that the Appellant is innocent and he himself is trapped in bank fraud without committing any crime.

6. Because the Appellant is submitting herewith the order of Chief Judicial Magistrate, Allahabad dated 30-08-2022, wherein while disposing the application of the Appellant U/s 156 (3) of the Indian Penal Code, has held that prima facie, it is evident that the said account was being operated in isolation and also a crime was committed thereof. An order for registering the FIR in this matter was given to the Inspector In charge, Thana Kotwali, Allahabad, whose copy is attached herewith as Annexure - IX.

7. Because the action of the Ld. Assessing Authority and confirmed by the Ld. Commissioner of Income Tax (Appeals), NFAC to treat the so called bank deposits as unexplained money U/s 69A is wrong and against the provisions of the Act since Sec 69A can only be invoked when the assesee is maintaining books of accounts. In this case the income of the Appellant was much below the taxable limit and as such no books of accounts were maintained during FY 2016-17.

8. Because the Appellant is relying upon the judgement of Hon'ble Delhi High Court in case of The Commissioner of Income Tax (International Taxation) 1, New Delhi Vs. Hersh Wishesher Chadha [ITA 676/2023], wherein the Hon'ble High Court has held that "it appears to us prima facie that the expression "if any" specifically used in Section 69A of the Act amplifies that where books of account are not maintained, it would not be possible to invoke this provision". Copy of judgement of Hon'ble Delhi High Court is attached herewith as Annexure - X.

9. Because the action of the Ld. Assessing Authority and confirmed by the Ld. Commissioner of Income Tax (Appeals), NFAC to treat the full gross receipts from LIC commission U/s 194D for Rs. 10,29,217-15 as the income is wrong and incorrect since the appellant has also incurred certain expenses to earn such receipts. Therefore the Ld. Assessing Authority and Ld. First Appellate Authority should have allowed certain deductions from gross receipts.

10. Because the Appellant is relying upon the judgement of Hon'ble ITAT Delhi Bench 'A', New Delhi in case of Arya Samaj Vs. Income Tax Officer, Ward A.Y. 2016-17 Chandra Bhawan (Exemption) -1 (1), New Delhi [ITA No. 1578/Del/2019], wherein it has been held as per principles of natural justice that right tax has to be collected from the right person. Copy of judgement of Hon'ble ITAT Delhi is attached herewith as Annexure - XI.

11. Because the Ld. Assessing Authority and Ld. First Appellate Authority has ignored the fact that there is no tax payable by the Appellant and as such there is no loss of revenue.

12. Because the Ld. Assessing Authority has erred in believing in wrong information and has arbitrarily assessed income in haste merely on conjectures and surmises, which was also confirmed by the Ld. First Appellate Authority.

13. Because the initiation of penalty U/s 274 r.w.s. 270 A, Sec 271AAC, Sec 272A (1) (d) & 271F is wrong and illegal.

14. Because the order passed U/s 147 r.w.s 144 r.w.s 144B by the Ld. Assessing Authority and the order passed U/s 250 by the Ld. First Appellate Authority is bad in law and against the facts.”

4. Aggrieved with this order of the ld. AO, the assessee went in appeal before the ld. CIT(A), Allahabad. Subsequently, his appeal was migrated to the National Faceless Appeal Centre. The ld. CIT(A), NFAC records that a total 13 notices were issued to the assessee during appeal proceedings and in response to the notices issued on 21.09.2022, the assessee filed a written submission in which it was submitted that he was a petty LIC agent, not engaged in other business or profession and it was beyond his means to deposit such a heavy amount in his bank account. It was submitted that the said bank account at Axis Bank, Chowk Branch, Prayagraj had been opened fraudulently, without the knowledge of the appellant and the appellant had lodged an FIR against the bank authorities vide FIR No.02 dated 2.01.2019 under sections 419, 420, 467 and 468 of the Indian Penal Code. A copy of this FIR had already been filed along with the appeal memo in Form No.35. It was submitted that the matter was under investigation by Thana Kotwali, Prayagraj. The assessee also attached a reply dated 12.09.2022 received from Axis Bank, wherein the bank had admitted its irregularities and had terminated the services of the responsible officers for the said duration. The bank had marked a freeze on the said account and they were also conducting internal investigations, as per the internal processes. It was submitted that this, in itself, was proof that the bank officials have acted in a fraudulent manner in respect of opening of account and its operation in the name of the appellant. It was submitted that the ld. AO had erred in applying section 69, since the assessee had offered explanation for the said cash deposits and the ld. AO was himself accepting, that the appellant had not opened the said bank account. It A.Y. 2016-17 Chandra Bhawan was submitted that only because the persons who had opened the said bank account were untraceable, the ld. AO was unjustified in passing a protective order and just to protect the interest of Revenue, tax had wrongly been imposed on the appellant, despite the ld. AO having come to a finding that the account did not belong to him. In view of the above, the assessee prayed that the appeal may kindly be allowed and the demand be cancelled. The ld. CIT(A) recorded the findings of the ld. AO that the said bank account was opened by the appellant but forgery was done by some persons and yet he made addition in the appellant’s hand. He held that the findings of the ld. AO were not clear, but the investigation was also not complete. The ld. CIT(A) noticed that the assessee is a trader dealing in various items and many beneficiaries have admitted to having transactions with the appellant. This fact has not been taken into consideration by the ld. AO. Furthermore, the investigation of the police and bank have also not achieved finality. He held that the involvement of the appellant cannot be ruled out at this stage. The cash deposit remained unexplained and hence he confirmed the additions in the hands of the appellant dismissing his appeal.

5. The assessee is aggrieved at this decision of the ld. CIT(A), NFAC and has accordingly come in appeal before us. Shri. Mayank Arora, (hereinafter referred to as the ‘ld. AR’) appeared before us and argued the matter. It was submitted that the bank A/c No. 914010031097645 at Axis Bank, Chowk Branch, Allahabad was not the bank account of the assessee, but had been fraudulently opened by some persons in connivance with the officials of Axis Bank. It was submitted that the assessee’s enquiries had revealed that another bank account bearing no. 914020031846606, had also been opened fraudulently in the name of the assessee and copies of the statements of both accounts were submitted before us for our perusal. It was submitted that the assessee came to know of this A.Y. 2016-17 Chandra Bhawan fraudulent activity when notice was issued to him by the Income Tax Officer, Ward-2(5), Kaushambi, regarding deposits made in the impugned bank account and that he had accordingly approached the Court of Chief Judicial Magistrate for registering an FIR in the matter. Subsequently, the Chief Judicial Magistrate, Allahabad, vide his order dated 24.04.2018 had held that prima facie it seems that a cognizable offence has been committed and therefore, ordered for registering an FIR in this matter to Inspector, In-charge, Thana Kotwali, Allahabad. In consequence of this order, FIR No.02 of 2019 dated 2.01.2019 was registered. It was submitted that the Inspector In-charge was submitting reports in the matter to the Hon’ble Chief Judicial Magistrate from time to time. The assessee attached copies of the progress reports dated 31.10.2023 and 5.06.2024. He pointed out that, in this latter report, the Thana Sub Inspector had informed that the police had regularly tried to catch the culprits (whose names were mentioned in the attached report namely; i. Mohd Tanvir S/o Peer Mohammad R/o B-287/8 GTB Nagar, Prayagraj. ii. Ashish Singh S/o Virendra Kumar R/o 10/66 Prabha Bhawan, Rana Pratap Marg, Teliyarganj, Mirzapur iii. Sameer Saxena, the then Branch Head S/o Bal Krishna R/o 722 Rikabganj, Faizabad – at their homes or every possible place where they are expected to be. It was further pointed out that in the said report, it had been pointed out that non- bailable warrants had been issued on 2.12.2023 against the accused and they had approached the Hon’ble Allahabad High Court in Criminal Writ Petition No.2633 of 2024 and the Hon’ble Allahabad High Court had issued orders that they shall not be arrested, till the submission of the police report or the date of A.Y. 2016-17 Chandra Bhawan listing, whichever is earlier. A copy of the said order of the Hon’ble High Court was also filed before us. The ld. AR, thereafter, informed that the Thana Sub- Inspector had informed, that due to his deployment for Lok Sabha elections, 2024, the investigation in this case is still pending and the matter would soon be disposed of on the basis of its merits. The ld. AR submitted that these documents that were being furnished by him, were evidence of the fact that the name of the assessee had been fraudulently used by certain parties to transact business through a bank account opened in his name, of which he had no knowledge. It was submitted that he was a victim of this and did not deserve to be saddled with a tax demand on this account. It was further submitted that the ld. AO had himself conducted an enquiry and come to the conclusion that the said bank account did not belong to the assessee. In the circumstances, there was no basis for him to subsequently assess the deposits in the said bank account in the name of the assessee and levy a tax demand upon the assessee for failure to explain the deposits therein. With regard to the order of the ld. CIT(A), it was submitted that the ld. CIT(A) was in error when he stated that parties had confirmed transacting with the assessee. It was submitted that the parties who had transacted with the said bank account, had also indicated the names of the parties with whom they are interacting and the reason for such interacting. The assessee was not connected to any of those parties and therefore, there was no truth in the findings of the ld. CIT(A). Furthermore, it was emphasized that the assessee was running an LIC agency and was not a trader in any respect. The fact that the police investigation in the matter was not final, could not be a ground to levy tax upon the assessee.

6. On the other hand, the ld. DR Shri. A.K. Singh, (hereinafter referred to as the ‘ld. DR’) submitted that it was not in doubt that the said bank account was being A.Y. 2016-17 Chandra Bhawan used for out of book transactions and thereby for evasion of tax. This income had to be brought to tax and since the bank account stood in the name of the assessee, it had to be protectively assessed in his hands, until it could be established that the actual beneficiaries were other persons. As the police investigation in the matter was still not complete, he argued that the decision of the lower authorities was taken in the best interest of Revenue and should be sustained.

7. We have duly considered the facts and circumstances of the case. We observe the fact that the bank A/c No.914010031097645 at Axis Bank Limited, Chowk Bazar, Allahabad was not opened by the assessee has been brought out by the ld. AO himself in his elaborate investigations conducted during the course of assessment. The ld. AO has pointed out that the mobile number and email ID given in the account opening form and also the address given in the account opening form did not belong to the assessee. He had pointed out that the said address was non-existent and the field verification report was manipulated. He has himself observed that the document used by the persons who have opened the said account i.e. the voter ID card, did not match with the voter ID card issued to the assessee. The ld. AO has, with great pains, traced the persons who transacted with the said bank account and obtained replies from them as to who they transacted with. He has in the course of his investigations, established that the transactions in this bank account or an account of sales and purchases made from M/s Sanjay Kumar & Company, Allahabad, M/s Bholenath Trading and Maa Kali Traders, Allahabad. No linkage of the assessee has been established with any of these concerns. There is nothing on record which suggests that the assessee was a signatory to either a field verification report or the account opening form or to the various cheques and withdrawals slips issued from this account.

A.Y. 2016-17 Chandra Bhawan Therefore, it was fairly clear even at the time of assessment that the said bank account did not belong to the assessee, but had been fraudulently opened by some persons, using the name of the assessee to transact some business. When the ld. AO had himself recorded this finding in his assessment order, we fail to understand as to why he felt compelled to thereafter make the addition in the hands of the assessee, only because he was not in-charge of the assessments of those other persons. In our opinion, he would have been well advised to refer the matter to the Assessing Officers of those persons, or if they were not known, to the Investigation Wing of the Income Tax Department, for further follow up. But the failure to locate the actual beneficiaries of the said bank account, could not in our opinion, be reason enough to make the addition in the hands of the assessee because tax must not only be realized, but it must also be realized from the person who is due to pay such tax and in this particular case, the ld. AO had himself recorded a finding, that the said bank account was not that of the assessee. As regards, the ld. CIT(A), we feel that the ld. CIT(A) has completely failed to grasp the outcome of the Assessing Officer’s investigations. The parties who transacted with the said bank account, have never confirmed transacting with the assessee. Rather they have submitted, that they transacted with the said bank account standing in the name of the assessee, on account of transactions done by them with some other persons, whom they have named in the their responses to the ld. AO. This does not lead to a conclusion that the transactions have been done with the assessee. Furthermore, we observe that the ld. CIT(A) is completely incorrect in concluding that the assessee is a trader dealing in various items. No such material has been brought on record to substantiate this finding. In fact, the assessee has constantly denied being anything but an LIC agent and investigations by the ld. AO had not rebutted this claim. Thus, there is no basis A.Y. 2016-17 Chandra Bhawan for the ld. CIT(A) coming to the conclusions that he has arrived at. We also observe from the order of the Hon’ble Allahabad High Court and the copy of the progress report on the FIR registered by the assessee, that the police investigations have since identified three persons as the possible culprits in this fraud and non-bailable warrants have been issued against them. We observe that the branch head of the Axis Bank, Chowk Branch, Prayagraj in the year 2019 was one of the accused persons and that he has been terminated from his post by the bank and has questioned the FIR on this basis, stating that lodging of FIR for the same cause of action is not justified. In our view, the very fact that the authorities at Axis Bank Limited had chosen to act against the Branch Head, is further proof that solidifies the findings of the ld. AO, that the said account in question did not belong to the assessee and was opened as a result of fraudulent activity. The mere fact that the police have not yet concluded their investigations, cannot in our opinion, be sufficient grounds to saddle the assessee with a tax liability when the ld. AO is himself convinced that the said account was not opened or operated by the assessee. We, therefore, delete the addition of Rs.18,32,63,238/- made under section 69 of the Income Tax Act, 1961.

9. This appeal has been filed against the order of the ld. CIT(A), NFAC on 27.10.2023 dismissing the appeal filed by the assessee against the order of the ld. AO at the National Faceless Assessment Centre that was passed under section 147 r.w.s. 144 and section 144B of the Income Tax Act, 23.03.2022. The grounds of appeal in this case are as under:-

A.Y. 2016-17 Chandra Bhawan “1. Because the Learned Commissioner of Income Tax (Appeals), NFAC has erred to pass ex-parte Appellate order without considering the facts and circumstances of the case and has simply confirmed the order passed by the Ld. Assessing Authority.

3. Because the Learned Commissioner of Income Tax (Appeals), NFAC has failed to appreciate the fact that the appellant belongs to a middle class family and it is not possible for him to collect and deposit cash for Rs. 5,96,20,250-00 in his bank account which is extremely high and beyond the caliber and even imagination of the appellant.

8. Because the Appellant is relying upon the judgement of Hon'ble Delhi High Court in case of The Commissioner of Income Tax (International Taxation) - 1, A.Y. 2016-17 Chandra Bhawan New Delhi Vs. Hersh Washesher Chadha [ITA 676/2023], wherein the Hon'ble High Court has held that "it appears to us prima facie that the expression "if any" specifically used in Section 69A of the Act amplifies that where books of account are not maintained, it would not be possible to invoke this provision". Copy of judgement of Hon'ble Delhi High Court is attached herewith as Annexure - X.

10. Because the Appellant is relying upon the judgement of Hon'ble ITAT Delhi Bench 'A', New Delhi in case of Arya Samaj Vs. Income Tax Officer, Ward (Exemption) -1 (1), New Delhi [ITA No. 1578/Del/2019], wherein it has been held as per principles of natural justice that right tax has to be collected from the right person. Copy of judgement of Hon'ble ITAT Delhi is attached herewith as Annexure - XI.

11. Aggrieved with such additions, the assessee went in appeal to the ld. CIT(A). The ld. CIT(A) took note of the grounds of appeal

and the statement of facts that were filed by the assessee, in which the assessee made reference to the fraud that have been perpetrated upon him by some elements in connivance with officials of Axis Bank and also of the registration of criminal case bearing no.576/12/2018 filed under section 153(3) of the Cr.P.C. before the CJM, Allahabad. However, the ld. CIT(A), thereafter records that despite three notices, no compliance was made by the assessee. Therefore, relying upon the decision of the Hon’ble Supreme Court in the case of CIT vs. B.N. Bhattarcharya 118 ITR 461 SC, Nandram Das Dwarka Das AIR 1958 M.P. 260, Dr. P. Nala Thampi vs. Shankar (1984) (Supp) SCC 63 and New India Assurance vs. Srinivasan (2000)

3. SCC 242, he dismissed the appeal of the assessee, holding that the assessee was not interested in pursuing its appeal and was only using dilatory tactics.

A.Y. 2016-17 Chandra Bhawan 12. Aggrieved with this summary dismissal of his appeal, the assessee is before us. Shri. Mayank Arora, Advocate (hereinafter referred to as the ‘ld. AR’) represented the assessee in this case. He once again took us through the facts of the case, as pointed out in and submitted that the assessee was a victim of fraud and the said bank account in question did not belong to him. It was submitted that before going ahead with the assessment, the ld. AO ought to have considered the order passed in the previous assessment year in which the findings that the said bank account did not belong to him, had been recorded by the ld. AO. However, the ld. AR had no satisfactory explanation to give as to why the assessee did not make compliance and bring these facts before the ld. AO and the ld. CIT(A) during the course of proceedings before them, other than to say that the assessee was living in a remote place (Kaushambi) and was not well versed with the faceless proceedings of the Income Tax Department. As a result he was handicapped in making submissions before the concerned authorities.

13. On the other hand, Shri. A.K. Singh, Sr. DR (hereinafter referred to as the ‘ld. Sr. DR’) pointed out that the assessee had not made any compliance before either the ld. AO or the ld. CIT(A). The details with regard to the account and the deposit thereon could not be enquired into properly by the ld. AO because of this lack of cooperation on the part of the assessee. Therefore, merely because the ld. AO had come to a particular finding in another assessment year, could not be reason enough to delete the additions made in the hands of the assessee in this year without any enquiry whatsoever. The ld. Sr. DR pointed out that the principle of res judicata was not applicable to income tax assessments. Accordingly, it was submitted that for a proper finding of fact on the deposits in the bank account at Axis Bank, the matter should be remanded back to the file of the ld. AO for investigations in the light of the findings by the ld. AO in assessment year 2016-17 and by the police in their A.Y. 2016-17 Chandra Bhawan subsequent investigations. With regard to the commission income from LIC, ld. Sr. DR submitted that the assessee had admitted to earning the said income, but had not filed a return with regard to it, even though it was above the minimum limit taxable. Accordingly, he prayed that the addition made in this regard should be confirmed.

14. We have duly considered the facts and circumstances of this case. It is not clear from the assessment order as to whether the bank account in question is the very same bank account which was the subject matter of enquiry by the ld. AO in the assessment year 2016-17 and also by the police in their investigations into FIR No. 02/2019, as the same is not mentioned in the assessment order and the assessee has himself brought on record the fact that there were two bank accounts standing in his name at Axis Bank , that had been fraudulently opened . It is, however, fairly clear that before proceeding to make the addition, the ld. AO has not received any compliance from the assessee and as a result he has not considered the investigations made by his predecessor in assessment year 2016-17 which quite clearly revealed that bank A/c No.904010031097645 at Axis Bank, Chowk, Allahabad had been opened and operated by some other parties, without the knowledge of the assessee. Thus, the orders passed by the ld. AO and the ld. CIT(A) have been passed without consideration of the basic facts, which were already on the record of the Department, in view of the earlier assessment order passed by the ld. AO in assessment year 2016-17. It is, therefore, quite clear that the additions made by them without considering the earlier findings, cannot be sustained as in the said assessment order, the ld. AO has clearly recorded that the period of fraudulent activity in the said bank account range from 7.08.2014 to 22.07.2017. It is also seen that the assessee did not render any assistance to the ld. AO in this regard, by way of compliance to his notices. In the circumstances, we deem it fit, in the interest of