CHANDRA BHAWAN,KAUSHAMBI vs. ITO WARD-2(5), , KAUSHAMBI

The grounds of appeal

The facts of the case are that the assessee filed a return of income for the A.Y. 2016-17 on 2.03.2017, declaring total income of Rs.3,10,370/-. The case was selected for limited scrutiny on the issue, ‘whether the cash deposit has been made from disclosed sources’. The ld. AO observed that the assessee was maintaining a savings bank a/c no. 914010031097645 in Axis Bank Limited, Chowk, Allahabad. He issued a notice under section 133(6) to the Branch Manager of the Axis Bank to furnish the bank statement of the assessee from 1.04.2015 to 31.03.2017. The bank statement so received, was confronted to the assessee for an explanation regarding the deposits made in the said bank account. In response, the ld. AR of the assessee made a written submission, denying the ownership of the said account in Axis Bank, Chowk Branch, Allahabad. It was submitted that the assessee had never opened any account in Axis Bank and that someone had opened the account by forgery. It was further submitted that he had filed an application before the Court of Chief Judicial Magistrate, Allahabad to lodge an FIR in this regard. Upon receipt of this reply, the ld. AO asked the bank to furnish a complete names and addresses of the parties who A.Y. 2017- A.Y. 2016-17 Chandra Bhawan had made transactions with the said account standing in the name of Shri Chandra Bhawan and furnish further details. In response to this notice, Axis Bank, Chowk Branch, Allahabad provided a list of beneficiaries who had made a transaction with A/c No.914010031097645, standing in the name of Shr. Chandra Bhawan. The ld. AO, thereafter issued notices to different banks asking them to provide complete contact details of account holders who had made the transactions with the said account at Axis Bank, standing in the name of Shri. Chandra Bhawan. After obtaining these details from the banks, the ld. AO issued notices under section 133(6) to the parties, asking them to furnish a copy of account of Chandra Bhawan in their books of accounts. In compliance with the notices under section 133(6), some parties informed that they had made transactions with the said account. i. M/s Laxmi Dal Mill, Plot No. 58, Opposite Ganga Bai Ghat, Old Bagatganj, Nagpur, intimated that transaction had been made with the said account number on account of Sanjay Kumar and Company against sales in 2014-15 and the amounts had been received in 2015-16. It furnished a copy of the account of Shri. Sanjay Kumar and Company, Allahabad in its books of accounts. It also submitted copies of acknowledgments of ITRs filed by it for assessment year 2016-17 to 2018-19. ii. M/s Pawan Industries Khaber Line, Madhav Nagar, Katni, (M.P.)-483501 intimated that it had made a transaction with the said account at Axis Bank, on account of Bholenath Trading Company & against sales. It furnished a copy of the account of Bholenath Trading Company, Allahabad in its books of accounts. It also submitted copies of acknowledgment of ITRs filed by it for A.Y. 2016-17 to 2018-19. iii. Jai Swami Industries, Jagmohan Das Ward, Katni intimated that it had made transactions with the said bank account at Axis Bank, on account of M/s Bholenath Trading Company, Allahabad & against sales. It furnished a copy of the account of ITA No.141/Alld/2023 A.Y. 2017- A.Y. 2016-17 Chandra Bhawan Bholenath Trading Company in its books of accounts. It also filed copies of acknowledgment of ITRs filed by it for A.Ys. 2016-17 to 2018-19. iv. Shri. Ishwar Pulses, Para Colony, Tikuriya Colony Raghuraj Nagar, Satna, 485001 intimated that it had made transactions with the said bank account, on account of Sanjay Kumar and Company, Allahabad & against sales. It furnished a copy of the account of Sanjay Kumar & Company, Allahabad in its books of accounts and also filed acknowledgments of ITRs filed by it for A.Ys. 2016-17 to 2018-19. v. M/s Tulsi Dal Mill, Plot No. 278, Bhandara Road, East Vardhman Nagar, intimated that it had made transaction with the said bank account, on account of Maa Kali Traders, Allahabad & against sales. It furnished a copy of the account of Maa Kali Traders, Allahabad to its books of accounts and submitted acknowledgments of the ITRs filed by it between A.Ys. 2016-17 and 2018-19. Subsequently, the ld. AO asked the ITI of his office to serve notices upon local parties. The ITI reported back that the local parties were not be found at the given addresses. The ITI was also asked to make enquiries with regard to the address that was mentioned in the account opening form of Shri. Chandra Bhawan and report back after appropriate enquiries. He reported back that the said address (141/4 Hewett Road, Allahabad) was not found. The ld. AO, thereafter, issued a summons under section 131 of the I.T. Act to the assessee to Chandra Bhawan, to record his statement. Shri. Chandra Bhawan appeared before the ld. AO on 17.12.2018 and gave his statement under oath. It was submitted that he had nothing whatsoever to do with the said account at Axis Bank, Chowk Branch, Allahabad and the account had been opened behind his back and with false signature. It was further submitted that the details given in the account opening form were not his, that he has never dealt in any kind of trade with the 164 people who had transacted with the said ITA No.141/Alld/2023 A.Y. 2017- A.Y. 2016-17 Chandra Bhawan bank account and that the only activity that he performed, was work relating to LIC from which he earned commission and that had been shown in the Income Tax returns filed by him. He further submitted that he had moved an application before the Court of Chief Judicial Magistrate, Allahabad under section 156(3) and the said Court vide its order dated 24.11.2018, had directed the police to register an FIR in the said matter which he was furnishing along with the statement. After recording the statement, the ld. AO issued a summons to Shri. Arvind Kumar Verma, the Branch Manager of Axis Bank, Chowk Branch and recorded his statement. After recording the statement, the ld. AO observed that the statement indicated that the account was opened by others, in connivance with Axis Bank officials who accepted the fabricated / voter ID card in the name of the assessee. He also observed that the officers and officials involved in the opening of this account has either been removed or had since left the Axis Bank. The ld. AO also went through the order of the CJM, Allahabad directing the Inspector, Kotwali, Allahabad to lodge an FIR in this case and make an enquiry. Thereafter, he summed up his conclusion as under:- The ITR details as per system directorate reveals that the assessee had been maintaining a savings bank A/c No. 10783571309 in SBI, Bharwani, Kaushambi and A/c No. 53350100001953 at Baroda, Uttar Pradesh Gramin Bank, Baish Kanti, Manjhanpur, Kaushambi. In both the said accounts, his address had been mentioned as Chak Gurain, Post Baish Kanti, Bharwari, Kaushambi, which was also the address given by the assessee in his statement. The credit entries in both accounts were of small amounts, which included LIC commission credited therein from time to time. The ld. AO concluded that since the assessee was already having these two bank accounts in nationalized banks near his native place, there was no need for him to go to a far way place like Allahabad, to open another bank account just to deposit high value of cash and then to transfer the same to accounts of unknown persons, as ITA No.141/Alld/2023 A.Y. 2017- A.Y. 2016-17 Chandra Bhawan was apparent from the account statement of the impugned savings bank A/c No. 914010031097645 in his name at Axis Bank, Chowk, Allahabad. The ld. AO agreed with the submission of the assessee that the said state of affairs was against the pre- ponderance of probability and therefore, in principle, he accepted the submission that the impugned account was never opened and operated by the assessee, but that some other persons had manipulated and misused the copies of his PAN and ID proof, in connivance with officials of Axis Bank Limited. He came to this conclusion on account of the following. (i) In the account opening form, the assessee’s mothers name was filled as Kalawati Bhawani but the assessee’s mother’s name was Smt. Savitri Devi. (ii) According to the assessee, the mobile number and the email address filled in the account opening form did not belong him. (iii) The original voter ID card that was produced by the assessee before the ld. AO bore the unique number DSM 2994291 whereas the certified copy of the assessee’s voter ID card, as per Axis Banks record showed another number, i.e. RQB9598581 and a different address i.e. 141/4, Hewett Road, Allahabad Sadar, Allahabad. (iv) The field verification report forming part of impugned account opening form shows the assessee to be the owner of 141/4, Hewett Road, Allahabad Sadar, Allahabad and having a food grain business, but the income tax Inspector had reported that the address given in the account opening form was not found and the assessee had submitted that he had no business other than LIC agency. Thus, the field verification report was prepared by the Axis Bank officials was without actual verification and without the knowledge or consent of the assessee, which was evident from ITA No.141/Alld/2023 A.Y. 2017- A.Y. 2016-17 Chandra Bhawan the fact that the said field verification report did not bear any signature of the assessee. Therefore, the ld. AO recorded his satisfaction that the impugned savings bank A/c No.914010031097645, was not opened by the assessee but by others in connivance of Axis Bank Officials, who accepted fabricated / manipulated voter ID card in the name of the assessee (which differed with the actual in terms of unique number and address) and the assessee had no knowledge or information of the transactions made by operation of the impugned account during the period 7.08.2014 to 22.07.2017. He was also of the opinion that since the impugned cash deposits were subsequently transferred to the accounts of other persons, whom the assessee did not know and attempts to trace these parties on whose behalf persons had confirmed making transactions with the said account, namely Sanjay Kumar & Company, Allahabad, Bholenath Trading Company, Allahabad and Maa Kali Traders, Allahabad had revealed these firms to be untraceable at their addresses, therefore the impugned sum of Rs.18,32,63,238/- that was transacted to this bank account may belong to some other persons for which appropriate action was required to be taken by their respective jurisdictional Assessing Officers by calling for their returns. However, thereafter, the ld. AO observed that these other persons, who were the apparent beneficiaries of the impugned sums i.e. cash deposit of Rs.18,32,63,238/- in the said bank account, were not under scrutiny and any finding with regard to their tax liability would depend upon the further action to be taken by their concerned ld. Assessing Officers. Therefore, on careful consideration of the entire facts and circumstances of the case, the material on record and the failure of the assessee to explain the nature and source of the tax deposited in the said Axis Bank account, he decided to add the amount of Rs.18,32,63,238/- in the hands of the ITA No.141/Alld/2023 A.Y. 2017- A.Y. 2016-17 Chandra Bhawan assessee, both substantively and protectively, as unexplained income of the assessee chargeable to tax in his hands. He also initiated penalty proceedings under section 271(1)(c).

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. 2017- 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.

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. 2017- 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 ITA No.141/Alld/2023 A.Y. 2017- 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.

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. 2017- 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.

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.

In the result, the appeal of the assessee is accordingly allowed.

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.”

The facts of the case are that the ld. AO observed that there was a deposit of cash of Rs.5,96,20,250/- in an account at Axis Bank and receipt of commission of Rs.10,29,217/- from LIC but the assessee had not filed an ITR for the year under consideration. He, therefore, issued a notice under section 148 of the Income Tax Act. No compliance was made by the assessee during these proceedings and A.Y. 2017- A.Y. 2016-17 Chandra Bhawan therefore, the ld. AO treated the entire deposits of Rs.5,96,20,250/- as unexplained money in the hands of the assessee under section 69A and added it back to the income of the assessee under the head, ‘other sources’ and brought the same to tax under section 115BBE of the Act. He also initiated penalty proceedings under section 271AAC in respect of the same. Furthermore, observing from the Form 26AS that the assessee had received commission from LIC of India to the tune of Rs.10,29,217/-, he issued a show cause notice to the assessee on this issue on 14.03.2022 and upon failure to receive any reply, he added back the amount of Rs.10,29,217/- to the income of the assessee for the previous year relevant to the assessment year 2017-18 and initiated penalty proceedings under section 270A of the Income Tax Act, 1961 for under reporting of income. Accordingly, the assessee was assessed at a total income of Rs.6,06,49,467/-.

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

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. 2017- 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.