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Facts
The assessee's PAN was allegedly misused to open a bank account and deposit a large sum of Rs. 8,55,18,650/-. The assessee, who was a minor at the time, claimed the account was not his and filed a police complaint. The Assessing Officer treated the deposit as unexplained income and initiated penalty proceedings.
Held
The Tribunal held that there was a significant lack of inquiry by the tax authorities at all stages of the proceedings. The Assessing Officer and CIT(A) did not conduct sufficient investigation to ascertain if the account was indeed opened and operated by the assessee.
Key Issues
Whether the tax authorities conducted adequate inquiry to establish that the bank account and the substantial deposits belonged to the assessee, especially considering the claim of PAN misuse and minority status.
Sections Cited
147, 148, 69A, 271(1)(c), 271F, 132, 142(1), 115BBE
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
These are appeals filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 13.01.2025 & 22.01.2025 passed for A.Y. 2016-17. relates to appeal filed by the assessee against quantum additions sustained by Ld. CIT(A), while 556/Ahd/2025 are appeals filed by the assessee against levy of penalty under Section 271(1)(c) of the Act towards concealment of income and under Section 271F of the Act on account of non-filing of return of income by the assessee, for the impugned assessment year. Since the facts and issues for consideration are common for to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 2– all the appeals before us, all the appeals filed by the assessee are being disposed of by way of a common order.
First we take up the assesseee’s appeal against the quantum addition confirmed by Ld. CIT(A) (ITA No. 554/Ahd/2025 for A.Y. 2016-17)
The assessee has taken the following Grounds of Appeal:
(A.Y. 2016-17) “1. The Ld. AO has erred in law in issuing notice U/s. 148 of the Act.
2. The Ld. CIT(A) and the Ld. AO erred in law and in fact in making addition of Rs. 8,55,18,650/- U/s. 69A of the Act.
3. The Ld. CIT(A) and the Ld. AO have erred in law and in fact in confirming the levy of penalty U/s. 271F of the Act.
4. The Ld. CIT(A) and the Ld. AO have erred in law and in fact in confirming the levy of penalty U/s. 271(1)(c) of the Act.
The appellant reserves the right to add, alter, amend, modify, delete all or any of the grounds of appeal
either partially or completely.”
3. The brief facts of the case are that based on information available with the Assessing Officer, a search and seizure action under Section 132 of the Act was carried out in the case of M/s. Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. During the course of search, it was found that huge money was deposited in the bank account maintained with the said society and that the aforesaid society had allowed huge cash deposits in the bank accounts of it’s account holders, whose creditworthiness were doubtful. The Assessing Officer had received information that assessee had deposited a large sum of Rs. 8,55,18,650/- with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd. during the impugned assessment year, to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 3– however, the assessee had not filed his return of income for the said assessment year. Accordingly, the case of the assessee was reopened under Section 147 of the Act, after taking necessary approvals. In response to notice issued by the Assessing Officer, the assessee vide response dated 29.11.2021 submitted that the assessee had not opened any bank account with M/s. Shri Renuka Mata Multi State Urban Cooperative Society Ltd. and that the assessee had opened his first bank with Central Bank of India on 27.11.2017. The assessee submitted that apparently his PAN Card was misused by some other person and that the assessee was a minor during the impugned year and having a weak financial position and did not have the capacity to deposit such a huge sum with M/s. Renuka Mata Multi State Urban Cooperative Credit Society. However, the Assessing Officer was of the view that the assessee has not been able to explain the source of deposits amounting to Rs. 8,55,18,650/- and accordingly, the aforesaid sum was added as unexplained income of the assessee, under Section 69A of the Act. Further, the Assessing Officer also initiated proceedings under Section 271(1)(c) of the Act for concealment of income.
While passing the assessment order the Assessing Officer made the following observations:
“3.10. As the assessee has not furnished any reply even after sending multiple notices and further, no compliance was made in this office, the source of cash deposit amounting to Rs. 8,55,18,650/- remains unknown. Therefore, this office has no other oration than to add the total cash deposits during the financial year 2015-16 to the total income of the assessee for the year under consideration u/s. 69A of the Income- tax Act, 1961 as unexplained money. The section 69A of the Income-tax Act, 1961 state as follows: ….. to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 4– 3.12. The assessee has not declared his true income and has not paid taxes due thereon. The assessee has not responded to notices u/s. 142(1) and show cause notice issued during E-assessment proceedings. The assessee failed to give any explanation about the nature and source of total cash deposits; hence, the cash credits/investments amounting to Rs 8,55,18,650/-appearing in account of the assessee in M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd in financial year 2015-16 relevant to assessment year 2016-17 remained unexplained. 3.13 Therefore, in absence of any submission and documentary evidences, the total amount of Rs. 8,55,18,650/- is deemed as unexplained money u/s. 69A of the Income Tax Act, 1961 and added to the Total Income of the assessee. The tax on above mentioned income is chargeable u/s 115BBE of the Income Tax Act, 1961.”
5. In appeal, the assessee reiterated that his PAN was misused in opening the bank account in M/s. Renuka Mata Bank and that the assessee had also filed a police complaint in this regard. Copy of the police complaint was also submitted before Ld. CIT(A) for his records. However, Ld. CIT(A) dismissed the appeal of the assessee with the following observations:
“6.3 I have carefully considered the submissions of the appellant. It has been claimed by him that his PAN was misused in opening the account with Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. and that he has also filed a police complaint in this regard. However, it is noted that there is nothing on record to establish that any enquiry conducted by the Police Department resulted in corroboration of the stand of the appellant that its PAN was misused in opening the account and the impugned amount did not actually belonged to him. Further, it is on record that enquires carried out by Investigation Wing revealed that various accounts were opened in the M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. and huge cash deposits were made at home branch of the customers. On physical verification of some of these account holders, it has been noticed that accounts were operated under the knowledge of the account holders on payment of commission. 6.4 Given the above modus operandi, as established by the enquiry of the Investigation wing, the onus was on the appellant either to come out with the actual beneficiary of the money deposited in the account maintained in his name or else own the money. The appellant has failed to disclose the real beneficiaries of the impugned account. Also, the Police enquiry has also not corroborated his story of his PAN being misused. As such, it is not possible, on the basis of material on record, to interfere with the findings of the AO on the issue of addition of Rs. 8,55,18,650/- u/s. 69A on account of cash deposit.” to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 5– 6. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A). Before us, the Counsel for the assessee submitted that the assessee was of a very immature age at the time of alleged deposits in the bank account with M/s. Renuka Mata Bank and the assessee also did not have any other bank account and also did not have the financial capacity to deposit such a huge amount of Rs. 8,55,18,650/- in his bank account. Further, the Counsel for the assessee also drew our attention to the fact that the assessee had furnished a complaint to the Police Department stating that the said deposits were not made by the assessee and that itself shows that the assesseee had not opened this bank account.
In response, Ld. D.R. placed reliance on the observations made by the Assessing Officer and Ld. CIT(A), in their respective orders.
On going through the facts of the instant case, we observe that apparently, there was an evident lack of enquiry made by the Tax Authorities, while concluding the assessment. When the notice of hearing was issued by the Assessing Officer, the assessee had promptly submitted that he was a minor (though during the course of hearing before us the Counsel for the assessee submitted that the assessee had completed 18 years of age) and that the assesseee did not have any means whatsoever to deposit such a huge amount of money in M/s. Renuka Mata Multi State Urban Cooperative Credit Society Ltd. The assessee had specifically submitted that the aforesaid bank account had not been the opened by the assessee and had also furnished a copy of the police complaint to support his argument that this account had been opened by misusing his PAN details etc. However, despite these specific averment by the assessee, the Department did not call for the to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 6– necessary documents from the concerned bank branch like the account opening form, bank statement for this account and necessary documents to as to ascertain that the said bank account was in fact opened and operated by the assessee himself. In our view, there was an evident lack of inquiry by the concerned tax authorities and the entire onus was shifted on the assessee, who at that relevant time had just attained majority and apparently also did not have sufficient means to deposit such a huge amount in the bank account maintained with M/s. Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. From a reading of the contents of the order passed by Ld. CIT(A), the only reason why this amount was confirmed in the hands of the assessee was that “there is nothing on record to establish that any inquiry was conducted by the Police Department”. We are of the considered view, that lack of inquiry by the Police Department cannot be the basis for confirming such a huge amount in the hands of the assessee, especially keeping into light the fact that no further information / details were called from the concerned bank like account opening form, no inquiry being made as to who had opened the bank account and who was effectively operating such bank account / making deposits in such bank account by calling for information from the concerned Bank Manager, the Assessing Officer did not call for the necessary bank statement to ascertain the nature of deposits / frequencies etc. and thereafter confronting the same to the assessee and further, the Assessing Officer also did not take into cognizance the fact that the assessee had specifically lodged a police complaint stating that the assessee had not opened the aforesaid bank account complaint. Further, the assessee had also specifically submitted that he was not in a financial position to deposit such huge amount in the bank account considering his age and lack of income to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 7– earning capacity. In our considered view, there was an evident lack of inquiry while framing the assessment and also while confirming such a substantial amount in the hands of the assessee, when the assessee had clearly submitted at all stages of proceedings that he had neither opened the bank account, nor had deposited such a huge amount in the aforesaid bank account and further, also did not have the financial capacity to make the aforesaid deposits in the bank account.
Accordingly, in the interest of justice, and given the evident lack of inquiry in the matter at all stages of proceedings by the concerned Tax Authorities, the matter is hereby restored to the file of Assessing Officer for de-novo consideration. The Assessing Officer is directed to call for necessary details from the concerned Branch Manager and carried out a detailed inquiry to ascertain whether it was the assessee who had opened this bank account and also responsible for making deposits in such bank account.
In the result, the appeal of the assessee is allowed for statistical purposes.
The assessee has taken the following grounds of appeal:
(A.Y. 2016-17) “1. The Ld. Faceless Assessing Officer, National Faceless Assessment Center (the Ld. FAO) has erred in law and in fact in initiating penalty proceedings U/s. 271(1)(c) of the Act. to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 8– 2. The Ld. CIT(A) has erred in law and in fact in confirming the levy of penalty by the Ld. AO.
The Appellant reserves the right to add, alter, amend, modify, delete all or any of the grounds of appeal either partially or completely.”
12. Since the appeal related to quantum additions have been restored to the file of Assessing Officer for de-novo consideration, the penalty is also accordingly, set-aside to the file of Assessing Officer.
In the result, the appeal of the assessee is allowed for statistical purposes.
The assessee has raised the following grounds of appeal:
“1. The Ld. Faceless Assessing Officer, National Faceless Assessment Center (the Ld. FAO) has erred in law and in fact in initiating penalty proceedings U/s. 271F of the Act. 2. The Ld. CIT(A) has erred in law and in fact in confirming the levy of penalty by the Ld. AO. 3. The Appellant reserves the right to add, alter, amend, modify, delete all or any of the grounds of appeal either practically or completely.”
15. This is an appeal filed by the assessee against order passed under Section 271F of the Act on account of non-filing of return of income for the impugned assessment year, despite the fact that the assessee had made huge cash deposits to the sum of Rs. 8,55,18,650/- in the bank account held with M/s. Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. The assessee’s contention is that neither was this bank account opened by the assessee and nor were the aforesaid deposit amounting to Rs. 8.55 crores to 556/Ahd/2025 Upenkumar Amrutji Vihol vs. ITO Asst. Year –2016-17 - 9– made by the assessee in such bank account. Further, the assessee, at the relevant time was only 18 years of age and did not have the financial capacity to make such huge deposits in such bank accounts.
16. Since we have restored the matter relating to quantum proceedings to the file of Assessing Officer, for de-novo consideration, with a direction to pass appropriate order after making necessary inquiry into the nature of cash deposits, accordingly, the present penalty is also restored to the file of Assessing Officer, for de-novo consideration.
In the result, the appeal of the assessee is allowed for statistical purposes.
In the combined result, all the appeals filed by the assessee are allowed for statistical purposes. This Order is pronounced in the Open Court on 16/06/2025
Sd/- Sd/- (NARENDRA P. SINHA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 16/06/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,