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Facts
The assessee, a civil contractor, faced an addition of Rs.6.12 crore to his income after the AO found a discrepancy between his declared turnover and contractual receipts in Form 26AS from the Executive Engineer, Irrigation Division, Etah. The assessee denied receiving the amount and claimed the associated bank account was fraudulently opened in his name by other individuals. The AO, however, treated the amount as concealed income and added it to the assessee's total income on a protective basis, which was upheld by the NFAC.
Held
The Tribunal noted that criminal proceedings (FIR and Charge Sheet) confirmed that two individuals had fraudulently opened the bank account in the assessee's name and had accepted their crime. Consequently, the Tribunal ruled that treating the amount deposited in this fraudulently opened account as the assessee's concealed income was not justified, as the assessee was not the true owner of the account. Therefore, the Tribunal set aside the NFAC order and directed the AO to delete the addition.
Key Issues
Whether an amount credited to a bank account fraudulently opened in the assessee's name by third parties, and for which criminal proceedings have been initiated and guilt accepted, can be added to the assessee's income as concealed income.
Sections Cited
133(6), 131(1)(d), 143(3), 274, 271(1)(c), Rule 37BA, Chapter VI, 419, 420, 467, 468, 471, 120-B
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Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA & SHRI NIKHIL CHOUDHARY
This appeal has been preferred by the Assessee against the order dated 10.01.2024, passed by the National Faceless appeal Centre, Delhi (NFAC) for Assessment Year 2016-17.
2.0 The brief facts of the case are that during the year under consideration, the assessee was engaged in Civil Construction work with Government Departments and local bodies. The assessee filed his return of income for the year under consideration on 10.10.2016 declaring a total income of Rs.26,51,560/-. The assessee had shown a turnover of Rs.6,32,26,013/- and net profit of Rs.27,51,560/-. The case of the assessee was selected for limited scrutiny under CASS. The Assessing Officer (AO) issued statutory notices along with questionnaire calling for details and information on the reasons for selection of scrutiny. In response, the assessee furnished the requisite details through e-proceedings. From the perusal of the details furnished by the assessee, the AO noticed that the total contractual receipts as per Form 26AS were Rs.12,36,27,197/- and that in Form 26AS, Rs.6,12,04.962/- was reflected as receipts from the Executive Engineer, Irrigation Division, Etah. The assessee was required to explain the discrepancy. The assessee submitted before the AO that no such payment was received from the Executive Engineer, Irrigation Division, Etah.
2.1 To verify the genuineness of assessee's claim, the AO issued letters under section 133(6) of the Income Tax Act, 1961 (hereinafter called “the Act’), dated 09.10.2018 & 02.11.2018 to the Executive Engineer, Irrigation Division, Railway Building, Mall Godam Road, Near Railway Station, Etah-207001, but he did not respond to the notices issued by the AO. Thereafter, a Commission under section 131(1)(d) of the Act, dated 26.11.2018 was issued to the Deputy/Asst. Commissioner of Income Tax, Aaykar Bhawan, Railway Road, Etah to make necessary enquiries and provide the information after obtaining the same from the Executive Engineer, Irrigation Division, Etah. Subsequently, the Executive Engineer, Irrigation Division, Etah vide letter dated 04.12.2018 furnished Form 16A along with details of income tax deducted from Shri Ashutosh Kumar Verma, Contractor (assessee under appeal) for the financial year 2015-16, confirming the payment of Rs.6,12,04,962/-. Thereafter, the assessee submitted an Affidavit denying receipt of such payment from the Executive Engineer, Irrigation Division, Etah and submitted that he had already written a letter to the Executive Engineer, Irrigation Division, Etah on 22.08.2016 in this regard and had also registered a complaint on Jan Sunvai Samvanvit Shikayat Nivaran Pranali, Uttar Pradesh on 10.05.2017. Thereafter, the AO again issued a Commission to the Deputy/Asst. Commissioner of Income Tax, Aaykar Bhawan, Railway Road, Etah on 07.12.2018 to obtain cheque details and account details (alongwith KYC from the concerned bank) in which payments have been made by the Executive Engineer, Irrigation Division, Etah. Accordingly, summon was issued to the Executive Engineer, Irrigation Division, Etah on 19.12.2018 by the Dy. Commissioner of Income Tax, Circle-4(3)(1), Etah calling for such details. The details called for were furnished by the Executive Engineer, Irrigation Division, Etah to the Dy. Commissioner of Income Tax, Circle-4(3) (1), Etah, vide letter 22.12.2018 from which it was noticed by the AO that following cheques of State Bank of India, Main Branch, Etah were issued to the assessee:
S.No. Cheque No. & date Amount (Rs.) 1 183973 dated 21.11.2015 85,36,794/- 2 184000 dated 01.02.2016 1,49,94,000/- 3 184747 dated 09.03.2016 3,00,22,448/- 4 184779 dated 28.03.2016 42,67,322/- 2.2 Accordingly, information under section 133(6) of the Act was called for from Bank of India, Jankipuram Vistar, Lucknow, which submitted the bank account statement relating to account No.684220110000286 of the assessee thereby confirming the deposits as per details given below:
S. Cheque No. & date Amount (Rs.) Credited in Bank account No. on 1 183973 dated 21.11.2015 85,36,794/- 22.12.2015 2 184000 dated 01.02.2016 1,49,94,000/- 06.02.2016 3 184747 dated 09.03.2016 3,00,22,448/- 04.04.2016 4 184779 dated 28.03.2016 42,67,322/- 22.04.2016 2.3 Thereafter, the AO issued show cause notice dated 28.12.2018 requiring the assessee to show cause as to why the amount of Rs.6,12,04,962/- credited in Bank Account No.
684220110000286 should not be considered as concealed income of the assessee and added to his total income for the year under consideration. The submission of the assessee through Affidavit was that Bank Account No. 684220110000286 maintained with Bank of India, Jankipuram Vistar, Lucknow did not belong to him. Not being satisfied with the explanations furnished by the assessee, the AO treated the amount of Rs.6,12,04,962/- as concealed income of the assessee and added the same to his total income on protective basis. The AO completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.6,38,56,522/-.
2.4 The AO also initiated penalty proceedings under section 274 read with section 271(1)(c) of the Act, separately.
2.5 Aggrieved, the assessee preferred an appeal before the Ld. First Appellate Authority and furnished additional evidences before him. The Ld. First Appellate Authority sought for remand report from the AO on the additional evidences furnished by the assessee. However, since no remand report was received from the Office of the AO within the prescribed time, the Ld. First Appellate Authority admitted the additional evidences and proceeded to dispose of the appeal on merits. The Ld. First Appellate Authority directed the AO to allow credit of taxes deducted at source in terms of Rule 37BA of the Income Tax Rules, 1962and also allow deductions under Chapter VI, but dismissed the appeal of the assessee on merits.
2.6 Now, the assessee has approached this Tribunal challenging the impugned order of the NFAC by raising the following grounds of appeal:
1. BECAUSE the Id. "CIT(A)" has erred in law and on facts in confirming the addition of Rs.6,12,04,962/- made by the Assessing Officer in the hands of the assesse on protective basis even though no addition on substantive basis was made in the hands of any other person and owing to such an illegality the addition on protective basis in the hands of the assessee is not sustainable."
2. BECAUSE the Id. "CIT(A)" has erred in law and on facts in confirming the addition of Rs.6,12,04,962/-made by the Assessing Officer on the alleged ground that the said amount had been received by the "appellant" from the Executive Engineer, Irrigation Division, Etah but not included in the total income in the ITR filed by the "appellant".
BECAUSE as per the material and information placed on record of the authorities below, the "appellant" has not received the alleged amount of Rs.6,12,04,962/- from the Executive Engineer, Irrigation Division, Etah and as such the authorities below have grossly erred in making/confirming the addition of the said amount to the total income of the "appellant".
BECAUSE the bank account no. 684220110000286 in Bank of India, Jankipuram Extension Branch, Lucknow alleged to be owned by the "appellant" is factually not owned/held by the "appellant" and as per the information placed before the lower authorities the said account was fraudulently opened by someone in the name of the assessee in collusion with the bank authorities and the "appellant" is neither beneficial owner of the said bank account nor has benefitted from the credit entry of Rs.6,12,04,962/- appearing in the said bank account and consequently, the addition of the said amount in the hands of the " appellant" is not sustainable either on facts or in law.
5. BECAUSE, without prejudice to the grounds hereinfore, the authorities below have grossly erred in making/confirming the addition of Rs.6,12,04,962/ in a mechanical manner, without due application of mind, and have further erred in treating the said amount as concealed income of the assessee without even allowing the benefit of deduction under Chapter VIA and the credit for tax deducted at source on the alleged amount of receipt.
6. BECAUSE the authorities below have passed the respective orders without considering the facts of the case and without appreciating the submission made and evidences placed on record and consequently the addition of Rs.6,12,04,962/- is not sustainable either on facts or in law.
7. BECAUSE the assessment order passed by the Assessing Officer suffers from the vice of malafide and the said order has been passed in complete dis-regard of the facts placed on record and consequently the ld. "CIT(A)" ought to have deleted the illegal addition of Rs.6,12,04,962/- made by the Assessing Officer.
BECAUSE the orders passed by the authorities below are based on presumption and surmises and have, therefore, caused gross injustice to the assessee as the assessee has been taxed on the amount not actually received/receivable by him.
BECAUSE the order appealed against is contrary to the facts/merits of the case, against the provisions of law and in complete violation of principles of natural justice.
BECAUSE the order appealed against is contrary to facts, law and principles of natural justice.
BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other.
The "appellant" craves leave, to add, delete or modify any of the grounds before or at the time of arguing the appeal.
3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the assessee was carrying on the business as a Civil Contractor for Government Departments and that the assessee was maintaining the accounts on mercantile basis. The Ld. A.R. further submitted that limited scrutiny assessment was completed under section 143(3) of the Act on 31.12.2018, assessing the total income of the assessee at Rs.6,38,56,522/- as against the returned income of Rs.26,51,560/-, thereby raising a demand of Rs.2,81,45,118/-. The Ld. A.R. submitted that during the course of assessment proceedings, the AO had noted that as per Form 26AS, the assessee had received contractual receipts of Rs.12,36,27,197/- whereas the assessee had shown contractual receipts of Rs.6,32,26,013/-only in his books. The Ld. A.R. also submitted that a show cause notice dated 28.12.2018 was issued by the AO requiring the assessee to show cause as to why the amount of Rs.6,12,04,962/- received from the Executive Engineer, Irrigation Division, Etah and credited in account number 684220110000286 should not be considered the concealed income and added to his income for the year under consideration. The Ld. A.R. submitted that the assessee, during the course of assessment proceedings, had filed/uploaded the details of bank accounts with yearly statements and duly audited Financial Statements and that the assessee had categorically stated through an Affidavit dated 14.12.2018 that he had never applied for nor had been allotted any work to the Executive Engineer, Irrigation Division, Etah in the financial year under consideration and, therefore, there was no question of receiving disputed amount of Rs.6,12,04,962/-. The Ld. A.R. submitted that furthermore, the assessee was surprised and shocked to learn that certain cheques of State Bank of India, Main Branch, Etah issued by the Executive Engineer, Irrigation Division, Etah had been encashed in account number 684220110000286 with Bank of India, Jankipuram Extention Branch, Lucknow which was alleged to be in his name and that the assessee had immediately inquired into the matter with the help of the local Lakhimpur branch of Bank of India and was able to obtain the bank statement of Bank account No. 684220110000286 maintained with Bank of India, Jankipuram Extension Branch, Lucknow and the screenshot of the signature card. The Ld. A.R. submitted that on a perusal of the material obtained, it was found that the beneficiaries of the withdrawals from the aforesaid bank account were complete strangers and that he never had any dealings with them either relating to business or personal. The Ld. A.R. further submitted that the address mentioned in the bank statement never belonged to the assessee and that even the photo on the signature card was not of the assessee and also that there was difference in the signatures and, therefore, the assessee through a second Affidavit dated 30.12.2018 had explicitly denied having ever opened or operated the aforementioned account with Bank of India, Jankipuram Extension Branch, Lucknow. It was submitted that the AO deliberately ignored the reply and the evidences filed/uploaded in response to the show cause notice and had failed to appreciate and consider the same while passing the order under section 143(3) of the Act. It was submitted that the AO had made the addition only to protect the interest of revenue.
3.1 The Ld. A.R. further submitted that, thereafter, the assessee lodged a First Information Report (FIR) No. 4 dated 06.01.2 019 under sections 419, 420, 467, 468, 471 and 120-B of the Indian Penal Code in the Jankipuram Police Station, Lucknow against the beneficiaries for the fraud committed by impersonating him. It was submitted that in this view of the matter, the addition made by the AO was without appreciating the facts and circumstances of the case and totally against the principles of natural justice, unjust and uncalled for.
3.2 The Ld. A.R. also drew our attention to certified copy of FIR No.004 dated 06.01.2019 as well as the photocopy of certified copy of Charge Sheet dated 16.10.2019 filed before the competent Court by the Police. The Ld. A.R. submitted that the copy of this Charge Sheet has been filed by the Police in the Court of Hon'ble ACJM-5, Lucknow in case No.81590/19 and Crime No.4/19 in Government vs. Sarvesh Kumar Verma under sections 419, 420, 467, 468, 478 and 120-B of the Indian Penal Code, 1860 (IPC) and it was demonstrated that as per this Charge Sheet, cases have been filed against one Shri Vishal Kumar Kanojia s/o Shri Omkar Nath Kanojia r/o 60, Beri Kalhanpur, Kalyanpur, Kanpur City, Uttar Pradesh and another Shri Sarvesh Kumar Verma r/o 645B/306A, Vashishtpuram Jankipur, Jankipuram Extn., Jankipuram, Lucknow on the complaint of Shri Ashutosh Kumar Verma (assessee), Shri Desh Raj Meena, Smt Pragya Srivastava, Shri Bajraj Singh Yadav, Shri Shailendra Kumar, Police Inspector, Shri Ram Kumar Yadav, Police Superintendent, Shri Harendra Kumar and Police Superintendent (Trans Gomti), Shri Amit Kumar. The Ld. A.R. also submitted that as per the brief noting on this Charge Sheet, it has been mentioned that the above charge sheeted two persons, namely Shri Sarvesh Kumar Verma and Shri Vishal Kumar Kanojia have accepted their crime of having fraudulently opening a bank account in the name of the assessee and, therefore, the competent Court had been requested to initiate proceedings under various sections of the IPC as mentioned in the Charge Sheet itself.
3.3 The Ld. A.R. submitted that, thus, in view of the Charge Sheet filed by the Police Department, wherein formal request has already been made to the competent Court to initiate penal proceedings against the two accused, namely Shri Sarvesh Kumar Verma and Shri Vishal Kumar Kanojia, it was crystal clear and the impugned bank account did not belong to the assessee and that the impugned money was deposited in the bank account, which had been fraudulently opened in assessee’s name and, therefore, no taxability could arise in such a situation. It was prayed that the impugned highly excessive demand created against the assessee was without any basis and deserved to be deleted.
4.0 Per contra, the Ld. CIT(DR) placed reliance on the orders of the authorities below and it was further submitted that before deciding the issue in dispute, the outcome of the criminal proceedings against the two accused should be awaited.
5.0 We have heard the rival submissions and have also perused the material on record. It is seen that the money deposited in Bank account No. 684220110000286 maintained with Bank of India, Jankipuram Extension Branch, Lucknow in the name of Shri Ashutosh Kumar Verma was treated by the AO as the concealed income of the assessee and added to the assessee’s total income. It was the submission of the Ld. A.R. that the assessee had filed an FIR No.004 dated 06.01.2019 against Shri Sarvesh Kumar Verma and Shri Vishal Kumar Kanojia, who had fraudulently opened the Bank account No. 684220110000286 maintained with Bank of India, Jankipuram Extension Branch, Lucknow in the name of Shri Ashutosh Kumar Verma (assessee) and deposited the money therein. The assessee has furnished before us the copy of FIR No.004 dated 06.01.2019 as well as the photocopy of the certified copy of Charge Sheet dated 16.10.2019 filed before the competent Court by the Police. It is also an undisputed fact that Shri Sarvesh Kumar Verma and Shri Vishal Kumar Kanojia have accepted their crime of having fraudulently opened the bank account in the name of the assessee. Therefore, we are of the considered view that in view of the Charge Sheet having been filed, treating the amount deposited in Bank account No. 684220110000286 maintained with Bank of India, Jankipuram Extension Branch, Lucknow as the concealed income of the assessee would not be justified, as the assessee is not the owner of the said Bank account and the real tax-evaders would be Shri Sarvesh Kumar Verma and Shri Vishal Kumar Kanojia, who had fraudulently opened the Bank account No. 684220110000286 maintained with Bank of India, Jankipuram Extension Branch, Lucknow in the name of the assessee. In this view of the matter, we set aside the order of the NFAC and direct the AO to delete the addition, in this regard.
6.0 In the final result, the appeal of the assessee stands allowed.
Order pronounced in the open Court on 30/09/2025.