2024 (6) TMI 1132 - AT - Income Tax

Unexplained cash deposits - bank accounts opened by CA misusing KYC documents - HELD THAT - The brief facts of the case is that the assessee was working as salaried employee. CA Shri Bharat Bomb was filling the return of income of the assessee. Shri Bharat Bomb misused the ID proof of assessee, opened various bank account, various trading concern and obtained loan and brought properties in his name. In the month of Feb-March 2016 big fraud of Rs. 2000 cr was unearthed and several persons including the DGM, Branch Manager and officers of Syndicate Bank and one CA named Mr. Bharat Bomb were arrested by CBI and ED. Large number of bank accounts operated by these persons were attached. Shri Bharat Bomb was the key person and master mind of this fraud Mr. Bharat Bomb operated these account and additions cannot be sustained in the hands of the assessee this decision has been given by ld. CIT(A)/NFAC vide order dated 08.09.2023(APB311). Wherein accepted the fact that addition cannot be made in the hands of the assessee when he has in a statement recorded that he has not done this transaction - AO is not justified in holding that bank account belonged to the appellant. The AO has not done dud diligence to cross verify the 15CA/CB forms, allegedly issued by the appellant. This forms involves three parties who are (i) The remitter, (ii) The Chartered Accountant (iii) The Bank officer. Once the appellant denied these forms all together, the AO must have summonded the Bank officer and CA who have signed these forms which AO failed. Appellant has satisfactorily proved that these bank accounts were not opened by him and only his name and KYC were used by Mr. Bharat Bomb for opening these bank accounts. Thus, financial, transactions appearing / credited in these bank accounts do not represent the appellant, the additions made on account on peak Balance.AO while re- opening the case of Shri Bharat Bomb wherein it has been accepted that the cash deposited in the case of the assessee Shri Pradeep Nimawat is done by Shri Bharat Bomb and not by the assessee. Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the assessment under section 144.
2. Addition of Rs. 1,69,01,000/- as unexplained cash deposits under section 69.
3. Disallowance of Rs. 1,00,000/- claimed under section 80C.

Issue-wise Detailed Analysis:

1. Legitimacy of the Assessment under Section 144:
The assessee argued that the assessment under section 144 was made without providing proper opportunity and considering the full facts and circumstances of the case. The AO initiated proceedings under section 147 due to unexplained cash deposits and issued notices under sections 148 and 142(1). Despite multiple opportunities, the assessee did not respond, leading to an ex-parte assessment under section 144. The CIT(A) upheld the AO's action, noting the assessee's failure to explain the source of cash deposits and non-cooperation during the assessment proceedings.

2. Addition of Rs. 1,69,01,000/- as Unexplained Cash Deposits under Section 69:
The AO added Rs. 1,69,01,000/- as unexplained cash deposits based on information from Syndicate Bank and Oriental Bank of Commerce. The assessee claimed that the deposits were made by Bharat Bomb, who fraudulently used the assessee's KYC documents. Supporting evidence included statements from Bharat Bomb before the ED/CBI, assessment orders of Bharat Bomb, and orders from Debt Recovery Tribunal and ITAT in related cases. The Tribunal noted that similar cases involving Bharat Bomb had resulted in the deletion of such additions. The Tribunal found that the AO had already acknowledged in the reasons for reopening Bharat Bomb's case that the deposits were made by Bharat Bomb. Consequently, the Tribunal deleted the addition of Rs. 1,69,01,000/-.

3. Disallowance of Rs. 1,00,000/- Claimed under Section 80C:
The AO disallowed the deduction of Rs. 1,00,000/- claimed under section 80C due to the assessee's failure to provide supporting evidence. The CIT(A) upheld this disallowance. The Tribunal, however, found that the AO did not provide adequate opportunity for the assessee to substantiate the claim. Given the overall context of fraudulent activities by Bharat Bomb and the lack of proper investigation by the AO, the Tribunal directed the deletion of the disallowance.

Conclusion:
The Tribunal allowed the appeals, quashing the assessment under section 144 and deleting the additions of Rs. 1,69,01,000/- and Rs. 1,00,000/-. The Tribunal emphasized the need for proper verification and cross-examination, especially in cases involving allegations of fraud and misuse of KYC documents. The Tribunal's decision was consistent with prior rulings in similar cases involving Bharat Bomb.