Delhi ITAT upholds finding that demonetisation cash deposits in forged bank account were not taxable in assessee’s hands

5-Second Takeaway

The Delhi Bench of the Income Tax Appellate Tribunal upheld the finding that the bank account into which Rs. 5,25,47,500 was deposited did not belong to the assessee, so the deposits could not be taxed in the assessee’s hands. It also rejected the Revenue’s challenge to the view that the amount could not be taxed twice simply because information had been passed to the officers of other persons.

The dispute arose from demonetisation-period cash deposits of Rs. 5,25,47,500 in a Canara Bank account at Kaithal. The assessee said the account had been opened in the name of M/s Jai Maha Lakshmi Products by using his papers without authority, while the Revenue contended that the account was opened with the assessee’s KYC documents and in his name, and therefore the deposits should be assessed in his hands.

The Assessing Officer did not accept the assessee’s explanation and added the full amount, taking the view that the assessee had deposited the cash through the Kaithal account. On appeal, the NFAC held that the account did not belong to the assessee and that the unexplained amount could not be taxed in his hands. It also held that the amount could not be taxed in two hands merely because information had been passed to the assessing officers of other persons.

Before the Tribunal, the Revenue argued that the appellate authority had erred in disregarding the KYC material and in making contradictory observations about possible commission income from rotating unaccounted cash. The Tribunal, however, sustained the appellate finding that the deposits were not taxable in the assessee’s hands and upheld the relief granted by the NFAC. The Revenue’s appeal was therefore rejected, and the assessee’s cross-objection did not disturb that result.