K. P. Religious & Charitable Trust Vs ITO (ITAT Delhi)
Delhi ITAT Remands ₹1.17 Crore Addition After Trust Alleges Fake Bank Account Opened Using Forged Documents
The Delhi ITAT restored the matter to the CIT(A) after finding that the tax authorities had failed to conduct a proper enquiry into the assessee trust’s claim that a fraudulent bank account had been opened in its name using forged documents.
The assessee, K.P. Religious & Charitable Trust, challenged an addition of ₹1.17 crore made under section 69 on account of deposits in a Punjab National Bank account allegedly standing in its name. The trust consistently maintained that the account had been fraudulently opened and operated by third parties (Chander Shekhar and Usha Yadav) using forged KYC documents, and that it had even lodged an FIR against the culprits.
The Assessing Officer, however, treated the deposits as unexplained income of the trust, relying primarily on the bank records showing the managing trustee as the authorised signatory. The CIT(A) confirmed the addition, observing that the trust had failed to conclusively establish forgery and had not explained the source of the deposits.
Before the Tribunal, the assessee produced a signature comparison report and argued that neither the Assessing Officer nor the CIT(A) had investigated the alleged fraud, examined the real beneficiaries, or provided an opportunity for cross-examination of the concerned bank officials.
Accepting that these issues required deeper factual verification, the ITAT held that both the Assessing Officer and the CIT(A.), who possess co-terminus powers, ought to have conducted a proper and detailed enquiry into whether the bank account had in fact been opened through forged documents. Since such enquiry was absent, the Tribunal set aside the appellate order and restored the matter to the CIT(A) for fresh adjudication after considering all evidence and granting adequate opportunity to the assessee. The appeal was allowed for statistical purposes.
Cases Discussed
- Mahesh Gautam v. Commissioner of Income-tax (Allahabad HC), [2025] 178 com597(Allahabad)
- CIT v. Kuwer Fibers (P.) Ltd. (Delhi HC), [2017] 77 com345(Delhi)
- M/s Pebble Investment And Finance Ltd. v. ITO (SC), [2017-TIOL 238-SC IT] Supreme Court
- Central India Electric Supply Co. Ltd. v. Income-tax Officer Company Circle-x New Delhi (Delhi HC), [2011] com169 (Delhi)
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the orders of the National Faceless Appeal Centre Delhi [hereinafter referred to as “Ld. NFAC”] vide order dated 07-11-2025 arising out the Assessment Order passed dated 24-12-2018 under section 143(3)/147 of the Income Tax Act, 1961 (in short “the Act” Act, dated 28-06-2023.
2. The assessee has raised the following ground in appeal as under:
1. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in law and on facts in summarily dismissing the appeal without adjudicating all issues and each ground of appeal raised by the appellant and also without proper appreciation of the evidences and submission placed on record., in contravention of the mandatory provisions of section 250 of the Income-tax Act,1961 thereby rendering the impugned order non-speaking and violative of the principals of natural justice.
2. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in law and on facts in sustaining the addition of Rs.117,39,995/- ignoring the material facts contained in the TEP dated 23-09-2013 received by the DDIT(inv.) (tech) New Delhi and the FIR filed by the appellant, which were on record.
2.1 That on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate that the KYC, specimen’s signature photograph and other documents of the appellant trust and it’s trustee namely Smt. Shail Bala were forged and that the actual beneficiaries were Shri Chandra Shakhar Yadav, Smt. Usha Yadav and M/s Royal Park Hospitality (P) Ltd. and therefore the addition was wrongly sustained in the hands of the appellant.
2.2 That on the facts and in the circumstances of the case the Ld. CIT(A) erred in law and on facts in holding that the trust failed to maintained proper books of account and to explain the nature and source of deposits, without correctly appreciating the appellant’s submissions or evidence on record.
3. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in law and on facts in upholding the reopening under section 148 despite the reasons recorded admitting that the bank account was opened on a fake address by Shri Chander Shekhar.
3.1 That the reopening was upheld without independent application of mind and without any valid “reasons to believe” of escapement of income in the hands of the appellant, who was itself a victim of fraud rendering the assumption of jurisdiction invalid in law.
4. That the sanction under section 151 was mechanical and without application of mind as the satisfaction was merely stamped and not recorded through a reasoned note thereby invalidating the reassessment proceedings.
5. That the notice issued by the Ld. ITO, Ward (Exemption) Ghaziabad under section 148 is without jurisdiction as the appellant had not claimed any exemption in the return of income, making the notice bad in law.
6. Because the order of learned A.O. is bad in law and against the facts and circumstances of the case and hence is unsustainable.
7. That issue of notice under section 148 by learned A.O. is illegal and not supported by any valid reasons for income escaping assessment within the meaning of section 147 of the IT Act 1961. The material available on record and reasons recorded do not support any such case for issue of notice. Service of notice is also defective.
8. That the order passed by learned AO under section 143(3) of the IT Act 1961 is devoid of merits on wrong footings and is passed without disposing of objection raised by assessee against issue of notice under section 148 of the Act.
9. That the learned A.O. has erred in law and on facts of the case in treating deposit of Rs. 117,33,995/- in fake bank account in the name of assessee trust as income of the assessee. Assessee has not been issued any show cause notice before making additions which is against the principal of natural justice.
10. That the learned A.O. has not given the opportunity to cross examine the bank officials opening the bank account in the name of trust and real beneficiaries of proceeds of fake bank account namely Shri Chander Shekhar and Smt. Usha Yadav specifically requested by the assessee trust vide its letter dated 30-11-2018 hence the principles of natural justice and law have been defeated in framing the order.
11. That the learned A.O. failed to make enquires about the facts mentioned in TEP and rather avoided to make proper enquires in the case from real beneficiaries of the bank account proceeds even after request of the assessee. The complaint made by the assessee against the culprits has also been ignored by the learned A.O.
12. That the learned A.O. erred in recording wrong findings that account opened with PNB Vijay Nagar belonged to assessee trust without any proper enquiry and even on the basis of reasons for issue of notice. Material relied upon was not provided to assessee despite specific request nor the TEP specifically charged that trustees were involved in opening fake bank account of trust. In any case A.O failed to discharge onus laid upon him.
3. The brief facts of the case are that the assessee filed its return of income for the year under consideration on 29-09-2022 declaring total income of Rs. Nil. Thereafter, based on the information for the A.Y.2011-12 the case was reopened under section 147 of the Act by issuing a notice under section 148 of the Act on 29-03-2018. The Assessing Officer completed the assessment order after considered the submissions filed by the assessee. According to Assessing Officer, the assessee trust deposited the huge amount in the bank account no. 3946000100314315 maintained with Punjab National Bank Vijay Nagar, Ghaziabad. The Assessing Officer also found that the huge transactions were made the assessee, and Mrs. Shail Bhatia was the authorized signatory to operate the bank account and Mr. Chander Shekhar & Divya Gupta could not operate the bank account as Mrs. Shail Bhatia as a managing trustee was authorized to operate the bank account of the Punjab National Bank in the Board Meeting as on 20-11-2009. The assessing Officer make the addition of Rs.1,17,33,995/-under section 69 of the Act as the transaction was unexplained. The penalty proceeding was also initiated by the assessing Officer.
4. Aggrieved the order of the Assessing Officer the assessee preferred the appeal before the Ld. CIT(A) who vide his order dated 07-11-2025 dismissed the appeal of the assessee. The Ld. CIT(A) rejecting the appeal observed as under:-
6.1 I have perused facts of the case, assessment order of the AO, submission of the appellant, remand report of the AO, rejoinder submitted by the appellant and the documents available on record.
6.2 In this case, information was received from the Income Tax Officer, Ward-21 (4), New Delhi, enclosing a report from the Additional Director of Income Tax (Investigation), Unit-Ill, New Delhi, in the case of M/s. Royal Park Hospitality Pvt. Ltd. and M/s. K.P. Religious & Charitable Trust. It was reported that the bank account of the Trust with Punjab National Bank, Vijay Nagar, Ghaziabad (A/c No. 3946000100341315) reflected huge cash and cheque deposits aggregating to Rs.1,17,33,995/- during the financial year 2010-11. The account was stated to have been fraudulently opened and operated by Mr. Chandra Shekhar and Mrs. Usha Yadav, who were not the trustees of the Trust, using forged documents.
Based on this information, the Assessing Officer recorded reasons to believe that income had escaped assessment and accordingly issued notice under section 148 of the Income-tax Act, 1961, on 29.03.2018. In response, the assessee submitted that the original return of income filed on 29.09.2011 may be treated as the return in compliance with notice u/s 148. Notices under sections 143(2) and 142(1) were thereafter issued.
During the course of reassessment proceedings, the assessee contended that the said bank account had been fraudulently opened by outsiders without authorization of the Trust or its managing trustee, late Mrs. Shall Bhatia, who expired on 27.11.2013, and that the Trust maintained a separate account with Bank of Baroda, Ghaziabad. The Assessing Officer, however, after examination of the information received, the bank records, and copies of the resolution and minutes of the Trust dated 20.11.2009, held that Mrs. Shail Bhatia, as the Managing Trustee, was authorized to open and operate the said Punjab National Bank account.
Since substantial credits totalling Rs. 1,17,33,995/- were found in the bank account and no satisfactory explanation was furnished regarding the source of the funds, the Assessing Officer held the same as unexplained income of the assessee Trust within the meaning of section 69 of the Income-tax Act. Accordingly, the total income of the Trust was assessed at Rs. 1,17,33,995/- under section 143(3)/147 of the Act, with penalty proceedings initiated separately under section 271(1)(c).
Aggrieved with this order, the appellant preferred appeal before this forum.
6.3 I have carefully considered the submissions of the appellant, the remand report furnished by the Assessing Officer, the rejoinder filed by the appellant, and the material available on record. The issue for adjudication relates to the addition of Rs.1,17,33,995/- made by the Assessing Officer under section 69 of the Income Tax Act, 1961, treating the deposits in the bank account maintained with Punjab National Bank, Vijay Nagar, Ghaziabad, as unexplained income of the appellant trust.
It is observed that the information forming the basis for reopening of the assessment emanated from the Investigation Wing, New Delhi, which had conducted inquiries in connection with M/s Royal Park Hospitality Pvt. Ltd. and others. The Investigation Wing categorically reported that a bank account was opened in the name of M/s K.P. Religious and Charitable Trust in Punjab National Bank, Vijay Nagar, Ghaziabad, showing total deposits of Rs.1,17,33,995/- during F.Y. 2010-11. The account opening documents, including the Trust’s resolution and authorization letter dated 20.11.2009, clearly mention Mrs. Shail Bhatia, the Managing Trustee, as the authorized signatory of the said account.
The appellant has taken the plea that the account was fraudulently opened by Mr. Chandra Shekhar and Mrs. Usha Yadav without authorization, and that the Trust had no knowledge of or connection with the transactions. However, the contention of the appellant is not supported by any conclusive evidence. The Assessing Officer, during reassessment proceedings, obtained information directly from the bank under section 133(6) and examined the account-opening forms, specimen signatures, and KYC documents, which contained the name and photograph of Mrs. Shail Bhatia as the Managing Trustee of the appellant trust. The appellant has not produced any contemporaneous evidence to prove that such documents were forged or fabricated during the relevant period. Mere allegation of misuse of documents, without any corroborative proof such as a forensic report or police verification report from the relevant time, cannot be accepted at this stage.
It is further noted that the Trust did not maintain proper books of account reflecting this bank account nor could it reconcile or explain the nature and source of the deposits appearing therein. The explanation that the funds belonged to third parties, namely, Mr. Chandra Shekhar and Mrs. Usha Yadav, is merely self-serving and unsupported by any direct evidence. No confirmation or statement from these individuals has been furnished by the appellant to substantiate its claim. On the other hand, the bank records, as rightly observed by the Assessing Officer, show that the account was in the name of the appellant trust and operated under the authority of its Managing Trustee.
As regards the contention that the Assessing Officer failed to provide adequate opportunity of cross-examination or to dispose of the objections raised under section 148, the record reveals that several statutory notices under sections 142(1) and 143(2) were duly issued and complied with by the appellant. The assessment was completed after due consideration of the replies and material available. Therefore, there is no violation of the principles of natural justice. The procedural lapses alleged by the appellant, even if assumed, are not sufficient to vitiate the assessment when the substantive findings are based on documentary evidence and credible information received from the Investigation Wing.
6.3.1 In view of the above discussion, I find that the Assessing Officer has examined the matter in detail and arrived and arrived at a reasoned conclusion. The addition of Rs. 1,17,33,995/- made under section 69 of the Income Tax Act, being unexplained money found credited in the bank account standing in the name of the appellant trust, is therefore confirmed.”
5. The Ld. AR submitted that the Assessing officer has failed to issues notices to beneficiaries of the fake account namely Sh. Chander Shekhar and Smt. Usha Yadav and the Principal Officers of the company M/s Royal Park Hospitality Pvt. Ltd. He further submitted that as information received to the department that the M/s Royal Park Hospitality Pvt. Ltd. fraudulently uses cheques issued by the various individuals for investment in Mutual Fund to make investment in the name of Usha Yadav himself as a second holder. The registration of the company was suspended by AMFI. The Assessing officer has not examined the information obtained from the bank for re-opening fake Bank account in the name of Trust. The first information report was lodged by the assessee trust against the culprits on 07-07-2018, but no action was taken by the Assessing Officer. The Ld. CIT(A) has also not examined this issue and dismissed the appeal of the assessee. During the hearing of this appeal the assessee filed the comparison of the signature which proved that the bank account was not operated by Smt. Shail Bhatia managing trustee. He also submitted that the approval was granted in the mechanical manner. The Ld. AR also submitted that no opportunity was provided for cross examination from the Manager of PNB bank who opened the forged account in the name of Chander Shekhar and Usha Yadav. Reliance is placed on the following judgements:
(i) Central India Electric Supply Co. Ltd. v. Income-tax Officer Company Circle-x New Delhi[2011] com169 (Delhi)
(ii) Mahesh Gautam v. Commissioner of Income-tax[2025] 178 com597(Allahabad)
(iii) M/s Pebble Investment And Finance Ltd. v. ITO [2017-TIOL 238-SC IT] Supreme Court
(iv) CIT v. Kuwer Fibers (P.) Ltd. [2017] 77 com345(Delhi)
6. The Ld. DR relied upon the orders of the lower authorities. He also submitted that approval was granted after perusing the material available on record.
7. We have heard the parties and perused the material available on record. In the present case the assessee alleged that forged account was opened in the name of trust, by Sh. Chander Shekhar and Usha Devi but no enquiry was made by the Assessing Officer. We also observed that first information was lodged by the assessee but no cognizance was taken by the lower authorities. The investigation is going on at this stage. During the hearing the assessee has filed the comparison report (PB. Page no. 133 to 152) of the signature of Smt. Shail Bhatia to prove that the account with Punjab national Bank was not opened by the managing director of the assessee trust. In this case the proper and detailed enquiry is required on the point whether the bank account in the name of Trust was opened by using the forged documents or not. The enquiry may be conducted by the both lower -authorities, the assessing officer and the Ld. CIT(A) who has the co-terminus power to conduct the proper and detailed enquiry. In our considered opinion the said order of the Ld. CIT(A) is not passed by conducting the detailed and proper enquiry, therefore we deem, fit to restore the matter to the Ld. CIT(A) for deciding the same after conducting the proper and detailed enquiry and considering the documents filed by the assessee and submissions made by him. In the result the issue in involved in the present appeal are restored to decide the appeal in accordance with law after conducting the proper and detailed enquiry after giving the opportunity of being heard to the assessee as earliest as possible.
8. In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 05.08.2026.
