Farmer’s KYC Documents Allegedly Misused for ₹5.83 Crore Cash Deposits; ITAT Hyderabad Orders Fresh Verification

Vijaykumar Odeti Vs ITO (ITAT Hyderabad)

The appeal was filed by the assessee against the order dated 13.11.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2015-16. The assessee sought permission to submit additional evidence that could not be produced earlier and requested that the ex-parte order of the CIT(A) be set aside and the matter be remanded for fresh adjudication after considering all relevant documents.

The authorised representative submitted that the assessee was an illiterate farmer engaged solely in agricultural activities. The assessment had been reopened on the basis of information regarding cash deposits of about ₹5.83 crore/₹5.87 crore in the assessee’s Axis Bank account and share trading transactions of ₹1.60 crore on the National Stock Exchange. According to the assessee, no such cash deposits or share trading transactions had been carried out by him. It was contended that one Totapalli Kiran had fraudulently misused the assessee’s KYC documents to open and operate the bank account.

The assessee relied upon FIR No.130/2015 lodged by the bank, the police charge-sheet dated 04.03.2017, bank account statements, and witness statements recorded during the criminal proceedings. It was submitted that the investigation revealed that three accused persons had fraudulently swindled cash from BNA machines and deposited it into 28 bank accounts opened in the names of friends and relatives without their knowledge, including the assessee’s account. The assessee argued that, being an agriculturist with meagre income, he had no source to deposit such a large amount. These documents were produced before the Tribunal as additional evidence. It was also submitted that in the cases of other alleged victims of the same fraud, the CIT(A) had already remanded the matters to the Assessing Officer after considering similar evidence, but the present assessee could not produce the documents before the CIT(A) because the appellate order had been passed ex-parte.

The Departmental Representative opposed the admission of the additional evidence. It was submitted that the assessee had failed to participate in the assessment proceedings as well as the appellate proceedings despite sufficient opportunities. Consequently, the Assessing Officer passed an ex-parte assessment under Sections 147 read with 144 of the Income-tax Act, 1961, and the CIT(A) also dismissed the appeal ex-parte.

The Tribunal noted that the Assessing Officer had reopened the assessment by issuing notice under Section 148 dated 04.04.2022 based on information regarding cash deposits of ₹5.83 crore in the assessee’s Axis Bank account and share trading transactions of ₹1.60 crore during the relevant financial year. The Tribunal observed that the assessee neither filed a return under Section 139 nor in response to the notice under Section 148, except for a reply to the last notice dated 13.03.2024. Consequently, the Assessing Officer completed the assessment ex-parte under Sections 147 read with 144 on 19.03.2024, assessing the total income at ₹5.83 crore. The CIT(A) also dismissed the appeal ex-parte due to non-compliance.

The Tribunal further observed that the record contained FIR No.130/2015 lodged by the bank with the Central Crime Station, Hyderabad, and the police charge-sheet dated 04.03.2017 against three accused persons, namely A-1 Thotapally Kiran, A-2 Bantu Ravi and A-3 D. Shiva Kiran. According to the charge-sheet, the accused used 28 bank accounts opened in the names of friends and relatives without their knowledge for depositing cash fraudulently siphoned from BMA machines. The Tribunal noted that the assessee had produced copies of the FIR, charge-sheet, bank account statements and witness statements as additional evidence.

The Tribunal held that since both the assessment order and the CIT(A)’s order had been passed ex-parte, and the additional evidence prima facie indicated that the assessee’s bank account may have been misused along with those of 27 other persons, the material required examination through proper enquiry. The Tribunal clarified that the allegations contained in the charge-sheet were not conclusive findings because the criminal trial was still pending before the Court of the IX Additional Chief Metropolitan Magistrate at Hyderabad, but observed that the charge-sheet constituted tangible material supporting the assessee’s case. The Tribunal also observed that the Assessing Officer had not conducted any enquiry into the allegation that the bank account had been misused by others for depositing siphoned bank funds.

Considering the facts and circumstances and in the interest of justice, the Tribunal set aside the order of the CIT(A) and remanded the matter to the Assessing Officer for proper verification of the additional evidence and for conducting a thorough enquiry into the allegation that the assessee’s bank account had been misused by other persons without the assessee’s knowledge. The Assessing Officer was directed to pass a fresh order in accordance with law after providing the assessee a proper opportunity of being heard.

The appeal of the assessee was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal by the Assessee is directed against the Order dated 13.11.2024 of the Ld. CIT(A)-National Faceless Appeal Centre [in short “NFAC”], Delhi, for the assessment year 2015-2016.

2. The Assessee has raised the following grounds of appeal:

1) The appellant submits that the absence of necessary evidence during the hearing was due to factors beyond the appellant’s control.

2) The appellant had intended to submit the evidence, but due to the unavailability of such evidence, they were unable to do so within the prescribed time limits.

3) Further the appellant was given reply on 11.11.2024 to the ITO (Karimnagar), the earlier Assessing officer deeming that he needs to reply to such authority instead of CIT(Appeals).

4) The appellant respectfully requests the Hon’ble Tribunal to direct the CIT to allow the submission of the relevant evidence, which was unavailable at the time of the hearing, and to consider the case based on the complete facts and documents.

5) The appellant further requests that they be allowed a reasonable opportunity to present additional evidence that was not available at the time of the original hearing.

6) In the interest of justice, the appellant prays that the CIT’s order be set aside and the matter be remanded for fresh hearing, allowing the appellant a fair opportunity to submit the necessary evidence and to present the case in its entirety.

7)  In view of the above, the appellant prays that the Hon’ble Tribunal may kindly:

• • • Set aside the order of the CIT dismissing the appeal due to non-submission of the reply.
    • Allow the appellant to submit the relevant evidence, which was unavailable at the time of the hearing.
    • Remand the case to the CIT for a fresh hearing on the merits, after considering all relevant documents and evidence.
    • Grant such other relief as may be deemed just and proper.”

3. At the outset, the learned Authorised Representative of the Assessee has submitted that the assessee is an illiterate farmer by occupation and solely engaged in the agricultural activities. The Assessing Officer has reopened the assessment on the basis of the information regarding the cash deposit of Rs.5.87 crores in the bank account in the name of the assessee as well as the transactions in the share trading in the National Stock Exchange of Rs.1.60 crores. The learned Authorised Representative of the Assessee has submitted that the assessee has not carried out any transaction of cash deposit or share trading in the stock exchange and the bank account in the name of the assessee was misused by one Totapalli Kiran fraudulently by using the KYC documents of the assessee. He has referred to the FIR No.130/2015 lodged by the bank against the accused persons for the offence related to the alleged criminal breach of trust and misappropriation of bank funds. The learned Authorised Representative of the Assessee has further submitted that after the investigation the police filed a charge-sheet dated 04.03.2017 before the Court of XI Addl. Chief Metropolitan Magistrate at Hyderabad and trial proceedings are going on against the accused persons. The learned Authorised Representative of the Assessee has pointed out that there are three accused who were involved in swindling the cash from BNA machines of the bank and deposited the same to the bank accounts opened in the name of friends and relatives without their knowledge. There were 28 bank accounts opened by them for this purpose. Thus, the learned Authorised Representative of the Assessee has submitted that the assessee having a meagre income from agriculture activity has no source to deposit such a huge amount in the bank account but the bank accounts of the assessee along with 27 other persons were fraudulently opened and operated by the accused persons. This fact is also duly stated in the charge sheet filed by the police. He has filed various evidences including the bank account statement, statement of witnesses recorded during the trial as well as copy of the charge sheet filed in the Court as an additional evidence along with an application. Hence, he submitted that by considering these evidences the learned CIT(A) has already remanded the matters in the case of other victims of this fraud to the record of the Assessing Officer however, the assessee could not obtain these documents and file before the learned CIT(A) as the learned CIT(A) has passed an ex-parte order. Therefore, the learned Authorised Representative of the Assessee has submitted that the additional evidence filed by the assessee may be admitted and the case may be remanded to the record of the Assessing Officer for verification and examination and then adjudicate the matter as per law.

4. On the other hand, the learned DR has submitted that the assessee has not appeared and participated in the proceedings before the Assessing Officer and consequently, the Assessing Officer has passed an ex-parte Order u/sec.147 r.w.s.144 of the Act. Thereafter, though the assessee has filed an appeal before the learned CIT(A) however, in the absence of appearance/participation in the proceedings before the learned CIT(A), the learned CIT(A) has passed the impugned ex-parte order. Thus, the learned DR has submitted that despite sufficient opportunities granted by the Assessing Officer as well as the learned CIT(A), the assessee did not comply with any of the notices issued by the authorities below. Accordingly, he has objected to the admission of the additional evidence filed first time at this stage.

5. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has reopened the assessment of the assessee by issuing notice u/sec.148 of the Income Tax Act [in short “the Act”], 1961 dated 04.04.2022 on the basis of the information of cash deposit of Rs.5.83 crores in the bank account of the assessee maintained with Axis Bank as well as transaction of share trading in the National Stock Exchange at Rs.1.60 crores during the financial year relevant to the assessment year under consideration. In response to the notice issued by the Assessing Officer there was no compliance on behalf of the assessee except reply was filed to the last notice issued on 13.03.2024. The assessee did not file any return of income either u/sec.139 or in response to notice u/sec.148 of the Act and consequently, the Assessing Officer has passed ex-parte order u/sec.147 r.w.s.144 of the Act on 19.03.2024 whereby the total income of the assessee was assessed at Rs.5.83 crores. The assessee challenged the assessment order before the learned CIT(A) however, the learned CIT(A) has passed the impugned order ex-parte and dismissed the appeal of the assessee when there was no response on behalf of the assessee to the notices issued by the learned CIT(A).

6. At the outset, we note that in respect of the transaction of deposit of cash in the bank account of the assessee along with 27 other persons there was FIR 130/2015 lodged by the bank with police station WCO, Hyderabad P.S. Central Crime Station. The police have carried out an investigation and filed charge-sheet dated 04.03.2017 against three accused viz., A-1 Thotapally Kiran, A-2 Bantu Ravi and A-3 D. Shiva Kiran. Thus, the police have found that the accused have used 28 bank accounts for their fraudulent activities of swindling cash from BMA machines was being deposited through BMA to the credit of accounts opened in the name of friends and relatives without their knowledge. The assessee has now filed copies of bank account statements, FIR, charge sheet and statement of the witnesses recorded in the Court of IX Addl. Chief Metropolitan Magistrate at Hyderabad along with a petition for admission of additional evidence. Since the assessment order as well as the impugned order of the learned CIT(A) were passed ex-parte and the evidences filed by the assessee prima facie shows that the bank account of the assessee along with 27 other persons were misused for fraudulent activities by the accused persons therefore, the same are required to be examined by conducting an inquiry. Though, the allegations in the charge-sheets are not conclusive findings of facts as the trial of the cases going on in the Court of IX Addl. Chief Metropolitan Magistrate at Hyderabad however, the same is a tangible material to support the case of the assessee. Further, the Assessing Officer has also not conducted any enquiry from this angle that the bank account of the assessee has been misused by the accused persons by depositing the syphoned off fund from the bank. Therefore, in the facts and circumstances of the case and in the interest of justice, we set aside the impugned order of the learned CIT(A) and remand the matter to the record of the Assessing Officer for proper verification of the additional evidence filed by the assessee as well as for conducting a thorough enquiry regarding the bank account of the assessee being misused by the other person [accused person] without the knowledge of the assessee and then pass fresh order as per law. Needless to say, the assessee be given proper opportunity of being heard before passing the fresh order.

7. In the result, appeal of the Assessee is allowed for statistical purposes.

Order pronounced in the open Court on 03.07.2026.