Case Law Details
Sanjay Chalia Vs ITO (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, remanded a matter involving addition of Rs.24,65,103 under Section 69A of the Income Tax Act for Assessment Year 2020-21. The assessee challenged the addition, contending that the amount credited in his Punjab National Bank account did not represent his income but Government money fraudulently deposited by a relative, Mr. Virender, who allegedly embezzled Government funds and routed them through accounts of relatives and friends.
The assessee submitted that he was a salaried employee earning income below the taxable limit and had not filed a return of income. It was stated that an FIR had been registered against Mr. Virender regarding embezzlement of Government money and misuse of bank accounts. According to the assessee, Rs.24,65,000 was deposited in his bank account by Mr. Virender and later withdrawn by him. During assessment proceedings reopened under Section 147, the assessee explained that, except for Rs.4,42,808, the deposited amount did not belong to him.
The Tribunal observed that the assessment was reopened based on information arising from the FIR lodged by the Deputy Commissioner, Nuh. However, the assessment order did not indicate whether any independent investigation had been conducted by the Assessing Officer to verify the assessee’s explanation. The Tribunal also noted that the contents of the FIR and the role of the assessee, if any, in facilitating siphoning of Government money through his account were not clear from the record.
ITAT held that if the bank account of the assessee had merely been used by Mr. Virender to siphon Government money, then no addition would be warranted in the hands of the assessee, since the money neither belonged to him nor represented his income. The matter was restored to the Assessing Officer for fresh examination after granting reasonable opportunity to the assessee. The impugned order was set aside and the appeal was allowed for statistical purposes.
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FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 06.12.2025, for Assessment Year 2020-21.
2. The solitary ground raised by the assessee in appeal is as under:-
“On the facts and circumstances of the case the learned C.I.T (Appeal) was not justified in confirming addition of Rs.24,65,103/- i.e. the credit amount in P.N.B A/c of the appellant which has been done by a fraudulent person in a fraudulent activities, was in embezzlement of Government money diverting the money to the accounts of relatives. The person faced Trials and died on 05-12-2025. The credit of Rs.24,65,103/- in P.N.B A/c No. 4593001700025242 is not the income of the appellant.”
3. Shri Rakesh Anthwal, appearing on behalf of the assessee submits that the assessee is a salaried employee earning a meagre salary below the taxable limit, therefore, no return of income was filed by the assessee. During the period relevant to the assessment year under appeal, the bank account of the assessee was misused by Mr. Virender, a relative of the assessee, for fraudulent purposes. In this regard, an FIR was also registered against him. Mr. Virender had embezzled Government money and siphoned off the same using bank accounts of his relatives and friends. The bank account of assessee was also used by Mr. Virender for siphoning Government money. An amount of Rs.24,65,000/- was deposited in the bank account of the assessee, which was subsequently withdrawn by Mr. Virender. The assessment for A.Y. 2020-21 in the case of assessee was reopened u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on the basis of information received consequent to the FIR lodged by the Deputy Commissioner, Nuh, regarding embezzlement of Government funds. During assessment proceedings, the assessee explained that the source of cash deposits in the bank account was the amount deposited by Mr. Virender after embezzling Government money. The assessee further submitted that his salary income is approximately Rs.4,50,000/- per annum. The AO accepted the fact that an FIR was lodged and that information had been received from the Investigation Wing, Faridabad, but failed to appreciate the explanation furnished by the assessee. It was submitted that the amount deposited in the bank account, except for Rs.4,42,808/-, does not belong to the assessee and represents Government money fraudulently deposited in the assessee’s bank account. The ld. Counsel submits that the assessee is a victim of fraud committed by Mr. Virender and, prayed for deleting the addition.
4. Per contra, Shri Manoj Kumar representing the department reiterated findings of the CIT(A) and the AO and prayed for dismissing appeal of the assessee.
5. Both sides heard, orders of the authorities below examined. The solitary issue raised in the appeal is the addition of Rs.24,65,103/- made u/s 69A of the Act. The contention of the assessee is that the aforesaid amount was deposited by Mr. Virender after embezzlement of Government money and the same amount was subsequently withdrawn by him. A perusal of the assessment order reveals that an FIR was lodged by the Deputy Commissioner, Nuh, and the assessment u/s.147 of the Act has been made on the basis of information received pursuant to the said FIR. However, it is not emanating from the records as to whether any independent investigation was carried out by the AO to verify the explanation furnished by the assessee regarding deposit of Government money by Mr. Virender in the bank account of the assessee. Further, the contents of the FIR and the role of the assessee, if any, in facilitating siphoning of Government money through his bank account are not discernible from the assessment order. I am of the considered view that the issue requires re-examination. If the bank account of the assessee was merely used by Mr. Virender to siphon off Government money, no addition is warranted in the hands of the assessee, as the said money neither belongs to the assessee nor represents his income. The matter is restored to file of the AO for reexamination for passing fresh assessment order in light of above observations. Needless to say, the AO shall grant reasonable opportunity of making submissions to the assessee before reframing the assessment, in accordance with law.
5. In the result, impugned order is set aside and appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on Friday the 24th day of April, 2026.
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