2025 (9) TMI 368 - AT - Income Tax

Assessee Failed to Prove Identity Theft; s.68 Applied, Onus on Depositor to Establish Source of Bank Credits

ITAT, Surat (AT) dismissed the appeal, finding the assessee failed to produce credible, independent evidence that the disputed bank account and credits ... Addition u/s. 68 - involvement of the appellant in arranging for accommodation entries for various entities - main contention raised by the assessee is that he has been a victim of identity theft, whereby fraudsters misused his PAN card and forged his signature to open a current account in the name of “Aadi Enterprises” in the Bank of Maharashtra, through which alleged credit entries were routed. HELD THAT:- Appellant has failed to furnish any credible and independent evidence to support his claim that he was not involved in the transactions under consideration or that the account was opened without his knowledge. The appellant has failed to satisfactorily explain with evidence that the mischief of section 68 is not attracted to the facts of his case. Useful reference be made to the decision of K. Chinnathamban [2007 (7) TMI 204 - SUPREME COURT] where it was held that the onus of proving source of deposit primarily rests on person in whose name deposit appears in various banks. Since the assessee failed to show that the amount in question did not represent his income, the Department was justified in treating same as assessee’s income. The appellant could not produce any evidence in support of forgery before the AO, CIT(A) and Tribunal. Hence, the appeal by the appellant was dismissed. The facts of the instant appeal are similar. There is no reason as to why the ratio of the above decision shall not be applicable to the instant appeal. Decided against assessee. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether delay in filing the appeal to the Tribunal should be condoned where the appellant filed an affidavit explaining bona fide reasons and the revenue raised no objection. 2. Whether credits totalling Rs. 40,61,93,200/- reflected in a bank account in the name of an entity purportedly using the appellant's PAN and KYC can be excluded from the appellant's income where the appellant alleges identity-theft and forged KYC but fails to produce corroborative documentary or official evidence. 3. What is the scope of the assessee's onus under section 68 (undisclosed cash credits) when identity-theft or alleged fraud in account-opening is asserted; and whether reliance on a co-ordinate decision distinguishing facts is permissible where the factual matrix differs. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing appeal Legal framework: Tribunal has power to condone delay in filing appeals where sufficient cause is shown and principles of substantial justice outweigh technical objections. Precedent treatment: The Court applied settled administrative principle favouring substantial justice over technicality where delay was not deliberate. Interpretation and reasoning: The appellant explained delay by reference to his socio-economic status, detention, ongoing criminal investigation, compilation of documents (charge-sheet, FIR, bank KYC), and mental/financial stress; revenue did not oppose condonation. The Tribunal found the delay unintentional and preferred substantial justice. Ratio vs. Obiter: Ratio - where delay is bona fide, unopposed by revenue, and appellant shows sufficient cause, delay may be condoned to decide appeal on merits. Conclusions: Delay of 149 days condoned; appeal admitted for adjudication on merits. Issue 2 - Addition under section 68: applicability where appellant alleges identity-theft/forged KYC Legal framework: Section 68 places primary onus on assessee to satisfactorily explain the identity and creditworthiness of persons from whom unexplained credits arise and to establish genuineness of transactions; unexplained credits can be added to income if onus not discharged. Precedent treatment: The Tribunal relied on established law that bald assertions without documentary backing do not discharge onus under section 68; reference to Supreme Court principle that onus to prove source rests on person in whose name deposit appears. Interpretation and reasoning: The appellant alleged KYC forgery and identity-theft leading to creation/operation of an account in the name of an entity using his PAN. The Tribunal examined record and found no cogent documentary evidence (forensic signature comparison, bank confirmation of fraud, FIR/charge-sheet proving forgery, court discharge/acquittal, or independent agency corroboration) to substantiate the forgery claim. The appellant's own narrative showed arrests and ongoing prosecution, which undermined the simple status of a victim exonerated by authorities. The AO had material from investigations into accommodation-entry networks and detailed bank credits aggregating Rs. 40.61 crores to the account in question; the assessee failed to refute identity, creditworthiness, or genuineness with credible evidence despite repeated opportunities before AO, CIT(A) and Tribunal. Ratio vs. Obiter: Ratio - where substantial unexplained credits appear in an account in the assessee's name and the assessee fails to produce independent, corroborative evidence of forgery or bona fide denial (bank confirmation, FIR/charge-sheet establishing forgery, judicial exoneration), the onus under section 68 remains unfulfilled and the amounts may be treated as undisclosed income. Conclusions: Addition under section 68 of Rs. 40,61,93,200/- affirmed; appellant failed to discharge onus and explanation of identity-theft was unsubstantiated. Issue 3 - Reliance on precedent (co-ordinate bench) alleging similar fraud facts and distinguishability Legal framework: Reliance upon co-ordinate or other tribunal decisions is permissible but their applicability depends on factual parity; distinguishing is required where material facts differ. Precedent treatment: The appellant relied on a Jodhpur Bench decision where identity-theft was established by confession of the actual wrongdoer and proactive approach by the assessee. The Tribunal distinguished that decision on factual grounds. Interpretation and reasoning: The Jodhpur decision was factually distinguishable because there the person who opened accounts confessed and authorities accepted fraudulent opening; the assessee there had proactively engaged authorities. In the present case no bank confirmation of fraud, no judicial finding exonerating the appellant, no complaint/steps taken to pursue or mitigate the alleged misuse, and ongoing prosecution/arrestees facts were absent or not supportive of the appellant's claim. The Tribunal also noted a co-ordinate Tribunal decision adverse to the appellant on similar facts where the appellant failed to produce evidence of forgery, reinforcing the result. Ratio vs. Obiter: Ratio - co-ordinate decisions favourable to an assessee are inapplicable where the critical evidentiary elements (confession by actual wrongdoer, bank/court confirmation, proactive steps by assessee) are absent; adverse co-ordinate decisions with similar fact-patterns support confirmation of addition. Conclusions: Reliance on the favourable precedent was rejected as misplaced; distinguishable facts justified treating the cited authority as not persuasive. Cross-references and cumulative conclusion Cross-reference: Issue 2 and Issue 3 interlink - the failure to produce independent corroboration (Issue 2) rendered the favourable precedent inapplicable (Issue 3). Final conclusion: Delay in filing appeal condoned; addition under section 68 confirmed because the assessee did not satisfactorily prove identity, creditworthiness or genuineness of credits or substantiate alleged KYC forgery with independent, conclusive evidence; appeal dismissed.