2025 (2) TMI 1947

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....n ignoring the facts that assessee is a power of attorney holder of the account of Shri Shankarrao Bhad which is employee of his brother and huge cash is deposited by the appellant in the said accounts and the substantial additions are made on account of unexplained credits received from parties and 10% of undisclosed income on those unexplained credits. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (Appeal) is right in ignoring the facts that the money credited in the account of Shri Shankarrao Bhad belongs to the assessee only. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (Appeal) is right in deleting the addition made of Rs. 3,51,00,000/- holding that none of money belongs to assessee, relying upon order of the Hon'ble ITAT Raipur and Rajkot, stating that the facts of the case are similar and same modus operandi was used in the case of assessee, whereas the case of assessee is not related with the cases covered under the order of the Hon'ble ITAT Raipur and Rajkot. 5. Any other ground that may be raised during the hearing of appeal." 3. The factual matrix of the c....

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....yee he was unable to do so. But since Deven Malviya had shown a very rosy picture to the assessee, he fell under his influence and, therefore, on his suggestion, the appellant along with another person Shri Shankarrao Bhad, opened an account in the name of Shri Shankarrao Bhad, which was operated by the assessee through a Power of Attorney. Being convinced by the assessee, Shri. Shankarrao Bhad, opened the account in the name of his newly formed proprietary concern "M/s. Pioneer Investments" in the ICICI Bank, Civil Lines and Ramdaspeth Branches. The bank branches were also suggested by Shri Deven Malviya, so that it would be convenient to transfer funds to and from his the accounts as Shri Deven Malviya, also maintained his accounts in the same branches with ICICI Bank. As Shri Bhad, was unknown to Shri Deven Malviya, the assessee was instructed to obtain power of attorney from Shri Bhad, to operate the bank accounts. Accordingly, the assessee with the power of attorney from Shri Bhad, operated the bank accounts at the instruction of Shri Deven Malviya. These facts are stated in the statements recorded of Shri Bhad, and assessee on 15/10/2015 by the Investigation Wing, Nagpur. Mea....

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....ad reported the news that Late Shri Deven Malviya has committed monetary fraud of Rs. 2,000 Crores and duped investors. The names of companies owned by Mr. Deven Malviya were also highlighted in the news items. The same companies were found mentioned in the bank statements submitted by the appellant. All these information were before the AO as well. Therefore, it was not difficult for the AO to obtain further information of Mr. Deven Malviya and his concerns as he was already in possession of information and bank details. However, the AO has not enquired any further and has chosen to simply added all the credits- rather than arrive at the correct income- or even the correct nature of income. Since the appellant has proved that the transactions were routed through the accounts actually belonging to Mr. Deven Malviya and monies belonged to him, the AO without assigning any reason, rejected the plea taken by the appellant and made the additions in his hand. When the appellant had narrated the whole fact before the AO and AO was confronted with tangible material on record about the source of transaction and money, he should have made independent enquiry of the firms owned by Deven Malv....

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....some time. When the rotation was paused due to stock market crash, he was unable to discharge the liability towards the investments made by various people. When the pressure to refund the money was mounted and various complaints were lodged against him, he took his own life. 5.9 The appellant was also lured by the promise of commission offered by him and has opened an account in the name of Shri. Shankarrao Bhad who was an employee at the shop of his brother. The cash and bank credits were supplied by Mr. Deven Malviya and further, on his instructions, the said payments or cash were paid by the appellant to parties as instructed by him. The same modus operandi was used by Shri Deven Malviya as described in the aforementioned judicial pronouncements. Hence these are accepted facts which are available in the public domain. Once, it is established that the funds did not belong to the appellant and appellant being a victim of a Ponzi scheme floated by another person, no addition can be made in the hands of the appellant as he was neither the owner nor the beneficiary of the transactions found in the impugned bank accounts. 5.10 In view of the above discussions, the pe....

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.... 12,65,000 - 6.10 Deemed Profit @10% of Total Deposits - 12,40,692 35,81,500 6.11 Cheque Deposits in Bank Account - 82,91,924 3,51,00,000 6.12 Cash withdrawal at the instruction of Legal Heir of Deven Malviya - - 1,27,000 6.13 Total Additions Deleted 3,60,000 1,07,97,616 3,88,08,500   5.15 However, although the gross additions have been deleted, it cannot be denied that the appellant and Mr Bhad (the owner of the impugned ban account)may well have received commission income from the transactions carried out in the bank accounts. Hence, in the identical case of Smt. Deven Malviya and the Late Deven Malviya, which have also been decided recently, it has been held that the owner/operator of bank accounts associated with the Ponzi scheme would have earned commission income as that was the whole purpose driving the said scheme. It would be in the fitness of natural justice and equity to apply the same principle to the case of the appellant as well. In the case of Shri Deven Malviya, the AO himself has graciously accepted at para 3.3 of the assessment order for AY 2011-12 that - "3.3 In this case, si....