Sanjay Chalia Fraud Deposits Issue reopened

The case concerned an addition of approximately INR 24.65 lakhs under Section 69A of the Income-tax Act in the hands of an individual salaried employee whose bank account was allegedly misused by a relative involved in embezzlement of government funds. 

The reassessment proceedings had been initiated pursuant to an FIR lodged by government authorities relating to siphoning of public money through accounts of relatives and acquaintances. The assessee contended that he neither owned nor controlled the funds and that the amounts had been deposited and withdrawn entirely by the relative responsible for the fraud. 

The Tribunal found that although the Assessing Officer relied upon the FIR and information from the Investigation Wing, there was no independent inquiry examining the assessee’s role, the contents of the FIR, or whether the assessee merely acted as an unwitting conduit. The Tribunal accordingly restored the matter for fresh examination and observed that if the account had only been used for routing fraudulently siphoned funds belonging to the government, no addition may ultimately survive in the assessee’s hands.