False return filed by loan consultant send to handwriting expert for verification of the signature of the assessee on ITR-V

False return filed by loan consultant send to handwriting expert for verification of the signature of the assessee found on ITR-V acknowledgement as submitted to CPC Bangalore

False return filed by loan consultant

ABCAUS Case Law Citation:
ABCAUS 1176 (2017) (03) ITAT

Assessment Year : 2010-11
Date/Month of Pronouncement: March, 2017

Brief Facts of the Case:
The appellant assessee was a teacher by profession and was training law students apart from running a law training /teaching centre. The return of income of the assessee for the relevant assessment year was filed declaring total income of Rs. 1,57,944/-. The case was selected for scrutiny under CASS with a direction to verify the genuineness of commission income as shown in the ITR and accordingly notice u/s 143(2) of the Income Tax Act, 1961 (‘the Act’) was served on the assessee. Notice u/s 142(1) of the act was also issued and served on the assessee.

In response to the notices, the assessee furnished a written submission stating that he was admitted to Hospital and that he had neither submitted any income tax returns before any income tax authority nor any balance sheet and profit and loss account, as his income was below the maximum amount not chargeable to income tax.

The assessee further submitted that he had handed over a Xerox copy of his PAN card and voter ID card to a consultant to arrange some unsecured loan from financial institution. The consultant had failed to do so and handed him back the Xerox copy of PAN card and voter ID card.

The assessee stated that he suspected that the consultant might have filed a false return in his name without his consent and without his signature. Accordingly he denied whatever has been reported in the said return and the balance sheet and profit and loss account.

The AO obtained the copy of the acknowledgement of returns in ITR-V for the relevant assessment year and also for the succeeding assessment year in order to verify the signature on the e filing return to find out the truth. On the basis of signature match with both copies of ITR-V, the AO concluded that the signature of assessee appeared to be the same with the signature furnished in the statement of receipt and expenditure for the year ended 31.3.2010 and 31.3.2011 and other documents.

The assessee further stated that there was no business carried on by him and hence the question of commission and advertisement, sundry debtors , creditors and other business items does not arise. The AO in order to verify the genuineness and authenticity of the submissions, issued summons u/s 131 to the assessee and recorded a statement on oath from the assessee wherein it was mentioned by the assessee that he had not filed any income tax return as his income was below the basic exemption limit.

However, the AO observed that no evidences were produced to prove the genuineness of this statement. The AO further observed that the assessee had not taken sufficient steps to establish that the return does not belong to him. He observed that the assessee did not lodge any complaint to the respective authority against cybercrime. Accordingly, the AO disbelieved the version of the assessee that he had not filed any returns and framed the assessment by making total addition of Rs. 4,00,41,508/- on account of proprietor’s capital, sundry creditors and disallowance for commission expenses.

The assessee carried the matter in appeal before CIT(A) who observed that the AO had found substantial evidence to hold that the assessee had acknowledged the e-return being filed and that the assessee had subsequently verified under his own signature. The CITA observed that the assessee being a qualified advocate for the past thirty years could not plead ignorance of judicial processes and consequences.The CIT(A) also observed that the provisions of section 136 of the Act are not for the benefit of the assessee but to secure their prosecution, if necessary, as such the reference of the assessee to this section was misplaced.

Further, the CIT(A) observed that the assessee suo moto accepted that he intended to secure a loan from financial institution. This could be possible only if the assessee had been a regular tax payer having a healthy balance sheet. Thus the assessee was aware and complicit in the matter of filing the e-return but the assessee had consciously avoided naming the financial institution or the persons who were supposedly going to assure him that loan for starting a large training academy.

It was also noted by the CIT(A) that the income tax return was filed on 25.5.2011 and the return was picked up for scrutiny on 17.8.2012 and the assessment order was passed on 22.3.2013. Till this entire period, the assessee refrained from disclosing any intention on his part to prove that the e-return was not filed by him. The assessee, a LLB and a law teacher with decades of experience, filed a Police Diary only on 19.12.2013 naming one person as a consultant who might have misused his PAN & voter card. However, this Police Diary was silent on the signed verification of ITR-V and did not give the complete postal address of the so called consultant.

CIT(A) further observed that the during the appellate proceedings before him, the assessee filed a written submission stating that he had approached the Police Station asking to lodge an FIR but could not, as the police authorities refused to lodge the report and instead just lodged a General Diary (G.D.). Subsequently, the assessee approached the Cyber Crime Department from wherein the investigation report was pending.

CIT(A) observed that the assessee had not even gone to the court to get the FIR registered against the alleged culprits. That the assessee was also silent on the role of the chartered accountant who conducted the tax audit as mentioned in the IT return. The CITA observed that the taxes due on the returned income had been paid by the assessee which is quite evident from the e-return. He observed that the assessee had not even filed any affidavit stating his contentions.

Accordingly, the CIT(A) confirmed the additions made by the AO and being aggrieved, the assessee was in appeal before the Tribunal.

Contentions of the Appellant assessee:
The assessee stated that the signature of the assessee in alleged profit and loss account and that reflected in the ITR-V acknowledgement did not match at all and the AO erred in stating that the signature in ITR-V matched with that of the assessee in other documents.

It was argued that in case if the AO had any doubt about the veracity of the signature, he could have very well verified by referring the same to a Handwriting Expert using his government machinery.

The assessee placed on record the letter addressed by the tax auditor to the AO completely denying the fact that he had conducted the tax audit of the assessee and also stated that the assessee was not his client at all.  Hence the finding of the CITA that the assessee did not raise any objection about the tax auditor in his appellate order was devoid of any merits.

It was stated that the assessee had placed on record the complaint lodged before the Cyber Crime Department explaining the facts against alleged consultant. In response to the said compliant before the Police authorities, the assessee was called for enquiry. The assessee appeared before the Police Authorities and explained his case and the matter was pending at that stage without any progress.

The assessee had stated that he was not that much powerful to use the influence to impress upon the police authorities and Cyber crime department to expedite the investigation to find out the truth. Also, in between the assessee was given to understand that the alleged consultant had passed away.  

It was stated that the assessee had lodged a recent complaint to Deputy Commissioner of Police against an accomplice of the alleged consultant to find out the truth. In the said compliant, the assessee had also specifically pleaded that the returns for Asst Years 2010-11 and 2011-12 were uploaded electronically through the IP Address which was not the IP address of the assessee.

Observations made by the Tribunal:
The Tribunal observed that the assessee had lodged complaints before the Police Station, Cyber Crime Department and before Deputy Commissioner of Police and the action against the said complaints were in progress.

The ITAT found that the signature in the ITR-V Acknowledgement of return required to be cross verified with the other documents of the assessee for which purpose the same was required to be referred to a Handwriting Expert to understand the truth.

The assessment was set aside to the file of the AO for de novo adjudication, with the following directions :-

(a) To send the signature of the assessee in ITR-V acknowledgement to a Handwriting Expert and obtain the report thereon ;

(b) To co-ordinate with the police authorities and cyber crime department with regard to the complaints lodged by the assessee and understand the status of the case from time to time and prevail upon them for speedy disposal of the complaints using the government machinery ;

(c) The assessee to co-operate with the enquiries conducted the police authorities and cyber crime department for expeditious disposal of the complaints lodged by him and also parallely co-operate with the assessment proceedings before the income tax authorities

False return filed by loan consultant

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