Accountant Fraud Defence Fails: ITAT Upholds Rs 1.44 Crore Addition in Demonetisation Deposit Case

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has delivered its judgement in an appeal filed by Mohsin Iliyas, challenging an order dated April 24, 2025, passed by the National Faceless Appeal Centre (NFAC), Delhi. The case pertains to the Assessment Year 2017-18. The impugned order had confirmed an addition amounting to Rs 1.44 crore imposed on the assessee’s income under Sections 69A and 115BBE of the Income Tax Act, on the grounds of unexplained cash deposits.

The assessee had filed his income tax return (ITR) for the year in consideration, declaring his total income at Rs 5.04 lakh. He got selected for scrutiny by the tax authorities because the assessee had made cash deposits of Rs 14,450,000 during the period of demonetisation in his bank accounts with HDFC Bank, Kotak Mahindra Bank, and ICICI Bank.

The assessee explained that these deposits did not belong to him but were part of a fraud committed by his accountant named Tahir Rajaiwala, who reportedly misused his documents and bank accounts in fraudulent GST activities. In support of his claim, the assessee also furnished relevant documents, including GST investigation records, a criminal complaint, and an FIR.

However, the Assessing Officer and CIT(A) rejected this explanation, noting that the assessee failed to prove that the cash did not belong to him. They observed inconsistencies in his financial records, including a sharp increase in turnover and a drop in profit rate. The cash book also showed limited opening cash and insufficient evidence of creditors before the deposits.

When the tribunal analysed the facts of the case, it endorsed the decision of the lower authorities, which held that the assessee failed to provide sufficient evidence for the claim that deposits were made by his accountant and not by him. The records indicated that the cash deposits were linked to his own business activities, and no convincing evidence was provided to prove otherwise.

Considering the aforementioned findings, the tribunal sustained the addition of Rs 1.44 crore made on the accounts of unexplained income and dismissed the assessee’s appeal.