Section 68 IT Act | PAN Linkage & Bank Signatory Status Insufficient to Prove Beneficial Ownership : ITAT Delhi

The Income Tax Appellate Tribunal, Delhi, has clarified that the mere linkage of an individual’s PAN to a bank account held by a separate legal entity, even with signatory authority, cannot trigger an addition under Section 68 of the Income Tax Act. The judgment reinforces the principle that tax liability must attach to the true owner of income, not merely the person with operational access.

Background & Facts

The Dispute

The dispute arose from the Assessing Officer’s (AO) addition of Rs. 4,94,69,000 under Section 68 of the Income Tax Act, 1961, treating cash deposits made into a bank account as unexplained income of the individual assessee, Shri Deepak Gupta. The cash was deposited in the account of M/s KCC Institute of Technology & Management, a unit of the Deepak Gupta Education Trust, during the demonetization period (November 2016 - March 2017). The AO concluded that because the assessee’s PAN was linked to the account and he was listed as Chairman and Authorized Signatory, the funds must be his unaccounted income.

Key Facts

• The assessee, Shri Deepak Gupta, is the Managing Trustee of Deepak Gupta Education Trust (PAN: AAATD9552E), a registered charitable trust.
• The bank account bearing number 06860100007528 at Bank of Baroda, Pusa Road Branch, is held in the name of M/s KCC Institute of Technology & Management, a unit of the Trust.
• The Trust’s PAN (AAATD9552E) was not used for this account; instead, the assessee’s individual PAN (AEHPG4727M) was erroneously linked for KYC purposes.
• During FY 2016-17, cash deposits totaling Rs. 4,94,69,000 were made into this account, primarily from student fee collections.
• The Trust’s books of account reflected these deposits as income, and the same were disclosed in its financial statements for A.Y. 2017-18.
• The Trust was under scrutiny assessment for A.Y. 2017-18, and the AO of the Trust had made an addition of Rs. 7,29,59,500 including the same Rs. 4,94,69,000.
• The assessee submitted a sworn affidavit dated 05.12.2019 affirming he had no beneficial ownership of the account or funds.
• The bank provided KYC documents confirming the assessee’s role as authorized signatory, not owner.

Procedural History

• 31.07.2017: Assessee e-filed return declaring income of Rs. 6,50,920 for A.Y. 2017-18.
• 08.11.2016: Demonetization of Rs. 500 and Rs. 1000 notes announced by Government of India.
• 09.12.2019: AO issued show-cause notice under Section 143(2) and notice under Section 133(6) to Bank of Baroda seeking account statements and KYC details.
• 16.12.2019: AO passed assessment order adding Rs. 4,94,69,000 under Section 68, citing PAN linkage and signatory role.
• 29.06.2025: Commissioner of Income Tax (Appeals) [Ld. CIT(A)] deleted the addition, holding the funds belonged to the Trust.
• 30.04.2026: ITAT Delhi dismissed the Revenue’s appeal, upholding the CIT(A)’s order.

The Parties' Positions

For the Revenue (AO and Appellant):

• Argued that the assessee’s PAN being linked to the account and his role as Chairman and Authorized Signatory established control and beneficial ownership.
• Relied on CIT v. P. Mohankala (2007) and N.R. Portfolio Pvt. Ltd. (2013) to assert that the assessee must prove identity, genuineness, and creditworthiness of the source.
• Contended that the Trust’s assessment does not absolve the individual, especially when the AO found deliberate misrepresentation of PAN.

For the Assessee (Respondent):

• Submitted that the account belonged exclusively to the Trust, and he was only an authorized signatory in his fiduciary capacity.
• Produced affidavit, Trust’s financial statements, bank statements, and the Trust’s assessment order showing the same amount was added in the Trust’s hands.
• Argued that the AO failed to establish any nexus between the cash and the assessee’s personal income.
• Distinguished M/s Rajmeet Singh v. ITO (2024) on grounds that the assessee maintained books and disclosed the transaction.

Relief Sought

The Revenue sought to restore the addition of Rs. 4,94,69,000 under Section 68 in the hands of the individual assessee. The assessee sought confirmation that the deletion by the CIT(A) was legally correct and that no liability attached to him.

The Legal Issue

The central question was whether Section 68 of the Income Tax Act, 1961 can be invoked against an individual solely on the basis of PAN linkage and signatory status in a bank account owned by a separate legal entity, when documentary evidence conclusively establishes that the funds belong to and were disclosed by that entity.

Arguments Presented

For the Appellant (Revenue)

The Revenue contended that the assessee’s role as Chairman and Authorized Signatory, coupled with the use of his PAN in the account, created a presumption of beneficial ownership. It argued that CIT v. P. Mohankala and N.R. Portfolio Pvt. Ltd. required the assessee to prove not just the identity of the creditor but also the genuineness of the transaction and the creditworthiness of the source. The Revenue asserted that the Trust’s assessment did not absolve the individual, particularly since the AO had found the PAN linkage to be deliberate and misleading. It further argued that the principle of double taxation cannot override the statutory burden under Section 68.

For the Respondent (Assessee)

The assessee submitted that Section 68 applies only to the person who is the beneficial owner of the unexplained credit. He produced sworn affidavits, audited financials of the Trust, bank statements, and the Trust’s assessment order to prove that the funds were received, recorded, and disclosed by the Trust. He emphasized that the AO had no evidence linking the cash to his personal income or undisclosed wealth. He distinguished M/s Rajmeet Singh on factual grounds, noting that in that case, the assessee had no books of account or disclosure, unlike the present case.

The Court's Analysis

The Tribunal emphasized that Section 68 imposes a burden on the assessee to explain the nature and source of any sum credited to his account. However, the burden arises only when the credit is in the name of the assessee or he has beneficial ownership. The Tribunal held that the mere fact that an individual’s PAN is linked to a bank account does not equate to ownership, particularly when the account is held in the name of a distinct legal entity.

"The fact that the appellant is merely an authorized signatory, without beneficial ownership, cannot by itself attract addition under section 68."

The Tribunal noted that the AO had not produced any evidence to show that the cash deposits originated from the assessee’s undisclosed income or that he derived any personal benefit. The Trust’s financial statements and its own assessment order confirmed that the amount was accounted for in the books of the Trust and was subject to scrutiny there. The Tribunal further observed that the AO’s reliance on P. Mohankala and N.R. Portfolio was misplaced, as those cases involved direct credits to the assessee’s own accounts with no third-party ownership claim.

The Tribunal also rejected the Revenue’s argument that the Trust’s assessment could not absolve the individual, stating that the principle of taxing the right person in the right hands must prevail. Where the same income is being taxed in the hands of the entity that owns it, and the individual has no beneficial interest, an addition against the individual is legally unsustainable.

The Tribunal explicitly declined to comment on the merits of the addition in the Trust’s case, limiting its holding to the individual assessee’s liability.

The Verdict

The Revenue’s appeal was dismissed. The ITAT Delhi upheld the deletion of the addition of Rs. 4,94,69,000 made under Section 68 in the hands of the individual assessee. The Tribunal confirmed that the addition was legally unsustainable because the bank account did not belong to the assessee, no evidence established his beneficial ownership, and the same amount was already under scrutiny in the hands of the Deepak Gupta Education Trust. No further directions were issued as the matter was concluded.

What This Means For Similar Cases

PAN Linkage Is Not Synonymous with Ownership

• Practitioners must now argue that Section 68 cannot be invoked merely because an individual’s PAN appears in a bank account held by a company, trust, or partnership.
• The burden shifts to the Revenue to prove beneficial ownership, not just operational control or KYC linkage.
• In cases involving trusts or family entities, documentary proof of separate legal identity and accounting is critical to defeat Section 68 additions.

Double Taxation Is a Valid Consideration, Not a Defeat

• Where the same income is being assessed in the hands of the legal entity that owns it, an addition against an individual signatory or trustee is prima facie unjust.
• Practitioners should proactively submit the entity’s assessment order and financials to demonstrate that the income is already under scrutiny.
• The Tribunal’s refusal to comment on the Trust’s assessment does not preclude future challenges to the Trust’s addition - only that the individual cannot be taxed twice.

Documentary Evidence Trumps Presumptions

• Sworn affidavits, audited financials, bank statements, and entity-level assessment orders collectively discharge the burden under Section 68.
• Oral explanations or vague denials are insufficient; structured, contemporaneous documentation is mandatory.
• The judgment reinforces that tax authorities cannot rely on suspicion or procedural anomalies (like PAN mismatch) to impose liability without substantive proof of ownership.