2019 (9) TMI 378 - AT - Income Tax

Tribunal upholds CIT(A) order, dismisses Revenue appeal on HSBC Bank balance additions

DCIT, Central Circle-1 (1), Mumbai Versus Arun Kumar R. Mehta

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, deleting the additions made by the AO towards the balance in the HSBC Bank, ... Addition u/s 69A - Undisclosed cash balances in HSBC account - search and seizure action u/s 132 - HELD THAT:- Identical issue had been considered by the co-ordinate bench of ITAT, Mumbai ‘A’ Bench in assessee own case for AY 2006-07 following the decision of Hon’ble Bombay High Court, in the case of CIT vs Murali Agro Product.Ltd [2010 (10) TMI 1052 - BOMBAY HIGH COURT] deleted additions made by the AO wherein held assessee is neither owner of bank account nor had any beneficial interest in those bank accounts and hence, the same cannot be added in the hands of the assessee as unexplained money u/s 69A - Decided in favour of assessee. Issues Involved:1. Deletion of addition of Rs. 96,52,514/- and Rs. 79,25,181/- on account of undisclosed cash balances in HSBC account.2. Justification of deletion without considering the fact that the department filed an SLP against the Bombay High Court's order in related cases.Issue-Wise Detailed Analysis:1. Deletion of Addition on Account of Undisclosed Cash Balances:The brief facts of the case reveal that the assessee filed a return of income for AY 2007-08 declaring a total income of Rs. 18,37,040/-. A search and seizure action was conducted at the premises of entities of the Rosy Blue (India) Group, including the assessee. The assessment was completed under section 143(3) read with section 153A of the I.T. Act, 1961, determining a total income of Rs. 1,94,14,740/- by making additions towards undisclosed cash balance in HSBC bank accounts in the names of Ruby Enterprises Inc. and White Cedar Investments Ltd.The CIT(A) deleted the additions made by the AO towards the cash balance in the HSBC account, Geneva, under section 69A of the I.T. Act, 1961. The Revenue appealed against this deletion.The Tribunal found that an identical issue had been considered in the assessee's own case for AY 2006-07, where it was held that in the absence of any incriminating material found as a result of the search, no additions could be made in the assessment framed under section 153A of the I.T. Act, 1961. The Tribunal noted that no incriminating material was found during the search regarding the undisclosed bank account in HSBC Bank, Geneva, in the names of Ruby Enterprises Inc. and White Cedar Investments Ltd. The assessee denied having any bank account with HSBC Bank, Geneva, and this was corroborated by statements from Mr. Dilip Ramniklal Mehta.The Tribunal emphasized that the provisions of section 153A are triggered by a search or requisition and that the scope of assessment under this section is limited to reassessing the income based on incriminating material found during the search. Since no such material was found, the additions made by the AO were deemed unsustainable.2. Justification of Deletion Without Considering the Department's SLP:The Revenue argued that the CIT(A) erred in deleting the additions without appreciating the fact that the department's SLP against the Bombay High Court's order in related cases (Continental Warehousing Corporation and Murli Agro Products) had been admitted by the Supreme Court. The Revenue relied on various judicial precedents, including the decision of the Kerala High Court in Dr. A.V. Sree Kumar vs CIT.The Tribunal reviewed the legal background and noted that the assessment for the impugned year was unabated as of the search date, and no incriminating material was found during the search. The Tribunal referred to the decision of the jurisdictional High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd vs CIT, which held that no additions could be made in respect of assessments that had become final if no incriminating material was found during the search. This principle was reiterated in various High Court decisions, including Murli Agro Products Ltd vs CIT and CIT vs Gurinder Singh Bawa.The Tribunal also considered the arguments of the Revenue that additions could be made even without incriminating material if the assessment was reopened consequent to a search. However, the Tribunal found that the Supreme Court in CIT vs Singhad Technical Education Society held that additions for years not related to the search could not be made in the assessment order passed under section 153A.The Tribunal concluded that the AO's additions were based on the 'Base Note' received from the French Government, which was not found as a result of the search. The Tribunal held that the additions made by the AO in the absence of any incriminating material found during the search were bad in law and liable to be deleted. The Tribunal upheld the CIT(A)'s order deleting the additions made by the AO towards the balance in the HSBC Bank, Geneva, in the names of Ruby Enterprises Inc. and White Cedar Investments Ltd.Conclusion:The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, deleting the additions made by the AO towards the balance in the HSBC Bank, Geneva, in the names of Ruby Enterprises Inc. and White Cedar Investments Ltd. under section 69A of the I.T. Act, 1961. The Tribunal emphasized the necessity of incriminating material found during the search to justify additions under section 153A.