2021 (8) TMI 119 - AT - Income Tax

Tax Tribunal Rules in Favor of Assessee, Prevents Double Taxation

The A.C.I.T. Central Circle – 15 New Delhi Versus Shri Krishan Lal Madhok And Shri Krishan Lal Madhok Versus The A.C.I.T. Central Circle – 15 New Delhi

The Tribunal allowed the assessee's appeals, directing the deletion of additions for A.Y 2006-07 and 2007-08 to avoid double taxation. The Tribunal ... Assessment u/s 153A - Addition of peak credit - HELD THAT:- Nowhere the Assessing Officer has demolished this claim of the assessee which means that the AO has inherently accepted the contention of the assessee that the disclosure was at the behest of the tax authorities and calculation of peak credit was also at the behest of the tax authorities. We have carefully examined the computation of income for A.Y 2007–08 and under the head ‘income from other sources’ at item L – “Other Income”, the assessee has shown income of ₹ 2,23,68,007/–. Once the assessee has returned the undisclosed income and paid taxes thereon, in our considered opinion, there should not be any quarrel to bifurcate the disclosed amount in two A.Ys when tax rate in both the A.Ys is the same and there is no loss to the revenue. We are of the considered view that the revenue authorities should desist from such litigation. Considering the relevant documentary evidences, we do not find any merit in bifurcating the income in two A.Ys when the assessee has paid taxes in A.Y 2007–08. Making the addition of same income in two A.Ys definitely amounts to double taxation. We, accordingly direct the Assessing Officer to delete the addition. Interest on the balances in his bank account with HSBC, Geneva - AO assumed that in India a Savings Bank account holder earns interest at the rate of 4%, therefore, applying the same rate, AO made the impugned addition - HELD THAT:- Action of the Assessing Officer defies the taxability of concept of real income. The undisputed fact is that in the alleged sheets of bank deposits received from the French government under DTAC, there is no mention of any interest paid by the bank to the assessee. Therefore, it is illogical to compute interest and that too at the rate prevailing in India. Since there is no documentary evidence to support the presumption of the Assessing Officer, we do not find any reason to interfere with the findings of the ld. CIT(A). Issues Involved:1. Legality of the addition of undisclosed foreign bank account balances under Section 69 of the Income-tax Act, 1961.2. Double taxation of the same income in different assessment years.3. Validity of the evidence obtained under the Double Taxation Avoidance Convention (DTAC) from the French Government.4. Addition of interest accrued on foreign bank balances based on assumptions.Detailed Analysis:1. Legality of the Addition of Undisclosed Foreign Bank Account Balances:The core issue in the assessee's appeals (ITA No 6268/DEL/2017 and 6269/DEL/2017) revolves around the addition of undisclosed foreign bank account balances under Section 69 of the Income-tax Act, 1961. The Assessing Officer (AO) added Rs. 2,05,50,545 for A.Y 2006-07 and Rs. 18,58,311 for A.Y 2007-08 as unexplained investments based on the statement of the assessee recorded under Section 132(4) during a search and information received from the French Government under DTAC.The assessee argued that the amount was already declared and taxed in A.Y 2007-08, and any further addition would result in double taxation. The Tribunal noted that the AO failed to disprove the assessee's claim that the peak credit was calculated and offered at the behest of tax authorities.2. Double Taxation of the Same Income:The Tribunal observed that taxing the same amount in two different assessment years amounts to double taxation. The assessee had already paid taxes on the peak credit of Rs. 2,23,68,000 in A.Y 2007-08, as evidenced by the computation of income. The Tribunal directed the AO to delete the additions for A.Y 2006-07 and 2007-08, emphasizing that there should be no bifurcation of the declared amount when tax rates for both years are the same, and there is no revenue loss.3. Validity of the Evidence Obtained Under DTAC:The Tribunal referred to the judgment of the Additional Chief Metropolitan Magistrate, which highlighted several deficiencies in the evidence obtained from the French Government under DTAC. The data received in a pen drive was not certified by the bank, lacked verification from the concerned bank, and was not authenticated as per Section 78(6) of the Indian Evidence Act. The judgment noted that the prosecution failed to prove the authenticity of the data, and there was no concrete evidence linking the accused to the foreign bank account.The Tribunal found that the AO's reliance on the unverified and unauthenticated data was misplaced, and the statement recorded under Section 132(4) was retracted by the assessee, further weakening the case against the assessee.4. Addition of Interest Accrued on Foreign Bank Balances:In the revenue's appeals (ITA Nos. 3917 to 3921/DEL/2017 and 6648/DEL/2017), the AO added interest on the balances in the foreign bank account based on the assumption that the assessee must have earned interest at the rate of 4%, similar to a savings bank account in India. The first appellate authority deleted these additions, finding the AO's assumptions baseless.The Tribunal upheld the deletion, stating that there was no documentary evidence to support the AO's presumption of interest income. The sheets of bank deposits received from the French Government did not mention any interest paid by the bank to the assessee, making the AO's computation illogical.Conclusion:- The Tribunal allowed the assessee's appeals (ITA Nos. 6268/DEL/2017 and 6269/DEL/2017), directing the deletion of additions for A.Y 2006-07 and 2007-08 to avoid double taxation.- The Tribunal dismissed the revenue's appeals (ITA Nos. 3917 to 3921/DEL/2017 and 6648/DEL/2017), rejecting the AO's baseless assumptions of interest income on foreign bank balances.The order was pronounced in the open court on 03.08.2021.