AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 596
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....ed 'the Act') was carried out on 09.11.2011 at the residential premises of the assessee located at A-1, Maharani Bagh, New Delhi. During the course of search, the assessee was stated to have been shown certain papers which were in the possession of the search team. The said papers have been reproduced in the assessment order and also form part of paper book filed by the assessee. As per the assessment order, the said information related to the bank account of the assessee in HSBC Bank, Geneva and was received under DTAA/ DTAC between India and other countries. The information, according to the assessment order, was that certain persons in India (including the assessee) held bank accounts in HSBC Private Bank (Suisse), SA, Switzerland. The statement of the assessee was recorded by the search team on 9.11.2011, copy whereof is placed at pages 35-49 of the assessee's paper book (in short "APB"). In the course of statement recorded under section 132(4) of the, though the appellant denied ownership of any such bank account, the assessee agreed upon to offer to tax income equivalent to US $11,46,368 to buy peace and avoid litigation. 2.1 On the basis of the aforesaid statement, in the....
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....ing into protracted/costly litigation and in a spirit of cooperation, the assessee voluntarily and suomotu agreed to pay tax on income equivalent to US$ 11.46 lakhs mentioned therein. It may be mentioned that subsequently, in the light of the aforesaid statement, the assessee, in the return of income for the assessment year 2012-13 offered for tax additional income of Rs. 5,81,32,321 (equivalent to US$ 11.46 lacs by applying exchange rate @Rs. 50.71 per dollar) and paid tax thereon. A copy of the return filed by the assessee for the assessment year 2012-13 along with computation of income is attached for your kind perusal and ready reference as Annexure 4. It is again clarified that since the document, on the basis of which the aforesaid amount has been additionally offered for tax, was confronted to the assessee during the course of search falling the previous year relevant to the assessment year 2012-13, the amount has been offered for tax in the said assessment year 2012-13 under section 69A of the Act [inadvertently mentioned as assessment year 2011-12 in the letter dated 9.02.2012] The aforesaid additional income/disclosure has been, it is reiterated....
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....hat in case the assessing officer were to tax the amount in assessment years 2006-07 and 2007-08, the assessing officer should exclude the amount declared in assessment year 2012-13, to avoid double taxation. 2.6 The assessing officer, in the assessment order dated 27.02.2015 under section 153A/ 143(3) of Act for assessment year 2006-07, however, did not agree with the aforesaid contentions of the assessee. The assessing officer held that the assessee has been evasive in his replies and that from the person- particulars mentioned in the documents, it is clear that the assessee opened and/or operated the account in HSBC Bank. It was observed that to verify the details, a reference has been sent to competent authorities in Switzerland and other countries through FT&TR division of the CBDT and the details are awaited. The denial of the assessee was held to be against human probability and the assessing officer proceeded to tax the aforesaid amount of Rs. 4,90,20,749/- equivalent to US$11,02,829 by applying conversion rate of Rs. 44.45 per dollar as income of the assessee under section 69 of the Act. 2.7 Vide separate but identical assessment order dated 27.02.2015 under se....
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....ed the amount as his income, which constitutes evidence found during the course of search. In Para 14.18, the Ld. CIT (A) noted that it may be possible that one argument in isolation may not be sufficient to prove the case of Assessing Officer (AO), however, if it is seen in totality with all the facts and circumstances of this case taken together, it can be concluded that the document belongs to the assessee. The Ld. CIT (A), while disposing of the appeals for assessment years 2006-07 and 2007- 08, vide separate orders dated 27.03.2017, dismissed the legal objections of the assessee and upheld the validity of the assessment order. The Ld. CIT (A) also upheld the addition made by the assessing officer on the ground that since the addition was made by the assessing officer on the basis of document/information received under DTAA/DTC, which contained details of the assessee, such information was authentic. Further, in so far as the issue of year in which the amount was to be taxed, the Ld. CIT (A) held that the deposit in foreign bank account were rightly taxed by the assessing officer in the assessment years 2006-07 and 2007-08.The assessing officer held that section 69 of the Act w....
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....thereto, the assessee vide letter dated 21.11.2012, filed return of income declaring income of Rs. 1,09,95,049/- as declared in the original return. Subsequently, the assessing officer issued notice under section 142(1) dated 15.07.2013, but no notice was issued under section 143(2) of the I.T. Act. It was submitted that notice under section 143(2) of the Act was, undisputedly, issued for the first time on 21.10.2013, which was served upon the assessee during the course of reassessment proceedings. It was contended that in terms of section 143(2) of the Act, notice under the said section should have been issued and served upon the assessee within a period of 6 months from the end of the financial year in which the return was furnished, that is, on or before 30.09.2013. However, the notice was issued on 21.10.2013, i.e., beyond the stipulated time period as provided in the said section. He contended that in the absence of issuance of notice under section 143(2) of the Act, assessment under section 143(3) read with section 153A/153C of the Act is invalid. He vehemently relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Hotel Blue Moon: 321 ITR 362 (SC) an....
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....earch proceedings no document/information, much less anything incriminating, was found from the premises of the assessee in respect of the foreign bank account. It was contended that on careful perusal of section 132(4) of the IT Act, it is clear that the said section requires the authorized officer to record statement of a person in whose possession or control any "books of account, documents, money, bullion, jewellery or other valuable article or thing" is found and therefore, in order to constitute evidence under section 132(4) of the IT Act, statement must be of a person found to be in possession or control of any incriminating material. On the other hand, in the present case, the assessee was not found to be in possession of the alleged papers and therefore, statement of the assessee cannot be regarded as search evidence in terms of section 132(4) of the IT Act. It was contended that even otherwise, statement cannot simply be the basis for making addition in the absence of material such as, books of account, documents, money, bullion, jewellery and the like being found or discovered during search. He relied upon the decision of the Delhi High Court in the case of PCIT vs. Meet....
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.... at the time of search to be around Rs. 2 crores, the assessee agreed to voluntarily offer for tax income equivalent to US $11.46 lacs. The said offer was made only in the spirit of settlement and to avoid litigation, without prejudice to the primary contention of the assessee that the said unsigned/ undated piece of paper did not belong/ pertain to him. The aforesaid facts were placed on record vide letter dated 09.02.2012 filed before JCIT (OSD), Jhandewalan Extension, New Delhi. He also referred to the note appended to the return of income and letter dated 30.11.2012 filed with the return. He submitted that the assessing officer, without taking into consideration the fact that the amount of US$ 11,46,368 was offered to tax by the assessee in the return of income filed for the assessment year 2012-13, merely to buy peace and to avoid litigation, made once again, addition of amount equivalent to US $11,02,829 in the assessment year under consideration. 3.6 The ld. Sr. Counsel further submitted that the entire case of the assessing officer is based on certain unsigned/ undated/ unauthenticated loose pieces of papers, which was for the first time shown to the assessee at the t....
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....ed that the paper does not appear to be "pertaining to any bank as name of the bank does not appear in this document". The assessee also clarified that the assessee has neither opened nor authorized anyone to open any bank account in HSBC Bank, Geneva and that the assessee had nothing to do with the unsigned/ unauthenticated pieces of paper. On the non-furnishing of the consent/declaration form, he submitted that the assessee had repeatedly and categorically asserted that since the alleged account in HSBC, Geneva, Switzerland did not belong/ pertain to him, the assessee was not at all competent to sign any form/ declaration in relation to the same. He then took us through assessment order and gave a para-wise rebuttal of the assessment order. 3.7 The Ld. Counsel stated that the addition made by the assessing officer under section 69 of the Act, merely on the basis of presumption that the assessee maintained an account with HSBC Bank, Geneva is legally unsustainable. He submitted that the loose extract of paper relied upon by the assessing officer (analyzed supra) only contains name of the assessee, his date of birth and there are some other particulars like some date of creation....
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....erely on the presumption that the assessee held an account with HSBC Bank, Geneva. In so concluding, the assessing officer has not placed on record any independent evidence gathered during the course of search/assessment to either establish the assessee's ownership of the alleged bank account or the deposits made therein. He alternatively submitted that in the instant case, the allegation of the assessing officer is that the assessee maintained a foreign bank account, which represents nothing but 'money' in the form of a deposit and thereby addition if at all, could have been made under section 69A as against section 69 of the Act. He vehemently contested the double addition made in assessment years 2006-07 and 2007-08. He stated that even as per the loose unauthenticated pieces of paper, the date of creation of the profile in alleged bank account is reflected as 09.01.2001 and another date of creation is mentioned as 30.01.2001 and further, the amount of UD$ 11,02,829 is only reflected as 'carry forward balance' and is not a fresh deposit that had been made in the year under consideration. Thus, the question of making addition of such account in assessment years 2006-07 and 2007-0....
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....aterial found during the course of search. It was submitted that the provisions of Section 153A of the IT Act makes no reference to undisclosed income as was mentioned in the earlier Chapter XIV-B relating to block assessment. In support of his contention, the Learned CITDR relied upon the following decisions:- 1. Gopal Lal Bhadruka Vs. DCIT 27 taxmann.com 167 (AP) 2. MadugulaVenu Vs. DIT 29 taxmann.com 200 (Del) 3. CIT Vs. Chetan Das Lachman Das [2012] 25 taxmann.Com 227 (Del) 4. Filatex India Ltd. 49 taxmann.Com 465 (Del) 5. Raj Kumar Arora, 52 Taxmann.com 172 (All) 4.1 The Learned CIT-DR further contended that though the aforesaid decisions of the Delhi High Court in the case of Anil Kumar Bhatia (supra), Chetan Das Lachman Das (supra) and Filatex India Ltd (supra) were referred to and relied upon before the Delhi High Court in the case of Kabul Chawla (supra), however, the High Court apparently reversed its earlier decision and held that the addition must be restricted to incriminating material. In supplementary written submissions, the Learned CIT-DR also relied upon the decision of the Kerala High Court in the case of Dr. A.V. S....
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.... his income tax return for assessment year 2012-13 offered for tax Rs. 5,81,32,321/- as amount equivalent to US $11,46,368. On the other hand, the assessing officer, apart from accepting the said offer in assessment year 2012-13, has also brought to tax US $ 11,02,829 and US$ 43,539 in assessment years 2006-07 and 2007-08 respectively. In fact, by applying conversion rate of Rs. 44.45 per dollar and Rs. 43.17 per dollar in assessment years 2006-07 and 2007-08, the assessing officer taxed Rs. 4,90,20,749 and Rs. 18,79,578 in the said assessment years, aggregating to Rs. 5,09,00,327, which is less than Rs. 5,81,32,321 offered for tax by the assessee in assessment year 2012-13. There can be no dispute with the settled legal position that the very same amount cannot be taxed twice in two different assessment years, which contention has also been accepted by the Ld. CIT (A). Therefore, the very same amount equivalent to US $11,46,368 cannot, in our view, be taxed twice, once in assessment years 2006-07 and 2007-08 and secondly in assessment year 2012-13. 5.2 Now the primary question which arises for consideration before us is in which year the amount equivalent to US $11,46,368 shoul....
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....esaid section provides that where any money, value of bullion, jewellery or other valuable article is found in the ownership of the assessee which is not recorded in the books of account maintained by him, the same will be treated as his income for the financial year in which he is found to be its owner. In terms of the said section, all what is required to be proved is that the assessee is owner of money or valuable article and it has not been recorded in the books of account and in that case, the amount is deemed to be the income of that financial year in which he is found to be its owner. The said section, thus, covers a situation where the assessee is, in any particular year, found to be owner of any undisclosed asset, but the year in which such asset is acquired is not known and by legal fiction, the value of such undisclosed asset is brought to tax in the year in which the assessee is found to its owner. The contention of the CIT(A) that the said section only covers physical asset is, in our view, too narrow interpretation of the said section since in that case, if the assessee is found to have made some investment and the year of investment is not known, then, the said in....
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....egarded as having made any investment and therefore, the provisions of section 69 of the I.T. Act cannot, in our view, be applied in those assessment years. Further, the documents relied upon actually refer to creation of account in earlier assessment year, much prior to assessment year 2006-07. 5.8 Furthermore, assessments for assessment years 2006- 07 and 2007-08 were undisputedly made under section 153A of the Act in respect of non-abated assessments. In respect of nonabated assessments, the law laid down in CIT vs. Singhad Technical Education Society: 397 ITR 344 (SC) and PCIT vs. MeetaGutgutia: 395 ITR 526 (Del), CIT vs. Kabul Chawla: 234 Taxman 300 (Del) and other decisions of the jurisdictional High Court is that the addition should be made on the basis of any incriminating document found during the course of search. In MeetaGutgutia (supra), the High Court further held that statement recorded cannot be regarded as incriminating material found during search and cannot independently be the basis for making any addition. In the present case, there is no dispute that the papers relied upon by the assessing officer were not found during the course of search at the residential....
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.... the grounds raised in assessee's appeal in ITA No. 2893/Del/2017 are identical to the grounds raised in assessment year 2006-07 and our decision in the said appeal shall apply mutatis mutandis in assessment year 2007-08. For the reasons submitted while deciding appeal for assessment year 2006-07, addition of Rs. 18,79,578 made by the assessing officer in assessment year 2007-08, the year under consideration, is hereby directed to be deleted. Accordingly, the grounds of appeal nos.2 to 2.3 raised by the assessee in assessment year 2007-08 are allowed. Further, in view of the addition made by the assessing officer having been deleted on merits, grounds of appeal nos. 1 to 1.2 challenging the validity of the assessment order are merely rendered academic in nature and the same are hereby dismissed as infructuous. Ground of appeal no.3 challenging the levy of interest is merely consequential in nature. 6.1 Coming to Revenue's appeal in ITA No. 3951/ Del /2017, the Department has challenged that the action of the CIT(A) in deleting the addition of Rs. 1,64,962/- made by the assessing officer on account of undisclosed interest income in HSBC Geneva. The facts in respect of the said is....
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..... CIT: 248 ITR 47 (Gau.) * Highways Construction Co. Pvt. Ltd vs. CIT: 199 ITR 702 (Gau.) * Jwala Prasad Radha Krishna vs. CIT [1992]: 198 ITR 415 (All) * CIT vs. Punjab Financial Corpn. Ltd.: 295 ITR 510 (P&H HC) * CIT vs. South India Corpn. (Agencies) Ltd.: 293 ITR 237 (Chennai HC) * CIT vs. Sanghi Finance and Investment Ltd.: 190 CTR 207 (MP) 6.4 We have considered rival submissions and the decisions relied upon by both the parties. We have already deleted the addition made in assessment year 2006-07 and also in assessment year 2007-08, therefore, on this ground itself the addition made by the assessing officer is liable to be deleted. Independent thereof, we note that in the instant case, the addition of Rs. 1,64,962 has been made purely on notional basis on the premise that the assessee: (a) had alleged foreign bank account, which itself is under serious challenge; and (b) on such bank account, assessee earned interest @ 4%. We are of the view that the case of the assessee is on a much better footing vis-à-vis the facts in judicial precedents relied upon by the Ld.Counsel inasmuch as in the aforesaid cases there was at ....
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....enalty, if at all levied, in the penalty proceedings, which are separate and independent and consequently, the ground raised in the present appeal is hereby dismissed as premature. 8.2 In ground of appeal nos. 3 to 3.4, the assessee has challenged the action of the assessing officer in making addition of Rs. 1,12,89,646/- on account of alleged unexplained jewellery found during the course of search which has been confirmed in appeal by the CIT(Appeals). The brief facts resulting in the aforesaid addition are that during the course of search at the residential premises of the assessee on 8/9.11.2011 and in continuation thereof on 20.12.2011, following jewellery was found/ seized: Gross Weight (Gms.) Value (Rs.) Remarks Jewellery Found 38,748.28 10,19,95,614 Value of jewellery is as on the date of search Jewellery Seized 6,716.70 1,12,89,646 As per annexure to Panchnama 8.3 On being confronted, the wife of the assessee, Mrs. Bina Modi, in her statement recorded on 20/21.12.2011 and also the assessee had during the course of assessment proceedings vide replies dated 08.12.2014, 29.12.2014 and 18.02.2015, explained that the jewellery fou....
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....d in excess of the gross weight declared in the wealth-tax return only need be seized. (ii) In the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family, need not be seized. (iii) The authorized officer may, having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a large quantity of jewellery and ornaments from seizure. This should be reported to the Director of Incometax/ Commissioner authorizing the search at the time of furnishing the search report. (iv) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purpose. 3. These guidelines may please be brought to the notice of all the officers in your region." 8.6 On the basis of the above, it was contended that the aforesaid Instruction is squarely applicable to the facts of the case of the assessee since the gross weight of jewellery declared by the assessee and his wife exceeds the gr....
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....ould not be matched/ reconciled.In support, the counsel placed reliance on various decisions, some of which are as under: - Smt. Krishna Wanti Batra vs. Assistant Commissioner of Income tax: 149 Taxman 36 (Del) - GaurishankerOmkarmal vs. ITO: 37 TTJ 353 (Ahd.) - DCIT vs. Arjun DassKalwani: 101 ITD 337 (Jodh.) - Sh. Arvind Agarwal and Sh. Subhash Agarwal: I.T.A. Nos. 455, 277, 278 & 443/Ind/2013 (Indore) 8.8 It was further argued that the Board, in the Instruction issued, has emphasized on the gross weight declared in the wealth-tax return rather than the description. This is for the reason that the Board recognized the above factors, which normally leads to description of the jewellery not matching with the return and that in clause (iii) of the above Instruction, the Board has further clarified that having regard to the status of the family, customs and practices of the community to which the family belongs, even larger quantity of jewellery may be treated as disclosed. Meaning thereby, that having regard to the status of the family, larger quantity of jewellery, larger than the one declared in the wealth tax return, may not be seized.The Ld.....
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....y members was much higher than the jewellery found during the course of search. CBDT Instruction dated 11-5-1994 provides that no seizure should be made in the search for the jewellery held by the ladies at 500 gms, girls at 250 gms and males at 100 gms each. Though the Instruction speaks of not seizing the same, the extended meaning of the same shows the intention that the jewellery is to be treated as explained one and is not to be treated as unexplained for the purpose of Income-tax Act. This instruction came to be considered by several Benches all over India in which it has been held that it would be relevant for the purposes of making addition as well. The Hon'ble Rajasthan High Court in the case CIT v. Kailash Chand Sharma 147 Taxman 376 has upheld this view. When this instruction is applied to the facts of the case, we observe that the possession of gold jewellery of 38,748.28gms, which is far less than declared jewellery of 46,634.842 gms it cannot be held to be unexplained. 8.12 Further, in so far as the allegation of mismatch of description of jewellery, we are of the view that it is well-known fact that Indian ladies keep changing design of jewellery from time to time....
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.... description. The Revenue authorities should have given benefit of weight of jewellery disclosed while determining the jewellery possessed by the assessee and her family members. The learned counsel for the assessee further explained that the assessee had 2,888.8 gms. gross and 2779.300 gms. net weight of jewellery as per her return. The jewellery found at the time of search was much less as per the following details: Gross weight (in gms.) Net weight (in gms.) 1483.000 1428.100 1238.800 1214.400 124.300 124.300 2846.100 2766.800 It was explained that above explanation was duly submitted before the AO but was not objectively considered by her. The AO went by order passed under section 132(5) which is only a summary assessment. Detailed explanation filed on 18th Nov., 1985, was also not considered. He drew my attention to valuation report filed in the case of the assessee for assessment year 1984-85 as also detailed explanation available at pp. 104 to 113 of the paper book. The learned Departmental Representative relied upon impugned orders of the Revenue authorities. 5. I have given careful thought to the rival submissions of the part....