TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 596
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....t 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 $11,46,368 to buy peace and avoid litigation. 2.1 On the basis of the aforesaid statement, in the return of income filed by the assessee on 28.0....
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....ily and suomotu agreed to pay tax on income equivalent to US$ 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, made as part of statement under section 132(4) read with Explanation 5A under section 271(1)(c) of the Act, su....
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....r 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 section 153A/ 143(3) of the Act for assessment year 2007-08, the assessing officer proceeded to tax the Rs. 48,79,578/- equivale....
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.... 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 would be applicable since the assessee was found to have invested/ deposited the money in the bank account and section 69A of the Act....
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.... 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) and the Delhi High Court in the case of CIT vs. Pawan Gupta &Ors.: 223 CTR 487 (Del), apart from various other decisions referred in the chart. ....
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....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. Meeta Gutgutia: 395 ITR 526, wherein it has been held thatsection 153A of the IT Act is an extremely potent power which enables the Revenue to re-open at least six years of assessments earlier to the year of search an....
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....ithout 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 time of search and copy whereof was given subsequently at the time of recording of statement on 11.12.2014. Analyzing the said document, it was submitted that even the contents of the unsigned/ undated/ unauthenticated loose....
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....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, PER ID, etc. Insofar as name, date of birth and address is concerned, the assessee is a well-known industrialist and his particulars like name, address and date of birth are available in the public domain and there is no re....
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....her 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 2007-08, the years under consideration, in the absence of any evidence to prove the year of such deposit/remittance, does not arise at all. He relied upon the following decisions: - P. Soman: 196 Taxman 335 (Ker) - CIT v. Premlal....
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....ed 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. Sreekumar V. CIT [2018] 90 taxmann.com 355 (Kerala), wherein the Kerala High Court, after considering the decision of the Delhi High Court in the case of Kabul Chawla, upheld the addition made in the Assessment completed under Section 153A on the basis of the material already available with the departme....
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....nd 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 should be subjected to tax, considering that the assessee has offered the amount for taxation in assessment year 2012-13 and contested the taxability when the assessing officer sought to tax the said amount (as converted in INR) in assessment years 2006-07 and 2007-08. It is noticed that in assessment years 2006-07, th....
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....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 investment cannot be taxed at all, not even in the year in which the assessee is found to be its owner. 5.6 In the present case, on perusal of the papers relied upon by the assessing officer, it is seen that there is reference to various dates. There is no specific date wherefrom the date of investment in the so-called bank account can be determined.....
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....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 premises of the assessee and therefore, strictly speaking, the said papers cannot be the basis for making any addition in assessment years 2006- 07 and 2007-08. In fact, in identical circumstances, coordinate benches of the Tribunal in the case of Anurag Dalmia vs. DCIT: ITA 5395 of 2017, BishwanathGarodia vs. DCIT: 76 taxmann.com 81 (Kol. Trib) and Yamini....
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....ar 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 issue are that in the assessment order passed under section 153A r.w.s. 143(3) of the IT Act, the assessing officer, apart from the addition on account of the deposits/ balances appearing in the alleged foreign bank account, made further addition of Rs. 1,64,962/- (US$ 3,821.22 @ Rs. 43.17) under section 69 of the IT Act on account of "interest" calculated @ 4% p.a. on the....
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....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 least some basis of taxation of notional amount/ interest, which was never realized/ received by the assessee, but in the case of the assessee, the so-called amount of interest brought to tax is totally without any basis and is clearly hypothetical/ imaginary.Since there is no evidence that the assessee actually received interest on the disputed deposit and just by figment of imagination it has been concluded that the assessee earned i....
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....peals). 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 found during the course of search primarily belonged to the assessee, his wife, Mrs. Bina Modi, and his daughter, Mrs. Charu Bhartia. Further, it was also explained that the total jewellery declared by the assessee and his wife, Mrs. Bina Modi, and their daughter, Mrs. Charu Bhartia, in their last wealth tax return for the assessment year 2011-12 was 46,634.842 gms, was much more than jewellery weighing 38,748.28 gms found during the course of search. The details of the....
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.... 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 gross weight of jewellery found during the course of search and accordingly the entire jewellery weighing 6,716.700 gms stood fully disclosed before the tax authorities.Apart thereof, the Ld.Counsel also placed reliance on the following decision, where it has been held that no addition can be made on account of jewellery which is within the tolerable limit stipulated in the aforesaid CBDT Instruction: - CIT V. Mohinder Lal Haryani: 307 ITR 348 (Del.) - CIT vs. Satya NarainPatni: 269 CTR 466 (Raj) - CIT vs. RatanlalVyaparilal Jain:....
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....tion. 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.Counsel submitted that the assessee belongs to an affluent business family and is a veteran industrialist and controls various companies under the control/ management of KK Modi group which has varied business interests. It was submitted that the assessee is more than 70 years old and got married way back in the year 1961 and that the assessee and his family members give/ receive jewellery as gift on various ceremonies/ occasions/ festivals. Thus, having regard to the aforesaid factors relating to the status of the assessee's family, jewellery weighing 6,716.700 gms cannot be considered as undisclose....
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....elevant 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. Further, the said fact was also stated by the assessee's wife during the course of statement recorded during the course of search and evidence in support of such remaking/conversion was also filed before the assessing officer, which was not all considered. Having in mind detailed explanation rendered by the assessee we are inclined to treat the entire jewellery found with assessee as fully explained. 8.13 In similar circumstances, the coordinate Delhi Bench of the Tribunal in the case of Smt. Krishna Wanti Batra (supra), deleted the addition. In that case, pursuant to search in the premises of the assesse....
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.... 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 parties advanced before me. It is well known that order under section 132(5) is to be passed within three months of the seizure to decide in a summary manner whether the seized assets are to be released or retained. Such an order has limited scope and in most of the cases, these are passed to retain the seized assets. Similar is the position of an order passed under sections 132(11) and (12) of the IT Act. I am, therefore, of the view that Revenue authorities were not justified in sustaining addition in dispute solely on the basis of finding recorded in orders passed under sections 132(5) and (12) of IT Act. The detailed explanations of the assessee are not ....