TaxTMI 
TaxTMI 
2024 (6) TMI 734
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....; PENALTY APPEALS 6767/Del/2017 17.10.2017 30.04.2015 2006-07 6769/Del/2017 17.10.2017 30.04.2015 2007-08 7756/Del/2017 20.10.2017 30.04.2015 2008-09 7757/Del/2017 20.10.2017 30.04.2015 2009-10 7758/Del/2017 20.10.2017 30.04.2015 2010-11 7759/Del/2017 20.10.2017 30.04.2015 2011-12 7760/Del/2017 20.10.2017 30.04.2015 2012-13 2. The revenue has also filed appeal in ITA 3368/Del/2016 for AY 2010-11 against the order of the Ld. CIT(A)-30, dated 11.03.2016 for AY 2010-11. 3. Since the identical issues are involved in all the above appeals, therefore, all these appeals are taken up together and disposed off by this consolidated order for the sake of convenience and brevity. We take ITA No. 6743/Del/2017 for AY 2006-07 as lead case. 4. Brief facts of the case are, assessee filed its return of income on 31.10.2006, declaring an income of Rs.6,47,19,409/-. Subsequently, a search and seizure operation u/s 132 of the Income Tax Act, 1961, (for short "the Act) was conducted at various business premises of Rajinder Kumar Group (in assessee group), in the residential premises of the B-5/116, Safdarjung Enclave, New Delhi- 29 on 23.08.2011. The case was centralised....
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....lders have furnished the complete statements of this bank account. The AO discussed the statement recorded u/s 132(4) of the Act with the assessee on 23.08.2011, which was discussed elaborately and reproduced the same in his order at page 8 to 11. The AO observed from the statement of Smt. Shobha Kumar(wife), Shri Rahul Kumar (son) that initially they denied the opening of any bank account abroad and later accepted that they have foreign bank account. The AO also discussed in his order about the reference made to the concerned authorities through FT&TR Division of the CBDT, New Delhi, calling for certain information relating to HSBC Account, London operated by the assessee. Due to non-receipt of requisite information from the concerned authorities, the time limitation of completion of assessment in this case was extended in accordance with the provision of section 153B(1)(viii) of the Act. 6. The AO observed at para 10 of the order that the assessee during search u/s 132 of the Act voluntarily stated on 24.08.2011 of having an account with HSBC, London and offered the same as undisclosed income with respect to the HSBC bank for taxation. Based on the above statement, the assessee ....
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....her he observed that the conduct of the assessee in not providing the concerned waiver form is amounts to non-cooperation on the part of the assessee. Only after search and subsequent proceedings, assessee accepted the same and disclosed the above said bank deposits as income. With the above observations, the ld. CIT(A) has dismissed the appeal filed by the assessee for the current assessment year. 9. Aggrieved with the above order, the assessee is in appeal before us, raising following grounds of appeal:- "1. That the Commissioner of Income Tax (Appeals) erred on facts and in law in not holding that the assessment order dated 27.02.2015, passed under section 143(3) r.w.s. 153A of the Income-tax Act, 1961 ('the Act') is beyond jurisdiction, bad in law and void-ab-initio. 1.1. That Commissioner of Income Tax (Appeals) erred in not appreciating that the impugned assessment under section 153A having been completed de-hors any incriminating material/ document being found/ seized during the course of search conducted under section 132 of the Act in the case of the appellant, is illegal and bad in law. Without prejudice 2. That the Commissioner of Income Tax (Appeals) er....
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....ds of appeal in accordance with Rule 11 of the ITAT Rules with the prayer and the same is reproduced below:- "4. "That on the facts and circumstances of the case, the Ld. CIT(A) erred on facts and in law in holding that the assessment under section 153A of the Act has been completed within the statutory time limit as mentioned in section 153B of the Act. 5. "That on true construction of Article 23(3) of the India-UK Double Taxation Avoidance Agreement, the credits in alleged bank account in London can't be taxed in the hands of the Appellant." 6. "That in view of Article 23(3) of the India-UK Double Taxation Avoidance Agreement, the Notification No. 91 dated 28.08.2008 issued under section 90(3) of the Act is inapplicable." 7. "Without prejudice to above, Notification No. 91 dated 28.08.2008 issued under section 90(3) of the Act will not be applicable retrospectively and accordingly will not apply to the assessment year under consideration." 11. Subsequently, the assessee has filed amended grounds of appeal as under:- "1. That the Commissioner of Income Tax (Appeals) erred on facts and in law in not holding that the assessment order dated 27.02.2015, passes under sec....
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.... there was no evidence on record to corroborate that deposit(s) in the alleged foreign bank account represented income earned/received by the Appellant in India. 2.7. Further, without prejudice, that the Commissioner of Income Tax (Appeals) erred in not appreciating that the exchange rate adopted by the assessing officer was without any basis. 3. That the Commissioner of Income Tax (Appeals) erred in not directing deletion of interest charged under section 234B of the Act. Additional Grounds of Appeal 4. That on the facts and circumstances of the case, the Ld. CIT(A) erred on facts and in law in holding that the assessment under section 153A of the Act has been completed within the statutory time limit as mentioned in section 153B of the Act. 5. That on true construction of Article 23(3) of the India-UK Double Taxation Avoidance Agreement, the credits in alleged bank account in London can't be taxed in the hands of the Appellant. 6. That in view of Article 23(3) of the India-UK Double Taxation Avoidance Agreement, the Notification No. 91 dated 28.08.2008 issued under section 90(3) of the Act is inapplicable. 7. Without prejudice to above, Notification No. 91 dated....
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....alleged undisclosed foreign bank account. [Kindly refer page 10 of the Paper Book, Volume 2]. 1.4. The said letter dated 26.10.2015 also contains a certified copy of the letter dated 28.06.2011 through which the said information was handed over by the Government of France to the Government of India in a pen drive. 1.5. Data provided in a pen drive to the Government of India by the authorities of French Government is based the documents stolen in 2006 by a person working for HSBC in Geneva. The documents purportedly contained details of more than 1,00,000 clients of HSBC from around the world. 1.6. The document alleged to be statement of a bank account with HSBC London does not bear any signature of any authority competent to generate/issue such bank statement. Further, no confirmation has been brought on record by the Income Tax Department either from HSBC Bank, London or from Swiss Government Authorities with respect to the authenticity, genuineness and correctness of the alleged bank statement. 1.7. The said information in form of a loose paper purportedly to be a bank statement cannot be considered to be evidence. Assuming that the information is from valid source and co....
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....ative evidence was found during the course of search so as to link the information already in hand with the material found during the course of search, then such an information for making any kind of addition ostensibly is outside the purview of Section 153A of the Act. Accordingly, the reliance place by the Revenue solely on the USB was held to be invalid and additions made by the revenue was deleted. c) ACIT v. Shri Rajeshkumar Govindlal Patel, ITA Nos. 25 & 26/ITAT Rajkot/2021, 12.04.2023, ITAT Rajkot (Relevant para 8.2, 8.3, 9.1 & 9.4, Page 36-80 of case law compendium, Volume 3.1): In this case, the AO attempted to draw an inference that the assessee owns and maintains foreign bank account, based on some unverified sheet of paper which was indicative of a bank statement. The court held that mere appearance of some personal details of the assessee on the three pages photostat copy does not validate the information as true and correct as personal details are easily available from known sources and therefore such details do not validate the case of the AO in any manner and it is upon the AO to prove the truthfulness of the same. Further, the court held that since the Revenue fa....
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....ed from the Pen Drive contains exactly the contents of the 'Bank Account' as recorded by the bank and only then can it be deemed to possess evidentiary significance of categorical value. Since, there was no incriminating material found during the course of search to support and substantiate the said addition hence the court held that the income relating for relevant AY under consideration was beyond the scope of section 153A of the Act. 1.10. Per contra, in Renu Tharani v. DCIT, ITA No.2333/Mum/2018, 16.07.2020 (Relevant paras 45, 46 & 50, Page 203-255 of case law compendium, Volume 3.1): The Hon'ble ITAT Mumbai has upheld the additions made in the case of the assessee based of the documents received from the French Authority. 1.11. In Ambrish Manoj Dhupelia v. DCIT, ITA No 5720 to 5729, 5751 & 5752 (MUM.) 2016, 23.10.2017, ITAT Mumbai (Relevant paras 16 & 18, Page 256-285 of case law compendium, Volume 3.1): ITAT upheld the assessment on the basis of that documents was received officially by the Government pursuant to an investigation made by permanent sub- committee on investigation of United States Senate. 1.12. In the case of Parag Dalmia v. DCIT, ITA No.5499/....
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....as out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. 1.16. Accordingly, as per section 65B of the Indian Evidence Act, 1872, the Revenue Authorities have to mandatorily and scrupulously follow the conditions laid down under section 65B(2) and (4) of the Indian Evidence Act, 1872 to render any documents to be valid in the eyes of law. 1.17. In the instant case, a certificate under section 65B of the Indian Evidence Act, 1872 (the "Certificate") issued by Under Secretary to the Government of India, FT&TR Division, CBDT [Kindly refer page 82-83 of the Paper Book, Volume.2] only states that a pen drive was received by Joint Secretary, FT&TR1, CBDT as per the India-France DTAA and thereafter printout of the documents was taken from the data stored in the pen drive through the computer installed in the office of the Indian Competent Authority at C Wing, Hudco Vishala Building, Bhikaji Cama Plance, New Delhi. Except these details not....
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....lause in section 65B(1) makes it clear that when it comes to information contained in an electronic record, admissibility and proof thereof must follow the drill of section 65B. The Hon'ble Court further observes that the requisite certificate in sub-section (4) is unnecessary if the original document itself is produced i.e., the owner of a laptop computer, a computer tablet or even a mobile phone, by stepping into the witness box and proving that the concerned device, on which the original information is first stored, is owned and/or operated by him. Further, it holds that in cases where "the computer", as defined, happens to be a part of a "computer system" or "computer network" and it becomes impossible to physically bring such network or system to the Court, then the only means of proving information contained in such electronic record can be in accordance with section 65B(1), together with the requisite certificate under section 65B(4) of the Indian Evidence Act. c) The Madras High Court in Vetrivel Mines v. ACIT, [2021] 129 taxmann.com 126 (Madras) dated 03.08.2021 (Relevant para: 21, 22, 25 & 26, Page 371-383 of case law compendium, Volume 3.1) allowed the writ petitio....
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....the assessment order passed in the case of the assessee on 31-3-2022 is not a valid assessment order in the eyes of law and it deserves to be set aside. 47. So far as Grounds No. 2 and 3 (AY 2012-13) are concerned, since we have set- aside the assessment order by allowing the Grounds No. 4 & 5 raised by the assessee, the Ground Nos 2 and 3 needs no separate adjudication. It is ordered accordingly. 48. In the result, appeal of the assessee for the AY 2012-13 is allowed." 2. Assessment under section 153A of the Act is bad in the absence of any incriminating material found during search operation. [AY 2006-07 and AY 2007-08: Ground number 1 and 1.1] [AY 2008-09 to AY 2012-13: Ground number 3 and 3.1] 2.1. The alleged undisclosed bank statement of the bank account with HSBC Bank, London was brought by the investigating officer when they came for search of appellant's premises on 23.08.2011 & 24.08.2011. The original or copy of the alleged bank account statement was never recovered from the Appellant Assessee during the search operation. Hence no incriminating material was found during the said search operation. Hence, Section 153A is inapplicable. 2.2. Accordingly, ra....
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.... preferred an appeal against the aforesaid order of Ld. CIT(A). Even if that appeal of revenue is allowed by this Hon'ble Bench, the incriminating material bears nexus to AY 2010-11. It will not confer jurisdiction to the department in relating to other completed assessments (vide para 11 of Abhisar Buildwell (P.) Ltd (supra), Page 416-436 of case law compendium, Volume 3.2) 3. The sum in question is not taxable under the Act in view of Article 23(3) under the India-UK DTAA and true meaning of the expression "may be" taxed employed therein. [AY 2006-07 and AY 2007-08: Ground Number 5, 6,7 (Additional Ground) AY 2008-09: Ground Number 6, 7, 8 (Additional Ground) AY 2009-10: Ground Number 6, 7 (Additional Ground) AY 2010-11: Ground Number 4, 5 (Additional Ground) AY 2011-12 and AY 2012-13: Ground Number 5, 6 (Additional Ground)] 3.1. Broadly speaking, section 90(2) of the Act is to this effect: where the Central Government has entered into an agreement with the Government of any country outside India, then the provisions of the Act shall apply to the extent they are more beneficial to an assessee. 3.2. The Appellant- Assessee has been assessed based on purported b....
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....l apply. 3. Notwithstanding the provisions of paragraphs (1) and (2) of this Article, items of income of a resident of a Contracting State not dealt with in the foregoing articles of this Convention, and arising in the other Contracting State may be taxed in that other State 3.5. Thus, vide, Article 23(3) of the India-UK DTAA, items of income not dealt with forgoing articles of the convention and being any income of resident of India arising in UK "may be taxed" in UK. In the light of decisions referred infra, when an article of a DTAA, suggest that income "may be taxed" in other contracting State tax, it cannot be charged to tax on that income by the resident State. Accordingly, the type of income falling under Article 23(3), if it arises in U.K., it is not liable to tax in India, even if the assessee is a resident of India. 3.6. The word "may be taxed" appearing DTAA entered by Government of India has been interpreted by courts in a catena of judgments explained infra. 8.7. P.V. A.L. Kulandayan Chettiar v. Income Tax Officer, [1983] 3 ITD 426 (MAD.) (SB), 27.12.1982, ITAT Madras (Special Bench) (Relevant para: 8, Page 451-454 of case law compendium, Volume 3.2): In this c....
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....plementation of the terms of the DTAA which would automatically override the provisions of the Income-tax Act in the matter of ascertainment of chargeability to income tax and ascertainment of total income, to the extent of the inconsistency with the terms of DTAC." The court held that the prevailing legal position is that once an income is held to be taxable in a tax jurisdiction under a double taxation avoidance agreement, unless there is a specific mention that it can also be taxed in the other tax jurisdiction, the other tax jurisdiction is denuded of its powers to tax the same (to check this extract) (fill up (5)) 3.12. DCIT v. Patni Computer Systems Ltd, [114 ITD 159 (Pune)], 29.06.2007, ITAT Pune, (Relevant para: Paras 7 & 8, Page 532-537 of case law compendium, Volume 3.2): In this case, inter alia, the court relied upon the interpretation of 'maybe' in aforesaid judgments. The aforesaid judgements deal with income from immovable property located in other contracting state. Patni Computers however related to business income. Principle of above judgement were applied to business income. The Tribunal expressly referred to relied on the judgments in the case of R.M....
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....ication number 91/2008 dated 28.08.2008 was issued by CBDT, which stated as follows: "In exercise of the powers conferred by sub-section (3) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that where an agreement entered into by the Central Government with the Government of any country outside India for granting relief of tax or as the case may be, avoidance of double taxation, provides that any income of a resident of India "may be taxed" in the other country, such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement." 3.18. In DCIT v. Bank of India [ITA No. 3082/2015/ITAT Mumbai 08.11.2017] (Relevant para: 5 & 12, Page 551-561 of case law compendium, Volume 3.2) relate to the appeal filed by the revenue for AY 2009-10 regarding taxability of business income earned in another state. It related to India-Kenya treaty for income from house property. ITAT relied upon its own rulings for AY 2004-05 and AY 2003-0....
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.... in question has been assessed by the Ld. AO as "income from the sources". 3.23. Therefore, self-evidently and even otherwise, the income represented by alleged credits in the bank account would be not covered by the relevant articles 6 to 22 of the India-UK DTA. Hence, it will be governed by Article 23 of the India-UK DTAA. 3.24. Since the bank account is in U.K., income purportedly represented by credit it would be income arising in U.K. Principles laid down by ITAT Patna in ITO v. Branch Manager 225 ITR AT 126 in the contest of Indo-Nepal treaty qua Nepalese resident suports the assessee in the present case qua India-UK treaty. 3.25. The decision of the Patna Bench of the ITAT in case of ITO v Branch Manager, State Bank of India [255 ITR (AT) 126] (Page 549-550 of case law compendium, Volume 3.2) is relevant as deals with applicability of Article 21 - Other Income of the Indo-Nepal DTAA. Although the said reported decision concerns appeal against the penalty levied u/s 271(1)(c) of the Act, order of ITAT quantum appeal is not reported or available it also set out the material facts and decision arrived in quantum proceedings for which penalty was levied, 3.26. Article ....
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....oncerned with Article 23 of the India-UK DTAA. This is based on the UN Model Convention. A superficial comparison of Article 21 of the Indo-Nepal DTAA with Article 23 of the India-UK DTAA should not be made arrive at a conclusion that sums deposited in the bank account in UK will be taxable in India which was the state of residence of the appellant in the present case. There is a material difference between Article 23 of the India-UK DTAA which is based on UN Model Convention and Article 21 of the Indo-Nepal DTAA which is based on OECD Model Convention. The difference is as follows: 3.34. Article 23 of the India-UK DTAA provides that: 1. Subject to the provisions of paragraph 2 of this Article, items of income beneficially owned by a resident of a Contracting State, wherever arising, other than income paid out of trusts or the estates of deceased persons in the course of administration, which are not dealt with tin the foregoing Articles of this Convention, shall be taxable only in that State. ........ 3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, items of income of a resident of a Contracting State not dealt with in the foregoing articles of this....
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....en made calling for information for period prior to 01.04.2011 (FY 2004-05 and FY 2005-06). Accordingly, the reference made by the Department in the present case is invalid in law, Consequently, the period of limitation can't be extended as claimed by the Ld. Assessing Officer in the impugned assessment order. Therefore, the assessment orders pertaining to AY 2006-07 to AY 2011-12 is bad in law. 4.3. This aspect is covered in favour of assessee by the following judgments: a) Late Shri Bhushan Lal Sawhney vs. DCIT (supra) (Relevant para: 8, 8.1, 8,2, Page 171-184 of case law compendium, Volume 3.1) No addition could be made of any unexplained bank deposits or interest earned thereon in the case of assessee for the relevant AYs i.c., 2006-2007 to 2011-2012 as by virtue of Notification No. 2903 (E) dated 27.12.2011 no information was provided by Swiss Authorities for the period prior to 01.04.2011. b) Shri Praveen Sawhney vs. ACIT, [2023] 152 taxmann.com 134, 18.05.2023, ITAT Delhi: (Relevant paras: 19, 20 & 21, Page 693-716 of case law compendium, Volume 3.2) In this instant case, the assessee had challenged the assessment order passed on him on 04.03.2015 on the ground t....
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..... In answer to the Question No. 45, the assessee has corrected his Stand to admit that he had deposited accumulated income over a period of many years. He submitted that the conduct of the assessee is not to come clean. Further, he submitted that the assessee was asked to file the bank statement and the assessee has not filed any bank statement before the authorities even during the appellate proceedings. No details were filed before the AO. Further, he submitted that even the assessee has not given consent form to obtain the bank statement through FT&TR Division of CBDT. It clearly shows that the assessee has not disclosed the above said bank account and bank balance voluntarily and without the action of search and seizure, the said disclosure would not have been possible. 16. With regard to incriminating material, he submitted that no doubt the Investigation Wing had the information about the bank account maintained by the assessee before initiation of search and on the basis of search the same was confronted before the assessee, the assessee had no option but to accept the same. Therefore, it is clearly an incriminating material for the simple reason that the information relati....
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....aving a bank account with the HSBC and not found any corresponding incriminating material in the possession of the searched person, it was held that the revenue cannot make addition purely on the basis of information which was already with the revenue prior to search. Whereas in the given case, the information with the revenue, no doubt prior to search, a bank statement with the complete details of bank transactions datewise/monthwise and details of assessee along with the family members of the assessee was received and the same was confronted with the assessee search assessment proceedings, the assessee has initially denied and subsequently agreed to having the bank account. The fact in the case is distinguishable to the above case. Normally, the department conducts the search proceedings in the case of several persons without having any information relating to the bank financial transaction but only based on the incomplete information about the clients code found in the USB from the Swiss authorities, without proper details, the information in the form of foreign language etc., The initiation of proceedings with the insufficient data and then tries to find the incriminating mater....
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....t. However, in the given case, as discussed in the above paragraph, the content of information with the revenue was not unverified but had details of the assessee with the relevant financial transactions, the assessee was cornered and finally accepted to have maintained the bank account. Therefore, these cases are distinguishable to the facts in the present case. e. In the cases of Renu Tharani, Ambrish Manoj Dhupelia, Parag Dalmia (supra), the issues were decided against the assessee, therefore, there is no need to discuss any further. 18. Ld AR submitted that the alleged documents of bank account with HSBC London belongs to the assessee is not admissible as electronic evidence considering the fact that the revenue has not made efforts to corroborate the contents of the documents under section 65B of the Indian Evidence Act, 1872. Therefore, it cannot be admitted as electronic evidence. It is mandatory on the part of the revenue authorities to follow the conditions laid down u/s 65B(2) and (4) of the IE Act. After careful consideration of facts on record, we are of the view that the relevant documents were confronted before the assessee and the assessee after considering the va....
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.... The other case law relied by the assessee's counsel are on the same line and therefore all these are distinguishable to the facts in the present case and we already discussed the issue in the above paragraphs. Therefore, we dismiss the submissions of the Ld AR. 19. The next submissions of the Ld AR is, the assessment u/s 153A of the Act is bad in the absence of any incriminating material found during the search operation. We observe that the authorities received the documents relating to the foreign bank account maintained by the assessee, with complete details relating to the details of the assessee and family along with the transactions, in order to verify the same, the search operation was initiated against the assessee, during the search assessment proceedings, the assessee has accepted to have maintained above foreign bank for a specific period. To the extent of the information contained in the bank statement, the assessee has declared the same as his income under the head income from other sources. Before us the assessee now challenges the proceedings initiated under section 153A as bad in law since no incriminating material found during the search. In our considered view, ....
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.... or reassess the "total income" taking into consideration the incriminating material unearthed during the search and the other material available with the Assessing Officer including the income declared in the returns; and in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration the other material in respect of completed assessments or unabated assessments, meaning thereby, in respect of completed or unabated assessments, no addition can be made by the Assessing Officer in the absence of any incriminating material having been found during the course of search under section 132 or requisition under section 132A of the Act. Court also held that the High Court was right in affirming the order of the Tribunal upholding the addition made on the basis of the incriminating material found during the search. However, completed or unabated assessments can be reopened by the Assessing Officer in exercise of powers under section 147 or 148 of the Act, subject to fulfillment of the conditions as envisaged or mentioned under section 147 or 148 of the Act and those powers are saved." 20. Therefore, the above decis....
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....urces of such cash deposits. It is the assessee who has disclosed the income voluntarily in its revised return of income and the same was accepted by the AO. It does not mean that the income actually falls in the category of income from other sources. Therefore, we are of the view that the assessee has not actually established or disclosed the sources of the deposits in the above said bank account. 22. Ld AR heavily relied on the decision in the case of Branch Manager, State Bank of India(supra) wherein two residents of Nepal made bank deposits in the SBI, Patna Branch and AO treated the above deposits as income is arising in India. Taxed the same u/s 163 of the Act in the hands of SBI, treated the SBI as agent of above said Nepali citizens. The ITAT deleted the addition by invoking the Art.21 of the Indo-Nepali DTAA and held that such income is taxable only in the Nepal which was the state of residence of both the Nepali citizens. The above said income was charged to tax as other sources by invoking sec.69 of the Act, the non residents are liable to tax under the Act only on income which has arisen in India. It was submitted that it is implicit and clear that income being sums de....
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....ded period due to reference to FT & TR division of CBDT calling for certain information, he submitted that the exchange of information between India and Switzerland applicable on or after 01.04.2011, therefore, the AO sent the request for calling information in the case of assessee for the period 2004-05 and 2005-06. The reference itself is invalid in law. After considering the above submission, we are of the view that the AO made the reference to FT&TR division for collecting information from the UK counterpart for the simple the reason that the information relevant for the case under consideration is from UK and not from Swiss even though the original information from Swiss authorities however, in this case the relevant information required from UK. There is no bar on the part of the AO to seek information from FT&TR division. This contention also cannot be accepted at this stage. 25. Accordingly, the various grounds including additional grounds raised by the assessee are dismissed for the impugned AY 2006-07. 26. With regard to other appeals filed by the assessee relating to AY 2007-08 which emanates from the additions proposed by the AO on the deposits made by the assessee du....
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....s a/c I have already given my reply vide question no. 25." 5.3. The department had identified peak balance of USD 608,200 in the bank statement in relation to period of August 2006. However, no interest was added for AY 2007-08 for the period between September 2006 to March 2007. The statement in the possession of the department does not indicate that any interest was being credited to the bank account, 5.4. The Hon'ble ITAT Delhi in Vikram Dhirani (Relevant para: 22) (supra) and Late Shri Bhushan Lal Sawhney (Relevant para: 12) (supra) has also held that the AO could not have added any notional interest to the income of the Assessee on a mere suspicion. 5.5. Also, no additions on account of notional bank interest has been made for AY 2013-14 and subsequent AYS. 29. On the other hand, the ld DR relied on the order of lower authorities. 30. Considered the rival submissions and material placed on record. We observed from the record that the AO proceeded to make the addition in AY 2006-07 and 2007-08 only on the basis of bank statement obtained from the data contained in pen drive forwarded by the French Authorities relating to the various account maintained in the HSBC. T....
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.... revised return for AY 2006-07 and AY 200708 was filed on 16.02.2015, splitting the income already returned entirely for AY 2007-08 into partly for AY 2006-07 & Balance for AY 2007-08. Impugned assessment is based on these returns filed under Section 153A of the Act. 6.2. Penalty proceedings have been initiated under section 271(1)(c) of the Act and imposed on the ground of concealment of income/ furnishing inaccurate particulars of income in the original returns filed under Section 139(1). No concealment is alleged in the revised returns filed under Section 153A. 6.3. In Shri Prem Arora v. DCIT, ITA No.4702 (Del) of 2010, ITAT Delhi dated 09.03.2012 (Relevant para: 30-33, Page 717-735 of case law compendium, Volume 3.2) a search and seizure action under section 132(1) of the Act was carried out in the case of assessee pursuant to which assessee filed returns of income for the relevant AY under section 153A of the Act admitting income from undisclosed business activities. The assessing officer completed assessment accepting the returned income filed under section 153A and invoked penalty under section 271(1)(c) read with section 274 of the Act. On appeal, the court held that on....
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.... had been conducted and such revised return was accepted by the AO then merely by virtue of the fact that such return showed a higher income, penalty under section 271(1)(c) cannot be automatically imposed. 6.6. Similarly, ratio was also laid down by the Hon'ble Punjab & Haryana High Court in CIT v. Suraj Bhan, [2007] 294 ITR 481(Punjab & Haryana) dated 19.04.2006 (Relevant para: 6, Page 760-761 of case law compendium, Volume 3.2) and Hon'ble Supreme Court in the case of PCIT v. Prabhjot Kaur Chhabra, [2020] 269 Taxman 34 (SC) decided on 02.07.2019 (Relevant para: Para 7, 8, 9 & 10, Page 762-764 of case law compendium, Volume 3.2) 6.7. Explanation 5A is inapplicable for a simple reason. Undisputedly, the alleged bank statement was already with the department when they came for search. It was not found in original or no copy during the search of the Appellant-Assessee premises. For this short explanation 5A is not attracted. In addition, the judgment of Hon'ble ITAT Delhi in Prem Arora (supra) and the ruling of ITAT Delhi in Neeraj Jindal (supra) and ruling of Hon'ble Delhi High Court in Neeraj Jindal (supra) rules out applicability of Explanation 5A. 6.8. In C....
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....e Hon'ble ITAT Mumbai in the case of DCIT v. Gopichand Roopchand Rajani (ITA No. 2158/Mum/2010 dated 27.05.2011. (Relevant para: 13, 14 & 15, Page 779-792 of case law compendium, Volume 3.2) c) The Hon'ble ITAT Hyderabad in the case of Shri P.V. Ramana Reddy v. ITO, ITA Nos. 1852-1857/Hyd/2011 dated 06.01.2012 (Relevant para: 8, Page 793812 of case law compendium, Volume 3.2) 7. There are conflicting decisions on applicability of Notification No.91/2008 dt.28.8.2008 and that too retrospectively. Hence, no penalty is imposable under Section 271(1) (c) for AY 2006-07 & 2007-08. [AY 2006-07, AY 2007-08: Ground Number 5 to 8 (Additional Ground) AY 2008-09: Ground Number 7 to 10 (Additional Ground) AY 2009-10, ΑΥ 2010-11, AY 2011-12 and AY 2012-13: Ground Number 7 to 9 (Additional Ground)] 7.1. The Appellant-Assessee submits that the interpretation of the phrase "may be taxed" in Article 23(3) of the India-UK DTAA and non-taxability of income of Indian resident arising in foreign country under Income Tax Act, 1961 has been settled in assessee favour by way of judicial precedents. Notification 91/2008 was issued only on 29.8.2008 modifying this legal pos....
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....er relates to AY 2008-09. The court observed that it is a debatable issue as there are divergent views by two different benches of the ITAT on the above issue. The court held that it is a trait law that where the issue is debatable, no penalty under section 271(1)(c) of the Act is leviable. 8. Penalty under section 271(1)(c) for exchange rate difference in AY 2006-07 is not sustainable 8.1. Pursuant to the search, the Appellant Assessee had, to buy peace of mind, in November 2011 suo-motto paid requisite taxes considering the income entirely to be of AY 2007-08. The Appellant Assessee had also reserved the right to offer the income to tax in respective years. Returns were filed under section 153A on this basis assessing the entire income to tax in AY 2007-08 (Kindly refer Page 40-42 of the Paper Book, Volume 1) 8.2. On 06.01.2014, the Appellant-Assessee was show-caused that a part of the peak balance of USD 575,010 stated in alleged bank statement was in relation to AY 2006-07 and as to why the sums should not be taxed in AY 2006-07, balance number of USD 5,75,010.88 being taxable in AY 2007-08. 8.3. In reply to the aforesaid notice, the Appellant-Assessee provided his cons....
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....in its discretion has reserved this discretion for the Assessing Officer. 9.3. CIT(A) may have the power to increase the addition or penalty, but such powers must be exercised only where the lower authority has not acted in accordance with law. The powers cannot be exercised merely to disturb the discretion of AO. 9.4. The penalty levied by Ld. AO was acted in accordance with law by levying the penalty at the rate of 100% of tax sought to be evaded. Having done so, the power of CIT(A) of increasing the penalty cannot be read to usurp the powers of AO and interfere with discretion that is otherwise reserved for AO. 9.5. The Ld. CIT(A) has cited that the Appellant-Assessee's alleged non-cooperation in submitting a consent letter to enable department to obtain copy of bank statement during the assessment proceedings as the basis for increasing the penalty from 100% to 200%. In doing 50, the Ld. CIT(A) has erred in law. The legislature has prescribed penalty under section 271(1)(b) for not submitting details during the assessment, In fact the Appellant-Assessee was penalised in terms of the said provision separately. Further, prosecution proceedings under section 276D for AY 2006....
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....ace with the revenue and accordingly, the AO had accepted the revised return of income to complete the quantum assessment. The information submitted by the assessee in the revised return of income was accepted by the AO. 35. We have analyzed whether the penalty can be imposed under explanation 5A of section 271(1)( c ) of the Act, for the sake of clarity, the same is reproduced below: "Explanation 5A.- Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of- (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,- (a) where the return of income for such previous year has been furnished before the s....
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....e explanation 5A of section 271(1)(c) of the Act. Therefore, in our view the AO had accepted the revised return of income and had not found any misreporting or concealment of income or even inaccurate particulars of income. Therefore, we are inclined to dismiss the penalty levied by the AO in the present case for the AY 2006-07 and AY 2007-08. Further, Ld CIT(A) has increased the quantum of penalty from 100% to 200% of Tax sought to be evaded. Since we have already deleted the penalty levied by the AO, the enhancement of above said penalty by the Ld CIT(A) also deserves to be deleted. Accordingly, the grounds raised by the assessee in AYs 2006-07 to 2007-08 are allowed. 37. With regard to other penalties levied by the AO, in the quantum appeals filed by the assessee in AY 2008-09 to 2012-13, we already held that the AO had applied the presumptions to make the addition of interest income with the belief that the assessee had maintained the funds in the HSBC Account in the subsequent years also. Since, we have deleted the above additions, imposing the penalty on the above interest income is not proper. Accordingly, we direct the AO to delete the penalty levied for the AY 2008-09 to ....