TaxTMI 
TaxTMI 
2024 (9) TMI 1052
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....Revenue : Dr. Darsi Suman Ratnam, CIT. DR & Shri Ashish Revar, Sr. DR ORDER PER BENCH: The above 82 appeals pertain to Late Shri Bipinchandra Prabhudas Patel (hereinafter referred to as "the assessee") and his wife Smt. Manjulaben Bipinbhai Patel in respect of assessments completed for 17 assessment years (A.Y.) from A.Y. 2000-01 to A.Y. 2016-17. All the 82 appeals filed by these two assessees and by the Revenue as well as the cross-objections were heard together. During the pendency of these group of appeals before the ITAT, Shri Bipinchandra Prabhudas Patel expired on 18.01.2021. Smt. Manjulaben Bipinbhai Patel has impleaded herself as his legal-heir and an affidavit to this effect has been filed. Further, the revised Form No.36 and 36A has also been filed in respect of appeals and cross-objections pertaining to late Shri Bipinchandra P. Patel. 2. The major controversy in all the appeals revolves around various transactions as reflected in the following foreign bank accounts of late Shri Bipinchandra Prabhudas Patel and Smt. Manjulaben Bipinchandra Patel:- i) Merrill Lynch Bank (Cayman Islands) ["MLB" for short] a) A/c No. ICA03B39 b) A/c No....
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....statement of Shri Bipinchandra P. Patel, initiated action against the assessee and Smt. Manjulaben B. Patel for 17 assessment years under different provisions of Act as follows: - i) U/s 147 of the Act : for AYs 2000-01 to 2009-10 ii) U/s 153A of the Act : for AYs 2010-11 to 2015-16 iii) U/s 143(3) of the Act : for AY 2016-17 4. Apart from the aforesaid foreign accounts, cash and jewellery were also found during the search operations. In the course of assessment proceedings, details of four foreign bank accounts held by the assessee in Hinduja Bank (Switzerland), as detailed earlier, were received through FT&TR Division of the CBDT. These accounts were having deposits during the period of financial years 2013-14 to 2016-17. The assessments were completed in the case of Shri Bipinchandra P. Patel and Smt. Manjulaben B. Patel after making additions in respect of credits reflected in the foreign bank accounts. Further, addition in respect of jewellery found during the search was also made. 5. It will be relevant here to discuss certain facts of the case pertaining to foreign bank accounts of the assessee in slight details in order to appreciate and properly exa....
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.... as reflected in these bank accounts were treated as income of the assessee and additions were made in AYs 2013-14 to 2016-17. The total additions made in respect of credits reflected in foreign bank accounts from AYs 2000-01 to 2016-17 aggregated to Rs. 24,18,78,960/-. As the foreign bank accounts were held by the assessee and Smt. Manjulaben B. Patel jointly, the Assessing Officer had made the addition of Rs. 24,18,78,960/- in the hands of both the persons in the following manner: - (i) 50% of the amount was added on substantive basis; (ii) 50% of the amount was added on protective basis. 9. Aggrieved with the orders of the Assessing Officer, appeals were filed before the First Appellate Authority by the assessee as well as by Smt. Manjulaben B. Patel. The ld. CIT(A) rejected all the technical grounds raised by the assessee in respect of reopening u/s 147 of the Act as well as the proceedings u/s 153A of the Act. He, however, adopted a different mechanism for working out the amount of income in respect of funds credited in foreign bank accounts. Apart from the credit side entries, he considered the entries on the debit side as well and reworked the income for....
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....he appellant has received or has been enriched in any manner whatsoever by any funds from the alleged foreign bank accounts, - Ld. AO has grievously erred in passing the order on "False Statement / Grounds/basis that incriminating documents were found or gathered from searched premises whereas the addition was made based on the documents gathered from unknown sources. - Ld. AO has passed the impugned order with the predetermined mind set to make high pitched assessment which can be proved from the fact that details and statements related to offshore trust accounts were provided almost after 22 months post search conducted and that too after number of requests made by your appellant. Such details and statements were running into around 2,500 pages. Accordingly, the order passed was without providing sufficient opportunity to your appellant to represent his case and as such violates principles of natural justice. 1.02 On the facts and in circumstances of your appellant's case and in law, the reasons recorded before issue of notice u/s 148 of the Act does not spell out clearly any income that has escaped assessment, in as much as, it only states that "am....
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...."1.00 Order passed u/s 153A r.w.s. 143(3) of the Act is void and deserved to be quashed: 1.01 On the facts and in circumstances of your appellant's case and in law, Id. CIT(A) failed to appreciate that - - Your appellant was simply settlor and Merrill Lynch was the director of the Company, therefore the ld. AO ought to have called on relevant information from the directors rather than calling the information from settlor and as such the act of Ld. AO is arbitrary to make impugned addition of Rs. 61,02,094/- to the returned income. - No documents were found during search or thereafter to prove that the funds in the alleged foreign bank accounts are transferred or sourced by the appellant and likewise the Id. AO also not proved that the appellant has received or has been enriched in any manner whatsoever by any funds from the alleged foreign bank accounts. - Ld. AO has grievously erred in passing the order on "False Statement / Grounds/basis that incriminating documents were found or gathered from searched premises whereas the addition was made based on the documents gathered from unknown sources. - Ld. AO has passed the impugned order....
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....d/2019 are identical as in IT(SS)A No.569/Ahd/2019 (except the amounts mentioned in Ground 1.01 and in Ground 1.03 of each appeal). 14. Grounds of appeal in ITA No.31/Ahd/2020 for A.Y. 2000-01 filed by the Revenue are as under: "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in restricting the addition of Rs. 54,43,228/- to Rs. 38,58,950/- on account of undisclosed income from foreign bank account, by not appreciating the facts involved in this case. . 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the income on account of STCG/LTCG which relate to transactions in shares and find place in bank statement showing realized gain/loss. 3. The issue involved is related to undisclosed foreign bank accounts which falls within the ambit of exception under para 10(d) of the C.B.D.T. instruction no. 17/2019 dated 08.08.2019. 4. It is, therefore, prayed that the order the Ld. CIT(A) 12, Ahmedabad may be set aside and that of the AO may be restored to the above extent. 5. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of....
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....ry found from Locker No.-17 not owned by your appellant on the ground that explanations given by your appellant do not corroborate with supporting evidence and as such it is not reliable. Ld. CIT(A) also failed to appreciate that the said locker was never operated since last 10 years as confirmed by the bank. 17. Grounds of appeal in ITA No.1915/Ahd/2019 for A.Y. 2016-17 filed by the assessee is also identical to grounds in ITA No. 1894/Ahd/2019 except that an additional ground No. 3 has been raised as under: 3.00 On the facts and in the circumstances of your appellant's case and in law, ld. CIT(A) erred in confirming addition of Rs. 52,41,977/-- on protective basis on account of jewellery found during the course of search though full details has been confirmed on this account in the hands of Smt. Jigishaben Patel, daughter-in- law of your appellant by virtue of order dated 07.01.2019 arising out of appeal No. CIT(A)-12/320/CC 1/2017-18. 18. Grounds of appeal in ITA No.50/Ahd/2020 for A.Y. 2016-17 filed by the Revenue are as under: 1. On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting the addition of Rs. 3,65,49....
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....he lead year(s) and discuss the grounds taken by the assessee as well as by the Revenue in detail in these years. The appeals pertaining to A.Y. 2000-01 are ITA No.1894/Ahd/2019 filed by the assessee and ITA No.31/Ahd/2020 filed by the Revenue. The assessee has also filed CO No. 54/Ahd/2020 in ITA No.31/Ahd/2020 with delay of 99 days. The delay was explained to be on account of Covid pandemic and, therefore, the delay is condoned. The appeals pertaining to A.Y. 2010-11 are IT(SS)A No.569/Ahd/2019 filed by the assessee and IT(SS)A No.01/Ahd/2020 filed by the Revenue with CO No.47/Ahd/2020. 21. We have heard Shri Tushar Hemani, Sr. Advocate and Shri Parimalsinh B. Parmar, AR appearing for the assessee as well as Dr. Darsi Suman Ratnam, CIT.DR on the various grounds taken in these appeals. Shri Tushar Hemani, Ld. Senior Counsel explained that the various grounds taken by the assessee can be categorized in following four categories: i. Principle of natural justice; ii. Reopening under Section 147 of the Act for the A.Ys. 2000-01 to 2009-10; iii. Completion of unabated assessment without incriminating material for A.Ys. 2010-11 to 2014-15; & iv. Gr....
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....was examined by the AO in the course of remand proceedings. The assessee had made further submissions in respect of year wise net income calculated as per bank statements, post remand report. Thus, sufficient opportunities were allowed to the assessee before the Ld. CIT(A) as well. The Ld. CIT.DR relied upon the decision of Hon'ble Calcutta High Court in case of Hydro Carbon Services (P.) Ltd. vs. Union of India, [2021] 131 taxmann.com 175 (Calcutta) in support of his contention that there was no violation of natural justice. 24. We have carefully considered the rival submissions and also gone through the assessment order. The Revenue has furnished a timeline chart of the events that took place in this case, which is reproduced below: Assessment Proceedings Sr. no. Date Event Reference Remarks 1. 02.12.2015 Search & Statement u/s 132 Para 2.1-2.2 Pg 1-2 of AO 2. 03.12.2015 Statement recorded where asked to explain contents of letter in Qs no 30. Para 5.9 Pg 31 of AO 3. 11.01.2016 Statements by (A) Para 5 Pg 18 of CIT (A) Order 4. 27.01.2016 Statements by (A) Para 5 Pg 18 of CIT (A) Or....
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.... accounts 21. 29.12.2017 Assessment Order Passed Pg73 Appellate Proceedings Sr. no. Date Event Reference Remarks 22. 24.01.2018 Appeal e-filed by Assesses Pg 2 of CIT(A) order 23. 09.09.2018 Submission of Assessee to CIT(A) PB dated 06.09.2023 Pg 40 24. 30.11.2018 Submission made by Assessee forwarded to AO vide letter Para 5 Pg 37 of CIT(A) 25. 10.12.2018 Paper book submission Para 3.9 Pg 40 of CIT(A) 26. 04.05.2019 Letter of Summarized statement of income from bank accounts of NAD investment furnished to Ld. AO by Assessee Pg 43 of CIT (A) 27. 07.05.2019 Letter dated 04.05.2019 acknowledged by Ld. AO & Ld. / AR furnished details and explanations Pg 40 & 43 of CIT (A) 28. 30.09.2019 AO Remand Report Para 5 Pg 37 of CIT(A) 29.. 07.10.2019 Remand Report received by Assessee Para 8.16 Pg 51 of CIT (A) 30. 19.10.2019 Rejoinder of Assessee Para 6 Pg 41 of CIT(A) 31. 21.10.2019 Hearing post Remand Report Para 7 Pg 44 of CIT (A) ....
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.... CIT(A) had also allowed sufficient opportunities to the assessee to explain the transactions in the foreign bank accounts by admitting the additional evidences filed before him. The assessee had made submissions before the AO in the course of remand proceeding as well as before the Ld. CIT(A) after receipt of the remand report. Even if the Ld. CIT(A) passed his order within a month of the remand report, it is not the case that the he didn't consider the submissions of the assessee on the rejoinder of the remand report. Rather, the ld. CIT(A) has passed a detailed order considering and taking into account the submissions of the assessee and has substantially reduced the additions as made by the AO. We, therefore, do not find any instance of violation of natural justice in this case. The assessee was allowed sufficient opportunities to explain the transactions in the foreign bank accounts. The case laws relied upon the assessee are not found applicable to the peculiar facts of this case as discussed above. Therefore, the grounds taken by the assessee in respect of providing insufficient opportunities and violation of principle of natural justice are dismissed. Reopening u/s. 147 ....
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....opening was absolutely vague, scanty and nonspecific: According to the Ld. Senior Counsel, the nature of underlying transaction was not specified in the reason. In this regard, he placed reliance on the following decisions: 1. Paresh Babubhai Bhalani vs. ITO, [2023] 156 taxmann.com 517 (Guj.) 2. Surani Steel Tubes Ltd. vs. ITO, [2022] 136 taxmann.com 139 (Guj.) (D) AO had not quantified amount of escapement of income chargeable to tax - The Ld. Sr. Counsel submitted that no notice u/s. 148 of the Act can be issued beyond four years unless the income chargeable to tax that has escaped assessment is Rs. One Lakh or more. He submitted that this condition was not fulfilled as the AO had not quantified the amount of escapement for the different years in the reason as recorded by him. He further relied on the followings decisions: 1. Mahesh Kumar Gupta vs. CIT, 363 ITR 300 (Allahabad) 2. Novo Nordisk India P. Ltd., [2018] 95 taxmann.com 225 (Kar.) (E) Reopening was barred by limitation - The Ld. Senior Counsel explained that the AO had resorted to Clause (c) of Section 149(1) of the Act which was inserted w.e.f. 01.07.2012 for issuing notice u/s.....
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....n this regard, he relied upon the decision of Hon'ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das, [1976] 103 ITR 437 (SC). As regarding amendment made in Section 149 of the Act vide Finance Act, 2012 w.e.f. 01.07.2012, the Ld. CIT.DR submitted that the said amendment was retrospective in nature. In this regard, he has placed reliance on the Explanation to Section 149 of the Act as well as Memorandum of the Finance Bill, 2012. He further submitted that the decision of Hon'ble Delhi High Court in the case of Brahm Dutt vs. ACIT (supra) relied upon by the assessee was without considering the retrospective application of Section 149(1)(c) of the Act. In this regard, he has placed reliance on the decision of ITAT, Mumbai Bench in the case of DCIT vs. Dilip J. Thakkar, 135 taxmann.com 208 (ITAT Mumbai). 29. We have carefully considered the rival submissions. In order to examine the objections of the assessee in respect of reopening under Section 147 of the Act, it will be relevant to reproduce the reason as recorded by the AO. The assessee has filed a copy of the reason in the paper book which is reproduced below: "The assessee has furnished the return of income.....
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....nk accounts : 4.1 In the meantime, a request was made to tax authorities of Cayman Islands, through FT & TR division of Central Board of Direct Taxes, New Delhi (CBDT), to obtain the bank statements as well as account opening forms for bank account numbers ICA03B39and 16503B39. In the copies of bank accounts/details received from FT & TR division of CBDT, the following year wise deposits in these bank accounts were found which is apparently on account of interest) dividend, person cheque deposits, wire transfers etc. which needs to be taxed in the hands of Shri Bipinchandra Patel and Smt. Manjulaben Patel for relevant assessment years. Financial Year Amount in US$ Average Exchange Rate as per RBI Amount in Rupees 1999-2000 124,396.00 43.3327 5390415 2000-01 254,994.56 45.6844 11649273 2001-02 3110.04 47.6919 148324 2002-03 4766.93 48.3953 230697 2003-04 3585.58 45.9516 164763 2004-05 2667.69 44.9315 119863 2005-06 145,526.01 44.2735 6442946 2006-07 93,038.14 45.2849 4213223 2007-08 22989.11 40.241 925105 2008-09 2824.59 45.917 129697 ....
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....anation (2)(d) of Section 147 of the Act was directly applicable in this case. There is no dispute to the fact that the foreign bank accounts, which were confronted to the assessee in the course of his statement recorded under Section 132(4) of the Act during the search, were not disclosed in the income tax returns filed with the Department. In view of the specific provision of deemed escapement of income in respect of foreign assets (bank account of the assessee), the case laws as relied upon by the Ld. Sr. Counsel in this respect are not found applicable to the facts of the present case. Whether reopening was based on borrowed satisfaction? 31. The 2nd objection of the assessee is that the cases were reopened on borrowed satisfaction without application of mind by the AO. We do not find any merit in this objection. The details received by the AO from FT & TR Division of CBDT was an 'information' based on which the AO had formed his opinion that the income chargeable to tax had escaped assessment. The AO had recorded a detailed reasons (as reproduced above) and he had considered all the information as available including the statement of the assessee recorded u/s. 132(4) of ....
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....opening of the cases on account of undisclosed foreign bank accounts of the assessee. The background of the case, the information available with the AO, the explanation of the assessee has been discussed in detail and taken into account, while the AO formed his opinion that the foreign bank accounts of the assessee were undisclosed and that the income had escaped assessment. Therefore, the ground taken by the assessee in this regard is found to be baseless, and is dismissed. The facts of the case laws as relied upon by the assessee in this respect are found to be totally different and not directly applicable to the facts of the present case, as the nature of underlying transaction was specified in the reasons recorded in this case. Whether quantification of escaped income is necessary? 35. The assessee has contended that the AO had not quantified the amount of escapement of income chargeable to tax. This objection of the assessee is found to be perfunctory as the AO had quantified the amount of escapement for the different years in the reasons as recorded and the quantum of escapement was mentioned in the table as appearing in the reason. Further, the quantification of escape....
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.... any entity) located outside India, chargeable to tax, has escaped assessment. ......... Explanation.-For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. (Emphasis supplied) 37. As per this amendment the time limit for issue of notice for reopening was increased to 16 years where the income in relation to any foreign asset had escaped assessment. The Explanation further clarified that the amended time limit of 16 years vide Finance Act, 2012 was applicable to any assessment year beginning on or before 1st day of April, 2012. Thus, the retrospective nature of this amendment for reopening the cases up to 16 years in case of escapement of any foreign income was made explicit by the legislature. The intention of the legislature was also categorically explained in the Memorandum to Finance Bill, 2012 which is reproduced below: REASSESSMENT OF INCOME IN RELATION TO ANY ASSET LOCATED OUTSIDE INDIA Under the provisions of section 149 of the Income-tax Act, the time limit for i....
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....ear time period on the strength of the amended provision. The Hon'ble Supreme Court held that the period for serving a notice of reassessment under the unamended section had expired and the amending provision had come into force after the expiry of the said period. Therefore, the amended provision will not come to the assistance of the AO to issue the reassessment notice, for the period already expired. The observation of the Hon'ble Apex Court is reproduced below: As we have already pointed out, the right to commence a proceeding for assessment against the assessee as an agent of a non-resident party under the Income-tax Act before it was amended, ended on March 31, 1956. It is true that under the amending Act by section 18 of the Finance Act, 1956, authority was conferred upon the Income-tax Officer to assess a person as an agent of a foreign party under section 43 within two years from the end of the year of assessment. But authority of the Income-tax Officer under the Act before it was amended by the Finance Act of 1956, having already come to an end, the amending provision will not assist him to commence a proceeding even though at the date when he issued the notice i....
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....ly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect or destroy any right already acquired or to revive any remedy already lost by efflux of time. That the language of the new section must be read as applicable only to those cases where the right of the ITO to reopen the assessment was not barred under the repealed section. That the new statute does not disclose in express terms or by necessary implication that there was a revival of the right of the ITO to reopen an assessment which was already barred under the old Act. The Hon'ble Supreme Court had relied upon the decision in the case of SS Gadgil (supra) and re-iterated the principle of rule of interpretation that the new statute must disclose in express terms or by necessary implication, its intent that the amended provision will have retrospective application and that there was a revival of the right of the AO to reopen an assessment which was already barred under the old Act. As already discussed earlier the retrospective application of the amended provision of section 147 w.e.f. 1st April, 2012 was expressed unequivocally by insertion of Explanat....
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.... matters which have attained finality under the then existing law due to limitation and, therefore, the new Act cannot be applied. Provision for limitation is not a mere procedure and unless it is made retrospectively, it cannot be acted upon retrospectively for reviving any barred and extinguished assessments on the date when the Act came into force. (Emphasis supplied). The Hon'ble Court had acknowledged that the provision of limitation can't be acted upon retrospectively unless the new provision was given retrospective application by the Statute. 44. In the case of C.B. Richards Ellis Mauritius Ltd. (supra) the reassessment notice dated 30.3.2009 under Section 148 of the Act for the A.Y. 1998-99 was challenged vis-à-vis the amendment vide Finance Act, 2001. Earlier the time limit of reopening was up to 10 years which was reduced to 6 years vide this amendment. Commenting on the law of limitation the Hon'ble Delhi Court had held as under: 11. Law of limitation, therefore, being procedural law has to be applied to the proceedings on the date of institution/filing. No person can have a vested right in the procedure. Therefore, the procedural law on the date wh....
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.... officers, but the liability under the charging section can only be said to be unenforceable after the expiry of the period under the law as it stands. In other words, though the liability to pay tax remains it cannot be enforced by the officers administering the tax laws. If the disability is removed or according to a new law a new time limit is created retrospectively, there is no reason why the liability should not be treated as still enforceable. The law does not deal with concluded claims or their revival but with the enforcement of a liability to the State which though existing remained to be enforced... ** ** ** 95. .....It says that the limit of time mentioned in Section 34 is removed in certain cases that is to say, action can be taken at any time in these cases. In our judgment, each case of a notice must be judged according to the law existing on the date the notice was issued or served, as the law may require. So long as the notice where the notice is in question, and the assessment, where the assessment is in question, are within the time limited by the law, as it exists when the respective actions are taken, the actions cannot be questioned provided ....
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....td. [1994] 206 ITR 727, and, more so in this case, particularly when Explanation below section 149(3), which did not come up for consideration before Their Lordships, has explicitly been relied upon by the learned Commissioner (Departmental Representative) before us. The Hon'ble non-jurisdictional High Court judgment, as we have seen in our analysis of legal position earlier in this order, in any event, do not constitute unquestionably binding judicial precedents, which cannot be deviated from, for us. While the views expressed by even non-jurisdictional High Court does deserve utmost respect and reverence, that position is still a step below the unquestionable binding force of law. On the peculiar facts of this case, it is not open to us to disregard the Explanation above below section 149(3) based on a judicial precedent that had no occasion to even deal with the same. Regarding the Hon'ble Supreme Court's summary dismissal of SLP against the Brahm Datt case (supra), as relied upon by the assessee, it is only elementary that mere dismissal of an SLP does not amount to a decision on the law. Such a summary dismissal of SLP cannot be treated as a binding precedent under....
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....ime in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021. The Hon'ble Court held that in view of express language of 1st proviso to Section 149(1), legislative mandate required that no notice could be issued under the new provision, if such notice could not be issued at that time on account of being beyond the time specified under the said section as it stood before the commencement of the Finance Act 2021, i.e. a period of six years. Further, in view of decision of Hon'ble Supreme Court in case of Ashish Agarwal (supra), the notices issued to the respective assessees under section 148 shall be deemed to be notices under section 148A(b) of the Act as substituted by Finance Act 2021. Accordingly, it was held that the notices under section 148A (by deeming fiction) was issued, between the peri....
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....t, 2017 came into effect, block period of six assessment years would get extended to ten assessment years. 50. The assessee has also relied upon the judgement of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. 88 ITR 192 (SC) in support of the proposition that if two view are possible, the view in favour of the assessee must be adopted. We don't find any ambiguity in respect of the issue of reopening. The express provision of Explanation to section 149 of the Act, which in unequivocal terms stated that amended provision will have retrospective effect, mandates for issue of notice for 16 years period for reopening the cases in the event of escapement of foreign income. Further the decisions of Hon'ble Supreme Court and the other decisions as discussed above have endorsed the view that if the amended provision has retrospective application, the reopening has to be held as correct. The law as existing on the date of issue of notice has to be applied and in the present case it is clear that the cases can be reopened up to 16 years. Therefore, the notice under section 148 of the Act issued by the AO for the assessment years 2000-01 to 2009-10 are held as valid, c....
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....g to the Ld. Sr. Counsel, the additions made by the AO in respect of foreign bank accounts were not based on any incriminating material found from the premises of the assessee during the search. He submitted that in the case of unabated assessment no addition can be made in the absence of any incriminating material found during the search. In this regard, he has placed reliance mainly on the following decisions: i. CIT v. Abhishar Buildwell (P.) Ltd., [2023] 149 taxmann.com 399/293 Taxman 141/454 ITR 212 (SC) ii. Pr.CIT-4 v. Saumya Construction (P) Ltd., (2016) 387 ITR 529 (Guj- HC) iii. CIT vs. Kabul Chawla, [2016] 380 ITR 573 (Del HC) 53. The Ld. Sr. Counsel further submitted that the statements recorded by the Revenue doesn't constitute incriminating material, for which reliance was placed on the following decisions: i. CIT v. Best Infrastructure Ltd. (2017) 397 ITR 82 (Del-HC) ii. PCIT vs. Anand Kr. Jain & Ors. Manu/DE/0347/7021 (Delhi) iii. CIT vs. Harjeev Aggarwal - [2016] 70 taxmann.com 95 (Delhi) 54. The Ld. Sr. Counsel contended that the material brought by search team along with them during course of search do no....
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.... the rival contentions, we deem it proper to refer to the judicial decisions on which reliance has been placed by the learned counsel for the respective parties. Prior to the judgment of Hon'ble Supreme Court in the case of Abhisar Buildwell (supra), the majority view of various High Courts was that no addition can be made in respect of completed/unabated assessment in the absence of any incriminating material. The lead judgments in this respect were that of the Hon'ble Delhi High Court in the case of Kabul Chawla (61 taxmann.com 412) (Del) and by the Hon'ble Gujarat High Court in the case of Saumya Constructions (81 taxmann.com 291) (Guj). The Hon'ble Allahabad High Court, however, in the case of CIT v. Mehndipur Balaji [2023] (147 taxmann.com 201) (All) had taken a contrary view. After the declaration of law on the issue by the Hon'ble Apex Court, reference and reliance on various other decisions of different High Courts and Tribunals, will be otiose. The doctrine of precedence is absolute for the lower courts and therefore, we don't find it necessary to refer to other decisions relied upon by the assessee in this regard. 57. The Hon'ble Supreme Court in the case of Abhisar Bu....
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....hasis supplied) 58. It is evident from the ratio of this decision as enumerated in Para 14(iii), that the scope of unabated / completed assessment is not confined only to the incriminating material found during search. The Hon'ble Apex Court has categorically held that the AO would assume the jurisdiction to assess or re-assessee the "total income" by taking into consideration the incriminating material unearthed during the search and the 'other material' available with the AO, including the income declared in the returns. The essence of the judgement is that the incriminating material found during the search gives the AO the jurisdiction to assess or reassess the 'total income' u/s 153A of the Act of the unabated/completed assessment. In the absence of any incriminating material unearthed during the search the AO would not have the jurisdiction to proceed in the unabated/completed year(s) only on the basis of other material. However, once the jurisdiction is assumed by the AO on the strength of incriminating material found during the search, the AO has to assess or reassess the 'total income' of the unabated year not only on the basis of incriminating material found during the ....
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....ocuments can't be considered as 'incriminating material' found during the search but are in the nature of 'other material' and the very basis upon which the search was conducted at the premises of the assessee. 60. In fact, the word "incriminating" is nowhere defined under the Income Tax Act. The provision of section 153A of the Act, only refers to books of accounts or other documents or assets or evidences found during the search and which has a bearing on the total income of the assessee. The Explanation 2 to section 153A clarifies that asset includes deposits in bank accounts. The dictionary meaning of the word "incriminating" is "making it seem that someone is guilty, especially of a crime". Therefore, any evidence found during the search as well as the basis of search, which has a bearing on the income of the assessee and which is not correctly disclosed to the Department, will be in the nature of 'incriminating material'. Such incriminating material found in the course of search can be any form of evidence such as a document, an entry in the books of accounts, an asset, a statement given on oath, absence of any fact claimed earlier but not found during the course of search....
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....ial Pin of a credit card issued by Barclays Bank were also seized. In the course of statement recorded u/s. 132(4) of the Act on 03.12.2015, the assessee was enquired about these documents and in reply to question no.30, he had stated as under: Q 30: During the course of search u/s 132 at your residential premises on 2/12/2015 certain loose papers were found and inventorized in a loose paper file as per Ax. A-1 containing pages 1 to 54. Kindly confirm whether the same have been found from your premises and give page wise description for the same. Ans.: I confirm that the loose paper, cards etc. were found during the course of search from my residential premises and the page wise description is as under: Page Nos. - 1 to 6 are xerox copy of visiting cards. ........ Page 26 - Credit Card related correspondence resident from Barclays Bank for Add on card of my sister Prabhavatiben Amin Page 27 - Visiting card Page 37 to 42 - Brochure of Barclays Bank Page 43 to 54 - Actual visiting cards, copies of which were already explained while explaining page no. 1 to 6. Q.31 During the course of search at your resi....
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....he assessee in the course of search. 65. In the statement of the assessee recorded u/s. 132(4) of the Act on 27.01.2016, extract of bank statement of Account No. I6503B39 and ICA03B39 in MLB in the name of M/s. NAD Investment Ltd. was confronted to the assessee and he was required to explain the source of $684468. The relevant questions put to the assessee and the reply of the assessee are reproduced below: "Q 4. You are shown the extract of bank statement of bank a/c. no. I6503B39 and ICA03B39 in Meryll lynch bank in the name of the company M/s. NAD Investment Ltd. There are total 31 transactions of deposits from the period 12/01/2000 to 16/09/2010 totalling to $6,84,468/- by way of fund transfer wire transfers, cheque deposits and money transfer. The company NAD Investment Ltd. was a property of a trust, whose settler as well as beneficiary were you and your wife Smt. Manjulaben Patel. Therefore you are requested to kindly explain the source of this $6,84,468/-. Ans 4:- First of all we were only Settler working under instruction of my sister. Any of these above amount had not been withdrawn or deposited by me from Indian funds. My sister's name is Prabhavatib....
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....Ans 11 Shri Anil Chaturvedi was Branch Manager of State Bank of India, Markarpura Indl. Est. Branch, Vadodara, where my account is there for last more than 45 years. I am not regularly in touch with him except talk phone." 66. The above statement was recorded in the course of search of the locker of wooden cupboard in the room near the staircase at the residence of the assessee on 27/01/2016. According to the Revenue, the documents referred in this statement were found from the pen-drive and the mobile backup taken on the date of search. Obviously, these documents were not available with the Revenue on the original date of search, else questions would have been put to the assessee in this respect on the date of original search itself. However, in the statement recorded on 27/01/2016 there is no mention in the questions raised by the Revenue as to from where these documents, which were confronted to the assessee, were found. Be that as it may, there is no doubt that evidences for foreign bank accounts as available with the Revenue and the bank statement of the foreign bank accounts of the assessee were confronted to the assessee in the course of statements recorded during the sea....
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....ng assessment years. As regarding statement of T, a copy of the said statement was not provided to the assessee and he was also not offered for cross-examination. Further 'T' had retracted from his statement and, therefore, his statement was discarded. Thus, the facts of that case are found to be totally different. In that case reliance was placed on statement of third party whereas in the present case the reliance is on the statement of the assessee himself and, therefore, the ratio of that decision can't be imported here. Rather, the statement u/s 132(4) of the Director of the company was considered as incriminating material by the Hon'ble Delhi High Court for the year to which the surrender pertained. 69. In the case of Anand Kumar Jain and Ors. (supra) the Hon'ble Delhi High Court has held that the statements recorded under section 132(4) of the Act alone cannot justify the additions made by the AO. According to the Hon'ble Court, the statement certainly has the evidentiary value and relevance as contemplated under the explanation to section 132(4) of the Act. However, such statement cannot, on standalone basis, without reference to any other material discovered duri....
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.... control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. ...(Emphasis supplied). 71. It is relevant to consider here that the decision of Hon'ble Delhi High Court in that case was given in the context of section 158BC of the Act, which required computation of undisclosed income only for the block period. On the other hand, the provision of section 153A of the Act, requires the AO to compute the 'total income' of the assessee considering the evidences found during the search as well as the other evidences as available with him. Therefore, the statement recorded during the search u/s 132(4) is not confined only to materials found during the search. As held by the Hon'ble Delhi High Court, the statement can be recorded in respect of al....
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....essity to scrutinize the documents. The document can be of some relevance, if the undisclosed income is determined higher than what is now determined by the department. Moreover, it is not the case of the assessee that the admission made by him was incorrect or there is mistake. In fact, when there is a clear admission, voluntarily made, by the assessee, that would constitute a good piece of evidence for the Revenue. The Special Leave Petition filed against this order was dismissed by the Hon'ble Apex Court in B. Kishore Kumar v. Dy. CIT [2005] 62 taxmann.com 215. The fact that a mere statement U/s 132(4) is evidence for making an assessment was upheld in this judgement. Thus, even a statement u/s 132(4) shall constitute incriminating material for the purpose of making an assessment U/s 153A of the Act. 74. In view of the above facts and analysis of the judicial pronouncements we are of the considered opinion that certain evidences in respect of the interest of the assessee in the foreign assets were found in the course of search in the form of communication of Barclays Bank and the visiting card of Shri Anil Chaturvedi representing MLB & HBS, which were incriminating evidenc....
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....filed before the AO in the course of assessment proceeding, which was ignored. The Ld. Sr. Counsel submitted that the contents of the affidavit cannot be ignored unless proved to be contrary by the Revenue and in this regard reliance was placed on the decision of Hon'ble Jurisdictional High Court in the case of Glass Lines Equipments Company Ltd. Vs. CIT, reported in 253 ITR 454 (Gujarat). 76. The Ld. Sr. Counsel further submitted that in the course of statement under Section 132(4) of the Act, the assessee had explained that one Mr. Anil Chaturvedi was the Fund Manager who was involved in the process of opening the foreign bank accounts in question and, thereafter, the transactions were looked after by him. This fact was also confirmed by Shri Anil Chaturvedi and the visiting card of the Anil Chaturvedi was also found in the course of search. In spite of this clarification of the assessee, the AO did not make any enquiry from Shri Anil Chaturvedi. According to the Ld. Sr. Counsel, there was no specific material with the department to demonstrate that the transactions in the foreign bank accounts were carried out by the assessee and that the entire addition was based solely on t....
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....ion of Section 79A of the Act which prohibits set off of losses subsequent to search was inserted by Finance Act, 2022 w.e.f. 01.04.2022 and the amendment was prospective in nature. Therefore, the assessee was eligible for set off of losses subsequent to search. The Ld. AR contended that the losses in question were worked out on the basis of same material based on which income was worked out and additions were made. According to the Ld. Sr. Counsel, any document has to be read in its entirety and it was not permissible for the Revenue to adopt pick and choose method. He further submitted that the losses falling within the block period must be allowed, reliance for which was placed on the following decisions: i. E.K. Lingamurthy(2009) 314 ITR 305 (SC): ii. H.E. Distilleries (P.) Ltd. (2010) 229 CTR 457 (Karnataka) iii. Fenoplast Ltd.(2014) 367 ITR 761 (AP & Telangana): iv. Ch. Mohan v ACIT-(2014) 369 ITR 189 (Andhra Pradesh); v. P Mohammed alias Manu- (2014) 41 taxmann.com 6 (Kerala); vi. P.D. Abrahm - (2012) 349 ITR 442 (Kerala): vii. Mahalaxmi Motors Ltd.-(2014) 368 ITR 724 (AP): 79. The Ld. Sr. Counsel further subm....
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.... assessee's sister or even her husband was mentioned anywhere. The Ld. CIT-DR vehemently submitted that the assessee had not explained, that if the accounts were opened to help his sister, why the ultimate beneficiary of the trust that was holding the foreign bank accounts were his own son, daughter-in- law and granddaughters and why his sister or his descendants were not nominated as beneficiary of the foreign accounts. The Ld. CIT-DR further submitted that the affidavit dated 04.12.2015 filed by the assessee on 04.12.2017 was only a self-serving document and no evidence was brought on record to establish the contentions as made in the said affidavit. He submitted that the primary onus was only on the assessee to establish that he was not the owner of the foreign bank accounts or that the funds in those accounts did not belong to him. Apart from making a bland denial the assessee has not brought any evidence to establish that the funds in the foreign bank accounts did not belong to him. As the assessee was a resident and his global income was taxable, the onus was squarely on him to establish that certain amount/credit were not his income and it was not for the AO to prove otherwi....
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....ds into India from the foreign bank accounts for their personal benefits. Further, that the bank accounts were closed and proceeds were transferred back to assessee's sister Prabhavatiben J. Amin/her nominees. It is further submitted that the AO did not make any enquiry with Mr. Anil Chaturvedi, the Fund Manager who was involved in opening the foreign bank accounts and was managing the funds of her sister. 84. There is no dispute to the fact that the assessee and his wife Manjulaben Patel were the Settlors of the trust and the company M/s. NAD Investment Ltd., which was holding to foreign bank accounts, was the property of the trust. Merrill Lynch Bank and Trust Company (Cayman) Ltd. was the trustee, who was requested by the assessee and his wife to allocate a company on their behalf, and a copy of this company formation letters dated 07.01.2000 signed by the assessee and his wife is reproduced in the assessment order. Accordingly, the trustee had allotted M/s. NAD Investment Ltd. to Shri Bipinbhai Patel and Manjulaben Patel. Though, M/s. Fairfield Nominee Ltd. was made a nominee share holder of M/s. NAD Investment Ltd. to maintain confidentiality and client secrecy, the actual ....
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....also not brought on record any evidence to establish the fact that the funds in the foreign bank account were transferred from the account of her sister. The contention of the assessee that the funds, on closure of the foreign bank accounts with MLB, were transferred to her sister is also not found correct. In the statement u/s 132(4) Dated 27th January 2016 (already reproduced earlier) it was categorically mentioned that at the time of closure of account number 1CA03B39 with Meryll Lynch Bank on 04/12/2012 the company NAD Investment Limited had transferred $71669/- to another account of NAD Investment Limited with Bank of America and when enquired about this another bank account the assessee had pleaded his ignorance. Thus, the fund on closure of the account was not transferred to his sister but to another account of NAD Investment Limited, which was owned by the assessee and his wife, as already discussed earlier. 86. A mere affidavit filed by the assessee that the foreign bank accounts belonged to his sister without bringing on record any evidence in this respect was rightly rejected by the Revenue. The evidences available with the Revenue, as discussed in the assessment orde....
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.... 88. The documents received by the AO through FT&TR Division of CBDT in the course of assessment proceeding, regarding four bank accounts of NAD Investment Ltd. with Hinduja's Bank, Switzerland was also confronted to the assessee. These documents, which are reproduced in the assessment order, clearly establish that the assessee and his wife Manjulaben Patel were the beneficial owners of these foreign bank accounts. The recommendation for opening these foreign bank accounts was given by Ex Bank Manager of SBI, whose name has been redacted in these documents. It is also mentioned that the family was known to the Ex-Manager for last 32 years when he was Manager of SBI, Vadodara. This leaves no doubt that the foreign bank accounts were opened only by the assessee and his wife and not by his sister as contended by the assessee. The AO has also given a finding that some of the cheques in the name of the assessee were deposited in the foreign bank accounts with MLB, which is categorical evidence that the accounts belonged to the assessee only. 89. As regarding enquiry with Mr. Anil Chaturvedi, it is found that the name of Shri Anil Chaturvedi was appearing in CCPS of foreign bank ac....
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....belonging to you? Ans : I have explained at the time of raid also that I helped my sister to take out whatever possible from East Africa and these may be the transactions she may have made in my name as per the bankers advice. Sitting in India, I cannot handle all these things. Q.No. 14 You are shown a cheque signed by Shri Prakash M Amin for $ 57,000 dated 25/08/2000, in which the payments is stated to be made to Bipin Patel and has been deposited in the bank account no. 16503B39 in Merrill Lynch in the name "NAD Investment Lid." Considering the fact that the cheque has been issued in your name and deposited in the account of Nad Investment Ltd, you are again asked why this bank account no. 16503B39 in Merrill Lynch Bank should not be considered as belonging to you? Ans I am not aware of the foreign countries law. Q. No. 15 Does this bank account number 16503B39 and 1CA03B39 in Merrill Lynch Bank belong to you and your wife?: Ans I was merely a settlor for this account and to my knowledge, no money has been deposited or withdrawn from India by me. Qs. No. 24 In reply to all questions related to bank account number 16503B39 & 1C....
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....e deposited in the foreign bank account with Merill Lynch Bank, which is a conclusive proof that those bank accounts belonged to the assessee. The assessee couldn't explain how the cheque drawn in his name was deposited in the bank account, if the account belonged to her sister, as contented. When the assessee was specifically asked to produce documentary evidence that the accounts belonged to his sister, no documentary evidence could be provided and an evasive reply was given by the assessee that the documents will be available with the banker or Mr. Chaturvedi. If so, why the documents couldn't be obtained and furnished by the assessee. Not only the assessee had signed the account opening forms for all the foreign bank accounts, but he was also in constant touch with Merrill Lynch through his telephone number 09898453287 as acknowledged in the statement. The evidences as available with the Revenue leave no doubt that the assessee and the assessee only, along with his wife, were the actual owner of all the foreign bank accounts. Therefore, the action of the AO to treat all the foreign bank accounts as belonging to the assessee is upheld. The grounds taken by the assessee and his w....
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....d. CIT(A) had rightly allowed the deduction for expenses as evident from the bank account itself. As a result, the ground taken by the Revenue against the deduction for expenses, as allowed by the ld. CIT(A), is dismissed. 94. The Revenue has also taken a ground in respect of deleting the addition on account of receipts in undisclosed foreign bank accounts described as "spot transactions". According to the Revenue, no one to one correspondence between credit and debit entries relating to "spot transactions" was established in the appellate order. We have considered the findings given by the ld. CIT(A) in this regard. The additional evidences as furnished by the assessee in the course of appeal were forwarded to the AO for verification in the remand proceeding. The ld. CIT(A) has given a finding that the AO had confirmed full verification of all the entries with ledgers. It is further mentioned in the order of the CIT(A) that 'spot' transactions depicted in Hinduja Bank Account were contra (transfer) entries from one currency account to another currency account which were neither any receipt nor any payment. The revenue had not come up with any facts or any specific submission as....
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....to be computed for each year separately. Therefore, the reliance upon decisions that were delivered in the context of the block proceeding u/s. 158BC of the Act cannot be applied to the assessments being completed u/s. 153A of the Act. In the scheme of assessment u/s. 153A of the Act, the carry forward of loss has to be decided in accordance with the specific provision as stipulated under the Act. 97. The Ld. CIT(A) has given a finding that the loss or negative income in any year was not eligible for carry forward and set off with income of the following year(s) for the reason that returns were not filed within the due date, which was a necessary condition for carry forward of loss. The assessee has contended that the return for the block period was filed within the time. The provision of Section 139(3) of the Act stipulates that in order to carry forward a loss under the head "business" or "capital gain", the return of income has to be filed within the time as allowed under section 139(1) of the Act. Thus, according to this provision, the assessee must file his original return of income within the time stipulated u/s 131(1) of the Act in order to carry forward the loss. In the ....
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....Fs" is appearing. For example, in A.Y. 2001-02, the loss of -6,04,934/- is worked out as the difference between sale and purchase of mutual funds and it is remarked that "total sale value less purchase value of mutual fund not considered by the AO". Thus, loss as well as the profit was worked out by the assessee by taking the difference between the total purchase value and the total sale value of mutual funds during the year, as reflected in the bank statement. The working of such loss can't be held as correct as it is based on the presumption that all the mutual funds purchased during the year were sold during the year itself, which may not be correct. Some of the shares/MF purchased during the year might be available in the form of closing stock, which were not considered in this working. Thus, the income/loss in the transactions of mutual funds was worked out by the assessee without considering the opening stock and closing stock of the mutual funds for each year. Under the circumstances, the year-wise profit or loss in the transactions of mutual funds as worked out by the assessee and reproduced in the order of Ld. CIT(A) cannot be held as correct. 100. From the above analys....
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....assessee. For this purpose, he may call for the details from the assessee in respect of the opening stock/closing stock for the different years or from any other source as deemed fit. If details are obtained from a third party, that should be confronted to the assessee before taking a final call. (ii) We are conscious of the fact that the above exercise will not be easy on the part of the AO since the assessee is no longer alive and the other family members may not be privy to the information. Further, the details from third party also, mayn't be forthcoming due to long passage of time. In such an eventuality and in the absence of any quantitative details of the mutual funds / share transactions, the net positive income of US $52,858.72 as per the working as detailed above, may be apportioned to different years proportionately on the basis of sale proceeds of the respective years. 102. Since the quantification of actual profit/loss in mutual funds / share transactions as appearing in foreign bank accounts is set aside to the file of the AO, the appeals of the assessee (except for A.Y. 2000-01 wherein no such transaction was involved) are deemed to be partly allowed for ....
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....ands of Smt. Jigishaben Patel on substantive basis. As per order giving effect to CIT(A)'s order, the AO vide order dated 11.03.2019 had made addition of Rs. 1,04,83,953/- on account of unexplained jewellery in the hands of Jigishaben Patel. As appeal was filed in the case of Jigishaben Patel before the ITAT vide ITA No.497/Ahd/2019 for the A.Y. 2016-17. The assessee has filed Form No.3, Form No.4 and Form No.5 in respect of application of Jigishaben Patel under Vivad Se Vishwas Act, 2020 and it transpires therefrom that the declaration made by the assessee was accepted on payment of the disputed tax. In the Form-5, a reference of appeal pending before the ITAT i.e. ITA No.497/Ahd/2019 is also appearing. It thus transpires that the entire substantive addition of the unexplained jewellery of Rs. 1,04,83,953/- as made in the hands of Smt. Jigishaben Patel stands finalized and accepted in her hands. In view of these facts, we direct that the protective addition of Rs. 51,93,444/-in respect of unexplained jewellery as made in the hands of Smt. Manjulaben Patel should be deleted. The ground taken by the assessee in the regard is allowed and the ground of the Revenue is dismised. 106.....
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....1996. In the meantime he had distributed all his jewellery among women of the family and jewellery of some of some of the women members of the family are lying with him which was kept in the said locker No.17 somewhere in 1995-96. The said locker has not been operated since 1995- 96. A certificate to this effect issued by the concerned bank i..e Makarpura Industrial Estate Co-Op. Bank Ltd. has been furnished wherein it stated that as per the records available with the bank for the last 10 years, the locker has not been operated within that period. It must have been operated before 10 years, the exact date of operation could not be provided in absence of the records beyond 10 years. Shri Bipin patel has kept the jewellery in the lockers of Smt Kusumben Patel because it was vacant at that time." 13.5 Due to frequent change in the explanations furnished by the assessee, Shri Bipinchandra Patel which is also not corroborative with his statement recorded during the search proceedings, the different versions of explanations submitted by Shri Bipin Patel is not reliable and thus rejected." 108. It is, thus, found that the assessee had not given any convincing explanation for t....