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Facts
The assessee filed a return of income declaring 'Nil' income. The case was reopened under Section 147, and an addition was made based on an undisclosed bank account. Penalty proceedings were also initiated.
Held
The Tribunal held that the reassessment proceedings were barred by limitation because the information from Swiss authorities was not available for the period in question, and the notice was served before the protocol came into operation. The penalty was deleted as it was based on the addition, which was quashed.
Key Issues
Whether the reassessment proceedings and the consequent penalty were validly initiated and imposed, considering the limitation period and the validity of the information received from foreign authorities.
Sections Cited
143(1), 147, 148, 143(3), 271(1)(c), 69A, 153(2), 92CA, 142(2A), 153(1)(b), 276C
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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 23.01.2025, impugned herein, passed by the Ld. Addl./Joint Commissioner of Income Tax (Appeals) (in short “Ld. Addl./Joint Commissioner”) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2020-21.
In this case, the Assessee by filing his original return of income on dated 07.12.2007, had declared his total income at Rs. “Nil” which was processed u/s 143(1) of the Act. Subsequently, case of the Assessee was reopened u/s 147 of the Act, by issuing notice u/s 148 dated 30.03.2012, in response to which, the Assessee filed his return of income on dated 25.04.2012 in TAPAL by declaring total income as Rs. “Nil”. The re- assessment proceedings carried out by the Assessing Officer (AO) ultimately resulted into passing the assessment order dated 18.03.2014 u/s 143(3) r.w.s. 147 of the Act, thereby the AO made the addition of Rs.19,48,46,625/- which was shown up as balance in F.Y.2006-07 in the undisclosed bank account of the Assessee in HSBC Bank, Geneva, Switzerland, which has not been accounted for and has escaped assessment, by treating the same as undisclosed income and added the same in the income of the Assessee.
The AO vide aforesaid assessment order dated 18.03.2014 also initiated the penalty proceedings for concealment of income u/s 271(1)(c) of the Act.
In the meantime, the Assessee challenged the said addition by filing first appeal before the then Ld. CIT(A)-51, Mumbai, which was pending for the adjudication, however, the AO without waiting for the outcome of the decision of the then Ld. CIT(A) in quantum appeal, proceeded to with the penalty proceedings and afforded an opportunity to the Assessee by issuing notice dated 01.09.2014 before finalizing the penalty proceedings u/s 271(1)(c) of the Act. However, till the passing of the penalty order dated 07.08.2015 by the AO no satisfactory reply has been submitted by the Assessee as noted by the AO in para no.2 of the penalty order.
Thereafter, the then Ld. CIT(A)-51, Mumbai vide order dated 07.01.2025 affirmed the aforesaid addition.
The AO, ultimately levied the penalty of Rs.6,54,98,527/- @ 100% of the tax amount evaded on the undisclosed income/addition of Rs.19,48,46,625/- by mainly holding as under: “The Assessee failed to explain the deposits shown in the Base Note in his bank account in this financial year. The balance reflected therein is his unexplained money. Therefore, an amount of Rs.19,48,46,625/- in the undisclosed bank account of the Assessee in HSBC Bank, Geneva, Switzerland as per the information in the document, was treated as the undisclosed income which was not accounted for and had escaped assessment, was added to the total income of the Assessee u/s 69A of the Income Tax Act, 1961. Penalty proceedings u/s 271(1)(c) were separately initiated for concealment of income. However, till the date of passing of this order no satisfactory explanation is furnished by the Assessee. 8. In this connection, it will be appropriate to mention the decision of the Hon’ble Supreme Court in the case of CIT, Ahmedabad vs. Reliance Petro Products Ltd. AIR 2012 (SC) 1881, wherein the Hon’ble Supreme Court also ruled in conformity with the earlier decision in the case of Union of India & Ors. Vs. Dharmendra Textiles & Ors. 306 ITR 277. It may be relevant here to mention the decision of the Hon’ble Supreme Court as under:
Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. [2007(6) SCC 329], this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), men- rea was necessary, as according to the Court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens-rea that the judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. was upset. In Union of India Vs. Dharamendra Textile Processors (cited supra), after quoting from Section 271 extensively and also considering Section 271(1)(c), the Court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the Assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea.
The Court went on to hold that objective behind enactment of section u/s 271(1)(c) read with explanations indicated with the said sections was for providing remedy for loss of Revenue and such a penalty was a civil liability and therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution u/s 276C of the Act.
Penalty u/s 271(1)(c) is leviable if the AO is satisfied during the course of proceedings under the Act that any person has concealed the particulars of his income. Thus, the onus is on the Assessee to rebut the inference of concealment. However, the Assessee has not filed any satisfactory explanation. In fact, by not disclosing the foreign bank account in HSBC, Geneva, there is conscious and deliberate attempt on the part of the Assessee to conceal his income, thereby suppressing his real income by Rs.19,48,46,625/-. I am of the considered view and satisficed that this is a fit case for imposition of penalty u/s 271(1)(c) of the IT Act, 1961, is worked out at Rs.65498600/- as under: Minimum penalty @ 100% : Rs.6,54,98,527/- Maximum penalty @300% : Rs.19,64,95,581/- I hereby levy a minimum penalty @ 100% of Rs.6,54,98,600/- ”.
The Assessee being aggrieved with the levy of penalty vide order dated 07.08.2015 u/s 271(1)(c) of the Act by the AO, challenged the same by filing first appeal before the Ld. Commissioner, who vide impugned order dated 08.01.2025 affirmed the aforesaid penalty on the same footing/reasoning as of the AO observed in the penalty order, by dismissing the appeal of the Assessee and therefore the Assessee, being aggrieved, has preferred the instant appeal.
8. Admittedly, the Hon’ble co-ordinate Bench of the Tribunal in the quantum appeal i.e. filed against the order dated 07.01.2025 passed by the then Ld. CIT(A)-51, Mumbai in first quantum appeal, ultimately vide order dated 15-04-2025 passed in deleted the aforesaid addition of Rs.19,47,55,280/-, on the basis of which the penalty under consideration to the tune of Rs.6,54,98,527/- has been imposed by the AO vide penalty order dated 07.08.2015, by observing and holding as under:
“9. We have heard rival submissions of the parties and perused the relevant materials on record. The issue in dispute raised in the ground is the period within which the Assessing Officer was required to complete the reassessment proceedings under section 147 of the Act. The relevant limitation period for passing order under section 147 of the Act has been provided under section 153(2) of the Act. The relevant provision during relevant period is reproduced as under: "(2) No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of one year from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 was served on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such assessment, reassessment or recomputation may be made at any time up to the 31st day of March, 2002: Provided further that where the notice under section 148 was served on or after the 1st day of April, 2005 but before the 1st day of April, 2011, the provisions of this sub-section shall have effect as if for the words "one year, the words "nine months" had been substituted: 109 Provided also that where the notice under section 148 was served on or after the 1st day of April, 2006 but before the 1st day of April, 2010 and during the course of the proceedings for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) of that section has not been made before such date; or (ii) is made on or after the 1st day of June, 2007, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words "one year", the words "twenty-one months" had been substituted: Provided also that where the notice under section 148 was served on or after the 1st day of April, 2010 and during the course of the proceeding for the assessment or reassessment or recomputation of total income, a reference under sub-section (1) of section 92CA is made, the provisions of this sub-section shall, notwithstanding anything contained in the second proviso, have effect as if for the words "one year", the words "two years" had been substituted." 9.1 Since in the case a reference under sub section (1) of section 92CA was made and this fact has not been disputed by the assessee, the limitation for passing the reassessment order extends to two years from the end of the financial year in which notice under section 148 was served. Since in the case notice under section 148 of the Act was served on 30/03/2012, the period of the two years from the end of the relevant year financial year i.e. 31/03/2012, expires on 31/03/2014. Since the reassessment order has been passed on 18/03/2014, therefore, the Learned DR submitted that reassessment order passed in the case is within the limitation period. But the learned counsel for the assessee has referred to the decision of the coordinate bench of the tribunal in the case of Shri Praveen Sawhney (supra), wherein, identical reference sent to the Switerzerland authorities under DTAA protocol in relation to exchange of information, as when held to be an invalid reference as the said protocol was not in operation during the year relevant assessment year. The relevant finding of the coordinate bench (supra) is reproduced as under: "14. The aforementioned Notification No. 2903 (E) is loud and clear and has specifically mentioned that Exchange of Information provided for in the said Protocol will be applicable for information that relates to any fiscal year beginning on or after the 1st day of April 2011 and if the said notification is read with the reference made by the department, we find that the specific periods for which the reference has been made calling for information is 1-4- 1995 to 31-3-2012. Therefore, qua the notification, information called by the Revenue by issuing the said reference was invalid for the period prior to 1-4-2011.
A reference to the decisions for analogous provisions can throw some light on this issue. The Hon'ble High Court of Rajasthan was considering the reference for Special Audit u/s 142(2A) of the Act in the case of CIT v. Bajrang Textiles (2007) 294 ITR 561 (Raj.) and held as under: "Direction of the AO for special audit of assessee's accounts under s. 142(2A) one day before the expiry of limitation for completing the block assessment being merely to get extension of time and AO having asked the special auditor to prepare the books of account in the form of cash book and ledger on the basis of seized documents/papers and also trading and P&L a/c which is apparently beyond the scope of the provisions of s. 142(2A), the direction for special audit was illegal and consequently, the assessment was barred by time"
16. Similarly, the Hon'ble Allahabad High Court in the case of Sadana Electric Stores v. CIT [2013] 36 taxmann.com 286/219 Тахman 294 held as under: “Assessment-Time limit for completion-Order passed beyond limitation period-Sustainability Assessee was subjected to special audit by approval of CIT-Assessee was asked to obtain special audit report u/s 152(2A)-Accounts audited in report was submitted However limitation for completion of assessment u/s 153(1)(b) expired-Assessee contended that subsequent assessment order passed by AO was time barred-Held, in case of Sadana Electric Company vs. Commissioner of Income-tax and another 2008, 152(2A), identical facts were dealt wherein Court held that section 153(1)(a) reads that no order of assessment shall be made u/s 143 or Section 144 at any time after expiry of two years from end of A.Y. in which income was first assessable-Order of assessment had been passed in violation of period prescribed in aforesaid provision, therefore, order passed by AO, CIT and ITAT was set aside-Therefore order passed by lower authorities including Tribunal could not be sustained as facts and circumstances were identical."
17. Similar view was taken by the co-ordinate bench in the case of Consulting Engineering Services India (P.) Ltd. v. ACIT [IT Appeal No. 1443 (Delhi) of 2014, dated 5-2-2019). Relevant findings read as under: "15. We have given a thoughtful consideration to the orders of the authorities below and have carefully perused the records qua the issue. It is true that noticed dated 21-11-2011 was for both the A.Ys i.e. 2008-09 and 2009-10. However, each A.Y is considered to be a separate unit and, therefore, for each A.Y, the Assessing Officer must bring out his case. A perusal of the said notice, which is exhibited at pages 67 to 70 of the paper book, clearly reveals that though the notice pertained to accounts of A.Y 2008-09, but entire financial details referred to therein pertain to A.Y 2009-10. Even the order u/s 142(2A) of the Act dated 27-12-2011 which is exhibited at pages 91 to 98 of the paper, the ACIT has specifically mentioned that "the special audit u/s 142(2A) of the Act in the case of captioned assessee for A.Y 2009-10 is ordered accordingly". This clearly proves that while making a reference u/s 142(2A) of the Act and thereafter passing the order u/s 142(2A) of the Act, the Assessing Officer did not apply his mind and mechanically adopted the figure of A.Y 2009-10 and passed the order u/s 142(2A) of the Act for A.Y 2009-10 without realizing that he is dealing with A.Y 2008-09.
The contention of the ld. DR that the letter to the appellant referred to both the A.Ys i.e. 2008-09 and 2009-10 and, therefore, there is no error in the same. We do not find any force in this contention of the ld. DR. As mentioned elsewhere, since each A.Y is considered as a separate unit the Assessing Officer should have made out a case for A.Y 2008-09 only and since the order framed u/s 142(2) of the Act also refers to A.Y 2009-10, then the same cannot be used for A. Y 2008-09.
The quarrel before us is as to whether the assessment order framed u/s 143(3) is passed within the period of limitation period prescribed under the Act or not. In our considered opinion, for coming to such a conclusion, we can examine whether the order passed u/s 142(2A) of the Act is in accordance with law or not. It is true that the order passed u/s 142(2A) of the Act is not appealable but when an assessment order is challenged, then the different aspects, which are integral to the process and ultimate completion of the amount can be challenged in appeal and since the ground before us is challenged for assessment being barred by limitation, we are well within our rights to consider all material aspects which were considered while framing the assessment order u/s 143(3) of the Act."
The co-ordinate bench in one of the group cases of Bhushan Lal Sawhney v. Dy. CIT [2021] 127 taxmann.com 64/190 ITD 225 (Delhi -Trib) through his L/H wife Smt. Sneh Lata Sawhney to 432/DEL/2017 & 434 to 439/DEL/2017 had the occasion to consider reference to Swiss authority and reply received by Swiss authority. It would be pertinent to refer to the said observation of the Co-ordinate Bench which reads as under: "Learned Counsel for the Assessee also placed on record letter Dated 26-6-2015 issued by Swiss Competent Authority addressed to the Government of India in which it is specifically mentioned that information as required could be provided from F.Y. 2011-2012 as the prior years are not covered by temporal scope of Article 26 of the Amended Double Taxation Avoidance Agreement between India and Switzerland. Therefore, such information could be provided from 1-4-2011. Learned Counsel for the Assessee also placed on record Notification Dated 27-12-2011 between India and Switzerland Confederation for avoidance of double taxation. These
would clearly show that these are applicable after assessment years under appeals and as per information provided vide letter Dated 26-6-2015 no such information could be provided prior to 1- 4-2011. Therefore, Swiss Authorities have not provided any information to Revenue Authorities in India about assessee's bank account with HSBC, Geneva, Switzerland to 432/Del./2017 & to 439/Del./2017 Late Shri Bhushan Lal Sawhney through his L.R./Wife Smt. Sneh Lata Sawhney, New Delhi for assessment years under appeals ie., A.Ys. 2006-2007 to 2011-2012."
In light of the aforementioned discussion, we are of the considered view that the information called for by the department from Swiss authorities could not have been received by them for the period prior to 1-4-2011. Therefore, it would be a futile exercise to wait for such information, and that too, by an invalid reference. Therefore, in our considered opinion, the period of limitation could not be extended as claimed by the Revenue. The impugned assessments are clearly bared by limitation and deserve to be quashed.
Since we have quashed the assessments as barred by limitation, we do not find it necessary to dwell into the merits of the case. The common ground in the captioned appeals is allowed."
9.2 Fact in the instant case are identical to the facts in the case of Shri Praveen Sawhney (supra) as the protocol in relation to the exchange of information came into operation from the first day of April, 2011 whereas the relevant financial year corresponding to the assessment year 2007- 08 is from 01.04.2006 to 31.03.2007 and therefore, said protocol was not in operation during the period relevant to the assessment year therefore, this reference which was sent by the AO in the year under consideration was invalid. In view of precedent in the case of Shri Praveen Sawhney (supra), the re-assessment order should have been passed within one year from the end of the financial year in under section 148 of the Act was served. Since in the case notice under section 148 of the act was served on 30/03/2012 and therefore the reassessment should have been completed on or before 31/03/2013 whereas the assessment order has been passed on 18/03/2014, which being beyond the period of limitation, the entire reassessment proceedings stand quashed. The ground No.2 of the appeal of the assessee is allowed. 9.1 The Ld. counsel for the assessee also referred to ground No. 3 of the appeal and submitted that on the merit also Co-ordinate Bench of the Tribunal in the case of ACIT v. Sh. Parminder Singh Kalra in that addition cannot be made simply on the basis of photocopy of document indicating balance in bank account without corroboration of the same. The relevant finding of the Tribunal (supra) is reproduced as under:
"151. We may further point out that it is settled law that statement cannot be read in isolation without any corroborative material. In the present case, we find that there is no evidence placed on record by the AO to corroborate the statement. Moreover, the Revenue itself is not clear whether the information pertains to the alleged bank account maintained with HSBC, Zurich or HSBC, Geneva as is evident from the paper book filed by the Revenue. No response has been received in response to the reference made to Swiss Competent Authority. No incriminating material whatsoever has been found during the course of the search. Under the facts and circumstances in our view, the provisions of Section 69 are not attracted to the Assessee in the instant year. The AO has made the addition on the basis of suspicion pertains to the bank account.
Keeping in view, the overall facts, we are of the view that the addition made by the AO in the assessment years 2006-07 and 2007-08 cannot be sustained. Accordingly, we direct the AO to delete the same." 9.2 In the instant case also, addition has been made on the basis of photocopy of a document commonly known as a base note of bank account with HSBC Geneva. The said base note was obtained by a nonofficial route by the French government and then same has been forwarded to the Indian government. But the existence of said bank account has not been confirmed by the HSBC, Geneva. Therefore, following the finding of the coordinate bench of the Tribunal (supra), no addition can be sustained on merit also. Since we have already quashed the reassessment proceedings on the ground of limitation in passing assessment order, the addition on merit is rendered merely academic.
In the result, the appeal of the Assessee is allowed.”
Thus, in view of the above decision of the Hon’ble Co-ordinate Bench of the Tribunal, in the quantum appeal i.e. 679/Mum/2025 mentioned above, wherein addition on the basis of which the penalty was levied, has already been deleted the penalty levied by the AO, is un-sustainable and therefore in our considered view, the same is liable to be deleted. Admittedly, it is also not the case of the Revenue Department that the order dated 15-04-2025 in the quantum appeal by the co-ordinate Bench of the Tribunal, has either been stayed or set aside by the Hon’ble High Court. Thus, the penalty under consideration is deleted and the appeal filed by the Assessee is allowed.
10. In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 30.5.2025.