SH. ANURAG DALMIA,NEW DELHI vs. DCIT, NEW DELHI

The facts in brief are that the assessee is an individual deriving income from salary, Short Term Capital Gain and income from other sources. A search and seizure action u/s.132(1) was carried out in the case of the assessee on 20.01.2012 and in pursuance of such action, notices u/s.153A was issued on 17.10.2012 for six Assessment Years prior to the year in which search took place and also for the year of search. In response to such notices for all the impugned assessment years, the assessee has filed the return of income declaring the same income as shown in the earlier return of income. During the course of assessment proceedings, a notice u/s. 142(1) was issued to the assessee on 18.07.2013 requiring the assessee to file certain information in respect of HSBC bank account, Geneva Switzerland. The relevant content of the notice which is common for all the years is reproduced hereunder:-

In this connection, it has been learnt that the HSBC Bank, Switzerland has decided to send the copies of documents such as account opening form, copy of pass book, transaction details, instructions from accounts holders and alert received by them to five account holders in respect of all the Indian Account Holders maintaining account with them, either as the account holder or as beneficiary, Accordingly, as a foreign bank account holder in the HSBC Bank at Geneva/Zurich, Switzerland, you must have received all the relevant details as mentioned supra. Therefore, you are requested to furnish the following details/evidences: i) Account opening form in respect of Foreign Bank account mentioned at para 2 above. ii) Complete Bank statements, in original, in the Foreign Bank mentioned at point i) above, since beginning till date. (iii) Residential status as per the I.T. Act as on the date of opening of Foreign Bank Accounts mentioned at point i) and thereafter for all Assessment Years till date. 4. In case you do not have the bank account statement, please furnish duly filled up, signed and notarized “consent letter” so 4 I.T.As. No.3802 to 3808/DEL/2017

Thereafter, the ld. Assessing Officer issued a show cause notice for levy of penalty u/s.271(1)(b) and in response to which the assessee vide letter dated 30th September, 2013 has submitted his reply as under: “I am surprised to have received your Notice No. ACIT/CC- 2/2013-14/463 dated 26th September, 2013 delivered personally in my office at 5.40 P.M. on 27th September, 2013 requiring me to show cause why penalty should not be imposed u/s 271(1)(b) of the Income Tax Act,1961 for alleged non compliance of notice u/s. 142(1) of the Income Tax Act,1961 dated 18th July, 2013 required to be complied by 22nd July, 2013. It is incorrect to state that the notice dated 18th July, 2013 was not complied with. Reply to the said notice dated 22nd July, 2013 (copy enclosed) was submitted in your office on 23rd July, 2013. Photocopy of this reply was personally handed over by my representative to your goodself on 23rd September, 2013 in response to your telephonic enquiry. Still you have chosen to send this notice. Therefore, there being complete compliance of the said notice, there is no reason for issue of notice u/s 271(1)(b) of the Income Tax Act, 1961. You are, therefore, requested to kindly drop the proceedings and file the notice.”

However, the ld. Assessing Officer levied a penalty of Rs.10,000/- u/s.271(1)(b) on the ground that assessee has not furnished the requisite information/document, i.e., complete bank statement as well as failure to give consent letter.

Ld. CIT (A) has confirmed the said penalty after making certain general observations about how there was information received about undisclosed bank accounts opened abroad and held that, since there was an information that assessee was engaged in suspected tax evasion by transferring or keeping funds overseas in an illicit manner and assessee was one of the suspected person having open and maintained undisclosed overseas bank account and therefore he was required to sign consent form to verify the allegation. Further, it was a duty of the assessee as a citizen of India to cooperate and join the investigation and jeopardy is caused to the assessee. Further, the purpose of levy of penalty u/s. 271(1)(b) is to ensure compliance to investigation and thus failure to send the consent form without any reasonable cause entails levy of penalty.

Before us, ld. counsel for the assessee, Mr. Vinod Bindal submitted that here in this case, first of all, in the quantum proceedings addition stands deleted from the stage of the Tribunal, wherein the Tribunal has held that the additions made in the assessments passed u/s.153A/143(3) are not sustainable as the same was beyond the scope of proceedings

Mr. Bindal further submitted that what is contemplated in Section 142(1) is that, for the purpose of making the 8 I.T.As. No.3802 to 3808/DEL/2017 assessment, Assessing Officer may require the assessee to produce or call to produce such document or account as Assessing Officer may require or to furnish in writing or verify in the prescribed manner, the information in such form as Assessing Officer may require. The assessee can only produce or file any documents which are available with the assessee and he cannot produce or cause to produce any such document which is not in his possession or in his knowledge. In fact, assessee from the day one has denied the document so where is the question of any default on the part of the assessee. In so far as notice u/s.142(1) is concerned, the assessee has duly complied with by submitting the letter, (which has been reproduced hereinabove) and from bare perusal of the said letter, it could be seen that assessee has duly informed that he has no connection with any of the alleged account and the transaction mentioned in the notice. There is no failure on the part of the assessee to comply with the notice u/s. 142(1) as sent by the Assessing Officer.

Other contention raised by the ld. counsel was that, here the scope of inquiry or addition as per the principle laid down by the Hon’ble Jurisdictional High Court was to done on the basis of any incriminating material found or seized during the course of search. Once, there is a categorical finding by the Tribunal that there was no incriminating material or evidence whatsoever found during the course of search, then the scope of any inquiry is limited to such material or evidence for the purpose of making the assessment. Thus,

Lastly, he submitted that there was a bona fide and reasonable cause in terms of Section 273B; firstly, because neither during the course of penalty proceedings nor at the time of search assessee was ever confronted with any specific information that assessee had any account in HSBC, Geneva Switzerland. Secondly, assessee from the day one has categorically denied maintaining any bank account and once assessee has denied having any bank account then there was no question of signing any waiver form. Under these circumstances, if assessee has not signed the consent waiver then there is a reasonable cause that he was required to do so. The ld. counsel submitted that even till date the Revenue could not produce any information or document showing that assessee was maintaining any bank account with HSBC Geneva Switzerland almost 9 years have lapsed. Once there is no such information available with the Assessing Officer arrived from the date of search till date, then how assessee can be held to be in default for not signing the consent waiver form. Accordingly, he submitted that penalty levied by the Assessing Officer u/s. 271(1)(b) and confirmed by the Ld. CIT(A) is factually illegal and same deserves to be deleted. He has also cited many judicial precedents and decisions, however, the same were not being reproduced hereunder.

On the other hand, ld. DR submitted that from the bare perusal of the material and impugned orders, it can be seen that certain information was received to the Government of India from the French Authorities, wherein name of the assessee was appearing and there were certain amounts deposited in the said bank account. In the wake of such information, the Department has conducted search and also the said very information was confronted to the assessee. It was only on this background the Assessing Officer had issued a notice u/s. 142(1) to submit the details of the said bank account and if the same is not available, then he should file consent waiver form so that Department can carry out inquiry and verification. Failure to submit or sign consent waiver form is a default, and therefore, penalty u/s.271(1)(b) has rightly been levied. He also strongly relied upon the order of the Ld. CIT (A) whereby he has confirmed the said penalty after making various observations.

We have heard the rival submissions, perused the relevant findings given in the impugned orders as well as material referred to before us at the time of hearing. The sole reason for levy of penalty u/s. 271(1)(b) is that assessee has not complied with the notice u/s.142(1) dated 18.07.2013. This was the only notice on which Assessing Officer has levied the penalty for non compliance. The reason given by the authorities below are that, the assessee has refused to sign the consent waiver form for Bank account HSBC Geneva Switzerland. From the bare perusal of the notice which has 11 I.T.As. No.3802 to 3808/DEL/2017 been reproduced above, it is seen that Assessing Officer mentioned that there was a certain information available with the Department that the assessee is having account in HSBC Geneva Switzerland, and therefore, the assessee was required to furnish the details/evidences regarding account opening form in respect of HSBC Geneva Switzerland, complete statement of the alleged bank account, residential status of the assessee on the opening of the foreign bank account; and further, it was required by the Assessing Officer that in case assessee does not have a bank account, bank statement, then assessee should sign consent letter so that department can is able to obtain the statement from the bank. First of all, from the perusal of the information as scanned in the assessment order as well as material available on record, it is seen that nowhere the said document contains the name of HSBC Bank Account Geneva Switzerland. Even during the course of search when assessee was confronted with this fact, he under the statement on oath stated that he has never opened any bank account in overseas and he denied having maintained such account. This stand has been taken all throughout the proceedings. Even in the statement recorded u/s 132(4) during the course of search, there was no mention of account in HSBC Bank Geneva Switzerland nor was any such information or material confronted to the assessee with the details of particular bank account till the date of initiation and levy of penalty. In response to the said notice u/s. 142(1), the assessee has reiterated the same and has duly complied

Section 142(1) empowers the Assessing Officer to call for any information or document for the purpose of making an assessment. If scope of the assessment as per the law laid down by the Hon’ble Jurisdictional High Court in the case of CIT vs. Kabul Chawla, (2016) 380 ITR 0573 (Del), CIT vs. Meeta Gutgutia, 395 ITR 0526 [Del] and PCIT vs. Best Infrastructure (India) Pvt. Ltd., [2017] 397 ITR 82; is circumscribed to the incriminating material found during the course of search, then inquiry should also be confined to that material only. Once there was no incriminating material, neither any such information was available with Assessing Officer, then where is the question of roping such an addition or making such inquiry in the assessment proceedings. If there would have been any incriminating document pertaining to the alleged bank account found directly or indirectly linking the said bank account with the assessee during the course of search, then only the entire scope of inquiry for the purpose of assessment could have been made; and if there is no such incriminating material or seized document, then ostensibly assessment has to be confined to the seized document relating to the assessee. Here the information which was available prior to the date of search

From a plain reading of Section 142(1), it envisages that, for the purpose of making the assessment the Assessing Officer may serve notice to the assessee, either to:

A part from that, we are in tandem with the submission of Mr. Bindal that, under these facts and circumstances there is genuine and bona fide belief that the assessee was not require to sign the consent waiver form, because as per the 15 I.T.As. No.3802 to 3808/DEL/2017 averments made by assessee, he never had any kind of bank account in overseas leave alone HSBC Bank Geneva Switzerland; and secondly, nothing incriminating was found during the course of search wherein the assessee was found to be directly or indirectly involved in opening any bank account with HSBC Geneva Switzerland. If all these circumstances have been duly explained before the Assessing Officer, then not signing of consent waiver form constitutes reasonable cause and therefore in terms of Section 273 B penalty is leviable. Accordingly, the penalty is deleted on this count also.

Since in all the years, penalty has been levied on similar notice of even date, i.e., 08.07.2013, therefore, the aforesaid finding will apply mutatis mutandis in all the years.

In the result, all the appeals of the assessee are allowed.