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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Mr. Ajay Gopikisan Piramal The Pr. Commissioner of 61, Piramal House, Income Tax, Pochkhanwala Road, Worli, Vs. Range-7, Room No. 125, Mumbai-400 030 Aayakar Bhavan, M.K. road, Mumbai-400 020 (अपीलार्थी / Appellant) (प्रत्यर्थी/ Respondent) .. स्र्थायी लेखा सुं./PAN No. AAEPP7726Q अपीलार्थी की ओर से / Appellant by : Shri Yogesh Thar, AR प्रत्यर्थी की ओर से / Respondent by : Shri Anadi Varma, CIT DR सुनवाई की तारीख / Date of hearing: 05.08.2019 घोर्णा की तारीख / Date of pronouncement : 30.10.2019 आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the Revision order of Pr. Commissioner of Income Tax-7, Mumbai vide order dated 29.03.2019. The Assessment was framed by the Dy. Commissioner of Income Tax, Mumbai (in short ‘DCIT/ AO’) for 2 | P a g e Mr. Ajay Gopikisan Piramal the A.Y. 2015-16 vide order dated 30.06.2017 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of assessee is against the revision order passed by Pr. Commissioner of Income Tax (PCIT) under section 263 of the Act, setting aside the assessment framed under section 143(3) of the Act by the AO for making detailed inquiry pertaining to the transaction in the overseas bank account on the ground that there is a difference in the balance shown by the assessee in its books of account and the balances as per the statements of overseas bank account. For this assessee has raised the following grounds: - “Ground No 1: Impugned order passed by invoking provisions of section 263 of the act is bad in law
1. On the facts and circumstances of the case and in law, the Id. PCIT erred in invoking the provisions of section 263 of the Act and setting aside assessment order us. 143(3) of the Act and directing the AO to pass a fresh order based on his independent application of mind to the facts of the ease.
2. Ld. PCIT, inter alia, failed to appreciate that:
3 | P a g e Mr. Ajay Gopikisan Piramal Notice issued u/s 263 of the Act is vague, without application of mind and thus, had in law: ii. Impugned order passed without application of mind by Ld. PCIT on the assessment records and on the details filed during the proceedings pursuant to the notice issued u/s 263 of the Act is bad in law: iii. Provisions of section 263 of the Act could not he invoked since adequate enquiries were made by the same AO while passing the assessment order not only in the case of the Appellant but also in case of one of the joint holders in the bank account which is the subject matter of the proceedings u/s 263 of the Act: iv. In any case, mere inadequate enquiry/lack of desired' enquiry is not a sufficient ground for revision us. 263 of the Act: v. He ought to have come to a finite conclusion that the assessment order passed by the AO is 'erroneous and 'prejudicial to the interest of the revenue' 4 | P a g e Mr. Ajay Gopikisan Piramal and lie cannot set-aside the matter to the AC) to decide afresh based on his independent application of mind; and vi. The pie-requisites for invoking provisions of section 263 of an order being erroneous in so far as is prejudicial to the interest of the revenue are not satisfied in the facts of the present case.
3. The Appellant prays that it he held that the provisions of section 263 of the Act cannot be invoked and accordingly. the notice u1s 263 of the Act dated November 16, 2018 and/or the impugned order pursuant thereto he quashed as had in law.
Without prejudice to ground No 1 Ground No II: alleged difference in the balance shown by the appellant in the jointly owned overseas bank account:
On the facts and in the circumstances of the case, the ld. PCIT erred in exercising jurisdiction u/s 263 of the Act and directing the AO to decide afresh on his independent application of mind to the facts pertaining to the 5 | P a g e Mr. Ajay Gopikisan Piramal transactions in the overseas hank account on the alleged ground that there is a difference in the balance shown by the Appellant and the balance as per the statement of the overseas bank account
2. He failed to appreciate and ought to have held that since the overseas hank account balance was jointly held by three holders, the bank balance shown by the Appellant is correct after considering all the transactions pertaining to the Appellant.
The Appellant therefore prays that the order of the ld. PCIT be set aside." 3. Brief facts relating to revision order passed by PCIT under section 263 of the Act revising the assessment order for the relevant AY 2015-16 passed by AO under section 143(3) of the Act dated 30.06.2017 are that the PCIT issued show cause notice vide No. Pr. CIT-7/Mum/263/Ajay Piramal/2018-19 dated 16.11.2018 and the relevant text of show cause notice read as under: - “Assessment in your case for AY 2015-16 was completed under section 143(3) on 30.06.2017 thereby accepting returned income ₹11,01,36,310/-.
6 | P a g e Mr. Ajay Gopikisan Piramal 2. In this regard on a perusal of the records, it is seen that while passing the assessment order /s 143(3) on 30.06.2017, the Assessing Officer has failed to carry out enquiries as warranted by the facts and circumstances of the case and that the assessment has been completed without examining all the aspects which were required to be looked into for arriving at the correct taxable income of the assessee. It is found that even though there were clear indications that something was amiss yet the AO did not cause the necessary verification. The omissions which render the assessment order as erroneous and prejudicial to the interest of revenue are as under: - 2.1 during the course of scrutiny proceedings, vide your letter dated 27.06.2017 you have submitted details of immovable properties including deposits/ securities, from which it is seen that the balance in Barclays Bank PLC, Singapore Branch is US Dollars 183164.48 and Great Briatain Pounds 5554.10. However, as per statement of current account of Barclays Bank PLC filed by you, balance as on 7 | P a g e Mr. Ajay Gopikisan Piramal 31.03.2015 is USD 441783.58 and GBP 15252.50. Thus there is a difference of USD 258619.10 and GBP 9708.40 in the balance shown by you and the balance as per bank account statement. It is further seen that as your holding is 33.95% share in the said amount as on 31.03.2015, you have ought to have shown USD 149985.52 as balance with Barclays bank PLC in your assets statement, whereas you have shown balance as USD 183164.64. 2.2 Further, you have submitted that the larger closing balance in foreign bank account is due to transfer of funds from HDFC bank Ltd. Mumbai to Barclays Bank PLC, Singapore in march 2015, pending deployment of the same for investment as on 3nd of the financial year. It is seen from the statement of HDFC Bank that you had transferred USD 115000 to Barclays Bank on 16.03.2015 which are reciting in statement of both the bank account but USD 120000 and USD 100000 which were credited in Barclays Bank on 18.03.2018 are not reflecting in statement of HDFC Bank. You have not 8 | P a g e /Mum/2019 Mr. Ajay Gopikisan Piramal offered any explanation in this regard and Assessing Officer has also not examined this issue through this is the one of the reason for selection of the scrutiny. 2.3 In aggregate, income to the tune of ₹3,07,63,275/- appears to have escaped assessment.
3. thus prima-facie there is a failure on the part of the AO to make relevant and meaningful inquiry as warranted by the facts of the present case and allowing without causing necessary enquiries the claims of the assessee. AO’s failure to take cognizance of the legal implication of the transaction would render the assessment order being erroneous and prejudicial to the interest of revenue in terms of section 263 of the Act."
The assessee replied this show cause notice vide letter dated 29.11.2018 specifying that the assessment order is neither erroneous nor prejudicial to the interest of revenue passed by the AO. The learned Counsel for the assessee stated that there is no difference as stated in the show cause notice in the balances of Barclays Bank PLC account and Great Britain Pounds. The PCIT pointed out in the show cause notice that the balance in Barclays Bank PLC, Singapore Branch in US dollars is 9 | P a g e Mr. Ajay Gopikisan Piramal 1,83,164.48 and Great Britain Pounds 5554.10. According to PCIT, as per statement of current account of Barclays Bank PLC, the balance standing as on 31.03.2015 is USD 4,41,783.58 and Great Britain Pounds 15,26,250/-. According to PCIT there is a difference of USD 2,58,619.10/- and Great Britain Pound 9708.40/- in the balance shown by the assessee and balance as per bank account statement. The PCIT also noted that as per the assessee’s holding, which is 33.95% in the said account, the balance as on 31.03.2015 ought to have being USD 149985.52 as balance in Barclays Bank PLC, whereas the assessee’s statement shown balance of USD 183164.64. Further objection of the PCIT is as regards to statement of HDFC bank from where the assessee has transferred USD 1,15,000/- to Barclays Bank on 16.03.2015 which are reflecting in statement of both the bank accounts but USD 1,20,000 and USD 1,00,000 which were credited in Barclays Bank PLC on 18.03.2018 are not reflecting in statement of HDFC bank. According to PCIT, in aggregate, income to the tune of ₹3,07,63,275/- has escaped assessment for the reason that the AO failed to make relevant and meaningful inquiry as noted on the basis of facts of the case and allowing the same without causing necessary enquiries about the claim of the assessee. According to PCIT, the assessment order is hence erroneous and prejudicial to the interest of the Revenue in terms of section 263 of the Act.
The assessee replied to the show cause notice stating that the Barclays Bank PLC, Singapore is jointly owned and held by the Ajay Piramal, his wife Mrs. Swati A Piramal and his son 10 | P a g e Mr. Ajay Gopikisan Piramal Anand Pirmal but the inflow/transfer to this account is made by each of the joint holders for different amounts from their respective HDFC Bank account from time to time. However, the inflow and transfer from HDFC to Barclays Bank PLC made by each joint holders are not in the same proportion and also outflow of each other investments out of the same bank account are not made in the same proportion. Hence, 33.95% of the total closing balance as on 31.03.2015 in the USD cannot be considered as belonging to the assessee.
On the other hand, the learned CIT DR heavily relied on the revision order passed under section 263 of the Act and also argued that incase the facts stated by assessee are true, no harm will be done to the assessee even if the AO will go through the same again. Hence, he supported the revision order.
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the PCIT in his revision order has directed the AO to make fresh enquiries because prima facie there is failure on the part of the AO to make relevant and meaningful enquiries in regard to the bank balances in Barclays Bank PLC, Singapore Branch in USD and Great Britain Pounds. Even, according to PCIT, the proportion of deposit and transfer from HDFC Bank Ltd. in the foreign bank account is not known. We noted from the reply filed by the assessee before PCIT on 29.11.2018 wherein complete details and position was clarified as under: - 11 | P a g e Mr. Ajay Gopikisan Piramal “As regards the specified credit transactions in March 2015 appearing in Barclays Bank Plc as stated in para 2.2 of the captioned notice, wherein Your Honour’s have stated that USD 1,00,000 and USD 1,20,000 which are credited to Barclays bank Plc Singapore, on dtd.18.03.2015 (printing error – wrongly printed as 18.03.2018) are not reflected by way of funds transfer from the HDFC Bank account Mumbai of the assessee i.e. Mr. Ajay G Piramal during the relevant period i.e. March 2015. In this context, we most humbly submit the following clarifications/ details with regard to observations stated in para 2.2. of the notice: 1. USD 1,00,000 equivalent to INR 62,84,000/- was transferred from HDFC Bank Account No. (3571000004895) standing in the name of Dr. Swati A Piramal on 16.03.2015. The said credit transaction was explained alongwith its source in detail during the course of the scrutiny assessment proceedings of Dr. Swati A Piramal 12 | P a g e Mr. Ajay Gopikisan Piramal on 16.03.2015. The said credit transaction was explained along with its source in detail during the course of the scrutiny assessment proceedings of Dr. Swati Piramal for the captioned assessment year, and the copy of the HDFC bank statement evidencing the said fund transfer under LRS from HDFC Bank to Barclays bank on the above date was filed by way of Annexure 12 to the letter dated 19.06.2017 by Dr. Swati Piramal. The same was verified by the assessing officer before passing assessment order of Dr. Swati Piramal for Assessment Year 2015-16. A copy of the letter dtd.19.06.2017 along with annexure 12 filed with the AO is enclosed herewith as Annexure 1 for your honour’s reference.
USD 1,20,000 was transferred from the HDFC Bank Account No. (003571000004913) standing in the name of Anand A Piramal on 13.03.2015. The said credit transaction was explained along with 13 | P a g e /Mum/2019 Mr. Ajay Gopikisan Piramal its source in detail during the course of the scrutiny assessment proceedings of Anand Piramal for the captioned assessment year, and the copy of the remittance application dtd. 13.03.2015 filed with the HDFC Bank for remitting the said funds under LRS to Barclays bank on the above date was also filed by way of Annexure 6 to the letter dtd. 15.11.2017 by Mr. Anand Piramal. The same was verified by the assessment year 2015-16. A copy of the letter dtd. 15.11.2017 alongwith annexure 6 is enclosed herewith as Annexure 2 for Your Honour’s ready reference.“
From the above, it is clear that the assessee has explained the details of USD 1 lakhs transferred from HDFC Bank A/c standing in the name of Dr. Swati A Piramal on 16.03.2015 and this credit transaction was explained along with its source in detail during the course of scrutiny assessment proceedings and also filed copy of HDFC Bank statement evidencing the above stated fund transferred under LRS from HDFC bank to Barclays Bank. Further, USD 1.20 Lakhs was transferred from HDFC Bank Account standing in the name of Anand A Piramal on 13.03.2015 and this transaction was explained along with its 14 | P a g e Mr. Ajay Gopikisan Piramal source during the course of scrutiny assessment. Even the copy of remittance application dated 13.03.2015 filed with the HDFC Bank for remitting the said fund under LRS to Barclays bank on the above date. Even the overseas investment made in 7.75% Prudential Plc 11 Perp EMTN Bond (USD) and in 8.25% FRN Barclays Bank Plc EMTN Perpetual subord (GBP), it was explained that assessee holds 33.95% shares in the total cost of investment jointly held along with M/s Swati Piramal and Ananad Piramal. It was explained that the inflow / transfers to this bank account are made by each joint holders for different amonts from their respective HDFC Bank Account jointly held by assessee along with M/s Swati Piramal and Ananad Piramal in the proportion of 33.95%. Even, this detail of investment was explained before the AO as under: - “As regards para no.2.1, at the outset, we would like to clarify that it is only the overseas investments made in 7.75% Prudential Plc 11 Perp EMTN Bonds (USD) and in 8.25% FRN Barclays Bank Plc EMTN Perpetual subord (GBP) are the investments in which the assessee holds 33.95% share in the total cost of investments jointly held alongwith Mrs. Swati Pirarnal and Anand Piramal. Though the Barclays Bank Plc Singapore is jointly held by Mr. Ajay Piramal, Mrs. 15 | P a g e Mr. Ajay Gopikisan Piramal Swati Piramal and Anand Piramal, but the inflows/transfers to this account are made by each joint holder for different amounts from their respective HDFC Bank account Mumbai from time to time. However, the inflows/transfers from HDFC to Barclays Bank made by each joint holder are not in the same proportion (i.e. 33.95%). Also the outflows/ other investments out of the above bank are not made in the same proportion. Hence, 33.95% of the total closing balance as on 31.03.2015 in USD cannot be considered as belonging to the assessee. It appears that your honour has assumed that the all the inflows/outflows are in the same proportion and hence closing balance should also have been in the same proportion i.e. 33.95% of the total closing balance. However, as already explained above, this is not the case."
Similarly, the complete details of closing balances in Barclays bank and HDFC bank was explained as under: - “In the absence of the detailed working, in order to comply with the notice, we have assumed that the total income of Rs 3.07 16 | P a g e Mr. Ajay Gopikisan Piramal crores appears to comprise of the following: i. Difference/balancing figure of USD 258619 and GBP 9708.40 (as appearing in para 2.1 of the Show Cause Notice dtd.16.11.2018) =(USD441783.48 & GBP 15262.50 Less USD 153154.48 and GBP 5554.10) (i.e. Total closing balance on 31.03.2015 in Barclays Bank jointly owned by the assessee with other 2 joint holders Less assessee's share of closing balance reflected in Details of Assets as on 31.03.2015 filed during scrutiny assessment. ii. USD 120000 and USD 100000 credited in Barclays Bank on 18.03.2015 but not reflected in the assessee's HDFC Bank book/statement, We draw your honour's attention to our letter dtd.29.11.2018 wherein we had explained that the deposits of $ 1,00,000 and $ 1,20,000 were made on 18.03.2015 by the remaining joint holders i.e. Mrs. 17 | P a g e Mr. Ajay Gopikisan Piramal Swati Piramal and Mr. Anand Piramal respectively. We submit that the total closing balance of $4,41,783.48 as on 31.03.2015 in Barclays bank represents the closing balance of all the joint holders including the assessee. The said closing balance is after including the deposits of $120000 and $1,00,000 made on 18.03.2015. Thus, the difference/ balancing figure of $258,619 also includes $120000 and $100000 deposited by them. The difference /balancing figure of $258,619 represents the combined closing balance of the remaining two joint holders i.e. Mrs. Swati Piramal and Mr. Anand Piramal. Similarly, the difference /closing balance of GBP 9708.40 represents the combined closing balance of the remaining two joint holders. A statement giving a Barclay’s bank summary for FY 2014-15 of each Joint holder is enclosed as Annexure 3. This will give a snap short of the various movements in the account. We hope we have explained in detail the reason as to 18 | P a g e /Mum/2019 Mr. Ajay Gopikisan Piramal why we do not agree with your proposal to revise the order under section 263.”