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Income Tax Appellate Tribunal, MUMBAI BENCHES “I”, MUMBAI
Before: Shri G S Pannu, Vice- & Shri Pawan Singh
O R D E R Per G S Pannu, Vice-President
This appeal is directed against the order of the CIT(A)-57, Mumbai, dated 05.02.2018, which in turn has arisen out of the order passed by the Assessing Officer u/s. 143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to A.Y. 2006-07.
In this appeal, the Revenue has raised the following Grounds of appeal:
“1) Whether on the facts and circumstances of the case and in law, the CIT(A) was correct in deleting the addition of Rs. 3,65,85,330/- made by A.O ignoring the fact that the assessee failed to provide the details of his HSBC accounts and the sources of deposits thereof during the course of assessment proceedings.
2) Whether on the facts and circumstances of the case and in law, the CIT(A) was correct in deleting the addition of Rs. 3,65,85,330/- made by A.O ignoring the fact that information related to HSBC accounts of the assessee not disclosed to Indian taxation department was received by Govt. of India from the French Government under DTAA.
3) Whether on the facts and circumstances of the case and in law, the CIT(A) was correct in upholding the contention of the assessee that it is fabricated/manufactured data with some malafide intention, and has ignored the fact that the assessee did not give any evidence /proof in this regard.
4) Whether on the facts and circumstances of the case and in law , the CIT(A) erred in ignoring the fact that the assessee did not sign consent waiver form for carrying out any further enquiry from Swiss HSBC Branch which could have provided all relevant information. The CIT(A) has ignored this vital issue in his order and stated that AO should have proved reliable and authentic evidence, whereas the assessee himself thwarted such attempt. More so when assessee has not denied before any authority that such account does not belong to him.
5) The Appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored.”
3. A perusal of the aforestated Grounds reveal that the solitary dispute emanates from the order of the CIT(A) in deleting an addition of ` 3,65,85,330/-, which was made by the Assessing Officer with respect to certain bank accounts stated to be connected with the assessee. In this background, both parties have been heard and relevant material perused.
Briefly put, relevant facts are that the respondent assessee is an individual, who is a Non-Resident Indian. The impugned proceedings were initiated by the Assessing Officer in terms of section 148 of the Act, based on certain information received by the Government of India from the French Government under the Double Tax Avoidance Agreement (DTAA). The information was that various individuals have foreign bank accounts in HSBC Private Bank (Suisse) SA, which were not disclosed to the Indian tax authorities. The assessment order records that such information was received in the form of a document, which has been referred to as “Base Note”. It is further stated that such Base Note contained details of account holders such as name, date of birth, place of birth, sex, residential address, profession, nationality, along with the date of opening of the bank account in HSBC Private Bank (Suisse) SA and also account balance in certain years, etc. The Assessing Officer records that in the case of captioned assessee also, a Base Note was received containing certain details with regard to bank accounts maintained with HSBC Private Bank (Suisse) SA. The Assessing Officer further records in the assessment order that as per the ‘Base Note’, three bank accounts in HSBC Private Bank (Suisse) SA were held in the name of three different entities viz. Zetec Ventures Ltd., Zeke Limited and Jonah Worldwide Inc., to which assessee was beneficially connected. On being show caused, the assessee made two-fold submissions. Firstly, that so far as the bank account in the name of Jonah Worldwide Inc. was concerned, assessee had no connection with the same at all.
Secondly, with respect to the bank accounts in the name of Zetec Ventures Ltd and Zeke Limited are concerned, the stand of the assessee was that he was not the owner of the same as they were opened by two different entities. It was also explained that Zetec Ventures Ltd and Zeke Limited were companies registered in the British Virgin Islands and that these companies have no nexus with any transactions of any entity in India and, therefore, the same fell outside the purview of the Indian Income Tax Act, 1961. The assessee also explained that he had dealt with the aforestated entities in the capacity of a Non-Resident Indian. Apart from the aforesaid, assessee also raised a preliminary objection of assailing the authenticity of the Base Note itself, as according to him, the same was prepared on the basis of stolen data and, therefore, the same could not be relied upon to fasten any tax liability on the assessee. The assessee also asserted that he did not maintain any bank account in his name in any branch of HSBC in Switzerland. So far as his name and address being mentioned in the Base Note, the assessee explained that the address stated was as per his passport, which was given to the bank as a document for verification at the time while opening the account for CBAY Systems U.S, in which he was the chairman and CEO. When the two impugned entities i.e. Zetec Ventures Ltd., Zeke Limited opened their account in the same branch of HSBC in which CBAY systems held its account, finding a common link in the three entities, the latter two entities also got tagged with the assessee’s name since he was the Director in the two entities. Explaining the entire factual matrix, the assertion of the assessee before the Assessing Officer was that Zetec Ventures Ltd and Zeke Limited were distinct legal entities and clients of HSBC Private Bank (Suisse) SA and that there was no link between the assessee and the two entities in so far as the transactions in the bank account of the two were concerned. In fact, the Assessing Officer has recorded the submissions of the assessee to the effect that the assessee was not handling any transactions of said companies.
On the other hand, the Assessing Officer required the assessee to provide the statements of the bank accounts in question, the consent waiver form and also the source of deposits made in such accounts along with the supporting evidence.
Noting the resistance on the part of the assessee to furnish such material, the Assessing Officer held that “the same leads to the presumption that the assessee has routed money sourced from India through these two entities to HSBC in Switzerland. Also, as mentioned earlier, the contention of the assessee that he is not associated with Jonah Worldwide cannot be accepted without examination of the bank account statements”.
In this manner, the Assessing Officer proceeded to hold that the peak amount appearing in the ‘Base Note’ of three bank accounts in question with HSBC Private Bank (Suisse) SA being ` 3,65,85,330/- was liable to be assessed as income of the assessee which is received or deemed to be received in India during the instant year by the assessee or that the same has accrued or arisen or is deemed to have accrued or arisen to him during the year under consideration. Accordingly, the addition of ` 3,65,85,330/- was made to the returned income, which was assailed before the CIT(A) on facts as well as on points of law.
Before the CIT(A), assessee made varied submissions asserting that the addition was not maintainable in law or on facts. As per the assessee, the assessment was based on incomplete, inaccurate stolen data, received from unauthorized source and, therefore, addition could not be sustained. The assessee also asserted that there was no justification in linking him to the three independent legal entities in question so as to assess the peak credit in the three bank accounts as income of the assessee. It was also submitted before the CIT(A) that the addition was not within the scope and ambit of section 5(2) of the Act since the assessee was a Non-Resident Indian and there was no material to say that any of the transactions contained in the stated bank accounts were having any Indian connection. The CIT(A) has reproduced the entire submissions of the assessee.
The CIT(A) further noticed that the onus was on the Assessing Officer to prove that the amounts reflected in the three bank accounts were sourced from India and that the bank accounts in question belonged to the assessee. As per the CIT(A), the AO did not discharge such onus and that it cannot be presumed that the amounts in three bank accounts in question belonged to the assessee without any evidence to corroborate the action of the AO. In fact at page 38 of his order, the following factual findings made by the CIT(A) is worthy of notice:
“I have carefully seen the facts of the case and submission made by the assessee. Here the assessing officer has asked the assessee to prove that the amount reflected in the HSBC account Geneva was not sourced from India. The assessee has repeatedly submitted he did not have any access to bank account and therefore he could not have submitted and whatever bank account he held in India, he disclosed in the Return of Income. In these circumstances, it cannot be presumed that the amount in the HSBC account belonged to the Assessee without any evidence or even corroborate evidence to that effect therefore, I am unable to subscribe to the action of the AO that the account and the peak amount in question belonged to the appellant or for that matter it was the undisclosed income of the appellant. Thus, considering the facts I am inclined to accept the arguments of the appellant. Thus, considering the facts I am inclined to accept the arguments of the appellant that the AO has made such addition merely by conjecture and surmises. It is well settled that suspicion howsoever strong it may be cannot take the position of proof and no addition could be made on such presumption and assumption.” Apart there from, the CTI(A) noted that in similar circumstances addition was made in the case of one Shri Hemant Mansukhlal Pandya for A.Y. 2006-07 and 2007-08, which was subject matter of consideration by his co-ordinate CIT(A), and in terms of the decision therein, dated 21.03.2016, the entire addition has been deleted.
The CIT(A) has reproduced the relevant portion of the decision of the CIT(A) in the case of Hemant Mansukhlal Pandya (supra). A perusal of the order of the CIT(A) reveals that reliance was placed in the case of one Rahul Rajnikant Parikh decided by the CIT(A) in similar circumstances.
Furthermore, on the aspect of the onus being on the AO to substantiate that the assessee was connected to the bank account, the CIT(A) has relied on the judgement of Hon’ble Supreme Court in the case of Carborandum Co. Vs. CIT [108 ITR 335] as well as judgement of Hon’ble Bombay High Court in the case of CIT vs. Tata Chemicals Ltd. [94 ITR 85].
For all the aforesaid reasons the CIT(A) found that there was no evidence, which could sustain the premises of the AO that the amount of ` 3,65,85,330/- in question was received or deemed to have been received or accrued in India in the hands of the assessee during the year under consideration.
Accordingly, she has deleted the addition made by the AO. Against such an action of the CIT(A), the Revenue is in appeal before us.
At the time of hearing, the learned representative for the respondent assessee, at the outset, stated that the decision of the CIT(A) in the case of Hemant Shri Hemant Mansukhlal Pandya relied upon in the impugned order had since come up before the Tribunal and in the case, reported at 174 ITD 101, the Tribunal has confirmed the action of the CIT(A) in deleting the addition made to the income of the assessee. The learned representative pointed out that the facts and circumstances leading to the addition in the instant case stand on identical footing as were considered by the Tribunal in the case of Shri Hemant Mansukhlal Pandya (supra), and, therefore, in this view of the matter, contended that the decision of the CIT(A) to be affirmed.
The learned CIT-DR appearing for the Revenue has not disputed the factual matrix brought out by the learned representative for the respondent but referred to the discussion made by the AO in support of the case of the Revenue. In particular, the CIT-DR has referred to the discussion made by the AO in para 7.2 of the order to point out that the assessee was not forthcoming in producing the bank account statements or consent waiver form that could have enabled the AO to obtain the relevant details with regard to the bank account in question . In this manner, the learned CIT-DR submitted that the AO had correctly invoked the presumption that money sourced from India was routed through three entities to the bank account in question and, therefore, addition was rightly made. The learned CIT-DR also referred to the findings of the AO that assessee was an Indian citizen who had financial interest in India and that on the basis of preponderance of human probabilities, the three bank accounts in question could be beneficially attributable to the assessee. In this manner, the addition is sought to be defended.
On the other hand, learned representative for the assessee pointed out to various factual assertions made by the assessee before the lower authorities and also relied upon the findings of the learned CIT(A). In particular, the learned representative submitted that though at the initial stage of the proceedings, the opinion which lead to the re-opening of the assessment was with regard to the bank account being held by the assessee, whereas ultimately what has been sought to be taxed are the three bank accounts which are ostensibly owned by three different entities. It has been emphasized in so far one of the entity is concerned i.e. Jonah Worldwide Inc, the assessee has no connection whatsoever with the concern and even the other two entities, they are independent entities based in British Virgin Islands. In fact, the findings of the AO in para 12(b) too emphasized that the AO was aware that the two bank accounts in question were opened by respective entities and not by the assessee. Therefore, it has been asserted that the addition was entirely misplaced which has been rightly deleted by the CIT(A).
We have carefully considered the rival submissions. So far as the factual aspect of the matter are concerned, the same has been noted in the earlier paragraphs and are not been repeated for the sake of brevity. So however, in order to briefly recapitulate, it is to be noticed that the assessee is a non-resident individual, an aspect which is not disputed. Further, it is also not disputed that three accounts in question are not in the name of the assessee. Further two of the bank accounts have been opened in the name of entities viz. Zetec Ventures Ltd and Zeke Limited based in British Virgin Islands and assessee is a Director in one of the two entities and so far as the second entity is concerned, assessee founded the same. The claim of the assessee was that none of the bank accounts in question have any relation or connection to India or to any of assessee’s transactions in India. We find that the case set up by the AO is on a presumption that the assessee has routed money sourced from India through three entities to the bank accounts in question.
In this background, the first and the foremost issue which arises for consideration is the question of onus on the respective parties (i.e. assessee and Revenue) and whether the same has been discharged? Aligned to this question, is the scope and ambit of the income assessable in India in the hands of a non- resident which is governed by the provisions of section 5(2) of the Act. In fact, such a situation has been examined by our co-ordinate Bench in the case of Shri Hemant Mansukhlal Pandya (supra). The bare provisions of section 5(2) of the Act bring out that in case of a non-resident assessee, the total income that is liable to be taxed shall comprise of income, which is received or deemed to be received by or on behalf of such person or the same accrues or arises or is deemed to accrue or arise in India to such person. Therefore, the moot question is whether it can be said that the credits appearing the three bank accounts in question lead to the situation where the amount is includible in the income of the assessee, a non- resident Indian, within the provisions of section 5(2) of the Act. For this purpose, what is relevant to decide is the burden on the assessee to disclose the details of the three bank accounts in question. This aspect was also gone into by our co- ordinate Bench in the case of Shri Hemant Mansukhlal Pandya (supra), and the following discussion is relevant:-
Having said, let us examine, non residents are required to furnish details of his foreign bank accounts and assets in India or not. The assessee has maintained only one bank account in India in Dena Bank which is an NRO account. The said bank account has been reflected in AIR information. In order to prove that the amount in foreign bank account is not sourced from India, the assessee filed the bank statement of his only bank account in India 24 Hemant Mansukhalal Pandya from the financial years 1998 to 2008. On perusal of the bank account filed by the assessee, it was noticed that there are no debits in the bank account which could have gone to the foreign bank account. Thus, it can be seen that no amounts have been transferred from his Dena Bank account in India to any of the bank accounts maintained including HSBC, Geneva. In fact, the balance in the account maintained in Dena Bank is so less that it cannot fund an amount of Rs.4.28 crores which has been added by the AO as assessee’s income. Despite this, the AO sought to put the onus of proving a negative that the deposits in foreign bank account are not sourced from India, on the assessee. In our considered view, the AO is not justified in placing the onus of proving a negative on the assessee. In fact, only a positive assertion can be proved, but not a negative. Furthermore, the onus of proving that an amount falls within the taxing ambit is on the department and it is incorrect to place the onus of proving negative on the assessee. This legal proposition is supported by the decision of Hon’ble Supreme Court in the case of Parimisetty Seetharaman vs CIT (1965) 57 ITR 532 (SC) where it was categorically held that the burden lies upon the department to prove that a particular asset is within the taxing provisions. Therefore, we are of the considered view that when the AO found that the assessee is a non resident Indian, was incorrect in making addition towards deposits found in foreign bank account maintained with HSBC Bank, 25 Hemant Mansukhalal Pandya Geneva without establishing the fact that the said deposit is sourced out of income derived in India, when the assessee has filed necessary evidences to prove that he is a non resident since 25 years and his foreign bank account and assets did not have any connection with India and that the same have been acquired / sourced out of foreign income which has not accrued / arisen in India.” The aforesaid discussion by our co-ordinate Bench reveals that the onus was on the Department to prove that the particular asset in question was within the taxing provisions of the Indian Income Tax Act, 1961. The proposition has been arrived at, relying on the judgment of the Hon’ble Supreme Court in the case of Parimisetty Seetharaman vs. CIT [57 ITR 532]. Therefore, we proceed further on the premise that the onus was on the AO to establish that qua the three bank accounts in question assessee had the ownership and also the fact that the transactions therein have Indian connection.
In this background, we have examined the factual findings which have been arrived at by the CIT(A). In the earlier part of this order, a portion of the said finding has also been extracted by us. As per the CIT(A) there is no material or evidence to say that the assessee was connected with the bank accounts in question so as to justify an inference that any income thereof was received or deemed to have been received or accrued or deemed to have accrued in India. A perusal of the Grounds of appeal raised by the Revenue before us reveal that none of the findings recorded by the CIT(A) have been assailed on the basis of any material or evidence. In fact, the entire case of the Revenue, which had been adverted to at the time of hearing before us, is based on the presumption that the assessee has routed the money sourced from India through the three entities into the bank accounts in question. It is a well-settled proposition that a presumption, howsoever, strong cannot substitute an evidence and, therefore, in our view, the CIT(A) made no mistake in deleting the addition. At this stage, we may also refer to the reliance placed by the AO as well as the CIT-DR on the judgment of Hon’ble Supreme Court in the case of Sumati Dayal vs. CIT [214 ITR 801] to defend the addition made on the test of human probability. No doubt, the test of human probabilities is an acceptable test to decide the genuineness or otherwise of a particular transaction. So, however, what is required is to weigh and consider all evidences and material which are available on record. Considering the facts of the instant case and noting that there was complete absence of material, as noted by the CIT(A) too, we find that the application of test of human probabilities to sustain the addition would be unjustified. Therefore, the reliance placed on the judgment of Hon’ble Supreme Court in the case of Sumati Dayal (supra), is not applicable to the facts of the instant case.
Before parting, we may also refer to the fact that there is no negation to the fact recorded by the CIT(A) that the circumstances of the case are similar to those in the case of Shri Hemant Mansukhlal Pandya (supra). Even in the Grounds of appeal filed before us, the Revenue has not canvassed to the contrary. In fact, at the time of hearing, the learned representative referred to the Grounds of appeal raised in the case of Shri Hemant Mansukhlal Pandya (supra) and stated that two of the Grounds in the present appeal are identically worded. Considering that our co- ordinate Bench in the case of Shri Hemant Mansukhlal Pandya (supra) has also considered an identical issue in similar circumstances, we find no reasons to depart from the aforesaid decision and, accordingly, on this ground also we affirm the ultimate decision of the CIT(A) in deleting the addition.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 19th June, 2019.