ACIT, CHENNAI vs. BHADRASHYAM HARSAD KOTHARI (DECEASED), CHENNAI

The assessee and Revenue have filed appeals against the common order passed by the Commissioner of Income Tax (Appeals)-8, Chennai, dated 30.12.2016 and pertain to assessment years 2006-07 and 2007-08. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order.

Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the Assessing Officer, on the basis of the information said to be received from the Investigation Wing of the Department, found that there were deposits in the name of M/s Sisal Holdings Limited and Nicola Fallaha and/or Alex Fallaha in HSBC Bank, Geneva, Switzerland. According to the Ld. counsel, the so-called information said to be received from the Assessing Officer is not an authenticated one. The assessee reliably understands that some of the data had been stolen from HSBC Bank, Geneva and the same was handed over to Government of India. The account in the name of M/s Sisal Holdings Limited, according to the Ld. counsel, might have been opened by the company. It is not known how the to the Ld. counsel, the assessee has not opened the account in HSBC Bank, Geneva nor deposited any money in the account.

The Ld.counsel for the assessee further submitted that with respect to deposits in the account of Nicola Fallaha and/or Alex Fallaha in HSBC Bank, the bank itself clarified that the account does not belong to the assessee. The assessee also clarified that the account in the name of Nicola Fallaha and/or Alex Fallaha is not connected to the assessee, hence, no tax was paid. In the absence of any authenticated information, according to the Ld. counsel, the Assessing Officer cannot make any assessment in the hands of the assessee. Even in respect of the account standing in the name of Sisal Holdings Limited, no authenticated information was available with the Department. The Assessing Officer hurriedly completed the assessment before the completion of investigation. According to the Ld. counsel, the CIT(Appeals) also failed to examine the factual aspect and confirmed the addition made by the Assessing Officer. When the investigation is still going on, according to the Ld. in the hands of the assessee.

On the contrary, Smt. Vijayalakshmi, the Ld. Departmental Representative, submitted that the Investigation Wing of the Department had received information in respect of account maintained by the assessee with HSBC Bank, Geneva at Switzerland. The Ld. D.R. further submitted that the assessee operated the HSBC account at Switzerland under Code No. BUP 5090151543 and carried out unaccounted transactions and made deposits during the period 01.04.2005 to 31.03.2006. In fact, according to the Ld. D.R., the assessee deposited USD 3,15,55,874.03 which is equivalent to `1,40,73,91,847/- in HSBC Bank in the name of Sisal Holdings Limited. The account number in HSBC Bank is 5091364910. Referring to the reply given by the assessee to the Assessing Officer regarding admission that the assessee and his wife’s name were found as beneficiaries, the Ld. D.R. submitted that the assessee agreed to pay taxes in respect of the amount outstanding in HSBC account No.5091364910. Hence, now, according to the Ld. D.R., the assessee cannot dispute that the account does not belong to him.

The Ld. Departmental Representative further submitted that the assessee has also produced a letter from HSBC Bank saying that he is not connected with the account in the name of Nicola Fallaha and/or Alex Fallaha. In view of the above, according to the Ld. D.R., the Assessing Officer requested the CBDT to counter check the matter by making proper investigation. According to the Ld. D.R., since investigation was in progress and the time limit for completing the assessment is going to expire, the Assessing Officer completed the assessment by making addition. Even in respect of Nicola Fallaha and/or Alex Fallaha, the assessee’s name was shown as beneficiary as in the case of Sisal Holdings Limited.

We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer received information from the Investigation Wing of the Department about the deposits in HSBC Bank, Geneva, Switzerland. The information received by the Assessing Officer from the Investigation Wing discloses the bank deposits in the name of Sisal Holdings Limited with A/c No.5091364910 and in the name of Nicola Fallaha and/or Alex Fallaha with A/c No.5094062371. The assessee and his wife were nominated as beneficiaries in the account. Now the assessee claims before this Tribunal that he is not in any way connected with the bank account. The assessee also claims that the account is neither opened by him nor operated by him. The Department claims that the assessee operated the account and carried on unaccounted transactions under Code BUP 5090151543. When the Investigation Wing of Chennai carried out the investigation, the assessee agreed to pay the taxes on the deposits made in account No.5091364910 stands in the name of Moreover, the names of the assessee and his wife were referred as beneficiaries in the account. Therefore, there is no gain saying at this stage by the assessee that the account was not opened by him.

In view of the above factual situation, the addition made in the hands of the assessee in respect of deposit in HSBC Bank, Geneva, Switzerland in the name of Sisal Holdings Limited in A/c No.5091364910 is confirmed. and/or Alex Fallaha, the assessee has produced a letter said to be received from HSBC Bank, Geneva, Switzerland claiming that there are some errors in the information transmitted to the Indian authorities by a French national. The HSBC Bank also appears to have clarified that the assessee is not connected with Account No. 5094062371 of Nicola Fallaha and/or Alex Fallaha. On the basis of the above said so-called letter said to have been received from HSBC Bank by the assessee, the Assessing Officer requested the CBDT to make further enquiry. The matter is pending investigation.

Since the investigation is pending, this Tribunal is of the considered opinion that the Assessing Officer is expected to consider the material collected by the competent authority in the its logical end. Therefore, this Tribunal is of the considered opinion that in respect of deposit in the name of Nicola Fallaha and/or Alex Fallaha with account No.5094062371, the matter needs to be reconsidered by the Assessing Officer after receiving report from the competent investigating authority of the Department. The assessee also has to explain how his name and his wife’s name were referred as beneficiaries in the account. The competent authority nominated by the CBDT for investigating the matter has to expedite the matter and file a report before the Assessing Officer so that the matter can be finalized at an early stage. Accordingly, while confirming the addition made by the Assessing Officer in respect of the deposit in Sisal Holding Ltd. in account No.5091364910, the orders of both the authorities below in respect of deposit in the name of Nicola Fallaha and/or Alex Fallaha in account No.5094062371, are set aside and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter afresh in the light of the investigation report that may be filed by the competent authority and thereafter decide the matter afresh in accordance with law, after giving a reasonable opportunity to the assessee.

We make it clear that the investigating authority nominated by the CBDT in this matter has to expedite the investigation and file its report as early as possible so that the Assessing Officer can complete the assessment at the earliest possible time.

With the above observation, all the appeals filed by both Revenue and the assessee are partly allowed for statistical purposes.