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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI R. K. PANDA & SHRI KULDIP SINGH
assessment order.
He submitted that on 9.2.2012, i.e. 20 days after the search date, the assessee filed one letter in which he agreed to pay tax and interest on the corresponding income. However, after about 9 ½ months the assessee retracted the surrender of corresponding undisclosed income for 3 reasons which the Assessing Officer has reproduced in the assessment order.
He submitted that the statement recorded during search and voluntarily declaration of undisclosed income in post search enquiries constitute evidence found during the search. For the above proposition, he relied on the decision of the Apex Court in the case of Mukundray K. Shah reported in 290 ITR 433, wherein it has held that even if addition arises out of enquiry related to source of investment in disclosed investment, if details of such disclosed investment were found during search, addition has to be sustained. He submitted that at that time simultaneous proceedings u/s 148/regular assessment and Block Assessment proceedings were not possible.
The ld. DR submitted that limitation to issue notice u/s 148 was available in this case till 31.03.2013. However, proceedings u/s 153A were pending on that date. Referring to the decision of the Co-ordinate Bench of the Tribunal in & 2676/Del/2010, order dated 8-8-2013, he submitted that the Tribunal at para 9 has held that during the pendency of proceedings u/s 153A of the Act, the Assessing Officer is not empowered to issue notice u/s 147/148 of the Act". Therefore, the Tribunal answered the following question of law in the negative and held that addition for such escapement of income is to be made in order u/s 153A/153C proceeding only. “Whether, during the pendency of proceedings u/s 153A/153C, the AO can issue a notice u/s 148, in respect of escapement of income, which comes to his knowledge from a source other than the evidence found during the course of search, and continue the said proceedings simultaneously with proceedings u/s 153A/153C"
Referring to the decision of the Tribunal in the case of Rajat Shubhra Chatterjee, reported in 47 CCH 0135, order dated 20.05.2016, he submitted that the Tribunal quashed the proceedings u/s 148 on the ground that for any evidence which is found/related to search, addition can be made only u/s 153A/153C. The ld. DR submitted that in this back ground for holding that the above addition could not have been made u/s 153A, the Tribunal may have to refer the matter to a Special Bench. He submitted that the decisions of Hon'ble Delhi High Court in the cases of Anil Kumar Bhatia, reported in 211 Taxman 453(Del) and Filatex India Ltd , reported in 229 Taxmann 555(Del) also support the stand of the Revenue that this addition is to be made u/s 153A. He submitted that the decision in the case of Kabul Chawla, reported in 380 ITR 573 does not apply in the present case as in the case of Kabul Chawla, the addition made had no connection with any material, evidence or statement found/recorded, letter filed during search or post search enquiries.
So far as merits of the case is concerned, he submitted that the information was received from a sovereign government. Though, the strict tests of Evidence Act do not apply to assessment proceedings, even in Evidence Act, documents /evidence received from foreign governments the acceptance of such evidence are different from evidence received from domestic/private sources.
The issue of cross examination in case of information received from another government does not arise, more so in assessment proceedings where the principle is "Preponderance of Probabilities" and not "Beyond reasonable doubt". The presence of assessee in the city/country during the period when the accounts were opened, specific personal details of assessee in those documents, assessee's name figuring in a long list of account holders of different countries, information initially leaked by a whistleblower employee of the bank, bank publicly apologizing for data leak of its customers, information being shared with India by a sovereign government and initial surrender of the corresponding undisclosed income by the assessee satisfactorily meet rather exceed the standards of test of “Preponderance of Probabilities”.
The ld. DR submitted that para 11 of assessment order refers to certain closed accounts for which reference was made to Swiss Authorities. The corresponding additions have not been made in the assessment order.
Therefore, the said communication to Swiss Authorities is not relevant in this appeal. As regards additions made, the basis is the principle of "Preponderance of Probabilities". He submitted that exchange of information between Sovereign Nations is governed by treaty provisions and not as per the standards and procedure laid down by domestic law. For the above proposition, he relied on the decision of Ahmedabad Bench of the Tribunal in order dated 30.11.2017 in the case of Mayurbhai Mangaldas Patel. For information received from Foreign Governments, the corresponding standard operating procedures apply and not the standard operating procedures applicable to receipt and verification of documents/ information from domestic sources.
He submitted that the decision in the cases of Bishwanath Garodia (supra) and Shyam Sunder Jindal (supra) relied upon by the assessee cannot be followed. He also relied on the decision of the Hon’ble Apex Court in the case of Mumbai Kamgar Sabha vs Faizullbhai AIR 1976 SC 1455.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer as well as the ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case information was received by Govt. of India under DTAA/DTAC between India and other countries that certain persons in India held bank accounts in HSBC Private Bank (Suisse), SA, Switzerland which contained the name of the assessee. A search u/s 132 was conducted in the premises of the assessee on 20.01.2012 during which the statement of the assessee was recorded u/s 132(4) of the I.T. Act. He was also asked to give the details of his foreign bank accounts to which the assessee had categorically denied to have known or maintained any such foreign bank account. We find the Assessing Officer, during the course of assessment proceedings, confronted the information received in the form of 7 page documents to which the assessee had also denied to have any knowledge about the existence of such bank account. It is pertinent to mention here that the assessee vide letter dated 09.02.2012 addressed to the DDIT (Inv.) New Delhi had clarified that neither he created any such entity nor is aware of one existing on that date as mentioned in the 7 pages which were confronted to him. He, however, had stated that in order to buy peace and avoid litigation with the revenue authorities is willing to pay income-tax and interest due thereon for the relevant year provided no penal action and/or prosecution action is undertaken and is kept confidence. The Assessing Officer noted that despite such undertaking given by the assessee before the DDIT (Inv.) no such amount was offered to tax in the return filed in communication to notice u/s 153A on the ground that the assessee did not receive any reasons from the department to his request and the information was leaked to a TV channel. Since the information in the form of document has been collected by the Government of India from credible sources wherein name of the assessee appeared containing his date of birth, address and other details such as name of father, wife, mother, etc. and since the details of visit to Switzerland coincided with the details of creation/operation of the bank accounts and despite being requested to sign the consent waiver form, the assessee did not sign the same, the Assessing Officer rejected the explanation given by the assessee and made addition of Rs.1,20,37,863/- to the total income of the assessee being the deposit in TAIRA FOUNDATION, RONDEBERG LIMITED and ASPREY WORLWIDE SA, the details of which are given at para 6 of this order. The Assessing Officer further made addition of Rs.1,23,130/- being income on account of undisclosed income earned for such undisclosed foreign bank account deposits u/s 69 of the I.T. Act.
We find the ld. CIT(A) deleted the addition of Rs.1,23,130/- being the interest on account of undisclosed interest earned on such deposits for which the revenue is not in appeal and therefore we are not concerned with the same. He, however, dismissed the ground raised by the assessee challenging the validity of the assessment proceedings u/s 153A and sustained the addition made by the Assessing Officer amounting to Rs.1,20,37,863/-.
It is the submission of the ld. counsel for the assessee that in absence of any incriminating material found during the course of search, no addition can be made. It is also the submission of the ld. counsel for the assessee that the documents relied on by the Assessing Officer are inadmissible since these documents are not signed by any authority and these are merely photocopies which were not duly authenticated. Further, it is the submission of the ld. counsel for the assessee that none of the client profile reflecting outstanding bank balance is in the name of the assessee i.e. Parag Dalmia or his family members and, therefore, addition, if any, can be made in the hands of those entities and not in the hands of the assessee.
It is the submission of the ld. DR that the assessee was shown the information received by the Government of India regarding the undisclosed foreign bank account during the course of search and his statement was recorded u/s 132(4) of the I.T. Act. The assessee vide his letter dated 09.02.2012 i.e. 20 days after the search had filed a letter before the DDIT (Inv.) agreeing to pay the tax and interest due thereon. The declaration of the assessee voluntarily on such undisclosed income in post-search enquiries and the statement recorded during the course of search constitute incriminating evidence found during the course of search. It is also the submission of the ld. DR that since a search has taken place u/s 132 during which the assessee was confronted with those 7 pages documents, therefore, the Assessing Officer could not have issued notice u/s 148 on the basis of the 7 pages received from a sovereign country containing the name of the assessee of having Swiss bank accounts which were confronted to him during the course of search. It is also the submission of the ld. DR since the assessee denied to have signed the consent waiver form as required by the Assessing Officer during the course of assessment proceedings and since his travel to Switzerland coincides with the creation of the documents/operation of the bank accounts, therefore, it is clear that the accounts maintained with the Suisse Bank belong to the assessee and, therefore, the addition made by the Assessing Officer and sustained by the ld. CIT(A) are justified.
So far as the argument of the ld. counsel for the assessee that in absence of any incriminating material found during the course of search, the proceedings u/s 153A has to be held as null and void is not applicable to the facts of the present case. The various decisions relied on by the ld. counsel for the assessee in our opinion are not applicable to the facts of the present case and are distinguishable. Since in the instant case the documents in the shape of 7 pages received by the Government of India from a sovereign country containing information regarding the undisclosed foreign accounts were received prior to the search and was confronted to the assessee during the course of search, therefore, the same, in our opinion, constitutes incriminating material which has rightly been used by the Assessing Officer in the proceedings u/s 153A/143(3) of the I.T. Act. Further, since the proceedings u/s 153A was pending, the Assessing Officer is not empowered to issue notice u/s 148 of the I.T. Act in respect of income which comes to his knowledge from a source other than the evidence found during the course of search and continued the said proceedings simultaneously with proceedings u/s 153A/153C as held by the Tribunal in the case of ACIT vs. Vipul Motors Pvt. Ltd. vide & 2676/Del/2010 order dated 08.08.2013 and in the case of Rajat Subham Chatterjee vs. ACIT vide ITA No.2430/Del/2015, order dated 20.05.2016. Such type of argument was never taken in the case of Bishwanath Garodia (supra) and Shyam Sunder Jindal (supra).
Now, coming to the merits of the case is concerned, we find the Assessing Officer at para 11 of the order as observed as under :-
“11. From the above facts it is clear that the assessee has opened and/or operated account(s) in HSBC Bank. He has been given a unique code which is BUP SIFIC PER ID 9070142903. His profile was found linked to five client profiles namely, ASPREY WORLDWIDE S.A.; RONDEBERG LIMITED; TAIRA FOUNDATION, 12717 RSK AND MENKO FOUNDATION, VADUZ. With a view to verifying the above foreign bank account(s) a reference(s) has/have been sent to competent authorities in Switzerland and other countries. Till date the verificatory report in respect of above foreign bank account(s) has not been received. In view of these facts and since the assessment is getting barred by limitation on 31.03.2015, the assessment of the assessee is being completed in the absence of verificatory report and appropriate action as provided in the Act, will be taken as and when the verificatory report is received.”
This shows that the verificatory letters from the competent authorities in Switzerland was yet to be received before completion of the assessment. Before ld. CIT(A) was also, the same was not available. Even before us nothing was brought to our notice regarding the verificatory letters received from Switzerland. Since assessee in the instant case was denying from the beginning that the accounts does not belong to him and since verificatory report in respect of above is yet to be received, and since in absence of such verificatory letter, it cannot be conclusively proved that the accounts in fact do belong to the assessee, therefore, considering the totality of the facts and in the interest of justice, we restore this issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh and in accordance with law after obtaining the verificatory report. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are partly allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on this 26th day of February, 2018.