SRI BISHWANATH GARODIA,KOLKATA vs. DCIT, CC-3(3), KOLKATA, KOLKATA

Date of concluding the hearing : July 20, 2016 Date of pronouncing the order : September 21, 2016 O R D E R Per Shri P.M. Jagtap, A.M.: These two appeals being & 856/KOL/2016 filed by the assessee against two separate orders passed by the ld. Commissioner of Income Tax (Appeals)-21, Kolkata both dated 11.03.2016 involve common issues and the same, therefore, are being disposed of by a single composite order along with the corresponding penalty appeals being ITA Nos. 853 & 855/KOL/2016 for the sake of convenience.

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 2 of 20

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 3 of 20 Switzerland. In reply to the query raised by the Assessing Officer in this regard, the assessee denied of having any Bank account with HSBC, Geneva, Switzerland by stating that he had no knowledge about such Bank account. He also stated that he was under extreme pressure and duress as a result of search and seizure action and signed whatsoever was dictated by the DDIT (Inv.)/Additional DIT (Inv.) in the statement recorded under section 131 on 30.07.2011. In his statement recorded under section 131 during the course of assessment proceedings on 17.06.2014 and 12.12.2014, the assessee again denied of having any Bank account in HSBC, Geneva, Switzerland. This denial of the assessee was found to be an after-thought by the Assessing Officer keeping in view the specific information received from foreign Government as well as the admission of the assessee in his statement recorded on 30.07.2011 accepting the ownership of the relevant Bank account. He also noted that the allegation of pressure and coercion during the course of search and seizure action as made by the assessee was not backed by any evidence of any sort. Accordingly, relying on the admission of the assessee as made in his statement recorded on 30.07.2011, which was duly supported by the information received by the Government of India from the foreign Government, the sums of Rs.4,61,16,074/- (equivalent to US Dollars 10,23,210) and Rs.9,70,73,651/- (equivalent to US Dollars 10,64,993 and 10,74,837) were added by him to the total income of the assessee for A.Ys. 2006-07 and 2007-08 in the assessments completed under section 153A/143(3) of the Act vide orders dated 31.12.2014.

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 4 of 20 relating to the validity of the assessments made by the Assessing Officer, the main contention raised by the assessee before the ld. CIT(Appeals) was that in the absence of any incriminating material or document found in the course of search, the Assessing Officer had no jurisdiction to initiate and frame the assessments under section 153A of the Act. This stand of the assessee was not found acceptable by the ld. CIT(Appeals) and he proceeded to uphold the validity of assessments made by the Assessing Officer under section 153A/143(3) of the Act for both the years under consideration for the following reasons given in paragraph no. 3.2 of his impugned orders:-

“3.2. The contention of the assessee that in absence of any incriminating material or document found in the course of search action, assessment could not be framed u/s. 153A of the Act. Ld. AR referred some case laws in. support of his arguments. There are decisions stating assessments can be made u/s. 153A even if no material found during search. Reliance is placed upon judgments in the case of Shivnath Rai Harnarain (India) Ltd. Vs. DCIT (ITAT, Delhi), 304 lTR (AT) 271 and Shyam Lata Kaushik Vs. ACIT (ITAT, Delhi), 114 ITD 305. However, facts in this case are different. In this case, apart from inventory of jewellery and other materials, cash of Rs.5,00,000/- was seized. Besides, at the time of search action, the Revenue was in possession of authenticated information that the assessee had an undisclosed bank account with the HSBC Bank, Geneva, Switzerland. In fact, one of the main reasons for initiation of search action was that undisclosed foreign bank account. Thus at the time of issuance of notice u/s 153A by the AO, there indeed some incriminating materials and documents were in the possession of the AO in the form of seized cash and undisclosed bank account and AO made an addition of Rs.4.61 crores on examination of undisclosed bank accounts as well. Moreover, the assessee never objected to the proceedings initiated u/s. 153A during the assessment proceedings. He filed a fresh return in response to notice u/s 153A and thereafter complied with the requirements of the assessment by attending the hearings from time to time and filing the requisite details and made several submissions. The materials on record suggest that before the AO, not even once the appellant had objected to the initiation or continuance of the assessment proceeding Vis. 153A of the Act. Therefore, the case is distinguishable on facts from the judicial pronouncements referred to. It is a well settled legal position that every case depends on its own facts. Even a slightest change in the factual scenario alters the entire conspectus of the matter and makes one case distinguishable from another. The crux of the matter

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 5 of 20 is that the ratio of any judgment cannot be seen divorced from its facts. Further section 92BB of the Act provides that- where an assessee has appeared in any proceeding or co-operated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provisions of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act --- '

In this case, as stated hereinabove, that the assessee had accepted the notice issued U/s. 153A of the Act and filed a fresh return without any objection. No objection was raised also during the assessment proceedings, rather assessee co-operated with the AO. An addition of Rs.4.61 crores were also made on account of undisclosed Swiss Bank account, which was a subject matter of search action. Therefore, I do not find any merit on facts and under the law, in the objection raised by the assessee during this appeal proceeding. This grounds of appeal are therefore, dismissed”.

4. As regards the issue relating to additions made by the Assessing Officer on account of the relevant transactions reflected in the Bank account with HSBC Bank, Geneva, Switzerland, an affidavit was filed by the assessee before the ld. CIT(Appeals) stating that the said Bank account with HSBC, Geneva, Switzerland was opened in his name by one Mr. Onn Sithawalla, owner of MSN International PTE Limited, Singapore in connection with a proposed joint venture. It was also stated in the said affidavit that the proposed joint venture was between MSM Enterprises PTE Limited owned and controlled by the family members of Mr. On Sithawalla, a permanent resident of Singapore and the Mangal Group owned by the assessee. It was further stated that the said MSN International PTE Limited had made certain deposits in the Bank account with HSBC Bank, Geneva, Switzerland opened in the name of the assessee and ultimately the entire balance lying in the said Bank account was remitted back to Singapore as per the directions given by Mr. Onn Sithawalla of MSM Enterprises PTE Limited in favour of Donald Mcarthy

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 6 of 20 Trading PTE Limited, an associated concern of MSM Enterprises PTE Limited. The affidavit of Mr. Onn Sithawalla, owner of MSM Enterprises PTE Limited was also filed by the assessee before the ld. CIT(Appeals) affirming all these facts on oath and a request was made to admit the said affidavit as well as his own affidavit as additional evidence on the ground he could not place the same before the Assessing Officer in the course of assessment proceedings. This additional evidence filed by the assessee was admitted by the ld. CIT(Appeals) and after obtaining the comments of the Assessing Officer thereon in the form of remand report and also counter-comments of the assessee in the form of rejoinder to the remand report, the ld. CIT(Appeals) proceeded to decide this issue on merit. In this regard, he recorded his observations/findings in paragraphs no. 4.4.1 to 4.4.5 of his impugned order, which read as under:- “4:4.1, I have read the submission of Ld. AR and seen the papers filed. I have also gone through the departmental records. The issue relates to ownership of a bank account [Code Profile No. 5091276522 and Identificants Internes No. BUP_SIFIC_PER_ID 5090147737] with HSBC, Geneva, Switzerland' [henceforth. referred to as Swiss Bank account] and deposits and transactions therein. The account was opened 'in the year 1999, in the .name of the assessee and his wife Smt. Usha Garodia was made 'nominee'. In this respect, four sworn statements of the assessee were recorded U/s. 131 of by the Revenue at three different stages -' (i) Statement dated 3010712011 recorded by the DDIT(Inv.) in the course of a search action, (ii) Statement dated 25106/2014 recorded by the AO during the assessment proceeding, (iii) Another statement dated 1511212014 recorded by the AO during the assessment proceeding, and (iv) Statement dated 05105/2015, recorded by my predecessor CIT(A)'in office after receipt of Form No.

connection with a proposed Joint Venture. He stated that all the deposits in the Swiss B~ account were made by MSM Enterprises PTE Ltd. and all actions were handled by Onn Sithawalla. In this regard, assessee filed a copy of his own affidavit dated 03/02/2015 and a copy of an Affidavit of Onn Sithawala alongwith Form No. 35.

4.2. A cursory look in the contain of the statements given by the assessee would reveal that he had at times made vague, roundabout, self-contradictory as well as false statements under 'oath', to suppress the facts. In his 2nd and 3rd statements recorded by the AO, assessee made false statements by denying to' have had any Swiss Bank account. However, his first statement can be considered as close to truth. Here he admitted that one. Bank a/c was opened in Swiss Bank in his name and his wife was authorized to operate the account(answer to Q.3). He also stated that no one approached me for opening of the account, I myself approached the bank to get an account opened.'(Answer to Q. 4). He further stated that 'except the deposits made at the time of-opening of account I do not remember the exact number of times deposits or Withdrawals in this account. However, I have operated this account 'only a few times.' (Answer to Q. 1O). On being asked about the source of deposits in the Swiss Bank account,· assessee categorically stated that 'the money deposited in this account represents the proceeds of my export business as far as I remember.' (Answer to Q.12). Thus, in the first statement, which has got immense evidentiary value in the eyes of law, the assessee admitted the vital points that the, Swiss Bank account was opened by him and at his own behest; made few deposits and withdrawals (factually correct); and the deposits were made from his export proceeds. It is well settled law that an admission is the best evidence that an opposing party can rely upon and decisive of the matter, unless proved erroneous. Reliance is placed on the decision in the cases of Narayan Bhagwantrao Gosavi Batajiwale Vs. Gopal, AIT 1960 100 (SC) and Pranav Construction. Co. -Vs. ACIT (ITAT, Mumbai) 61 ITJ 145.

4.4.3. The name of MS M Enterprises PTE Ltd. (MSM), a company owned by one Onn Sithawalla, a Singapore citizen and a proposed Joint venture between assessee and MSM surfaced for the first time in a form of an Affidavit, dated 03/02/2015~Jiled in this office alongwith Form No. 35., i.e.

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 8 of 20 after 3 years and 6 months from the date of recording the first statement on 30/07/2011. In this Affidavit, it is stated that assessee though opened the Swiss Bank account but neither remitted any money in that account nor operated the same. All deposits were made by MSM and neither the assessee nor his wife had any beneficial interest therein. Ld. AR in his submission has given high emphasis on this affidavit. However, he failed to explain why the assessee bad not stated about the purported JV with MSM in his first statement; In his first statement, assessee unequivocally admitted that not only the Swiss Bank account was opened by him but de posits were made by him and the source of such deposits was proceeds from his export business. It is not that the first statement was recorded under threat or coercion. No such allegation has ever been made by the 'assessee during or after the search action. When statement was made voluntary and was not alleged to have been obtained under threat or coercion,· onus was on assessee to prove that said declaration was made under any misconception of facts. Since assessee had not taken any steps to rectify his declaration before authorities before whom such declaration was made, there could not be any valid reason for retraction of same after a gap of three' and half years. Reliance is placed in the case of Carpenters Classics (Exim) Pvt. Ltd. Vs- DCIT, ITAT, Bang) 108 ITD 142, Further, Ld, AR could not explain but the assessee had given false statements before the AO during the assessment proceedings by denying to have had any Swiss Bank account.

4.4.4. Ld. Ld. AR has also given some emphasis on the statement given by the assessee on 05/05/2015 before my predecessor CIT(A) in office. However, I find that the contents of the statement do not support the cause of the assessee, rather it goes against assessee. Here assessee fumbled to answer some of the queries raised. On being asked to produce the copy of JV where capital and profit sharing between assessee and MSM was 30:70, assessee stated that there was no formal IV agreement (Answer to Q.26). InQ.28; it was asked if the bank account with HSBC, Switzedrland was to open for the purpose of proposed Joint venture, why it was a condition that the bank account should be opened only in your name and that your wife Smt. Usha Garodia would be nominee, whereas 70% of the capital was to be contributed by MSM Enterprises PTE Limited? Assessee’s reply was – because the name of the I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 9 of 20 joint venture was not decided and therefore, Onn Sithawalla asked me to open a bank account in HSBC...In Q. 29, assessee was asked – in the proposed joint venture the share of MSM Enterprises PTE Ltd. was 70%. If the name of the Joint Venture was not decided, then why Mr. Sithawalla was not willing to have a joint account with you or at least the nominee in the said·bank account?' Assessee's answer was - 'I do not know.' In Q. 33, assessee was asked to reply - 'Whether Mr. Onn Sithatvalla or MSM Enterprises PTE Ltd were having any control over that bank account to issue any direction to the bank about utilization of balance or withdrawal of money?' Assesse's reply was that they were not having any control over it [emphasis given]. In Q. 42, assessee was asked to produce the copy of bank statement of MSM and assessee’s reply was – M/s. MSM Enterprises is not able to provide its bank statement of the relevant period as the ABN AMRO Bank was merged withy RBS Bank in 2006 and thereafter the RBS Bank was taken over by ANZ Bank. Thus it emerges from assessee's statement' dated. 05/05/2015, that there was no actual-Joint Venture between assessee and MSM. Though MSM and the assessee had capital and profit share ratio of 70: 30, the Swiss Bank account was opened only in the name of the assessee and his wife was made nominee, who alone could operate the bank account in case of eventuality, MSM and its owner Mr. Onn Sithawala though had no control over the bank account to issue any difrection for utilization or withdrawl of money but still withdrew the money in the account of M/s. Donald Mcarthy Trading PTE Limited of Singapore, as associate concern of MSM. Thus this statement of the assessee was far from truth. Ld. AR could not explain these self-contradictions in assessee’s statement.

4.4.5. In a landmark judgment of CIT Vs. Durga Prasad More (SC) 82 ITR 540, the Hon'ble Apex Court held that in a case where party relied on self-servicing recitals in documents, it was-for the party to establish the truth of these recitals: The taxing authorities were entitled to look ·into the surrounding' circumstances' and find . out the reality of such recitals. In this case, the assessee 'produced some self-servicing documents after three and half years from the date of search, in the form of an Affidavit and some purported correspondence from MSM, Singapore and its owner Mr. Onn Sithawala, for shifting ownership of his own black money which was parked in a Swiss Bank account, which cannot be considered as genuine. In the case of Sri Krishna –vs.- CIT (All.) 142 ITR 618,

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 10 of 20 it is held that affidavit need not always be accepted as genuine. Going by the facts of the case considering the self- contradictory, evasive and false statements of the assessee and circumstantial evidences as discussed hereinabove, the Affidavit filed by the assessee cannot be accepted as genuine. It is well settled law that the person in whose name the bank account is opened, is the owner, and he is responsible to explain the .source of all deposits and withdrawals with supporting evidences, Mere saying or procuring some papers from a foreign concern would not come into rescue of explaining assessee's undisclosed income stashed in a Swiss Bank. Moreover, MSM, Singapore or his owner Mr. Onn Sithawalla, with whom the assessee had no official business activity in this particular matter are non entities in the eyes of Indian Income Tax Law, especially when the assessee failed to file even the relevant bank statement of MSM, Singapore. The fact that all initial deposits in assessee's Swiss Bank account came from the bank account of MSM, is going to prove that the assessee had channelized his undisclosed money in Swiss Bank account through the bank account of MSM, Singapore, a company owned and managed by Mr. Onn Sithawalla, an old business associate of the assessee, who probably played the role of a conduit in the matter”.

On the basis of the above findings/observations recorded by him, the ld. CIT(Appeals) held that the relevant Bank account with HSBC, Geneva, Switzerland was the undisclosed Bank account of the assessee and the source of all deposits made in the said Bank account was assessee’s own undisclosed funds, which were channelized through MSM Enterprises PTE Limited, Singapore. He also held that the entire income generated, accrued and accreted in that Bank account was unaccounted income of the assessee. Having arrived at this conclusion, the ld. CIT(Appeals), however, found that there were no deposits made in the said Bank account of the assessee during the years under consideration and such deposits were actually made in the said Bank account in the earlier years. He, therefore, held that the additions made by the Assessing Officer in both the years under consideration on account of such deposits were not sustainable as the same could be made only in the relevant years when the deposits were actually made for which the assessments had already

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 11 of 20 been reopened by the Assessing Officer. He, however, found that there was an accretion of US Dollars 4,246.42 and US Dollars 55,414 in the Bank account of the assessee with HSBC, Geneva, Switzerland in the previous year relevant to A.Ys. 2006-07 and 2007-08 respectively and the same represented earnings of the assessee on investment made out of initial deposits in the Bank account in various forms like Fixed Deposits, Bonds, etc. Accordingly, he directed the Assessing Officer to add equal Indian rupee of US Dollars 4,246.42 and US Dollars 55,414 to the total income of the assessee for assessment years 2006-07 and 2007-08 respectively. Still aggrieved by the orders of the ld. CIT(Appeals) for both the years under consideration, i.e. A.Ys. 2006-07 and 2007-08, the assessee has preferred these appeals before the Tribunal.

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 16 of 20 the legislative intendment and the judicial decision was that where the assessments had already become final prior to the date of search, the total income has to be determined under section 153A by clubbing together the income already determined in the original assessments and the income that is found to have escaped assessment on the basis of incriminating material found during the course of search. To arrive at this conclusion, reliance was placed by the Tribunal on the decision of Special Bench, Mumbai in the case of All Cargo Global Logistic Limited (supra), wherein it was held that even though all the six years shall become subject matter of assessment under section 153A as a result of search, the Assessing Officer shall get the free hand through abatement only on the proceedings that are pending. But in a case or in a circumstances where the proceedings have reached finality, assessment under section 143(3) read with section 153(3) has to be made as was originally made and in a case certain incriminating documents were found indicating undisclosed income, then addition shall only be restricted to those documents/incriminating material.

I.T.A. Nos. 853 & 854/KOL./2016 Assessment years: 2006-2007 & & 856/KOL/2016 Assessment Year: 2007-2008 Page 17 of 20 by the ld. CIT(Appeals) that he had channelized his undisclosed money through Bank account of MSM Enterprises PTE Limited and that the source of monies deposited in HSBC Bank Account was his undisclosed money.

(iv) MSM Enterprises PTE Limited was an independent Company having substantial business and it was in existence for several years having substantial funds of its own.

(v) There was no material brought on record by the Revenue Authorities to show that Mr. Onn Sithawala or MSM Enterprises PTE Limited acted in concern with the appellant-assessee or under the dictates of the assessee.

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(vi) The entries in the relevant Bank statement also proved that save and except the deposits from MSM Enterprises PTE Limited, there was no other deposit made in the HSBC Account, which was in assessee’s name.

(vii) The entries in the Bank statement made during 2000 to 2004 establish that the monies deposited originated from MSM Enterprises PTE Limited and even Mr. Onn Sithawalla of MSM Enterprises PTE Limited admitted the ownership of all the funds so deposited.

(viii) The relevant Bank account was closed in the year 2011 and the total deposits made therein along with the income accrued over the years were remitted to the account of M/s. Doland Mearthy Trading PTE Limited at the instance of Mr. Onn Sithawalla. Not even a part of the monies withdrawn from the said Bank account thus ever reached the assessee or used for the benefit of the assessee.

(ix) All the above facts were sufficient to support and substantiate the explanation of the assessee that the entire money found deposited in the relevant Bank account of the assessee belonged to MSM Enterprises PTE Limited, which was deposited in connection with the setting of a joint venture between the said company and the assessee’s company and although there was no actual joint venture agreement entered into, the relevant correspondence setting out the terms and conditions of the joint venture was brought on record. Even the affidavits of the assessee and Mr. Onn Sithawalla affirming the relevant facts on oath were filed in support and there was nothing brought on record either by the Assessing Officer or by the ld. CIT(Appeals) to prove any factual infirmity or falsity therein. They also failed to dislodge or disprove the ownership of funds claimed by Mr. Onn Sithawalla.

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