2018 (2) TMI 1731 - AT - Income Tax

Undisclosed bank accounts - undisclosed foreign bank account deposits u/s 69 - assessment proceedings undertaken u/s 153A validity - proof of incriminating material found in search - AO empowerment empowered to issue notice u/s 148 - Held that - 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 AO in the proceedings u/s 153A/143(3). Further, since the proceedings u/s 153A was pending, the Assessing Officer is not empowered to issue notice u/s 148 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. 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, we restore this issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh - Decided partly in favour of assessee for statistical purposes.

Issues Involved:
1. Validity of assessment proceedings under Section 153A of the Income Tax Act.
2. Addition of ?1,20,37,863/- based on alleged undisclosed foreign bank accounts.
3. Relevance of incriminating material found during the search.
4. Admissibility and authenticity of documents relied upon by the Assessing Officer.
5. The assessee’s retraction of surrender of undisclosed income.
6. Interest on undisclosed foreign bank account deposits.

Issue-wise Detailed Analysis:

1. Validity of Assessment Proceedings under Section 153A:
The CIT(A) upheld the validity of the assessment proceedings under Section 153A, rejecting the assessee's claim that no incriminating material was found during the search and that the proceedings were barred by limitation. The CIT(A) cited the Hon'ble Delhi High Court's rulings in CIT (C)-III vs. Kabul Chawla and Dayawanti Modi vs. CIT, supporting the action under Section 153A in such situations. The Tribunal found that since the documents received from a sovereign country were confronted to the assessee during the search, they constituted incriminating material, justifying the proceedings under Section 153A.

2. Addition of ?1,20,37,863/- Based on Alleged Undisclosed Foreign Bank Accounts:
The Assessing Officer made an addition of ?1,20,37,863/- based on information received regarding the assessee's alleged foreign bank accounts in HSBC Bank, Switzerland. The CIT(A) upheld this addition, noting that the assessee's name and personal details appeared in the documents, and the assessee had initially admitted to the accounts during the search. The Tribunal, however, noted that the verificatory report from Switzerland was yet to be received and restored the issue to the Assessing Officer for fresh adjudication after obtaining the verificatory report.

3. Relevance of Incriminating Material Found During the Search:
The Tribunal held that the documents received from a sovereign country and confronted to the assessee during the search constituted incriminating material. The assessee's statement recorded under Section 132(4) and the letter agreeing to pay tax and interest on the undisclosed income were considered incriminating evidence found during the search.

4. Admissibility and Authenticity of Documents Relied Upon by the Assessing Officer:
The assessee argued that the documents were inadmissible as they were not signed by any authority and were merely photocopies. The Tribunal noted that the documents were received under DTAA and were considered credible by the Government of India. However, due to the absence of a verificatory report, the Tribunal restored the issue to the Assessing Officer for fresh adjudication.

5. The Assessee’s Retraction of Surrender of Undisclosed Income:
The assessee retracted the surrender of undisclosed income, claiming undue pressure and leakage of information to a TV channel. The CIT(A) rejected this retraction, noting that the initial admission during the search and the presence of personal details in the documents supported the addition. The Tribunal did not specifically address the retraction but focused on the need for a verificatory report.

6. Interest on Undisclosed Foreign Bank Account Deposits:
The CIT(A) deleted the addition of ?1,23,130/- on account of undisclosed interest earned on foreign bank account deposits. The Revenue did not appeal this deletion, and the Tribunal did not address this issue further.

Conclusion:
The Tribunal restored the issue of the addition of ?1,20,37,863/- to the Assessing Officer for fresh adjudication after obtaining the verificatory report from Switzerland. The appeal was partly allowed for statistical purposes.

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