2019 (4) TMI 2003 - AT - Income Tax

Addition on the basis of peak balance lying in assessee s HSBC Private Bank, (Suisse) SA, Geneva - fabricated/manufactured data with some malafide intention - CIT(A) allowed the appeal of the assessee - HELD THAT - In this case the bone of contention was the source of deposits in HSBC Private Bank, (Suisse) SA, Geneva to the tune of 2,33,92,363/- the peak balance in financial year relevant to A.Y. 2006-07. We find merit in the contentions of the Ld. A.R. that the source of deposit was out of the funds held by the assessee s husband in Muscat and other countries as assessee s husband was engaged in the business of construction and builders abroad. The assessee received this money by way of inheritance on the death of her husband in 1988 who expired on 15.07.1988. We further find that the Ld. CIT(A) has allowed the appeal of the assessee after considering all these facts and information record subject to verification of these informations by the AO as AO has passed the assessment order in a hurried manner without examining all these facts. No reason to interfere in the order of Ld. CIT(A) and accordingly we uphold the same by dismissing the appeal of the Revenue.

Summary

Issues Involved:
1. Deletion of addition of ?2,33,92,362/- based on peak balance in HSBC Private Bank (Suisse) SA, Geneva.
2. Assessment barred by limitation under section 149(1).
3. Applicability of Section 114 of the Indian Evidence Act, 1872.
4. Relevance of the Bombay High Court decision in Soignee R. Kothari Vs. DCIT.
5. Deletion of penalty under section 271(1)(c) of the Act.

Detailed Analysis:

1. Deletion of Addition of ?2,33,92,362/- Based on Peak Balance in HSBC Private Bank (Suisse) SA, Geneva:
The primary issue raised by the Revenue was the deletion of the addition of ?2,33,92,362/- by the CIT(A), which was made by the AO based on the peak balance in the assessee’s HSBC Private Bank (Suisse) SA, Geneva account. The Government of India received information from the French Government under DTAA, indicating that certain Indian nationals had undisclosed foreign bank accounts. The AO issued a notice under section 148 after obtaining approval and recording reasons to believe that the assessee's income had escaped assessment. The assessee, a non-resident, argued that the assessment was barred by limitation and provided documents to support her claim. The AO, however, did not accept the assessee's explanation and treated the peak amount as income.

2. Assessment Barred by Limitation under Section 149(1):
The assessee contended that the assessment was barred by limitation under section 149(1) and that the provisions of section 149(1)(c) did not apply as she had been a non-resident for the last 40 years. The AO, however, proceeded with the assessment, treating the peak balance in the HSBC account as income.

3. Applicability of Section 114 of the Indian Evidence Act, 1872:
The Revenue argued that the CIT(A) ignored the provisions of Section 114 of the Indian Evidence Act, 1872, which allows the court to presume the existence of certain facts. The AO presumed that the assessee's failure to produce evidence regarding the source of deposits indicated that the evidence would be unfavorable to the assessee.

4. Relevance of the Bombay High Court Decision in Soignee R. Kothari Vs. DCIT:
The Revenue cited the Bombay High Court decision in Soignee R. Kothari Vs. DCIT, where it was held that if a person has nothing to hide, they would cooperate by providing documents to dispel any doubts. The Revenue argued that this decision was applicable to the present case, as the assessee did not provide sufficient evidence to explain the source of deposits.

5. Deletion of Penalty under Section 271(1)(c) of the Act:
The Revenue also challenged the deletion of penalty under section 271(1)(c) of the Act. Since the appeals challenging the quantum were dismissed, the appeals related to the penalty became infructuous and were also dismissed.

Conclusion:
The Tribunal upheld the CIT(A)’s decision to delete the addition of ?2,33,92,362/- after considering the facts and evidence presented. The Tribunal noted that the assessee was a non-resident and the source of deposits in the HSBC account was from funds inherited from her late husband, which were deposited in foreign banks and later transferred to HSBC. The AO was found to have passed the assessment order in a hurried manner without adequately examining the evidence. Consequently, the Tribunal dismissed the Revenue’s appeals and upheld the CIT(A)’s order, including the deletion of penalties under section 271(1)(c).