2022 (6) TMI 1443 - AT - Income Tax

Unexplained deposit in the foreign bank account - ownership of the alleged bank account or the alleged disputed deposits - as argued assessee was not a beneficiary of the said account and that assessee s name was struck off from the account when M/s Soverign Holding Private Ltd became owner of this foreign bank account - HELD THAT - Since, this account was opened by the Sh. Rajinder Singh Chatha as a main beneficial owner of account and that the name of assessee i.e. Joginder Singh Chatha was struck off from the account 11 th April, 2004 then by no stretch of imagination assessee can be held liable to pay tax for the deposit in the above said bank account in the A.Y 2006-07 2007-08. Over and above, Sh. Rajinder Singh Chatha has paid all the taxes on the outstanding amount in this impugned bank account to the revenue authority of U.K under Specific Disclosure Facility of all the irregularities in UK as per the certificate of C.A. of Sh. Rajinder Singh Chatha i.e. M/s Stonegate Trinity LLP filed in this regard as above. We accept the grievance of the assessee as genuine and accordingly, we hereby delete the addition made by the Ld. Assessing Officer and confirmed by CIT appeals. Decided in favour of assessee.

Issues Involved:
1. Legitimacy of the addition of Rs. 11,13,83,849/- and Rs. 1,00,04,919/- for AY 2006-07 and 2007-08 respectively.
2. Ownership and beneficiary status of the foreign bank account.
3. Compliance with the Double Tax Avoidance Convention (DTAC).

Detailed Analysis:

1. Legitimacy of the Addition:
The primary issue revolves around the addition of Rs. 11,13,83,849/- for AY 2006-07 and Rs. 1,00,04,919/- for AY 2007-08 made by the Assessing Officer (AO) due to unexplained deposits in an HSBC Bank account in Geneva. The AO initiated proceedings under Section 147 of the IT Act, as the appellant had not filed returns for these years. The appellant declared minimal income and agricultural income during the assessment proceedings, disputing the ownership of the foreign bank account and attributing it to his nephew, Rajinder Singh Chatha.

2. Ownership and Beneficiary Status:
The appellant contended that he was not the beneficiary of the foreign bank account and that his name was removed from the account on 11.06.2004 when M/s Sauvignon Holdings Ltd. became the owner. The CIT (Appeals) confirmed the AO's findings, stating that the appellant failed to provide substantial evidence to support his claims. The appellant's name was linked to the account, but the appellant argued that the account was primarily operated by his nephew, Rajinder Singh Chatha, and M/s Sauvignon Holdings Ltd.

The appellant provided an affidavit and documents indicating that the account was managed by his nephew, who paid taxes on the account in the UK. However, the AO and CIT (Appeals) found these documents insufficient and lacking legal or evidentiary value. The appellant failed to produce his nephew or any corroborative evidence to substantiate his claims.

3. Compliance with DTAC:
The appellant argued that the deposits were made by his nephew, who had paid taxes in the UK, and provided a certificate from a Chartered Accountant in the UK. The CIT (Appeals) and AO found this certificate lacking legal value and not corroborated by UK tax authorities. The appellant's claims were further weakened by a report from HMRC, London, which stated that the transactions in the Swiss account were not disclosed in the nephew's disclosure report.

Tribunal's Findings:
The Tribunal noted that the appellant's name was removed from the account on 11.06.2004, prior to the assessment years in question (2006-07 and 2007-08). The Tribunal found that the appellant was not the owner of the account during these years and that the AO and CIT (Appeals) failed to provide concrete evidence linking the appellant to the deposits made in these years. The Tribunal accepted the appellant's argument that the account was managed by his nephew and that the appellant had no right or interest in the account during the relevant assessment years.

Conclusion:
The Tribunal concluded that the addition made by the AO and confirmed by the CIT (Appeals) was not justified without concrete evidence. The Tribunal deleted the additions for AY 2006-07 and 2007-08, accepting the appellant's contention that he was not the owner or beneficiary of the foreign bank account during these years. The appeal was allowed, and the additions were deleted.

Order:
The appeal of the assessee is allowed, and the additions made by the AO and confirmed by the CIT (Appeals) are deleted. The order was pronounced in the open court on 13.06.2022.

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