2019 (7) TMI 596 - AT - Income Tax

Assessment u/s 153A - validity of assessment order - Addition u/s 69 - no incriminating material/ document being found/ seized - taxability of same amount twice - HELD THAT - We find substantial merit in contention of assessee that if at all the amount on the basis of the papers relied upon could only be taxed in year of search, when the said papers were, for the first time, confronted to the assessee. This is for the reason that the paper nowhere shows any amount being deposited in any of the assessment years beginning with assessment year 2006-07. Therefore, neither in assessment year 2006-07 nor in assessment year 2007-08, the two years in which additions have been made by the assessing officer, the assessee could be regarded as having made any investment and therefore, the provisions of section 69 cannot, in our view, be applied in those assessment years. Further, the documents relied upon actually refer to creation of account in earlier assessment year, much prior to assessment year 2006-07. Assessment years 2006- 07 and 2007-08 were undisputedly made u/s 153A in respect of non-abated assessments. In respect of nonabated assessments, the law laid down in CIT vs. Singhad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT and PCIT vs. MeetaGutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT , CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and other decisions of the jurisdictional High Court is that the addition should be made on the basis of any incriminating document found during the course of search. In Meeta Gutgutia (supra), the High Court further held that statement recorded cannot be regarded as incriminating material found during search and cannot independently be the basis for making any addition. In the present case, there is no dispute that the papers relied upon by the assessing officer were not found during the course of search at the residential premises of the assessee and therefore, strictly speaking, the said papers cannot be the basis for making any addition in assessment years 2006- 07 and 2007-08. Assessee offered for tax ₹ 5,81,32,321/- as amount equivalent to US 11,46,368 in assessment year 2012-13 u/s 69A , which amount, as noticed above, is more than ₹ 5,09,00,327/- brought to tax cumulatively by the assessing officer in assessment years 2006-07 and 2007-08.In view thereof and the entirety of circumstances discussed in the preceding paragraphs, we are of the considered opinion that the addition of ₹ 4,90,20,749 made by the AO equivalent to US 11,02,829 in assessment year 2006-07 under section 69 and similar addition made in assessment year 2007-08, are not sustainable in law and the same are hereby directed to be deleted. We therefore, hold that the addition of ₹ 4,90,20,749 in assessment year 2006-07 and similar addition of ₹ 18,79,578 in assessment year 2007-08 are not sustainable in law and are hereby directed to be deleted. As a consequence the amount offered for tax by the assessee in assessment year 2012-13, being ₹ 5,81,32,321, which was sustained by the Ld. CIT(A) on protective basis, is hereby directed to be restored on substantive basis in assessment year 2012-13.In the result, the grounds of appeal nos. 2 to 2.3 raised by the assessee in assessment year 2006-07 are allowed. In view of the addition made by the assessing officer having been deleted on merits, grounds of appeal nos. 1 to 1.2 challenging the validity of the assessment order are merely rendered academic in nature and the same are hereby dismissed as in fructuous. Addition on account of interest - HELD THAT - Addition been made purely on notional basis on the premise that the assessee (a) had alleged foreign bank account, which itself is under serious challenge; and (b) on such bank account, assessee earned interest @ 4%. We are of the view that the case of the assessee is on a much better footing vis- -vis the facts in judicial precedents relied upon by the Ld.Counsel inasmuch as in the aforesaid cases there was at least some basis of taxation of notional amount/ interest, which was never realized/ received by the assessee, but in the case of the assessee, the so-called amount of interest brought to tax is totally without any basis and is clearly hypothetical/ imaginary.Since there is no evidence that the assessee actually received interest on the disputed deposit and just by figment of imagination it has been concluded that the assessee earned interest on such deposits @ 4% p.a., the impugned addition on account of notional interest, has, even on merits, been rightly deleted by the CIT(A). Unexplained jewellery found during the course of search which has been confirmed in appeal by the CIT(Appeals) - HELD THAT - Considering the quantum of jewellery declared in the wealth tax returns, quantum of jewellery found and jewellery mismatched, statement of wife of assessee Mrs. Bina Modi and also the status of the assessee s family, we are of the view that there was no warrant to treat part of the jewellery as undisclosed. Accordingly, the addition made in the hands of the assessee on account of undisclosed jewellery, is unjustified and is directed to be deleted.

Issues Involved:
1. Validity of the assessment order under section 153A without issuance of notice under section 143(2).
2. Addition under section 69 of the Income Tax Act based on alleged foreign bank account.
3. Double taxation of the same income in different assessment years.
4. Addition on account of interest income from the alleged foreign bank account.
5. Addition on account of unexplained jewellery found during the search.

Detailed Analysis:

1. Validity of the Assessment Order:
The assessee challenged the validity of the assessment order on the grounds that the mandatory statutory notice under section 143(2) was not issued within the prescribed time limit. The Tribunal noted that the notice under section 143(2) was issued beyond the stipulated period, making the assessment invalid. However, this issue was rendered academic as the Tribunal decided the case on merits.

2. Addition under Section 69 of the Income Tax Act:
The assessee denied owning any foreign bank account but offered an amount equivalent to US $11,46,368 in the return for the assessment year 2012-13 to avoid litigation. The assessing officer, however, made additions in assessment years 2006-07 and 2007-08 based on documents received under DTAA, which were unsigned and undated. The Tribunal held that these documents did not conclusively prove the ownership of the bank account by the assessee and that the same amount could not be taxed twice. The Tribunal directed that the amount offered in the assessment year 2012-13 should be taxed substantively, and the additions in assessment years 2006-07 and 2007-08 were deleted.

3. Double Taxation:
The Tribunal noted that the same amount equivalent to US $11,46,368 was taxed in different assessment years. It held that the same income could not be taxed twice and directed that the amount should be taxed in the assessment year 2012-13, where the assessee had already offered it for taxation.

4. Addition on Account of Interest Income:
The assessing officer made an addition of &8377; 1,64,962/- on account of notional interest income from the alleged foreign bank account. The Tribunal found that this addition was made purely on a notional basis without any evidence of actual receipt of interest. It held that the addition was hypothetical and deleted it.

5. Addition on Account of Unexplained Jewellery:
During the search, jewellery worth &8377; 10,19,95,614 was found, out of which &8377; 1,12,89,646 worth of jewellery was seized. The assessee explained that the jewellery belonged to him, his wife, and his daughter and that the total jewellery declared in their wealth tax returns exceeded the jewellery found. The Tribunal noted that the jewellery declared was more than the jewellery found and that the CBDT Instruction No. 1916 provided guidelines for treating jewellery as explained. It held that the addition on account of unexplained jewellery was unjustified and directed its deletion.

Conclusion:
The Tribunal allowed the assessee's appeals for the assessment years 2006-07, 2007-08, and 2012-13, deleting the additions made by the assessing officer under sections 69 and 69A. The Tribunal also dismissed the Revenue's appeals for the assessment years 2007-08 to 2012-13, upholding the deletion of notional interest income. The Tribunal directed that the amount offered by the assessee in the assessment year 2012-13 should be taxed substantively, and the addition on account of unexplained jewellery was deleted.

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