2021 (6) TMI 99 - AT - Income Tax

Levy of penalty proceedings u/s 271(1)(c) - HELD THAT - During the course of search no incriminating material was found against the assessee for maintaining any such bank accounts with HSBC, Geneva, Switzerland. Whatever information was supplied by the Swiss Authorities subsequently to the Revenue Authorities in India, no such information was provided for the period prior to 01.04.2011. Therefore, it is clear that no information have been provided by the Swiss Authorities that assessee maintained any bank account with HSBC, Geneva, Switzerland in assessment years under appeals i.e., 2006-2007 to 2011-2012. Therefore, it is clear that no incriminating material was found against the assessee so as to make any addition against the assessee. See KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT and MEETA GUTGUTIA PROP. M/S. FERNS N PETALS 2017 (5) TMI 1224 - DELHI HIGH COURT In this reason alone no addition could be made of any unexplained bank deposits or interest earned thereon in any of the assessment years. In view of the above, we set aside the Orders of the authorities below and delete the entire additions.- Decided in favour of assessee. Levy of the penalty u/s 271(1)(c) - HELD THAT - In assessment years under appeals since quantum addition have already been deleted by us on quantum appeals (supra), therefore, no basis is left for levying of penalty under section 271(1)(c) of the I.T. Act. Further the show cause notices issued by the A.O. on 02.03.2015 prior to levy of the penalty, the A.O. has not mentioned therein specifically for which limb of Section 271(1)(c) the penalty proceedings have been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of such income. therefore, show cause notices issued by the A.O. are illegal and bad in Law and vitiate the entire penalty proceedings - no penalty could be levied against the assessee. In view of the above discussion, we set aside the Orders of the authorities below and cancel the penalty in all the assessment years under appeals. Appeals of the Assessee are allowed.

Summary

Issues Involved:
1. Legality of the assessment orders passed as being time-barred.
2. Validity of additions made on account of unexplained deposits in the HSBC Bank, Geneva, Switzerland, and interest earned thereon.
3. Legality of penalty proceedings under section 271(1)(c) of the I.T. Act, 1961.

Detailed Analysis:

1. Legality of the Assessment Orders Passed as Being Time-Barred:
The assessee argued that the assessment orders passed on 02.03.2015 were barred by limitation as the search took place on 28.07.2011, and the limitation to pass assessment orders expired on 31.03.2014 as per Section 153B(1)(a) of the I.T. Act, 1961. The Revenue contended that the time limit was extended by one year under Explanation-IX of Section 153B due to a reference made to the Swiss Authority under section 90 of the I.T. Act, 1961. However, the Tribunal noted that the Swiss Authorities could only provide information from 01.04.2011, and no information for the period prior to this date could be obtained. Therefore, the reference made by the Revenue was invalid, and the assessment orders were barred by limitation.

2. Validity of Additions Made on Account of Unexplained Deposits in HSBC Bank, Geneva, Switzerland, and Interest Earned Thereon:
The assessee challenged the additions made on the grounds that no incriminating material was found during the search to justify the additions. The Tribunal observed that no incriminating material was found during the search to connect the assessee with the HSBC Bank account in Geneva. The Swiss Authorities did not provide any information for the period prior to 01.04.2011, and the assessee consistently denied maintaining any such bank account. Therefore, the Tribunal concluded that the additions made by the A.O. were without any basis and deleted the entire additions.

3. Legality of Penalty Proceedings Under Section 271(1)(c) of the I.T. Act, 1961:
The assessee argued that the penalty notices issued by the A.O. were vague as they did not specify whether the penalty was for concealment of particulars of income or furnishing inaccurate particulars of such income. The Tribunal agreed with the assessee, citing the judgment of the Hon’ble Delhi High Court in the case of Pr. CIT vs. Sahara India Life Insurance Company Ltd., which held that such vague notices are illegal and bad in law. Furthermore, since the quantum additions were deleted, there was no basis for levying the penalty. Therefore, the Tribunal set aside the penalty orders and canceled the penalties in all the assessment years under appeal.

Conclusion:
The Tribunal allowed all the appeals of the assessee, setting aside the assessment orders as time-barred, deleting the additions made on account of unexplained deposits and interest, and canceling the penalties levied under section 271(1)(c) of the I.T. Act, 1961.