2024 (10) TMI 1267 - AT - Income Tax

Assessment u/s 153A - addition on account of undisclosed foreign asset in the form of foreign bank account and interest income earned on the deposits in the said undisclosed foreign bank account - incriminating material found in search or not? - HELD THAT - We observe that the AO, in the first round of proceedings, confronted the assessee information/documents in the form of client profiles of HSBC Bank also showing unique code assigned to the assessee for operation of the bank account maintained with HSBC Bank. The profile of the assessee was found to be linked to 5 client profiles. Thus, evidently, the Revenue was in possession of definite material claimed to be obtained under DTAA/DTAC with foreign countries which seeks to indicate holding of foreign bank account by the assessee with HSBC Bank, Switzerland. The particulars available with the Revenue were thus overwhelming and specific in nature. With a view to verify the credibility and precision of such information on purported foreign bank account, a reference was sent to competent authorities in Switzerland and other countries by the Indian Revenue Authorities. The confirmatory verification report in respect of the foreign bank accounts allegedly maintained by the assessee could not however be obtained by the Revenue Authorities owing to the conditional handicap namely Consent Waiver Form which is required to be necessarily signed by the account holder. The Swiss authorities would, otherwise, in the absence of consent from the account holder would not officially part with the information of the customer to authorities of other sovereign state. The Revenue is in possession of cogent material which indicated the details of bank account maintained in the name of the assessee including the date of opening of bank account (06.10.1998) and date of closure (25.01.2006). The authenticated copy of such bank account could be obtained only with the consent and concurrence of the assessee, i.e., bank account holder, owing to limitations fastened by the stated policy, protocols and regulations of Swiss Govt. The question of self incrimination by signing the consent waiver form would arise only in the case of a finding of any offence committed. Where the assessee has not maintained any bank account, the existence of offence would not arise. Besides, a person who is called upon to assist the deptt. in the course of enquiry and investigation of facts is not an accused per se. Hence self incrimination plea is a damp squib. This view is supported by the judgment rendered in the case of Ramesh Chandra Mehta vs. State of West Bengal 1968 (10) TMI 50 - SUPREME COURT Therefore, in the context of income tax proceedings, providing consent waiver form on non existent bank account, in our view , would not tantamount to testamentary compulsion violative of Article 20(3) of the Constitution. We thus see no substance in justification advanced for refusal to provide consent waiver form. Hon ble Bombay High Court in the case of Soignee R Kothari vs. DCIT 2016 (12) TMI 59 - BOMBAY HIGH COURT in identical facts, observed that the conduct of the assessee is not forthcoming and opposed to normal human conduct. The Hon ble Court declined to turn a blind eye to the fact of refusal to sign consent waiver form to support absence of any undisclosed foreign bank account. The remedy sought by way of Writ challenging reopening action was thus not entertained. Notwithstanding, an undertaking of voluntary nature by the assessee addressed to DDIT (Inv.) post search filed by the assessee is entitled to due weight. Such undertaking, in the light of specific bank particulars of overseas bank confronted to the assessee, is a good evidence to draw adverse inference even if not conclusive. Decided against assessee. Addition of imputed interest income attributable to amount deposited with HSBC Geneva Switzerland - As purported bank account maintained by the assessee in HSBC bank is shown to be closed on 25.01.2006 and thus where the deposit itself is not available with the bank, the question of notional interest on deposits in the subsequent financial years is incomprehensible. The imputed interest @ 4% in the deposits kept with HSBC bank as a secondary adjustment cannot be countenanced on such facts. The grievance of the Revenue on account of imputed interest on deposits with HSBC bank in the respective appeals captioned above thus stands dismissed. Additions on account of notional interest attributable to undisclosed bank account in HSBC Bank is not permissible owing to closure of the bank account itself. Unexplained investment in jewellery found during the search - For gifts received on wedding, name and address of the persons, relationship and the description of item of jewellery is mentioned along with the corresponding serial number of the valuation report prepared during search matching the respective jewellery item. The total value of jewellery received on the occasion of the wedding comes to Rs. 25,36,118/-. The appellant has also filed hand written Aashirvad Patras in substantiation of the above. In view of the same, there is enough evidence and material in support of the appellant's contention that the said jewellery items were received on its wedding. AO in case he disbelieved the version of the appellant could have conducted inquiries from the persons gifting jewellery items for which names and addresses are available in the details filed by the appellant. AO failed examine the issues and disprove the contention of the appellant. In view of the same, addition to the extent of Rs. 25,36,118/-, out of total addition of Rs. 29,02,002/- is directed to be deleted. As regards the balance amount it is seen from the above table that the same is claimed to have been received as small jewellery items on the occasion of children's birthdays from friends and relatives. However, the names and addresses of friends and relatives have not been furnished. Even the description of certain items of jewellery reveals that expensive items such as 1 pair of Kara, aggregating Rs. 1,60,000/- has been received on birthday which is highly unlikely even for a person of the status of the appellant. Thus, addition is hereby confirmed due to lack of proper details and substantiating documents filed by the appellant.

Summary

Issues Involved:

1. Legality of additions under Section 153A in absence of incriminating material.
2. Validity of additions based on alleged undisclosed foreign bank accounts.
3. Jurisdictional issues concerning the assessment under Section 153A.
4. Justification of penalty under Section 271(1)(c) related to notional interest.

Issue-wise Detailed Analysis:

1. Legality of Additions under Section 153A in Absence of Incriminating Material:

The Tribunal examined whether the additions made under Section 153A were justified in the absence of any incriminating material found during the search. The assessee argued that since the assessment for A.Y. 2006-07 was completed and not abated, no additions could be made without incriminating evidence as per the judgments in PCIT vs. Abhisar Buildwell Pvt. Ltd. and others. However, the Tribunal noted that in the first round of proceedings, it was already determined that the 7-page document constituted incriminating material. Thus, the jurisdictional issue was considered resolved, and the Tribunal refused to revisit this decision, affirming that the additions were permissible under Section 153A.

2. Validity of Additions Based on Alleged Undisclosed Foreign Bank Accounts:

The Tribunal addressed the issue of whether the additions related to alleged undisclosed foreign bank accounts in HSBC Switzerland were sustainable. The assessee contended that the accounts were closed before 31.03.2006 and that no corroborative evidence was presented by the Revenue. The Tribunal observed that the Revenue possessed specific information indicating the existence of foreign bank accounts linked to the assessee. However, the verification of these accounts was hindered by the assessee's refusal to sign the Consent Waiver Form, which was necessary for obtaining details from Swiss authorities. Despite the lack of direct evidence, the Tribunal upheld the additions, citing the preponderance of probabilities against the assessee.

3. Jurisdictional Issues Concerning the Assessment under Section 153A:

The Tribunal reiterated that the jurisdictional issue regarding the applicability of Section 153A was conclusively addressed in the first round of proceedings. The Tribunal had previously determined that the 7-page document constituted incriminating material, thereby justifying the assessment under Section 153A. Consequently, the Tribunal did not entertain further arguments on this issue in the second round of proceedings.

4. Justification of Penalty under Section 271(1)(c) Related to Notional Interest:

The Tribunal examined the imposition of penalties under Section 271(1)(c) concerning notional interest on purported deposits with HSBC Bank. It was established that the alleged foreign bank account was closed before 25.01.2006, rendering the basis for notional interest additions unsustainable. Consequently, the Tribunal found no justification for the penalty, as the foundation for the quantum additions had crumbled. The Tribunal upheld the CIT(A)'s decision to delete the penalties.

Conclusion:

The Tribunal dismissed all appeals, affirming the legality of additions under Section 153A based on the presence of incriminating material, despite the absence of direct corroborative evidence. The penalties related to notional interest were also dismissed due to the lack of a sustainable basis for the underlying additions. The Tribunal's decision emphasized adherence to legal precedents and the significance of cooperation in verification processes.