2023 (4) TMI 742 - AT - Income Tax

Assessment u/s 153A - assessee has found to have not disclosed HSBC Bank account at Dubai - admissibility of information received from the French authorities - HELD THAT - The onus was on Ld. AO to establish that the material retrieved or printed from the Pen Drive, has contents of the Bank Account as exists with the said Bank. Then only it could be said to be carrying any evidentiary significance with categorical value. There is nothing on record to show that any communication was made with the concerned Bank to verify the details made available in the information or as to what was the nature of account, who was its operator, how it was operated. It appears that Ld. CIT(A) has done this all exercise on the basis of his own interpretation and inferences from the information available in the paper, by refereeing it to a Bank Account Statement . The Bench is of considered view that when any quasi judicial authority is referring to a document of the nature like Bank Account Statement, then mere inferences from the contents of a documents it cannot be assumed that same is extract of a Bank Account statement kept in regular course of Banking Business. Even in case of a Banks incorporated in India it is only by virtue of the Bankers Books Evidence Act, 1891, the Bankers books have been made admissible. When the information about an account in foreign bank was not coming from the Bank itself but some other source, there had to be some foundation to rely the same and reach a conclusion. However, that seems to be not the case here. Whether apart from the aforesaid information in the hands of Revenue there was any other material of inculpatory nature found during search itself on the basis of which assessment under Section 153A of the Act can be done? - No doubt the admission is best piece of evidence and any retracted admission continues to be relevant and admissible for drawing inferences. However, the same need corroboration in material particulars. Which is completely absent in the present case. Any search material of inculpatory nature found in search can be corroborated by a retracted statement by way of establishing material facts arising from the search material matching with the retracted oral statements but where the retracted statement is the solitary evidence to be relied, the Revenue cannot consider same to be a 'incriminating material to make addition under Section 153A of the Act. As decided in Parminder Singh Kalra 2021 (6) TMI 542 - ITAT DELHI statement recorded u/s 132(4) does not constitute incriminating material and no addition can be made on the basis of statement alone without any reference to material gathered during the course of search operations, we hold that no addition can be made in the instant years. Present is case of a Completed assessment - We hold that the additions as finally made to the total income of the assessee on account of transactions reflected in the alleged Bank account of the assessee with HSBC Bank account at Dubai and income relating thereto for relevant AY under consideration are beyond the scope of section 153A as the assessments for the said years had become final prior to the date of search and there was no incriminating material found during the course of search to support and substantiate the said addition. The disputed addition therefore, deserves to be deleted allowing the relevant grounds of the assessee's appeals. Addition made on account of deposits found in the Bank accounts of the children - The matter of fact is that no incriminating material was found during the course of search so as to suggest that any part of undisclosed money or investment in Banks were transferred to the accounts of children. More so once the explanation of source of such money was explained by the children in their assessment and same was accepted, then Ld. AO had no reason to make additions in the hands of assessee and Ld. CIT(A) has rightly deleted the same. Payment made by Sh. Rajkapur to the Children of assessee - AO has erred in making additions based on conclusion that money was not transferred by legitimate manner while Ld. CIT(A) has examined the evidence which establish that it was a loan arrangement from Sh. Raj Kapur at the instance of Sh. Behl who is related to the wife of assessee. CIT(A) is also justified to observe that as the two children are non-resident Indians so without there being any connection of this disputed loan amount with any income earned by them in India, the same cannot not be added in the hands of Assessee. Addition on account of air conditioner allegedly purchased by the assessee - CIT(A) has taken in due consideration the fact that the name of the assessee no where figures in the retail cash invoices and the evidence that during the relevant period of time, the premises was in occupation of a tenant who was leased out the said premises vide lease deed and tenant may have installed these air conditioners for his own use, as such the expenses have not been incurred by the assessee. Addition on account of payment made to Sh. Jindal towards excess money received on account of JMD flats sold during the year - From the notices u/s 142(1) of the Act it is observed that except for calling for details related to foreign bank account and other routine issues no question was ever raised by the AO during the assessment proceedings and addition has been made without giving the assessee any opportunity to clarify or rebut the allegation. On consideration of the facts it is apparent that all the transactions are through banking channels and there is no case for unaccounted payment. The addition is therefore deleted. Undisclosed interest income on deposit made in foreign bank account - Revenue cannot dispute the fact that so called bank statement of foreign bank account does not show any interest has been credited in the said. There is no evidence brought on record by the Ld. AO that interest was also paid on the deposits/balance in the account peak balance of which has already been added in AYs 2007-08 and 2008-09. Particularly in the subsequent years after the years relevant to AYs 2007-08 and 2008-09 for which there is no statement of the said bank account or any information, as part of the information received under exchange of information or otherwise, in respect of these subsequent years. There is also no error in Ld. CIT(A) holding that it is settled law that notional interest cannot be taxed as income. Decided against revenue.

Summary

Issues Involved:
1. Admissibility of information received from French authorities.
2. Presence of any other inculpatory material found during the search.
3. Applicability of Section 153A in the case of completed assessments.
4. Deletion of additions made on account of deposits found in the bank accounts of the assessee's children.
5. Additions based on alleged payments made by a third party to the assessee's children.
6. Deletion of addition on account of air conditioner purchase.
7. Addition on account of payment made towards excess money received on sale of flats.
8. Deletion of alleged undisclosed interest income on deposits in a foreign bank account.
9. Penalty proceedings under Sections 271(1)(b) and 271(1)(c).

Summary:

1. Admissibility of Information Received from French Authorities:
The Tribunal held that the CIT(A) erred in considering the "information" itself to be "evidence." The information from the French authorities was merely in a pen drive and not verified by the concerned bank. The Tribunal emphasized that the information needed to be converted into evidence with a foundation to rely upon it, which was absent in this case.

2. Presence of Any Other Inculpatory Material Found During the Search:
The Tribunal noted that no document or material was found during the search. The only evidence was the statement recorded under Section 132(4) of the Act, which was retracted by the assessee. The Tribunal held that the statement alone, without corroborative material, cannot be considered incriminating material for making additions under Section 153A.

3. Applicability of Section 153A in the Case of Completed Assessments:
The Tribunal referred to the Delhi High Court's decision in Kabul Chawla, emphasizing that completed assessments can only be interfered with based on incriminating material found during the search. Since no such material was found, the additions made under Section 153A were beyond the scope of the provision.

4. Deletion of Additions Made on Account of Deposits Found in the Bank Accounts of the Assessee's Children:
The Tribunal upheld the CIT(A)'s deletion of additions, noting that no incriminating material was found during the search. The source of the money was explained and accepted in the children's assessments.

5. Additions Based on Alleged Payments Made by a Third Party to the Assessee's Children:
The Tribunal agreed with the CIT(A) that the payments were legitimate loan arrangements and not undisclosed income. The children were non-resident Indians, and the disputed loan amount had no connection with income earned in India.

6. Deletion of Addition on Account of Air Conditioner Purchase:
The Tribunal upheld the CIT(A)'s finding that the air conditioners were likely installed by a tenant and not the assessee, as the premises were leased out during the relevant period.

7. Addition on Account of Payment Made Towards Excess Money Received on Sale of Flats:
The Tribunal agreed with the CIT(A)'s deletion of the addition, noting that all transactions were through banking channels, and the excess amount was refunded with proper documentation.

8. Deletion of Alleged Undisclosed Interest Income on Deposits in a Foreign Bank Account:
The Tribunal concluded that since the addition of the undisclosed balance in the foreign bank account was not established, any notional interest earned on such an account could not be taxed. The CIT(A) rightly held that notional interest cannot be taxed as income.

9. Penalty Proceedings Under Sections 271(1)(b) and 271(1)(c):
Given the Tribunal's conclusion to delete the additions in income, the substratum of the penalty appeals fell. Consequently, the penalty appeals filed by the assessee were allowed, and those filed by the revenue were dismissed.

Conclusion:
The Tribunal allowed the assessee's appeal and dismissed the revenue's appeals, concluding that the additions made by the tax authorities were not substantiated by incriminating material found during the search. The penalty appeals were also resolved in favor of the assessee.