2024 (11) TMI 700 - HC - Income Tax

Addition as undisclosed income on account of unexplained deposit in foreign bank account - appellant had earned undisclosed income only on the ground that he had been issued a debit card by a foreign bank - HELD THAT - As none of the questions are substantial questions of law. As noted addition as admitted by the Assessee has been made solely on the basis that the Assessee had maintained an overseas bank account with Barclays Bank, and the deposits were made in the said bank account were not disclosed. AO thus, in his best judgment estimated the quantum of deposit. However, it is also admitted that no enquiries were made, as directed by the learned ITAT in terms of the order dated 31.12.2007. Assessee also concedes that in the absence of the Assessee producing the relevant material, the AO was well within his right to make an estimate bearing in mind the income profile of the Assessee. We find it difficult to accept that any interference with the estimation of the deposit made in the bank account, are called for in the absence of Assessee producing his own bank account statement. As Assessee submits that the Assessee may be given one more opportunity to produce the relevant bank statement for the block period to establish the quantum of deposits. The learned counsel appearing for the Revenue fairly states that he has no objection in this regard. AO is directed to re-examine the question of quantum of the addition on account of the deposits made in the foreign bank account maintained by the Assessee during the relevant period. This is subject to the Assessee producing the authenticated bank statement of the said bank account for the relevant period. In the event, the Assessee produces the same, the AO shall determine the addition based on the said account. And, the additions, as directed by the learned CIT(A) and as upheld by the learned ITAT in the impugned order, will shall stand modified to the said extent.

Summary

Issues:
1. Addition of unexplained credit in foreign bank account.
2. Validity of addition made by AO without necessary inquiries.
3. Quantum of addition based on estimation by AO.
4. Assessee's failure to produce relevant bank statements.
5. Direction to re-examine quantum of addition.

Detailed Analysis:
1. The appellant (Assessee) challenged an order by the ITAT regarding unexplained credit in a foreign bank account. The AO raised a demand of Rs. 50,00,000 on the Assessee due to an unexplained credit found during a search. The CIT(A) confirmed this demand, stating that the Assessee failed to provide bank statements despite evidence of maintaining the account. The ITAT found fault with the additions made without proper inquiries and remanded the matter for further examination, similar to the Assessee's spouse's case where a similar issue arose.

2. The AO, upon remand, again made the addition of Rs. 50,00,000 as the Assessee did not provide any details. The Assessee contended that the addition was based on surmises. The CIT(A) reduced the addition to Rs. 25,00,000 and directed the AO to verify the details of the foreign account. The ITAT upheld the CIT(A)'s decision, noting the Assessee's failure to rebut factual findings.

3. The Assessee raised questions on the ITAT's decision to sustain the addition and the basis for concluding undisclosed income. The court observed that the addition was solely due to the undisclosed foreign bank account and estimated deposits. The Assessee's failure to produce relevant material allowed the AO to estimate the deposit based on income profile. The court found no grounds for interference without the Assessee's bank statement.

4. The court directed the AO to re-examine the quantum of the addition if the Assessee provides authenticated bank statements within twelve weeks. Failure to produce the statement would confirm the ITAT's order. The decision was made with the agreement of both parties' counsels, ensuring a fair opportunity for the Assessee to substantiate the deposits in the foreign bank account.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the case and the court's decision.