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TMI Blog2019 (7) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 $11,46,368 in assessment year 2012-13 u/s 69A , which amount, as noticed above, is more than ₹ 5,09,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d jewellery found during the course of search which has been confirmed in appeal by the CIT(Appeals) - HELD THAT:- Considering the quantum of jewellery declared in the wealth tax returns, quantum of jewellery found and jewellery mismatched, statement of wife of assessee Mrs. Bina Modi and also the status of the assessee s family, we are of the view that there was no warrant to treat part of the jewellery as undisclosed. Accordingly, the addition made in the hands of the assessee on account of undisclosed jewellery, is unjustified and is directed to be deleted. - ITA No.2892/Del/2017, ITA No.2893/Del/2017, ITA No.2894/Del/2017, ITA No.3951/Del/2017, ITA No.3952/Del/2017, ITA No.3953/Del/2017, ITA No.3954/Del/2017, ITA No.3955/Del/2017 And ITA No.3956/Del/2017 - - - Dated:- 5-7-2019 - Shri G.D. Agrawal, Vice President And Shri Sudhanshu Srivastava, Judicial Member For the Assessee : Shri Ajay Vohra, Sr. Advocate, Shri Rohit Jain, Adv., Ms Deepashree Rao, CA And Shri Vibhu Gupta, CA For the Department : Shri J.K. Mishra, C.I.T. DR ORDER PER SUDHANSHU SRIVASTAVA, JM : These appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording of the said statement, the applicant, on the basis of contents of a paper shown to him for the first time, merely in order to avoid entering into protracted/costly litigation with the Tax Department, agreed to voluntarily surrender income equivalent to US$ 11.46 lakhs mentioned therein. This voluntary surrender was without prejudice to the primary contention of the assessee that the said paper did not belong/pertain to the assessee. This fact was elaborately explained in the letter dated 09.02.2012 filed before JCIT (OSD), Jhandewalan, New Delhi, copy attached as Annexure 2. In view of the aforesaid, the assessee has, suo moto, offered to tax ₹ 5,81,32,321 in the return of income for the assessment year 2012-13 under section 69A of the Act, to specifically cover US$ 11,46,368 surrendered in the aforesaid statement. For the said purpose, the TT buying rate of State Bank of India as on 31.03.2012 has been adopted as the applicable exchange rate for conversion into Indian rupee as per Rule 115 of the Income Tax Rules, 1962. The aforesaid payment of tax is, it is reiterated at the cost of duplicity, is being made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of proceedings under section 153A/143(3) of the Act for assessment year 2006-07, the assessing officer, on the basis of papers confronted to the assessee during the course of search, vide various notices/ questionnaires required the assessee to furnish information/ documents in respect of an alleged bank account maintained with HSBC, Geneva, Switzerland bearing code BUP_SIFIC_PER_ID_5090158251. In the assessment order, it is mentioned that the information is in the form of a three page document reproduced on pages 3 to 8 of the assessment order. It is stated that the document was confronted to the assessee vide show-cause notice issued on 12.02.2015. Referring to the said document and the statement of the assessee recorded at the time of search, the assessee was required to explain why the balance shown as per the document the credits of ₹ 4,90,20,749/- (US $11,02,829) and ₹ 18,79,579/- (US$ 43,539) appearing in the bank account may not be treated as income under section 69A of the Act for assessment years 2006-07 and 2007-08 respectively. 2.5 In response thereto, the assessee filed reply dated 23.02.2015, wherein the assessee repeatedly denie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e foreign bank account. 2.8 In the assessment for assessment year 2012-13 completed by the assessing officer under section 143(3) of the Act vide order dated 27.02.2015, the assessment year in which the assessee offered the amount for taxation, the assessing officer accepted the offer of the assessee and brought ₹ 5,81,32,321/- to tax equivalent to US $ 11,46,358 as declared in the return of income. This is despite that fact that in the assessment orders passed under section 153A r.w.s. 143(3) of the Act for the assessment years 2006-07 and 2007-08, addition of ₹ 4,90,20,749/- and 18,79,578/- as discussed supra, were made by the assessing officer under section 69 of the Act. 2.9 In the aforesaid background, the assessee filed appeals before the Ld. CIT (A) for assessment years 2006-07 and 2007-08 challenging the aforesaid addition/s made by the assessing officer. In the alternative, the assessee contended before the Ld. CIT (A) that in case the additions made by the assessing officer in assessment years 2006-07 and 2007-08 were to be affirmed by the Ld. CIT (A), then, to avoid double addition, the amount already offered for tax by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late order dated 27.03.2017 for assessment year 2012-13, directed that the addition be retained on protective basis as in all likelihood the assessee may not accept the findings in assessment year 2006-07 and 2007-08 and may prefer second appeal. The addition was thus directed to be retained on protective basis, subject to the outcome of the further appeals. 2.11 It is in the aforesaid background that the present appeals have been preferred raising common grounds of appeal. 2.12 In grounds of appeal nos.1 to 1.2 for assessment year 2006-07, the assessee has challenged the order of the Ld. CIT (A) upholding the validity of the assessment order dated 27.02.2015, passed under section 143(3) r.w.s. 153A of the Act on the ground that the assessment was concluded without issuance and service of statutory notice under section 143(2) of the Act within the prescribed time limit and that the assessment having been completed de hors any incriminating material/ document being found/ seized during the course of search conducted in the case of the assessee, the assessment was illegal and bad in law. Further, in grounds of appeal nos.2 to 2.3, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 337 ITR 399 (Del), though he tried to distinguish the said decision. 3.1 The second legal argument taken by the Ld. Sr. Counsel was that since the assessment under section 153A of the IT Act has been completed after making additions de-hors any incriminating material/ document being found/ seized during the course of search, the assessment as well as the addition is clearly without jurisdiction and bad in law and relied upon the following decisions of the Supreme Court and the jurisdictional Delhi High Court: - CIT vs. Singhad Technical Education Society: 397 ITR 344 (SC) - PCIT v. MeetaGutgutia [2018] 257 Taxman 441 (SC) affirming the decision of the Delhi High Court in the case of PCIT vs. MeetaGutgutia: 395 ITR 526 (Del) - CIT vs. Kabul Chawla: 234 Taxman 300 - CIT vs. Chetan Das Lachman Das: 254 CTR 392 (Del) - CIT vs. Anil Bhatia: 211 Taxmann 453 (Del) - CIT vs. Lachman Das Bhatia: 254 CTR 383 (Del) - PCIT v. Vikas Gutgutia: 396 ITR 691 (Delhi) 3.2 Specific reliance was placed by the Ld. Sr. Counsel on the decision of coordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is not to be exercised lightly. Thus, it is only if during the course of search under section 132 incriminating material justifying the reopening of the assessments for six previous years is found that the invocation of section 153A would be justified. It was submitted that SLP preferred by the Revenue against the aforesaid decision has been dismissed in 257 Taxman 441 (SC). He further relied upon the decision of the Gujarat High Court in the case of PCIT vs. Somaya Construction Pvt. Ltd.: 387 ITR 529 and various other decisions. Insofar as the reliance placed by the CIT(Appeals) on the decision of the Allahabad High Court in the case of CIT vs. Rajkumar Arora: 52 taxmann.com 172 is concerned, it was submitted that the decision of the jurisdictional High Court in Kabul Chawla (supra) is binding, in preference to the order of the Hon ble Allahabad High Court. 3.4 In view of the aforesaid arguments, the Ld. Counsel contended the addition of ₹ 4,90,20,749 made by the assessing officer in assessment year 2006-07 de-hors any material/document found during the course of search is clearly outside the scope of proceedings under section 153A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it was submitted that even the contents of the unsigned/ undated/ unauthenticated loose pieces of papers nowhere establish that the said papers and/ or amounts mentioned therein belonged/ pertained to the assessee. It was submitted that: (a) the paper nowhere refers to the name of any bank, leave aside containing complete particulars of the so-called bank in Geneva; (b) in the entire assessment order, the assessing officer has not mentioned the source wherefrom the aforesaid unsigned/ undated/ unauthenticated loose pieces of papers have been received; (c) in the assessment order it is vaguely mentioned that document has been received as a part of tax information exchange treaty between Government of India and other countries , without even bothering to mention the name of the country from which the information has been received. He vehemently contended that the assessing officer failed to appreciate that : (a) the assessee repeatedly and categorically asserted that the alleged foreign bank account did not belong to the assessee; (b) none of the deposits, as alleged, related to the assessee; and (c) no transaction was made by the assessee, and therefore, the question of making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is particulars like name, address and date of birth are available in the public domain and there is no reason to draw any adverse inference simply because such particulars appear on some unsigned/ undated/ unauthenticated piece of paper. It was further submitted that merely on account of the said particulars appearing on the unsigned/ undated/ unauthenticated piece of paper, it cannot be inferred/ assumed that the documents pertain/ belong to assessee. Furthermore, it is emphatically reiterated that even in the statement recorded on 11.12.2014, the assessee clarified that he is not aware as to how his particulars appeared on the unsigned/ undated/ unauthenticated piece of paper. He further submitted that it is trite law that if an item of income, not admitted by an assessee, is to be assessed in the hands of the assessee, the burden to establish that such income is chargeable to tax is on the assessing officer. He submitted that with a view to assist the assessing officer and to reduce the rigours of the burden that lay upon the assessing officer, provisions of sections 68, 69, 69A to 69D of the IT Act have provided for certain deeming provisions, where an assumption of taxable inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, does not arise at all. He relied upon the following decisions: - P. Soman: 196 Taxman 335 (Ker) - CIT v. Premlal: 330 ITR 499 (P H) - Shankar R. Mhatre vs. ACIT: 117 ITD 241 (Mum) - ITO vs. GhanshyamdasHassanand: 28 Taxman 219 - MasoomkhanShabbirkhan Pathan vs. DCIT: 7 ITR (T) 443 (Mum) 3.9 In the alternative, and without prejudice to the aforesaid contentions, the Ld. Counsel submitted that since the double addition made should be directed to be deleted. He submitted that it is trite law that double addition of the very same amount in two different assessment years is not at all permissible in law and in case the assessee offers a particular amount in one assessment year and the assessing officer seeks to tax the very same amount in a different assessment year(s), then, the assessing officer is duty bound, as a necessary consequence, to exclude the amount offered for tax in the former assessment year; otherwise the same would result in double taxation, contrary to law. In the context, he relied upon decision of the Supreme Court in the case of Bachul Lal Kapoor: 60 ITR 74 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Dr. A.V. Sreekumar V. CIT [2018] 90 taxmann.com 355 (Kerala), wherein the Kerala High Court, after considering the decision of the Delhi High Court in the case of Kabul Chawla, upheld the addition made in the Assessment completed under Section 153A on the basis of the material already available with the department in the form of tax revision petition. Relying on the said decisions, the Learned CIT-DR submitted that there is no error in the order passed by the Assessing Officer making addition in respect of the amount found deposited in the HSBC Account/Geneva in Assessment Year 2006-07 and Assessment year 2007-08. 4.2 On merits, the Ld. CIT-DR placed heavy reliance upon the assessment order and the order of the Ld. CIT (A). He further relied upon the decision of the coordinate bench in the case of Parag Dalmia in ITA No.5499/ Del/ 2017 dated 26.02.2018 to contend that in the worst scenario the assessment may be set aside to the file of the assessing officer and the addition made should not be deleted. 5.0 We have carefully considered the rival submissions and have gone through the records. We first deem it appropriate to adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2 Now the primary question which arises for consideration before us is in which year the amount equivalent to US $11,46,368 should be subjected to tax, considering that the assessee has offered the amount for taxation in assessment year 2012-13 and contested the taxability when the assessing officer sought to tax the said amount (as converted in INR) in assessment years 2006-07 and 2007-08. It is noticed that in assessment years 2006-07, the assessing officer has made the addition under section 69 of the Act, which is reproduced as under: 69. Unexplained investments Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year . 5.3 As per the aforesaid provisions of section 69, where the assessee is found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction only covers physical asset is, in our view, too narrow interpretation of the said section since in that case, if the assessee is found to have made some investment and the year of investment is not known, then, the said investment cannot be taxed at all, not even in the year in which the assessee is found to be its owner. 5.6 In the present case, on perusal of the papers relied upon by the assessing officer, it is seen that there is reference to various dates. There is no specific date wherefrom the date of investment in the so-called bank account can be determined. As per the English translation, the date of creation of the profile of the so-called bank account is reflected as 09.01.2001 and another date of creation is mentioned as 30.01.2001 and both the dates are much prior to assessment year 2006-07, the year under consideration. Moreover, it is noticed that the amounts reflected balances carried forward from earlier period and there is no reference to any deposition being made in the said bank account which could be related to any of the assessment years 2006-07 or 2007-08. Of course, there is reference to certain balances for the period November, 2005 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In fact, in identical circumstances, coordinate benches of the Tribunal in the case of Anurag Dalmia vs. DCIT: ITA 5395 of 2017, BishwanathGarodia vs. DCIT: 76 taxmann.com 81 (Kol. Trib) and Yamini Agarwal vs. DCIT: 83 taxmann.com 209 (Kol. Trib), relied upon by the assessee, deleted similar addition made in assessment completed section 153A r.w.s. 143(3) of the Act. 5.9 On the other hand, the assessee offered for tax ₹ 5,81,32,321/- as amount equivalent to US $11,46,368 in assessment year 2012-13 under section 69A of the Act, which amount, as noticed above, is more than ₹ 5,09,00,327/- brought to tax cumulatively by the assessing officer in assessment years 2006-07 and 2007-08.In view thereof and the entirety of ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed as infructuous. Ground of appeal no.3 challenging the levy of interest is merely consequential in nature. 6.1 Coming to Revenue s appeal in ITA No. 3951/ Del /2017, the Department has challenged that the action of the CIT(A) in deleting the addition of ₹ 1,64,962/- made by the assessing officer on account of undisclosed interest income in HSBC Geneva. The facts in respect of the said issue are that in the assessment order passed under section 153A r.w.s. 143(3) of the IT Act, the assessing officer, apart from the addition on account of the deposits/ balances appearing in the alleged foreign bank account, made further addition of ₹ 1,64,962/- (US$ 3,821.22 @ ₹ 43.17) under section 69 of the IT Act on account of interest calculated @ 4% p.a. on the alleged balance appearing in the undisclosed foreign bank account. 6.2 On appeal, the Ld. CIT (A) deleted the addition made by the assessing officer holding that since no corroborative evidence has been brought out by the assessing officer to substantiate that the assessee has actually earned any interest income, therefore, the addition made only on the basis of estimate and presu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing officer is liable to be deleted. Independent thereof, we note that in the instant case, the addition of ₹ 1,64,962 has 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). For the said cumulative reasons, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that during the course of search at the residential premises of the assessee on 8/9.11.2011 and in continuation thereof on 20.12.2011, following jewellery was found/ seized: Gross Weight (Gms.) Value (Rs.) Remarks Jewellery Found 38,748.28 10,19,95,614 Value of jewellery is as on the date of search Jewellery Seized 6,716.70 1,12,89,646 As per annexure to Panchnama 8.3 On being confronted, the wife of the assessee, Mrs. Bina Modi, in her statement recorded on 20/21.12.2011 and also the assessee had during the course of assessment proceedings vide replies dated 08.12.2014, 29.12.2014 and 18.02.2015, explained that the jewellery found during the course of search primarily belonged to the assessee, his wife, Mrs. Bina Modi, and his daughter, Mrs. Charu Bhartia. Further, it was also explained that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the notice of the Board. The question of a common approach to situations where search parties come across items of jewellery, has been examined by the Board and following guidelines are issued for strict compliance:- (i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need be seized. (ii) In the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. per married lady, 250 gms. per unmarried lady and 100 gms. per male member of the family, need not be seized. (iii) The authorized officer may, having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a large quantity of jewellery and ornaments from seizure. This should be reported to the Director of Incometax/ Commissioner authorizing the search at the time of furnishing the search report. (iv) In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the assessment year 2012-13 during the assessment proceedings and most of the items, stood reconciled.Even without considering the above, the Ld. Counsel submitted once the jewellery disclosed by the assessee (and his family members) far exceeds the jewellery physically found during the course of search, no addition could have been made merely on the ground that the description of some of the jewellery items could not be matched/ reconciled.In support, the counsel placed reliance on various decisions, some of which are as under: - Smt. Krishna Wanti Batra vs. Assistant Commissioner of Income tax: 149 Taxman 36 (Del) - GaurishankerOmkarmal vs. ITO: 37 TTJ 353 (Ahd.) - DCIT vs. Arjun DassKalwani: 101 ITD 337 (Jodh.) - Sh. Arvind Agarwal and Sh. Subhash Agarwal: I.T.A. Nos. 455, 277, 278 443/Ind/2013 (Indore) 8.8 It was further argued that the Board, in the Instruction issued, has emphasized on the gross weight declared in the wealth-tax return rather than the description. This is for the reason that the Board recognized the above factors, which normally leads to description of the jewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of mind and no addition has been made on account of unexplained jewellery. 8.10 In rebuttal, the Ld. Departmental representative vehemently relied on the orders of the lower authorities. 8.11 We have carefully considered the rival submissions and the relevant material and ratio of the orders and judgment relied by both the parties, at the very outset, we note that undisputedly the quantum of jewellery declared in the wealth tax returns of the assessee and his family members was much higher than the jewellery found during the course of search. CBDT Instruction dated 11-5-1994 provides that no seizure should be made in the search for the jewellery held by the ladies at 500 gms, girls at 250 gms and males at 100 gms each. Though the Instruction speaks of not seizing the same, the extended meaning of the same shows the intention that the jewellery is to be treated as explained one and is not to be treated as unexplained for the purpose of Income-tax Act. This instruction came to be considered by several Benches all over India in which it has been held that it would be relevant for the purposes of making addition as well. The Hon ble Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of hearing of appeal, submitted that addition made is totally unjustified as the assessee in her return of wealth for the assessment year 1984-85 filed on 16th Nov., 1984, i.e., much before the search, had disclosed jewellery having gross weight of 2,888.8 gms. which was more than total jewellery found in the search. However, instead of considering aforesaid latest return or valuation report, the AO wrongly considered valuation report for assessment year 1978-79 and thus did not give benefit of item disclosed which had slight variation in the description. The Revenue authorities should have given benefit of weight of jewellery disclosed while determining the jewellery possessed by the assessee and her family members. The learned counsel for the assessee further explained that the assessee had 2,888.8 gms. gross and 2779.300 gms. net weight of jewellery as per her return. The jewellery found at the time of search was much less as per the following details: Gross weight (in gms.) Net weight (in gms.) 1483.000 1428.100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jewellery disclosed in the reports filed with the return and reports of the Departmental valuers prepared at the time of search. Here again Revenue authorities went back to report for assessment year 1978-79 without considering latest report for assessment year 1984- 85. In my view assessees were entitled to benefit of weight of jewellery disclosed in the returns as it is well-known fact that Indian ladies keep changing design of jewellery from time to time. Having in mind detailed explanation rendered by the assessee (copies available at pp. 104 to 113 of the paper book) I am inclined to treat the entire jewellery found with assessee as fully explained. The addition made in the hands of the assessee for undisclosed income, is unjustified and is directed to be deleted. 7. In the result, the assessee's appeal is allowed. 8.14 In view of the aforesaid, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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