9911796707
TMI Blog2024 (6) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has accepted the same and proceeded to revise the return of income shows that the documents collected by the revenue from the foreign authorities are genuine and no need to follow the procedure laid down in the section 65B of IE Act considering the fact that the assessee has not retracted the acceptance on the contents of the statement of bank account produced before him neither before revenue authorities in the revision proceedings or appellate proceedings. Therefore, we do not see any reason to consider the above submissions of the Ld AR. Absence of any incriminating material found during the search operation - The search was initiated on the basis of information which was confirmed by the assessee in the search assessment proceedings, further, the assessee has not retracted means he has accepted, it goes to prove that the information with the revenue is substantially correct. Hence the material with the revenue has to be considered proper and the action of the AO to accept the revised return of income and proceeded to complete the assessment goes to prove that the material with the revenue can be assessable u/s 153A of the Act. Therefore, we have no choice but to reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see also dismissed. Impugned assessment was completed with extended period due to reference to FT TR division of CBDT calling for certain information - AO made the reference to FT TR division for collecting information from the UK counterpart for the simple the reason that the information relevant for the case under consideration is from UK and not from Swiss even though the original information from Swiss authorities however, in this case the relevant information required from UK. There is no bar on the part of the AO to seek information from FT TR division. This contention also cannot be accepted at this stage. Assessee appeal dismissed. Additions proposed by the AO on the basis of accrued interest on the outstanding amount in the bank account maintained by the assessee in the HSBC bank, UK - We observed from the record that the AO proceeded to make the addition in AY 2006-07 and 2007-08 only on the basis of bank statement obtained from the data contained in pen drive forwarded by the French Authorities relating to the various account maintained in the HSBC. The information contained in the above sourced information which contained the details of account held by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posing the penalty on the above interest income is not proper. Accordingly, we direct the AO to delete the penalty levied for the AY 2008-09 to AY 2012-13. Addition on the basis of loose sheets - Officers found a loose sheet having certain details of expenses, which may or may not have any relevance to the accounts. The loose sheet never have a evidentiary value unless it is brought on record that these were having direct link with the financials or to the activities of the assessee. In this case, it is only certain probable expenses were recorded by the accountant, which is only a projected expenses and the assessee has already recorded the actual expenses on cash basis in its books of account, therefore, this loose sheet cannot be the basis of any addition. Hence, we do not see any reason to interfere with the findings of the Ld CIT(A). Accordingly, the grounds raised by the revenue are dismissed. - Shri S. Rifaur Rahman, Accountant Member And Shri Sudhir Pareek, Judicial Member For the Assessee : Shri V. Sridharan, Sr. Adv, Shri Karanjot Singh, Adv, Shri Snehal Ranjan Shukla, Adv, Shri Romit Hotwani, Adv And Shri dinesh Kukreja, Adv For the Revenue : Shri P. N. Barnwal, CIT DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment proceedings, the assessee filed a revised return of income on 16.02.2015 for the current assessment year and in this revised return of income the assessee has declared maximum balance in the bank account maintained at HSBC Bank, London for financial year 2005 06 at US$ 5705010 (equivalent to Indian Rupee 2,53,00,440/-) was declared as additional income under the head income from other sources . Accordingly, the assessee has declared revised return of income in the above said revised return of income at Rs. ₹9,00,19,849/-. The AO proceeded to complete the assessment based on the revised return of income declared by the assessee on 16.02.2015. The AO observed in his order that the assessee along with his family members, wife and son had maintained a bank account with HSBC Bank London with the client profile name of the assessee and his family members and the same was created on 28.08.1991. The AO has discussed various issues relating to this account in his order and also reproduced the monthly transaction of this bank account from November 2005 to October 2006 in his order at page 2 to 8. Further, he observed that the above said account maintained by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO acknowledged that the assessee has declared maximum balance of US$ 575010 in AY 2006-07, adopting exchange rate at the ₹44 per dollar and he has adopted average exchange rate of January 2006 was at the rate of 44.398 per dollar. Since the assessee has considered the exchange rate at the rate of 44/- instead of 44.398, AO had proceeded to make the of addition of exchange difference to the extent of ₹2,28,854/-. 7. Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT(A) vide grounds of appeal and filed a detailed submissions and objections as under:- a) Extension of period of assessment by 1 year u/s 153B of the Act. b) the addition made by the AO was not based on any incriminating material found during the search and the information available with the department about the bank account was available with them even before the date of search. c) The assessee has declared maximum credit in bank account in his revised return to buy peace of mind and to avoid litigation. The amount declared by the assessee is out of income that has already been taxed year after year. d) The AO has not declared the source of the evidence and opportunity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial/ evidence, i.e., on the basis of unauthenticated piece of paper, source whereof is also not known; (b) the alleged foreign bank account, in any case, did not belong to the appellant; (b) none of the deposits, as alleged, related to the appellant; and (c) no transaction was made by the appellant 2.3 That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the addition made, without making available copies of bank statements and other ex-parte material(s) on the basis of which addition was made in the hands of the appellant, in gross violation of principles of natural justice. 2.4 That the Commissioner of Income Tax (Appeals) failed to appreciate that merely because an amount, not taxable in law, is under threat and coercion offered for tax by the appellant in the return of income, cannot confer jurisdiction to tax the said amount 2.5 That the Commissioner of Income Tax (Appeals) erred in alleging that the appellant had intentionally concealed vital information by not signing the consent/declaration form, without appreciating that the appellant was not at all competent to sign such form. 2.6 That the Commissioner of Income Tax (Appeals) failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as undisclosed income of the appellant from an alleged undisclosed foreign bank account. 2.1. That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the aforesaid addition de-hors any material found/seized during the course of search in the premises of the Appellant. 2.2. That the Commissioner of Income Tax (Appeals) failed to appreciate that no addition could be made in the hands of the Appellant, considering that: - (a) the addition was made without any material/evidence, i.e., on the basis of unauthenticated piece of paper, source whereof is also not known; (b) the alleged foreign bank account, in any case, did not belong to the Appellant; (b) none of the deposits, as alleged, related to the Appellant; and (c) no transaction was made by the Appellant. 2.3. That the Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the addition made, without making available copies of bank statements and other ex-parte material(s) on the basis of which addition was made in the hands of the Appellant, in gross violation of principles of natural justice. 2.4. That the Commissioner of Income Tax (Appeals) failed to appreciate that merely bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolving legal issues, which goes to the root of the matter and all the relevant information s are already available on record, he relied on the decision of Hon ble Supreme Court decision in the case of NTPC. On the other hand, Ld DR has no serious objection for admission of the above additional grounds. Therefore, we proceeded to adjudicate the additional grounds raised by the assessee considering the fact that the issues now raised by the assessee are legal issues which goes to root of the matter. 14. At the time of hearing Ld AR made a detailed submissions and also made following written submissions as under:- 1. Addition cannot be made based on data given in a pen drive by France authorities to government of India. [AY 2006-07 and AY 2007-08: Ground number 2] 1.1. On 14.01.2016, the Respondent filed complaint under section 276-C (1)/276-D 277 of the Act for AY 2006-07 before the Hon'ble Court of Ld. ACMM (Special Acts), Tis Hazari Courts, Delhi (Kindly refer page 4-7 of the Paper Book, Volume 2] praying the Hon'ble Court to initiate prosecution against the Appellant-Assessee. 1.2. Paragraph 2 of the said complaint states that certain information was received from the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. 1.9. Reliance in this regard, can be placed on the following judgements: a) Bishwanath Garodia v. DCIT, [2016] 76 taxmann.com 81, 21.09.2016, ITAT Kolkata (Relevant paras: 10 11, Page 7-12 of case law compendium, Volume 3.1): The Hon'ble ITAT has considered similar HSBC Bank foreign account and deleted the additions made by the AO as no seized materials was found during the search operation. b) Anurag Dalmia v. DCIT, ITA No. 5395 5396/Delhi/2017, 15.02.2018, ITAT Delhi (Relevant paras: 18 19, Page 22-35 of case law compendium, Volume 31): In this case, search was conducted under section 132(1). Assessment entailing additions was conducted as per section 153A of the Act in light of some information received by the Government of India in a USB allegedly containing details of bank accounts of Indian persons with HSBC, Switzerland as part of tax information exchange treaty. In this case, the Hon'ble ITAT noted that i. no documents or any incriminating material relating to HSBC accounts in Switzerland was found from the possession and premises of the assessee during the course of search and seizure. ii. the entire information and material was in possession of the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said pen drive is not established. Accordingly, the Hon'ble ITAT has held that in the absence of any corroborative evidence, the information contained in the said pen drive can't be relied upon. e) Late Shri Bhushan Lal Sawhney vs. The DCIT, ITA Nos. 427-439/Delhi/2017, 01.06.2021, ITAT Delhi (Relevant para 8., 8.1, 8.2, Page 171-184 of case law compendium, Volume 3.1): The Hon'ble ITAT has considered a similar HSBC foreign account case and in the absense of any corroborative evidene and in the absence of any incriminating material found during search, the Hon'ble ITAT held that the information/documents provided by the French Authorities in a pen drive cannot be relied and deleted the additions. f) Vikram Dhirani v. ACIT, ITA No. 4647 to 4652/Del/2016, 17.04.2023, ITAT Delhi (Relevant para 185, Page 185-202 of case law compendium, Volume 3.1): In this case, the assessee was found to have not disclosed an HSBC Bank account at Dubai. The Assessing Officer ( AO ) treated this as an undisclosed income of the assessee, Upon appeal, the ITAT held that an information, regardless of its validity and accuracy from a reliable source, must still be converted into evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 2.6.3 of the Manual, the CBDT has directed that while handling any digital evidence, the procedure has to be in consonance with the provisions of section 65B of the Indian Evidence Act. 1.14. Further the Manual also states that merely gathering electronic evidence is not sufficient and efforts will have to be made to corroborate the contents therein vis- -vis other evidence such as material and oral. Therefore, without prejudice to the aforesaid submissions, since in the present case, no corroborative evidence is supplied by the Ld. AO in support of the alleged bank statements, the same can't be relied on. 1.15. Section 65B of the erstwhile Indian Evidence Act, 1872 states that any information contained in an electronic record which is, inter alia, printed on a paper shall be admissible as evidence in all proceedings, if the following conditions are satisfied: a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; b) duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e information in question i.e. the alleged bank statement and not the contents of the pen drive. Thus, there is a complete failure to comply with elementary principles of section 65B of the Indian Evidence Act, 1872. 1.20. Accordingly, the conditions mentioned under section 65B(2) of the Indian Evidence Act, 1872 have not been followed and therefore, the Certificate produced under section 65B of the Indian Evidence Act, 1872 is not valid/relevant. 1.21. Further, the Certificate was issued on 20.11.2015 which is years after the day on which the alleged pen drive was received by the Indian tax authorities i.e., 28.06.2011 and even beyond the date of passing of assessment order for AY 2006-07 i.e., 27.02.2015. It is also signed by an Under Secretary functioning as such on that date. This is way short of the requirements of Section 65B. Hence, the alleged bank statement can't be relied on to complete the assessment. 1.22. Reliance in this regard is placed on the following judgements: a) Hon'ble Supreme Court in the case of Anvar P.V. v. P.K. Basheer, [2014] 10 SCC 473(SC) dated 18.09.2014 (Relevant para: 22, Page 301314 of case law compendium, Volume 3.1) has stated that that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also the said Certificate was not completely filled up by the Ld. Revenue Authorities. Further, from the Certificate obtained under Indian Evidence Act which is placed in Page-11 of Paper Book-2, we find force in the arguments of the Ld. AR that it is not as per the conditions laid down u/s. 65B of the Indian Evidence Act. 46. After considering the decisions of the Hon'ble Supreme Court in the case of Anvar P.V (supra); Arjun Pandit Rao Khotkar (supra) and the judgment of the Hon'ble Madras High Court in the case of Vetrivel Mineral (supra) as well as on perusal of the facts and circumstances of the case, we are of the considered we that the four conditions stipulated in section 65B(2) i.e., (a) to (d) along with section 65B(4) were not followed while obtaining the Certificate u/s. 65B of the Indian Evidence Act 1872 in the case of the assessee which are to be followed mandatorily. Therefore, we have no hesitation to hold that this Certificate is not a valid Certificate as prescribed under the Indian Evidence Act 1872 and hence cannot be enforced. Therefore, the Certificate obtained in the case of the assessee cannot be regarded as a legally valid certificate u/s. 65B of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. 2.5. The Hon'ble Delhi Bench of ITAT in ACIT v. Sh. Parminder Singh Kalra (supra) (Relevant para: 151, Page 81-170 of case law compendium, Volume 3.1):held that the statement recorded u/s 132(4) does not constitute incriminating material and that the assessment cannot be made on the basis of statement alone without any reference to material gathered during the course of search operations. 2.6. The judgement of Hon'ble ITAT, Rajkot in ACIT v. Shri Rajeshkumar Govindlal Patel, ITA Nos. 25 26/ITAT Rajkot/2021, 12.04.2023 (Relevant para: 9.3, Page 36-80 of case law compendium, Volume 3.1): held that a statement recorded under section 132(4) of the Act is not a document seized during the continuation of a search. 2.7. The Ld. AO has also made additions amounting to Rs. 2,28,00,000/- alleging the sum as fictitious expenditure for AY 2010-11. The Ld. AO has based his conclusion on an accountant' note wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appeals filed before this Hon'ble ITAT also. Hence, Appellant-Assessee can urge this additional ground before this Hon'ble ITAT particularly since penalty has been levied and prosecution has been launched on appellant-assessee. 2.4. Indo-UK DTAA has been duly notified vide Notification No. GSR 91(E) dated 11.12.1994 as amended by Notification No. 10/2014 [F. No. 505/1986 FTD-1] dated 10.02.2014. Article 23 of the India-UK DTAA is reproduced as under: Subject to the provisions of paragraph (2) of this Article, items of income beneficially owned by a resident of a Contracting State, wherever arising, other than income paid out of trusts or the estates of deceased persons in the course of administration, which are not dealt with in the foregoing Articles of this Convention, shall be taxable only in that State. 2. The provisions of paragraph (1) shall not apply to income, other than income from immovable property as defined in paragraph (2) of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court (Page 458-468 of case law compendium, Volume 3.2): In this case, the court interpreted the word 'may be taxed' as a prohibition or embargo upon the authorities' exercising powers under the Act and it can't be read as an enabling form of language. 3.10. CIT v. P.V.A.L Kulandagan Chettiar, (2004) 267 ITR 654, (Supreme Court), 26.05.2004, Supreme Court of India, (Relevant para: Para 5, 11, 12, 13, 14, 15 16, Page 469-481 of case law compendium, Volume 3.2): dismissed the appeal of the revenue against the above decisions of Madras High Court Karnataka high Court. 3.11. In Union of India v. Azadi Bachao Andolan, [2003] 263 ITR 706 (SC), [2003] 263 ITR 706 (SC), 07.10.2003, Supreme Court of India (Relevant para: Para 23-26, Page 482-531 of case law compendium, Volume 3.2 after inter alia, referring to CIT v. R.M. Muthaiah (supra) the Hon'ble Supreme Court observed that: ... We approve of the reasoning of the decisions which we have noticed. If it was not an intention of the Legislature to make a departure from the general principles of chargeability under section 4, and the general principles of ascertainment of total income under section 5 of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 345 ITR 443 (Bombay), 16.10.2008, Bombay High Court (Relevant para: 3 4, Page 547-548 of case law compendium, Volume 3.2) the assessee was an Indian company tax resident of India. It had a permanent establishment at Oman. The assessee was sought to be taxed under Indian Income Tax Act, 1961 in respect of the income earned from the said establishment in Oman. In light of article 7(1) of the India- Oman DTAA which employed the expression may be taxed and in the light of the judgment of the apex court in the case CIT v. P. V. A. L. Kulandagan (supra), the ITAT excluded the profit earned from the permanent establishment at Oman. Upon appeal by revenue, the Hon'ble High Court upheld the order of the Tribunal and dismissed the appeal of Revenue. Effect of Section 90(3) and notification 91/2008 dated 28.8.2008 on the meaning of term may be taxed particularly for AY 2006-07 and AY 2007-08 in question. 3.16. Sub-section (3) to section 90 was inserted vide Finance Act 2003 with effect from 01st April 2004 and provides as under: (3) Any term used but not defined in this Act or in the agreement referred to in sub- section (1) shall, unless the context otherwise requires, and is not inconsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive and applicable to AY 2006-07, AY 2007-08 and AY 2008-09 by the decision of Mumbai bench of ITAT in Essar Oil Ltd. v. ACIT, (2014) 42 taxmann.com 21 (Mumbai ITAT) (Relevant para: Para 54, 60 61, Page 562637 of case law compendium, Volume 3.2). 3.20. The above order of the ITAT in Essar Oil case is contrary to the principles flowing from the judgement of Hon'ble Bombay High Court in Godrej Boyce Mfg. Co. Ltd. v. DCIT, [2010] 328 ITR 81, dated 12.08.2010 (Relevant para 65, 66 67, Page 638-676 of case law compendium, Volume 3.2) and the ruling of Hon'ble Supreme Court in CIT v. Essar Teleholdings Ltd., [2018] 300 CTR 561 dated 31.01.2018 (Relevant para: 23 48, Page 677-692 of case law compendium, Volume 3.2. These judgements were no doubt in the context of Rule 8D and Section 14A of the Act and not in the context of Notification 91/2008 dated 28.8.2008. However, these judgements have held that the Rules/notifications issued under the fiscal statutes will be, unless otherwise expressly provided, prospective in nature. 3.21. Notification dated 28.8.2008 cannot be retrospective and applicable to AY 2006-07 2007- 08, particularly where civil and penal consequence are attracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Article 21 of the Indo-Nepal DTAA, such income taxable only in Nepal which was the state of residence of both the Nepali Citizens. 3.29. In that case, the AO had invoked Section 163 of the Act. It is implicit that both the Nepali citizens were not residents for the purpose of Indian Income Tax Act, 1961. 3.30. The sums deposited by non-residents in the bank account located in India were held taxable under Section 69 of the Act. Non-residents are liable to tax under the Act only on income which has arisen in India. It is also implicit that clear basis of the aforesaid decision is that income being sums deposited in bank account arise in the country in which the bank account is located, 3.31. ITAT has clearly in view that Section 69 is otherwise attracted. It is therefore self-evident that ITAT has effectively concluded that income accrues or units in India as otherwise non- resident will not be taxable in India. 3.32. Therefore, it is clear ratio of the above decision type of income being sums deposited in bank account is not an item of income dealt with by specific articles of the DTAA and consequently fall only within the ambit of Article 21 - Other Income of the DTAA. Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove decision of ITAT in ITO v. Branch Manager, sums in question are not taxable in India, in view of Article 23(3)/ 4. The impugned assessment order passed under section 153A of the Act for all the AYs is barred by limitation prescribed under section 153B of the Act. Reasoning of the Ld. AO to extend it, based on reference made to Swiss tax authority is invalid. [AY 2006-07 and AY 2007-08: Ground Number 4 (Additional Ground) AY 2008-09, AY 2009-10: Ground Number 2 AY 2010-11: Ground Number 1 AY 2011-12 and AY 2012-13: Ground Number 2] 4.1. In the impugned assessment order, it has been averred that a reference has been made to the concerned Swiss tax authorities through the FT TR Division of CBDT calling for certain information vide letter dated 16.11.2012 and 11.02.2015. Accordingly, it is the contention of the Ld. Assessing Officer that because of the said reference the time period for concluding the assessment u/s 153A of the Act is extended. 4.2. The Notification No. S.O. 2903(E) dated 27.12.2011 amending the DTAA between India and Switzerland clearly states that that Exchange of Information provided for in the said Protocol will be applicable for information that relates to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to 01.04.2011 can't be received and it would be futile to wait for such information by making an invalid reference. Thus, the period of limitation could not be extended by the Revenue and the impugned assessments are clearly barred by limitation and deserve to be quashed. 15. On the other hand, the Ld. DR submitted that the assessee has agreed to disclose the above said undisclosed credit in the bank account in the revised return of income and he submitted that can the assessee raise the issues in the appellate proceedings on which no addition was made in the assessment order by the AO. The AO has accepted the revised return of income and proceeded to complete the assessment based on the revised return of income. Therefore, he submitted that all the issues raised by the assessee on such already declared income are not to be entertained by the Hon ble Bench. Accordingly, he prayed that several issues raised by the Ld. AR on the issue of additional income declared by the assessee is only afterthought. Further, he brought to our notice Question No. 45 from the statement recorded u/s 131 in which the question raised by the revenue is that the assessee has spent a period of one m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue. In this regard, he relied on following cases: a. Bishwanath Garodia (supra), in this case, the assessment was completed by the AO on the basis of information of assessee having bank account with the HSBC bank and having conducted the search and seizure operation, the department could not find any incriminating material. The case of the assessee was decided on the basis of jurisdictional issue and not on the basis of merits. Therefore, this case is distinguishable to the present case. b. Anurag Dalmia (supra), In this case, the search was conducted on the basis of alleged information contained in the USB that Indian persons maintaining bank account with HSBC Switzerland. In search, no documents or any incriminating material was found from the possession of the assessee, the coordinate bench held that no incriminating material found during the search and the information of having bank account was already with the department therefore, it was held that though there is material in the nature of incriminating but it has not been found in the possession in course of search, then such an addition cannot be roped in the assessment u/s 153A. From the facts on record, we observe that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e truthfulness of the same. In our view, this case also distinguishable to the facts in the present case, as discussed in the case of Anurag Dalmia (supra) case. d. Similarly in the cases of Parminder Singh Karla, Late Shri Bhushan Lal Sawhney, Vikram Dhirani (supra), in the above cases, it was held that an information, regardless of its validity and accuracy from a reliable source, must still be converted into evidence in order to draw an inference and establish the proven fact. It was held that the French authorities had provided the information stored on a USB drive but the Act does not include any provision that assumes the truth of the information received from the Competent Authority under the DTAA between India and France. Therefore, it was held that it is the responsibility of the AO to prove that the material obtained or printed from the Pen Drive contains exactly the contents of the 'Bank Account' as recorded by the bank and only then it can be deemed to possess evidentiary significance of categorical value. Since, there was no incriminating material found during the course of search to support and substantiate the said addition hence it was held that the income r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion are received thru the FT TR Division and these evidences are forwarded to the respective officers to make the investigations, normally the information s may not contain basic information s or may contain certain information relating to the alleged assessees, upon investigations, the information s used to corroborate with the information collected from the respective assessees. In the given case, the contents of the information are complete and the assessee has accepted the same upon investigation and not preferred to retract the same before any authorities. At this stage, contesting the same is not appropriate. In our view, the Evidence Act is applicable based on the evidential value of the same and it is known fact that it is not applicable in the income tax proceedings. Therefore, in our view the facts in the above case are distinguishable to the facts in the present case. b. Arjun Pandit Rao Khotkar Vs. Kailash Kushanrao Gorantyal (supra), in this case also, the findings in the Anvar P.V supra was relied and held that admissibility of electronic evidence is based on the drill of section 65B of the Evidence Act. Since we have already held that the above case is distinguishab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not found in the search proceedings, in our view, after thought and irrelevant at this stage. Further even the assessee has not retracted the statement till now, proceeded to revise the return of income and paid the relevant tax. Therefore, the search was initiated to verify the information available with the revenue thru the FT TR division of the CBDT and the same was found to be proper when confronted with the assessee. Therefore, the information collected was confirmed in the search assessment proceedings is nothing but acceptance and confirmation of the existence of such bank account. The important thing is that the assessee not only revised the return of income and chose not to retract the statement. Therefore, now invoking the jurisdictional issue relying on the several case law is not acceptable at this stage. The findings in the Abhishar Buildwell is as under: It held that in a case of search under section 132 or requisition under section 132A, the Assessing Officer assumes jurisdiction for assessment under section 153A ; all pending assessments or reassessments shall stand abated. In case any incriminating material is found or unearthed, even in case of unabated or complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantially correct. Hence the material with the revenue has to be considered proper and the action of the AO to accept the revised return of income and proceeded to complete the assessment goes to prove that the material with the revenue can be assessable u/s 153A of the Act. Therefore, we have no choice but to reject the contentions of the assessee. 21. The next contention of the assessee is, the sum in question is not taxable in view of Article 23(3) of Indo-UK DTAA on the expression may be taxed employed therein. We perused the detailed submissions made by the Ld AR that in case of income declared under the head Income from other sources, the relevant article 23(3) of Indo-Uk is applicable and as per the concept of may be taxed , the various courts have held that it should be taxed only in the other country of source. We are not in dispute with the above submissions and he has relied on several case law. By acknowledging the various case law on this subject, the facts in this case is quite different to the facts of other cases relied by the assessee. Therefore, the facts in this case is that the assessee has disclosed the deposits in the HSBC London account as income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s declared the relevant income in the source country. There is nothing coming out of the submissions made by the assessee. Merely because the income was declared by the assessee as income from other sources and the same was accepted by the AO, the article 23 will not be invoked automatically. The assessee first has to establish the source of income declared in the UK relevant to the bank deposits or establish that the bank deposits are not generated in India and earned outside India, further the income is falling under the category of other income without considering the fact that global income is chargeable to tax in the case of Indian resident. Therefore, the case of SBI, Patna branch is not applicable in the present case and distinguishable. 23. As discussed above, the assessee itself declared the income under the head income from other sources without clearly disclosing the nature of income earned by the assessee in the source country in this case, UK. Merely because the AO accepted the same as such, it does not mean that the article 23(3) will automatically apply. Therefore, this contention of the assessee also dismissed. 24. With regard to another contention raised in additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. On the other hand, Ld DR objected to the above submissions and the assessee has not submitted any bank statement and also failed to sign the waiver form to obtain the above said bank statement through the FT TR division. 28. In this regard, Ld AR has filed the below detailed submissions: 5. Notional interest could not have been added to income of AY 2008-09 to AY 2012-13 [AY 2008-09 to AY 2012-13: Ground Number 4] 5.1. The Ld. AO added notional interest to the incomes for AY 2008-09 to AY 2012-13 alleging that the Appellant-Assessee ought to have earned interest at the rate of 4% from the alleged bank account. This is incorrect. 5.2. Even as per the bank statement relied upon by the department, the bank account is indicated to be closed in October 2006. Further, the Assessee in his statement dated 23.08.2011 (Page 7 to 39 of Paper Book Volume 1) had also stated that the bank account stood closed in 2006. The relevant extract of the statement (Page 36 of Paper Book Volume 1) is reproduced below: Q No. 52-Pls furnish date wise deposits and withdrawals from the foreign bank account including amount. Ans:- This was an old a/c which was closed in 2006 and at present I am not having a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tarily to buy peace of mind and to avoid protracted litigation. Therefore, the Ld. AO has completed the assessment based on the revised return of income. AO again proceeded to levy the penalty and further he submitted that there is no material with the department about the maintenance of bank account by the assessee only because of old age and to buy peace of mind the assessee has proceeded to disclose the undisclosed bank account in its return of income. In this regard, he has submitted a detailed submissions as under: 6. For AY 2006-07 and 2007-08 penalty under section 271(1)(c) of the Act is not leviable since the assessment under Section 153A is based income disclosed in the return of income filed pursuant to notice under section 153A of the Act. [AY 2006-07 to AY 2012-13: Ground Number 1 and 2] 6.1. The Appellant-Assessee had filed returns of income under section 153A of the Act on 21.11.2011 disclosing the amount alleged peak credits of USD 6,08,200 as income of AY 2007-08. Letter dated 24.11.2022 was also written reserving a right to revise the returns in respective years. Show Cause Notice dated 06.01.2014 was issued proposing to add part of the amount in AY 2006-07 and bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee made an appeal before the CIT(A) where it was held that for the purpose of imposition of penalty, the original return of income filed under section 139 of the Act could not be considered and penalty under section 271(1)(c) of the Act was imposable only when there was a variation in assessed and returned income. If there was no variation, there will be no concealment and thus the question of levy of penalty would not arise. Upon appeal by the revenue against the CIT(A) order, the ITAT held that the concealment of income is to be determined with reference to the return of income to be filed in response to notice u/s 153A of the Act. Once returned income filed u/s 153A of the Act is accepted by the assessing officer it can neither be a case of concealment of income nor furnishing of inaccurate of particulars of such income. Hence, penalty u/s 271(1)(c) of the Act is not exigible. 6.5. The above order of ITAT Delhi was further confirmed by the Hon'ble Delhi High Court in PCIT v. Neeraj Jindal, [2017] 393 ITR 1 (Delhi) dated 09.02.2017 (Relevant para: 28 29, Page 748-759 of case law compendium, Volume 3.2) wherein it was held that the when an assessee has filed revised returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Page 772-773 of case law compendium, Volume 3.2) the Hon'ble Supreme Court upheld the view taken by the Hon'ble Madhya Pradesh High Court. The Hon'ble High Court of Madhya Pradesh in Commissioner of Income Tax v. Suresh Chandra Mittal [(2000) 241 ITR 124] (Page 774- 776 of case law compendium, Volume 3.2) has held that once the revised assessment was filed by the Assessee and regularised by the Revenue and once the Assessing Authority had failed to take any objection in the matter, the declaration of income made by the assessee in his revised returns and his explanation that he had done so to buy peace with the Department and to come out of vexed litigation could be treated as bona fide in the facts and circumstances of the case. Accordingly, the Hon'ble High Court held that the Tribunal was justified in cancelling the penalty levied by Assessing Officer and affirmed by CIT(A) in the facts and circumstances of the case. 6.10. Similar view has been taken in the following judgements: a) The Hon'ble Madhya Pradesh High Court in CIT v. Shyamlal M. Soni ([2005] 276 ITR 156). (Relevant para: Para 7 8, Page 777-778 of case law compendium, Volume 3.2) b) The Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government of any other country. The court observed that the above issue was debatable and had come before this tribunal in the case of Essar Oil Ltd. v. Addl. CIT (supra) from where it has been appealed and pending before the Hon'ble Bombay High Court. There was another ruling of Bank of India v. DCIT (supra) where in a similar issue emerging in context of India-Kenya DTAA. It held by the co-ordinate bench that any notification or circular cannot alter the nature of income that had been specifically included in the DTAA's. Therefore, on the basis of conflicting views of two benches of the Tribunal on the issue under consideration, ITAT held that it could be concluded that the issue under consideration was not free from doubts and debates, thus the assessee could not be subjected to levy of penalty under section 271(1)(c) of the Act. 7.5. In DCIT v. Johnson Johnson Ltd., ITA No. 3781/Mum/2016, 20.12.2019, ITAT Mumbai (Relevant paras: Para 13 14, Page 838-842 of case law compendium, Volume 3.2) the issue was whether the profits of foreign branch in the case of assessee are liable to be taxed in India. Matter relates to AY 2008-09. The court observed that it is a debatable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the last day of the month should be adopted. Further, the Assessee had made complete disclosures regarding exchange rate adopted in the revised ITR. 8.8. Consequently, penalty under section 271(1)(c) in relation to exchange difference is not sustainable. 9. Ld. CIT(A) should not have arbitrarily increased quantum of penalty from 100% to 200%. [AY 2006-07, AY 2007-08: Ground number 3] 9.1. At the time of passing the assessment orders, the Ld. AO had levied penalty under section 271(1)(c) of the IT Act at the rate of 100% of the tax sought to be evaded by the Appellant Assessee. During the proceedings before the first appellate authority, the Ld. CIT(A) increased the penalty from 100% to 200% of the tax sought to be evaded by the Appellant Assessee. The Ld. CIT(A) cited the non-cooperation of the Appellant-Assessee in submitting the requisite details before the Ld. AO as the basis of increase of penalty. 9.2. The provisions of section 271(1)(c) cast a discretion on the Assessing Officer to levy penalty between 100% to 300% of the tax sought to be evaded by an assessee. The legislature in its discretion has reserved this discretion for the Assessing Officer. 9.3. CIT(A) may have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady held in the quantum proceeding that the information collected by the revenue from foreign authorities and based on the above information, the search was initiated and during the search no incriminating material was found and only because the assessee had accepted the existence of bank account in the search assessment proceedings, we held that the income accepted by the assessee is chargeable to tax and assessable u/s 153A of the Act. We came to the conclusion based on the fact that the search was initiated only to substantiate the existence of such bank account in the HSBC Bank. Since the assessee accepted the same, we have concluded that the material with the revenue as proper and true. However, for the purpose of penalty, we have to analyze the circumstances and situation to levy the penalty. In this case, no doubt the material for initiating search was already with the department and in the search proceedings, there was no material found relating to any of the alleged transactions. Only during the search assessment proceedings, the assessee had to accept the same to buy peace with the revenue and accordingly, the AO had accepted the revised return of income to complete the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no incriminating material found during the search and such material was not applied to revise the return of income. The explanation 5A of section 271(1)(c) can be invoked only in the situation wherein the department finds incriminating material found during the search and in the given case, the department had the material prior to initiation of search. We have to interpret the provision literally in order to invoke the provisions of penalty whereas in the quantum appeal, certain information can be interpreted in order to confirm the quantum owing to the situation. In the given case, the assessee had accepted the existence of bank account in order to buy peace and the situation was such that the search was initiated based on the information already existed with department. In the search they could not find any material to substantiate the same. Only because the assessee had accepted the bank account only in the search assessment proceedings. In our view the penalty can be imposed only on the basis of material found during the search in order to invoke the explanation 5A of section 271(1)(c) of the Act. Therefore, in our view the AO had accepted the revised return of income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year. c. That the Appellant-Assessee follows cash system of accounting, and that the Appellant has actually paid for the expenses claimed by him before the closure of financial year and deducted taxes in accordance with the provisions of IT Act. Therefore, the accountant note could not have been an after through prepared after the closure of financial year to book fictitious expense as alleged by Ld. AO. d. That the Appellant-Assessee had produced the details of all the expenses and the Ld. AO could not even identify any expense which was not genuine. e. That the Appellant-Assessee explained the content of the note in detail and the Ld. AO has not been able to counter the facts put across by the Appellant Assessee. f. That majority of the expenses incurred by the Appellant-Assessee (i.e., about 88% of the total expenses) were in the form of salaries and that the details of these individuals was made available to Ld. AO in relation to which no adverse inference has been drawn. 39. Considered the rival submissions and material placed on record. On careful consideration of facts, we observed that the officers found a loose sheet having certain details of expenses, which may ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
