2025 (7) TMI 1157 - AT - Income Tax

Validity of Assessment Order issued without document identification number ( DIN ) as mandated by CBDT - HELD THAT - We find that it is not disputed that Assessment Order with DIN was available in the income tax portal itself and shared with Assessee though there were some missing contents which is protected by Section 292B of the Act. We accordingly find no infirmity in the findings of the Ld. CIT(A) and accordingly dismiss this technical ground raised by the Assessee. Thus this ground of appeal is dismissed. Jurisdiction and passing of Assessment Order on the ground of invalid approval u/s 153D - Bench is of the view that except for the allegation of approval being given on same day and Assessment Order being passed without DIN there are no other objections by the Assessee. The Assessment Order has been upheld on the grounds of DIN as per our decision supra. Further Bench is of the view that various case laws relied upon by the Assessee are clearly distinguishable from the case in hand thus cannot be applied. Moreover none of the parties has brough on our record the said approval for our examination therefore merely on the ground that approval is given on same day the Assessment Order cannot be held invalid. It is always possible that approval letter is signed on particular date but in principle approval and case discussion between AO and concerned superior authority happens on a regular basis. Thus this ground of appeal raised by Assessee is dismissed as indicated above. Jurisdiction u/s 153A in the absence of incriminating material for completed assessment - Addition of foreign asset/income u/s 69A - Appellant has demonstrably proved that bank account with Hinduja Bank was opened with the Funds of the Trust and Hinduja bank account and portfolio of various assets maintained in account named Terapanth also belongs to BWR Trust and the said portfolio of assets is duly reflected in the Balance Sheet of BWR Trust as on 31.03.2013. It is also noted that the relevant disclosure of investment made by BWR Trust with Hinduja Bank in portfolio assets at cost is also reflected in notes forming part of the balance sheet available. We also note that CIT(A) has itself given the relief of notional gain added by considering market rate as compared to cost of investment. The notional gain has been considered by Ld. CIT(A) and consequential relief has been given by deleting it while arriving the cost of portfolio investment. If the cost is derived by deducing this notional gain itself from market valuation of Rs. 80, 10, 38, 714/- computed by Ld. AO (which is based on portfolio statement available) the cost of portfolio assets comes at Rs. 76, 47, 56, 279/- i.e. USD 12, 375, 698.34 equivalent (1 USD 61.795). The cost of portfolio in Hinduja Bank at USD 12, 375, 698.34 along with current liability of USD 3063193.58 is reflected in Balance of BWR Trust and same matches with portfolio statement received by AO through information from FT TR division No. 266-270 and 261-265 of PB Vol 1). Thus when the said investment is duly owned and reflected by BWR Trust in its Balance Sheet and existence of BWR Trust is duly established by Deed of Instrument its financial statements bank account statements in which flow of funds have taken place there is no basis for making addition of any foreign asset in the hands of the Assessee and in any eventuality source of funds stands satisfactorily explained. It is observed that the authorities below merely brushed aside the aforesaid documentary evidences without assigning any cogent reasons and merely on the pretext of having information from F T TR division no inquiries have been made. Nothing has been brought on record in rebuttal of documentary evidence brought by the Appellant on record. It is trite law if the AO is not satisfied with any documentary evidence then he is free to conduct necessary inquiries however Ld. AO as well Ld. CIT(A) as placed one sided reliance on ITR disclosure as contained in form of the ITR whereas the factual position and primary disclosure made in the notes to return of income has not been considered at all wherein the Assessee has duly explained that she was signatory in the bank accounts only and source of funds emanated from Trust Funds which were contributed by Mr. Kirit Kumar Jain in terms of deed of family settlement and partition deed available. The declaration of Mr. KK jain of having contributed the funds to the trust remains uncontroverted. It is also noted that no documentary evidence has been brought on record to establish whether any income or asset was distributed to Assessee. Bench also notes that Assessee is not the beneficiary of the BWR Trust rather than as per Part C of the BWR Trust instrument of formation available the issues of first Protector and Settlor are the initial beneficiaries. AO as well as Ld. CIT(A) have not controverted the existence of the family settlement deed BWR Trust Vibrant Properties Pvt Ltd. The existence of the same is evident from family partition deed incorporation certificate MOA and AOA and Trust documents available. Thus once the existence of the Trust and source of funds as well as entries in the bank statement reflecting credit therefrom from Vibrant Properties Limited is established by the Assessee we find substance in the explanation of the Assessee that asset or income in the bank account maintained with Hinduja Bank does not belong to Assessee in her individual capacity and rather of BWR Trust and Assessee is just signatory to the bank account maintained with Hinduja Bank Switzerland and not even a beneficiary. Addition made u/s 69A of the Act deserves to be deleted as ownership of investment or assets has been duly established to be not belonging to Assessee-Appellant. Addition in respect of net asset of BWR Trust in the hands of Assessee is not justified and is directed to be deleted. Assumption of jurisdiction u/s 153A - Resort to Section 153A without there being any incriminating material for year under consideration is not justified merely on the ground that there was search u/s 132 of the Act in case of the Assessee. Thus following the law laid down in PCIT Central-3 V/s Abhisar Buildwell (P.) Ltd 2023 (4) TMI 1056 - SUPREME COURT that completed assessment could not be disturbed in the absence of incriminating material we hold that present assessment made u/s 153A is bad in law.

Summary

ISSUES:

Validity of assessment order issued without Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019.Validity of approval under Section 153D of the Income Tax Act for passing assessment order.Jurisdiction and validity of assessment under Section 153A versus Section 153C of the Income Tax Act in absence of incriminating material.Ownership and disclosure of foreign bank account and assets held in the name of a family trust versus individual ownership for income tax purposes.Application of provisions under Sections 69 and 69A of the Income Tax Act relating to unexplained assets and income.Requirement and applicability of filing declaration under Chapter VI of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.Levy of interest under Section 234B of the Income Tax Act consequent to additions made.Admissibility and evidentiary value of documents allegedly recovered from third party's premises and their attribution to the assessee under Sections 65A and 65B of the Indian Evidence Act.Validity of references from the Foreign Tax and Tax Recovery (FT & TR) division in the assessment proceedings.

RULINGS / HOLDINGS:

Assessment order was validly issued with DIN generated through ITBA system; absence of DIN on face of order was a technical defect without substantive infirmity, hence the ground challenging order without DIN was dismissed.Approval under Section 153D given on the same day as assessment order was not invalid merely on that ground; no evidence of non-application of mind was established, thus approval was held valid.In absence of any incriminating material found during search in the assessee's premises and with completed assessment prior to search, invocation of Section 153A was held invalid; assessment under Section 153A was quashed and additions deleted accordingly.Foreign bank account and portfolio assets held in the name of the family trust (BWR Trust) were not owned by the assessee individually; documentary evidence including trust deed, family settlement deed, financial statements, and bank statements established ownership by the trust, leading to deletion of additions made in assessee's hands under Sections 69 and 69A.Documents allegedly recovered from third party's premises could not be attributed to the assessee without proper enquiry; reliance on such documents without adherence to Sections 65A and 65B of the Indian Evidence Act was held erroneous.References from FT & TR division were upheld but did not independently justify additions without corroborative evidence; no separate adjudication was required on this ground.Levy of interest under Section 234B was consequential and did not require separate adjudication in view of deletion of additions.Requirement to file declaration under Chapter VI of the Black Money Act was not upheld against the assessee as additions were deleted.

RATIONALE:

The Court applied the provisions of the Income Tax Act, 1961, specifically Sections 153A, 153C, 153D, 69, 69A, 131, 234B, and relevant procedural circulars issued by CBDT, including Circular No. 19/2019 regarding DIN issuance.Assessment orders must comply with procedural mandates including DIN issuance; however, technical non-compliance without prejudice does not invalidate orders, consistent with Section 292B protection.Approval under Section 153D requires application of mind but can be given contemporaneously with assessment order if prior discussions have occurred; mere timing does not invalidate approval.Jurisdiction under Section 153A is contingent upon existence of incriminating material found during search in the assessee's case; absent such material and with completed assessments, reopening is impermissible as per binding precedents including the Supreme Court ruling in PCIT Central-3 v. Abhisar Buildwell (P.) Ltd.Ownership of assets for tax purposes depends on substantive control and beneficial interest; evidence of family trust formation, fund flow, and trust financials established that foreign assets belonged to the trust, not the individual assessee.Assessing Officer's reliance on documents recovered from third parties without proper authentication or linkage to the assessee violates principles of evidence under Sections 65A and 65B of the Indian Evidence Act.Judicial precedents emphasize that burden of proof lies on revenue to establish ownership and unexplained income; mere possession or association is insufficient to invoke Sections 69 and 69A.Partial relief granted by appellate authority on account of double additions and notional gains was upheld, reflecting adherence to principles of fair assessment.The Court recognized the importance of procedural fairness and evidentiary standards in tax assessments, rejecting mechanical or arbitrary additions unsupported by credible evidence.