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2015 (12) TMI 902 - ITAT MUMBAI

2015 (12) TMI 902 - ITAT MUMBAI - TMI - Income from undisclosed sources by way of pay orders from Union Bank of Switzerland (UBS) AG for US $ 4 million - Held that:- We find nothing on record to suggest any link between the assessee and the said company, which appears to be an Indian company and is only to be regarded as a distinct legal entity. And income due to or receivable by it could be regarded as the assessee's income only on the strength of evidence which leads to the inference of it b .....

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in, that received/receivable on transfer of a capital asset would stand to be assessed, to the extent of the gain embedded therein, as capital gains. There is nothing to suggest that the amount is on capital account, or in lieu of a capital asset. Why, any unexplained deposit or money, etc., is, by virtue of the provisions of the Act, and for the same reason, also deemed as income. That is, the onus to establish the nature (as well as the source) of the money, i.e., as being not in the nature of .....

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r expenditure - Held that:- Though the assessee subsequently, vide his statement u/s.131 dated 01.5.2007, does state that the said estimate by him was only for the current year f.y. 2006-07, and that the household expenditure earlier was much lower at ₹ 20,000/- p.m., there is nothing to indicate that his lifestyle of few years earlier was any different, or any less ostentatious. Why, the letter under reference by UBS AG is itself of April, 1999, suggesting links abroad even at that time. .....

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lls; the number of residences being maintained; social or health clubs joined, etc. No such exercise has been attempted by the Revenue. Under the circumstances, it is only considered proper to determine the addition on account of lifestyle, including by way of maintenance, expenditure on the basis of the assessee's own estimate, and which we do at ₹ 7.50 lacs. The assessee shall be allowed credit for any sum reflected in his books of account toward the same. We decide accordingly, and the .....

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al' is claimed to be in the form of assets carried over from generations, as part of the family heirloom. The books of account for the earlier years have admittedly been not produced. How and why have the same, having been acquired without incurring any cost, been valued? The income as returned for the nine years preceding the current year is meager, being not sufficient for the family even to meet two ends. Then, again, is the question of valuation. The claim of the opening capital, to the exte .....

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ai ('CIT(A)' for short) dated 17.11.2008, dismissing the Assessee's appeal contesting its assessment u/s.143(3) r/w s. 147 of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2000-01 dated 19.3.2008. 2. None appeared for and on behalf of the assessee when the appeal was called out for hearing, even as the assessee has caused to place on record a General Power of Attorney dated 02.2.2010, duly accepted, in favour of one Shri Sunil Shinde, CA on r .....

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to adjudicate these appeals after hearing the party before us and considering the material placed on record by the parties, including the assessee, who has filed a paper-book containing 31 pages, and which includes written submissions before the Assessing Officer (A.O.). In addition, the assessee has also made an Application vide letter dated 01.10.2013 for admission of additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 (containing 79 pages), which is a combine .....

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of H.A. Khan. You have asked whether this is a genuine document and whether the veracity of the contents can be confirmed. We do NOT believe that this document is genuine. HAK, as we have previously reported, did not maintain accounts with us at this time. We explained in our previous letters the limited nature of the HAK relationship, which came later than the date of this facsimile. As we have previously confirmed, we did employ a Dr. P. Waely, who has since retired from UBS. However, the fact .....

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ission of the said letter, among others, as additional evidence, stating the same to have come into his possession in April, 2012, much after the conclusion of the proceedings before the first appellate authority. The ld. DR would, on this being put across to him (i.e., while hearing the appeals for AYs. 2001-02 to 2007-08), object, stating that the same cannot be admitted in-as-much as the document is not notarized or apostiled. Both India and Switzerland are signatories to the Hague Convention .....

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n the main relates, and not the current year. Before we may discuss the merits of the objections raised by the ld. Departmental Representative (DR), we observe that the letter under reference is unsigned. Its contents, therefore, carry little weight, i.e., as evidence. The same accordingly cannot be admitted in evidence. 3. The assessment in this case was made u/s. 143(3) r/w s. 147 of the Act, with the proceedings initiated on the basis of information found by the Revenue during searches u/s.13 .....

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t thereof by the assessee, were retained by the A.O. as such, making the following additions: (Amt. in Rs.) a) Income from undisclosed sources by way of pay orders from Union Bank of Switzerland (UBS) - AG for US $ 4 million 17,14,00,000 b) Income from undisclosed sources 28,50,000 c) Income from undisclosed sources by way of unexplained capital 17,29,051 The assessee failing to make any improvement in his case; rather, exhibiting un-cooperative behavior in the appellate proceedings, the additio .....

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f the assessment order, which reads as under: 'Kind Attn: Mr. H. A. Khan This is to inform you that the understated Pay Orders have expired its encashment period. Pay Order No. Favouring Amount Payable in 004 07192013276543 Pan Asian Distribution Ltd USD 2000000 Singapore 00406298027432895 Hassan Ali Khan USD 2000000 India 004080460182248547 Roberts & Mclean Cos. Ltd USD 2000000 India Fresh Pay Orders are in the process of being issued along with the amended name of Robert & Mclean C .....

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ger UBS AG' The assessee, on being questioned in the matter, denied any knowledge of the said document. No revised pay orders have been received, i.e., after 12.04.1999, or at any time later, and toward which he furnished (uncertified) copy of his bank account with Bombay Mercantile Bank at Hyderabad, which was stated to be the only bank account maintained by him. An Affidavit was also furnished averring to have no foreign bank accounts. Summons u/s. 131 of the Act were issued to the assesse .....

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ion between him and KT, Chairman (of the Board of directors) of Robert Mclean & Co. Ltd., as well as of them indulging in cross border transactions. The document was duly signed by the Chief Manager, also giving his name, and the assessee did not lead any evidence to rebut the presumption u/s.292C of the Act (refer para 7.7 of the assessment order). The pay orders received (or receivable) by the assessee in lieu of pay orders bearing Nos. 004 07192013276543 and 004 06298027432895, i.e., the .....

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rties, and perused the material on record. Our first observation is that the conversion rate of US Dollar into Indian Rupees (Rs.42.85) has not been disputed at any stage. The second observation in the matter is that of the two pay orders under reference, one is in the name of a company by the name Pan Asian Distribution Ltd. The presumption u/s.292C would, therefore, suggest that there is a company by that name, and the money represented by the said pay order is to be conveyed to it, as its' .....

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or receivable by it could be regarded as the assessee's income only on the strength of evidence which leads to the inference of it being the assessee's money, being transferred to it, or the like. There is, in fact, no mention or even a whisper in this regard, or of any association or link between the two. Clearly, no case for including the amount received or receivable by the said company (US $ 2 million) in the assessee's hands is made out. Coming, next, to the amount paid to the a .....

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self reveals several accounts with UBS AG, Zurich (refer para 7.7 of the assessment order). The existence or the making of the pay order (No.004 06298 027 43 2895) by UBS AG - as stated by it, in assessee's favour, is neither disputed nor could be without any controverting material. The same, in the absence of anything to the contrary, establishes the assessee's right to the said amount. As such, the amount receivable by the assessee would not cease to be so merely because the pay order, .....

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tion that arises. The fresh pay order/s is, and as per the letter itself, which would be governed by the presumption of section 292C, i.e., with regard to the truth of its' contents, to follow. Why, rather, should it not be so, allowing for the things to take their normal, regular course? There is no explanation in this regard. The assessee's case rests on a bald statement as to the ignorance of the transaction/s, and who does not even explain as to why, or on what account, or under what .....

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issued fresh instructions to the bank, which is, as apparent from the letter, in clear communication with the assessee, to whom the letter is addressed, having the details, including telephone numbers, of all the beneficiaries. The change in the name of one of the companies to its' correct name also bears out the said communication in-asmuch as the bank stands conveyed the correct name, as against the original, incorrect name, to which the original pay order (number specified), issued in th .....

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prompted us to suggest that the monies may have been diverted to a different destination. There is, in any case, nothing on record to rebut the statutory presumption of section 292C, so that it cannot be said that the earlier pay order/s was not followed, as the letter states, by fresh pay order/s. The existence of cross border transactions, or foreign bank accounts, as the seized material bears out, only strengths this presumption. Income, it is well-settled, could be brought to tax either on .....

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larified the same; denying the receipt itself, which we have found as of no consequence in-as-much as the pay order stands already issued in assessee's favour, with the letter dated 12.04.1999, to which the presumption of section 292C shall apply, being issued only in view of the same having lapsed, i.e., in consequence, so that the payment shall have to be effected by issuance of a fresh pay order. It is only on its receipt that the payment could be said to have been received by the assesse .....

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posit or money, etc., is, by virtue of the provisions of the Act, and for the same reason, also deemed as income. That is, the onus to establish the nature (as well as the source) of the money, i.e., as being not in the nature of income, is on the assessee, and which he has clearly not. There is, under the circumstances, no case for or no basis to consider the impugned sum as not received (during the relevant year) and, two, of it being not in the nature of income. The assessment of the amount, .....

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e to the notice u/s.148. The detail of the said capital is as under (APB pg. 9/DPB pg. 28): Credit Amount Debit Amount i) To balance carry forward Rs.17,29,032 Ornament Rs.1,29,032 ii) Watches Rs.11,00,000 iii) Cash on hand Rs.5,00,000 Rs.17,29,032 Rs.17,29,032 The same did not find favour with the Revenue authorities. The assessee had admittedly not filed any returns since A.Y. 2000-01, i.e., prior to the initiation of the assessment proceedings for these years. The returns for A.Ys. 1990-91 to .....

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ct, the assessee was recalcitrant, not appearing before the assessing as well as the first appellate authority, both of whom allowed extensive opportunity to him to state his case. We observe a statement by the assessee to the effect that the jewellery and watches were ancestral, family property, the details of which are in the possession of the Department, being explained to the competent authority, who had accepted the same (refer para 26 of the letter dated 24.2.2010 to the AO/APB pgs.5-10). .....

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o reference to the date/s thereof, or even the authority before whom the same had been made, stating to be explaining the source. We have, on our part, perused the assessee's statements recorded on oath u/s. 131 of the Act on 27.4.2007 (continued from 26.4.2004) and 01.5.2007 (APB pgs. 11-27), forming part of the paper-book. Both the statements are before the investigating authority, being ADIT (Inv.), Unit-VIII(2), Mumbai, duly signed by him as well as the assessee. There is no reference th .....

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from his Pune and Mumbai residences, which were subject to search, and the assessee, as it appears, is a keen watch collector as well, having been found in search to be the owner of branded watches. The assessee's claim of having produced computerized books of account before the A.O., so that the latter's stating of him as not maintaining any books of account is incorrect, is neither here nor there. The 'opening capital' has nothing to do with the books of account for the curren .....

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ven to meet two ends. Then, again, is the question of valuation. The claim of the opening capital, to the extent it relates to cash-in-hand of ₹ 5 lacs, is thus, again, without any explanation, none being even otherwise furnished. The addition is, accordingly, confirmed. We decide accordingly. Ground 3: Addition on account of life style other expenditure - ₹ 28.50 lacs 9. We may next consider the assessee's third and final ground, which concerns an addition of ₹ 28.50 lacs. .....

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ncome toward the later years, with that for A.Y. 2007-08 being at ₹ 139.04 lacs (out of an aggregate income of ₹ 226.07 lacs for the said years), only to avoid interest u/ss. 234A, 234B and 234C. The assessee was even otherwise found to be leading a lavish lifestyle, travelling abroad, gifting luxury cars to his relatives, etc. All this lends credence to the statement u/s. 132(4)(supra), stating his annual earning to be to the tune of ₹ 30 lacs. The assessee having, however, re .....

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material on record. It is nobody's case that the assessee had been disclosing his correct or true income from year to year; rather, he had not disclosed any income from A.Y. 2000-01 onwards, i.e., prior to the initiation of the assessment proceedings for these years by issue of notices u/s.148 or, as the case may be, section 153A, with that returned for the years preceding thereto being also for paltry sums, not sufficient to make two ends meet. He, in fact, is candid about it, explaining t .....

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his near relatives, stated to be gifted thereto by him. The assessee's stating of his admission being confined only to A.Y. 2007-08, i.e., the year during the previous year relevant to which the statement u/s.132(4) was made, is thus without any merit in the given facts and circumstances of the case. At the same time, the Revenue, having already made separate additions qua the assets found, is not justified in adding, once again, based on the assessee's statement of his annual earnings. .....

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decided on the basis of an appraisal of the said materials, and the explanation/s furnished in support. Reference thereto, which, as afore-stated, comprises the assessee's returned income in the main, would thus be of no assistance to the Revenue. The income toward which an estimate could be made, i.e., which could be justified on the basis of an informed estimate, is therefore only which does not result in any tangible (or intangible) asset, viz. expenditure. The assessee surely maintains a .....

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