TMI Blog2019 (4) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... -assessments in these four assessment years are clearly time barred since framed on 08.11.2017 going by the above statutory provision. I quash the impugned re-assessments since not framed within statutory limitation period. - Revenue appeals are dismissed - ITA No.2243-2246/Kol/2018 And Cross Objection No.128, 130-132/Kol/2018 a/o ITA No.2243-2246/Kol/2018 - - - Dated:- 20-3-2019 - Shri S.S, Godara, Judicial Member For The Assessee : Shri D.S. Damle, Advocate For The Respondent : Shri C.J. Singh, JCIT-SR-DR ORDER This batch of eight cases pertains to a single assessee Sri Biswanath Garodia. The Revenue has filed its four appeal(s) ITA No.2243-2246/Kol/2018 followed by taxpayer s Cross Objection(s) therein CO Nos.128, 130-132/Kol/2018 for assessment years 2008-09 to 2011-12, against the Commissioner of Income-tax (Appeals)-21, Kolkata s separate orders; all dated 07.08.2018, passed in case Nos.10237- 10240/DCIT,CC-3(3)/CIT(A)-21/KOL/2017-18, reversing Assessing Officer s action adding the latter s overseas deposits in Switzerland HSBC bank accounts amounting to ₹28,50,418/-,₹15,00,780/-, &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S DECISION: 1. I have carefully considered the submissions of the Ld. AR of the appellant and perused the impugned order. I have also gone through the reasons recorded by the Ld. AO for reopening the assessment u/s 147 of the Act. In Ground Nos. 1 2 the appellant in sum substance has objected to the legal validity of the proceedings initiated u/s 147 of the Act. On perusal of the recorded reasons, I find that the Ld. AO's formation of belief that income escaped assessment was based on the copies of the bank statements of HSBC Bank, Geneva, which he had furnished before the CIT(A) in the appellate proceedings for AY 2006-07 2007-08. The Ld.AO noted that this bank account and the transactions therein were not reflected in assessee's income tax returns filed earlier. This fact led him to form a reasonable belief that income from such bank account was chargeable to tax for the relevant assessment year and the same had escaped assessment. It is the case of the appellant that the reopening of assessment was based on surmises and conjectures and that there was no tangible material in the AO's possession on the basis of which proceedings u/s 147 could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. In my considered view therefore the initiation of proceedings u/s 147 and the issuance of reassessment notice u/s 148 was valid and the conditions precedent for initiating reassessment proceedings were fulfilled by the Ld. AO. Ground Nos. 1 2 are therefore rejected. 3. In Ground No. 3, the limited question to be adjudicated in this ground is whether the impugned order was passed within the period of limitation prescribed under the .provisions of the Income-tax Act, 1961. In the facts of the present case, the normal period of limitation in the appellant's case expired on 31.12.2016. The Explanation to Section 153 however contains certain exceptional circumstances where in the period of the limitation gets extended. In terms of clause (x) 01 the Explanation to Section 153, the period 'commencing from the date on which a reference is made for exchange of information by the competent authority to the date on which the information requested is last received or a period of one year, whichever is less; is required to be excluded while computing the period of limitation for the purposes of Section 153 of the Act. 4. In the appellate proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he foregoing and from the assessment order for the year under consideration and for the earlier years, I find that a search u/s 132 was conducted against the appellant in 2011 on the basis of information available with the Department that an account with HSBC Private Bank Geneva Switzerland was maintained in the name of the appellant and which was not disclosed in the tax assessments completed earlier. In the course of the said search, statements of the appellant were recorded by the Investigating Officer concerning the said bank account in which the contradictory answers were given by the assessee. In the course of the assessment proceedings u/s 153A which followed the search, the appellant's statement was recorded by the AO wherein the appellant had denied the amounts invested in the said bank account to be his monies. Against the assessment orders for AYs 2006-07 2007-08 wherein the money deposited in the said bank account was assessed as appellant's income, he had filed appeals before the Ld. CIT(Appeals). The appeals filed by the appellant for AYs 2006-07 2007-08 were however accompanied with affidavit of Mr. Onn Sithawalla, a Singapore citizen wherein he had admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.09.2004 99975 20.09.2004 74975 22.09.2004 74975 04.10.2004 79981 06.10.2004 89981 12.10.2004 79975 13.10.2004 49975 Total 899812 The payments of 798792 and 387182.25 were actually made from the account maintained in Euro. These; payments are made to the Euro account of Donald Mcarthy Trading Pte Limited (Ale 0.0819441022). The details are as under. Date Amount in Euro Amount in USD 04.03.2009 450000 798792 05.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adictory statements concerning the said HSBC A/c at the time when the assessments u/s 153A were completed for the AYs 2006-07 to 2011-12. However it is significant to note that at the relevant time when these statements were recorded neither the appellant nor even the AO had in their possession the relevant bank statements of HSBC A/c. The assessment proceedings for these two years had been completed on the basis of some information for which official confirmation from Swiss tax authority was admittedly awaited and not received. Even the appellant did not have in his possession the affirmative statement of Mr. Sithawalla by which he could have explained the source of money deposited in the said HSBC A/c. It was only in February 2015 i.e. after the completion of the assessments u/s 153A, the assessee came in possession of the affidavit of Mr. Onn Sithawalla as well as bank statements herein he had admitted that the amounts deposited in the HSBC A/c were remitted by MSM. It was only after such affidavit was received, the appellant brought before the appellate authorities all relevant facts, supported by the affidavit and the bank statements and claimed that even though HSBC account w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the pertinent witness believing the averments made in the affidavit to be true. Although the Ld. AO has made much ado about alleged discrepancy in the weight of the postal consignment through which the summons was sent by speed post by the appellant, I find that the assessee had furnished before the Ld. AO evidence, which proved that the notice issued u/s 131 was actually served on Mr. Sithawalla at his Singapore address. The assessee also furnished before the Ld. AO, the requisite evidence to show that such summon was actually served on him at the given address. The Ld. AR also furnished the evidence that in response, Mr. Sithawalla had directly provided to the AO copy of his affidavit in support of his transactions, which was the subject matter of AO's enquiry. From the foregoing facts therefore I find that whatever was possible within the assessee's control, he had performed the same to support his contention that the monies transacted though HSBC A/c belonged to Mr. Sithq,walla and/or companies controlled and menaced by him. 11. In the impugned order the Ld. Aa states that the affidavit of Mr. Sithawalla could not be accepted in evidence because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Ld. AO the assessee made every effort to serve the said summon u/s 131 and ultimately succeeded in serving the same at his Singapore address through speed post. Requisite evidence in support of the service of summons was furnished. I therefore find that the charge of noncompliance cannot be attributed to the appellant. I also find that Mr. Sithawalla acknowledged the receipt of summons and in confirmation of his transactions in relation to HSBC A/c, directly furnished copy of his affidavit to the Ld. AO vide his letter dated 16.11.2016. I also note that subsequent to issue of notice u/s 131 the Ld. AO made reference to FT TR division of CBDT requesting the said authority to conduct enquiries through Singapore tax authorities. The impugned order is however silent as to what precise enquiry was sought to be conducted by FT TR division through Singapore tax authority. It is also apparent from the impugned order that at the stage of conducting enquiry through FT TR division, the appellant was not kept informed nor made a party to the enquiry conducted by Singapore tax authority. I also find that a letter bearing reference number B/49/IND/EXCH/16/427(1782) was received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. Till June 2000, no transaction took place in the said account. The first deposit in the account was reflected on 22.06.2000 when HSBC Republic Bank (Sussie) S.A.; as the bank was then known, gave credit for net sum of $149987.50. The entry in the statement of accounts stated that the amount was received from MSM Enterprises Ltd, Singapore. The further deposits were made in the years 2001 2004. From the statement of accounts, it is apparent that each of such deposit originated from the account of MSM Enterprises Pte Ltd. This fact was examined by the Ld. AO in the remand proceedings and in the remand report he accepted that the source of deposits was MSM. The said account continued till May 2011 when the amount remaining in the account was remitted to the Euro denominated account of DMT with Citibank N.A., Singapore. This has been confirmed by the HSBC Bank in the statement of accounts and debit advices issued and confirmed by the Ld. AO in his remand report submitted before my predecessor. I therefore find that the bank account in question was in existence for almost twelve years, starting in June 1999 and ending with May 2011. During the span of twelve years, the monies were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonged to the appellant. From Page 24 of the impugned order, the Ld. AO has categorically admitted that both MSM DMT were managed by Mr. Sithawalla. As such both the payer payee companies were not under the control, supervision or superintendence of the appellant. Merely because M/s Mangal Steel Enterprises Ltd, a company managed by the appellant, had transactions with MSM in the past cannot ipso facto lead one to believe that in 2015, Mr. Sithawalla would have affirmed certain facts on oath in the Ld. AO's opinion did not reveal the truth. Once the Ld. AO admitted that Mr. Sithawalla was in control of the affairs management of the payer payee companies, then the onus was on the Ld. AO to prove that the monies which originated ended in the coffers of Mr. Sithawalla's companies actually belonged to the appellant. No manner of corroborative evidence has been gathered by the Ld. AO which in any manner proved any close nexus between Mr. Sithawalla and the appellant. Nothing has been brought on record by the Ld. AO on the basis of which any prudent person could come to conclusion that Mr. Sithawalla, a resident of Singapore and businessman in his own right, would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also considering the surrounding circumstances, then the conclusion which a prudent person can draw is that the monies transacted through the HSBC A/c did not belong to the appellant but to Mr. Sithawallaand his companies, who were named payer payees in the bank statements. Since the Ld. AO has not been able to bring on record any cogent tangible material which could link either the deposits or withdrawals made in the names of MSM DMT with the appellant, and he has also not been able to disprove the affidavit of Mr. Sithawalla, the conclusions drawn by the Ld. AO treating the accretions to be the income of the appellant is held to be untenable. The addition of ₹ 28,50,418/- made in the impugned order is therefore deleted. Ground Nos. 4 to 6 are therefore allowed . This leaves both the parties agreed to the extent indicated in their respective pleadings. 6. I reiterate that the sole issue before me as of now is as to whether the impugned assessments framed in all four assessment years are time barred or not u/s 153 of the Act. Mr. Singh has taken pains to file the following written submissions supporting the impugned re-assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod for completing the assessment. In the present case, admittedly the reference by a competent authority u/s 90 of the I.T. Act read with Article 28 of the DTAA with Singapore was made on 25.11.2016. As on that date, 36 days were available to the AO for passing of the assessment order u/s 153(2) of the Act. However, once the reference under Article 28 of the DTAA with Singapore was made, the period of one year commencing from 25.11.2016 was required to be excluded in working out the period of limitation. In the resent case, the period which was required to be excluded in working out period of limitation commenced on 5.11.2016 and ended on 24.11.2017. Additionally, the AO had 36 more days to pass the assessment order from 24.11.2017. Since the assessment orders were passed on 08.11.2017 they were within time and therefore A/R's contention that the assessment orders were barred by limitation is not factually and legally enable and liable to be rejected. It may also be pertinent to submit that the contentions raised by the respondent-assessee through cross objections are not maintainable because these contentions were never raised by the assessee before the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation-1 to sec. 153 prescribes certain specified circumstances in clauses (i) to (xi) as exception to statutory running of limitation period in framing of assessment, re-assessment re-computation. Clause(X) deals with an instance of exchange of information between competent authority of the two countries u/s 90 and 90A with Government of India being one of them. I notice that the CBDT (FT and TR (Foreign Tax and Tax Research division) made necessary reference on 25.11.2016 on which stood replied 08.08.2017 as per the Revenue s stand. The said period of almost nine months deserves to be excluded since coming under clause (x) of Explanation-1 to sec. 153 of the Act. The Assessing Officer was very well aware of all clinching developments during the course of re-assessment regarding exchange of communication between the two tax jurisdictions as he only had initiated the necessary process in question triggering sec. 90 r.w.s. 91 machinery in motion. 9. I proceed with the sole issue of limitation in this factual backdrop. I repeat at this stage that sec. 153 Explanation-1 clause-(x) expressly stipulates that the relevant time period which is to be excluded as outs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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