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2019 (7) TMI 596

..... merit in contention of assessee that if at all the amount on the basis of the papers relied upon could only be taxed in year of search, when the said papers were, for the first time, confronted to the assessee. This is for the reason that the paper nowhere shows any amount being deposited in any of the assessment years beginning with assessment year 2006-07. Therefore, neither in assessment year 2006-07 nor in assessment year 2007-08, the two years in which additions have been made by the assessing officer, the assessee could be regarded as having made any investment and therefore, the provisions of section 69 cannot, in our view, be applied in those assessment years. Further, the documents relied upon actually refer to creation of account in earlier assessment year, much prior to assessment year 2006-07. Assessment years 2006- 07 and 2007-08 were undisputedly made 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 .....

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..... 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-à-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). Unexplained 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 a .....

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..... n of income filed by the assessee on 28.07.2012 under section 139(1) of the Act for assessment year 2012-13, the assessee offered for tax ₹ 5,81,32,321/- as income under section 69A of the Act to cover the aforesaid offer of US$ 11,46,358. The said amount was computed by applying the conversion rate of ₹ 50.71 per dollar, as applicable in the relevant assessment year 2012-13. Along with the said return, following note was also filed by the assessee: 1.During the course of search carried at the residential premises, statement of the assessee was recorded on 09.11.2011 under section 132(4) of the Income Tax Act, 1961 ( the Act ) During the course of recording 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 .....

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..... under section 271(1)(c) of the Act, subject to there being no penalty and/or prosecution under the provisions of the Act. 2.3 Subsequently, pursuant to search under section 132 of the Act, proceedings under section 153A of the Act were initiated by the assessing officer vide separate notices dated 2.11.2012 for assessment years 2006-07 to 2011-12 and for assessment year 2012-13, the year of search, regular assessment was undertaken under section 143(3) of the Act. 2.4 During the 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 .....

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..... g officer proceeded to tax the ₹ 48,79,578/- equivalent to US$43,539 by applying conversion rate of ₹ 43.17 per dollar as income of the assessee under section 69 of the Act. Apart from the said addition, in assessment year 2007-08, the assessing officer also made addition on account of interest that the assessee, according to the assessing officer, would have earned on the balance in the 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 .....

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..... / deposited the money in the bank account and section 69A of the Act was not applicable since the said section only applies to money, bullion, jewellery or other valuable article which is in the physical form where the year of acquisition cannot be identified. As regards the alternative contention of the assessee, the Ld. CIT (A), in separate appellate 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 w .....

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..... R 487 (Del), apart from various other decisions referred in the chart. The Ld. Counsel, in fairness, submitted that the aforesaid issue is covered against the assessee by the decision of the Hon ble Delhi High Court in the case of Ashok Chaddha vs. ITO: 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: 39 .....

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..... of assessments earlier to the year of search and 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 .....

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..... ts 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 any addition in the hands of the assessee .....

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..... lable 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 income in the hands of the assessee is raised in the absence of .....

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..... 96 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) and Laxmipat Singhania vs. CIT: 72 ITR 291 (SC) and the Delhi High Court in the case of ACIT Vs. Precision Metal Work: 156 ITR 693 (Del). 4.0 On the other hand, the Ld. CIT-DR v .....

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..... ble 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 adjudicate grounds of appeal nos. 2 to 2.3 whereby the assessee has challenged the addition of ₹ 4,90,20,749/- made by the assessing officer under section 69 of the Act equivalent to US $11,02,829. On careful perusal of the records, it is noticed that the addition has been made on the basis of documents which were available with the Revenue and .....

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..... 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 to have made any investment not recorded in the books of account in any financial year and the assessee is not able to explain its source to the satisfaction of the assessing officer, then, the value of the investments is deemed to be unexplained income of the assessee in financial year in which investments were made. Therefore, for section 69 of the Act to be applied, the undisclosed investment must be found to be relating to any particular year and in .....

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..... 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 to February, 2007, which has been relied upon by the assessing officer, but it is noticed that the said balances are merely balances and not any deposits. In this context, the Ld. Senior Counsel vehemently contended that if one were to strictly construe the document as it is, then, no addition could have been made in any of the assessment years under consideration since as per the document the account was created much earlier and there is no evidence of deposition of any amount in any of the assessment yeas beginning with assessment year 2006-07. It was conte .....

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..... om 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 circumstances discussed in the preceding paragraphs, we are of the considered opinion that the addition of ₹ 4,90,20,749 made by the assessing officer officer equivalent to US $ 11,02,829 in assessment year 2006-07 under section 69 of the Act and similar addition made in assessment year 2007-08, are not sustainable in law and the same are hereby directed to be deleted. We therefore, hold that the addition of ₹ 4,90,20,749 in assessment year 2006-07 and similar addition of ₹ 18,79,578 in assessment year 2007-08 are not sustainable in law and are hereby directed to be deleted. As a consequence the amount offere .....

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..... e 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 presumption is not sustainable. 6.3 In support of the aforesaid ground, the Ld. CIT-DR/ Departmental Representative heavily relied on the order of the assessing officer and contended that the addition of ₹ 1,64,962/- made on account of interest should be confirmed and the finding of the CIT(A) to this extent should be reversed. In rebuttal, the Ld. Senior Counsel vehemently argued that the addition on account of notional interest has been rightly deleted by Ld. CIT (A) since the said addition was made by the assessing officer in the absence of any bank statement or any other documents, merely on the basis of presumption that interest @4% p.a. would have been credited on the balance in the account, without even first establishing the existence of .....

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..... sputed 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, the Revenue s appeal on this ground stands dismissed. ITA Nos. 3952 to 3956/ Del /2017 by Revenue for A.Y. 2008-09 to 2012-13 7.0 The above Revenue s appeals in ITA Nos. 3952 to 3956/ Del /2017 for assessment years 2008-09 to 2012-13 raise identical issue of taxability of interest in various years, which was deleted by the Ld. CIT(A). For the reasons stated in Revenue s appeal in ITA No.3951/Del/2017 for assessment year 2007-08, the Revenue s appeal are dismissed and the order of the Ld. CIT (A) deleting the addition of notional interest is upheld. ITA No. 2894/ Del /2017 by Assessee for A.Y. 2012-13 8.0 In ground of appeal no.1, the assessee has challenged the protective addition of ₹ 5,81,32,321/- (US$ 11,46,368) offered to tax by the assessee in the return of income and substained by the Ld. CIT(A), despite confirming addition made in respect of the alleged balance in the foreign bank account in ass .....

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..... jewellery weighing 38,748.28 gms found during the course of search. The details of the jewellery so declared, is tabulated as under: Gross Weight (Gms.) Value (Rs.) Sh. K.K. Modi 1,708.650 65,70,041 Mrs. BinaModi 43,886.392 9,30,51,715 Mrs. CharuBhartia 1,039.800 62,55,850 Total 46,634.842 10,58,77,606 8.4 In the assessment order, the assessing officer, held that the assessee was unable to provide an item wise reconciliation of jewellery to the extent of 6,716.700 gms [valued at ₹ 1,12,89,616/- by the Departmental valuer applying the rates prevailing on the date of search] and held the same to be taxable as undisclosed income of the assessee, which was confirmed in appeal before the Ld. CIT (Appeals). 8.5 During the course of hearing, the Ld. Senior Counsel vehemently contended that the addition deserves to be deleted in entirety at the very threshold itself for the simple reason that the gross weight of jewellery declared by the assessee, his wife and daughter far exceeded the gross weight of jewellery found during the course of search and thus there could be no allegation any undisclosed income. In support of the aforesaid proposition, the Ld. Counsel placed heavy reliance .....

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..... j) - CIT vs. RatanlalVyaparilal Jain: 339 ITR 351 (Guj) - ACIT vs. Gopi Lal Mor: 21 SOT 29 (Jodh) - ACIT vs. Rameshchandra R. Patel: 89 ITD 203 (Ahd) 8.7 Further, in so far as the allegation of the assessing officer that the jewellery found short during the course of search could not be reconciled, it was submitted by the Ld. Counsel that some of the jewellery items found during the course of search do not match with the items specified in the valuation reports attached with the wealth tax returns since the assessee has a big family, the items of jewellery of the family members gets mixed and therefore, it may not be possible to correlate/ match each and every item of jewellery found with the description of jewellery mentioned in the valuation report attached with the wealth tax return. Further, it was also emphasized that the aforesaid facts/ reason for mismatch of jewellery items was also mentioned by the wife of the assessee, Smt. Bina Modi, in her statement dated 20.12.2011 and also by Mrs. Charu Bhartia in her statement dated 9.11.2011, wherein they stated that jewellery items of various family members got mixed on various occasions, part of jewellery is being used by daughter .....

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..... be considered as undisclosed. 8.9 On the basis of the above, it was vehemently contended that the case of the assessee was squarely covered by the aforesaid decisions, in so far as the total jewellery (both in terms of weight and value) declared by the assessee and his family members far exceeds the jewellery physically found during the course of search and thereby benefit of such excess jewellery declared should be allowed and addition cannot be made merely on the ground that the assessee could not lead evidence for conversion or remaking of the jewellery. It was also pointed out that most of the jewellery predominantly belonged to Mrs. Bina Modi, wife of the assessee and the assessing officer has merely proceeded to presume that the entire jewellery found short belonged to the assessee, without appreciating that jewellery belonging to the assessee s wife and daughter also formed a part of the jewellery that was found and seized during the course of search conducted in the case of the assessee and accordingly, the addition made solely in the hands of the assessee was not at all justified, more so when the value of jewellery declared by the assessee and his family members in the we .....

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..... remises of the assessee, Revenue found jewellery worth ₹ 13,89,530. The assessee stated that a part of jewellery belonged to her daughters-in-law and married daughter. The Assessing Officer found the entire jewellery except for value of ₹ 1,66,348 as explained and consequently added the aforesaid amount to the income of assesse. The assessment was confirmed on appeal by the Commissioner (Appeals). On further appeal to the Tribunal, the assessee contended that the addition made was totally unjustified as she had, in her return of wealth for the assessment year 1984-85, filed on 13-11-1984, i.e., much before the search, disclosed jewellery having gross weight of 2,888.8 gms, which was more than the total jewellery found during the course of search. In this regard, the Tribunal further held that the assessee was entitled to benefit of weight of jewellery disclosed in the returns as it is a well-known fact that Indian ladies keep changing design of jewellery from time to time. Accordingly, the Tribunal directed the addition made in the hands of the assessee to be deleted. The relevant findings of the Tribunal in this regard are reproduced as under: ………& .....

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..... ed explanations of the assessee are not shown to be objectively considered by the Revenue authorities. It is further not clear from record as to why benefit of jewellery disclosed by the assessee in assessment year 1984-85 in the return of wealth submitted before the date of search, was not allowed. Likewise limited benefit has been allowed to other family members and not as claimed by them. 6. It is further clear from record that jewellery of value of ₹ 13,89,530 was found from the premises subjected to search. It has been admitted by the Revenue that above jewellery belonged not only to the assessee but to her daughters-in-law and her unmarried daughter. Jewellery of value of more than ₹ 12 lakhs has been accepted as explained. The addition in dispute has been made on account of slight variation in description 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 ret .....

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