TMI Blog2019 (9) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, Mumbai, dated 14/02/2018 and it pertains to the Assessment Year 2007-08. The revenue has raised the following grounds of appeal:- 1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the addition of ₹ 96,52,514/- and ₹ 79,25,181/- made on account of undisclosed cash balances in HSBC account. 2. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) was justified in deleting the additions of ₹ 96,52,514/- and ₹ 79,25,181/- made on account of undisclosed cash balance in HSBC accounts without appreciating the fact that SLP has been filed by the department against the order of the Hon ble Bombay High Court in the case of Continental Warehousing Corporation and Murli Agro Products which have been relied upon by the Ld.CIT(A). 2. The brief facts of the case are that the assesee is an individual, derives income from salary and income from other sources, filed his return of income for AY 2007-08 on 27/08/2007, declaring total income of ₹ 18,37,040/-. A search and seizure action was carried out u/s 132 of the I.T.Act, 1961, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ruby Enterprises Inc. and White Cedar Investments Ltd. cannot be made in the hands of the assessee u/s 69A of the Act, 1961. 6. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We have also carefully considered case laws relied upon by both the parties. We find that an identical issue had been considered by the co-ordinate bench of ITAT, Mumbai A Bench in assessee own case for AY 2006-07 in ITA No. 3712/Mum/2017, where the Co-ordinate Bench, after considering relevant facts and also by following the decision of Hon ble Bombay High Court, in the case of CIT vs Murali Agro Product.Ltd, deleted additions made by the AO. The relevant findings of the Tribunal are as under: 16. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The facts born out from the record clearly established that assessment for the impugned assessment year is unabated as on the date of search i.e. 25/08/2011, because the assessment for the impugned assessment year was completed u/s 143(1) of the Act, and the time limit for issue of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be framed in connection with search u/s 132 or requisition u/s 132A. As per the said provision, notwithstanding anything contained in section 139, 147, 148, 149, 151 and 153, in the case of a person where search was initiated u/s 132 or books of account are requisitioned u/s 132A, the AO shall issue notice to such person requiring him to furnish within the said period as may be mentioned in the notice, the return of income of each assessment Years falling within six assessment years referring to in clause- (b). Sub-clause-(b) of section 153 A, empowers the AO to assess or reassess, the total income of six Assessment Years immediate to preceding assessment year relevant to the previous year in which search is conducted or requisition is made. The proviso provided to section 153A, however made it clear that assessment or reassessment, if any relating to any assessment year falling within the period of six Assessment Years referring to in this subsection pending on the date of initiation of search u/s 132 or making of the requisition u/s 132A as the case may be shall abate. From the reading of above provision, it is very clear that although the legislature sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of search. This legal proposition is further supported by the decision of division bench of the Hon ble Bombay High Court in the case of Murali Agro Products Ltd vs CIT (2014) 49 taxman.com 72, wherein it was held that no additions can be made in respect of unabated assessment which have become final, if no incriminating material is found during the course of search. This legal proposition is further reiterated by various High Courts, including the jurisdictional High Court in the case of CIT vs Gurinder Singh Bawa 386 ITR 483(Bom), where it was held that once an assessment has attained finality for a particular year i.e. it is not pending, then the same cannot be subject to tax in proceedings u/s 153A of the Act. 19. Coming back to the arguments of the ld DR, that although there is no incriminating material found as a result of search in respect of additions made towards balance lying in the HSBC bank account, Geneva, but fact remains that there are incriminating material and undisclosed assets found in respect of silver articles and gold jewellery and the same has been admitted by the assessee in its statement u/s 132(4) and also filed return, accordingly t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the documents found during the course of search were incriminating in nature or there is prima facie undisclosed income. The assessee has relied upon the decision of ITAT Kolakata, in the case of Bishwanath Garodia vs DCIT(2016) 76 taxmann.com 81 (kol). 20. The Tribunal had an occasion to consider an identical issue where the Income Tax Department had already information relating to funds lying in the foreign bank account which formed basis for search and it has been held that addition in respect of fund lying in such bank account could not be made in the assessment order passed u/s 153A of the Act, as no incriminating material were found in the course of search. The relevant findings of the Tribunal are as under:- ■ The returns of income originally filed by the assessee for both the years under consideration were duly processed by the Assessing Officer under section 143(1) well before the date of search. The said search was conducted in the case of the assessee on the basis of information received by the Assessing Officer from CBDT relating to the undisclosed account maintained by the assessee with HSBC Bank, Geneva, Switzerlan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee under section 153A of the Act. In support of this contention, he has relied on the decision of the Delhi High Court in the case of CIT v. Anil Kumar Bhatia [IT Appeal No. 1626 of 2010, dated 14-5-2012]. ■ It is quite clear from the question raised by the Delhi High Court that there was no distinction in the assessments completed under section 143(1) and section 143(3) for determining the scope of the proceedings under section 153A. However, the said question arose specifically for the consideration of Mumbai Bench of this Tribunal in the case of Asstt. CIT v. Pratibha Industries Ltd. [2013] 141 ITD 151/[2012] 28 taxmann.com 246 and the Tribunal held that the only logical conclusion which could be traced out by harmonizing the legislative intendment and the judicial decision was that where the assessments had already become final prior to the date of search, the total income has to be determined under section 153A by clubbing together the income already determined in the original assessments and the income that is found to have escaped assessment on the basis of incriminating material found during the course of search. ` ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six assessment years 'in which both the disclosed and the undisclosed income would be brought to tax'. (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this section only on the basis of seized material.' (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nating material relevant for assessment years 2004- 05, 2005-06 and 2006-07 against the assessee, were unearthed during the course of search under section 132 but incriminating material relevant for other years referred to in clause (b) of section 34 ITA Nos.3712 4721/Mum/2017 153A(1) were indeed unearthed. ■ He applied the judgment in the case of Smt. Dayawanti v. CIT [2016] 75 taxmann.com 308/[2017] 245 Taxman 293/390 ITR 496 to hold that even in respect of those assessment years in respect of which no incriminating materials was unearthed during search under section 132; and even if no assessments or reassessments are pending for those assessment year(s) on the date of search under section 132; there is no obstacle in making addition under section 153A provided some incriminating material in the case of the assessee for any assessment year(s) (referred to in clause (b) of section 153A(1) is unearthed as a result of search under section 132 whether by statement under section 132(4) or by way of undisclosed investment or by way of incriminating documents or in any other manner. ■ This is how, he held that the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the date of search or the years for which the regular assessments were not taken up after the filing of the returns by the assessee and further that the time limit for issuing notice under section 143(2) stood expired on the date of search. [Para 8] ■ As per the scheme under the Act, a return filed by the assessee is first processed by the Assessing Officer under section 143(1)(a) in which total income is computed after making the specified adjustments. As per clause (b), tax and interest, if any, is computed on the basis of the total income computed under clause (a). Clauses (d) and (e) of section 143(1) provide that an intimation shall be sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee and the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee. Processing of the return under section 143(1) and the consequential issuing of intimation is construed as passing of the assessment order except where a notice under section 143(2) is issued for a scrutiny assessment under section 143(3) of the Act. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain additions based on incriminating material found during the course of search. In other words, if no incriminating material is found during the course of search, then, the amount of total income determined under the earlier completed assessments, is to be adopted in such fresh assessments under section 153A without making any further addition. [Para 12] ■ It is, seen that whereas the judgment in CIT v. Kabul Chawla [2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi) clearly lays down that in the absence of any incriminating material found during the course of search, no fresh addition can be made in respect of completed assessments, the judgment in the case of Smt. Dayawanti (supra) is peculiar to its facts inasmuch as the addition in that case was based on the assessee's statement made at the time of search admitting: 'additional income in respect of business carried on outside the books of account in connection with production and sale of gutka. It was not a case in which no incriminating material was found. Rather the assessee's statement given at the time of search confirming the carrying on of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to repeat the originally assessed income (loss) plus fresh additions, if any, based on the incriminating material found at the time of search. ■ Admittedly, no incriminating material was found in respect of the assessment years under consideration. There is no reference whatsoever to any incriminating material found during the course of search casting shadow of doubt on the genuineness of such expenses. Since these expenses were claimed as deduction in the original returns and the Assessing Officer accepted the loss so declared except for making some modification for the assessment year 2005-06, the Assessing Officer was supposed to restrict his exercise of completing assessments under section 153A only to the amount of income/loss determined originally. It was not open to him to venture to re-examine the details in respect of expenses in assessment proceedings under section 153A read with section 143(3) for the patent reason that, admittedly, no incriminating material in respect of such expenses was found during the course of search. [Para 16] ■ The contention of revenue that there was some incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in negative by holding that the Commissioner (Appeals) was not justified in upholding the additions made by the Assessing Officer for the years of completed assessments, which were not based on any incriminating material found during the course of search relating to such years and consequently denying the benefit of carry forward and set off of the resultant loss in subsequent year. [Para 18] 23. The Ld. DR has drawn our attention to the decision of the Hon ble Kerala High Court in the case of E. N. Gopukumar vs CIT [2016] 75 taxmann.com 215 (Kerala) where the Hon ble High Court has held as under:- ■ In so far as the issue as to whether it is necessary that incriminating materials should be unearthed in a search under section 132 to sustain a notice issued under section 153A(1)(a), it is opined that for the issuance of a notice under section 153A(1)(a), it is not necessary that the search on which it was founded should have necessarily yielded any incriminating material against the assessee or the person to whom such notice is issued. [Para 7] ■ Section 153A is a provision which deals with asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That activity carried out by the assessing authority, though to a larger extent, was found against by the Commissioner (Appeals), has found disapproval at the hands of the Tribunal which is the last fact finding authority. The decision of the Tribunal cannot be critisised as unreasonable, perverse or unavailable on the face of record. ■ In the result, these appeals are dismissed. [Para 9] 24. We, further noted that n analysis of judgments discussed hereinabove, although divergent views had come from different High Courts on the issue, but majority of the Hon ble High Court including jurisdictional High Court of Bombay division Bench in the case of CIT vs Murali Agro Products Ltd.(supra) had ruled in favour of the assessee. The Hon ble Supreme Court has dismissed SLP filed by the Department in the case of Pr. CIT vs Meeta Gutgutia (supra), where it was categorically held that invocation of section 153A to reopen conclude assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during the course of search qua each such earlier assessment year. It is set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the assessee has hidden information from the Department about the bank account in HSBC Bank, Geneva even though the information received from French Government under DTAA agreement clearly established that the assessee is one of the account holder in HSBC Bank, Geneva and the same has not been disclosed to the Indian Income Tax Authorities. The AO further observed that had been the assessee given consent for collecting information from the French authorities or bank by signing consent waiver form, the matter would be different, but when the assessee has not signed consent waiver form, the presumption goes against the assessee and the provision of section 61 of the Indian Evidence Act 1872 came into operation, as per which secondary evidenced may be given to the existence, condition or contents of documents, when the original shown or appears to be in the position or power of person against whom the documents is sought to be proved or of any person out of which or not subject to the process of the Court or of any person legally bound to produce it ,and when, after the notice mentioned in section 66, such person does not produce it. Since, the original documents was in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued letter to Mr. Dilip Ramniklal Mehta seeking an explanation in respect of the balance in bank account of White Cedar Investment Ltd. with HSBC Bank, Geneva. Mr. Dilip Ramniklal Mehta clarified that White Cedar Investment Ltd. is an independent investment company with several subscribers and the estate of Late Shri Ramniklal R. Mehta is having corpus of 5.73% out of investment made in the company of USD 27,95,000 and the source of such investment is out of wealth of his later father in the form of natural pearls and rubies which were kept with One Mr. Sultanbhai Meherali in Dubai, UAE. As per his father wishes, he had instructed Sultanbhai s sun-in-law to sell the said jewellery and remit the funds to White Cedar Investments Ltd.. For this purpose, he also produced letter dated 27/12/2011 from Mohammadali Hassanali confirming this fact. Mr. Dilip Ramniklal R. Mehta further clarified that Mr. Arunkumar R. Mehta has never visited nor maintained or operated any account with HSBC Bank, Geneva in the name of White Cedar Investment Ltd. 27. The provisions of section 69A of the Act, deals with the cases where in any financial Year, the assessee is found to be owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls vs CIT (2003) 130 taxman 553 (Cal.) where it was held that there is nothing to show that the learned Tribunal has ever come to any conclusion that the assessee owned this amount. Even then, in this case once it had added to the income of the assessee and then again the same amount has been accepted as income of the partners in their revised return, the Income-tax Authority is precluded from contending that the assessee is the owner of the amount or income. Further, the Hon ble Supreme Court in the case of R.B. Jodha Mal Kuthiala vs CIT (1971 SCC (3) 369) had explained the meaning of term owner which reads as under:- 9. The question is who is the owner referred to in this section? Is it the person in, whom the property vests or is it he who is entitled to some beneficial interest in the property It must be remembered that S. 9 brings to tax the income from property and not the interest of a person in the property. A property cannot he owned by two persons, each one having independent and exclusive right over it. Hence for the purpose of s. 9, the owner must he that person who can exercise the rights of the owner, not on behalf of the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as unexplained income u/s 69A of the Act, purely on suspicious and surmises manner without there being any material in his possession to prove that the assessee is owner of the bank account or having beneficial interest in those bank accounts. We further noted that sole basis for addition is Base Note received from the French Government but which is an unauthenticated document not received from the bank directly. Although, information exchanged between two sovereign countries, cannot be ignored, but the contents, of Base Note is incomplete which is not fully throw any light on the fact of any undisclosed bank account in the name of the assessee in HSBC Bank account Geneva. The assessee, all along denied having any bank account in HSBC Bank Geneva in the name of White Cedar Investment Ltd. and Ruby Enterprises Inc. This fact has been further strengthened by filing a letter from HSBC Bank, Geneva, where it was stated that the assessee neither visited nor opened or operated any bank account in HSBC bank Geneva in the name of White Cedar Investment Ltd. This fact has further strengthened by the fact that Mr. Dilip Ramniklal Mehta in his statement recorded u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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