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2019 (9) TMI 378

..... ;A’ Bench in assessee own case for AY 2006-07 following the decision of Hon’ble Bombay High Court, in the case of CIT vs Murali Agro Product.Ltd [2010 (10) TMI 1052 - BOMBAY HIGH COURT] deleted additions made by the AO wherein held assessee is neither owner of bank account nor had any beneficial interest in those bank accounts and hence, the same cannot be added in the hands of the assessee as unexplained money u/s 69A - Decided in favour of assessee. - ITA No.2477/Mum/2018 - 6-9-2019 - Shri G. Manjunatha, Accountant Member And Shri Ram Lal Negi, Judicial Member For the Assessee : Nitesh Joshi & P.P.Bhandari For the Revenue : Anadi Varma ORDER PER G.MANJUNATHA (A.M): This appeal filed by the revenue is directed against the order of the Commissioner of Income Tax (Appeals)-47, 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 circumstanc .....

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..... overed in favour of the assesee by the decision of ITAT, Mumbai A Bench, in assessee own case for AY 2006-07 in ITA. No. 3712/Mum/2017, where the Tribunal under identical set of facts and also by following the decision of Hon ble Bombay High Court, in the case of CIT vs Murali Agro Products Ltd (2014) 49 taxmann.com 72, held that in absence of any incriminating material found, as a result of search, no additions could be made in the assessment framed u/s 153A of the I.T.Act, 1961. The Ld. AR, further submitted that even on merits, the Tribunal had considered necessary facts and held that additions towards unexplained cash in HSBC Bank account, Geneva in the name of 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 .....

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..... He has also explained the source of deposits of USD 27,95,000 with HSBC bank, Geneva in the account of the White Cedar Investment Ltd. and source is out of wealth of his late father in the form of natural pearls and rubies. In the above factual back ground, if you examine the additions mad by the AO towards balance lying in HSBC bank account in the name of Whit Cedar Investment Ltd & Ruby Enterprises Inc, we came to the conclusion that the additions made by the AO is not supported by any incriminating material found as a result of search. 17. The provision of section 153A deals with situations where assessment 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 ass .....

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..... y the additions made by the AO in assessment order passed u/s 153A of the Act, consequent to search, in absence of any incriminating material found as a result of search is bad in law and liable to be deleted. This legal proposition is supported by the decision of the jurisdictional High Court of Bombay in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd vs CIT (supra), where the court held that no additions can be made in respect of assessments which have become final if no incriminating material is found during the course 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 .....

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..... n mainly in relation to material found during the course of search or requisition. If no incriminating material was found during the search, no additions could be made on the basis of material collected after search. The Hon ble Karnataka High Court, in the case of CIT vs IBC Knowledge Park (P.) Ltd. 385 ITR 346 (Karn.) had considered similar issue and held that Tribunal was not justified in upholding the assessment u/s 153C, despite their being no satisfaction recorded to show that 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 ar .....

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..... cer under section 143(1) could not be regarded as assessment and it is, therefore, not a case where the assessments for both the years under consideration could be said to have been completed. It was also contended that the conclusion of such alone is sufficient to give jurisdiction to the Assessing Officer to proceed against the 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 .....

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..... reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers 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.' .....

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..... 05-06 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 disallowance of loss claimed by the assessee for the assessment years 2004-05 and 2005-06 on the ground of claim .....

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..... 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. ■ In a case, where notice under section 143(2) is issued, the processing of return under section 143(1) and the consequential issuance of intimation does not amount to passing of the assessment .....

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..... ts 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 business outside the books of account was extrapolated to the earlier years as well. [Para 14] ■ Turning to the facts of the instant case, it is seen that the Assessing Officer has not disallowed any specific amount of expenses on account of any incriminating material found at the time of search. It is pertinent to note that the .....

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..... 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 incriminating material for subsequent years and the same should be considered to have bearing on the disallowance of loss for the two years under consideration, is incapable of acceptance for more than one reason. Firstly, the existence of an incriminating material for the relevant year is sine qua non for making any disallowance of expenses in respect of the completed assessments. [Para 17] ■ Secondly, it is not even a case in which some incriminating material indicating recording of bogus ex .....

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..... erala) 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 assessment in case of search or requisition. The activation of a search is not something which is regulated by any limit as to period of time. Even if returns are filed and regular assessments are concluded, search on premises could always be made, if the authority concerned is satisfied that action ought to proceed in that line. Once that is done, section 153A(1)(a) authorises the issuance of notice calling for filing of returns. ■ Once a return is filed in answer to such a notice, the Explanation to section 153A provides, among other things, that all provisions of the Act will apply to the assessment made under sect .....

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..... e 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 settled law when there are contradicting judgments of different High Courts, the decision which is in favour of the assessee needs to be considered in view of the decision of the Hon ble Supreme Court in the case of CIT vs M/s Vegetables Products (India) Ltd(1973) 88 ITR 192. Further, judicial discipline demands that lower courts in the jurisdiction of any High Court is bound to follow the ratio laid down by the jurisdictional High Court, accordingly, by following the judicial discipline and also considering majority view of various High Courts, including the decision of the Hon ble Delhi High Court in the case of CIT vs Kabul Chawla, where the SLP has been dismissed, we are of the considered view that the AO was erred in making additions towards peak balance lying in the HSBC Bank ac .....

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..... nts 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 possession of bank outside the jurisdiction of the Government of India and also Swiss Bank had not parted with information regarding complete bank account statement of the assessee, the base note was considered by the AO as the existence, condition, or contents of the document. The information received by the Government of India is found to be true and genuine, accordingly, he came to the conclusion that the assessee is beneficiary of bank account opened and maintained in the name of Ruby Enterprises Inc. and also White Cedar Investments Ltd. Hence, he made additions towards peak balance in the account of Ruby Enterprises Inc. fully in the hands of the assessee as unexplained money U/s 69A of the Act. In so far as, peak balance lying in the bank account of White Cedar Investment Ltd., taking note of .....

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..... 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 owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is 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 acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. For invoking the provisions of 69A of the Act, the assessee must be found to be the owner of the money, bullion, jewellery or other valuable article. In the present case, on perusal of facts, we find that there is nothing to indicate that the assessee is the owner of bank .....

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..... erty 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 but in his own right. 17. ... It is not necessary for our present purpose to examine what the word "owner" means in different contexts. The meaning that we give to the word " owner" in s. 9 must not be such as to make that provision capable of being made an instrument of oppression, must be in consonance with the principles underlying the Act. 28. From the above decisions of the courts, it was abundantly clear that in order to bring any money or asset or valuable articles within the ambit of section 69A, the Revenue must prove that the assessee is owner of the asset or value articles. Unless the Revenue proves with necessary material that the asset is belong to the assessee or the assessee is beneficial owner of such asset, then the provisions of section 69A of the Act cannot be invoked. It is well settled that a charging provision under a taxing statute must be strictly interpreted .....

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..... tated 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/s 131 had explained the nature and source of money lying in the bank account of White Cedar Investment Ltd. He had also explained the source with necessary evidences. Therefore, we are of the considered view that the AO was erred in making additions towards peak balance lying in the HSBC bank account in the name of White Cedar Investment Ltd. and Ruby Enterprises Inc. in the hands of the assessee as unexplained money u/s 69A of the Act. The Ld. CIT(A) although deleted additions made by the AO towards peak balance in HSBC bank, Geneva in the name of White Cedar Investment Ltd., but the Ld. CIT(A) deleted such addition on the ground that a similar addition has been made in the hands of estate of Late Shri Ramniklal R Mehta without considering the arguments of the assessee that the account is neither belongs to him nor he is having any beneficial interest in those bank accounts. We, therefore, are of the opinion that the assessee is neither .....

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