Income Tax Appellate Tribunal - Delhi
Parag Dalmia, New Delhi vs Dcit, Central Circle-26, New Delhi on 26 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D", NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.5499/Del/2017
Assessment Year : 2006-07
Parag Dalmia, DCIT, Central Circle-26,
A-238, Ground Floor, New Delhi.
Vs.
Okhla Industrial Area,
Phase-1, New Delhi.
PAN : AAAPD3725B
(Appellant) (Respondent)
Assessee by : Shri Hiren Mehta, CA
Department by : Shri Vijay Verma, CIT-DR
Date of hearing : 04-12-2017
Date of pronouncement : 26-02-2018
ORDER
PER R. K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 11.08.2017 of the CIT(A)-XXVI, New Delhi relating to assessment year 2006-07.
2. Facts of the case, in brief, are that the assessee is an individual and derives income from salary, business and profession and income from other sources apart from declaring long term capital loss. He filed his return of income on 30.10.2006 declaring total income of Rs.20,73,131/-. A search and seizure action u/s 132 was carried out in the case of the assessee on 20.01.2012. In response to notice u/s 153A, the assessee filed the return of his income on 2 ITA No.5499/Del/2017 22.11.2012 declaring total income of Rs.20,73,131/- which is the same as was declared in the original return of income.
3. The Assessing Officer issued notice u/s 142(1) to the assessee on 18.07.2013 requiring him to file certain information in respect of HSBC Bank Switzerland. Since there was no compliance to this notice, the Assessing Officer levied penalty of Rs.10,000/- u/s 271(1)(b) which was subsequently confirmed by the ld. CIT(A). Subsequently, the assessee, in response to notice u/s 143(2) and the questionnaire issued, appeared before the Assessing Officer through his Authorized Representative and filed details as called for from time to time. The Assessing Officer observed that as per the information received under DTAA/DTAC between India and other countries, certain persons in India (including the assessee) held bank accounts in HSBC Private bank (Suisse), SA, Switzerland (hereinafter referred to as the HSBC Bank). He observed that in respect of the assessee, information was received in the form of a 7 page document which was provided to the assessee. The Assessing Officer observed that during the course of search u/s 132, statement of the assessee was recorded u/s 132(4) wherein he was specifically asked to give details of his foreign bank accounts. The assessee denied to have any such foreign bank account. The Assessing Officer reproduced the reply given by the assessee in response to various questions. The important questions that were asked in the said statement are Question No.56 to 59, the details of which are as under :- 3 ITA No.5499/Del/2017
Q.56 I am showing you copy of your bank statement with HSBC, Switzerland wherein your name, date of birth, date of creation of account, date of modification and address of earlier are appearing. Now what would you like to say.
Ans. I have nothing to comment.
Q.57 As per this statement, your wife Smt. Sangeeta Dalmia and your father Shri Nar Hari Dalmia have been attorney holder for your account. Details of client, linked to the person Parag Dalmia are as under:
1. ASPREY WORLDWIDE S.A.
2. RONDEBERG LIMITED
3. 12717RSK
4. MENKO FOUNDATION, VADUZ And details of maximum amount lying with the bank are as under:1. ASPREY WORLDWIDE SA $ 10912 AS ON 11/2005 2. RONDEBERG LIMITED $ 2,52,246 AS ON 12/2005 3. TAIRA FOUNDATION $ 7658 AS ON 11/2005
Please give your comments.
Ans. I have nothing to comment. I deny to have anything to do with this. Q.58 How do you know the following entities/society/foundation and how did you found/created these entities/society/foundations etc.
1. APREY WORLDWIDE SA
2. RONDEBERG LIMITED
3. TARA FOUNDATION
4. 12717 RSK
5. MENKO FOUNDATION
6. EBERSBERG DR.INR CHRIST OF MECHAIL (99070137872)
7. PRASIDIAL MANAGEMEM ANTAL (9070242256)
8. HABCONSULT AG (9070235991)
9. ASPREY WORLWIDE SA (9070242902)
10. RONDEBERG LIMITED (9070242902)
11. HABCONSULT AG (GESCHLOSSEN) (9070242904)
12. HABERMACHER CHRLES SIEGFRIED (9070142859)
13. TAIRA FOUNDATION (9070242906)
14. DALMIA SANGEETA (9070144326)
15. DALMIA ARUNA (9070144327)
16. DALMIA NARHARI (9070144328)
17. MENKO FOUNDATION VADUZ (9070248981) Ans. I have already denied having anything to do with this.
Q.59 Please furnish details of foreign travel to Switzerland made during 2004, 2005, 2006 and 1998?
Ans. JAN 1998 4 January, 2004
APR 1998 6 MAY, 2004
NOV 1998 6 APRIL 2005
4
ITA No.5499/Del/2017
4. He observed that the assessee filed a letter dated 09.02.2012 before the DDIT (Inv.), New Delhi wherein he clarified that during the search operation certain documents related to an Overseas Bank account were shown to him according to which the accounts belonged to some trust/companies. The name of the assessee appeared in that statement as a beneficiary/attorney holder together with some of his family members. It was clarified by the assessee that neither he created such an entity nor is he aware of one existing as on date. The assessee submitted that not a single document related to the above account was found from the residential premises of the assessee during the course of search operation. It was stated that even if the bank statement in respect of the said bank account are old and may fall outside the block period, however, as assessee's name accidently happens to appear in the statement as a beneficiary/attorney holder, in order to buy peace and avoid litigation with the revenue authorities, the assessee is willing to pay income tax and interest due thereon for the relevant assessment year, provided no penal action and/or prosecution action is undertaken. The assessee also requested to keep the statement confidential and not to share with any agency/individual since offer has been made to protect the assessee from undue harassment. 4.1 Subsequently, the assessee while filing the return in response to notice u/s 153A filed a letter dated 21.11.2012 retracting from the offer made earlier on the ground that no letter has been issued to the assessee accepting his request for non-initiation of penal action and/or prosecution action for concealment of 5 ITA No.5499/Del/2017 income. It was stated therein that he, his wife and mother were put to undue pressure and the assessee was forced to sign the letter under duress. Even a part of the jewellery was seized although the same was duly explained and, therefore, the assessee and his family members do not have peace of mind. In the said letter, it was further mentioned that the information was passed on to a TV Channel.
4.2 The Assessing Officer, during the course of assessment proceedings, recorded the statement of the assessee on 02.12.2014 wherein the assessee again denied to have any knowledge about the existence of the bank account. However, the Assessing Officer was not satisfied with the statement given by the assessee as well as the explanation made during the course of assessment proceedings. He observed that the assessee has opened and/or operated account(s) in HSBC Bank and has been given a unique code which is BUP SIFIC PER ID 9070142903. His profile was found linked to five client profiles namely, ASPREY WORLWIDE S.A., RONDEBERG LIMITED, TAIRA FOUNDATION, 12717 RSK AND MENKO FOUNDATION, VADUZ.
Although reference(s) has/have been sent to competent authorities in Switzerland and other countries to verify the above foreign bank accounts however, till date the verificatory report in respect of above foreign bank account(s) has not been received. In view of these facts and since the assessment was getting barred by limitation on 31.03.2015 he proceeded to complete the assessment.
6ITA No.5499/Del/2017
5. He observed that :
(1) Client profile ASPREY WORLDWIDE S.A. (CLIENT PROFILE Code-9072051591) was created on 19.06.2000. It was having account balance of USE 10,912 in November, 2005. This client profile was closed on 14.12.2005. The assessee Shri Parag Dalmia is shown as 'ATTORNEY A' in client profile ASREY WORLDWIDE S.A. (2) Client profile RONDEBERG LIMITED (Code-9072037661) was created on 27.01.1998. It was having account balance of USD 2,52,246 in December, 2005. This client profile was closed on 25.01.2006. Shri Parag Dalmia is shown as 'ATTORNEY A' IN CLIENT PROFILE RONDEBERG LIMITED.
(3) Client profile TAIRA FOUNDATION (Code-9072037726) was created on 28.01.1998. It was having account balance of USD 7,658 in November, 2005. This client profile was closed on 03.01.2006. (4) Client profile 12717 RSK (Code-9072013290) was created on 11.06.1992. This client profile was closed on 28.06.2000. Shri Parag Dalmia is shown as 'Account Holder' in client profile of 12717 RSK.
Since in the column maximum balance amount during the period is written as [non reference], no amount is being taxed qua this account.
(5) Client profile MENKO FOUNDATION, VADUZ (Code-
9072011212) was created on 27.08.1991 and closed on 07.08.1992. Shri Parag Dalmia is shown as 'Beneficial Owner' in client profile of Menko Foundation, Vaduz. Since in the column maximum balance amount during the period is written as [non reference], no amount is being taxed qua this account.
6. The Assessing Officer observed that the information in the form of the document has been collected by the Government of India from credible sources 7 ITA No.5499/Del/2017 wherein the name of the assessee, his date of birth, address and other details are appearing. The nature of the said details being personal in nature cannot generally be accessed to without the consent/permission/authorization of the assessee. The inference is further corroborated by the fact that in the profile of the client 12717 RSK, in which the assessee has been shown as the account holder, the name of the family members such as Sangeeta Dalmia - wife, Aruna Dalmia - mother and Narahari Dalmia - father are appearing as attorneys. This according to the Assessing Officer gives credence to the genuineness of the document and veracity to the details mentioned therein. Further from the details furnished by the assessee regarding his travel to Switzerland, he inferred that the assessee was physically present in Switzerland when the document was created and/or some operation has taken place. He observed that the accounts could not have been opened without the permission of the assessee or without his knowledge. The link between the travels which the assessee has undertaken to Switzerland and the creation/modification of the linked client profiles indicate that there is some relation between the two and there is some further information which is not being made available to the Department intentionally thereby concealing the information from the Department. As regards the submission of the assessee that it is stolen data and he has no idea under what circumstances his name, name of his family members and other personal particulars are appearing in the document, the Assessing Officer observed that the document was received from French Government under mutual agreement 8 ITA No.5499/Del/2017 signed between India and France. Moreover, assuming but not admitting that the data is stolen, the Assessing Officer held that the contents appearing therein can still be used against the assessee as the factum of theft does not affect the evidentiary value of the document and the details appearing therein. The Assessing Officer further observed that despite repeated requests from the department to help him getting the true and fair details, the assessee categorically denied signing the consent waiver form which would have enabled the department to get the account details from HSBC Bank, Geneva. No prejudice would have been caused to the assessee had he signed the consent waiver form especially when he has been telling that the account is not his. Rather he would have helped the Government of India in its efforts to bring back the money lying in foreign bank accounts about which the Government has not been informed of. The submission of the assessee that his name is accidently appearing in the document was rejected by the Assessing Officer since the nature of details available in the document are personal and the same are corroborated with the appearance of the details of his father, mother and wife. Moreover, the assessee has not taken any action against any entity/agency for using his particulars without his permission. Even he has not bothered to contact the bank to know under what circumstances his details are appearing in the accounts. The Assessing Officer observed that the three accounts to which he has been related as attorney and beneficial owner has the following maximum amounts appearing therein which is as under :-
9ITA No.5499/Del/2017
TAIRA FOUNDATION USD 7,658.49
RONDEBERG LIMITED USD 2,52,246.78
ASPREY WORLDWIDE S.A. USD 10,912.80
Total USD 2,70,818.07
Total in Rupees Rs.1,20,37,863/-
1$=Rs.44.45 as on 31.3.2006
SBI TT Buying rates
7. Since these account profiles are linked to his name and it is outside India and the assessee has not been able to give any satisfactory explanation relating to the true affairs of these accounts, he proposed to treat these linked profiles as that of the assessee.
8. He, therefore, again asked the assessee to show-cause as to why the above amounts appearing in the bank accounts/linked profiles shall not be added to his income for the assessment year 2006-07. The assessee filed his reply dated 27.02.2015 strongly refuting the allegation of the Assessing Officer which is appearing at para 15 of the assessment order. However, the Assessing Officer was not satisfied with the explanation given by the assessee by recording the following reasons :-
"1. The document has been received under mutual agreement between India and other countries. The details appearing in the Document pertain to information relating to accounts of the persons, the personal details of which are also appearing in the Document. Your name and other personal details are there in the Document.
2. The same has been corroborated by the fact that your family members' details are also appearing in the accounts to which he is related.
3. Independent reference has been made to the authorities outside India to get a copy of the bank statement and other particulars about the account to verify the genuineness of the account as stated by you in your submission. Reference has also been made to get the account details for the periods which have not been made to get the account details for the periods which have not been covered in the Documents.
4. Your submission - that merely because basic personal details of the assessee and the family members are appearing in a solitary sheet of paper it would be inappropriate to conclude that the assessee owns the alleged bank account - is baseless and flows from non-appreciation of the contents of the Document. The 10 ITA No.5499/Del/2017 Document does not merely contain the personal details of yours and your family members. It contains specified details of the entities, their addresses, your relationship with those entities and more importantly the maximum amount appearing in those related entities on specific dates.
5. Reference is made to para 16 of your reply to the show-cause notice in which you have stated that in this age of technological advancement...... it is not improbable that the personal information of any person and his family members could be retrieved..... In this respect your attention is invited to the statement recorded during the assessment proceedings in which you have given a very evasive reply on being asked - do you think that your personal details have been misused. Hence your submission lacks credibility.
6. Numerous opportunities were given to you during the search, post search and assessment proceedings requiring you to sign the consent waiver from which would have enable the department to get the bank account details (not appearing in the Document) and other particulars relating to the details mentioned in the Document. Your non-cooperation to get the full particulars about the account is incomprehensible, belies human logic and makes all your defenses self-serving. The only unassailable conclusion from all this is that the details in the Document pertain to you and your family members. These details have not been disclosed to the Income Tax Department."
9. The Assessing Officer accordingly made an addition of Rs.1,20,37,863/- to the total income of the assessee which appears in the bank account/linked profile u/s 69 of the I.T. Act. The Assessing Officer further made addition of Rs.1,23,130/- being income on account of undisclosed interest earned on such undisclosed foreign bank account deposits u/s 69 of the I.T. Act.
10. Before the ld. CIT(A), the assessee made elaborate submission. Apart from challenging the addition made on merit, the assessee challenged the validity of the assessment proceedings undertaken u/s 153A of the I.T. Act on the ground that no incriminating materials were found during the course of search and the same is also barred by limitation.
11ITA No.5499/Del/2017
11. So far as the grievance of the assessee that the order passed by the Assessing Officer is barred by the limitation is concerned, the ld. CIT(A) rejected the same by holding as under :-
"The appellant has referred to the observations of the AO in the assessment order to highlight that there had been some exchange of information where by the department had received certain information from DTAA/ DTAC even before the search had been carried out and the said period could not be excluded for such exchange of information. It was contented that the reference for exchange of information had to be made during the course of assessment made by the competent authority under the agreement to another competent authority. It was contended that no record of having made such reference had been made part of the assessment order. It has also been contended that what information had been received in consequence thereof was also not clear. In view of the impugned claim of the appellant on the issue, the AO was directed to bring on record as to when the first reference for exchange of information had been made in the case of appellant and when such information had been received. The AO vide F No. ACIT/CC-26/2015-16/195 dated 14/03/2016 submitted that the reference in the case had been made vide letter dated 17/02/2017. The report of the AO was forwarded to the assessee for a rejoinder by the then CIT(A) vide letter dated 21/03/2016. The assessee appellant has not responded specifically to the report of the AO in this regard. Considering the evidence in entirety as above and as per the record, the validity of extension of the limitation period is held to be correct. The assessment by the AO is hence within time and not barred by limitation. The ground number 2 of appeal about limitation is dismissed in view of the foregoing. So far as the addition of the amount is concerned, the ld. CIT(A) upheld the addition made by the Assessing Officer by observing as under :-
"Findings:-
The AO discussed the issues related in details in the assessment order. I have considered the submission made by Ld AR in this regard and also the fact that the assessee has later denied owning up the accounts.
The document providing information in respect of the undisclosed foreign bank account has been received under mutual agreement between India and other countries. The details appearing in the Document pertain to information relating to accounts of the persons, the personal details of which are also appearing in the Document. The assessee name and other relevant details are there including personal details. The assessee apart from merely denying has not rebutted the presence of clear personal details in the account papers. The assessee had himself admitted to the account and also accepted the deposits as his during the course of search, The retraction subsequently is cryptic and without any cogent basis. There is ample jurisprudence available to reject the assessee contention in absence of any material facts in support of the assessee. Therefore, the amount of Rs.1,20,37,863/- was rightly added by the AO to the income of the assessee for the AY 2006-07 u/s 69 of the Income-tax Act, 1961.
Further, it may also be noted here that the assessee surrendered this amount while confronted by the department and later retracted the disclosure on very specious grounds that the information came out in public domain."12 ITA No.5499/Del/2017
12. Ld. CIT(A) however deleted the interest on such foreign bank account for which the Revenue is not in appeal and therefore we are not concerned with the same.
13. So far as the validity of the assessment completed u/s 153A in absence of any incriminating material found during the course of search is concerned, ld. CIT(A) also rejected the said ground by observing as under :-
"The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non seizure of documents. The same has to be construed with the peculiar facts of the case and the expected action on part of an independent entity in normal circumstances. There cannot be a 'fit all' template in such cases. The AO and this appellate forum too have to construe the incriminating material in a harmonious fashion. Hon'ble Delhi High court has also reiterated in many rulings that action u/s 153A is bound to be initiated in such situations. Therefore, this action of the AO is in tune with judgment of Hon'ble Delhi High Court in CIT (C)-III vs. Kabul Chawla (Delhi) [2015] 61 taxman.com 412 (Delhi), 234 Taxman. 30. The same is further strengthened by the judgment of Hon'ble Delhi High Court in the case of Dayawanti Modi vs. CIT in 'ITA Nos.357, 358, 359/2015 and other' dated 27.10.2016. Having considered the detailed and belaboured submissions of the Ld AR and the material on record. I am drawn to the conclusion that the action of the AO does not go at variance with the provisions of law and the available jurisprudence in this matter in so far as invoking the rigours of section 153A is concerned. These grounds are, therefore, dismissed."
14. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :-
"1. That on the facts and circumstances of the case the order passed by the CIT(A) is bad in law and contrary to facts.
2. That on the facts and circumstances of the case and in law the CIT(A) has grossly erred in upholding the addition of Rs.1,20,37,863/- in respect of the purported peak balance of the bank accounts alleged to be held by the Appellant, based on information, the authenticity of which the tax department has failed to corroborate and substantiate.
2.1 That without prejudice to the above ground on the facts and circumstances of the case and in law the CIT(A) has grossly erred in upholding the addition of Rs.1,20,37,863/- in respect of the purported peak balance of the bank accounts alleged to be held by the Appellant, whereas the alleged bank accounts as admitted in the assessment order are in the name of certain foreign entities and not in the name of the Appellant.
2.2 That without prejudice to the above ground(s) on the facts and circumstances of the case and in law the CIT(A) has grossly erred in upholding the addition of 13 ITA No.5499/Del/2017 Rs.1,20,37,863/- in respect of the purported peak balance of the bank accounts whereas in para 11 (page 23) of the assessment order it has been admitted that - "Till date verificatory report in respect of the above foreign bank accounts) has not been received. In view of these facts and since the assessment is getting barred by limitation on 31.03.2015, the assessment of the assessee is being completed in the absence of verificatory report and appropriate action as provided in the Act, will be taken as and when the verificatory report is received."
3. That on the facts and circumstances of the case and in law the impugned order passed by the CIT(A) is contrary to law in as much as the addition u/s 69A has been made in the absence of any incriminating document unearthed during the course of search.
3.1 That on the facts and circumstances of the case and in law the CIT(A) erred by not following the proposition of law laid down the jurisdictional High Court in the case of CIT Vs. Kabul Chawla 380 ITR 573 (Delhi).
4. That the impugned order passed by the CIT(A) is non-speaking, laconic, cryptic and devoid of cogent reasoning.
4.1 That on the facts and circumstances of the case ad in law the CIT(A) erred in not following the proposition laid down by the Hon'ble ITAT in the case of Bishwanath Goradia Vs. DCIT 78 taxmann.com 81 (Kol) and Shyam Sunder Jindal Vs. ACIT (Del).
4.2 That the impugned order passed by the CIT(A) is vitiated as it does not address the arguments raised by the Appellant in the preceding ground of appeal.
5. The Appellant craves leaves to add, alter, amend, withdraw or substitute the grounds of appeal before or at the time of hearing."
15. The ld. counsel for the assessee strongly challenged the order of the ld. CIT(A) in sustaining the addition made by the Assessing Officer in absence of any incriminating material found during the course of search. Referring to the provisions of section 153A of the I.T. Act, he submitted that making of an addition in an assessment under section 153A of the Act, without the backing of any incriminating material found during the course of search is unsustainable even in a case where the original assessment on the date of search stood completed by absence of issue of intimation under section 143(1) of the Act or by not issuing notice u/s.143(2) of the Act within the time limit laid down in the proviso to Sec.143(2) of the Act. For the above proposition, he relied on the following decisions :-
14ITA No.5499/Del/2017
1. Bishwanath Goradia Vs. DCIT 76 Taxmann.com 81 (Kol) - Para 9 to 11
2. Yamini Aggarwal Vs. DCIT 83 Taxmann.com 209 (Kol) - Para 24 to 26
3. CIT Vs. Kabul Chawla 61 Taxmann.com 412 (Delhi) - Para 37
16. In his alternate contention, the ld. counsel for the assessee submitted that the said document/evidence was not signed by any authority and did not demonstrate in any manner that the same was a photocopy of bank statement. It was also not on the letter head of any bank. Neither it was stamped by any bank nor it bore the signature of any official of any bank. Therefore, it is not clear as to how and in what manner the said document was considered as the bank statement of HSBC Bank, Geneva, particularly when there was no indication as to the branch and country to which the alleged bank statement related. He submitted that although the Assessing Officer in the present case stated that the documents had been obtained under DTAA but nowhere it was mentioned that under which DTAA those documents had been obtained. If the aforesaid documents had been received under DTAA' nothing is brought on record to substantiate that any letter was issued by the competent authority of the relevant country from which the aforesaid documents were obtained. The assessee had also asked for the same but nothing was provided to the assessee. Therefore, in the absence of all the relevant documents/evidences on record, it is not possible to come to a just conclusion relating to the authenticity of the document relied by the AO or to the facts as to whether these documents pertained to the assessee.
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17. He submitted that the documents relied on by the AO are inadmissible evidence as the documents were photocopies which were not duly authenticated. The documents relied on by the AO are the copies which did not have any signature of bank official or name of the bank or the place or the country were the branch was situated. For the above proposition, he relied on the decision of the Delhi Bench of the Tribunal in the case of Shyam Sunder Jindal Vs. ACIT reported in 81 Taxmann.com 123 (Del).
18. In his 3rd alternate contention, the ld. counsel for the assessee submitted that a perusal of the 7 pages received under DTAA confirms that none of the client profile reflecting outstanding bank balance is in the name of Parag Dalmia or his family members. The outstanding bank balance is only shown in the name of Asprey Worldwide SA, Rondeberg Ltd. and Taira Foundation. In view of the same, no addition can be made in the hands of an individual who is neither an owner nor a beneficiary nor a beneficial owner of such bank account.
19. He submitted that even assuming but not admitting that such HSBC account did exist in the name of aforesaid entities, the same cannot be taxed in the hands of an individual namely Mr. Parag Dalmia in his capacity as Attorney holder. Even if the allegation that the name of Mr. Parag Dalmia existed in the bank account of aforesaid entities is believed as true, inspite of the same no tax liability can be fastened in the hands of an individual as he is neither the owner of such bank account nor beneficial owner. He submitted that the term "beneficial owner" (inserted w.e.f. 1.4.2016 by Finance Act 2015) is defined in 16 ITA No.5499/Del/2017 explanation 4 to section 139(1), according to which beneficial owner in respect of an asset is an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person. In the present case there is no allegation and evidence that the amount lying in bank accounts of aforesaid entities were provided by Mr. Parag Dalmia.
20. The ld. counsel for the assessee drew the attention of the Bench to explanation 5 to section 139 (1), as per which "beneficiary" (inserted w.e.f. 1.4.2016 by Finance Act 2015) in respect of an asset means an individual who derives benefit from the asset during previous year and the consideration for such asset has been provided by any person other than such beneficiary. He submitted that Sh. Parag Dalmia has not derived any benefit from the bank account of the aforesaid entities during A.Y. 2006-07. There is no evidence on record to this effect. Additionally, there is no document/ evidence on record for alleging that Mr. Parag Dalmia was beneficiary in the assets (i.e. HSBC Account) of the aforesaid entities.
21. In his further alternate contention, ld. counsel for the assessee submitted that the surrendered income must be correlated with some incriminating material found during the search so as to justify the addition. As admittedly no incriminating material was found during the course of search showing the involvement of the assessee in the HSBC account for which the concession was 17 ITA No.5499/Del/2017 made or obtained vide letter dated 09.02.2012, the addition cannot be sustained. For the above proposition, he relied on the following decisions :-
Ajay Gupta Vs. DCIT 81 Taxmann.com 462 (Del) Para - 7 CIT Vs. Harjeev Aggarwal 70 taxmann.com 95 CIT Vs. Sunil Aggarwal 64 Taxmann.com 107.
22. Referring to the decision of the Kolkata Bench of the Tribunal in the case of Bishwanath Garodia vs. DCIT reported in 76 taxmann.com 81, he submitted that under identical facts and circumstances, the Tribunal has deleted the addition made by the Assessing Officer and sustained by the ld. CIT(A). Referring to the decision of the Delhi Bench of the Tribunal in the case of Shyam Sundar Jindal vs. ACIT reported in (2017) 81 taxmann.com 123, he submitted that under identical circumstances, the Tribunal has restored the issue to the file of the Assessing Officer. He accordingly submitted that the order of the CIT(A) be set-aside and the grounds raised by the assessee be allowed.
23. The ld. DR on the other hand strongly supported the order of the CIT(A). He submitted that the original return filed on 30.10.2006 was processed u/s 143(1). The Government of India then received information regarding undisclosed foreign bank accounts of the assessee from another sovereign nation under relevant international arrangements/treaties the information of which is placed from page 3 to page 9 of the assessment order. He submitted that during the course of search, the assessee's statement was recorded u/s 18 ITA No.5499/Del/2017 132(4) and he was also shown the information regarding his undisclosed foreign bank accounts received (supra). The period of visits to Switzerland furnished by assessee coincided with the period of opening the aforesaid bank accounts as per the details given by the Assessing Officer at page 17 and 25/26 of the assessment order.
24. He submitted that on 9.2.2012, i.e. 20 days after the search date, the assessee filed one letter in which he agreed to pay tax and interest on the corresponding income. However, after about 9 ½ months the assessee retracted the surrender of corresponding undisclosed income for 3 reasons which the Assessing Officer has reproduced in the assessment order.
25. He submitted that the statement recorded during search and voluntarily declaration of undisclosed income in post search enquiries constitute evidence found during the search. For the above proposition, he relied on the decision of the Apex Court in the case of Mukundray K. Shah reported in 290 ITR 433, wherein it has held that even if addition arises out of enquiry related to source of investment in disclosed investment, if details of such disclosed investment were found during search, addition has to be sustained. He submitted that at that time simultaneous proceedings u/s 148/regular assessment and Block Assessment proceedings were not possible.
26. The ld. DR submitted that limitation to issue notice u/s 148 was available in this case till 31.03.2013. However, proceedings u/s 153A were pending on that date. Referring to the decision of the Co-ordinate Bench of the Tribunal in 19 ITA No.5499/Del/2017 ITA No.2675 & 2676/Del/2010, order dated 8-8-2013, he submitted that the Tribunal at para 9 has held that during the pendency of proceedings u/s 153A of the Act, the Assessing Officer is not empowered to issue notice u/s 147/148 of the Act". Therefore, the Tribunal answered the following question of law in the negative and held that addition for such escapement of income is to be made in order u/s 153A/153C proceeding only.
"Whether, during the pendency of proceedings u/s 153A/153C, the AO can issue a notice u/s 148, in respect of escapement of income, which comes to his knowledge from a source other than the evidence found during the course of search, and continue the said proceedings simultaneously with proceedings u/s 153A/153C"
27. Referring to the decision of the Tribunal in the case of Rajat Shubhra Chatterjee, reported in 47 CCH 0135, order dated 20.05.2016, he submitted that the Tribunal quashed the proceedings u/s 148 on the ground that for any evidence which is found/related to search, addition can be made only u/s 153A/153C. The ld. DR submitted that in this back ground for holding that the above addition could not have been made u/s 153A, the Tribunal may have to refer the matter to a Special Bench. He submitted that the decisions of Hon'ble Delhi High Court in the cases of Anil Kumar Bhatia, reported in 211 Taxman 453(Del) and Filatex India Ltd , reported in 229 Taxmann 555(Del) also support the stand of the Revenue that this addition is to be made u/s 153A. He submitted that the decision in the case of Kabul Chawla, reported in 380 ITR 573 does not apply in the present case as in the case of Kabul Chawla, the 20 ITA No.5499/Del/2017 addition made had no connection with any material, evidence or statement found/recorded, letter filed during search or post search enquiries.
28. So far as merits of the case is concerned, he submitted that the information was received from a sovereign government. Though, the strict tests of Evidence Act do not apply to assessment proceedings, even in Evidence Act, documents /evidence received from foreign governments the acceptance of such evidence are different from evidence received from domestic/private sources. The issue of cross examination in case of information received from another government does not arise, more so in assessment proceedings where the principle is "Preponderance of Probabilities" and not "Beyond reasonable doubt". The presence of assessee in the city/country during the period when the accounts were opened, specific personal details of assessee in those documents, assessee's name figuring in a long list of account holders of different countries, information initially leaked by a whistleblower employee of the bank, bank publicly apologizing for data leak of its customers, information being shared with India by a sovereign government and initial surrender of the corresponding undisclosed income by the assessee satisfactorily meet rather exceed the standards of test of "Preponderance of Probabilities".
29. The ld. DR submitted that para 11 of assessment order refers to certain closed accounts for which reference was made to Swiss Authorities. The corresponding additions have not been made in the assessment order. Therefore, the said communication to Swiss Authorities is not relevant in this 21 ITA No.5499/Del/2017 appeal. As regards additions made, the basis is the principle of "Preponderance of Probabilities". He submitted that exchange of information between Sovereign Nations is governed by treaty provisions and not as per the standards and procedure laid down by domestic law. For the above proposition, he relied on the decision of Ahmedabad Bench of the Tribunal in ITA No 3451/Ahd/2014 order dated 30.11.2017 in the case of Mayurbhai Mangaldas Patel. For information received from Foreign Governments, the corresponding standard operating procedures apply and not the standard operating procedures applicable to receipt and verification of documents/ information from domestic sources. He submitted that the decision in the cases of Bishwanath Garodia (supra) and Shyam Sunder Jindal (supra) relied upon by the assessee cannot be followed. He also relied on the decision of the Hon'ble Apex Court in the case of Mumbai Kamgar Sabha vs Faizullbhai AIR 1976 SC 1455.
30. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer as well as the ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case information was received by Govt. of India under DTAA/DTAC between India and other countries that certain persons in India held bank accounts in HSBC Private Bank (Suisse), SA, Switzerland which contained the name of the assessee. A search u/s 132 was conducted in the premises of the assessee on 20.01.2012 during which the statement of the assessee was recorded u/s 132(4) of the I.T. Act. He was also 22 ITA No.5499/Del/2017 asked to give the details of his foreign bank accounts to which the assessee had categorically denied to have known or maintained any such foreign bank account. We find the Assessing Officer, during the course of assessment proceedings, confronted the information received in the form of 7 page documents to which the assessee had also denied to have any knowledge about the existence of such bank account. It is pertinent to mention here that the assessee vide letter dated 09.02.2012 addressed to the DDIT (Inv.) New Delhi had clarified that neither he created any such entity nor is aware of one existing on that date as mentioned in the 7 pages which were confronted to him. He, however, had stated that in order to buy peace and avoid litigation with the revenue authorities is willing to pay income-tax and interest due thereon for the relevant year provided no penal action and/or prosecution action is undertaken and is kept confidence. The Assessing Officer noted that despite such undertaking given by the assessee before the DDIT (Inv.) no such amount was offered to tax in the return filed in communication to notice u/s 153A on the ground that the assessee did not receive any reasons from the department to his request and the information was leaked to a TV channel. Since the information in the form of document has been collected by the Government of India from credible sources wherein name of the assessee appeared containing his date of birth, address and other details such as name of father, wife, mother, etc. and since the details of visit to Switzerland coincided with the details of creation/operation of the bank accounts and despite being requested to sign the 23 ITA No.5499/Del/2017 consent waiver form, the assessee did not sign the same, the Assessing Officer rejected the explanation given by the assessee and made addition of Rs.1,20,37,863/- to the total income of the assessee being the deposit in TAIRA FOUNDATION, RONDEBERG LIMITED and ASPREY WORLWIDE SA, the details of which are given at para 6 of this order. The Assessing Officer further made addition of Rs.1,23,130/- being income on account of undisclosed income earned for such undisclosed foreign bank account deposits u/s 69 of the I.T. Act.
31. We find the ld. CIT(A) deleted the addition of Rs.1,23,130/- being the interest on account of undisclosed interest earned on such deposits for which the revenue is not in appeal and therefore we are not concerned with the same. He, however, dismissed the ground raised by the assessee challenging the validity of the assessment proceedings u/s 153A and sustained the addition made by the Assessing Officer amounting to Rs.1,20,37,863/-.
32. It is the submission of the ld. counsel for the assessee that in absence of any incriminating material found during the course of search, no addition can be made. It is also the submission of the ld. counsel for the assessee that the documents relied on by the Assessing Officer are inadmissible since these documents are not signed by any authority and these are merely photocopies which were not duly authenticated. Further, it is the submission of the ld. counsel for the assessee that none of the client profile reflecting outstanding bank balance is in the name of the assessee i.e. Parag Dalmia or his family 24 ITA No.5499/Del/2017 members and, therefore, addition, if any, can be made in the hands of those entities and not in the hands of the assessee.
33. It is the submission of the ld. DR that the assessee was shown the information received by the Government of India regarding the undisclosed foreign bank account during the course of search and his statement was recorded u/s 132(4) of the I.T. Act. The assessee vide his letter dated 09.02.2012 i.e. 20 days after the search had filed a letter before the DDIT (Inv.) agreeing to pay the tax and interest due thereon. The declaration of the assessee voluntarily on such undisclosed income in post-search enquiries and the statement recorded during the course of search constitute incriminating evidence found during the course of search. It is also the submission of the ld. DR that since a search has taken place u/s 132 during which the assessee was confronted with those 7 pages documents, therefore, the Assessing Officer could not have issued notice u/s 148 on the basis of the 7 pages received from a sovereign country containing the name of the assessee of having Swiss bank accounts which were confronted to him during the course of search. It is also the submission of the ld. DR since the assessee denied to have signed the consent waiver form as required by the Assessing Officer during the course of assessment proceedings and since his travel to Switzerland coincides with the creation of the documents/operation of the bank accounts, therefore, it is clear that the accounts maintained with the Suisse Bank belong to the assessee and, 25 ITA No.5499/Del/2017 therefore, the addition made by the Assessing Officer and sustained by the ld. CIT(A) are justified.
34. So far as the argument of the ld. counsel for the assessee that in absence of any incriminating material found during the course of search, the proceedings u/s 153A has to be held as null and void is not applicable to the facts of the present case. The various decisions relied on by the ld. counsel for the assessee in our opinion are not applicable to the facts of the present case and are distinguishable. Since in the instant case the documents in the shape of 7 pages received by the Government of India from a sovereign country containing information regarding the undisclosed foreign accounts were received prior to the search and was confronted to the assessee during the course of search, therefore, the same, in our opinion, constitutes incriminating material which has rightly been used by the Assessing Officer in the proceedings u/s 153A/143(3) of the I.T. Act. Further, since the proceedings u/s 153A was pending, the Assessing Officer is not empowered to issue notice u/s 148 of the I.T. Act in respect of income which comes to his knowledge from a source other than the evidence found during the course of search and continued the said proceedings simultaneously with proceedings u/s 153A/153C as held by the Tribunal in the case of ACIT vs. Vipul Motors Pvt. Ltd. vide ITA No.2675 & 2676/Del/2010 order dated 08.08.2013 and in the case of Rajat Subham Chatterjee vs. ACIT vide ITA No.2430/Del/2015, order dated 20.05.2016. Such type of argument 26 ITA No.5499/Del/2017 was never taken in the case of Bishwanath Garodia (supra) and Shyam Sunder Jindal (supra).
35. Now, coming to the merits of the case is concerned, we find the Assessing Officer at para 11 of the order as observed as under :-
"11. From the above facts it is clear that the assessee has opened and/or operated account(s) in HSBC Bank. He has been given a unique code which is BUP SIFIC PER ID 9070142903. His profile was found linked to five client profiles namely, ASPREY WORLDWIDE S.A.; RONDEBERG LIMITED; TAIRA FOUNDATION, 12717 RSK AND MENKO FOUNDATION, VADUZ. With a view to verifying the above foreign bank account(s) a reference(s) has/have been sent to competent authorities in Switzerland and other countries. Till date the verificatory report in respect of above foreign bank account(s) has not been received. In view of these facts and since the assessment is getting barred by limitation on 31.03.2015, the assessment of the assessee is being completed in the absence of verificatory report and appropriate action as provided in the Act, will be taken as and when the verificatory report is received."
36. This shows that the verificatory letters from the competent authorities in Switzerland was yet to be received before completion of the assessment. Before ld. CIT(A) was also, the same was not available. Even before us nothing was brought to our notice regarding the verificatory letters received from Switzerland. Since assessee in the instant case was denying from the beginning that the accounts does not belong to him and since verificatory report in respect of above is yet to be received, and since in absence of such verificatory letter, it cannot be conclusively proved that the accounts in fact do belong to the assessee, therefore, considering the totality of the facts and in the interest of justice, we restore this issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh and in accordance with law after obtaining the verificatory report. The Assessing Officer shall decide the issue as per fact and 27 ITA No.5499/Del/2017 law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are partly allowed for statistical purposes.
37. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on this 26th day of February, 2018.
Sd/- Sd/-
(KULDIP SINGH) (R. K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 26-02-2018.
Sujeet
Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T., New Delhi
By Order
//True Copy//
Assistant Registrar
ITAT, New Delhi