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I-T - Incriminating evidences obtained prior to date of search, cannot be roped in to make additions in case of unabated assessments: ITAT

By TIOL News Service

NEW DELHI, FEB 20, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether additions can be enlisted in case of unabated assessment, in absence of any incriminating evidence unearthed during course of search. NO is the answer.

Facts of the case:

The Assessee, an individual, had declared total income of Rs.27,86,027/- while filing his return, which was duly accepted and processed u/s 143(1). Subsequently, a search & seizure action u/s 132(1) was carried out in the premises of assessee and group cases, in pursuance of which notices u/s 153A were issued for six A.Ys prior to the year in which search took place. In response, the assessee had filed his return declaring the same income as was shown in his original return. As regards the nature of addition in dispute qua the scope of section 153A, an information was received in the form of a document collected by the Government of India as a part of tax information exchange treaty. As per the said information received in form of USB, certain persons in India were found to held bank accounts with HSBC Bank, Switzerland. The AO after meticulously analyzing the documents found that it contained the name of assessee through various entities wherein assessee was linked with four accounts in some manner. The total amount which stood deposited in these bank accounts aggregated to Rs. 27,91,72,017.47. Accordingly, the assessee was confronted with the said documents and his statement on oath u/s 132(4) was recorded to verify the contents of the information contained in the said documents. Further, a very important fact was noted by the AO that with a view to get further details relating to foreign bank account, reference had been sent to competent authorities in Switzerland and other authorities through FT & TR, Division of CBDT for getting the details of the account and other details which were yet to be received. The Assessee however denied the entire details or having any kind of link with HSBC account. Finally, the AO held that the amount as reflected in these bank accounts was to be taxed u/s 69 in the hands of assessee. Apart from that, he also held that the amount towards interest calculated on said deposits also deserves addition u/s 69.

Tribunal held that,

++ it is seen from the perusal of the statement recorded u/s 132(4), that firstly, no documents or any incriminating material relating to HSBC accounts in Switzerland was found from the possession and premises of the Assessee; secondly, in the statement on oath recorded u/s 132(4) and also recorded during the course of assessment proceedings, nowhere the Assessee has admitted of having such bank accounts or being any beneficial owner in the said bank accounts, albeit he has denied in all the questions put forth by the investigation authorities and the AO; and lastly, the entire information and material was in possession of the Department prior to the date of search. It is also seen that original return of income was filed in July, 2006 and said return was duly accepted and processed u/s 143(1). Since no notice u/s 143(2) was issued thereafter or any other proceedings have been commenced to disturb the said return, it had attained finality much prior to the date of search. Hence, in terms of 2nd Proviso to sec 153A, the assessment for the AY 2006-07 was not pending and accordingly, has to be reckoned as unabated assessment. Under the jurisdiction of the Delhi High Court, the law is well settled that in case of unabated assessment, the additions which can be roped-in for assessments framed u/s 153A, would only be with regard to any incriminating material or evidence unearthed or found during the course of search. If no incriminating material has been found during the course of search, then no addition can be made in the AYs where assessments had attained finality;

++it is seen that the Income Tax Department through its FT & TR Division of CBDT had received information pertaining to foreign bank accounts either held by certain Indians or were beneficiaries in these bank accounts under the exchange of information between India and France. The French Authorities gave information in USB that certain persons in India held bank accounts in HSBC Pvt. Bank (SUISSE), Switzerland. In the said information, the name of assessee had also figured. These documents revealed that in the bank accounts of certain entities, the assessee was either beneficial owner in the account or had been shown as the person having right of inspection or as account holder. After receiving the said information, the Investigation Wing of the department carried out search and seizure action in the case of assessee and group cases, to find out the assessee’s link with these bank accounts and to get some corroborative material or documents. During the course of search and seizure action, it is admitted that no documents or any incriminating material whatsoever was found, so as to remotely suggest that either the assessee was having any bank account in Switzerland with HSBC or assessee was any way linked to these bank accounts. In the statement recorded u/s 132(4), the assessee had categorically denied having such bank accounts or having any link with the bank accounts of such entities. No evidence was found to rebut the denial statement of assessee. Apart from that, even during the course of assessment proceedings, the assessee continued to deny such kind of transaction and the AO did not confront with any material which can be said to have been recovered from the possession of assessee with regard to the deposits or any kind of link in the foreign bank accounts;

++ it is seen that Department has nowhere urged that anything has been found post search, except that the information which though was incriminating against the assessee was already in the possession of the department. The CIT(A) though has tried to rope in the element of incriminating material/evidence found during the course of search by holding that statement u/s 132(4) constitutes incriminating material within the meaning and scope of Section 153A. However, the observation of CIT(A) to this extent is erroneous on facts and hence cannot be upheld. In the letter written by the AO, it is clearly established that the information was received by the French Authority and based on this information the investigation wing had carried out search in the case of assessee. This fact itself is a testament that the material information which has been referred to in the assessment order was prior to the date of search and not found in the course of search or even in the post search events. The information which has been received from the foreign authorities wherein the name of the assessee is appearing at the outset, appears to be incriminating which warrants not only inquiry but also can lead to prima facie belief that assessee may be somehow link to these bank accounts. However whatever may be the incriminating information which can implicate assessee but the said information has been received as a result of search. Once any document which though is in the nature of incriminating material but if it has not been found in the course of search, then, such an addition cannot be roped in the assessment u/s.153A especially in the assessments which are not abated. If the Revenue had any incriminating material antecedent to the search, that is, it was found during the course of search or as a result of search, then in that case Revenue had various other courses of action left under the provisions of Income Tax Act, but certainly not within the ambit and scope of Section 153A read with 2nd proviso thereto.

(See 2018-TIOL-274-ITAT-DEL)


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