No Tax on deposit in Swiss Bank when sec. 143(1) assessment completed prior to search

By | December 13, 2016
(Last Updated On: December 13, 2016)

IN THE ITAT KOLKATA BENCH ‘B’

Bishwanath Garodia

v.

Deputy Commissioner of Income-tax , Central Circle-3(3), Kolkata

P.M. JAGTAP, ACCOUNTANT MEMBER
AND S.S. VISHWANETHRA RAVI, JUDICIAL MEMBER

IT APPEAL NOS. 853 TO 856 (KOL.) OF 2016
[ASSESSMENT YEARS 2006-07 AND 2007-08]

SEPTEMBER  21, 2016

D.S. Damle, FCA for the Appellant. Niraj Kumar, CIT-DR and Pinaki Mukherjee, JCIT, Sr. DR for the Respondent.

ORDER

P.M. Jagtap, Accountant Member – These two appeals being ITA Nos. 854 & 856/KOL/2016 filed by the assessee against two separate orders passed by the ld. Commissioner of Income Tax (Appeals)-21, Kolkata both dated 11.03.2016 involve common issues and the same, therefore, are being disposed of by a single composite order along with the corresponding penalty appeals being ITA Nos. 853 & 855/KOL/2016 for the sake of convenience.

2. The relevant facts of the case giving rise to these appeals are as follow:—

The assessee in the present case is an individual, who belongs to Mangal Steel Group. As per the information received by the Government of India from a Foreign Government under the provision of Exchange of Information Clauses of the Bilateral Double Taxation Agreement with that country, the assessee had a Bank Account in HSBC, Geneva, Switzerland showing a sum of US Dollars 10,23,210 in December, 2005 relating to A.Y. 2006-07 and two other sums of US Dollars 10,74,837 in May, 2006 and US Dollars 10,64,993 in December, 2006 relating to A.Y. 2007-08. On the basis of this information, a search and seizure action under section 132 of the Income Tax Act, 1961 was conducted in the case of the assessee as well as in other cases belonging to Mangal Steel Group on 28.07.2011 as well as subsequent dates. During the course of search, books of account, jewellery, etc. were found besides some cash. The statement of the assessee was recorded under section 131 of the Act, wherein he admitted of having maintained a Bank Account in HSBC, Geneva, Switzerland. He also admitted that the said Bank Account was opened on 07.06.1999 and his wife Smt. Usha Garodia was an authorized person to operate the said account maintained in his name. He further accepted that the money deposited in the said account represented the proceeds of his export business and agreed to pay income-tax, if any, due thereon. He also pointed out that the said Bank Account was closed sometime ago and there was no balance in the said account on the date of recording of his statement. Pursuant to the search, notices under section 153A of the Act were issued by the Assessing Officer for both the years under consideration, in response to which his returns of income for the years under consideration were filed by the assessee on 23.08.2012 declaring total income of Rs. 5,18,435/- and Rs. 5,49,810/- for A.Y. 2006-07 and 2007-08 respectively. In the said returns, the assessee had not offered to tax the amounts found deposited in his Bank account with HSBC, Geneva, Switzerland. In reply to the query raised by the Assessing Officer in this regard, the assessee denied of having any Bank account with HSBC, Geneva, Switzerland by stating that he had no knowledge about such Bank account. He also stated that he was under extreme pressure and duress as a result of search and seizure action and signed whatsoever was dictated by the DDIT (Inv.)/Additional DIT (Inv.) in the statement recorded under section 131 on 30.07.2011. In his statement recorded under section 131 during the course of assessment proceedings on 17.06.2014 and 12.12.2014, the assessee again denied of having any Bank account in HSBC, Geneva, Switzerland. This denial of the assessee was found to be an after-thought by the Assessing Officer keeping in view the specific information received from foreign Government as well as the admission of the assessee in his statement recorded on 30.07.2011 accepting the ownership of the relevant Bank account. He also noted that the allegation of pressure and coercion during the course of search and seizure action as made by the assessee was not backed by any evidence of any sort. Accordingly, relying on the admission of the assessee as made in his statement recorded on 30.07.2011, which was duly supported by the information received by the Government of India from the foreign Government, the sums of Rs. 4,61,16,074/- (equivalent to US Dollars 10,23,210) and Rs. 9,70,73,651/- (equivalent to US Dollars 10,64,993 and 10,74,837) were added by him to the total income of the assessee for A.Ys. 2006-07 and 2007-08 in the assessments completed under section 153A/143(3) of the Act vide orders dated 31.12.2014.

3. Against the orders passed by the Assessing Officer under section 153A/143(3) for both the years under consideration, appeals were preferred by the assessee before the ld. CIT (Appeals) challenging therein the validity of the said assessments as well as disputing the additions made therein on account of the transactions reflected in the Bank account with HSBC Bank, Geneva, Switzerland. As regards the preliminary issue relating to the validity of the assessments made by the Assessing Officer, the main contention raised by the assessee before the ld. CIT (Appeals) was that in the absence of any incriminating material or document found in the course of search, the Assessing Officer had no jurisdiction to initiate and frame the assessments under section 153A of the Act. This stand of the assessee was not found acceptable by the ld. CIT (Appeals) and he proceeded to uphold the validity of assessments made by the Assessing Officer under section 153A/143(3) of the Act for both the years under consideration for the following reasons given in paragraph no. 3.2 of his impugned orders:—

“3.2. The contention of the assessee that in absence of any incriminating material or document found in the course of search action, assessment could not be framed u/s. 153A of the Act. Ld. AR referred some case laws in. support of his arguments. There are decisions stating assessments can be made u/s. 153A even if no material found during search. Reliance is placed upon judgments in the case of Shivnath Rai Harnarain (India) Ltd. v. DCIT (ITAT, Delhi), 304 ITR (AT) 271 and Shyam Lata Kaushik v. ACIT (ITAT, Delhi), 114 ITD 305. However, facts in this case are different. In this case, apart from inventory of jewellery and other materials, cash of Rs. 5,00,000/- was seized. Besides, at the time of search action, the Revenue was in possession of authenticated information that the assessee had an undisclosed bank account with the HSBC Bank, Geneva, Switzerland. In fact, one of the main reasons for initiation of search action was that undisclosed foreign bank account. Thus at the time of issuance of notice u/s. 153A by the AO, there indeed some incriminating materials and documents were in the possession of the AO in the form of seized cash and undisclosed bank account and AO made an addition of Rs. 4.61 crores on examination of undisclosed bank accounts as well. Moreover, the assessee never objected to the proceedings initiated u/s. 153A during the assessment proceedings. He filed a fresh return in response to notice u/s. 153A and thereafter complied with the requirements of the assessment by attending the hearings from time to time and filing the requisite details and made several submissions. The materials on record suggest that before the AO, not even once the appellant had objected to the initiation or continuance of the assessment proceeding Vis. 153A of the Act. Therefore, the case is distinguishable on facts from the judicial pronouncements referred to. It is a well settled legal position that every case depends on its own facts. Even a slightest change in the factual scenario alters the entire conspectus of the matter and makes one case distinguishable from another. The crux of the matter is that the ratio of any judgment cannot be seen divorced from its facts. Further section 92BB of the Act provides that-

where an assessee has appeared in any proceeding or co-operated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provisions of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act — ‘

In this case, as stated hereinabove, that the assessee had accepted the notice issued U/s. 153A of the Act and filed a fresh return without any objection. No objection was raised also during the assessment proceedings, rather assessee co-operated with the AO. An addition of Rs. 4.61 crores were also made on account of undisclosed Swiss Bank account, which was a subject matter of search action. Therefore, I do not find any merit on facts and under the law, in the objection raised by the assessee during this appeal proceeding. This grounds of appeal are therefore, dismissed”.

4. As regards the issue relating to additions made by the Assessing Officer on account of the relevant transactions reflected in the Bank account with HSBC Bank, Geneva, Switzerland, an affidavit was filed by the assessee before the ld. CIT (Appeals) stating that the said Bank account with HSBC, Geneva, Switzerland was opened in his name by one Mr. Onn Sithawalla, owner of MSN International PTE Limited, Singapore in connection with a proposed joint venture. It was also stated in the said affidavit that the proposed joint venture was between MSM Enterprises PTE Limited owned and controlled by the family members of Mr. On Sithawalla, a permanent resident of Singapore and the Mangal Group owned by the assessee. It was further stated that the said MSN International PTE Limited had made certain deposits in the Bank account with HSBC Bank, Geneva, Switzerland opened in the name of the assessee and ultimately the entire balance lying in the said Bank account was remitted back to Singapore as per the directions given by Mr. Onn Sithawalla of MSM Enterprises PTE Limited in favour of Donald Mcarthy Trading PTE Limited, an associated concern of MSM Enterprises PTE Limited. The affidavit of Mr. Onn Sithawalla, owner of MSM Enterprises PTE Limited was also filed by the assessee before the ld. CIT (Appeals) affirming all these facts on oath and a request was made to admit the said affidavit as well as his own affidavit as additional evidence on the ground he could not place the same before the Assessing Officer in the course of assessment proceedings. This additional evidence filed by the assessee was admitted by the ld. CIT (Appeals) and after obtaining the comments of the Assessing Officer thereon in the form of remand report and also counter-comments of the assessee in the form of rejoinder to the remand report, the ld. CIT (Appeals) proceeded to decide this issue on merit. In this regard, he recorded his observations/findings in paragraphs no. 4.4.1 to 4.4.5 of his impugned order, which read as under:—

“4:4.1, I have read the submission of Ld. AR and seen the papers filed. I have also gone through the departmental records. The issue relates to ownership of a bank account [Code Profile No. 5091276522 and Identificants Internes No. BUP_SIFIC_PER_ID 5090147737] with HSBC, Geneva, Switzerland’ [henceforth. referred to as Swiss Bank account] and deposits and transactions therein. The account was opened ‘in the year 1999, in the .name of the assessee and his wife Smt. Usha Garodia was made ‘nominee’. In this respect, four sworn statements of the assessee were recorded U/s. 131 of by the Revenue at three different stages -‘ (i) Statement dated 3010712011 recorded by the DDIT(Inv.) in the course of a search action, (ii) Statement dated 25106/2014 recorded by the AO during the assessment proceeding, (iii) Another statement dated 1511212014 recorded by the AO during the assessment proceeding, and (iv) Statement dated 05105/2015, recorded by my predecessor CIT(A) ‘in office after receipt of Form No. 35. Iri the first statement recorded by the DDIT (Inv,), assessee owned up the Swiss Bank account. In the next two statements recorded by the AO during the assessment proceedings, assessee flatly denied to have had any Swiss Bank account. In the Forth statement recorded by the CIT (A), he though accepted that he opened that Swiss Bank account but contended that the bank account had been handled by one Onn Sithawalla, a citizen of Singapore and owner of MSM Enterprises P. in connection with a proposed Joint Venture. He stated that all the deposits in the Swiss B~ account were made by MSM Enterprises PTE Ltd. and all actions were handled by Onn Sithawalla. In this regard, assessee filed a copy of his own affidavit dated 03/02/2015 and a copy of an Affidavit of Onn Sithawala alongwith Form No. 35.

4.2 A cursory look in the contain of the statements given by the assessee would reveal that he had at times made vague, roundabout, self-contradictory as well as false statements under ‘oath’, to suppress the facts. In his 2nd and 3rd statements recorded by the AO, assessee made false statements by denying to’ have had any Swiss Bank account. However, his first statement can be considered as close to truth. Here he admitted that one. Bank a/c was opened in Swiss Bank in his name and his wife was authorized to operate the account (answer to Q.3). He also stated that no one approached me for opening of the account, I myself approached the bank to get an account opened.’ (Answer to Q.4). He further stated that ‘except the deposits made at the time of-opening of account I do not remember the exact number of times deposits or Withdrawals in this account. However, I have operated this account ‘only a few times.’ (Answer to Q. 1O). On being asked about the source of deposits in the Swiss Bank account,• assessee categorically stated that ‘the money deposited in this account represents the proceeds of my export business as far as I remember.’ (Answer to Q.12). Thus, in the first statement, which has got immense evidentiary value in the eyes of law, the assessee admitted the vital points that the, Swiss Bank account was opened by him and at his own behest; made few deposits and withdrawals (factually correct); and the deposits were made from his export proceeds. It is well settled law that an admission is the best evidence that an opposing party can rely upon and decisive of the matter, unless proved erroneous. Reliance is placed on the decision in the cases of Narayan Bhagwantrao Gosavi Batajiwale v. Gopal, AIT 1960 100 (SC) and Pranav Construction Co. v. ACIT (ITAT, Mumbai) [1998] 61 TTJ 145.

4.4.3 The name of MS M Enterprises PTE Ltd. (MSM), a company owned by one Onn Sithawalla, a Singapore citizen and a proposed Joint venture between assessee and MSM surfaced for the first time in a form of an Affidavit, dated 03/02/2015 filed in this office alongwith Form No. 35., i.e. after 3 years and 6 months from the date of recording the first statement on 30/07/2011. In this Affidavit, it is stated that assessee though opened the Swiss Bank account but neither remitted any money in that account nor operated the same. All deposits were made by MSM and neither the assessee nor his wife had any beneficial interest therein. Ld. AR in his submission has given high emphasis on this affidavit. However, he failed to explain why the assessee bad not stated about the purported JV with MSM in his first statement; In his first statement, assessee unequivocally admitted that not only the Swiss Bank account was opened by him but deposits were made by him and the source of such deposits was proceeds from his export business. It is not that the first statement was recorded under threat or coercion. No such allegation has ever been made by the ‘assessee during or after the search action. When statement was made voluntary and was not alleged to have been obtained under threat or coercion,• onus was on assessee to prove that said declaration was made under any misconception of facts. Since assessee had not taken any steps to rectify his declaration before authorities before whom such declaration was made, there could not be any valid reason for retraction of same after a gap of three’ and half years. Reliance is placed in the case of Carpenters Classics (Exim) (P.) Ltd. v. DCIT,(ITAT, Bang) 108 ITD 142, Further, Ld, AR could not explain but the assessee had given false statements before the AO during the assessment proceedings by denying to have had any Swiss Bank account.

4.4.4 Ld. AR has also given some emphasis on the statement given by the assessee on 05/05/2015 before my predecessor CIT(A) in office. However, I find that the contents of the statement do not support the cause of the assessee, rather it goes against assessee. Here assessee fumbled to answer some of the queries raised. On being asked to produce the copy of JV where capital and profit sharing between assessee and MSM was 30:70, assessee stated that there was no formal IV agreement (Answer to Q.26). InQ.28; it was asked if the bank account with HSBC, Switzedrland was to open for the purpose of proposed Joint venture, why it was a condition that the bank account should be opened only in your name and that your wife Smt. Usha Garodia would be nominee, whereas 70% of the capital was to be contributed by MSM Enterprises PTE Limited? Assessee’s reply was – because the name of the joint venture was not decided and therefore, Onn Sithawalla asked me to open a bank account in HSBC…In Q. 29, assessee was asked – in the proposed joint venture the share of MSM Enterprises PTE Ltd. was 70%. If the name of the Joint Venture was not decided, then why Mr. Sithawalla was not willing to have a joint account with you or at least the nominee in the said•bank account?’ Assessee’s answer was – ‘I do not know.’ In Q. 33, assessee was asked to reply – ‘Whether Mr. Onn Sithatvalla or MSM Enterprises PTE Ltd were having any control over that bank account to issue any direction to the bank about utilization of balance or withdrawal of money?’ Assesse’s reply was that they were not having any control over it [emphasis given]. In Q. 42, assessee was asked to produce the copy of bank statement of MSM and assessee’s reply was – M/s. MSM Enterprises is not able to provide its bank statement of the relevant period as the ABN AMRO Bank was merged with by RBS Bank in 2006 and thereafter the RBS Bank was taken over by ANZ Bank. Thus it emerges from assessee’s statement’ dated. 05/05/2015, that there was no actual-Joint Venture between assessee and MSM. Though MSM and the assessee had capital and profit share ratio of 70: 30, the Swiss Bank account was opened only in the name of the assessee and his wife was made nominee, who alone could operate the bank account in case of eventuality, MSM and its owner Mr. Onn Sithawala though had no control over the bank account to issue any difrection for utilization or withdrawl of money but still withdrew the money in the account of M/s. Donald Mcarthy Trading PTE Limited of Singapore, as associate concern of MSM. Thus, this statement of the assessee was far from truth. Ld. AR could not explain these self-contradictions in assessee’s statement.

4.4.5 In a landmark judgment of CIT v. Durga Prasad More 82 ITR 540, the Hon’ble Apex Court held that in a case where party relied on self-servicing recitals in documents, it was-for the party to establish the truth of these recitals: The taxing authorities were entitled to look •into the surrounding’ circumstances’ and find. out the reality of such recitals. In this case, the assessee ‘produced some self-servicing documents after three and half years from the date of search, in the form of an Affidavit and some purported correspondence from MSM, Singapore and its owner Mr. Onn Sithawala, for shifting ownership of his own black money which was parked in a Swiss Bank account, which cannot be considered as genuine. In the case of Sri Krishna v. CIT(All.) 142 ITR 618, it is held that affidavit need not always be accepted as genuine. Going by the facts of the case considering the self- contradictory, evasive and false statements of the assessee and circumstantial evidences as discussed hereinabove, the Affidavit filed by the assessee cannot be accepted as genuine. It is well settled law that the person in whose name the bank account is opened, is the owner, and he is responsible to explain the .source of all deposits and withdrawals with supporting evidences, Mere saying or procuring some papers from a foreign concern would not come into rescue of explaining assessee’s undisclosed income stashed in a Swiss Bank. Moreover, MSM, Singapore or his owner Mr. Onn Sithawalla, with whom the assessee had no official business activity in this particular matter are non entities in the eyes of Indian Income Tax Law, especially when the assessee failed to file even the relevant bank statement of MSM, Singapore. The fact that all initial deposits in assessee’s Swiss Bank account came from the bank account of MSM, is going to prove that the assessee had channelized his undisclosed money in Swiss Bank account through the bank account of MSM, Singapore, a company owned and managed by Mr. Onn Sithawalla, an old business associate of the assessee, who probably played the role of a conduit in the matter”.

On the basis of the above findings/observations recorded by him, the ld. CIT (Appeals) held that the relevant Bank account with HSBC, Geneva, Switzerland was the undisclosed Bank account of the assessee and the source of all deposits made in the said Bank account was assessee’s own undisclosed funds, which were channelized through MSM Enterprises PTE Limited, Singapore. He also held that the entire income generated, accrued and accreted in that Bank account was unaccounted income of the assessee. Having arrived at this conclusion, the ld. CIT (Appeals), however, found that there were no deposits made in the said Bank account of the assessee during the years under consideration and such deposits were actually made in the said Bank account in the earlier years. He, therefore, held that the additions made by the Assessing Officer in both the years under consideration on account of such deposits were not sustainable as the same could be made only in the relevant years when the deposits were actually made for which the assessments had already been reopened by the Assessing Officer. He, however, found that there was an accretion of US Dollars 4,246.42 and US Dollars 55,414 in the Bank account of the assessee with HSBC, Geneva, Switzerland in the previous year relevant to A.Ys. 2006-07 and 2007-08 respectively and the same represented earnings of the assessee on investment made out of initial deposits in the Bank account in various forms like Fixed Deposits, Bonds, etc. Accordingly, he directed the Assessing Officer to add equal Indian rupee of US Dollars 4,246.42 and US Dollars 55,414 to the total income of the assessee for assessment years 2006-07 and 2007-08 respectively. Still aggrieved by the orders of the ld. CIT (Appeals) for both the years under consideration, i.e. A.Ys. 2006-07 and 2007-08, the assessee has preferred these appeals before the Tribunal.

5. The preliminary issue involved in this case as raised in Ground Nos. 1 to 4 of the assessee’s appeal for A.Ys. 2006-07 and 2007-08 and further argued by the ld. counsel for the assessee at the time of hearing before us is that there was no incriminating material found during the course of search in relation to the transactions reflected in the Bank account of the assessee with HSBC, Geneva, Switzerland and since the assessments for both the years under consideration had become final before the initiation of search, no additions on account of the said transactions or income arising therefrom were permissible in the assessments completed under section 153 of the Act.

6. The ld. counsel for the assessee submitted that the returns of income filed by the assessee for both the years under consideration, i.e. A.Ys. 2006-07 and 2007-08 were processed by the Assessing Officer under section 143(1) prior to the date of search and since no notices under section 143(2) were issued by him for the said two years and even the period available to issue such notices had already lapsed even prior to the date of search, the assessments for the said two years were deemed to have been completed. He submitted that the information relating to the undisclosed Bank account maintained by the assessee with HSBC, Geneva, Switzerland was available with the Assessing Officer prior to the date of search and although the search was conducted on the basis of the said information, no incriminating material whatsoever was found during the course of search relating to the transactions reflected in the said Bank account or income arising to the assessee relating thereto. He contended that the scope of assessment made by the Assessing Officer under section 153A for both the years under consideration pursuant to the search, therefore, was limited to the income unearthed during the course of search on the basis of incriminating material found and in the absence of any such incriminating material found during the course of search, addition on account of HSBC Bank transactions or income relating thereto was beyond the scope of assessment made under section 153A. He contended that when this issue was specifically raised by the assessee during the course of appellate proceedings before the ld. CIT (Appeals), the concerned Assessing Officer had appeared before the ld. CIT (Appeals) on 21.12.2015 and agreed vide order-sheet entry dated 21.12.2015 recorded by the ld. CIT (Appeals) (copy at page no. 22 of the paper book) that the information regarding the undisclosed HSBC bank account maintained by the assessee was duly received from the CBDT and there was no incriminating documents/books of account that were found during the course of search, which had been used in making the additions to the income of the assessee under section 153A of the Act. The ld. counsel for the assessee reiterated that in the absence of such incriminating material, the additions as made to the total income of the assessee on account of transactions reflected in the Bank account of the assessee with HSBC Bank, Geneva, Switzerland as well as income relating thereto in the assessments completed under section 153A for both the years under consideration are not maintainable. In support of this contention, he relied on the decision of the Mumbai Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287  as well as the decision of the Division Bench of this Tribunal in the case of Asstt. CIT v. Pratibha Industries Ltd. [2013] 141 ITD 151

7. The ld. D.R., on the other hand, strongly relied on the impugned orders of the ld. CIT (Appeals) in support of the Revenue’s case on this issue. He contended that there is no such requirement of any incriminating material having been found during search to initiate proceedings under section 153A and the fact that the search is conducted and concluded in the case of the assessee alone is sufficient to give jurisdiction to the Assessing Officer to initiate the proceedings under section 153A against the assessee for the preceding six years. He contended that the scope of section 153A is very wide and it talks about total income, which includes income on the basis of incriminating material as well as without incriminating material. He also contended that the proceedings under section 143(1) are not assessment at all and since the assessment proceedings for both the years under consideration had not been completed prior to the date of search, the scope of proceedings under section 153A was wide to assess and reassess the total income of the assessee. In support of this contention, he relied on the decision of the Hon’ble Delhi High Court in the case of CIT v. Anil Kumar Bhatia (Income Tax Appeal No. 1626 of 2010 dated 14.05.2012) as well as the decision of the Delhi Bench of this Tribunal in the case of Shivnath Rai Harnarain (India) Ltd. v. Dy. CIT [2009] 117 ITD 74.

8. We have considered the rival submissions and also perused the relevant material available on record. It is observed that 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 conducted on 28.07.2011. 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 assesese with HSBC Bank, Geneva, Switzerland. During the course of search, no incriminating material, however, was found relating to the transactions reflected in the said Bank account of the assessee with HSBC Bank or any income relating thereto and this position was categorically admitted by the Assessing Officer during the course of appellate proceedings before the ld. CIT (Appeals) as is evident from the relevant order-sheet entry dated 21.12.2015 recorded by the ld. CIT (Appeals) (copy at page no. 22 of the paper book). The question that arises now is whether in the absence of such incriminating material, any addition to the total income of the assessee can be made on account of the transactions reflected in the Bank account of the assessee with HSBC Bank or any income relating thereto in assessments completed under section 153A of the Act for both the years under consideration.

9. As per the provisions contained in Section 153A, if the search or requisition is initiated after 31.03.2003, the Assessing Officer is under an obligation to initiate proceedings under section 153A for six years immediately preceding the year of search. The Assessing Officer is then required to assess or reassess the total income of the said six years and if any assessment or reassessment out of the said six years is pending on the date of initiation of the search, the same would abate, i.e. pending proceeding qua the said assessment year would not proceed thereafter and the assessment has to be made under section 153A(1)(b) of the Act read with the 1st Proviso thereunder. As regards the other years for which assessments have already been completed and the assessment orders determining the assessee’s total income are subsisting at the time when the search or requisition is made, the scope of assessment under section 153A is limited to reassess the income of the assessee on the basis of incriminating material found during the course of search.

10. At the time of hearing before us, the ld. D.R. has contended that the processing of returns of income filed by the assessee as made by the Assessing Officer 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. He has 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 unreported decision of the Hon’ble Delhi High Court in the case of Anil Kumar Bhatia (supra). In the said case, a question was posed by the Hon’ble Delhi High Court in paragraph no. 12 of its order as to whether the Assessing Officer was empowered to reopen the proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search where an assessment order had already been passed in respect of all or any of those six assessment years either under section 143(1) or section 143(3) of the Act and such order was already in existence having been passed prior to the initiation of search/requisition. Although this question was not finally answered by the Hon’ble Delhi High Court in the case of Anil Kumar Bhatia (supra), it is quite clear from the said question raised by the Hon’ble Delhi High Court that there was no distinction made by Their Lordships 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 Pratibha Industries Ltd. (supra) and after referring to the discussion made by the Hon’ble Delhi High Court in this context in the case of Anil Kumar Bhatia (supra), 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. To arrive at this conclusion, reliance was placed by the Tribunal on the decision of Special Bench, Mumbai in the case of All Cargo Global Logistics Ltd. (supra), wherein it was held that even though all the six years shall become subject matter of assessment under section 153A as a result of search, the Assessing Officer shall get the free hand through abatement only on the proceedings that are pending. But in a case or in a circumstances where the proceedings have reached finality, assessment under section 143(3) read with section 153(3) has to be made as was originally made and in a case certain incriminating documents were found indicating undisclosed income, then addition shall only be restricted to those documents/incriminating material.

11. Keeping in view the discussion made above, we hold that the additions as finally made to the total income of the assessee on account of transactions reflected in the Bank account of the assessee with HSBC, Geneva, Switzerland and income relating thereto for both the years under consideration are beyond the scope of section 153A as the assessments for the said years had become final prior to the date of search and there was no incriminating material found during the course of search to support and substantiate the said addition. The said additions made for both the years under consideration are, therefore, deleted allowing the relevant grounds of the assessee’s appeals.

12. In Grounds No. 5 to 8 of his appeals for both the years under consideration, the assessee has mainly objected to the findings recorded by the ld. CIT (Appeals) that he had channelized his undisclosed money through Bank account of MSM Enterprises PTE Limited and that the source of monies deposited in HSBC Bank Account was his undisclosed money.

13. In support of the assessee’s case on the issues raised in Grounds No. 5 to 8, the ld. counsel for the assessee has made a detailed submission, the gist of which is given below:—

(i)Although the account with HSBC Bank, Geneva, Switzerland was opened on 07.06.1999, there was no money deposited in the said account initially for a period of about one year.
(ii)The first deposit in the said account was made only on 22.06.2000 and the same was originated from MSN International PTE Limited, a Company belonging to Mr. Onn Sithawalla as per the description given in the Bank statement itself.
(iii)The entire deposits made in the said account amounting to US Dollars 8,99,812 were in the name of MSM Enterprises PTE Limited as per the description given in the Bank statement itself. Mr. Onn Sithawalla and his family members were promoters/shareholders of MSM Enterprises PTE Limited, Singapore and the assessee had regular business transactions for import of goods with MSM Enterprises PTE Limited from 1993.
(iv)MSM Enterprises PTE Limited was an independent Company having substantial business and it was in existence for several years having substantial funds of its own.
(v)There was no material brought on record by the Revenue Authorities to show that Mr. Onn Sithawala or MSM Enterprises PTE Limited acted in concern with the appellant-assessee or under the dictates of the assessee.
(vi)The entries in the relevant Bank statement also proved that save and except the deposits from MSM Enterprises PTE Limited, there was no other deposit made in the HSBC Account, which was in assessee’s name.
(vii)The entries in the Bank statement made during 2000 to 2004 establish that the monies deposited originated from MSM Enterprises PTE Limited and even Mr. Onn Sithawalla of MSM Enterprises PTE Limited admitted the ownership of all the funds so deposited.
(viii)The relevant Bank account was closed in the year 2011 and the total deposits made therein along with the income accrued over the years were remitted to the account of M/s. Doland Mearthy Trading PTE Limited at the instance of Mr. Onn Sithawalla. Not even a part of the monies withdrawn from the said Bank account thus ever reached the assessee or used for the benefit of the assessee.
(ix)All the above facts were sufficient to support and substantiate the explanation of the assessee that the entire money found deposited in the relevant Bank account of the assessee belonged to MSM Enterprises PTE Limited, which was deposited in connection with the setting of a joint venture between the said company and the assessee’s company and although there was no actual joint venture agreement entered into, the relevant correspondence setting out the terms and conditions of the joint venture was brought on record. Even the affidavits of the assessee and Mr. Onn Sithawalla affirming the relevant facts on oath were filed in support and there was nothing brought on record either by the Assessing Officer or by the ld. CIT (Appeals) to prove any factual infirmity or falsity therein. They also failed to dislodge or disprove the ownership of funds claimed by Mr. Onn Sithawalla.

14. Although in reply to the arguments raised by the ld. counsel for the assessee in support of the assessee’s case on this issue, the ld. D.R. has also raised various contentions besides relying on the impugned orders of the ld. CIT (Appeals), wherein he has rejected the case of the assessee on this issue by recording various adverse observations/findings, we find that this issue has become infructuous or academic as a result of the decision rendered by us on the preliminary issue raised in these appeals, holding that the additions made to the total income of the assessee on account of the income arising from the relevant transactions reflected in the HSBC Account are not sustainable in the absence of any incriminating material found during the course of search to support and substantiate the same. We, therefore, do not consider it necessary or expedient to adjudicate upon this issue on merit.

15. In his appeals for A.Y. 2007-08 being ITA No. 856/KOL/2016, the assessee has raised two new grounds. However, no material or specific contentions are raised by the ld. counsel for the assessee at the time of hearing before us in support of the issues raised therein. We, therefore, treat both these grounds as not pressed and dismiss the same.

16. In the remaining two appeals being ITA Nos. 853 & 855/KOL/2016, the assessee has challenged the levy of penalty imposed under section 271(1)(c) in respect of the additions finally sustained by the ld. CIT (Appeals) on account of accretion of income on the basis of transactions reflected in the Bank account of the assessee with HSBC, Geneva, Switzerland for both the years under consideration on various grounds. However, keeping in view the decision rendered by us hereinabove while disposing of the corresponding quantum appeals of the assessee whereby we have deleted the said additions, the penalty imposed by the Assessing Officer under section 271(1)(c) in respect of the said additions for both the years under consideration is liable to be cancelled having no legs to stand. We, therefore, cancel the penalty imposed under section 271(1)(c) for both the years under consideration and allow the appeals of the assessee.

17. In the result, the appeals of the assessee being ITA Nos. 853, 854 and 855/KOL/2016 are allowed, while the assessee’s appeal being ITA No. 856/Kol./2016 is partly allowed.

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