DCIT, CENTRAL CIRCLE-26, NEW DELHI V. ANURAG DALMIA, NEW DELHI

MA 45/DEL/2022

AI Insights

The case revolves around the Revenue's appeal concerning the addition of undisclosed interest income earned on deposits in a foreign bank account (HSBC) for the assessment year 2013-14. Initially, the appeal was dismissed due to the tax effect as per CBDT Circular No.3/2018. However, the Revenue contended that the case fell under an exception in the Circular related to undisclosed foreign income/assets. The Tribunal recalled its earlier order based on this exception but ultimately dismissed the appeal due to the absence of incriminating material linking the assessee to the foreign bank accounts during the search operation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 313125 (ITAT-DELHI)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Other Referred Cases: Pooranmal vs. DIT, Kabul Chawla vs. CIT, Pr. CIT vs. Somaya Construction Pvt. Ltd., CIT vs. IBC Knowledge Park Pvt. Ltd., CIT vs. Gurinder Singh Bawa, Pr. Commissioner of Income Tax vs. Meeta Gutgutia, PCIT vs. Best Infrastructure (India) Pvt. Ltd., PCIT vs. Dharampal Premchand Ltd.
• Laws Referred To: CBDT Circular No.3/2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: V.K. BINDAL
• Keywords: Tax effect; Search and seizure
• Section: 143(3); 132; 153A

Judgement Text

"MA.No.49/Del/2023 & ITA No.4748/Del/2019 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI M BALAGANESH, ACCOUNTANT MEMBER MA No. 45/Del/2022 (In I.T.A No.2263/Del/2018) िनधा\u0005रणवष\u0005/Assessment Year: 2013-14 DCIT, Central Circle-26, Room No.323, ARA Centre, Jhandewalan Extn., New Delhi. बनाम Vs. Anurag Dalmia, 2nd Floor, Indraprakash Building-21, Barakhamba Road, New Delhi. PAN No.AADPD9439P अपीलाथ\u0011 Appellant \u0013\u0014यथ\u0011/Respondent & आ.अ.सं/.I.T.A No.2263/Del/2018 िनधा\u0005रणवष\u0005/Assessment Year:2013-14 DCIT, Central Circle-26, Room No.323, ARA Centre, Jhandewalan Extn., New Delhi. बनाम Vs. Anurag Dalmia, 2nd Floor, Indraprakash Building-21, Barakhamba Road, New Delhi. PAN No.AADPD9439P अपीलाथ\u0011 Appellant \u0013\u0014यथ\u0011/Respondent Revenue by Shri Om Prakash, Sr. DR Assessee by Shri V.K. Bindal, CA and Ms. Rinkie Sharma, CA सुनवाईक\bतारीख/ Date of hearing: 25.04.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 30.04.2025 MA.No.49/Del/2023 & ITA No.4748/Del/2019 2 आदेश /O R D E R PER C.N. PRASAD, J.M. Through this miscellaneous application the Revenue stated that appeal of the Revenue was dismissed on account of tax effect following the CBDT Circular No.3/2018 dated 11.07.2018. It is the contention of the Revenue that since the issue involved is interest income earned in foreign bank accounts namely HSBC Bank the same falls under exception mentioned in clause (d) of Circular, wherein it is stated that where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets/undisclosed foreign bank account) the Circular will not apply. Therefore, the Revenue submitted that the appeal of the Revenue be recalled and be heard on merits. 2. On the other hand, the Ld. AR submitted that even according to the miscellaneous application filed by the Revenue the quantum addition which was made initially while completing the assessment u/s 143(3) in the AY 2006-07 was deleted by the Tribunal and therefore even the appeal of the Revenue is recalled the same is liable to be dismissed. MA.No.49/Del/2023 & ITA No.4748/Del/2019 3 3. We have heard rival submissions, perused the orders of the authorities below. On perusal of the assessment order for the assessment year under consideration, we noticed that an addition of Rs.1,53,00,826/- was made on account of undisclosed interest income earned on undisclosed deposits in foreign bank account (HSBC) and therefore the case of the Revenue will fall under exception clause (d) provided in CBDT Circular 3/2018 dated 20.08.2018. Thus, allowing the miscellaneous application filed by the Revenue, we recall the order of the Tribunal in ITA No.2263/Del/2018 dated 15.07.2021. 4. Coming to the merits of the addition made as stated earlier the addition was made on account of undisclosed interest income earned on undisclosed deposits in foreign bank account. We observe that in the AY 2006-07 the Tribunal deleted the quantum addition and therefore the consequential interest which was added during the assessment year under consideration has no legs to stand. For the AY 2006-07 the Tribunal in ITA No.5395/Del/2017 dated 15.02.2018 deleted the addition made on account of deposits in foreign bank account observing as under: - “12. We have heard the rival submissions, perused the relevant material placed on record and the finding given in the impugned order with respect to legal issue raised vide ground no.5 by the assessee that the additions made in this MA.No.49/Del/2023 & ITA No.4748/Del/2019 4 year are beyond the scope of assessment u/s.153A, as no incriminating material was found during the course of search for the impugned Assessment Year; and the assessment had attained finality and was not abated in terms of 2nd Proviso to Section 153A. As stated above, the original return of income was filed in July, 2006 and said return was duly accepted and processed u/s. 143(1) vide intimation dated 25.05.2007. Since no notice u/s. 143(2) was issued thereafter or any other proceedings have been commenced to disturb said return of income, accordingly, it had attained finality much prior to the date of search which was on 20.01.2012. Hence in terms of 2nd Proviso to Section 153A the assessment for the Assessment Year 2006-07 was not pending and accordingly, has to be reckoned as unabated assessment. Under the jurisdiction of Hon'ble Delhi High Court, the law is well settled that in case of unabated assessment, the additions which can be roped-in, in the 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 assessment years where assessments had attained finality. The relevant observations and the ratio laid down would be discussed in the later part of this order. 13. Now keeping in view the binding judicial precedents of the Jurisdictional High Court, we shall proceed to examine the facts as are available on record. 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 on 28.06.2011 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 the assessee had also figured and 11 pages document pertaining to the assessee was also received. The contents of the documents have been reproduced in the assessment order. 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 MA.No.49/Del/2023 & ITA No.4748/Del/2019 5 account holder. The name of the entities which held the bank accounts have already been discussed above. The total sums standing in the bank accounts for the relevant financial year, aggregated to Rs.27.92 crore in terms of INR. The details of amount appearing in the account of various entities have already been incorporated above. After receiving the said information, the Investigation Wing of the department carried out search and seizure action in the case of the assessee and group cases on 20.01.2012, 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, as culled out from the impugned orders as well as the material placed on record, it is an admitted fact that no documents or any incriminating material whatsoever was found or seized during the course of search and seizure action 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 material or evidence was found to rebut the denial statement of the assessee. Apart from that, even during the course of the assessment proceedings when statement was recorded by the AO, assessee continued to deny such kind of transaction and even at the stage of the assessment proceedings the Assessing Officer did not confront with any material which can be said to have been recovered from the possession of the assessee in the course of search with regard to the deposits or any kind of link in the foreign bank accounts. The ld. CIT (A) in the impugned order also (which has been incorporated above) has not held that any document or evidence qua any link with the foreign bank accounts has found during the course of search, albeit he has given a finding that to the effect that it was on the basis of the information received which was precursor to carry out search and seizure action at the premises of the assessee and such an information/material even though not found in the course of search can be utilized for the purpose of assessment. For which reference was to made judgment of Hon'ble Supreme Court in the case of Pooranmal vs. DIT, (1974) 93 ITR 505 (SC). In the said judgment, Hon’ble Supreme Court held that if any evidence or material which MA.No.49/Del/2023 & ITA No.4748/Del/2019 6 has been found during the course of search can still be used/utilised, even if search has been held to be invalid. Nowhere has it been laid down by the Hon’ble Supreme Court that any material or information gathered prior to the search has to be reckoned or is deemed to be found during the course of search. It was never a case of the department either before us or before the first appellate stage that in the post search anything has been found, except that the information which though was incriminating against the assessee was already in the possession of the department. Ld. 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) it constitutes incriminating material within the meaning and scope of Section 153A. However, such an observation and the finding is de hors the fact as admittedly in the statement recorded on oath u/s 132(4) at the time of search, assessee has categorically denied having such transaction or any kind of link with the foreign bank accounts. Thus, the observation of the ld. CIT (A) to this extent is erroneous on facts and hence cannot be upheld. In the letter filed by the ld. CIT-DR written by the Assessing Officer before us, it is clearly established that the information was received by the French Authority on 28.06.2011 and based on this information the investigation wing had carried out search in the case of the 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. 14. 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 carried out on 20.01.2012. 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 in view of the principle laid down by the Hon'ble Jurisdictional High Court in several MA.No.49/Del/2023 & ITA No.4748/Del/2019 7 cases, 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. 15. Now coming to the ratios laid down by the Hon’ble Jurisdictional High Court, first of all, in the case of Kabul Chawala (supra), the Hon'ble Court after discussing the issue threadbare and analysing the various judgments of different High Courts laid down the following legal proposition in terms of scope of addition which can be made u/s. 153A(1) which are as under:- “37. On a conspectus of Section 153A (1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs \"in which both the disclosed and the undisclosed income would be brought to tax\". MA.No.49/Del/2023 & ITA No.4748/Del/2019 8 iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post- search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment \"can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.\" v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” This judgment of the Hon'ble Delhi High Court has been followed in several judgments not only by the Hon'ble Delhi High Court but also by other Hon'ble High Court like, Pr. CIT vs. Somaya Construction Pvt. Ltd. 387 ITR 529 (Guj), CIT vs. IBC Knowledge Park Pvt. Ltd. 385 ITR 346 (Kar) and CIT vs. Gurinder Singh Bawa reported in 386 ITR MA.No.49/Del/2023 & ITA No.4748/Del/2019 9 483. In the latest judgment the Hon'ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia, their Lordships reiterated the same principle after discussing and analyzing catena of decisions including that of Anil Kumar Bhatia (supra) and Dayawanti Gupta. The Hon'ble High Court observed and held as under:- “62. Subsequently, in Principal Commissioner of Income Tax1 v. Devangi alias Rupa {supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. {supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. {supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in CIT-2 v. Salasar Stock Broking Ltd. {supra), too, followed the decision of this Court in Kabul Chawla (supra). In CIT v. Gurinder Singh Bawa {supra), the Bombay High Court held that: “6...once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings.” 63. Even this Court has in CIT v Mahesh Kumar Gupta {supra) and The Pr. Commissioner of Income Tax-9 v. Ram Avtar Verma {supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd. {supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015.” MA.No.49/Del/2023 & ITA No.4748/Del/2019 10 16. Thus, following the aforesaid proposition of law and admitted fact of the case that there is no incriminating material found during the course of search qua the assessment year for which impugned addition has been made, we hold that such an addition cannot be roped in in the assessment order passed u/s 153A. Accordingly, same is directed to be deleted. 17. So far as the reliance placed by the Learned CIT DR on the judgment of Anil Kumar Bhatia, we find that the Hon'ble High Court itself had clarified that there no incriminating material was found during the course of search and therefore, no express opinion as to whether the addition can be made u/s 153A was made by their Lordships. The relevant observation in para 23 of the judgment reproduced here under, clarifies this aspect:- “We are not concerned with a case where no incriminating material was found during the search conducted u/s 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open.” Hence, the reliance placed by the Learned CIT-DR on this judgment is wholly misplaced. 18. Post the judgment of Meeta Gutgutia (supra), also the same principle have been reiterated in the case of PCIT vs. Best Infrastructure (India) Pvt. Ltd. (supra), wherein the Hon'ble High Court held that during the course of search, statement recorded u/s. 132(4) by themselves does not constitute incriminating material and assumption of jurisdiction by the Assessing Officer u/s.153A solely based on statement is unsustainable when there is no incriminating material found during the course of search. Again in the case of PCIT vs. Dharampal Premchand Ltd., in ITA No.512 to 514/206, the Hon'ble Delhi High Court held that ratio laid down in the case of Kabul Chawla, Meeta Gutgutia, still holds ground and the Revenue’s contention that the matter should be referred to a larger bench was turned down. Apart from these judgments, there are catena of other judgments of other High Courts laying down similar ratio and proposition. The main underlying principle MA.No.49/Del/2023 & ITA No.4748/Del/2019 11 permeating in all the judicial precedents is that, in the case of the unabated assessment which had attained finality on the date of search, which are reckoned as unabated assessments, no addition over and above the originally assessed income can be made sans any incriminating material found or unearthed during the course of search. The principle reiterated time and again is that something should be found as a result of search which is incriminating in nature so as to implicate the assessee and acquire jurisdiction to make the addition, because for the completed assessment, or in other words, assessment which are not abated, the Assessing Officer is required to make reassessment u/s.153A which is only possible when any incriminating material has been found during the course of search. If the Revenue has any information in its possession prior to the date of search and no corroborative evidence was found during the course of search so as to link the information already in hand with the material found during I.T.A. No.5395 & 5396/DEL/2017 31 the course of search, then such an information for making any kind of addition ostensibly is outside the purview of Section 153A as per the binding judicial precedents of the Hon'ble Jurisdictional High Court. We again reiterate that if the Income Tax Department had any material information in its possession received from any external source and in wake of such an information search u/s 132 has been carried out and nothing incriminating has been found having live-link nexus with the said information already in hand, then the Revenue has other courses open to implicate the assessee or carry out further inquiry under the other provisions of the Act, but definitely not u/s.153A. 19. Thus, we hold that despite there being incriminating material in the possession of the Revenue which may implicate assessee, but same cannot be used within the scope of Section 153A when nothing has been found from the search, especially when assessee too has denied any such involvement and there is no material gathered during the search to rebut such a denial by the assessee. Accordingly, the addition made by the Assessing Officer for sum of Rs.28,24,48,860/- is deleted.” MA.No.49/Del/2023 & ITA No.4748/Del/2019 12 Therefore, since the quantum addition has already been deleted by the Tribunal the interest income which was added in the assessment year under consideration is liable to be deleted. Thus, we direct the Assessing Officer to delete the interest income of Rs.1,53,00,826/- which was added in the assessment year under consideration. 5. In the result, miscellaneous application of the Revenue is allowed and the appeal of the Revenue is dismissed. Order pronounced in the open court on 30/04/2025 Sd/- Sd/- (M BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30.04.2025 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "