Assessment framed on the basis of mere ‘base note’ is unsustainable

Pratap Joisher Vs ACIT (ITAT Mumbai)

ITAT Mumbai held that assessment framed on the basis of ‘base note’ without preferring to collect evidence based on ‘consent waiver form’ is not sustainable in the eyes of law.

Facts-On receiving information by the Central Board of Direct Taxes (CBDT) from French Authority under Article 28 of the Indo France Fiscal Convention (Treaty) of 29th September 1992 qua banking relationship maintained by the assessee at HSBC Bank, Geneva, Switzerland which he has not disclosed in his return of income.

The assessee was called upon to explain as to why the bank account with HSBC Bank, Geneva, Switzerland should not be treated as undisclosed bank account and amount of Rs.5,47,49,792/- & Rs.9,85,58,995/-for A.Y. 2006-07 & 2007-08 respectively found as peak credit balance be not added in his income for A.Y. 2006-07 & 2007-08. Declining the contentions raised by the assessee that the assessee is not having any bank account as alleged and the information referred to as “base note” has nothing to do with the assessee the AO reached the conclusion that the assessee has bank account with HSBC Bank, Geneva, Switzerland.

Conclusion-Held that vide the ‘consent waiver form’ the assessee has given unconditional consent for providing documents pertaining to the bank accounts in question to the Income Tax Department, Government of India, in both paper and electronic form, however the AO has not preferred to collect the evidence which was readily available but proceeded to frame the assessment on the basis of “base note” which is not sustainable in the eyes of law.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

Both the aforesaid inter-connected appeals pertaining to A.Y. 2006-07 & 2007-08 bearing common question of law and facts are being disposed of by way of composite order to avoid repetition of discussion.

2. The appellant, Shri Pratap Joisher (hereinafter referred to as ‘the assessee’) by filing the present appeals, sought to set aside the impugned orders both dated 20.03.2019 passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the assessment years 2006-07 & 2007-08 on the identically worded grounds inter-alia that (grounds are taken from A.Y. 2006-07):-

“1. On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of AO of reopening the assessment u/s 148 beyond four years by stating that since the asset is located outside India the provision of section 149(1)(c) relating to assessment beyond four years but within sixteen years is applicable to the appellant without appreciating the fact that no foreign bank account was held by the appellant and hence the provision is itself not applicable to the appellant. Hence reopening the assessment u/s 148 of the Act beyond four years is bad in law. The amendment to section is prospective in nature and reopening for AY 2007-08 is not valid as time limit of six years have lapsed.

2 a) On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of AO of rejecting the objections raised by the appellant that the appellant has no bank account abroad and the department has no proof except the base note The appellant cannot be prove the negative. The department has failed to bring any material on record.

2 b) On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred on the facts and in law in not appreciating that the assessing officer passed the assessment order in undue haste and in gross violation of principles of natural justice.

2 c) That the CIT(A) erred on facts and in law in confirming the above addition without appreciating that the assessing officer has admitted in the assessment order that authentic information/ communication regarding the alleged foreign bank account was still awaited from the Swiss Authorities.

2 d) That the CIT(A) erred on facts and in law in not appreciating that (a) the above alleged foreign bank account did not belong to the appellant; (b) none of the deposits,as alleged, related to the appellant; and

2 e) That the CIT(A) erred on facts and in law in not appreciating that no transaction was made by the appellant, and that the above addition made in the hands of the appellant is without any evidence or basis.

3) On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of AO for addition made of peak balances of Rs.5,47,49,792/- & Rs.9,85,58,995/- for A.Y. 2006-07 & 2007-08 respectively in HSBC Bank Switzerland u/s 69 on followings grounds:

a) By treating the information which is received in the form of document (referred to as the Base Note) as genuine information without appreciating the fact that the said information is not authenticated or certified by any credible statutory authority or the bank in question and therefore cannot be any admissible as evidence. It is also relevant that the source of the evidence since inception is illegal (being stolen) and is inadmissible as being unauthenticated and unproven.

b) By stating that details such name, address, passport details etc were mentioned in the Base Note received from the Investigation Wing and the same were confirmed by the assessee without appreciating the fact that the document shown to Premal Joisher (son of the appellant) was some printed information in the language not known to him and no stamp of HSBC Bank was mentioned in the document.

c) By simply relying on the information received from the Investigation without making any independent inquiry and the document on which AO has relied was shown to the assessee during the search proceedings and no copy of such document was ever provided to the appellant inspite of repeated request.

4) On the facts and under the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the action of AO of not providing the opportunity of cross examination of the source of document relied by AO thus denying natural justice to the appellant.

5) The appellant craves for leave to add to alter and/or withdraw the above ground of appeal, if necessary.”

2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee filed his original return of income declaring total income of Rs.3,72,872/- and Rs.6,74,637/- for A.Y. 2006-07 & 2007-08 respectively which were processed under section 143(1) of the Income Tax Act, 1961 (for short ‘the Act’). Subsequently on receiving information by the Central Board of Direct Taxes (CBDT) from French Authority under Article 28 of the Indo France Fiscal Convention (Treaty) of 29^th September 1992 qua banking relationship maintained by the assessee at HSBC Bank, Geneva, Switzerland which he has not disclosed in his return of income. The assessee was confronted with the aforesaid information received, statement on oath under section 131 was recorded of Shri Premal Pratap Joisher, son of the assessee (appearing on behalf of his father) wherein he was specifically asked qua the detail of foreign bank account held by him/his family members abroad, in HSBC Bank, Geneva. However, Shri Premal Pratap Joisher, son of the assessee responded to question nos.5 & 6 of the statement that to the best of his knowledge neither he nor his father nor any of his family members are having any bank account in HSBC Bank, Geneva or any bank abroad. However, he has confirmed the personal details given in the information obtained such as his father’s name, date of birth, residential address etc. Thereafter, he consulted his father and further stated that these details have nothing to do with them as his father has not maintained any such bank account.

3. On the basis of aforesaid information, copy of statement recorded under section 131 of the Act, the Assessing Oofficer (AO) recorded reasons for reopening and initiated the reopening proceedings under section 147 of the Act by issuance of notice under section 148 of the Act. Declining the contentions raised by the assessee that notice under section 148 of the Act is time barred the AO proceeded to initiate the assessment proceedings. The assessee opted to treat the return of income already filed as return filed in response to notice under section 148 of the Act. Objection filed by the assessee to the reopening disposed of. The assessee was called upon to explain as to why the bank account with HSBC Bank, Geneva, Switzerland should not be treated as undisclosed bank account and amount of Rs.5,47,49,792/- & Rs.9,85,58,995/-for A.Y. 2006-07 & 2007-08 respectively found as peak credit balance be not added in his income for A.Y. 2006-07 & 2007-08. Declining the contentions raised by the assessee that the assessee is not having any bank account as alleged and the information referred to as “base note” has nothing to do with the assessee the AO reached the conclusion that the assessee has bank account with HSBC Bank, Geneva, Switzerland with following details:

“> Name of the assessee- Joisher Pratap Chhaganal

> Date of birth of the assessee as 19.11.1939 which has been corroborated with the Passport of the assessee as well as from his return of income.

> Place of Birth is given to be Godhara (Gujarat) which is also the same as mentioned in the passport.

> Passport details are mentioned as 2112783 issued on Bombay on 20.09.2000 This is the old passport of the assessee and the same is mentioned in the last page of the new passport. The file number of the old passport is also mentioned as BOMS001204 Other details like place of issue, date of issue, number are all correct and corroborated with copies of record.

> Legal address of the assessee is 102, Udaybhariu Apts, M.G. Road, Rajawadi, Ghatkopar East, Mumbai-400077. The address is same as mentioned in all letters of the assessee which are on record.

> The Name of the Client Profile (Non du Profil client in French) is mentioned as Contabel Holding LTD, the beneficial owners. This apparently means that the HSBC Bank Account in the case of the assessee, could be a joint account which may be operated by any of them.

> The Code of Client Profile (Code Profil Client in French) is 5091327488.

> The list of IBANs mentioned is IBAN CH CH15 0868 9050 9120 78536/CH2S 0868 9050 9111 13303/CH39 0868 9050 9111 2022 9/CH41 0868 9050 9126 80147/CH67 0868 90509122 8362 8

> The BUP_SIFIC_PER_ID is 5090160947, PER_ID-96347, PER NO.-160947.”

4. So the AO reached the conclusion that the particulars mentioned in the “base note” belong to the assessee which he has not disclosed to the Income Tax Authorities. The AO also treated “base note” as admissible document under section 11 of the Indian Evidence Act as the original documents are in possession of the bank outside jurisdiction of Government of India which the Swiss bank has not parted with. The AO after examining the “base note” which is a bank statement in the name of assessee containing month wise summary of investment made in bonds, mutual funds, liquid assets, funds in shares, fiduciary deposits etc., the detail of which is as under:

5. So the AO considered the value of these investments as income of the assessee for the financial years under consideration and added to his income under section 69 of the Act. The AO taken peak balance in the account for the month of March as $12,27,298.63 equivalent to Rs.5,47,49,791.88 and $ 22,09,346.68 equivalent to Rs.9,85,58,955/- for A.Y. 2006-07 & 2007-08 respectively and made addition thereof by framing assessment under section 143(3) read with section 147 of the Act.

6. The assessee carried the matter before the Ld. CIT(A) by way of filing appeals who has confirmed the addition by dismissing the appeals filed by the assessee for A.Y. 2006-07 & 2007-08. Feeling aggrieved with the impugned orders passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way of filing present appeals.

7. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.

8. Undisputedly the AO has framed the assessment by making addition in question on the basis of “base note” by treating the same as admissible evidence under section 11 of Indian Evidence Act, 1872. It is also not in dispute that all the original documents pertaining to the bank account maintained by the assessee with HSBC Bank, Geneva are in possession of Swiss Bank and beyond the jurisdiction of Government of India which cannot be parted with except with the statement of the assessee.

9. However, now the Ld. A.R. for the assessee stated that the assessee has signed “consent waiver form” on 30.07.2013 for both A.Y. 2006-07 & 2007-08, however, it is surprising as to why the AO through Government of India has not obtained the original documents on the basis of “consent waiver form” signed by the assessee from HSBC Bank, Geneva.

10. In these circumstances, we are of the considered view that when “consent waiver form” has already been signed by the assessee way back on 30.07.2013 the AO is required to get all the original documents pertaining to the bank account in question maintained by the assessee with HSBC Bank, Geneva and then framed the assessment afresh. No doubt during the assessment proceedings the assessee has vehemently denied to have any such accounts maintained with HSBC Bank, Geneva which is apparently in the name of the assessee with his date of birth and passport number, legal address and his complete profile with code of client profile, but now the assessee has given the “consent waiver form”. Copy of “consent waiver form” is available at page 10 to 11 of the paper book whereby the assessee has given unconditional consent for providing documents pertaining to the bank accounts in question to the Income Tax Department, Government of India, in both paper and electronic form, however the AO has not preferred to collect the evidence which was readily available but proceeded to frame the assessment on the basis of “base note” which is not sustainable in the eyes of law.

11. So without entering into the merits of the order passed by the Ld. CIT(A), we are of the considered view that the impugned orders are liable to be set aside and the AO is directed to frame the assessment afresh after obtaining the original documents on the basis of “consent waiver form” given by the assessee from HSBC Bank, Geneva. Both the Ld. A.Rs for the parties to the appeals have concurred to the proposal that to impart complete justice and to decide the issue once for all, the impugned orders are liable to be set aside. So the impugned orders passed by the Ld. CIT(A) are set aside.

12. Resultantly, both the appeals filed by the assessee are allowed for statistical purposes.

Order pronounced in the open court on 28.03.2023.