ACIT, CC-26, New Delhi v. Parag Dalmia, New Delhi

ITA 6283/DEL/2019 | 2016-2017
Pronouncement Date: 31-03-2021 | Result: Allowed

Appeal Details

RSA Number 628320114 RSA 2019
Assessee PAN AAAPD3752B
Bench Delhi
Appeal Number ITA 6283/DEL/2019
Duration Of Justice 1 year(s) 8 month(s) 6 day(s)
Appellant ACIT, CC-26, New Delhi
Respondent Parag Dalmia, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2021
Appeal Filed By Department
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 31-03-2021
Assessment Year 2016-2017
Appeal Filed On 25-07-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC : NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO . 6283 /DEL/20 1 9 ASSESSMENT YEAR : 2016 - 17 ACIT CENTRAL CIRCLE - 26 ROOM NO.323 E - 2 ARA CENTRE JHANDEWALAN EXTN. NEW DELHI - 110055 VS. SH. PARAG DALMIA 11 HARI BHAWAN SHRI RAM MANDIR MARG SECTOR D - 4 VASANT KUNJ NEW DELHI - 110070 PAN - AAAPD3752B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SA NJIV MAHAJAN SR. DR RESPONDENT BY : SH. HIREN MEHTA CA DATE OF HEARING : 28.01 .2021 DATE OF PRONOUNCEMENT : 31 .03 .2021 ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 1 6.05.2019 OF THE LEARNED CIT(A) - 29 NEW DELHI RELATING TO ASSESSMENT YEAR 2016 - 17 . 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS OR PROFESSION CAPITAL GAIN AND INCOME FROM OTHER SOURCES. HE FILED HIS RETURN OF INCOME ON 15.07.2016 DECLARING LOSS OF RS.10 01 742/ - . DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT AS PER CALCULATION MADE IN AY 2014 - 15 THE CLOSING BALANCE OF THE FOREIGN BANK ACCOUNT INCLUDING INTEREST WAS USD 362 354.79 AS ON ITA NO.6283/DEL/2019 2 31.03.2014 WHICH BECAME THE OPENING BALANCE FOR THE ASSESSMENT YEAR 2015 - 16 AND THE ASSESSEE ALSO EARNED INTEREST INCOME ON THIS SUM FROM 01.04.2014 TO 31.03.2015 I.E. FOR TWELVE MONTH WHICH @4% WORKS OUT TO RS.9 04 872.28/ - (USD 14494.19 X 62 .43) THE CLOSING BALANCE OF THE FOREIGN BANK ACCOUNT FOR THE AY 2015 - 16 INCLUDING INTEREST WAS USD 3 76 848.98 AS ON 31.03.2015 WHICH BECAME THE OPENING BALANCE FOR THE ASSESSMENT YEAR 2016 - 17 AND THE ASSESSEE ALSO EARNED INTEREST INCOME ON THE SUM FROM 01.04.2015 TO 31.03.2016 I.E. FOR TWELVE MONTH WHICH @ 4% WORKS OUT TO RS. 9 98 649.85/ - (USD 15073.96 X 66.25) AS PER THE CALCULATION IN THE CHART GIVEN BELOW. NAME OF THE PROFILE CLIENT FINANCIAL YEAR BALANCE AS ON 31 ST MARCH OF EARLIER YEAR IN US$ INTER EST RATE TOTAL INTEREST IN US $ TOTAL BALANCE AT THE END OF YEAR IN US$ (CO.3+COL . 5) VALUE OF US $ IN THE END OF THE F.Y. INTT. IN RUPEES (CO. 5 X COL.7 1 2 3 4 5 6 7 8 ASPREY WORLDWIDE S. A. 2013 - 14 14551.84 4% 582.07 15133.91 60.96 35482.98 RONDEBERG LTD. 2013 - 14 323653.83 4% 12946.15 336599.98 60.96 789197.30 TAIRA FOUNDATION 2013 - 14 10212.40 4% 408.50 10620.90 60.96 24902.16 TOTAL 348418.07 4% 13936.72 362354.79 60.96 849582.44 ASPREY WORLDWIDE S.A. 2014 - 15 15133.91 4% 605.36 15739.27 62.43 37792 .62 RONDEBERG LTD. 2014 - 15 336599.98 4% 13463.99 3500643.97 62.43 840556.90 TAIRA FOUNDATION 2014 - 15 10620.90 4% 424.87 11045.77 62.43 26524.63 TOTAL 362354.79 4% 14494.19 376848.98 62.43 904872.28 ASPREY WORLDWIDE S.A. 2015 - 16 15739.27 4% 629.57 1636 8.84 66.25 41709.01 RONDEBERG LTD. 2015 - 16 3500643.97 4% 140025.76 3640669.73 66.25 9276706.6 TAIRA FOUNDATION 2015 - 16 11045.77 4% 441.83 11487.60 66.25 29271.23 TOTAL 376848.98 4% 15073.96 391922.94 66.25 998649.85 3. THE ASSESSING OFFICER THEREFORE H E LD THAT THE INTEREST INCOME OF RS.9 19 649/ - WAS NOT DISCLOSED BY THE ASSESSEE TO THE DEPARTMENT . H E THEREFORE ADDED THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 69 OF THE ACT. ITA NO.6283/DEL/2019 3 4. IN APPEAL THE LEARNED CIT(A) F OLLOWING HIS ORDER FOR AY 2013 - 14 DELETED THE ADDITION BY OBSERVING AS UNDER: - THERE IS ONLY ONE ISSUE WHICH RELATES TO ADDITION OF RS.9 98 649/ - MADE BY THE ASSESSING OFFICER. THE OTHER GROUNDS OF APPEAL ARE NEITHER GENERAL OR CONSEQUENTIAL IN NATURE. T HE ADDITION WAS MADE U/S 69 OF THE IT ACT ON ACCOUNT OF INTEREST @4% ON THE BALANCE OF AN ALLEGED UNDISCLOSED FOREIGN INVESTMENT. HOWEVER THE APPELLANT HAS FILED A COPY OF APPELLATE ORDER IN THE CASE OF THE APPELLANT FOR THE AY. 2013.14 IN WHICH THE ON T HE SAME ISSUE THE APPEAL WAS ALLOWED BEING IDENTICAL ISSUE THE ORDER OF THE THEN CIT(A) - 26 NEW DELHI IN THE CASE OF THE APPELLANT HIMSELF IS FOLLOWED AND ACCORDINGLY THE APPEAL IS ALLOWED. 5. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(A) THE REVE NUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUNDS OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PROTECTIVE ADDITION OF RS.9 98 649/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED INTEREST INCOME WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT SUBMITTED ANY DETAILS REGARDING THE SAME DURING THE ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS. 6. THE LEARNED DR STRONGLY CHALLENGED THE ORDER OF TH E CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE MUST HAVE EARNED INTEREST ON THE OUTSTANDING CREDIT BALANCE IN HIS FOREIGN BANK ACCOUNTS AND THEREFORE THE AO WAS JUSTIFIED IN MAKING THE ADDITION. 7. THE LEA RNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). REFERRING TO THE COPY OF THE ORDER FOR AY 2006 - 07 COPY OF WHICH IS PLACED IN THE PAPER BOOK AT PAGE 1 TO 40 HE SUBMITTED THAT THE ADDITION MADE BY THE AO IN THE IMPUGNED ASSESSMENT YEAR ORIGINATES FROM THE ADDITION MADE IN AY 2006 - 07. REFERRING TO THE ASSESSMENT ORDER FOR 2006 - 07 HE SUBMITTED THAT AN AMOUNT OF ITA NO.6283/DEL/2019 4 RS.1 20 37 863/ - WAS ADDED BY THE AO AS UNDISCLOSED FOREIGN BANK ACCOUNT U/S 69 OF THE ACT BEING THE PE AK BALANCE OF THE ALLEGED FOREIGN BANK ACCOUNT MAINTAINED WITH HSBC BANK SWITZERLAND. HE SUBMITTED THAT IRRESPECTIVE OF THE FATE OF THE SAID ADDITION ASSESSING AUTHORITIES THEREAFTER COMPUTED INTEREST @ 4% ON THE PEAK BALANCE OF THE ALLEGED FOREIGN BANK AC COUNT AND IN SUBSEQUENT YEARS SUCH ADDITION WAS MADE ON THE BASIS OF SUCH PREMISES. ACCORDINGLY AN AMOUNT OF RS.9 98 649/ - BEING INTEREST EARNED ON SUCH ACCOUNT WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE FOR THE CURRENT ASSESSMENT YEAR. HE SUBMITTED T HAT SINCE THE CIT(A) FOLLOWING HIS ORDER FOR AY 2013 - 14 HAS DELETED THE ADDITION AND THE ORDER OF THE CIT(A) IS CRYPTIC THEREFORE THE COPY OF THE ORDER FOR AY 2013 - 14 OF THE CIT(A) IS NECESSARY TO BE GONE THROUGH WHICH IS PLACED IN THE PAPER BOOK PAGE S 44 TO 48. THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FINDINGS OF THE CIT(A) FOR AY 2013 - 14 WHICH READS AS UNDER: - 5. I HAVE CONSIDERED THE FACTS OF THE CASE THE BASIS OF ADDITION MADE BY THE AO AND THE ARGUMENTS OF THE A R DURING ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS. IT IS SEEN THAT THE AO HAS PRESUMED THAT ASSESSEE WOULD HAVE EARNED INTEREST ON THE CREDIT BALANCE IN ITS BANK ACCOUNT AS ON FEBRUARY 2007. FT IS A FACT THAT NO SUCH INFORMATION IS EVIDENT FROM THE DOC UMENTS RECEIVED BY THE AO FROM FRENCH GOVERNMENT UNDER INFORMATION EXCHANGE MECHANISM OF DTAC. THE PERUSAL OF SAID DOCUMENTS ONLY SHOWS THAT MONTH END BALANCES HAVE BEEN WRITTEN IN RESPECT OF THE BANK ACCOUNT OPERATED BY THE APPELLANT AND THERE IS NO MENTI ON OF ANY INTEREST EARNED ON THE SAID CREDIT BALANCES. PERUSAL OF INFORMATION AVAILABLE IN RESPECT OF THE SAID BANK ACCOUNT DOES NOT SHOW PAYMENT OF ANY INTEREST CREDITED WITH REGARD TO THE DEPOSITS. THE PRESUMPTION OF THE AO IS APPARENTLY BASED ON EXPERIE NCE WITH THE INDIAN BANKING SYSTEM WHEREIN THE SAVING BANK ACCOUNTS GENERALLY EARNS AN INTEREST OF 4% OR SO. THE AO THEREFORE APPLIED THE SAME STANDARDS IN RESPECT OF THE CREDIT BALANCES HELD BY THE ITA NO.6283/DEL/2019 5 ASSESSEE IN ITS FOREIGN BANK ACCOUNT AS WELL. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT THE RATE OF INTEREST ON TIME DEPOSIT/FDRS IN DEVELOPED COUNTRIES BANKING SYSTEM ARE GENERALLY FROM LOW AND NOWHERE IN COMPARISON TO THE INDIAN BANKING SYSTEM. IN FACT THE RATE OF INTEREST IN THE CURRENT/SAVING BANK ACCOUN T COULD SOMETIMES BE NEGATIVE IN TERMS OF OPERATIONAL COST OF MAINTAINING SUCH AN ACCOUNT. THIS ONLY HIGHLIGHTS THE ABSENCE OF CERTAINTY IN AO S PRESUMPTION BASED UPON INDIAN BANKING SYSTEM. IT CLEARLY SHOWS THAT THERE IS NO DOCUMENTARY EVIDENCE TO SUPPORT SUCH A PRESUMPTION. IN VIEW OF THESE FACTS THE EARNING OF INTEREST CANNOT BE TAKEN FOR GRANTED SO AS TO BE MADE THE BASIS OF ADDITION OF HAVING EARNED INCOME. IN THE CIRCUMSTANCES THE ADDITION MA DE BY THE AO ON PRESUMPTIVE BASI S IS DIRECTED TO BE DELETED. 8. HE SUBMITTED THAT THE ADDITION IN THE INSTANT CASE IS MERELY BASED ON PRESUMPTION AND SURMISES THAT THE FOREIGN BANK ACCOUNT HELD BY THE ASSESSEE MUST HAVE EARNED SOME INTEREST INCOME. HE SUBMITTED THAT THERE IS NO T A SINGLE DOCUMENT AVAILABLE ON REC ORD TO SUGGEST THAT THE ASSESSEE HAS IN FACT EARNED ANY INTEREST. SINCE THE ADDITION WAS BASED ON MERE PRESUMPTION AND SURMISES THEREFORE SUCH ADDITION MADE ON ACCOUNT OF NOTIONAL INTEREST BEING HYPOTHETICAL INCOME AND NOT REAL INCOME CANNOT BE ADDED T O THE TOTAL INCOME OF THE ASSESSEE . HE SUBMITTED THAT THE INCIDENCE OF TAX LIES ONLY ON REAL INCOME. FURTHER THE RATE OF INTEREST @ 4% I S NOT RATIONAL WHATSOEVER AND ARBITRARY AND FICTIONAL. HE SUBMITTED THAT THE MANNER OF ARRIVING AT SUCH ARBITRARY RAT E HAS ALSO NOT BEEN PROVIDED IN THE ASSESSMENT ORDER . RELYING ON VARIOUS DECISIONS HE SUBMITTED THAT ADDITIONS MADE BY THE INCOME TAX AUTHORITIES CAN BE SUSTAINED ONLY ON CREDIBLE AND COGENT EVIDENCE AND A FICTION CANNOT BE FOISTED UPON ANOTHER FICTION. HE SUBMITTED THAT WHERE REVENUE FAILS TO DEMONSTRATE THE SAME THE ADDITION MADE ON THE SAID BASIS ARE LIABLE TO BE DELETED AND SET ASIDE. ITA NO.6283/DEL/2019 6 8.1 REFERRING TO THE COPY OF THE ASSESSMENT ORDER FOR AY 2006 - 07 COPY OF WHICH IS PLACED AT PAPER BOOK PAGE S 1 - 40 THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PAGE 3 TO 7 OF THE SAID ORDER ON WHICH THE INFORMATION RECEIVED FROM THE FRENCH GOVERNMENT ABOUT THE EXISTENCE OF THE HSBC BANK ACCOUNT HAS BEEN REPRODUCED. REFERRING TO PAGE S 10 - 17 OF THE ORDER HE DREW THE ATTENTION OF THE BENCH TO THE TRANSLATION OF THE SAME IN ENGLISH. HE SUBMITTED THAT HSBC BANK ACCOUNT IN THE NAME OF ASPREY WORLDWIDE SA WAS CLOSED ON 14.12.2005. SIMILARLY HSBC ACCOUNT IN THE NAME OF RONDERBERG LIMITED WAS CLOSED ON 25.01.2006 AND HSBC ACCOUNT OF TAIRA FOUNDATION WAS CLOSED ON 03.01.2006. THIS FACT HAS BEEN ADMITTED BY THE AO IN THE ASSESSMENT ORDER F OR AY 2006 - 07. HE ACCORDINGLY SUBMITTED THAT WHEN THE BANK ACCOUNTS ARE CLOSED W AY BACK IN FINANCIAL YEAR 2005 - 06 AS ADMITTED BY THE AO IN THE ASSESSMENT ORDER FOR AY 2006 - 07 THEREFORE THE QUESTION OF MAKING ANY ADDITION ON ACCOUNT OF NOTIONAL INTEREST FOR THE IMPUGNED ASSESSMENT YEAR DOES NOT ARISE. 9. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH TH E SIDES PERUSED THE ORDERS OF THE AO AND LEARNED CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. A PERUSAL OF THE TABLE REPRODUCED BY THE AO AT PAGE 2 AND 3 OF THE ASSESSMENT ORDER SHOWS THAT THE NOTIONAL INTEREST COMPUTED BY THE AO CONTAINS THE NAME OF THE PROFILE CLIENT WHICH ARE ASPREY WORLDWIDE S.A. . RONDERBERG LTD. AND TAIRA FOUNDATION. THE SE NAMES CLAIMED MATCH WITH THE NAMES MENTIONED IN THE ASSESSMENT ORDER FOR THE ITA NO.6283/DEL/2019 7 AY 2006 - 07 WHEREIN THE ADDITION WAS MADE ON ACCOUNT OF PEAK BALANCE APPEARING IN THESE BANK ACCOUNT S . IT IS ALSO MENTIONED IN THE SAID ORDER THAT THE BANK ACCOUNTS ARE CLOSED IN FY 2005 - 06 ON DIFFERENT DATES. THEREFORE I FIND MERIT IN THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IF THESE ACCOUNTS WERE CLOSED IN FY 2005 - 06 THEN THE QUESTION OF COMPUTING ANY NOTIONAL INTEREST FOR THE IMPUGNED ASSESSMENT YEAR DOES NOT ARISE. IN MY CONSIDERED OPINION NO INTEREST INCOME CAN BE EARNED ON A BANK A CCOUNT DURING AY 2016 - 17 WHICH STAND CLOSED IN AY 2006 - 07. HOWEVER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN INTEREST OF JUSTICE I DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR ADJUDICATION OF THE ISSUE AFRESH WITH T HE FOLLOWING OBSERVATIONS/ DIRECTION S : - I. THE ADDITION TOWARDS INTEREST ON OUTSTANDING CREDIT BALANCE IN FOREIGN BANK ACCOUNT CAN ONLY BE MADE ON THE BASIS OF SOME EVIDENCE/ MATERIAL . A DDITION CANNOT BE SIMPLY MADE ON THE BASIS OF PRESUMPTION AND SURMISES. II. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THIS BANK ACCOUNT WHICH IS THE BASIS FOR COMPUTING NOTIONAL INTEREST WERE ALREADY CLOSED IN FY 2005 - 06 AND THE CLIENT PROFILE NAMES MENTIONED IN THE ASSESSMENT ORDER FOR AY 2016 - 17 MATCH WITH THE NAMES APPEARING IN THE ASSESSMENT ORDER AY 2006 - 07 IN ASSESSEE S OWN CASE. THEREFORE THE AO IS DIRECTED TO VERIFY THE ABOVE AND IF THESE ACCOUNTS HAVE BEEN CLOSED THEN NOT TO MAKE ITA NO.6283/DEL/2019 8 ANY ADDITION SINCE NO INTEREST CAN BE EARNED ON CLOSED BANK ACCOUNT S. III. IF THE AO FIND S ANY EVIDENCE/MATERIAL THAT THERE EXIST S ANY OTHER UNDISCLOSED BANK ACCOUNT APART FROM THE ON ES MENTIONED ABOVE IN THE NAME OF THE ASSESSEE ONLY THEN AN ADDITION HOLDING INTEREST EARNED O N SUCH BANK ACCOUNT IS CALLED FOR AND THAT TO AT A REASONABLE RATE OF INTEREST. 10. ACCORDINGLY THE ORDER OF THE LEARNED CIT(A) IS SET ASIDE AND THE MATTER IS REMANDED BACK TO THE AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE DIRECTION /OBSERVATION . THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 11. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .03.202 1. SD/ - - SD/ - ( SUCHITRA KAMBLE ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMB ER DELHI/DATED - 31. 0 3 .2021 SHEKHAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BY ORDER ASSISTANT REGISTRAR ITAT DELHI