Hassan Ali Khan vs. DCIT (ITAT Mumbai)

(i) As regards the addition for Rs.10,494 crores (USD 2.4 billion) toward transfer instructions, the same bears specific instructions, drawn on the assessee’s account number (206-794.786). The valuation date is the material date, on which the instruction is executed and, accordingly, the conversion rate is adopted for that date. The same being found during search, from his control and possession, in the form of a pen drive at the residence of KT, is to be regarded as true as regards its contents in view of section 292C of the Act. The assessee denying any knowledge thereof, despite several reminders, the same came to be added as income by way of unexplained investment. The assessee being unable to improve his case in any manner in appeal, the same stood confirmed; the assessee continuing to deny the existence of the accounts, and his arguments being general as in nature, as adopted for the earlier years as well, duly met by the ld. CIT(A) (refer para 6 of this order).

(ii) We are acutely conscious that the amount under reference is astronomical. At the same time, however, we cannot disregard the clear evidences found in or as a result of search. The additions made, it may be appreciated, are only on the basis of objective materials – totally unexplained and, further, in agreement with the other materials found and in possession of the Revenue. Why, the notarized statement dated 30.06.2003 supra (Ann. C), itself contains details of the assessee’s relationship with UBS, with account opened as far back as in 1982, with USD 5M, as also details of transfer of huge funds. The assessee’s stand of complete denial is only toward stalling the process of law, which continues even before us. The same is clearly aimed at providing no clue whatsoever to the Revenue as to how he, at best only a horse trainer in India, had access to such sums, visiting and staying at Switzerland, Dubai, London, Hongkong, etc. on a regular basis, in fact since 1980s.

(iii) The assessee’s case, across all the years, is the same, i.e., of denial, alluding to the UBS AG report dated 30.10.2007 and the result of the investigations by ED, stating of complaints by it being ultimately filed only in May, 2011, and only on two counts. The reliance on the UBS report stands discussed at paras 11 and 12 of this order. The contention qua ED is not supported by any material on record. We have further explained that the proceedings under PMLA stand on a different footing, and that the request for mutual legal assistance by the Indian authorities would stand to be considered and responded to by the Swiss authorities on a clear nexus between the predicate offences and the funds, i.e., for/qua which information/assistance is sought. The investigation by ED, which is thus at a trial stage, would be of little consequence in the proceedings under the Act, which are or can be decided upon on the basis of preponderance of probabilities, and toward which the ld. DR has cited abundant case law, viz. CIT vs. Empire Builtech Pvt. Ltd. [2015] 228 Taxman 346 (Del)(Mag.); Umakant B. Agrawal vs. Dy. CIT [2014] 369 ITR 220 (Bom); CIT vs. Narinder Kumar Sekhri [2015] 228 Taxman 35 (P&H)(Mag); Edayanal Constructions vs. CIT [1990] 183 ITR 671 (Ker). In fact, that apart, the decision in the case of Sumati Dayal v. CIT [1995] 214 ITR 801 (SC), rendered considering four precedents by the hon’ble Apex Court, is a locus classicus on the subject.

(iv) As regards the objection of the documents being not subject to apostille, the same is essentially a question of authenticity of the document. This is as the apostille only certifies the signature; the capacity of the signer; and the seal or stamp it bears, and does not certify the content of the document for which it is issued. The documents being presented by the assessee would only have been sent directly by the Bank to ED in India, so that it would in any case stand to be verified there-from. The same, as well as the accompanying report by Deloitte AG, Zurich, are marked as ‘confidential’. The question as to how the assessee obtained the same does arise. It, in fact, clearly proves the assessee’s connections not only in India but even abroad; he being able to access confidential communication between UBS AG and the Swiss National Bank, as well as the accompanying report by an independent auditor, made available directly to the bank for its purposes. But, then, should we allow that consideration to weigh when an issue is to be decided on the basis of ‘facts’, so that any document that is relevant and purports to reveal the truth, should be, in principle, and subject to the provision/s of law in the matter, considered. In fact, the documents being presented by the Revenue are also, similarly, not apostilled. However, as afore-stated, the documents being presented are direct communications between the relevant (competent) authorities of the two countries, sent through the proper channel, so that authenticity thereof cannot be doubted, or the same insisted for being subject to the regular verification procedure and, in any case, could be got verified from the concerned Department, which (procedure) shall also establish the veracity (of the contents) of the document/s.

(v) Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 is a provision regarding production of additional evidence before the Tribunal. The rule places a total ban on the parties to the appeal to produce additional evidence, either oral or documentary, before the tribunal. But the tribunal is vested with a judicial discretion to allow the production of the additional evidence in the following circumstances: i. if the tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause; or ii. if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them, or not specified by them. On the existence of either of the circumstances mentioned above, the tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. The rule does not thus enable an assessee or the Department to tender fresh evidence to support a new point or to make out a new case. Additions in the present case are based on the information received from ED as well as that found and seized upon search dated 05.1.2007 at the residences of the assessee and others, including Kashinath Tapuriah, on the ground of the same being not satisfactorily explained. The Revenue, acting through the proper channel, has sought further information and made inquiries into the affairs of the assessee. It is the result of such post search enquiries, received from time to time, which it claims as relevant and material, and seeks admission as additional evidence. How could then, we wonder, it validly object to the assessee’s prayer for, similarly, admission of the reports received as a result of such enquiries. If the Revenue’s plea is accepted, there is no reason not to accept that of the assessee, the two being of the same genre, supported by the same reasons. So, however, the terms of rule 29 would have to be regarded and satisfied, i.e., quite apart from the validity of the Revenue’s objection, and which (rule) itself obliges the tribunal to record reasons for such admission or, as the case may be, production or examination.

(va) The tribunal’s power to admit additional evidence is strictly limited. The Hon’ble jurisdictional High Court in Velji Deoraj & Co. vs. CIT [1968] 68 ITR 708 (Bom) clarified that the admission of additional evidence is made to depend not on the relevancy or materiality but upon the fact whether or not the appellate court requires the evidence to enable it to pronounce the order or for any other substantial cause. Further, the mere fact that the evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at the appellate stage, especially when the evidence was available to the party at the initial stage and had not been produced by him. This, it was further explained, is as the rule is not to allow a litigant, who has been unsuccessful in the lower courts, to patch up the weak parts of his case and fill up the omissions in the court of law. The admission of additional evidence by the tribunal is thus dependent on the tribunal requiring it for the purpose of pronouncing its judgment or for the purpose of curing some inherent lacuna which it has itself discovered (refer pgs. 713- 715 of the reports). In this context, it would be useful to refer to the constitutional bench decision in K. Venkataramiah vs. A. Seetharama Reddy AIR 1963 SC 1526, 1530, wherein it was observed in the context of the provision of Order 41, Rule 27(1) of Code of Civil Procedure, 1908, to which r. 29 is similar in terms, that the appellate court has the power to allow additional evidence not only where it requires such evidence to enable it to pronounce the judgment but also for any other substantial cause. There may well be cases where even though the Court finds that it is able to pronounce the judgment on the state of record as it is, so that it cannot strictly be said that it requires additional evidence to enable it to pronounce the judgment, it still considers that in the interest of justice something which remains obscure should be filled up, so that it can pronounce its judgment in a more satisfactory manner. Such a case will be one for allowing additional evidence for any other substantial cause under Rule 27(1)(b) of the Code. This aspect was again emphasized recently by the Hon’ble Court in Ibrahiam Uddin and Anr. [2012] 8 SCC 148, wherein it was explained that the words ‘for any other substantial cause’ must be read with the word ‘requires’ in the beginning of the sentence, so that it is only where, for any other substantial cause, the appellate court requires additional evidence, that this rule shall apply, for example, when evidence had been taken by the lower courts so imperfectly that the appellate court cannot pass a satisfactory judgment (refer pg. 168 of the reports). This view stands also expressed by the Hon’ble jurisdictional HC in Suhasinibai Goenka vs. CIT [1995] 216 ITR 518, 521-22 (Bom), stating that r. 29 allows the exercise of the power for production of additional evidence for a fair and just disposal of the appeal. Surely, the result of the enquiries initiated by GOI in the matter or even that subsequently need to be taken on record in arriving at our conclusions thereon in-asmuch as they enable us to pass orders which are consistent with and, in any case; the same being not binding on this tribunal, take into account the results of such enquiries. This is more so as the decision/s by the Revenue in the matter are based primarily on the preponderance of probabilities. In fact, copy of the facsimile dated 15.1.2007 by the Swiss Federal Government, or the report dated 30.10.2007 by UBS AG to the Swiss National Bank, etc. are documents which were available at the time of assessment, so that they ought to have been considered or taken into account by the Revenue, providing, in all fairness, a copy thereof to the assessee. The assessee, whatever his conduct in the proceedings before the Revenue may have been, could not possibly have access thereto. A decision, after all, is only to be taken on the basis of the facts established or inferable from the material on record. We are, accordingly, prima facie, inclined to admit the material sought to be placed on record, both by the assessee and the Revenue.

(vi) The assessee’s claim is even otherwise legally sustainable in-as-much as notice u/s.143(2) is not a prerequisite for framing an assessment u/s. 153A, which provision itself confers jurisdiction to frame the assessment of the total income for each of the relevant years. Notice u/s. 143(2), clearly procedural, was considered by the Hon’ble Apex Court as mandatory in CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC) only on account of it assuming a jurisdictional character. The view in this respect, expressed by the Hon’ble Delhi High Court in Ashok Chaddha vs. ITO [2011] 337 ITR 399 (Del), rendered considering the decision in Hotel Blue Moon (supra), has since been adopted by the tribunal in Sumanlata Bansal vs. Asst. CIT (in ITA Nos. 525-530/Mum/2008 dated 20.5.2015 – reported at 2015-TIOL-1053-ITAT-Mum-TM).

(vii) We are, however, unable to read the statement of account as at 13.3.2001 (annexed as Annexure B to this order) as being the statement of profit of the said two companies or the earnings of the assessee there-from, at least in its entirety, as inferred by the Revenue. The bank particulars, i.e., to which the amount (DHS 151, 197.94) is to be transferred, is also mentioned therein. To whom does this bank account belong? The amounts are in respect of different matters, identified by number and brief description, for which invoices (number and date specified) have been raised. The statement also includes fees as well as costs which are yet to be billed, i.e., as on 13.3.2001. The same, even if not in its entirety, pertains to these companies. The assessee has not explained the document in any manner, giving an evasive reply, nor has it been enquired into the Revenue. One thing, however, is clear, i.e., the two companies – Payson Company Ltd. and Autumn Holdings Ltd., were existing during the relevant year, and had transactions therein. This is also the unmistakable inference; rather, the admitted position that also flows from the Agreement dated 07.8.2001 supra. True, where the assessee does not lead the best evidence in his possession, which could throw light on the issue in controversy, and withholds it, the court may draw an adverse inference (Section 114, Illustration (g), of the Evidence Act, 1872), even as clarified in, inter alia, CIT v. Sanjay Jain [2015] 230 Taxman 550 (Cal). At the same time, however, the inference could only be as arising from the material in the possession of the Revenue. Who has drawn this statement or the invoices noted therein? What is the nature of the services provided by the assessee in the past, for which consultancy fees and commission had been charged and paid? (refer para 8.1, Annexure B to this order). Are the invoices, as listed in the statement, raised or to be raised in respect of such like charges? If the amount is due from these companies, which are separate companies, why is a single statement drawn? Is the amount already billed accounted for in the books of the corresponding companies? Was the money received, toward which bank account particulars are also specified? The assessee has maintained complete passivity in the instant proceedings, refusing to divulge any information. The assessee’s name is conspicuous by it’s absence in the document, so that the only link with the assessee could be the bank account specified, as well as the consultancy fees received, similarly, in the past. Also relevant would be the place, circumstances, and the proceedings under which the document was recovered by ED. The information being received from ED, it would surely have probed the matter and, if so, the nature of its finding, if any, may be relevant. The matter is, clearly, factually indeterminate, and requires further investigation before some definite findings are arrived at. Toward the tribunal’s competence to direct so, we may refer to s. 254(1) of the Act r/w r. 28 of the Rules (also refer: Hukumchand Mills Ltd. vs. CIT [1963] 63 ITR 232, 237 (SC); Bhor Industries Ltd. vs. CIT [1963] 48 ITR 376, 403 (Bom); Tarajan Tea Co. (P.) Ltd. vs. CIT [1994] 205 ITR 45 (Gau)), to cite few.

(viii) The assessee claiming that no transfer of funds had, however, been effected, would be of little moment in-as-much as the addition is toward unexplained money or bank deposit. True, the same may be lying in his account, in whole or in part, from an anterior date, falling in a preceding year. However, it is for the assessee to exhibit so – in explanation of the nature and source of acquisition of the money he is found to be in possession of, as statutory obliged to u/ss. 69/69A, lest the deposit be deemed as his unexplained income for the relevant year, i.e., the year for which he is so found. It is open for the assessee to show that the sum of money – to whatever extent, is brought forward from an earlier period, or otherwise does not represent his own capital – as where it is by way of a loan, or despite being his capital, represents a capital receipt, so that it cannot be brought to tax as his income. He, however, does not do so, and merely denies the existence of the account without adducing any evidence toward the same. Again, it is open to be argued that the transfer instruction would not by itself establish the balance in account to that extent. A transfer instruction (TI) is akin to a (non-negotiable) cheque drawn on his bank by the account holder, specifying also the account particulars of the transferee. Its’ preparation itself is an expert job, with the assessee being assisted in this regard by the bank officials (also refer para 11.4). We have already clarified that the document is to be regarded as reliable, with persuasive evidentiary value. The same implies that such an instruction was in fact issued to his bank (UBS AG) by the assessee. If that be so, the said account, by necessary implication, had balance at least to that extent on the relevant date. True, the burden of proof that there is unexplained money, investment, etc. is on the Revenue. The same, however, can be discharged by it by establishing facts and circumstances from which a reasonable inference toward the same can be drawn (refer: Sudhakaran (C. K.) vs. ITO [2001] 279 ITR 533 (Ker)). The assessee is required to disprove the said document, and the logical inference/s that flows there-from.

(ix) The Revenue, to proceed against the assessee, must have definite information with regard to the assessee being in possession of monies or holding investment. This is in view of the salutary principle of common law jurisprudence, embodied u/s.110 of the Evidence Act, i.e., that possession implies ownership, so that the onus of proving that the possessor is not the owner is on the person so alleging. This principle is also applicable to tax proceedings, incorporated in the Act (under Chapter VI), so that the principle would be attracted to a set of circumstances that satisfies its conditions. The expression ‘income’ under the Act, a term of wide import, is applicable to section 69A, among others, of the Act (refer: Chuharmal vs. CIT [1988] 172 ITR 250 (SC)). The assessee, claiming to have no foreign bank accounts, concedes subsequently (on the basis of a report by UBS AG, Zurich – which has been taken as part of the record) to have a limited banking relationship with UBS AG, Zurich. The said report, for the reasons afore-discussed, cannot be considered as completely reliable.

(x) We are conscious that no account number is mentioned in the transfer instruction. Could that, however, be interpreted as it bearing no account number, defeating the exercise or the very purpose of issuing the same? It is not unusual not to write information, deemed confidential, except in the original copy, i.e., on the basis of which the execution is to be made/is sought. Likewise for the non signing of the transfer instruction; it being usual not to ascribe the signature on the office copy. In fact, TIs have been found in search, as Annexure 12 to the assessment order for the current year, which bears both the account number (written by hand in the place provided for it in the letter, as in the instant transfer instruction), as well as the assessee’s signature. The absence of these attributes would, thus, in our view, be of little moment. In-as-much as, however, the account number, which is not mentioned, could be any of the accounts which the assessee is found to be associated with, he shall be required to obtain the relevant record of his accounts (i.e., accounts of which he is either the holder or beneficiary or POA holder), and satisfy the Revenue with regard to the non-maintenance of any balance (or of a lower balance) therein at the relevant time. For the transfer instruction bearing an account number, as the one dated 23.7.2000 supra, the validity or otherwise of the inference could be dislodged by producing the said information with regard to the account number specified therein.

(xi) We are conscious that the transfer instruction bears no account number. To accept, as contended, that the transfer instruction of a sum to an account which, as confirmed by the said report itself, belonged to an Indian national (though since closed) was issued without there being any account of the issuer of the instruction at the relevant time, is fatuous, if not also farcical. The assessee has, as it transpires, issued not one but several transfer instructions, from time to time, which have been found as a part of the seized material from his residences, or that of KT at Kolkata, searched simultaneously. The information/TIs provided by ED, who joined forces with the Department, besides being equally reliable, are corroborative. The same thus have strong evidentiary value, quite apart from s. 292C, which shall apply to all the documents found in search, so that their contents, unless shown otherwise, are to be regarded as true (ref: Surendra M. Khandhar v. CIT [2010] 321 ITR 254 (Bom)). The beneficiary is clearly specified, confirmed by the Revenue as an existing person, with complete bank particulars, again, found as correct. That, therefore, there is an account/s, even if unspecified, with reference to which the transfer instruction was issued by the assessee, is the only reasonable inference that emanates in the facts and circumstances of the case. The premise of the assessee’s – who has not explained as to why this, or any of the several transfer instructions were issued by him to different persons, for different amounts, and even from different places, from time to time – case is that the Revenue is obliged to prove beyond doubt that income was generated by him. Couple this with a complete denial of the transactions, his case cannot but be discountenanced. The assessee, who is in fact applied for & obtained a new PAN from the Department at Mumbai in 2005, claiming to be a new assessee notwithstanding he being an existing assessee – filing returns (up to A.Y. 1999-2000) at Hyderabad, shall, therefore, be required to obtain a clear certificate of not maintaining any account, either as an account holder or its beneficiary or as its POA, i.e., of which he is the owner of or could operate, as specified in the various documents found in search or otherwise transmitted to the Revenue. He cannot, after all, it must be appreciated, prove a negative, i.e., that he does not have any account with UBS AG (on which transfer instruction is drawn), other than he is found to be associated with in any capacity, either on the basis of the various documents in the possession of the Revenue or per the UBS AG report, since admitted in evidence. For these accounts, however, he is obliged to produce an authentic statement of account for the relevant period. The assessee could disprove the said document by a certificate from his Bank that no such transfer instruction dated 16.7.2000 (i.e., the specified transfer instruction) was in fact received or processed by it. In-as-much as the account number (on which the TI is drawn), which is unspecified, could be any of the account numbers which find reflection in the various documents found and seized by the Revenue in search or otherwise in its possession from reliable sources, the assessee, to decisively disprove the document, would require a statement of account for the relevant year in respect of such accounts. We may hasten to add that we are, when we state so, not foreclosing the assessee’s options in any manner. It is equally open to him to explain the document, as indeed the law obliges him to. That is, why and under what circumstances the TI was issued on his bank, for a specified amount, favoring a specified beneficiary (by name and/or account) and, as a concomitant, the nature and source of the funds in his account/s. The notarized statement dated 30/6/2003 (refer para 11.5), as apparent, does not throw any light on this aspect, except that HAK had access to huge funds and, besides investments, was also called upon to finance projects.

(xii) Ground 11 impugns the non-grant of telescoping benefit. No such case was made out before the authorities below. How could then the assessee be aggrieved? Even the assessee’s written submissions are silent on this. The plea could in fact be available only where the assessee accepts the addition, claiming a double addition, leading to a double jeopardy. Be that as it may, we have already restored the assessment on some grounds, while confirming some additions. The principles of telescoping are well laid out by the Hon’ble Apex Court, as in the case of Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 (SC). The AO shall, in the set aside proceedings, consider the assessee’s case in this respect, where one is made out, in accordance with law. This disposes the assessee’s said ground, as well as similar ground/s for other years as well, where we observe the assessee contends of an addition as having been already returned, i.e., forming part of his returned income. The AO shall allow credit on the basis of verifiable cash flows, assuming annualized income/expenditure on a uniform basis, while taking others on the basis of actual date (of investment, expenditure, etc.), also accounting for the payment of tax, again, on defined dates. We decide accordingly.
(xiii) Before parting, we may highlight and deal with another aspect of the matter. It may be argued that in-as-much as the hard copy of certain documents are only printouts of different documents found from the laptop of PA, who happened to be staying at the residence of the assessee at the time of search on 05.1.2007, the same cannot be regarded as documents to which the statutory presumption of section 292-C of the Act shall apply. In this regard, in our view, the argument is both legally and factually untenable. The words used in the provision are ‘any person’, so that it may not necessarily be the assessee himself. On facts, the man (PA), in whose laptop the documents were stored, as also noted by both the AO & the ld. CIT(A), has not owned these documents, clearly stating them to belong to the assessee. He himself, closely associated with the assessee, was engaged for representing the assessee internationally, having several transactions with him (refer para 24). His residing at the assessee’s residence, having, by own admission, come to India in October, 2006, only to pursue the assessee for his outstanding payments, was thus only in relation to his work/assignment. The same clearly proves that the two were well known to each other and, further, as between the two, they did indeed enter into transactions, or transacted business/es, entailing financial obligations and commitments on the part of the assessee, which he did not, however, meet in whole or in part. In fact, materials, apart from that found from the seized laptop, were also seized, which are corroborative, independently establishing their veracity. That is, the truth of the documents gets established even independent of the provision of s. 292-C of the Act. The statement/s by PA, made on oath, would be admissible in evidence u/s.132(4) or, as the case may be, s. 131 of the Act. The assessee in fact has not denied or rebutted the statement/s; rather, further presses on PA’s statement/s before the ED in proceedings under PMLA, without of course making them a part of the record. The plea that the laptop did not belong to the assessee, but to PA, which may well be true, would thus be of no moment, both in law as well as in the facts and circumstances of the case.