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DATE: September 10, 2020 (Date of pronouncement)
DATE: October 31, 2020 (Date of publication)
AY: 1999-2000 to 2002-03
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CITATION:
S. 69/69A HSBC Bank Black Money: The AO has to prove that the money belongs to the assessee. If the assessee files necessary evidences to prove that the unexplained money does not belongs to him, the onus shift to the revenue to prove that the unexplained money in fact belongs to the assessee. Unless the AO proves that unexplained money is belongs to the person, he cannot make any addition in the hands of the assessee. The fact that the assessee is a joint holder of the bank account does not mean that the money belongs to him if the evidence suggests that the money belongs to the other holder

It is the case of the Ld. AO that account with HSBC bank , Geneva is opened by resident Indian and black money earned by such resident Indian has been stashed abroad without paying taxes/disclosing income in India. But, fact remains that in the instant case, the account was opened in 1998, when the assessee himself and Mr. Dipak Galani permanently resided in outside India for 30 years and had no intention to come to India at that time. Further, both of them have no source of income in India, during the course of their residence abroad. Therefore, we are of the view that entire motive as presented by the Ld. AO defines all logic of opening of a secret bank account in Geneva, by NRI to stash unaccounted income taxable in India fails. The ld. AO mechanically disregarding all explanations furnished by the assessee as to the ownership of the account along with the corroborative materials is contrary to the settled position of law, because, once assessee has provided a reasonable explanation about ownership, then the onus was on the Ld. AO to establish that account belongs to the assessee.

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DATE: October 16, 2019 (Date of pronouncement)
DATE: October 25, 2019 (Date of publication)
AY: -
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CITATION:
Undisclosed income/ expenditure: A letter written in refutal of allegations contained in a news items with a without-prejudice offer cannot be treated as admission of non-disclosure or as an unconditional offer to pay tax. Also, the disclosure is by the USA Co and not by the assessee. It is not the case of the Dept that the amount has been received in the accounts of the assessee or spent for and on behalf of the assessee so as to be treated as undisclosed income of the assessee

In our opinion, such communication(s) cannot be treated as admission of non-disclosure as such. What is significant to note is that in the present case, the disclosure is attributed to Goodyear Tyre & Rubber Co., USA, filed by it in the proceedings in USA; and not by the assessee as such. It is not the case of the Department that the amount referred to in the said disclosure has been received in the accounts of the assessee or spent for and on behalf of the appellant – assessee under instruction, so as to be treated as undisclosed income of the appellant.

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DATE: August 21, 2019 (Date of pronouncement)
DATE: October 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination

The entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Returnthe entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return

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DATE: April 22, 2019 (Date of pronouncement)
DATE: June 26, 2019 (Date of publication)
AY: 2006-07
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CITATION:
S. 6, 68, 69: Law explained on (i) when an Indian citizen or person of Indian origin can be said to have come on "visit to India" so as to qualify as a "Non Resident" u/s 6(6) r.w. CBDT Circular No. 7 of 2003 & (ii) whether amount found deposited in a foreign bank is taxable in India u/s 68 & 69 if the assessee is a "Not Ordinary Resident"

In that view of the matter, clause (a) of Section 6(1) would not apply. It is true that in absence of clause (b) of Explanation 1 below Section 6(1) of the Act, the assessee would have fulfilled the requirements of clause (c) of Section 6(1). However, as per the explanation, if the assessee comes to a visit in India, the requirement of stay in India in the previous year would be 182 days and not 60 days as contained in clause (c). These facts would demonstrate that the assessee had migrated to a foreign country where he had set up his business interest. He pursued his higher education abroad, engaged himself in various business activities and continued to live there with his family. His whatever travels to India, would be in the nature of visits, unless contrary brought on record

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DATE: February 11, 2019 (Date of pronouncement)
DATE: April 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 68/69 Bogus Purchases: Even if the purchases are bogus, the entire purchase amount cannot be added. As the department had not disputed the assessee's sales & there was no discrepancy between the purchases and the sales, the purchases cannot be rejected without disturbing the sales in case of a trader. The addition has to be restricted to the extent of the G.P. rate on purchases at the same rate of other genuine purchases (N.K .Industries 292 CTR 354 (Guj), N. K. Proteins 250 TM 22 (SC) distinguished)

In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee’s additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee’s sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases

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DATE: November 16, 2018 (Date of pronouncement)
DATE: November 21, 2018 (Date of publication)
AY: 2006-07, 2007-08
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CITATION:
S. 68 Black Money in HSBC Bank Account (i) Non-residents are not required to disclose their foreign bank accounts and assets to Indian income-tax authorities (ii) The assessee cannot be asked to prove the negative that the credits found in HSBC Bank is not sourced out of income derived from India (iii) the Govt / legislature never intended to tax foreign accounts of non residents (iv) mere holding of an account outside India does not have led to the conclusion that the amount is tax evaded

It is very clear from the clarifications issued by the Government itself that the legislature does not wish to take any action in respect of non residents holding foreign bank accounts. Further, even in the excel utility of return of income in the income-tax department website, the moment a person fills his residential status as non resident, the excel utility prevents filling of columns pertaining to foreign assets. Even, the Hon’ble Finance Minister has clarified that all accounts in foreign bank may not be illegal as they may belong to NRI. Thus, even the government has acknowledged the fact that an NRI foreign bank account is not illegal

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DATE: May 4, 2018 (Date of pronouncement)
DATE: June 30, 2018 (Date of publication)
AY: -
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CITATION:
S. 69 Bogus Purchases: Purchases cannot be treated as Bogus if (a) they are duly supported by bills, (b) all payments are made by account payee cheques, (c) the supplier has confirmed the transactions, (d) there is no evidence to show that the purchase consideration has come back to the assessee in cash, (e) the sales out of purchases have been accepted & (f) the supplier has accounted for the purchases made by the assessee and paid taxes thereon

It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises

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DATE: August 29, 2017 (Date of pronouncement)
DATE: September 4, 2017 (Date of publication)
AY: 2009-10 to 2011-12
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CITATION:
Bogus Purchases: If the AO has not disputed the genuineness of sales and the quantitative details and the day to day stock register maintained by the assessee, a trader, he cannot make an addition in respect of peak balance of the bogus purchases. He can only determine the element of profit embedded in the bogus purchases. On facts, the addition is restricted to 2% of the bogus purchase

AO has not disputed the quantitative details and also day to day stock register maintained by the assessee. Assessee company being a trader of goods, AO not having doubted the genuineness of sales, could not have gone ahead and made addition in respect of peak balance on such purchases. Accordingly, CIT(A) concluded that issue boil down to find out the element of profit embedded in bogus purchases which the assessee would have made. When the corresponding sales have not been doubted and the quantitative details of purchases and sales vis-a-vis stock was available, we deem it appropriate considering the entirety of facts and circumstances of the case to restrict the addition to the extent of 2% of such bogus purchase. Accordingly, the order of both the lower authorities are modified and AO is directed to restrict the addition to the extent of 2% on such purchases.

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DATE: July 14, 2017 (Date of pronouncement)
DATE: July 20, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 69A: NDTV indulged in a clear cut case of "abuse of organization form/ legal form and without reasonable business purpose” and therefore, no fault can be found with the order of the AO in charging to tax Rs. 642 crores by re-characterizing the conditions according to its economic substance and imposing the tax on the actual controlling Indian entity. There is no doubt that the transaction used principally as a devise for the distribution/ diversion of sum to the Indian entity. The beneficial owner of the money is the assessee

It is a clear out case of “abuse of organization form/ legal form and without reasonable business purpose and therefore, no fault can be found with the order of the Id Assessing Officer/ Id DRP in charging to tax Rs. 642 crores by re-characterizing the conditions according to its economic substance and imposing the tax on the actual controlling Indian entity. In the present case we do not have any doubt that the transaction used principally as a devise for the distribution/ diversion of sum to the Indian entity on review of all the facts circumstances surrounding the present transaction. In the present case, the beneficial Owner of the money is the assessee. This money trail stares so glaringly on the various complex structures created by the assessee that without proving any substance one cannot reach to any other conclusion but to the conclusion that series of the transaction entered into by the assess were to transfer Rs. 642 crores from the investor-company or the owner of the investor company to the assessee

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DATE: July 14, 2017 (Date of pronouncement)
DATE: July 20, 2017 (Date of publication)
AY: 2003-04
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CITATION:
S. 292C: An addition cannot be made on the basis of a handwritten loose paper which does not indicate if it pertains to the assessee and if AO has not brought on record any forensic evidence to prove the handwriting of the assessee. An addition cannot be made on the basis of suspicion and guesswork and without bringing corroborative material on record

The ITAT in the impugned order noted that the said document “does not indicate if it pertains to the assessee nor the address and location of the property is mentioned therein nor such property has been located by the AO during the assessment proceedings. The AO has also not brought on record any forensic evidence to prove the handwriting of the loose paper relied upon by him to make the addition, which is exclusively made on the basis of suspicion and guesswork. Even no corroborative material has brought on record by the AO to substantiate the addition nor the CIT(A) has called for any remand report seeking corroborative evidence, if any.” In the considered view of the Court, the addition of Rs. 49 lakhs to the returned income of the Assessee was based on surmises and conjectures and that too on the basis of a single document without making any further enquiry. No attempt was made by the AO to find out if in fact it constituted the construction expenses of any project of the aforementioned company of which the Assessee was a director

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