Facts of the Case

The appellant/assessee was subjected to a search operation conducted on 14.11.2011 under Section 132 of the Income-tax Act. Subsequently, assessment proceedings were initiated under Section 153A for Assessment Year 2006–07.

The Assessing Officer made an addition of ₹69,07,414/- alleging undisclosed deposits in a foreign bank account (HSBC Bank, Geneva), based on certain information purportedly available with the department.

The assessee contended that:

  • No incriminating material was found during the search.
  • The information relied upon by the Revenue was already available prior to the search.
  • The alleged foreign bank account was denied, and the documents relied upon were unverified and unreliable. 

Issues Involved

  1. Whether addition under Section 153A can be sustained in absence of incriminating material found during search?
  2. Whether pre-existing information (not discovered during search) can justify reassessment under Section 153A?
  3. Whether the Revenue discharged its burden of proving undisclosed foreign bank account?

Petitioner’s Arguments

  • No incriminating material was found during the search operation.
  • The information relating to HSBC account existed prior to the search and hence could not justify action under Section 153A.
  • The alleged bank statement:
    • Was not authenticated,
    • Did not bear official seal/signature,
    • Source was undisclosed.
  • The assessee consistently denied ownership of any such foreign account.
  • Reliance was placed on judicial precedents including:
    • CIT vs Kabul Chawla (Delhi HC)
    • PCIT vs Abhishar Buildwell Pvt. Ltd. (SC)

Respondent’s Arguments

  • Incriminating material was claimed to have been found during the search.
  • The addition was based on foreign bank account information received by the department.
  • The assessee failed to cooperate by not signing consent forms required to obtain details from Swiss authorities.
  • Such refusal indicated concealment of income.

Court Findings / Order

  • The Revenue ultimately admitted in its affidavit that:
    • No incriminating material was found during the search.
    • The information relied upon existed prior to the search.
  • The Court observed:
    • The material relied upon was deficient and unreliable.
    • The Revenue failed to establish ownership of the alleged foreign bank account.
    • The absence of incriminating material is fatal to proceedings under Section 153A.
  • Held:
    • Addition made under Section 153A is unsustainable in absence of incriminating material.
    • The Tribunal’s order was set aside.
    • The addition of ₹69,07,414/- was deleted.

Important Clarification

  • Completed assessments can be interfered with under Section 153A only when incriminating material is found during search.
  • Pre-existing or third-party information cannot justify reassessment under Section 153A.
  • Burden lies on Revenue to prove:
    • Authenticity,
    • Source,
    • Ownership of alleged undisclosed assets.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS13122023ITA6122017_190217.pdf

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