Punjab And Haryana High Court Quashes Section 69 Addition On HSBC Geneva Deposits As Sufficient Explanation About Source Of Investments Given On Affidavit

The Punjab and Haryana High Court has quashed the addition under Section 69 of the Income Tax Act on HSBC Geneva deposits as a sufficient explanation about the source of investments given in the affidavit.

The bench of Justice G.S. Sandhawalia and Justice Harpreet Kaur Jeewan have observed that the explanation offered by the Assessee that the amount in the bank account belonged to his nephew seems justified as he paid taxes on the amount in a bank account which was confirmed by his nephew's CA certificate and also by the UK Revenue authorities. A sufficient explanation has been given regarding the fact by filing an affidavit, which has not been taken into consideration by the Assessing Officer or by the Commissioner of Income Tax. The assessee, being an agriculturist and only having a small holding of land, apparently could not be in possession of huge amounts, which were also in foreign currency. Nothing was produced on record indicating that it was transferred from India, where he was doing some business.

The Tribunal allowed the appeals by a common order of the assessee/respondent by coming to the conclusion that the amounts deposited in the foreign bank account were by the nephew of the assessee namely Rajinder Singh Chatha, who was residing in U.K. who was the beneficiary of the account.

The tribunal observed that the addition made by the Assessing Officer and confirmed by the Commissioner Income Tax, Jalandhar was held to be not justified as there was no corroborative cogent and concrete evidence to establish either the ownership of the alleged bank account or the alleged disputed deposits in those accounts to be belonging to the assessee. Thus, it was held that there was no violation of the Double Tax Avoidance Convention (DTAC). It was also recorded that the nephew had paid all the taxes on the outstanding amount in the impugned bank account to the revenue authority of U.K under a specific disclosure facility of all the irregularities in U.K as per the certificate of C. A i.e. M/s Stonegate Trinity LLP. The certificate had further been verified and confirmed by the HM Revenue & Customs (HMRC) Authority of the U.K. Resultantly, an addition made by the relevant Assessing Officer and confirmed by the Commissioner of Income Tax was deleted while allowing the appeals.

The issue raised was whether the tax advisors of the nephew were competent to issue such a certificate was questioned.

The court noted that the onus lay upon the appellant under the provisions of Section 69/69A of the Income Tax Act, which apparently had not been discharged even in the course of appellate proceedings. The fact that the nephew had paid all the taxes on the amount outstanding in the impugned bank account to the Revenue Authority of the U.K. and the certificate of C.A. was rejected on the ground that the certificate does not qualify as a legal certificate or document under any law and, therefore, did not have any legal or evidentiary value.

The court held that there is no material on record to show that the amounts were deposited by the assessee, as the account was opened on March 25, 2003. The first visit of the assessee was in 1985 to the U.K., and there was nothing on record that, at the time of his visit abroad, he had opened the said account in Geneva.

The court noted that it is neither the case of the department that the amounts were credited from his income while doing business abroad nor that he was based abroad for such long periods to generate that kind of income.

Counsel For Appellant: Gauri Neo Rampal Opal

Counsel For Respondent:

Case Title: Pr. Commissioner of Income Tax-I, Jalandhar Versus Joginder Singh Chatha

Case No.: ITA-25-2023 (O&M)

Click Here To Read The Order