No burden of proof on assessee to rebut the alleged Swiss Bank Account for mere presence of name in document obtained from a foreign govt. under DTAA.
In a recent judgment, Delhi High Court held that mere presence of name in unauthenticated document obtained indirectly through a Foreign Government about alleged Swiss Bank Accounts, does not shift the burden of proof onto the Petitioner to rebut the allegations as mentioned therein.
ABCAUS Case Law Citation:
4664 (2025) (07) abcaus.in HC
Important Case Laws relied upon by Parties:
State of Haryana v. Bhajan Lal
Baijnath Jha v. Sita Ram & Anr
Rinkoo Steels and Ors vs. KP Ganguly, Income Tax Officer & Anr
In the instant case two petitions had been filed by assessee under Section 482 and Section 483 of the Code of Criminal Procedure, 1973 (Cr.P.C), read with Article 227 of the Constitution of India, seeking quashing of the Criminal Complaints initiated against the Petitioner under Sections 276C(1)(i), 276(D) and 277(1) of the Income Tax Act, 1961 (the Act) before the Trial Court.
The main ground for seeking quashing was that the Assessment Order which was the very foundation of the Criminal Complaints, had been set aside in Appeal by the Income Tax Appellate Tribunal (ITAT) and nothing survived for prosecution of the Complaints.
Petitioner filed his original Income Tax Return which got finalized and even Refund was given to the Petitioner under Section 143(1) of the Act.
Later, an information was received from the French Government under the Double Taxation Avoidance Agreement (DTAA) indicating that the Petitioner along with certain others, held bank accounts in Switzerland. The profile of the Petitioner was also linked to four other accounts, in which he was shown as the beneficial holder.
Based on the aforesaid information received under DTAA, a Search under Section 132 of the Act was carried out on the premises of the Petitioner but no incriminating material was found qua him. However, certain Independent communication was also sought by the Authorities through FT &TR Division of the Central Board of Direct Taxes.
The Petitioner was confronted with the aforesaid documents and his Statements were recorded under Section 132 (4) of the Act, in which he denied having any Account in the said Bank. The Petitioner also denied to sign the Consent-Waiver Form to procure details of his Bank account from the Swiss Bank.
The assessment proceeding against the accused were completed and assessment Order was passed under Section 153A/ 143(3) of the Act, making certain additions on account of undisclosed alleged Foreign Bank Accounts of the Petitioner, particularly the Bank in Switzerland and the interest presumed to have been received from the alleged Foreign Bank Accounts under Section 69 of the Act. Additionally, a penalty along with interest, was imposed upon the Petitioner.
The petitioner filed appeal before CIT(A) claiming that in the absence of any incriminating material found against the Petitioner, these additions could not have been made under 153A. However, CIT(A) confirmed the order.
A Criminal Complaint under Sections 276C(1)(i), 277(1) and 276(D) of the Act was instituted against the Petitioner for willful attempt to evade tax in relation to the alleged Foreign Bank Accounts in Switzerland; alleged false verification given while filing original Return of Income; and non-compliance of Notice wherein the Petitioner was required to sign “the Consent Form” and thereby committed offences punishable thereunder.
However, the ITAT set aside the additions made by the AO and the penalty imposed upon the Petitioner under Section 271(1)(c) was also cancelled by the Commissioner of IncomeTax (Appeals) in Appeal.
The Petitioner sought quashing of criminal complaints on the ground that the orders of the AO and of the CIT(A) merged into the Order of the ITAT, being the final Fact-Finding Body under the Income-Tax Act, 1961. Once the Assessment Order passed by the AO itself is set aside, the criminal proceedings initiated against him, would become infructuous.
On the other hand the Revenue submitted that non recovery of incriminating material during Search and Seizure Operation, is not material in a criminal case if all the ingredients of an offence are established for conviction of an accused. Even though the Assessment proceedings under the Act/ Order of the ITAT would have a bearing on the question in issue involved in a criminal case and it may be sufficient to drop the Criminal proceedings in appropriate case, but such Orders are not binding on the Criminal Court. Further, it was submitted that ITAT’s Order which set aside the Assessment Order under Section 153A, was based solely on technical grounds of lack of jurisdiction of the AO to assess the income in absence of any incriminating material found during search and it did not give any findings in regard to the alleged undisclosed Foreign Bank Accounts.
The Hon’ble High Court opined that indisputably, if credible information about a wrongdoing associated with the income of an individual is received under DTAA, the Department is duty bound to investigate the same, within the boundaries of constitutional permissibility.
However, in the present case, the source of information was the non authenticated documents received from Foreign Government under DTAA and not from the primary source i.e. Swiss Government which casted a doubt on its authenticity. Even no prima facie evidence whatsoever, has been placed on record to establish ownership or linkage of any funds in Foreign Bank Accounts, to the Petitioner. Mere presence of his name in unauthenticated document obtained indirectly through a Foreign Government about alleged Swiss Bank Accounts, does not shift the burden of proof onto the Petitioner to rebut the allegations as mentioned therein.
The Hon’ble High Court further noted that s that on the basis of un-authenticated documents, a raid was conducted in the premises of the Petitioner, but no incriminating document even remotely suggesting existence of foreign Account, was discovered. In the absence of any evidence of there being a concealment of the income or non-disclosure of the complete income for the relevant Financial Years, it cannot be said that the income Assessment as submitted by the Petitioner, was fraudulent or there was any concealment of true income.
The Hon’ble High Court further observed that there is no denying on the legal proposition that if ITAT Order quashing the Assessment Order has its basis in technical grounds, the offence under Section 276CC for non-filing of Returns is independent of Assessment proceedings. However, in the present case, the sole basis to re-open the Assessment and to seek prosecution was the unauthenticated documents received under DTAA claiming that the Petitioner had some accounts in Swiss Bank, but the authenticated information was held to be not established. The contention that the Order of ITAT was on technical ground, was absolutely incorrect.
The Hon’ble High Court further noted that the Petitioner was never confronted with the alleged Bank details allegedly found by the Revenue, before imposition of the penalty.
Further, the Hon’ble High Court observed that there was no basis for the Revenue to have sought the signing of the Consent Waiver Form. It was essentially a roving enquiry with no authentic basis and the Petitioner cannot be compelled to be a witness against himself. Had there been some concrete incriminating evidence with authenticated details of Foreign account, the non-signing of Consent waiver Form may have led to some adverse inference, but in the given circumstances, non-signing of Consent Waiver Form, cannot be considered as a basis for criminal prosecution.
The Hon’ble High Court further dealt with the question of whether the Criminal Complaints under Sections 276(1), 276D, and 277(1) can be sustained when the Assessment Order has been set aside by ITAT for want of incriminating material?
The Hon’ble High Court noted that the entire prosecution rested on non-signing of the Consent Waiver Form. The basis for compelling him to sign the Consent Waiver Form was the unauthenticated information of Swiss Bank Accounts, which was not justiciable. The ITAT already upheld that penalty under S. 271(b) for this act. Therefore, no offence was even prima facie disclosed u/s 276 (D) of the Act.
The Hon’ble High Court observed that he detailed Order of ITAT reflected that both the contentions of non signing of Consent-Waiver Form and unauthenticated documents with no recovery in search and seizure were considered in detail and found to be non-sustainable and re-assessment was set aside. All the allegations made in the Complaint were discussed in detail and decided on merits in the adjudicating proceedings.
Further, the concluding remark of ITAT clearly mentioned that the legal questions had been answered, thereby reflecting that the aspects on which the Complaint was based, have been duly considered and decided. Moreover, the contention of the Revenue did not hold much water when all the allegations raised in the Complaint had already been scrutinized independently and it has already been established hereinabove that there was no cogent material to support the allegations in the Complaint.
The Hon’ble High Court held that in the absence of any credible or corroborative evidence, the essential ingredients required to attract the provisions of Sections 276(1), 277(1), and 276D of the Act, cannot be said to have been established.
Accordingly, Petitions were allowed and the two Complaints were quashed.
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