E-Paper
Unauthenticated info from foreign country not evidence: HC
Delhi HC ruled unauthenticated foreign info on Swiss bank accounts insufficient for tax evasion charges, quashing criminal proceedings against Anurag Dalmia.
The Delhi high court has held that unauthenticated information received from a foreign country regarding an individual’s Swiss bank account cannot be treated as evidence and form a valid basis for criminal prosecution for tax evasion under the Income Tax (IT) Act.
The ruling was delivered by justice Neena Bansal Krishna on Monday, in a plea by Anurag Dalmia to quash the case registered by the IT department for tax evasion.
The case was registered in 2016 on the basis of the information received by the French government regarding the existence of a Swiss Bank account in Dalmia’s name till 2005.
Pursuant to receipt of information and unauthenticated documents received in 2011, the department conducted a raid in his premises in December 2012, but failed to recover anything. It later reopened the assessment proceedings for assessment year (AY) 2006-07, 2007–08 in 2012, and imposed fresh penalties by way of an assessment order (AO).
In 2016, it also registered a case under section 276C (wilful evasion of tax, penalty, or interest chargeable), 276D (failure to produce accounts and documents), 277 (false statement in verification) of the Income Tax Act. The department had alleged that he evaded taxes by not disclosing details of his HSBC Bank account in Switzerland in his income tax returns for the assessment years 2006–07 and 2007–08, and by refusing to sign a consent waiver form that would have allowed access to the Swiss account information.
The Income Tax Appellate Tribunal (ITAT) in February, 2018, concluding that there was no basis for revising Dalmia’s ITR.
In his petition, Dalmia asserted that the Swiss authorities had failed to respond to the department’s request of further information from about the Swiss account and mere surmises or conjectures were not enough for pressing criminal charges. He further argued that the assessment order, which formed the basis for the department’s initiation of criminal proceedings, had already been quashed by the Income Tax Appellate Tribunal (ITAT), and this alone should be sufficient grounds for dropping the criminal case.
On the contrary, the IT department had asserted that quashing of the AO, was not sufficient to exonerate Dalmia of the criminal charges and the ITAT’s order was not binding on the criminal court. It was also asserted that the case was not solely based on the AO but also independent information received from the French government.
Rejecting the department’s contention, justice Krishna in her 33-page ruling said, “Merely on some unauthenticated information received from a third Country with no material evidence, is not sufficient to make out a prima facie case and there cannot be a presumption that a person has committed any wrongdoing. Thus, mere surmise and conjectures is not enough to prosecute a person alleging a criminal offence under Section 276D.”
She added, “Respondent has no cogent evidence whatsoever, to establish that the Petitioner has any Swiss Bank accounts and the unauthenticated documents have no evidentiary value, to make out a prima facie case against the Petitioner. It, therefore, has to be concluded that the unauthenticated documents under DTAA cannot be a basis to conclude that there was no complete disclosure of the income by the Petitioner for the relevant Financial Years.”
Ultimately, the court quashed the criminal proceedings observing that the department lacked “cogent, credible and corroborative evidence” to establish the existence of Swiss accounts and the receipt of such information from the French and not Swiss government raised questions on the document’s authenticity.
The judge further noted that the department had failed to recover incriminating material during the raid and confront Dalmia with the bank details before imposition of penalty.
“There was nothing even remotely to suggest that either the Assessee was having any bank account in Switzerland with HSBC or he was in any way linked with these bank accounts It thus concluded that if no incriminating material has been found during the course of search, no additions can be made in the Assessment year where Assessments had attained finality,” the court maintained.
