GHANSHYAM RAMCHANDRA KRIPLANI,AHMEDABAD V. THE INCOME TAX OFFICER, INTL. TAXN. WARD-1, AHMEDABAD

ITA 566/AHD/2024

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The case revolves around an appeal by Ghanshyam Ramchandra Kriplani against an order passed by the Assessing Officer under section 147 read with section 144C(13) of the Income Tax Act, 1961, which pertained to the Assessment Year 2015-16. The primary issue was the addition of Rs.1,00,00,000 to the assessee's income, considered as unexplained investment in fixed deposits. The assessee, a non-resident, had not filed a return of income for the impugned year but had made significant investments in immovable property and fixed deposits in India. The Assessing Officer and the Dispute Resolution Panel (DRP) initially rejected the assessee's explanation regarding the source of these investments. However, the Tribunal accepted the assessee's appeal, noting that the funds were sourced from his business in the UAE and were properly remitted to his NRE account in India.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298738 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATHVI RAJ MEENA
• Assessee Lawyers: S.N. DIVETIA
• Keywords: Business income; Additional evidence; Corroborative evidences; Unexplained investment; Source of fund
• Section: 147; 148; 69

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘D’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.566/Ahd/2024 Assessment Year : 2015-16 Ghanshyam Ramchandra Kriplani, 5, Netaji Society Nr. Jai Hind High School Maninagar Ahmedabad 380 008. PAN : AYCPK 3430 A Vs The ITO, International Taxn., Ward-1 Ahmedabad. (Applicant) (Responent) Assessee by : Shri S.N. Divetia, AR and Shri Samir Vora, AR Revenue by : Shri Prathvi Raj Meena, CIT-DR सुनवाई क\t तारीख/Date of Hearing : 08/01/2025 घोषणा क\t तारीख /Date of Pronouncement: 27/02/2025 आदेश आदेश आदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The above appeal has been filed by the assessee against order passed by the Assessing Officer passed under section 147 read with section 144C(13) on 30.1.2024 in compliance of the directions of the DRP vide its order under section 144C(5) of the Income Tax Act, 1961 (\"the Act\" for short) pertaining to Assessment Year 2015-16. 2. The grounds raised by the assessee are as under: 1. Unexplained Investment in Time Deposits of Rs.1,00,00,000/-: ITA No.566/Ahd/2024 2 1.1 The learned AO with the direction of DRP has erred in facts and law in considering FD investment of Rs.1,00,00,000 as unexplained investment. 1.2 The appellant presented substantial evidence, including the Trading License, MOA, and bank statements of Real Electronics Trading LLC, to support the legitimate source of funds from Dubai. 1.3 The DRP acknowledged that part of the investments did not pertain to the AY under consideration but failed to adequately examine and consider the evidence regarding the remittance of Rs.1,00,00,000/- 2. Penalty Proceedings: As the assessment order is under dispute, the initiation of penalty proceedings under section 271(l)(c) is premature and unjust. 3. Solitary issue, as is evident from the grounds raised before us, pertains to the addition made to the income of the assessee of Rs.1,00,00,000/- on account of investment in fixed deposits made by the assessee, source of which remained unexplained in terms of provisions of section 69 of the Act. 4. Orders of the authorities below record the fact that the assessee is a non-resident. No return of income was filed for the impugned year, and noting from the information available in the INSIGHT portal of the department that the assessee had made investments of approx. Rs.2 crores in an immovable property purchased in Ahmedabad, the case of the assessee was reopened and subjected to re-assessment proceedings in terms of provisions of section 148A read with section 147 of the Act. The assessee was confronted with the information available of the investment made by the assessee of Rs.2 crores in immovable property and was directed to explain the source thereof. In the absence of any reply filed by the assessee, order under section 148A(d) was passed holding that prima facie ,in the absence of any explanation furnished by the assessee of the ITA No.566/Ahd/2024 3 source of investment and no return being filed by the assessee, the income of the assessee had escaped assessment. Accordingly, thereafter, notice under section 148 was issued to the assessee, requiring the assessee to file return of income, in response to which the assessee filed return declaring NIL income claiming interest income of Rs.80,47,714/- as exempt under section-10 of the Act. Thereafter, the assessee was questioned regarding the source of investment of Rs.2 crores in immovable property. The assessee explained the source of the same, as one crore having been invested from money repatriated from UAE out of the business carried out by the assessee along with brother and one crore rupees having been sourced from loan taken. The explanation of the assessee in this regard was accepted by the AO. Further, during the assessment proceedings, the AO noted the assessee to have invested in fixed deposits to the tune of Rs.2,56,99,999/-. In the absence of any explanation furnished by the assessee with regard to the source of investment in the same, the AO proposed the addition of the entire amount of Rs.2.56 crores to the income of the assessee. The assessee objected to the proposed addition before the DRP and explained that out of Rs.2.56 crores proposed to be added to the income of the assessee, only Rs.1 Cr pertained to the impugned year and the source of the same was explained as out of remittance from UAE sourced out of his business carried out there. The assessee furnished additional evidences before the DRP in this regard which were admitted by the DRP and comments sought from the AO from the same. The AO in his remand report accepted assessees contention of only Rs. I Cr being invested in FD during the year but stated that the assessee’s ITA No.566/Ahd/2024 4 explanation of the source of investment was not acceptable for the reason that the same was not substantiated with necessary evidences. The DRP accordingly confirmed the addition to the income of the assessee on account of investment in FDs source of which remained unexplained to the tune of Rs.99,99,999/- and directed to make addition of the same to the income of the assesse, which accordingly was made by the AO in the final order passed under section 147 read with section 144C(13) of the Act. 5. Thus, aggrieved by this addition of approx. rupees one crore under section 69 of the Act the assessee has come up in appeal before us. 6. The contention of the ld.counsel for the assessee was that the finding of the AO in his remand report, which was accepted by the DRP also, to the effect that the assessee had failed to substantiate the source of investment in FDs of Rs.1 crores was grossly incorrect. In this regard, he drew our attention to the remand report of the AO at page no.17 of the order para 3.2 as under: 3.2 Comments on merits Before the Id. DRP, the assessee has submitted that, out of all the active Time Deposits (FDs), only on 1 FD (A/c. No. 200845210000205) pertains to the year under consideration; wherein, he has invested Rs. 99,99,999/- on 15.10.2014. The assessee submitted copies of statements of all the active FDs. On verification of bank statements for FDs submitted by the assessee before the ld.DRP, it is noticed that, except FD A/c. No. 200845210000205 pertain to earlier years. Further, the investment of Rs.99,99,999/- in FD A/c. No. 200845210000205 is made as transfer of Rs.1,00,00,000/- out of his Bank of India NRE A/c. No. 200813110000136. On verification of this NRE A/c., it is noticed that there is a remittance/repatriation of Rs.1,00,00,000/- on 09.10.2014. Regarding the same, the assessee has not submitted any details, viz. details of foreign bank from which the fund was ITA No.566/Ahd/2024 5 remitted, copy of remittance advice/request etc. Further, the submission of the assessee is short on the following documentary details, which were also asked for during the assessment proceedings. i. Copy of Audited books of account for business activity carried out in foreign country. ii. Copy of profit and loss account, capital account and balance sheet for business concern/s. In view of the above that the source of remittances are not fully explained by the assessee, it may be noted that if the NRI fails to explain the source of deposit in his NRE Account or he gets the money (on first occasion) under his control, in India in his NRE Account then it is said to be the income received in India and therefore, as per Sec. 5(2)(a) of the Act, which deals with the scope of income arising to a Non-Resident, the income of a Non-Resident received in India is taxable in India. This is subject to only condition that the assessee has not already offered this income in his country of residence or employment. 4. Considering the above facts, it is prayed that the facts may be considered at your honors level and suitable with regard to addition made in assessment order may kindly be provided\" 7. Referring to the same, he pointed out that the finding of the AO regarding non-substantiation of the explanation of the assessee was with respect to the assessee (i) having not furnished evidences of carrying out business in the UAE by way of furnishing audited balance-sheet/profit & loss account and financial statements, (ii) for not having furnished the details of foreign bank account, from where funds have been furnished, (iii) for not furnishing remittances advice/request. Our attention was drawn to the finding of the DRP at para 14 of the order as under: ITA No.566/Ahd/2024 6 ITA No.566/Ahd/2024 7 8. Referring to the same, the ld.counsel for the assessee pointed out that the DRP takes note of the fact that the amount of Rs.1 crore is reflected in the NRE account of the assessee on 9.10.2014, but it is not backed by the supporting evidences of remittance or repatriation; that the assessee has not furnished any details about the accounting entry or otherwise of the foreign bank from where the funds were remitted, and he pointed out that the DRP noted that mere furnishing of trading licence and MOU done with the UAE Citizen’s Bank, is not adequate to explain or establish that the same were emanated from the accounted sources/accounted business. 9. In sum and substance, therefore, the ld.counsel for the assessee contended that objection of the Revenue to accepting the assessee’s explanation of funds having been sourced from his business carried out in the UAE was that though the money has been received in the NRE account in India, but that is not sufficient to establish the source of the same as coming out of the business carried out by the assessee in the UAE; that the assessee ought to have established the direct link of the ITA No.566/Ahd/2024 8 amount having been remitted from his business in the UAE to his NRE account in India by showing the accounting of the same in his books of accounts of business maintained in the UAE. 10. In this regard, the ld.counsel for the assessee contended that it is not that the assessee had only furnished copy of NRE account in India, or for that matter, only the evidences of carrying out the business in the UAE by way of licence issued to him. He pointed out that the assessee had also furnished copy of the bank account of the assessee, and his brother as partner in Real Electronics Trading, the concern in which the business was carrying out. He drew our attention to PB Page no.30, which is the copy of the bank account of the assessee, Ghayshaym R. Kriplani and/or Kriplani, partner of Real Eletronics Trading, UAE and from the same, he demonstrated withdrawal by way of cheque on 8.10.2014 of an amount of Rs.599,220 Dirams which he pointed out were cleared in NRE account admittedly on 9.10.2014 with a credit of rupees one crore. Copy of the NRE account of the assessee in Bank of India, mentioning the assessee to be a small business in the UAE and showing the corresponding credit of rupees one crore on 9.10.2014 from RTGS/Kriplani Suresh is reflected. He, therefore, stated that the fact that the assessee had license to carry out the business in the UAE is not disputed. The fact that the assessee has received rupees one crore in his NRE account on 9.10.2014 is also not disputed, and also that this remittance is source of investment in FDs. The ld.counsel for the assessee also demonstrated to the authority below that the impugned amount of rupees one crore had been remitted from ITA No.566/Ahd/2024 9 his bank account in the UAE maintained as partner in business that he carried out there. It was contended therefore that it is sufficiently clear that investment in FDs of rupees one crore was sourced from his business income out of outside India. 11. He further pointed that identical explanation and evidences were filed by the assesse for explaining the source of investment to the tune of rupees one crore in immovable property purchased during the year. He pointed out that the case of the assessee had been reopened for inquring into the source of investment of rupees two crores in immovable property, which the assessee had explained – as one crore sourced out of money remitted from outside India from his business carried out in UAE, and rupees one crore sourced from loan taken in India; that the assessee substantiated his explanation of rupees one crore sourced from his business outside India, furnishing identical evidences as had been filed to the AO for explaining source of investment in FD’s and the same was accepted. He therefore contended that there is no reason for the authority below to reject the identical explanation and evidences furnished with regard to the source of investment in FDs to the tune of Rs.1 crores. 12. The ld.DR however relied on the orders of the authorities below. 13. We have heard contentions of the both the parties. The issue before us relates to the source of investment in FDs to the tune of one crores remaining unexplained. The fact ITA No.566/Ahd/2024 10 that the assessee is non-resident and investment sourced from the amounts received in his NRE account in India, is not disputed. The assessee has explained the source of investment as sourced from business carried out outside in India, which has been rejected by the authority below for lack of substantiation. More particularly, linking the amount remitted from outside India being sourced from the business carried out outside India. The exact reasons for rejecting the assessee’s explanation is that though admittedly, the amount is remitted in his NRE account from outside India, but the co-relation of the remitted amount to business carried out by the assesse outside India is not established. The assessee before us has suitably demonstrated that it was shown to the authority below that the amounts had been transferred from his foreign account, which was maintained, as partner in his business carried out outside India. Thus clearly the assessee had established the investment in FD being sourced from his business in UAE. The assessee has also demonstrated before us that the identical explanation furnished for source of investment in immovable property was accepted by the AO. 14. In the light of the same, we fail to understand, how the assesse can to be said to have not explained the source of investment in FDs to the tune of rupees one crores. The fact that the amount came to his NRE account from his business account maintained outside is sufficient to address the objection of the Department that the co-relation with the business of the amount remitted was not established by the assessee. ITA No.566/Ahd/2024 11 15. Further in the light of the fact that identical explanation furnished by the assessee for investment in immovable property was accepted by the AO, there is no reason, we find, for rejecting the same explanation for investment in FDs. In the light of the same, we hold that the addition of Rs.1,00,00,000/- to the income of the assessee under section 69 of the Act, is not justified and the same is directed to be deleted. 16. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 27th February, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 27/02/2025 "