Ramasamy Senthivel, CHENNAI V. ACIT, CHENNAI

ITA 2313/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81189 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 27-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2013
• Court: TRIBUNAL
• Department Lawyers: A SASI KUMAR
• Assessee Lawyers: G BASKAR
• Keywords: Residential status; Bonafide belief; Ignorance of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 2313/MDS/2013 / ASSESSMENT YEAR : 2009-10 RAMASAMY SENTHILVEL, FLAT NO.A-2, II FLOOR, SHANTHI HAVEN, DOOR NO.139 & 140, ST. MARYS ROAD, ALWARPET, CHENNAI 600 018 [PAN: AMFPS 4785 D] ( !% /APPELLANT) VS THE ASST. COMMISSIONER OF INCOME TAX, SALARY RANGE-V, CHENNAI ( &'!% /RESPONDENT) / APPELLANT BY : SHRI G.BASKAR, ADVOCATE / RESPONDENT BY : SHRI A.SASI KUMAR, JCIT / DATE OF HEARING : 27-08-2014 ! / DATE OF PRONOUNCEMENT : 25-09-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-VI, CHENNAI DATED 31-10-2013 FOR THE ASSESSMENT YEAR (AY) 2009-10, W HEREBY, THE CIT(APPEALS) HAS CONFIRMED PENALTY ORDER PASSED U/S .271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). I.T.A. NO. 2313/MDS/2013 2 2. THE BR IEF FACTS AS EMANATING FROM THE RECORDS ARE : THE ASSESSEE IS WORKING WITH COGNIZANT TECHNOLOGY S OLUTIONS AS SR.SOFTWARE PROFESSIONAL. THE ASSESSEE FILED HIS R ETURN OF INCOME FOR THE AY.2009-10 ON 30-07-2009 DECLARING TOTAL IN COME OF ` 2,07,00,360/-. DURING THE COURSE OF SCRUTINY ASSES SMENT, THE ASSESSING OFFICER OBSERVED FROM THE DETAILS FURNISH ED BY THE ASSESSEE THAT THE ASSESSEE HAD OPENED A BANK ACCOUN T IN ICICI BANK AND TRANSFERRED A SUM OF ` 1,68,95,344/- FROM NRE FIXED DEPOSIT ACCOUNT. THE SAID SUM REPRESENTS MATURITY OF FIXED DEPOSITS OF ` 87,56,634/- AND INTEREST ELEMENT OF ` 81,38,700/-. THE FIXED DEPOSITS IN NRE ACCOUNT WERE MADE IN THE YEAR 2002 THAT HAD MATURED IN THE YEAR 2009. THE INTEREST RE CEIVED BY THE ASSESSEE WAS NOT OFFERED TO TAX IN THE RETURN OF IN COME FILED BY THE ASSESSEE FOR THE RELEVANT PERIOD. THE ASSESSEE DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS GAVE EXPLANATION THAT U/S .10(4) OF THE ACT, INTEREST INCOME IN THE NRE A/C IS EXEMPT FROM TAX. THE ASSESSEE IS RESIDENT OUTSIDE INDIA IN TERMS OF THE DEFINITION OF PERSONS RESIDENT OUTSIDE INDIA DEFINED IN SECTION 2(Q) OF THE FOREIGN EXCHANGE REGULATION ACT [FERA], 1973. HOWE VER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION FURNISHED BY THE ASSESSEE AND TAXED THE INTEREST RECEIVED ON FIXED DEPOSITS FROM THE SAID ACCOUNT. THE ASSESSEE ACCEPTED THE A SSESSMENT I.T.A. NO. 2313/MDS/2013 3 ORDER. THEREAFTER, PENALTY PROCEEDINGS WERE INITIA TED AGAINST ASSESSEE U/S.271(C). THE ACIT, SALARY CIRCLE-V, VI DE ORDER U/S.271(1)(C) DT.28-06-2012 LEVIED PENALTY OF ` 16,80,000/- ON THE ASSESSEE. THE ACIT WHILE IMPOSING PENALTY HELD THA T EXEMPTION U/S.10(14) OF THE ACT IN RESPECT OF INTEREST ON NRE DEPOSITS IS AVAILABLE ONLY TO NON-RESIDENT INDIANS. WHEREAS, T HE ASSESSEE IS RESIDENT. HE FURTHER HELD THAT IGNORANCE OF LAW CA NNOT BE EXCUSED. THE NON-DISCLOSURE OF INCOME IS DELIBERATE ON THE P ART OF THE ASSESSEE. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS) V IDE IMPUGNED ORDER UPHELD THE FINDINGS OF ASSESSING OFFICER AND CONFIRMED LEVY OF PENALTY U/S.271(1)(C). NOW, THE ASSESSEE HAS CO ME IN SECOND APPEAL IMPUGNING THE ORDER OF CIT(APPEALS) IN CONFI RMING LEVY OF PENALTY. 3. SHRI G.BASKAR, APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED THAT THE ASSESSEE HAD OPENED NRE A/C WHEN HE WAS SENT ON FOREIGN ASSIGNMENT BY THE COMPANY. THEREAF TER, THE AMOUNTS IN NRE SAVINGS A/C WERE TRANSFERRED TO NRE FIXED DEPOSITS ACCOUNT IN THE YEAR 2002 ON VARIOUS DATES. THE FIXED DEPOSIT ACCOUNTS MATURED IN JANUARY, 2009 AND MARCH , 2009. THE I.T.A. NO. 2313/MDS/2013 4 ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT SINCE T HE INVESTMENT HAS BEEN MADE FROM NRE A/C, THE INTEREST INCOME THEREON IS EXEMPT FROM TAX U/S.10(4) OF THE ACT. T HE BELIEF OF THE ASSESSEE WAS FURTHER FORTIFIED BY THE FACT WHEN THE BANK ALSO DID NOT DEDUCT TAX AT SOURCE ON THE MATURITY VALUE OF T HE FIXED DEPOSITS. HOWEVER, THE EXPLANATION FURNISHED BY TH E ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. IT IS N OT A CASE WHERE THE ASSESSEE HAS CONCEALED ANY MATERIAL FACTS. IT IS THE CASE OF MIS-INTERPRETATION OF LEGAL PROVISIONS. THE NON-DI SCLOSURE OF INTEREST WAS UNDER THE BONAFIDE BELIEF THAT THE SAM E IS EXEMPT U/S.10(4) OF THE ACT. THE LD.COUNSEL FURTHER CONTE NDED THAT THE ASSESSEE WAS SENT ON DEPUTATION TO US BY THE COMPAN Y. AFTER THE COMPLETION OF PROJECT, THE ASSESSEE WAS CALLED BACK TO INDIA. DUE TO SPECIALIZED NATURE OF JOB, THE ASSESSEE WAS UNCE RTAIN, WHETHER HE WOULD CONTINUE TO STAY IN INDIA OR WOULD BE SENT TO SOME OTHER PROJECT ABROAD. THE ASSESSEE HAD NOT RETURNED TO I NDIA WITH THE INTENTION TO PERMANENTLY SETTLE DOWN IN INDIA ON HI S OWN WILL. THEREFORE, THE ASSESSEE WAS UNDER BONAFIDE BELIEF T HAT THE ASSESSEE IS A RESIDENT OUTSIDE INDIA WITHIN THE M EANING OF FOREIGN EXCHANGE MANAGEMENT ACT [FEMA], 1999. I.T.A. NO. 2313/MDS/2013 5 4. ON THE OTHER HAND, SHRI A.SASI KUMAR, APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF CI T(APPEALS). THE LD.DR SUBMITTED THAT THE LAPSE ON THE PART OF A SSESSEE TO FILE CORRECT INCOME WAS NOT ON ACCOUNT OF ANY INADVERTEN T MISTAKE OR NEGLIGENCE BUT WAS PURELY A DELIBERATE ACT OF FURNI SHING INACCURATE PARTICULARS. THE ASSESSEE CANNOT TAKE BENEFIT OF F AULT OF BANK IN NOT DEDUCTING TDS. THE LD.DR PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE AND CONFIRMING THE PENALTY ORDER. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES, AND HAVE ALSO PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS NOT DISCLOSED INTEREST FROM FIXED DEPOSITS IN HIS RETURN OF INCOM E FOR THE AY UNDER CONSIDERATION. THE ASSESSEE HAD MADE INVESTM ENT IN NRE FIXED DEPOSITS FROM HIS NRE SB A/C IN THE YEAR 2002 . DURING THAT PERIOD, THE ASSESSEE WAS SENT ON A PARTICULAR ASSIG NMENT BY THE EMPLOYER COMPANY TO US. THE ASSESSEE WAS ALLEGEDLY UNDER BONAFIDE IMPRESSION THAT SINCE THE DEPOSITS ARE MAD E FROM NRE A/C, THE INTEREST INCOME THERE FROM IS EXEMPT U/S.1 0(4), EVEN THOUGH THE ASSESSEE HAD RETURNED TO INDIA AND WAS A RESIDENT IN INDIA. THE FERA, 1973 HAS BEEN REPEALED AND HAS BE EN REPLACED WITH FEMA, 1999. THE CORRESPONDING PROVISIONS CONT AIN IN SECTION I.T.A. NO. 2313/MDS/2013 6 2(Q) DEFINING PERSON RESIDENT OUTSIDE INDIA IN FE RA, 1973 ARE CONTAINED IN SECTION 2(W) OF FEMA, 1999. THE PERS ON RESIDENT OUTSIDE INDIA AND PERSONS RESIDENT IN INDIA AS D EFINED UNDER FEMA, 1999 ARE RE-PRODUCED AS UNDER: (V) 'PERSON RESIDENT IN INDIA ' MEANS- (I) A PERSON RESIDING IN INDIA FOR MORE THAN ONE HUNDRED AND EIGHTY-TWO DAYS DURING THE COURSE OF THE PRECEDING FINANCIAL YEAR BUT DOES NO T INCLUDE- (A) A PERSON WHO HAS GONE OUT OF INDIA OR WHO STAYS OUTSIDE INDIA, IN EITHER CASE- (A) FOR OR ON TAKING UP EMPLOYMENT OUTSIDE INDIA, OR (B) FOR CARRYING ON OUTSIDE INDIA A BUSINESS OR V OCATION OUTSIDE INDIA, OR (C) FOR ANY OTHER PURPOSE, IN SUCH CIRCUMSTANCES A S WOULD INDICATE HIS INTENTION TO STAY OUTSIDE INDIA FOR AN UNCERTAI N PERIOD; (B) A PERSON WHO HAS COME TO OR STAYS IN INDIA, IN EITHER CASE, OTHERWISE THAN- (A) FOR OR ON TAKING UP EMPLOYMENT IN INDIA, OR (B) FOR CARRYING ON IN INDIA A BUSINESS OR VOCATIO N IN INDIA, OR (C) FOR ANY OTHER PURPOSE, IN SUCH CIRCUMSTANCES A S WOULD INDICATE HIS INTENTION TO STAY IN INDIA FOR AN UNCERTAIN PER IOD; (II) ANY PERSON OR BODY CORPORATE REGISTERED OR INC ORPORATED IN INDIA, (III) AN OFFICE, BRANCH OR AGENCY IN INDIA OWNED OR CONTROLLED BY A PERSON RESIDENT OUTSIDE INDIA, (IV) AN OFFICE, BRANCH OR AGENCY OUTSIDE INDIA OWNE D OR CONTROLLED BY A PERSON RESIDENT IN INDIA; (W) 'PERSON RESIDENT OUTSIDE INDIA' MEANS A PERSON WHO IS NOT RESIDENT IN INDIA; I.T.A. NO. 2313/MDS/2013 7 6. AS PER THE CONTENTIONS OF LD.COUNSEL FOR THE ASS ESSEE, AFTER RETURNING BACK FROM USA, THE ASSESSEE WAS NOT SURE, WHETHER HE WOULD STAY IN INDIA OR WOULD BE SENT TO ANOTHER ASS IGNMENT ABROAD. THEREFORE, THE ASSESSEE WAS ALLOWED TO RET AIN NRE A/C TILL MATURITY. IT IS AN ADMITTED FACT THAT THE ASS ESSEE WAS IN THE STATUS OF NON-RESIDENT AS PER THE PROVISIONS OF FEM A (ERSTWHILE FERA) DURING THE YEARS 2000-01, 2001-02 & 2002-03. THE ASSESSEE RETURNED TO INDIA IN APRIL, 2003. THE INV ESTMENT WAS MADE BY THE ASSESSEE IN NRE FIXED DEPOSIT A/C DURIN G JANUARY, FEBRUARY & MARCH, 2002. THE BANK ALSO DID NOT DEDU CT TAX AT SOURCE ON SUCH INTEREST INCOME. THIS FURTHER GAVE IMPETUS TO THE BELIEF OF THE ASSESSEE THAT THE INTEREST INCOME EAR NED BY THE ASSESSEE IS NOT TAXABLE IN VIEW OF THE PROVISIONS O F SECTION 10(4) OF THE ACT. IT IS EQUALLY UN-DENYING THE FACT THAT IG NORANCE OF LAW IS NO EXCUSE AND THE ASSESSEE CANNOT ESCAPE FROM TAX LIAB ILITY IF THE DEDUCTOR HAS FAILED TO DEDUCT TAX AT SOURCE. 7. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE H AS NOT OFFERED INTEREST INCOME FOR TAX DUE TO WRONG INTERP RETATIONS OF THE PROVISIONS OF THE ACT AND NOT ON ACCOUNT OF DELIBER ATE CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF S UCH INCOME. THE ASSESSEE WAS UNDER BONAFIDE IMPRESSION THAT HE IS A I.T.A. NO. 2313/MDS/2013 8 PERSON RESIDENT OUTSIDE INDIA AS DEFINED UNDER FE MA. THE EXPLANATION FURNISHED BY THE ASSESSEE IN NOT DISCLO SING THE INTEREST INCOME IN THE RETURN APPEARS TO BE QUITE GENUINE. WE DO NOT AGREE WITH THE FINDINGS OF THE AUTHORITIES BELOW TH AT THE EXPLANATION FURNISHED BY THE ASSESSEE IS NOT COVERED BY CLAUSE( B) OF EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT. AFT ER EXAMINING CHRONOLOGY OF EVENTS AND DOCUMENTS ON RECORD, WE AR E SATISFIED THAT THE EXPLANATION FURNISHED BY ASSESSEE IS BONAF IDE AND ACCEPTABLE. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER AND A LLOW THE APPEAL OF THE ASSESSEE. ORDER PRONOUNCED ON THURSDAY, THE 25 TH SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) '#$ / VICE PRESIDENT % &' / JUDICIAL MEMBER (% /CHENNAI, )& /DATED: 25 TH SEPTEMBER, 2014 TNMM &* +,-, /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ./0 /CIT(A) 4. . /CIT 5. ,12 3 /DR 6. 245 /GF