Shri Rakesh Jain, Indore V. I T O IT & TP, Bhopal

ITA 7/Ind/2020

AI Insights

This case involves an appeal by Shri Rakesh Jain against the order of the CIT(A)-13, Ahmedabad, which confirmed the addition of Rs. 23,60,300 to the assessee's income under section 69A of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer (AO), who treated the amount as unexplained money since it was not directly credited from the employer to the assessee's bank account. The CIT(A) upheld this decision, noting that the amounts were credited before the assessee's employment period with M/s. Bernhard Schulte Ship Management (Hong Kong) began. The tribunal found that the assessee had not been given a fair opportunity to present his case fully, particularly regarding the employment agreements and the nature of the bank transactions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122611 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-12-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 05-01-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Salary income; Set aside; Capital Gains
• Section: 69; 143(3); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE [CONDUCTED THROUGH VIRTUAL COURT ] BEFORE: SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEBER And SHRI B.M. BIYANI, ACCOUNTNT MEMBER Shri Rakesh Jain, 35, Ravi Nagar , Khajrana Road, Indore PAN: AB KPJ1521C (Appellant) Vs The I TO I T & TP, Bhopal (Respondent) Assessee by : Shri Anil K amal Garg, A.R. Revenu e by: Shri Ashish Porw al, Sr. D.R. Date of hea ring : 26 -12-2022 Date of pronounce ment : 11 -01-2023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This assessee’s appeal for A.Y. 2016-17, arises from order of the CIT(A)-13, Ahmedabad dated 30-10-2019, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”. 2. The assessee has taken the following grounds of appeal:- ITA No. 07/Ind/2020 Assessment Year 2016-17 I.T.A No. 07/Ind/2020 A.Y. 2016-17 Page No Shri Rakesh Jain vs. ITO IT & TP 2 “Grounds of Income-Tax appeal before the Hon'ble Income-Tax Appellate Tribunal, Indore Bench, Indore, against the Appellate Order passed under s. 250/143(3) of the Income-Tax Act, 1961 by the learned Commissioner of Income- Tax (Appeals)-13, Ahmedabad, pertaining to the A.Y. 2016-17 in response to the appeal filed against the Assessment Order under s. 143(3) of the Act, passed by the Income Tax Officer (International Taxation & Transfer Pricing), Bhopal. 1. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in determining the total income of the appellant u/s. 143(3) of the Income-Tax Act, 1961 at Rs.29,43,010/-, as against the Returned Income of Rs.5,46,600/- thereby making additions of Rs.23,96,410/- which is quite unjustified, unwarranted and bad-in-law. 2. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.23,60,300/- made by the AO under S.69A of the Act by holding the difference amount of Rs.23,60,300/- on account of salary income, claimed as exempt by the appellant, being accrued and arisen outside India, in his return of income at Rs.65,30,722/- and receipts of Rs.41,70,422/- appearing to have been received from his employer namely M/s. Bernhard Schulte Ship Management (Singapore) Limited in his NRE bank account. 3. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in holding that the amounts deposited by the appellant in his NRE bank account in the month of April and May 2015 were not forming part of amount deposited out of the salary income received by the appellant without considering and appreciating the material fact that the appellant was engaged in employment with the same employer for the last many years. 4. That, without prejudice to the above, both the Authorities below grossly erred, both on facts and in law, in making and confirming the addition of Rs.23,60,300/- in the appellant's income by invoking the provisions of S.69A of the Act without considering and appreciating the material fact that neither during the course of the assessment proceedings nor under any under proceedings, the appellant was found to be in possession of any unexplained money, bullion, jewellery or other valuable article and therefore, in the case of the appellant, the provisions of S.69A could not have validly been invoked. 5. That, the appellant further craves leave to add, alter or amend the forgoing ground of appeal as and when considered necessary.” I.T.A No. 07/Ind/2020 A.Y. 2016-17 Page No Shri Rakesh Jain vs. ITO IT & TP 3 3. The brief facts of the case are that the assessee is an individual and was a non-resident for the assessment year under consideration. During the year under consideration, the assessee derived salary income working as chief engineer in a merchant ship. Besides, salary income, the assessee also derived income from capital gains on sale of mutual funds and rental income from house situated at Indore. During the year under consideration, the Assessing Officer observed that while the assessee had claimed a sum of Rs. 65,30,722/- as income from salary and bonus ( which was claimed as exempt since the assessee did not render any service in India and the salary was received from his overseas employer in his NRE account), whereas on perusal of the bank statements, the Assessing Officer observed that the assessee had received only a sum of Rs. 41,70,422/- as salary and bonus from his employer. The assessee submitted before Assessing Officer that this difference of Rs. 23,60,300/- was credited in his HBSC NRE Account but the Assessing Officer observed that in absence of any credit entries from his employer i.e. Bernhard Schulte Ship Management (Hong kong) having been found in the bank account, differential amount of Rs. 23,60,300/- is unexplained money of the assessee taxable u/s. 69 of the Act and added the same to the income of the assessee. 4. In appeal proceedings, the ld. CIT(A) observed that from a perusal of the chart/statement showing details of salary received by the assessee, it was seen that though certain amounts were credited to the bank account of the assessee during the year under consideration, however from the details of employment contract produced before him, the period of the employment began from 01-06-2015, therefore, the various amounts shown in the table, I.T.A No. 07/Ind/2020 A.Y. 2016-17 Page No Shri Rakesh Jain vs. ITO IT & TP 4 which according to the assessee was the differential amount which was sought to be taxed as unexplained income has been received by the assessee prior to his period of employment with M/s. Bernhard Schulte Ship Management (Hongkong). Accordingly, the ld. CIT(A) held that the claim of the assessee that the differential amount of Rs. 23,60,300/- is part of salary is not acceptable due to the fact that the impugned amount was deposited before the period of employment with M/s. Bernhard Schulte Ship Management (Hongkong) which began on 01-06-2015. Accordingly, the ld. CIT(A) held that the amount deposited by the assessee primarily in the month of April and May, 2015, which is prior to the period of employment, is the unexplained income of the assessee. 5. In appeal before us, the ld. counsel for the assessee submitted that the assessee is an engineer working primarily on merchant ship for a substantial part of the year. This amount of cash credited to the bank account received by the assessee is cash received from his employer. As soon as the assessee lands in India, he converts the aforesaid cash amount into Indian Rupees through the authorized money exchanger namely Cox & Kings Ltd. and Walls Street Finance Ltd. as per applicable FEMA regulations. The counsel for the assessee submitted that the assessee has been in the employment of M/s. Bernhard Schulte Ship Management (Hongkong) for past several years and by way of additional evidence he has sought to produce copy of employment agreements executed between the assessee and his employer for the past several years to show that ld. CIT(A) has erred in observing that the said salary income was received by the assessee prior to I.T.A No. 07/Ind/2020 A.Y. 2016-17 Page No Shri Rakesh Jain vs. ITO IT & TP 5 his period of employment with the aforesaid employer M/s. Bernhard Schulte Ship Management (Hongkong). 6. In response, the ld. Departmental Representative placed reliance on the observations made by the order of the Assessing Officer and ld. CIT(A). 7. We have heard rival contentions and perused the material on record. We observed that the assessee’s primary contention is that during the course of appellate proceedings, he did not get an opportunity to file the employment agreement between the assessee and his employer M/s. Bernhard Schulte Ship Management (Hongkong) to substantiate the fact that the aforesaid differentiate amount of Rs. 23,60,300/- was received by the assessee from his employer only and the same did not constitute any unexplained income of the assessee. Since, this is a material piece of evidence which goes to the root of matter and revenue authorities did not get an opportunity to analyse the same, the matter is being set aside to the file of CIT(A) to enable the assessee to produce the relevant employment contracts in support of the fact that the aforesaid sum of Rs. 23,60,300/- which was taxed as unexplained u/s. 69A of Act is in fact the salary income of the assessee received from his employer. In the remand proceedings, the ld. CIT(A) is directed to analyse the modus operandi of the assessee as to how salary income received by him from his employer in cash is converted into Indian rupees through authorized foreign exchange money exchanger and deposited in his bank account by way of account payee cheque. The ld. CIT(A) may also analyse the employment contracts for the period of April 2015 to June, 2015 to verify whether the assessee was in the employment of I.T.A No. 07/Ind/2020 A.Y. 2016-17 Page No Shri Rakesh Jain vs. ITO IT & TP 6 M/s. Bernhald Schulte Ship Management (Hongkong). However, we would also add that it is observed that the assessee is a senior citizen and he is following cash system of accounting and offers income as salary income in the year when the salary income received in cash is converted into Indian rupees by the authorized money exchanger in his bank account through account payee cheque. We also observe that this fact has not been disputed that the aforesaid income sought to be taxed as unexplained income has been received by the assessee during the year under consideration itself in his bank account. Accordingly, the ld. CIT(A) may verify whether the same has been received by the assessee from his employer after analyzing the employment agreement so produced before him for the period under consideration. In the result, the appeal of the assessee is set aside to the file of ld. CIT(A) with the aforesaid directions. 8. In the result, the appeal of the assessee is allowed for statistical purposes Order pronounced in the open court on 11 -01-2023 Sd/- Sd/- (B.M. BIYANI) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 11/01/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. I.T.A No. 07/Ind/2020 A.Y. 2016-17 Page No Shri Rakesh Jain vs. ITO IT & TP 7 By order, Sr. Private Secretary, Income Tax Appellate Tribunal, Indore Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 26/12/2022 2) Date on which the typed draft is placed before the Dictating Member & Other Member 27/12/2022 3) Date on which the approved draft comes to the Sr. P.S./P.S. /12/2022 4) Date on which the fair order is placed before the Dictating Member for pronouncement /12/2022 5) Date on which the fair order comes back to the Sr. P.S./P.S. /01/2023 6) Date on which the file goes to the Bench Clerk /01/2023 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order a.k