The DCIT, Central Circle-3, Vadodara V. Shri Vimal Kanubhai Patel, Vadodara

ITA 980/AHD/2019

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0695 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-08-2023
• Assessment Year: 2004-2005
• Appeal Filed On: 03-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Residential status; Deemed to accrue or arise in india
• Section: 90; 143(3); 5(2)

Judgement Text

आयकर आयकरआयकर आयकर अपीलीय अपीलीयअपीलीय अपीलीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद 瀈यायपीठ 瀈यायपीठ瀈यायपीठ 瀈यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ B’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI TR SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./ITA No. 980/AHD/2019 /Asstt. Year: 2004-05 DCIT Central Circle-3, Vadodara Vs. Shri Vimal Kanubhai Patel, 58, Alkapuri Society, Alkapuri, Vaoddara PAN : ACXPP 5119 Q (Appellant AppellantAppellant Appellant) (Respondent) Revenue by : Shri Vaghe Prasadrav Annasaheb, Sr. DR Assessee by : Shri Milin Mehta, AR सुनवाई क琉 तारीख/Date of Hearing : 21/08/2023 घोषणा क琉 तारीख /Date of Pronouncement: 16/11/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income-tax (Appeals)-12, Ahmedabad, (here-in-after referred to as "CIT(A)") dated 20.03.2019 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2004-05. 2. The revenue has raised following grounds of appeal:- “1 . On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.3,45,90,531/- on account of unexplained credits in the account of City Bank, Singapore when it is on record that the assessee himself admitted before Investigation Wing that the said bank account was undisclosed foreign bank account and the deposits in this bank account were liable for taxation in India. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.3,45,90,531/-on account of unexplained credits in the account of City Bank, Singapore when the assessee could not prove that the deposits in the said undisclosed foreign bank account are the income accrued to the assessee from the source out of India. 3. It is, therefore, prayed that the order of the Ld. CIT(A)-12, Ahmedabad may be set aside and that of the AO may be restored to the above extent.” ITA No. 980/Ahd/2019 DCIT Vs. Shri Vimal Kanubhai Patel A.Y. 2004-05 2 3. The only effective issue raised by the revenue is that the learned CIT(A) erred in deleting the addition made by the AO on account of unexplained credit in undisclosed foreign bank account namely Citibank NA Singapore for Rs. 3,45,90,531/- only. 4. The facts in brief are that the assessee is an individual and for the year under consideration, he is a non-resident for the purpose of the Act. The assessee is director in various companies including the company namely M/s Banco Product (India) Ltd. The “Banco Group” was subject to search proceedings dated 2 nd August 2016 and assessee being director, his residence at Alkapuri Vadodra was also included in the search operation. From his residence, 17 Pen drives were found, containing details regarding his foreign assets in the form of bank accounts, investments, properties etc. These assets or bank accounts were not disclosed by him. The Assessee in the post search inquiry vide letter dated 18 th October 2016 before the investigation team admitted that foreign banks or assets were not disclosed, and he is in the process of determining the income liable to be taxed with respect to those undisclosed foreign banks to offer income accordingly. 5. The undisclosed foreign bank accounts include one of the accounts, opened with Citibank NA Singapore linked to customer No. 112969. Under the impugned customer number, there were various accounts in different currencies jointly held with his 2 brothers namely Shri Mehul Patel and Shri Samir Patel. As such, the assessee before settlement commission had offered income on account of foreign bank accounts including Citibank NR accounts from AY 2005-06 to 2016-17 whereas his brother’s offered income before the settlement commission from A.Y. 2004-05 being the year in which they were ordinary residents. 6. During the year under consideration i.e. A.Y. 2004-05, the Citibank NA Singapore USD account got credited by US $ 7,87,939.73 and Euro account got credited by 2,20,000 Euro which was credited on 5 th Feb 2004. Out of total deposit in USD account, there was initial deposit of $ 6,06,549.82 and $ 1,66,194.70 as on 29 th Aug 2003. In other words, the total initial deposit was $ 7,72,744.52 only. ITA No. 980/Ahd/2019 DCIT Vs. Shri Vimal Kanubhai Patel A.Y. 2004-05 3 The remaining credits of $ 15,194.71 represent various small amount credit entries of interest earned on bond/deposits/coupon etc. 7. The assessee explained that the initial deposits in the USD account were transferred from his foreign account in Habib bank jointly held with his brothers and the sources of deposit in Habib bank has been explained before settlement commission. Therefore, the income chargeable to tax with respect to initial deposit has been offered. Likewise, the credits of interest were from investment held outside India, therefore not taxable in India as the same accrued or arose outside India. Similarly, the credit entry in Euro account is contra entry transferred from USD account, hence no income. 8. The AO accepted the explanation of the assessee regarding the credit entry in Euro account however disagreed with the assessee as far as the credit entry in the USD account for $ 7,87,939.73 was concerned. The AO found that the assessee has not provided corroborative material establishing his claim that the amount was transferred from Habib Bank. As such, the assessee before the settlement commission submitted that he does not have account statement of Citibank Singapore for the period prior to A.Y. 2008-09 and offering income from such account for that period on estimation basis. Therefore, the explanation of the assessee cannot be accepted. The account in Citibank Singapore were jointly held with his brother and his brother in year under consideration has offered income from this account before settlement commission whereas the assessee has neither offered before settlement commission nor in the return filed under section 148 of the Act. Accordingly, the AO held that the assessee failed to explain the sources of credit in USD account for $ 7,87,939.73 only. Therefore, the same liable to be taxed in his hand as his unexplained income. Thus, the AO converted the USD amount in INR by applying relevant exchange rate and worked out undisclosed income at Rs. 3,45,90,531/- which was added to his total income. 9. On appeal by the assessee the learned CIT(A) deleted the addition made by the AO. The relevant observation/ finding of the learned CIT(A) is extracted as under: ITA No. 980/Ahd/2019 DCIT Vs. Shri Vimal Kanubhai Patel A.Y. 2004-05 4 “5.5 As to the residential status of the appellant for taxation purposes for A.Y.2004- 05, it is seen that though the appellant was in India in the FY 2003-04 for 167 days, he met the criteria of NR as per sec. 6(1)(a) However, as per sec. 6(1)(c), if an individual was in India for 60 or more days in the previous year and 365 or more days in preceding 4 years, the individual is to be treated as resident. This condition is met by the appellant, however, as the appellant is a PIO (Person of Indian Original as also held by the Hon'ble ITSC), and residing in UAE (as held by the Hon'ble ITSC), the words "60 days" have to be read as 182 days" and therefore, the appellant cannot be held to be resident and thus he is a non- resident as per sec. 2(3) r.w.s. 6 of the Act. As there is no dispute that the appellant was non-resident in the previous year related to A.Y. 2004-05 as per the provisions of Section- 5(2) of the Act, the appellant was liable for tax on all income from whatever source derived which (a) is received or deemed to be received in India or (b) accrues or arises or is deemed to be accrued or to arise to him in India. In simple words, an NR is liable for tax in India only on those income which has Indian Connection. In view of this, the appellant has contended that the income deposited in the concerned bank accounts being the receipts from Tanzania business and having no relation to any source in India, the amount could not be taxed in India. 5.6 While dealing with the scope of taxation and the onus on the AO to prove the chargeability, it has been submitted by the Ld. AR that if the provisions of Section-5(2) are seen, it becomes very clear that unless it is established that the income accrues or arises or it is deemed to accrue or arise in India or is received or deemed to be received in India, it will not be taxable in India. In other words, a positive evidence of accrual/receipt in India is required to be brought on record by the Department for bringing such items of income to tax in India in the cases of non-residents. Among other, the reliance has been placed on the decision of Mumbai ITAT in the case of DCIT v/s. Dipendu Bapalal Shah wherein the addition in foreign bank account was deleted holding that when the assessee is a non-resident and there is no finding that any income has accrued or received in India, in that case, no addition can be made and "assessee being a non-resident, having money in foreign country cannot be called upon to pay income tax on that money in India unless it satisfies the tests of taxability of non-resident under the provisions of the act, which in the instant case is not getting satisfied in the case of the assessee, thus, the bank account of HSBC Bank, Geneva is outside the preview of this Act" and on the decision of Delhi Tribunal in the case of ACIT v/s. Suresh Nanda wherein it was held that "the Ld. DR could not controvert the factual finding of the Ld. CIT (A) that the AO had not brought on record any evidence to link the money brought into India or kept in foreign account by the assessee have a link with any Indian Defense Contract payment. The income has not accrued or arising in India. We, therefore, uphold the orders of the CIT (A) on this issue". 5.7 On analytical reading of the provisions of the Income Tax Act on the issue of taxing a non-resident in India, it is clear that being NR, the appellant is not liable to offer his global income as per sec. 5(1) to tax in India (of course subject to sec. 90 and sec. 91 of the Income-tax Act) where the appellant would be required to prove non- taxability or credit of tax paid outside India as the case may be. As the appellant is NR, he is liable to offer his income in and from India as per sec. 5(2) to tax in India but the onus is on the Revenue to prove that the deposits in the foreign account maintained by the non-resident assessee are out of the income that falls u/s.5(2) of the Act and that the AO has no authority to presume that the deposits in the foreign bank accounts will be income of the non-resident assessee unless the AO proves that the deposits and income were out of the income falling u/s.5(2) of the Act. An assessee cannot be fastened with a negative/reverse onus/burden if it is not so specifically provided through any deeming fiction in the Act. This is also not material that the two brothers of the appellant have offered the income in A.Y.2004-05 out of the foreign bank account for tax before the Hon. Income Tax Settlement Commission (ITSC). While the residential status of two brothers is not mentioned in the assessment, an offer of an incutie to tax by one assessee is not binding on other assessee even though the ITA No. 980/Ahd/2019 DCIT Vs. Shri Vimal Kanubhai Patel A.Y. 2004-05 5 facts and circumstances may be identical. Taxation of an assessee has to be based only on the facts and circumstances of his case alone. The AO has to bring on record as to why the income of the assessee under consideration should be brought to tax under the Income Tax Act. 5.8 The copy of the order dated 30/01/2019 u/s 245D(4) of the IT Act made by the Hon'ble Income Tax Settlement Commission was obtained from the appellant and it is seen that the appellant Shri Vimal K. Patel was before the ITSC for A.Yrs 2005-06 to 2013-14 whereas his brothers were for A.Yrs 2004-05 to 2015-16, that they were born in Kenya and are PIO (Persons of Indian Origin), they are residents of UAE, and that they were NR (Non-Residents) where there was Panama Expose in April 2016. It also appears from the said order that two brothers of the appellant were residents u/s 6 for A.Y. 2004-05 also. It is also seen that the further additional income of Rs.8,65,63,679/- offered during proceedings u/s 245D(4) along with the additional income offered in the SoF in the settlement petition amounting to Rs.90,28,25,000/- have been accepted for the three applicants - Shri Vimal K Patel, Shri Samir K Patel and Shri Mehul K Patel which includes an aggregate income (with NIL amounts for A.Y.2004-05, A.Y.2014-15 and A.Y.2015-16) of Rs.32,49,02,569/- (i.c. Rs.28,32,25,000+ Rs.4,16,77,569/-) for the period from A.Y. 2005- 06 to A.Y. 2013-14 in the case of Shri Vimal K Patel. The amount of income for A.Y. 2004- 05, A.Y. 2014- 15 and A.Y. 2015-16 in the case of Shri Vimal K Patel has been taken as NIL. It can be inferred from the said order that had any income for A.Y. 2004-05 in the hands of Shri Vimal Patel being liable to tax in India, the PCIT must have pointed out in his report to the Settlement Commission and the Hon'ble ITSC may have obtained offer of further additional income during proceedings u/s 245D(4) of the Act. 5.9 Under the circumstances, I find that the appellant being NR in the year under consideration and the deposits in the foreign bank (CitiBank, Singapore), has no connection with income that might have fallen u/s 5(2) of the Act, the addition of Rs.3,45,90,531/- cannot be sustained and is required to be deleted. The Ground succeeds and other related grounds need not be adjudicated.” 10. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 11. The learned DR before us reiterated the findings contained in the assessment order. 12. On the other hand, the learned AR before us filed a paper book running from pages 1 to 126 and the order of the settlement commission which is available on record. It was contended by the learned AR that the assessee for the year in dispute was non-resident and therefore the income in the foreign bank account cannot be made subject to tax in India as per the provisions of section 5 of the Act. The learned AR before us vehemently supported the order of the learned CIT-A. ITA No. 980/Ahd/2019 DCIT Vs. Shri Vimal Kanubhai Patel A.Y. 2004-05 6 13. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the issue at hand have been elaborately discussed in the preceding paragraphs, therefore we are not inclined to repeat the same for the sake of brevity and convenience. Admittedly, the assessee for the year under consideration was a non-resident under the provision of the Act. The AO also assessed him as a non-resident assessee which is evident from the assessment order. As per the provision of section 5 of the Act, in case of a non- resident, the assessee is chargeable to tax for those income which is received or is deemed to be received or, accrue or arise or is deemed to accrue or arise in India shall be chargeable to tax under the Act. 14. We note that the assessee during the post search proceedings before the investigation unit vide letter dated 18 th October 2016 has explained that his family has business in Tanzania for several decades, however considering the economic and political uncertainty of Tanzania, it was decided by family to receive the business proceeds outside Tanzania and accordingly bank accounts were opened in UAE and Singapore jointly with his brothers. During appellate proceeding before the learned CIT(A), the assessee once again reiterated that the deposit in his foreign bank accounts were source from business in Tanzania and income accrue or arise in UAE from different activity. Thus, the assessee contended that no income in those bank accounts were received or is deemed to be received in India or the income accrue or arises or is deemed to accrue or arises in India. We also thoroughly gone through the finding of the AO and noticed the AO nowhere alleged based on material that the amount credited in the Citibank NA Singapore were accrued or arose or deemed to be accrued or arose in India. In other words, there is no finding of the AO that the credit entry in those bank accounts were sources from India. On the other hand, the assessee has time and again submitted the credit entry in Citibank NA Singapore USD account was from his other foreign bank account held with Habib Bank AG Zurich and interest from the investment held outside India. The AO in the assessment order without bringing contrary material or material establishing any link to those deposits with income ITA No. 980/Ahd/2019 DCIT Vs. Shri Vimal Kanubhai Patel A.Y. 2004-05 7 accrue or arises in India made the addition of those credit entry by holding the same as unexplained. As such, it is the onus upon the revenue, especially considering the status of the assessee as non-resident to bring corroborative material to tax the amount credited in foreign bank account under this Act. It is also pertinent to highlight that the assessee was resident but not ordinary resident for the A.Y.s 2000-01 to 2003-04 and assessment was reopened in similar ground, but no addition was made by the AO on account of deposit in foreign bank account namely Citibank NA Singapore or Habib Bank AG Zurich. Thus, it is transpired that the revenue has treated the deposit in those foreign bank accounts as accrued or arose outside India from the business which was also not controlled from India. In view of the above, we hold that there is no infirmity in the order of the learned CIT(A). Hence, the ground of appeal raised by the revenue is hereby dismissed. 15. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 16/11/2023 at Ahmedabad. Sd/- Sd/- (TR SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 16/11/2023 आदेश आदेशआदेश आदेश क琉 क琉क琉 क琉 灹ितिलिप 灹ितिलिप灹ितिलिप 灹ितिलिप 灡ेिषत 灡ेिषत灡ेिषत 灡ेिषत/Copy of the Order forwarded to : आदेशानुसार आदेशानुसारआदेशानुसार आदेशानुसार /BY ORDER, TRUE COPY उप उपउप उप/सहायक सहायकसहायक सहायक पंजीकार पंजीकारपंजीकार पंजीकार (Dy./Asstt. Registrar) आयकर आयकरआयकर आयकर अपीलीय अपीलीयअपीलीय अपीलीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad 1. अपीलाथ牸 / The Appellant 2. 灹瀄यथ牸 / The Respondent. 3. संबंिधत आयकर आयु猴 / Concerned CIT 4. आयकर आयु猴(अपील) / The CIT(A) 5. िवभागीय 灹ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड榁 फाईल / Guard file.