KAUSHAL GOYAL,NEW DELHI V. DDIT (INV) 1(1), NEW DELHI

BMA 9/DEL/2023

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 41790 (ITAT-DELHI)
• Appeal Type: Black Money Appeal
• Pronouncement Date: 31-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2021-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APPELLANT ASSESSEE; RAJESH KUMAR
• Assessee Lawyers: C.S.AGGARWAL; .
• Keywords: Set aside; Gift; Principle of natural justice
• Section: 22; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’ NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER Black Money Act (BMA) Nos. 7, 8 & 9/Del/2023 (Assessment Years : 2019-20, 2020-21 & 2021-22) Kaushal Goyal I-2/16, Ansari Raod, Opp. Saraswati School, Daryaganj, Delhi – 110 002 PAN : AEUPG 2376 R Vs. DDIT (Inv.) 1(1) New Delhi – 110 002 (Appellant) (Respondent) Assessee by Shri C. S. Aggarwal, Sr. Adv., Shri Ravi Pratap Mal, Adv. and Shri Uma Shankar, Adv. Respondent by Shri Rajesh Kumar, CIT-D.R. Date of Hearing 17.10.2024 Date of Pronouncement 31.12.2024 O R D E R PER VIMAL KUMAR, JM: 1. Three appeals filed by assessee are against order dated 16.02.2023 of Learned Commissioner of Income Tax (Appeals)-31, New Delhi [hereinafter referred to as ‘Ld. CIT(A)’] arising out of assessment order dated 31.07.2022 of the Asst. Commissioner of Income Tax, Investigation DDIT/ADIT (Inv.), 1(1), New Delhi (hereinafter referred as ‘Ld. AO’) u/s 10(3) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax, -2- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 2015 [hereinafter referred to as “BMA, 2015”] for the Assessment Years 2019-20, 2020-21 & 2021-22. 2. All the three appeals involve similar facts, grounds and issues. For facility of convenience, all three appeals were heard together and are being disposed of by a common order. BMA No.7/Del/2023 is taken as lead case. 3. Brief facts of BMA No.7/Del/2024 are that survey was conducted in the case of Shri Kaushal Goyal and M/s. General Book Depot on 09.11.2021. Shri Kaushal Goyal resident individual assessee is owner of GBD Books, Pigeon Books and director in M/s. GBD Overseas Pvt. Ltd. He has also 50% partner in the firm M/s. General Book Depot having PAN AABFG6866D. The entity claimed to have received foreign remittances from various Chinese Entities in the form of Printing/Publication/Translation services being provided to foreign entities. 3.1 On perusal of Digital Evidences examined during the course of survey proceedings, various incriminating evidences pertaining to remittance received from outside India was found in “wechats” of I Phone of Shri Kaushal Goyal. From the chats, it was observed that Shri Kaushal Goyal had received Grants/Subsidy/Financial Aid from the Government of Foreign Country in the garb of services -3- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 provided. The analysis of Foreign Remittance as per Books of Accounts in lakhs is as under: Sr. No. Particulars F.Y. 2016-17 F.Y. 2017-18 F.Y. 2018-19 F.Y. 2019-20 F.Y. 2020-21 1. Sales as per Books 538.79 459.70 587.89 562.25 471.39 2. Foreign Remittance received NIL 3.5 53.29 117.11 129.13 3. Purchase 478.21 300.03 459.10 407.99 246.03 4. % of Remittance w.r.t. total turnover - 0.06% 9% 20% 27% 3.2 Shri Kaushal Goyal had received remittances on account of translation and publishing services. 3.3 The assessee had not declared any information relating to foreign assets including cash received in foreign country in schedule FA, as Nil for A.Ys. 2017-18, 2018-19, 2019-20, 2020-21 & 2021-22. 3.4 During the survey proceedings and post survey proceedings, statement of Shri Kaushal Goyal under section 131(1A) of the Act was recorded under oath. The assessee admitted that he had received minor cash on visit to China. Assessee had made payments out of books in form of cash on various dates. The movement of cash between individuals gets corroborated with “Wechat” and “Whatsapp” Chats of the assessee; are under: Sr. No. Date of chat/email Amount Currency Nature 1. E-mail with New World Press dated 12.05.2020 Non Known Not known Received 2. Chat with Xuemei dated 14.08.2019 1500 USD Received -4- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 3. Chat with Leif dated 11.05.2019 2567 RMB Payment 4. Chat with Zhao dated 11.05.2019 3000 RMB Received 5. Chat with Weely Lee dated 31.07.2019 1500 RMB Received -6. Chat with Vipin Mishra (F.Y. 2018- 19) 1,40,000 RMB Received 7. Chat dated 23.02.2019 7200 RMB Accrued/rece ived 8. E-mail with Leif dated 12.12.2020 10,000 RMB Payment 3.5 Assessee/appellant admitted that he had never reported in Books of Accounts as the payments in the form of Gifts as a courtesy from the friends. 3.6 On the basis of above facts, Learned AO vide order dated 31.07.2022 concluded the assessment proceedings by making following additions: F.Y. Amount (USD) Amount (RMB) Amount (INR) Tax @ 30% 2019-20 0 1,47,200 15,20,576/- 4,56,172/- 2020-21 1,500 4,500 1,51,455/- 45,436/- 2021-22 0 10,000 1,07,400/- 32,220/- Total 1,500 1,61,700 17,79,431/- 5,33,838/- 4. Penalty proceedings were also initiated vide order dated 31.07.2022. 5. Appellant/assessee preferred separate appeals before the learned CIT(A), which were dismissed by a common order dated 16.02.2023. -5- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 6. Being aggrieved by the order of learned CIT(A), assessee/appellant preferred aforesaid separate appeals. 7. Learned Authorized Representative for the assessee/appellant submitted that learned CIT(A) erred in upholding the order of learned AO u/s 10(3) of the BMA, 2015 determining the undisclosed foreign income and asset at Rs. 15,20,576/-, Rs.1,51,455/- & Rs.1,07,400/- and computing the tax payable thereon at Rs.4,56,172/-, Rs.45,436/- & Rs.32,220/- for A.Ys. 2019-20, 2020- 21 & 2021-22 respectively. 7.1 Learned Authorized Representative for appellant/assessee submitted that learned CIT(A) erred in failing to appreciate that assumption of jurisdiction by the learned AO under the provisions of BMA, 2015 is without jurisdiction, as the appellant/assessee has neither any 'undisclosed asset located outside India' nor any 'undisclosed foreign income and asset for application of BMA, 2015. Learned CIT(A) erred in not appreciating that there is no material admissible in law which suggest that the appellant/assessee is liable to be assessed under the BMA, 2015 and the scanned copy of alleged chats/email is not admissible as per the provisions of section 65B of the Evidence Act. Learned CIT(A) failed to appreciate the finding of the learned Assessing Officer that the assessee had received the sums as allegedly reflected in chats dated 14.04.2020 and 23.02.2019 aggregating to RMB 1,47,200/- and that too in F.Y. -6- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 2018-19 is wholly misconceived and contrary to records. The referred sums in chats did not fall in the scope of total undisclosed foreign income and asset. There is no material establishing that the appellant/assessee has derived any income from any source outside India which is not included in the return of income and the addition made in the assessment order under section 10(3) of the BMA, 2015 is unsupported by any material. Learned CIT (A) erred in failing to appreciate that appellant/assessee is engaged in translation of books from Chinese language to English and Hindi, and receipts in respect of translation services were duly disclosed in the books of accounts of the appellant/assessee. Learned CIT(A) grossly erred in upholding the common assessment framed u/s 10(3) of the BMA, 2015 for the A.Ys. 2019-20, 2020-21 and 2021-22, failing to appreciate that for each assessment year, separate assessment order is required to be passed u/s 10(3) of the BMA, 2015. Learned CIT(A) failed to comprehend that while framing assessment order, learned Assessing officer had not provided valid and proper opportunity of hearing in the circumstances of case and had completely misread the statement without even supplying the same to assessee to explain the statement recorded by him. 7.2 The assessments have been made in complete violation of the principles of natural justice in as much as no notice of undisclosed foreign income under section 2(12) of the BM Act had been issued to the appellant. It has been held by the Apex Court in the case of -7- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 Dr. (Miss.) Binapani Dei (1967) 2 SCR 625 that an order in violation of principles of natural justice is of no value and is a nullity in law. The Apex Court in the case of R. B. Shreeram Durga Prasad vs. Settlement Commission, reported in 176 ITR 174 at page. 175 have held that the validity of an order has to be seen on the date of an action taken. 7.3 Learned CIT(A) while dismissing appeal of the assessee had merely uploaded the order on the income tax portal and there was no real time alert or any intimation on the email of the appellant/assessee and the certified copy of the order was not served on the appellant. 7.4 Learned Authorized Representative for the appellant/assessee submitted that Act No. 22 of 2015 [The Black Money (Undisclosed a Foreign Income and Assets) and Imposition of Tax Act, 2015] had been enacted to make provisions to deal with the problem of the Black money that is undisclosed foreign income and assets, the procedure for dealing with such income and assets and to provide for imposition of tax on any undisclosed foreign income and asset held outside India and for matters connected therewith or incidental thereto, the aforesaid Act had been enacted. The provisions of section 2(12), defining the ‘undisclosed foreign income and asset’ is reproduced hereunder: -8- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 2(12) \"undisclosed foreign income and asset\" means the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India, referred to in section 4, and computed in the manner laid down in section 5;\" 7.5 The close reading of section 2(12) shows that an amount of undisclosed income must be from a source obviously of income outside India. There can only be a place of receipt of sum and not of source of receipt. Place of receipt of a sum is not a source of receipt of income. The section envisages that the assessee must have source of income located outside India. In the absence of a source of income located outside India, mere place of receipt is insufficient. Had it been prescribed that when an assessee receives from a place located outside India, it could only then be held that the assessee has undisclosed foreign income. 7.6 The assessee had received at times in the three financial years in China sums by way of reimbursement of expenses incurred by him during his stay at China. The Finding of the AO in para 12 that the assessee had claimed that he had received cash payment from outside India as a gift or arrangement, is entirely erroneous. 7.7 In fact, the whole basis of the assessment u/s 10(3) of the BMA, 2015 was the email/chats. In fact, none of the chats/email reflect that the appellant has earned any undisclosed income in China from a source located outside India which is liable to be -9- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 taxed in India. The learned AO at page 4 in para 6 has tabulated the relevant email/chats which had been made the basis of making the impugned addition. It would be seen that such chats/emails are 38 in number, however, only in 6 email/chats some amount has been reflected. Out of the 6 email/chats, 1 is email and 5 are chats. For the sake of convenience, chat/email-wise submission of the appellant is as under: “Text of Chats on the basis whereof it has been held that the assessee had received undisclosed foreign income alongwith the assessee's submissions in support that such in inference drawn is wholly unwarranted and arbitrary. FY 2018-19 (AY 2019-20) Text of chats No. Amount Assessee's submission Chat 34 : 14.04.2020 2 Sall pehle mujhe rmb 1,00,000 dive the cash. Use pehle bhi kuch 30- 40 thousand rmb bhi diye the. I don't remember exactly. 1,00,000 RMB This chat is between the assessee and his employee. The period is unspecific and is based memory. There is on no corroborative material. It is not known who paid the money to whom much less from a source outside India. There is no basis to conclude that it pertains to the AY 2019-20. Detailed submissions are at Pg. 17-19. Chat No. 37: 23.02.2019 it will take 15-20 days to finish both the books. General rate is rmb lo/- per 30-40 thousand 7200 RMB This chart is with a person based in China and is discussion for a quote. No adverse inference could have -10- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 page but good proof- readers charge rmb 15. I have told then not or than 12 rmb so total cost would be RMB 7200/0 but good quality. been drawn. Detailed submission are at Pg. 19 FY 2019-20 (AY 2020-21) Chat 32: 31.07.2019 This includes delivery charges, which will come to about RMB 1500/-. Weely there is a request we will be arriving in Beijing from Hangzhou on 18th bt train at 5:40 pm. So, please request the Beijing International Hotel t wait for us till 1500 RMB This chat is with one Ms. Weeley Lee based in China, who is CEO of Beijing Glise Culture Media Co. The appellant was not in China at the relevant time. Chat does not reflect any receipt of money and was merely a discussion and quote send by the assessee. Detailed submission is at Pg. 20 Chat 27: 11.05.2019 ok how about 3000 3000 RMB This chat is between the assessee and another author, a person based on China. Appellant was not in China at the relevant time. The aforesaid chat is merely a proposal which does not materialized. Detailed submission is at Pg. 20. Chat 8: 17.11.2019 US$ 1500/- or equivalent in RMB 1500 USD Chat is between the assessee and his client. The appellant was not in China at the relevant time and hence it cannot be -11- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 assumed that any such sum was received. Detailed submission is at Pg. 21 FY 2020-21 (AY 2021-22) Chat 24: 22 12.08.2020 Dear Goyal I'm so glaf to receive your email, and I hope everything is going well with you now. It's my pleasure to work with you. Please let me know if you find any difficulty during the English hindi translation. RMB 7000 is after deducting RMB 10,000. You paid me during your visit to Beijing last time. At the time you paid rmb 10000 in advance for this translation and promised to pay the balance next time when you come to china again. By the way during the last visit you also paid me the translation fees for the children books I finished last year. That's why you has the impression that you paid me a litter over 10000 rmb last time I totally understand and trust you, and expect to get the balance next year when you come to china again. Thank you Leif 10,000 RMB The appellant had remitted a total sum of Rs. 71,658/- and Rs. 90,739/- to Leif Cheung for some translation work done by him and as such assertion that nay sum was paid in cash in incorrect. Detailed submission is at Pg. 21. -12- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 7.8 Reimbursement of expenses is not an income or even a source of income. The aforesaid view has also been taken by Hon'ble High Court of Madras in the case of Anand Transport Pvt. Ltd. vs. ACIT, reported in 370 ITR 524 (Mad.). 7.9 Section 2 of the Evidence Act further states that terms \"electronic form\", \"electronic records\", \"information\", shall have the same meaning as assigned by the Information Technology Act, 2000 (IT Act). Section 65A of the Indian Evidence Act, 1872 provides for Special provisions as to evidence relating to electronic record. The contents of electronic records may be proved in accordance with the provisions of section 65B of the Indian Evidence Act. 7.10 Hon'ble Supreme Court in the case of Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal and Ors. (Civil Appeal Nos. 20825-20826 of 2017 dated 14.07.2020) has held that the certificate required under Section 65B(4) is a condition precedent to the admissibility of evidence by way of electronic record. 8. Learned Departmental Representative submitted that learned AO had held enquiry and thereafter proceeds to take action under the BMA, 2015. The assessee having received foreign money failed to disclosed the same in the books of accounts. The orders of the Departmental Authorities were in accord with law. -13- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 9. From examination of record in light of aforesaid rival contentions, it is crystal clear that appellant/assessee is an individual proprietor of 'GBD Books', 'Pigeon Books' besides being a director in M/s GBD Overseas Pvt. Ltd. He is also a partner in a partnership firm M/s General Book Depot having 50% share in the firm. The appellant is engaged in the business of printing, publishing besides providing his services as a supplier, importer, distributor and translator of books from foreign language to Indian language from its business premises. The details of sales as per books of accounts including sums received from outside India are tabulated here below: Particulars A.Y. 2019-20 A.Y. 2020-21 A.Y. 2021-22 Sales as per books (in Lacs) 587.89 562.25 471.39 Receipts from China (included in the sales) (in Lacs) 53.29 117.11 129.13 9.1 Learned AO in assessment order held that the assessee received sums in China which aggregated to Rs.15,20,576/- (A.Y. 2019-20), Rs. 1,51,455/- (A.Y. 2020-21) and Rs.1,07,400/- (A.Y. 2021-22) and framed the assessment order under section 10(3) of the BMA, 2015 by holding that the payments received outside India form a source located outside India and not been disclosed in the Return of Income of the respective assessment years are liable for taxation under the BMA, 2015. -14- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 9.2 Learned Assessing Officer had relied on chats and emails as under: Financial Year Assessment Year Chat No. RMB USD INR Page of PB 2018-19 2019-20 34 37 1,40,000 7,200 - 15,20,576 2019-20 2020-21 32 7 27 1500 - 3000 - 1500 - 1,51,455 2020-21 2021-22 Email No.23 10,000 - 1,07,400 9.3 The assessee in statement claimed that the amount received were in nature of reimbursement of expenses and were not incorporated in the books of accounts. 9.4 As per ratio of judgment of Anand Transport Ltd. vs. ACIT’s case (supra) it is well settled that reimbursement of expenses is not an income or even a source of income. 9.5 Appellant/assessee undisputedly is not holder of any undisclosed assets outside India or undisclosed foreign income and assets. In absence of source of income located outside India near place of receipt is insufficient to attract the provision of section 2(12) of BMA, 2015. Moreover, the amounts of reimbursement received by appellant/assessee if compared with the income earned outside India is very meager. The application of provision of BMA Act shall lead to miscarriage of justice. In view of above material facts and well settled legal position, orders of learned AO and -15- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 learned CIT(A) are not just, fair, reasonable and legal. Therefore, the impugned orders are set aside. The grounds of appeal are allowed. 10. In the result, appeal of assessee in BMA No.7/Del/2023 is allowed. BMA Nos.8 & 9/Del/2023 11. As the facts and circumstances of the above mentioned appeal are admittedly mutatis mutandis similar to those discussed and disposed of in BMA No.7/Del/2023 hereinabove, we hold accordingly and allow the appeals of the assessee. 12. In the combined result, all the three appeals filed by the assessee are allowed. Order pronounced on this day 31st December, 2024 Sd/- Sd/- (M. BALAGANESH) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 31.12.2024 Pr i ti Y adav, S r. PS -16- BMA Nos.7, 8 & 9/Del/2023 Kaushal Goyal vs. DDIT(Inv.) A.Ys. 2019-20, 2020-21 & 2021-22 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "