The Income Tax Officer, International Taxation, Surat V. Shri Alkesh Pratapchandra Bhansali, Surat

MA 34/SRT/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1463 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-10-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-09-2022
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Residential status; Deemed to accrue or arise in india; Tax effect
• Section: 68; 69; 5(2); 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER M.A. No.34/SRT/2022 (AY 2007-08) (Arising out of ITA No.677/Srt/2018) (Hearing in Physical Court) Income Tax Officer (International Taxation) Anavil Business Centre, Adajan, Hazira Road, Surat Vs Alkesh Pratapchandra Bhansali, 110,Nirmal Chambers, Sattapir, Navsari. PAN No.: ABBPB 7892 F Assessee / appellant Revenue /respondent Assessee by Shri K. Gopal, Advocate Revenue by Shri Vinod Kumar, Sr. DR Date of hearing 30/09/2022 Date of pronouncement 07/10/2022 Order under section 254(2) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This Miscellaneous Application (MA) is filed by the revenue for seeking recall by way of rectification of the order dated 22/11/2021 in ITA No. 677/Srt/2018 for the A.Y. 2007-08. 2. The ld. Senior Departmental representative (Sr. DR) for the revenue submits that the appeal of revenue was dismissed vide consolidated order passed in ITA No. 676 & 677/Srt/2018 for the A.Y. 2006-07 and 2007-08 respectively, vide order dated 22/11/2021. The ld.Sr.DR submits that the appeal for A.Y. 2007-08 was dismissed due to low tax effect i.e. less than Rs. 50.00 lacs as determined by Central Board of Direct Tax (CBDT), for filing appeal by the Revenue before the Tribunal. The tax effect involved in this appeal is Rs. MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 2 32,37,039/-. In the order, the revenue was given liberty to move appropriate application, if on later stage, it is discovered that the appeal is covered by any exception clause of Circular of CBDT. The ld. Sr. DR submits that the case/appeal of the assessee is covered by the exception clause of para 10 of CBDT Circular No. 3/2018 dated 11/07/2018. Sub clause (d) of para 10 of CBDT Circular No. 3/2018 relates to undisclosed Foreign income/undisclosed Foreign asset (including financial asset/undisclosed foreign bank account). The additions in the assessment year under consideration was made on account of undisclosed foreign bank account of assessee. The ld. Sr. DR, accordingly, submits that the order qua the A.Y. 2007-08 in ITA No. 677/Srt/2018 may be recalled and to fix the appeal for adjudication all the grounds of appeal raised therein, afresh. 3. On the other hand, the ld. AR of the assessee submits that the ld. Sr. DR for the revenue, during the hearing of appeal agreed that the tax effect in the present appeal was less than Rs. 50.00 lacs of monetary limit fixed by the CBDT for filing appeal before the Tribunal. The ld. AR further submits that if it is accepted or admitted by him that the case of revenue is covered by any exception clause prescribed in para 10 of CBDT Circular No. 3/2018, even thereafter it will be a futile exercise as the case of assessee is itself covered by decision of Tribunal in A.Y. 2006-07 in ITA No. 676/Srt/2018 dated 22/11/2021. MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 3 4. In the short rejoinder, the ld. Sr. DR for the revenue submits that the revenue want decision on merit instead of dismissal of appeal for the want of tax effect. 5. At the time of hearing, we directed the parties to make their submission on merit. Both the parties made their respective submission on merit of appeal which we will deal with later on. First adverting to the grievance raised in this Misc. application No. 34/Srt/2022. 6. We have considered the submissions of the parties on the application under section 254(2) and have gone through the orders of the lower authorities. We find that the addition of Rs. 88,03,308/- were made on account of inward remittance in non-resident Indian (NRI) account from abroad. On considering the submission of parties, we find that the case of revenue is covered by exception provided in para 10 of CBDT Circular No. 3/2018 dated 11/07/2018, therefore, the order dated 22/11/2021 passed in ITA No. 677/Srt/2018 is recalled. 7. In the result, this Misc. application of the revenue is allowed. 8. Now adverting to the adjudication on merit of case in ITA No. 677/Srt/2018 for the A.Y. 2007-08. The assessee has raised following grounds of appeals; a. That the Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in holding that sec. 68 or Section. 69 of the Act have limited application in the case of a non- resident without appreciating the fact that the provisions u/s 68 and 69 of the Act do not distinguish between the residential status of an assessee. b. That the Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in extending the benefit of section 5(2) of the Act to the assessee without verifying the residential status of the assessee in the FY 1999-2000 and 2000-01 when the MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 4 impugned bank account was opened by the assessee and its consequent impact on the residential status of the assessee for the year under consideration. c. That the Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in allowing the claim of the assessee of not explaining the source of the credits appearing in his bank account of HSBC Switzerland of Rs.9,69,340/- completely ignoring the provisions of Section 5(2) of the Act which makes the receipts taxable in India even if the same is received or deemed to be received in India even though the same is accruing or arising outside India. d. That the Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in allowing the claim of the assessee of not explaining the source of the credits appearing in his bank account on the ground of assessee being non-resident even though the assessee could prove that he was a non-resident only in the A.Y 2005-06 onwards and therefore deposit of huge sums in such a short span required deeper investigation by the CIT(A) and proper explanation by the assessee. e. That the order of the Ld. CIT(A)-13, Ahmedabad suffers from perversity since the Ld. CIT(A) failed to apply the provisions of Section 6(1)(c) of the Act to the facts of the assessee’s case upto AY 2004-05 as the assessee would become resident in India if his stay in India is more than 365 days in the previous four years and more than 60 days in the A.Y 2004-05. f. That the order of the Ld. CIT(A)-13, Ahmedabad suffers from perversity since the Ld. CIT(A) failed to collate / collect the details of number of days presence of the assessee in India to determine his residential status before F.Y 2001-02 which were very vital for deciding the residency of the assessee. Therefore, the order passed by the Ld. CIT(A) is perverse to this extent. g. That the Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in holding that in the case of remittance of Rs.88,03,380/- by way of banking channel, the onus on the Non-Resident u/s 69 of the Act stands discharged and therefore Section. 5(2)(b) of the Act does not apply, completely ignoring the fact that the onus was not discharged by the assessee that the said amount did not accrue or arise in India or could not be held to have accrued order arisen in India without verifying the residential status of the assessee upto AY 2004-05 wherein the assessee could have been a resident as per provision 6(11)(c) of the Act and therefore such a huge remittance within such a short span warranted deeper investigation and enquiry. h. That the order of the Ld. CIT(A)-13, Ahmedabad suffers from perversity since the Ld. CIT(A) failed to enquiry the source of remittance which was received by the assessee or call for a remand report directing the assessee which were received in such a short span of time of assessee becoming non-resident. i. That the Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in holding that it is incumbent upon the AO to establish that the balance in the bank account reflect the income, source of which is in India, in absence of which the additions MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 5 cannot be sustained completely ignoring the fact that as per the provision s of the statute the responsibility lay on the assessee to explain to the satisfaction of the assessing officer the nature of a transaction or entries appearing in its bank account of the assessee in the absence of assessee being a non-resident for a fairly long period of time. j. That the Ld. CIT(A)-13, Ahmedabad has erred in facts and in law in relying on the order of the Hon'ble ITAT in the case of Shri Dipendu Bapalal Shaha ITA No.4751/Mum/2016 & 4752/Mum/2016 in which there was no dispute that the assessee was a non-resident since 1979 whereas in the present case the assessee became non-resident only in the AY 2005-06. 9. We have heard the submission of both the parties and perused the record carefully. The ld. Sr. DR for the revenue submits that the Assessing Officer made addition on the basis of information received from sovereign countries i.e. French authorities wherein it was informed that certain nationals were maintaining bank account in HSBC, Geneva. Such bank accounts are not disclosed before income tax authorities. The ld. CIT(A) deleted the addition without proper appreciation of facts. Thus, the ld. Sr. DR for the revenue supported the order of the Assessing Officer. 10. On the other hand, the ld. AR of the assessee relied on the order of ld. CIT(A) as well as order of Bench for A.Y. 2006-07 dated 22/11/2021. 11. We have considered the rival submissions of both the parties on merits and have gone through the orders of the lower authorities carefully and the order passed by this combination in appeal for A.Y. 2006-07. We find that the grounds of appeal raised by the Revenue are squarely covered by the decision MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 6 of this combination for A.Y. 2006-07 wherein, we have passed the following order: “12. We have considered the rival submissions of the parties and have gone through the order of the lower authority. We have also deliberated on various case laws relied by ld AR of the assessee and on the decisions referred by ld. CIT(A) in his order. The A.O. made additions of Rs. 57,37,619/- by taking his view that assessee has not furnished any evidence to establish that assessee having any source of income outside India and that the depositing in this account is of such source of income. That assessee has not furnished any evidence to establish that assessee having any source of income outside India and that the depositing in this account is of such source of income. In absence of information, the Assessing Officer took his view that income deemed to accrue or arise in India and is liable to tax under section 5 (2)(b) r.w.s section 69. The AO further held that the assessee has not denied the HSBC bank or there was no fund in the said account. The AO held that there was deposit of Rs.2,50,30,653/- in the month of March, 2006 and in absence of information, the AO held that income deemed to accrue or arise in India and is liable to tax under section 5 (2)(b) r.w.s section 69. 13. The ld CIT(A) deleted both the additions by holding that once the assessee took his stand that he a non-resident, he can have foreign asset and foreign accounts which is not required declared before the Income Tax Authority. The status of non-resident is not disputed by the AO. The assessee is cannot be asked to prove negative. The A.O. has not brought any evidence on record to go through that income in India has been diverted and remitted in abroad. From the bank account furnished by assessee it is clear that assessee has not diverted any income of remittance abroad from India. Therefore the assessee has discharged his MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 7 primary onus. Moreover, the non-resident, the assessee is working abroad. The assessee is not a partner, a proprietor, director of any company doing business in India and he does not have any business in India. As he is non-resident, he is under obligation to declare his Indian asset and Indian accounts and he is not required to explain his foreign income or asset. The assessee already declared income arising or accruing in India by filing return of income in India. The Assessing Officer merely assumption and surmises that assessee has concealed particulars of income on the basis of sheet of papers from French Government highlighting that assessee holds a bank account in Switzerland. 14. We find that the coordinate bench of Mumbai Tribunal in DCIT Vs Venu Raman Kumar (supra) while relying on earlier decision in DCIT Vs Hemant Mansukhlal Pandya (supra) almost on similar grounds of appeal, in case of assessee who was also non-resident from decade, passed the following order; “12. We have carefully considered the rival submissions. So far as the factual aspect of the matter are concerned, the same has been noted in the earlier paragraphs and are not been repeated for the sake of brevity. So however, in order to briefly recapitulate, it is to be noticed that the assessee is a non-resident individual, an aspect which is not disputed. Further, it is also not disputed that three accounts in question are not in the name of the assessee. Further two of the bank accounts have been opened in the name of entities viz. Zetec Ventures Ltd and Zeke Limited based in British Virgin Islands and assessee is a Director in one of the two entities and so far as the second entity is concerned, assessee founded the same. The claim of the assessee was that none of the bank accounts in question have any relation or connection to India or to any of assessee’s transactions in India. We find that the case set up by the AO is on a presumption that the assessee has routed money sourced from MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 8 India through three entities to the bank accounts in question. 13. In this background, the first and the foremost issue which arises for consideration is the question of onus on the respective parties (i.e. assessee and Revenue) and whether the same has been discharged? Aligned to this question, is the scope and ambit of the income assessable in India in the hands of a non resident which is governed by the provisions of section 5(2) of the Act. In fact, such a situation has been examined by our co-ordinate Bench in the case of Shri Hemant Mansukhlal Pandya (supra). The bare provisions of section 5(2) of the Act bring out that in case of a non-resident assessee, the total income that is liable to be taxed shall comprise of income, which is received or deemed to be received by or on behalf of such person or the same accrues or arises or is deemed to accrue or arise in India to such person. Therefore, the moot question is whether it can be said that the credits appearing the three bank accounts in question lead to the situation where the amount is includible in the income of the assessee, a non resident Indian, within the provisions of section 5(2) of the Act. For this purpose, what is relevant to decide is the burden on the assessee to disclose the details of the three bank accounts in question. This aspect was also gone into by our coordinate Bench in the case of Shri Hemant Mansukhlal Pandya (supra), and the following discussion is relevant:- “17. Having said, let us examine, non residents are required to furnish details of his foreign bank accounts and assets in India or not. The assessee has maintained only one bank account in India in Dena Bank which is an NRO account. The said bank account has been reflected in AIR information. In order to prove that the amount in foreign bank account is not sourced from India, the assessee filed the bank statement of his only bank account in India Hemant Mansukhalal Pandya from the financial years 1998 to 2008. On perusal of the bank account filed by the assessee, it was noticed that there are no debits in the bank account which could have gone to the foreign bank account. Thus, it can be seen that no amounts have been transferred from his Dena Bank account in India to any of the bank accounts maintained including HSBC, Geneva. In fact, the balance in the account maintained in Dena Bank is so less that it cannot fund an amount of Rs.4.28 crores which has been added by the AO as assessee's income. Despite this, the AO sought to put the onus of proving a negative that the deposits in foreign bank account are not sourced from India, on the assessee. In our considered view, the AO is not justified in placing the onus of proving a negative on the assessee. In fact, only a positive assertion can be proved, but not a negative. Furthermore, the onus of proving that an amount falls within the taxing ambit is on the department and it is incorrect to place the onus of proving negative on the assessee. This legal proposition is supported by the MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 9 decision of Hon'ble Supreme Court in the case of Parimisetty Seetharaman vs CIT (1965) 57 ITR 532 (SC) where it was categorically held that the burden lies upon the department to prove that a particular asset is within the taxing provisions. Therefore, we are of the considered view that when the AO found that the assessee is a non resident Indian, was incorrect in making addition towards deposits found in foreign bank account maintained with HSBC Bank, Hemant Mansukhalal Pandya Geneva without establishing the fact that the said deposit is sourced out of income derived in India, when the assessee has filed necessary evidences to prove that he is a non resident since 25 years and his foreign bank account and assets did not have any connection with India and that the same have been acquired / sourced out of foreign income which has not accrued / arisen in India.” The aforesaid discussion by our co-ordinate Bench reveals that the onus was on the Department to prove that the particular asset in question was within the taxing provisions of the Indian Income Tax Act, 1961. The proposition has been arrived at, relying on the judgment of the Hon’ble Supreme Court in the case of Parimisetty Seetharaman vs. CIT [57 ITR 532]. Therefore, we proceed further on the premise that the onus was on the AO to establish that qua the three bank accounts in question assessee had the ownership and also the fact that the transactions therein have Indian connection. 14. In this background, we have examined the factual findings which have been arrived at by the CIT(A). In the earlier part of this order, a portion of the said finding has also been extracted by us. As per the CIT(A) there is no material or evidence to say that the assessee was connected with the bank accounts in question so as to justify an inference that any income thereof was received or deemed to have been received or accrued or deemed to have accrued in India. A perusal of the Grounds of appeal raised by the Revenue before us reveal that none of the findings recorded by the CIT(A) have been assailed on the basis of any material or evidence. In fact, the entire case of the Revenue, which had been adverted to at the time of hearing before us, is based on the presumption that the assessee has routed the money sourced from India through the three entities into the bank accounts in question. It is a well-settled proposition that a presumption, howsoever, strong cannot substitute an evidence and, therefore, in our view, the CIT(A) made no mistake in deleting the addition. At this stage, we may also refer to the reliance MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 10 placed by the AO as well as the CIT-DR on the judgment of Hon’ble Supreme Court in the case of Sumati Dayal vs. CIT [214 ITR 801] to defend the addition made on the test of human probability. No doubt, the test of human probabilities is an acceptable test to decide the genuineness or otherwise of a particular transaction. So, however, what is required is to weigh and consider all evidences and material which are available on record. Considering the facts of the instant case and noting that there was complete absence of material, as noted by the CIT(A) too, we find that the application of test of human probabilities to sustain the addition would be unjustified. Therefore, the reliance placed on the judgment of Hon’ble Supreme Court in the case of Sumati Dayal (supra), is not applicable to the facts of the instant case. 15. Before parting, we may also refer to the fact that there is no negation to the fact recorded by the CIT(A) that the circumstances of the case are similar to those in the case of Shri Hemant Mansukhlal Pandya (supra). Even in the Grounds of appeal filed before us, the Revenue has not canvassed to the contrary. In fact, at the time of hearing, the learned representative referred to the Grounds of appeal raised in the case of Shri Hemant Mansukhlal Pandya (supra) and stated that two of the Grounds in the present appeal are identically worded. Considering that our coordinate Bench in the case of Shri Hemant Mansukhlal Pandya (supra) has also considered an identical issue in similar circumstances, we find no reasons to depart from the aforesaid decision and, accordingly, on this ground also we affirm the ultimate decision of the CIT(A) in deleting the addition. 16. In the result, the appeal of the Revenue is dismissed.” 15. In view of the aforesaid factual and legal discussions, and keeping in view of legal proposition declared by the decision of Hon'ble Supreme Court in the case of Parimisetty Seetharaman vs CIT (supra), where it was categorically held that the burden lies upon the department to prove that MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 11 a particular asset is within the taxing provisions. As noted above that the assessee is non-resident, and that status of the assessee is not in dispute. A bare reading of provisions of section 5(2) of the Act makes it clear that that in case of a non-resident assessee, the total income that is liable to be taxed shall comprise of income, which is received or deemed to be received by or on behalf of such person or the same accrues or arises or is deemed to accrue or arise in India to such person. No such evidence to prove the fact that the remittance made by the assessee in his NRE Account or the credit allegedly appearing in HSBC has any source from income in India or routed from any business connection in India. The moot question is whether it can be said that the credits appearing the HSBC bank accounts in question lead to the situation where the amount is includible in the income of the assessee, a non resident Indian, within the provisions of section 5(2) of the Act. We find that the CIT(A) clearly held that there is no material or evidence to say that the assessee was having any business connection in India so as to justify an inference that any income thereof was received or deemed to have been received or accrued or deemed to have accrued in India. Further on perusal of the Grounds of appeal raised by the revenue before us, we find that none of the findings recorded by the CIT(A) have been assailed on the basis of any material or evidence rather based on assumption. Therefore, we do not find any merit in the grounds of appeal raised by the revenue. Hence, we do not find any infirmity, illegality or perversity in the order passed by ld CIT(A), which we affirm. 16. In the result, we do not find any merit in all the grounds of appeal raised by the revenue, resultantly all the grounds of appeal raised by the revenue are dismissed. As we have dismissed all the grounds of appeal raised by the revenue, thus, the grounds of Cross Objections raised by the assessee have become infructuous. Even otherwise the ld AR for the assessee at the time of his submissions asserted that in case, the grounds of appeal raised MA No.34/SRT/2022 ITO(IT) vs Alkesh Pratapchandra Bhansali 12 by the revenue is dismissed, the assessee will not press his grounds of appeal raised in Cross objections. 17. In the result, the appeal of the revenue for AY 2006-7 is dismissed and the Cross Objection, filed by the assessee therein is also dismissed.” 12. Considering the decision of this combination for A.Y. 2006-07 on similar grounds of appeal, the appeal for A.Y. 2007-08 is also dismissed with similar observation. 13. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 07 th October, 2022 in open court and result was also placed on notice board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 07/10/2022 *Ranjan Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order / / TRUE COPY / / Sr. Pvt. Secretary, ITAT, Surat