The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has held that there is no tax liability for NRI being a joint signatory to the bank account of the foreign company without direct beneficial interest.
The Government of India received information from the French Government under DTAA in the exercise of its sovereign powers that some Indian nationals and residents have Foreign Bank Accounts in HSBC Private Bank (Suisse) SA, Geneva which were undisclosed to the Indian Taxation Department. The details of the assessee, Ganpat Singhvi were also received by the revenue as per the information. That from the information, it is seen that there are two accounts in HSBC, Geneva with which the assessee is associated – the first account is in the name of Blueridge Investment Corporation in which the peak balance is USD 300494.55 in AY 2007-08, the second account is an account in which he is an Account Holder – 1 (Account Holder -2 being his brother Devendra Singhvi) in which no amount is reflected for AY 2007-08. Accordingly, without considering the submissions of the assessee the AO framed the assessment u/s 143(3) r/w section 147 of the Act by making an addition of Rs. 1,32,72,864/- to the income of the assessee equal to the peak balance in the bank account.
The assessee submitted that he is a non-resident u/s 6 of the Act. He contends that as per Section 5 of the Act the income that accrues or arises outside India does not form part of his total income as per the Act and that the transactions with HSBC, Geneva are not covered by the provisions of Sec. 9 of the Act as they are made out of the funds transferred from HSBC, Abu Dhabi. With regard to the account in the name of Blue Ridge Investment Corporation, that the company is a Tax resident of Liberia with the sole beneficial owner is Mr. Nazar Khan who is an Iraqi National and that the respondent is a treasurer and director of the company and he is neither a shareholder nor having any beneficial interest in the company and he is only a joint signatory of the bank account of the company along with other directors. The assessee further submitted that the Corporation being a foreign company has no obligation to provide any information about the company to Indian tax authorities. Also, it is stated that he is just a joint – signatory to the bank account and he cannot operate it on his own. He submitted that he is under no obligation to provide the information about the company.
Not satisfied with the submissions of the assessee, AO referred to case laws from Honorable Delhi High Court decision in the case of Nova Promoters and Finlease P.Ltd. 342 ITR 169 and Honorable Supreme Court decision in case of Sumati Dayal vs CIT (1995) 214 ITR 801(SC) and CIT vs Durga Prasad More [1971] 82 ITR 540 and concluded as under:-
“In view of the above, the peak amount as appearing in the Base Note of the assesses HSBC account in AY 2007-08 being USD 3,00,495 in Jan, 2007 which translates to Rs. 1,32,72,864/- (@ Rs. 44.17 per USD being the exchange rate in Jan, 2007 as per RBI) is hereby added to the total income of the assesse as income which is received or is deemed to be received in India in this year by the assessee or on his behalf or accrues or arises or is deemed to accrue or arise to him in India during this year”.
The aggrieved assessee filed an appeal before the CIT (A). CIT (A) after admitting the additional evidence and after considering the remand report of the AOI on the additional evidence held that in order to assess the asset/bank account held by a third party in the hands of the respondent-assessee the department has to prove that the assessee has a direct beneficial interest in the asset/bank account held by a third party (i.e. Blueridge Investment Corporation). The CIT (A) observed that the department has failed to bring any evidence on record to show that the respondent is having any beneficial interest in the company i.e. Blueridge Investment Corporation or the bank account held by the company with HSBC Geneva. On the contrary, the respondent filed three independent/third party evidence to show that he has no beneficial interest either direct or indirect in the company namely Blueridge Investment Corporation with HSBC Geneva.
The CIT (A) held that facts are similar to the issue decided by him in his order dated 12.11.2018 in assesses own case for AY 2006-07. For the same reason, he decides the issue in favor of the assessee.
The order of CIT(A) reads as under:- after appreciating the facts including the additional evidences held that “the assessee has no beneficial interest in the company Blueridge Investment Corporation and the sources of credit in his bank account with HSBC Geneva are from his bank account with HSBC Abu Dhabi and thus deleted the additions made by the AO in respect of assets lying in the name of Blueridge Investment Corporation and the respondent assessee with HSBC Geneva and thus allowed the appeal”.
Aggrieved by the order of CIT (A), revenue preferred appeal before the ITAT.
The Coram of Sri Shamim Yahya (AM) and Sri Amarjit Singh (JM) relying on the order ITAT in the assesses own case,
“the source of the funds transferred from HSBC Abu Dhabi, UAE was stated to be out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976.After considering the facts of the case are in full agreement with the conclusion drawn by the CIT (A) that the assessee is not the beneficial owner of the bank account held by Blueridge Investment Corporation with HSBC Geneva. Similarly, as regards the joint account of the assessee with his brother in HSBC Geneva, the CIT (A) recorded a finding on the basis of evidences that money was transferred in the bank account out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976. Considering all these facts, we are inclined to uphold the order of CIT (A) by dismissing the appeal of the revenue”,
It was held that “from the above, it is evident that the same issue has been decided in favor of the assessee. It is not the case that the Honorable jurisdictional High Court has reversed the decision of ITAT. Hence, respectfully following the precedence from the ITAT in assessing own case on the same facts, we do not find any infirmity in the order of CIT (A). Hence, we uphold the same”.
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