“Income Chargeable to Tax Means Chargeable Under the Act”: Rajasthan HC Quashes S.148A(d) Order on NRI’s Land Purchase [Read Order]

The Rajasthan High Court recently quashed an order passed under Section 148A(d) of the Income Tax Act, 1961, affirming that foreign income used for purchasing land in India does not automatically become chargeable to tax unless it falls within the scope of taxable income under the Act.

The ruling was rendered by a Division Bench of the Rajasthan High Court while adjudicating a Writ Petition filed by Namrata Jain against the Income Tax Officer and Deputy Commissioner of Income Tax, both at Jaipur. The facts of the case follow the Income Tax Department initiation of proceedings against the Petitioner-Assessee, a Non-Resident Indian ( NRI ), questioning the source of funds used for purchasing land in India during the Assessment Year (A.Y.) 2016-17.

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The department contended that the amount used for the transaction should be treated as taxable income, triggering reassessment under Section 148A and the proceedings were transferred to the Assistant Commissioner (International Taxation) which led to the impugned order.

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Represented by Siddarth Ranka and Rohan Chatter, the Petitioner contended that merely bringing foreign-earned income into India does not make it taxable unless it falls within the ambit of the Income Tax Act. It was submitted that the petitioner had disclosed details of her two bank accounts in the USA and NRE account held with CITI Bank, Jaipur and that the Petitioner had used proper banking channels to route the US income to India for purchasing the property.

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Meanwhile, Shantanu Sharma, Aditya Doda and Parth Vashishtha appearing for the Revenue maintained that the Department was not satisfied with the Assessee’s contentions regarding the source of her alleged foreign income.

The Bench of Justice Avneesh Jhingan and Justice Maneesh Sharma examined the provisions of the Act and relied on precedent cases, including (cases referred to in the document). The court observed that the phrase “income chargeable to tax” must be interpreted strictly as per the Income Tax Act.

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The Rajasthan High Court emphasized that foreign income earned by an NRI does not become taxable simply because it is used for making a purchase in India and that the Revenue had failed to establish any taxable event justifying the reopening of assessment.

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Citing the Supreme Court decision in Chhugamal Rajpal vs. S.P. Chaliha and Ors. (1971), where it was held that the Assessing Officer should have a prima-facie ground for taking action under Section 148 of the Act and a need for further enquiry cannot be equated as the reason for issuing notice under Section 148 of the Act.

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The Rajasthan High Court quashed the impugned order noting that the Revenue had nil information to suggest that the petitioner had earned income liable to be taxed in India and that it had been duly explained that the source of investment had originated in a foreign country, thereby warranting no proceedings under Section 148.

To Read the full text of the Order CLICK HERE

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