The Income Tax Appellate Tribunal (ITAT) Mumbai bench directed readjudication of foreign Income earned by the deceased assessee depending on residential status of the previous year, not that of the Executor.
Assessee, Ramniklal Rajmal Mehta passed away on 7.4.2022 and he was a non-resident during A.Y. 2002-03. Under the provisions of section 168(1) of the Act, residential status of the executor would depend upon the residential status of the deceased person during the previous year in which his death took place. However the AO, during the assessment proceedings took the residential status of the present as “Resident”.
Legal heir of the deceased assessee contended that residential status of Ramniklal R Mehta was “Non-resident” during the A.Y. 2002-03 .However without considering the contentions, the AO had completed the assessment proceedings and made addition under Section 69A of the Income Tax Act in respect of peak balance found in the bank accounts of M/s. White Cedar Investments Ltd./Red Oak Operations Limited maintained with HSBC Bank, Geneva.
Aggrieved by the order, the assessee filed an appeal before the commissioner of Income Tax-Appeals [CIT(A)], who dismissed the appeal and confirmed the addition. Thereafter the assessee filed another appeal before the tribunal.
Before the bench Nitesh Joshi, counsel for the assessee submitted that the status of assessee was “Non-resident” during AY 2002-03 then the Assessing Officer could not have assessed the alleged deposits made in two accounts made with HSBC Bank in the hands of the assessee, since the foreign income is not taxable under the Income tax Act in the hands of a non-resident assessee.
Riddhi Mishra, Counsel for the revenue, supported the decisions of the lower authorities.
The tribunal observed that the issue relating to residential status of the assessee has been restored to the file of CIT(A) in AY 2006-07 and the decision taken in that year has to be applied to the years under consideration. Therefore issue relating to “residential status” of the assessee is crucial in deciding other issues.
After considering the facts submitted by both parties, the two member bench of B.R. Baskaran (Accountant Member) and Sandeep Singh Karhail (Judicial Member) directed readjudication of foreign Income earned by the deceased assessee depending on residential status of the previous year, not that of the Executor.
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