The Ahmadabad bench of the Income Tax Appellate Tribunal ( ITAT ) observed that onus is on Income Tax Department, to bring corroborative material to tax amount credited in foreign bank account of Non- Resident Indian ( NRI )
The facts in brief were that the assesse was an individual and for the year under consideration, he was a non-resident for the purpose of the Act. The assesse was a director in various companies, including the company namely M/s Banco Product ( India ) Ltd. The “Banco Group” had been subject to search proceedings dated 2nd August 2016, and the assessee, being a director, had his residence at Alkapuri Vadodra included in the search operation. From his residence, 17 Pen drives were found, containing details regarding his foreign assets in the form of bank accounts, investments, properties, etc. These assets or bank accounts had not been disclosed by him. In the post-search inquiry, vide letter dated 18th October 2016 before the investigation team, the Assessee had admitted that foreign banks or assets were not disclosed, and he was in the process of determining the income liable to be taxed with respect to those undisclosed foreign banks to offer income accordingly.
Counsel for the assesse Millen Mehta, explained that the initial deposits in the USD account were transferred from his foreign account in Habib bank jointly held with his brothers and the sources of deposit in Habib bank has been explained before settlement commission. Therefore, the income chargeable to tax with respect to initial deposit has been offered. Likewise, the credits of interest were from investment held outside India, therefore not taxable in India as the same accrued or arose outside India. Similarly, the credit entry in Euro account is contra entry transferred from USD account, hence no income.
The Assessing Officer had accepted the assessee’s explanation for the credit entry in the Euro account but disagreed regarding the USD entry of $7,87,939.73. The AO had noted the lack of corroborative material and had rejected the claim that the amount was transferred from Habib Bank. The assessee, unable to provide Citibank Singapore statements, had estimated income for the period before A.Y. 2008-09. The AO, finding the explanation insufficient, had treated the USD credit as unexplained income, converting it to INR and had added Rs. 3,45,90,531 to the total income.
Counsel for the assessee Milin Mehta filed a paper book running from pages 1 to 126 and the order of the settlement commission which is available on record. It was contended by the assessee for the year in dispute was non-resident and therefore the income in the foreign bank account cannot be made subject to tax in India as per the provisions of section 5 of the Act. The learned AR before us vehemently supported the order of the CIT-A.
The counsel for the respondent Vaghe Prasadrav Annasaheb had erred in deleting the addition of Rs.3,45,90,531/- on account of unexplained credits in the account of City Bank, Singapore when it was on record that the assessee himself had admitted before the Investigation Wing that the said bank account was an undisclosed foreign bank account and the deposits in this bank account were liable for taxation in India.
The Bench heard the rival contentions of both parties and perused the materials available on record. Admittedly, the assessee for the year under consideration was a non-resident under the provision of the Act. The AO had also assessed him as a non-resident assessee, which was evident from the assessment order. As per the provision of section 5 of the Act, in the case of a non-resident, the assessee was chargeable to tax for that income which was received or deemed to be received or accrued or arose or deemed to accrue or arise in India, and shall be chargeable to tax under the Act.
The two member bench of the tribunal comprising T.R Senthil Kumar (Judicial member) and Waseem Ahammed (Account member) concluded that The revenue, burdened by the assessee’s non-resident status, needed corroborative material to tax the foreign bank account credits. The assessee, a resident but not an ordinary resident for A.Y.s 2000-01 to 2003-04, faced a reopened assessment with no additions for deposits in Citibank NA Singapore or Habib Bank AG Zurich. The revenue treated these deposits as arising outside India and beyond Indian control. Affirmed the CIT(A)’s order, dismissing the revenue’s appeal.
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