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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI S. RIFAUR RAHMAN, HONBLE & SHRI RAHUL CHAUDHARY, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “I”, MUMBAI
BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, HON'BLE JUDICIAL MEMBER
ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja v. Income Tax Officer 304, Venkatesh Chambers CHS International Taxation – 3(2)(1) Prescot Road, G.T. Marg Room No. 1627, 16th Floor Fort, Mumbai - 400001 Air India Building Nariman Point, Mumbai – 400 021 PAN: AACPM5882C (Appellant) (Respondent)
Shri Anuj Kisnadwala Assessee Represented by : Department Represented by : Shri Anil Sant
Date of Conclusion of Hearing : 13.07.2023 Date of Pronouncement : 06.09.2023
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by assessee against order of Learned Commissioner of Income Tax (Appeals)-57, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 31.01.2023 for the A.Y. 2017-18.
ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja 2. Brief facts of the case are, assessee filed return of income for A.Y.2017-18 on 27.11.2017 declaring income of ₹.3,32,170 /-. The case was selected for limited scrutiny for the reason "Large value of cash deposited during demonetization period as compared to returned income". Accordingly, notices u/s. 143(2) and 142(1) of the Act along with the questionnaire were issued and served on the assessee. It is relevant to note that assessee is an NRI. In response, assessee submitted the relevant details through e-portal as well as in Tapal.
After considering the submissions of the assessee, Assessing Officer observed that assessee derives Income under the head income from house property and Income from Other Sources. Further, he observed that during the year it was noticed that assessee has deposited cash of ₹.21,00,000/- in bank A/c no. 36020100005671 maintained with Bank of Baroda, Pali Road Branch, Bandra West. The assessee in its reply vide letter dated 28.09.2018 and 10.10.2018 submitted that source of cash deposit was cash withdrawal from the same bank account. He submitted that cash withdrawn of ₹.22,50,000/- i.e., ₹.18,00,000/- on 07.11.2016 and ₹.4,50,000/- on 08.11.2016 out of which ₹.21,00,000/- was deposited in bank account on 11.11.2016. The assessee submitted that the withdrawal was made for renovation of house and major repair work and Page No. | 2
ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja since demonetization was announced the very next day, assessee redeposited the same cash on 11.11.2016.
In order to verify the claim made by the assessee, show cause notice u/s 133(6) of the Act was issued to Bank of Baroda, Pali Road, Bandra Branch dated 18.04.2019. In response, bank submitted that the assessee had withdrawn ₹.18,00,000/- on 07.11.2016 with 400 currency notes of ₹.1000/- and 2800 currency notes of ₹.500. Further, assessee withdrawn ₹.4,50,000/- on 08.11.2016 with 300 currency notes of ₹.1000/- and 300 currency notes of ₹.500/-. Assessing Officer observed that at the time of deposit of ₹.21,00,000/-, the assessee used 1850 currency note of ₹.1000/- and 500 currency note of ₹.500/-. Therefore, the currency notes withdrawn by the assessee is not matched with the currency notes deposited by him. Accordingly, Assessing Officer came to the conclusion that the cash withdrawn by the assessee and deposited by the assessee do not match.
Assessing Officer has issued show cause notice dated 30.5.2019 asking the assessee to explain about the non-matching of currency notes withdrawn and deposited and also the assessee was asked to submit the details of contractors, contact number, address, PAN etc., and also if there Page No. | 3
ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja is any documentary evidences like agreement, receipt etc., for the said contract. In response assessee filed its submissions vide letter dated 14.06.2019 and 26.06.2019. After considering the submissions of the assessee the Assessing Officer rejected the submissions made by the assessee and proceeded to make the addition of ₹.21,00,000/- u/s. 69 of the Act with the following observation: -
“5.5 The assessee claimed that he has given cash of Rs.21,00,000/- to the contractor in the morning of 8th Nov, 2016 however, on verification from the bank it is noticed that cash of Rs.4,50,000/- was withdrawn by him at afternoon of 8th Nov. 2016. Thus in the morning of 8th November 2019 the assessee did not have cash of Rs.21,00,000/- then how he able to give the same to the contractor. 5.6 In his statement in reply to Q.No. 12, the assessee claimed that his flat was in very dilapidated condition and required huge renovation which need expenses of Rs.40,00,000/- or more. As per assessee's claim, he failed to do so due to demonetization, however, he is still staying in that flat after doing renovation work of Rs.25,000/- only. which shows that the claim of renovation is false.
Aggrieved with the above order, assessee preferred an appeal before the Ld.CIT(A). After considering the detailed submissions of the assessee Ld.CIT(A) dismissed the appeal filed by the assessee and sustained the additions made by the Assessing Officer by relying on the decision of the Sudhir Kumar Sharma (HUF) v. CIT [2014] 46 taxmann.com 340 (P & H), Smt. Kavita Chandra v. CIT [2017] 81 taxmann.com 317 (P & H), Dinesh Kumar Jain v. Pr. CIT, New Delhi [2018] 97 taxmann.com 113
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ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja (Delhi), and in the case of J. Stephen v. ITO [2018] 93 taxmann.com 327 (Madras).
Aggrieved with the above order of the Ld.CIT(A), assessee is in appeal before us and raised following grounds in its appeal: -
“1. The Learned Commissioner of Income Tax (A) has erred in law and in facts by passing the impugned order in violation of Principles of Natural Justice. 2. The Learned Commissioner of Income Tax (A) has erred in law and in facts in upholding the order passed by the Assessing Officer which is illegal and Bad in Law. 3. The Learned Commissioner of Income Tax (A) 57 has erred in dismissing the appeal and confirming the addition of cash deposit amounting to Rs. 21,00,000/- as income u/s 69 A of the I.T. Act, 1961 made by the assessing officer 4. The appellant prays that the addition of RS. 21,00,000/- be deleted. 5. The appellant craves leave to add or alter or delete or amend any grounds of appeal.
Further, assessee also filed additional ground with an application to admit of same. The relevant additional ground is as under: -
"The CIT(A) ought to have held that the Assessing Officer has erred in law and on facts in ignoring the fact that the appellant is a non- resident hence, is eligible to claim benefit under DTAA entered into between India and Kuwait."
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ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja 9. Ld. Counsel for the assessee submitted that the above additional grounds of appeal are purely legal grounds and do not require any fresh examination of facts. Therefore, Ld. Counsel for the assessee prayed it may be admitted.
Ld. DR objected for admission of the additional grounds as they were never raised before lower authorities and therefore cannot be admitted.
Considered the rival submissions and material placed on record, we observe that as the said additional grounds are legal grounds, wherein, the facts are on record and facts do not require fresh investigation, following the decision of Hon’ble Supreme Court in the case of National Thermal Power Co., Limited v. CIT 229 ITR 383 (SC), we admit the said additional grounds of appeal.
At the time of hearing, Ld. AR of the assessee submitted that Ground No. 1 is general and Ground No. 2 is not pressed by the assessee, Accordingly, both these grounds are dismissed as such.
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ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja 13. With regard to Ground No. 3, Ld. AR of the assessee submitted that assessee is an NRI and withdrawn cash from bank on 07.11.2016 before the demonetization announced by the Government and he brought to our notice withdrawal made by the assessee on 07.11.2016 and 08.11.2016 and subsequently assessee has deposited ₹.21,00,000/- on 11.11.2016 and brought to our notice Page No. 2 of the Assessment Order. Further, he submitted that assessee has raised additional grounds of appeal, Ld.AR submitted that assessee has a right to claim the treaty benefit. In this regard he brought to our notice Page No. 19 of the Paper Book which is the tax treaty between Indo – Kuwait and in particular he brought to our notice Article 22 relating to other income. Further, he brought to our notice decision in the case of ITO v. Rajeev Suresh Ghai in ITA.No. 6290/Mum/2019 dated 23.11.2021 and brought to our notice the ratio of the decision in Para No. 10 to 15 of the order. He submitted that the facts in the present case is exactly similar.
On the other hand, Ld. DR submitted that the issue involved in additional ground may be remitted to the file of the Assessing Officer, since Assessing Officer has not given any finding or considered the same in the Assessment Order.
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ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja 15. Considered the rival submissions and material placed on record, we observe from the record that assessee is an NRI and the assessee has withdrawn certain cash before the announcement of the demonetization and subsequently redeposited the same. Since the issue involved is relating to NRI who is a resident of Kuwait and Assessing Officer has not raised any doubt on source of income. However, he proceeded to make the addition based on the fact that the demonetization of currency notes of withdrawal of the cash and denomination of currency notes deposited by the assessee are different. In our considered view the issue involved in this case relating to Non-Resident of India and also there is no doubt on the issue of source of income and assessee has a right to claim the benefit under the treaty between Indo – Kuwait. The assessee has relied on the decision of the Coordinate Bench in the case of ITO v. Rajeev Suresh Ghai (supra) wherein the similar facts involved were considered relating to the issue of addition made under unexplained investment. The Coordinate Bench has clearly held that the assessee is a tax resident of United Arab Emirates and thus is entitled to the benefit of Indo-UAE tax treaty. When the rights to tax the income in question, under the applicable tax treaty provisions, are allocated to the residence jurisdiction, it is wholly immaterial whether or not the source jurisdiction has the right to tax that income, and, in any event, India is not even a source Page No. | 8
ITA NO. 977/MUM/2023 (A.Y: 2017-18) Pareshkumar Lakhmichand Muthreja jurisdiction for the income in question as no economic activities have been carried out in India. Therefore, we are inclined to remit this issue to the file of the Assessing Officer to consider the facts in this case and decide the issue in line with the decision of the Coordinate Bench in the case of Ito v. Rajeev Suresh Ghai (supra), after giving proper opportunity of being heard to the assessee. Accordingly, the appeal filed by the assessee is allowed for statistical purpose.
In the result, appeal filed by the assessee is allowed for statistical purpose.
Order pronounced in the open court on 06th September, 2023.
Sd/- Sd/- (RAHUL CHAUDHARY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 06/09/2023 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum Page No. | 9