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Income Tax Appellate Tribunal, MUMBAI ‘SMC’ BENCH, MUMBAI.
Before: Shri B.R. Baskaran (AM) & Smt. Kavitha Rajagopal (JM)
Per B.R.Baskaran (AM) :-
Both the appeals filed by the assessee are directed against the orders passed by the learned CIT(A)-National Faceless Appeal Centre, Delhi and they relate to A.Y. 2005-06 & 2006-07.
The Facts relating to the case are stated in brief. The assessee is a resident assessee and she did not file her return of income for the two years under consideration. Her husband is Shri AshokKumar M Sheth and his status under the Income tax Act was non-resident in AY 2005-06. His status became resident from 2006-07 onwards. The Income Tax Department received information that both these persons are having bank accounts in foreign banks, but they have not disclosed those bank accounts to the Income tax department. It was noticed that the following bank accounts are held by them jointly:-
2 Darshana Ashokkumar Sheth
S.No. Name of bank Account No. Currency Remarks 1 Credit Agricole Bank 1052362 USD Joint account with Indosuez (Sussie) Stay husband Shri Application Geneva Ashokkumar Sheth, PAN : BFFPS6146Q 2 HSBC Bank Geneva 11363938 USD Joint account with husband Shri Ashokkumar Sheth PAN : BFFPS6146Q Hence the Assessing Officer reopened the assessment of these two years under consideration in the hands of the assessee by issuing notice u/s 148 of the I.T. Act.
In response to the notices issued u/s 148 of the Act, the assessee filed returns of income declaring Rs.127/- in AY 2005-06 and Rs.225/- in AY 2006-07.
The Assessing Officer noticed that the assessee’s husband Shri Ashokkumar Sheth has furnished copies of above said two bank accounts in his assessment proceedings. On perusal of the bank statement relating to A.Y. 2005-06, it was noticed that there was interest income of Rs. 34,852/- from M/s. Credit Agricole bank and Rs. 2,45,353/- from HSBC Bank, both aggregating to Rs. 2,80,203/-. Since the husband of the assessee (joint holder) was non-resident in A.Y. 2005-06, he did not offer the above said interest income in his hands. The AO also did not assess the impugned interest income in the hands of assessee’s husband, apparently for the reason that foreign income belonging to a non-resident is not liable to be assessed in India and no provision of the Act impose tax liability on such foreign income. However, since the assessee herein is “resident” and she was one of the joint holders of the above said bank accounts, the AO took the view that the entire interest income referred to above is liable to the assessed
3 Darshana Ashokkumar Sheth in her hands in AY 2005-06. Accordingly, the Assessing Officer assessed the above said entire interest income in the hands of the assessee. The learned CIT(A) also confirmed the same, since the assessee did not appear before him and no submission was made.
In A.Y. 2006-07, the aggregate amount of interest received from the above said two bank accounts was Rs.4,04,556/-. In AY 2006-07, the assessee’s husband was assessed in the status of “resident” and the entire amount of interest income was assessed in his hands. Hence, in order to protect the interests of revenue, the Assessing Officer assessed the above said interest income of Rs. 4,04,556/- on “protective basis” in the hands of the assessee herein. The learned CIT(A) also confirmed the same, since there was no representation before him.
Since the Ld CIT(A) has passed ex-parte orders in both the years, the bench proposed to set aside all the issues to the file of the Ld CIT(A). The Ld A.R, however, submitted that the issue under consideration is a legal issue, i.e., whether the impugned interest income can be said to belong to the assessee liable to be assessed under Income tax Act. He submitted that he will demonstrate that the impugned interest income in both the years actually belongs to the assessee’s husband and hence it could not have been assessed in the hands of the assessee. Accordingly, he pleaded that the issue may be decided by the Tribunal. Accordingly, we proceeded to hear the parties.
The Ld A.R submitted that the assessee’s husband Shri Ashokkumar Sheth has owned up both the bank accounts, even though they are in joint names of Shri Ashokkumar Sheth and the assessee. Since the status of Shri Ashokkumar Sheth was “non-resident” in AY 2005-06, there was no requirement for him to declare foreign income. However, the status of Shri Ashokkumar Seth is “resident” from AY 2006-07 onwards and the entire
4 Darshana Ashokkumar Sheth interest income from the above said two banks has been assessed in his hands. In support of this submission, the Ld A.R furnished copies of assessment orders passed in the hands of Shri Ashokkumar Sheth in AY 2006-07 to 2008-09. The Ld A.R also submitted that the husband of the assessee Shri Ashokkumar Sheth initially claimed his status as “non- resident” in AY 2006-07. However, when the AO determined the status as “resident” on the basis of his availability in India, he has accepted the same. Accordingly, the Ld A.R submitted the AO was not justified in assessing the interest income in AY 2005-06 on substantive basis and in AY 2006-07 on protective basis.
The Ld D.R, on the contrary, submitted that the assessee has not appeared before the Ld CIT(A) and hence the Ld CIT(A) has confirmed the orders passed by the AO.
We have heard rival contentions and perused the record. Even though the above said two bank accounts are in joint names of the assessee and her husband Shri Ashokkumar Seth, yet a perusal of the assessment order passed in the hands of husband of the assessee for AY 2006-07 to 2008-09 would show that he is owning up both the bank accounts and the interest income therefrom is disclosed by him. The above said action of the husband of the assessee would show that he is the exclusive owner of deposits made in both the bank accounts mentioned above and hence the interest income from them was assessed in his hands. This fact proves that the assessee did not have any ownership rights over the deposits, even though she was a joint holder. It is well settled proposition of law that the income has to be assessed in right hands in right assessment year. In this regard, we may take support of following observations made by Hon’ble Supreme Court in the case of CIT vs. Ch Atchiah (218 ITR 239)(SC):- “In our opinion, the contention urged by Dr. Gauri Shanker merits acceptance. We are of the opinion that under the present Act, the Income Tax Officer has no option like the one he had under the 1922 Act. He can,
5 Darshana Ashokkumar Sheth and he must, tax the right person and the right person alone. By "right person", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue…… The definition merely says that expression "person" includes inter alia a firm and an Association of Persons or a body of individuals whether incorporated or not. There are no words in the present Act which empower the Income Tax Officer or give him an option to tax either the Association of Persons or its members individually or for that matter to tax the firm or its partners individually. If it is the income of the Association of Persons in law, Association of Persons alone has to be taxed; the members of the Association of Persons cannot be taxed individually in respect of the income of the Association of Persons. Consideration of the interest of Revenue has no place in this scheme. When Section 4(1) of the present Act speaks of levy of income tax on the total income of every person, it necessary means the person who is liable to pay income tax in respect of that total income according to law. The tax has to be levied on that person, whether an individual, Hindu Undivided Family, Company, Firm, Association of Persons/BOP, a local authority or an artificial juridical person….”
When the revenue itself has accepted in the subsequent years that both the bank accounts belong to assessee’s husband Shri Ashokkumar Sheth and accordingly assessed the interest income in his hands, then the assessee cannot be said to have beneficial interest on the very same interest income and hence it cannot be taxed in the hands of the assessee either on substantive basis or on protective basis. Accordingly, we set aside the order passed by Ld CIT(A) in both the years and direct the AO to delete the addition made on substantive basis in AY 2005-06 and on protective basis in AY 2006-07.