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Facts
The assessee, an individual and US citizen, filed returns declaring income from salary, house property, and other sources. The AO initiated proceedings under section 143(1) and later 143(2) due to a large balance in a foreign bank account, treating peak balances as unexplained credit under section 68. The assessee appealed to the CIT(A) and provided additional evidence.
Held
The CIT(A) admitted the additional evidence and held that the AO had wrongly invoked sections 68 and 69. The tribunal upheld the CIT(A)'s order, finding that the credits in question pertained to opening balances, sale proceeds of ESOPs taxed in prior years, and rental income from the USA, which was also taxed in the USA. The tribunal found no valid reason to interfere with the CIT(A)'s findings.
Key Issues
Whether the CIT(A) was correct in admitting additional evidence and deleting additions made by the AO under sections 68 and 69, considering the assessee's explanation for credits in bank accounts originating from foreign income and prior year's taxation.
Sections Cited
143(1), 143(2), 144, 68, 271AAC, 46A, 69
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Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,
Before: SHRI PRAKASH CHAND YADAV & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the ld. CIT(A), New Delhi dated 31.01.2022 pertaining to A.Y 2017-18.
The Grounds raised by the Revenue read as under:
“1. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in admitting additional evidences whereas conditions prescribed under R. 46A were not satisfied? 2. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in allowing income exclusion method of elimination of double taxation under India-USA DTAA instead of tax credit method as per the tax treaty? 3. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in adjudicating on taxability of credits in account under other provisions of the Act in view of explanation furnished by the assessee? 4. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in accepting plea of the assessee without obtaining running ledgers of the accounts and examination of taxability of each credit entry therein? 5. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in holding that provisions of section 68 and 69 of the Act are not applicable even though no satisfactory explanation on sources of credits could be furnished by the assessee? 6. The appellant craves to add, amend, modify or alter any grounds of appeal at any time or before the hearing of the appeal.”
Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. Judicial decisions wherever relevant, were duly considered.
Brief facts of the case are that the assessee is an Individual and his main source of Income is Income from Salary, House property and Income from Other Sources. The assessee filed its original return of Page 2 of 9 2,98,17,320/-. The return of income was subsequently revised on 21.06.2018 declaring a total income of Rs. 2,98,17,320/-. The return of Income was subsequently processed u/s 143(1) of the Income-tax Act, 1961 [the Act, for short]. Later the case was selected for limited scrutiny under CASS due to the reason “large balance in foreign bank account".
Thereafter, notices u/s 143(2) of the Act were issued and served upon the assessee which were not responded to in spite of several opportunities provided to the assessee.
Accordingly, the Assessing Officer, observing that the assessee failed to provide any justification/explanation along with valid supporting evidences, passed the assessment order u/s 144 of the Act treating the peak balances available of Rs. 3,53,81,501/- as unexplained credit found in the accounts of the assessee u/s 68 of the Act. Penalty proceedings u/s 271AAC of the Act were initiated separately.
The assessee carried the matter before the ld. CIT(A) and furnished additional evidences. The ld. CIT(A) called for a remand report from the Assessing Officer who categorically stated that the additional evidences should not be admitted because the assessee was Page 3 of 9 does not satisfy the conditions laid down u/r 46A. The AO also commented on merits by stating that the bank statement filed as additional evidence is incomplete.
After considering the facts and submissions, the ld. CIT(A) was of the considered view that the Assessing Officer has wrongly invoked the provisions of section 68 of the Act and directed to delete the same.
Now the Revenue is aggrieved and has come in appeal before us.
Before us, both the rival representatives reiterated what has been stated before the lower authorities.
We have heard the rival submissions and have perused the relevant material on record. We find that the assessee was a US citizen and an OCI card holder. The assessee lived in USA from 1997 and moved to India in August 2012. He was earlier employed with Amazon.com and all his emoluments were taxed as per US laws and the savings remain with his foreign bank accounts. From the order of the ld. CIT(A), we find that the assessee was not maintaining books of account which he was also Page 4 of 9 that the assessee did not explain the large balance in the foreign bank account before the AO. It is equally true that the assessee furnished certain evidences during the appellate proceedings. The ld. CIT(A) did call for remand report but the Assessing Officer contested the filing of those documents and u/r 46A. Considering the submissions made by the assessee and order of the Assessing Officer and the observations of the Assessing Officer in the remand report as well as the rejoinder of the ld. counsel for the assessee, the ld. CIT(A) admitted the additional evidences.
Regarding addition u/s 68 of the Act, we find that the ld. CIT(A) after discussing the facts of the case and observations of the Assessing Officer, came to hold as under:
“4.3.5 From the details of bank statement submitted by the ld. counsel for the assessee it seen that the assessee was having balances in these accounts since 2012. The ESOP shares sold during the previous year was brought to tax during the previous year 2016- 17 relevant to the assessment year 2017-18. It is seen from the details filed by the appellant during the appellate proceedings that various credits observed by the AO in the assessment proceedings
Page 5 of 9 and taxed in the Ex-parte assessment order have been taxed during the previous years. It is quite evident from the copies of form 16 for AY 2014-15, 2015-16 and 2016-17 that taxes have been paid on perquisites received in form of ESOP. The variation in credits observed in the bank statement from 2012 when the appellant migrated to India vis a vis 2016-17 is on account of rent received and the expenses by the appellant in USA. The rent received has been offered to tax in USA and all the relevant papers including tax returns filed in USA have been submitted in the course of appellate proceedings. Thus on merits the peak balances added by the AO in the assessment order have been duly explained by the appellant's representative. ******* 4.5 In these facts and circumstances and citations mentioned above, I am of the considered view that the AO has wrongly invoked the provisions of section 68 of the Act and therefore the addition made u/s. 68 is directed to be deleted. Considering the explanation above it's also not the case of section 69 of the income tax Act 1961 as the form 16 for respective years offering ESOP for taxation in various years as perquisites has been submitted in appellate proceedings and further the capital gains on sale of such shares on account of ESOP would be offered to taxation as and when these shares are sold. Furthermore, the variation in figures in bank statements has been explained with appropriate evidences by the appellant mentioning that the rental receipts from properties in USA has been offered to taxation in USA. Therefore, it is also not the case for addition under section 69 of the IT Act. So these grounds of appeal no. 2 to 6 are accordingly allowed.” Page 6 of 9 upon by him, we find that the CIT(A) has examined the additional evidences in the nature of foreign Bank statements and ITRs filed in USA and found that various credits in the bank accounts pertain to opening balances, sale proceeds of ESOP received in earlier years and rent received in USA. The CIT(A) examined the tax returns filed in USA and concluded the rent received in the banks are taxed in USA. Similarly, the sales consideration on account of ESOPs were also taxed in appropriate years. The ld CIT(A) further relied on the following decision for the proposition that no additions can be made u/s 68 of the amount which was credited in the preceding previous years: i) Ivan Singh v. Asstt. CIT [2020] 116 taxmann.com 499/272 (Bom) ii) Baladin Ram Vs. CIT 11969)
7. ITR 427(SC) iii) CIT Vs. Ms. Mayawati reported in 338 ITR 563 [DEL] We therefore, do not find any valid reason to interfere with the well- reasoned findings of the ld. CIT(A). Accordingly, we uphold the order of the ld. CIT(A) and dismiss the ground no 1 to 5 raised by the Revenue on this count.
Page 7 of 9 is dismissed.
The order is pronounced in the open court on 30.07.2025.