SHRI RAJESH CHANDHA C/O- KALANI & CO. CA 5TH FLOOR, MILESTONE BUILDING, GANDHINAGAR TURN, TONK ROAD, JAIPUR,AJMER vs. DCIT CIRCLE (INTERNATIONAL TAXATION) JAIPUR, CIRCLE, JAIPUR

The ld AR submitted that the assessee is a non-resident. He is employed with United Nations Organization at Democratic Republic of Congo, South Africa since 15th July, 2007. His gross annual salary for the year under consideration was USD 1,14,941/- apart from other allowances. The salary so received from United Nations is exempt from taxation as per section 18(b) of the convention on privileges and immunities of the United Nations. The Shri Rajesh Chadha, Ajmer Vs. DCIT, Circle (IT), Jaipur assessee regularly filed the return of income declaring saving bank and FDR interest even though his income is below taxable limit. For the year under consideration, he filed the return of income declaring gross total income of Rs 1,86,076/- and exempted salary income from United Nations and interest on NRE Account at Rs 1,50,78,056.

The ld AR further submitted that during the course of assessment proceedings, the AO observed that there is a cash deposit of Rs.8,00,000/- in the NRO account of the assessee on 27.05.2015 which was claimed to be out of the exchange of the USD through authorized money changer but assessee has not submitted any evidence by way of receipt from authorized money changer for converting the USD into Indian rupees. He therefore, treated the cash deposit of Rs.8,00,000/- in NRO Account as unexplained and made addition for the same. On appeal, the Ld. CIT(A) accepted that the assessee has submitted evidence relating to bringing of foreign currency in India. However, he observed that in the absence of receipt of exchange of dollars into rupees, the assessee has failed to demonstrate the nexus of foreign currency bought in India with the cash deposit in the bank account and the receipt is critical to establish the nexus. He further held that the possibility of taking foreign currency on the return journey cannot be ruled out and that in case of any relaxed approach, the bank account of the assessee can be misused for deposits of unexplained cash by their known ones. Accordingly, he confirmed the addition of cash deposit as unexplained income. Against the said findings, the assessee is in appeal before the Tribunal.

In the aforesaid background, the ld. AR submitted that there is no dispute as to the fact that the assessee brought to India USD 21500 with him when he came on 22.05.2015. This was declared by him before the custom authorities at IGI airport, New Delhi. These dollars were exchanged by him 2 Shri Rajesh Chadha, Ajmer Vs. DCIT, Circle (IT), Jaipur in Indian Rupee through staff of Thomas Cook, authorized money exchanger, and out of the same Rs.8 lakhs was deposited by him in his NRO Account on 27.05.2015. Thus, the source of deposit is fully explained as intimated to the Assessing officer in assessment proceedings vide letter dated 11.12.2018. Only because the assessee has not kept the receipt for converting USD into Indian rupee would not mean that the amount deposited in the bank account is unexplained income by ignoring the various other evidences and without bringing on record any other material that assessee has any other source of income in India.

It was further submitted by the ld AR that the assessee has no source of income in India except interest from SB Account, FDR and long term capital gain. He has only one NRO Account in India maintained with ICICI bank, Greater Kailash, New Delhi. In the return itself, assessee has declared this bank account and also the interest from this bank Account at Rs.18,144/-. Thus, this is a disclosed account. The assessee deposited the cash in his bank account within five days of arriving in India and therefore, the deposit made in this bank account cannot be considered as unexplained. Rather than considering the circumstances of the case, the Ld. CIT(A) has disbelieved the assessee’s explanation in absence of receipt of exchange by presuming that giving a relaxed approach would lead to the NRO bank accounts being misused by their known ones to deposit unexplained cash or there is possibility of assessee taking back the foreign currency on return journey. There is no basis for such presumption. Once the assessee has given an explanation with cogent evidence, the burden to prove otherwise is on the Department by bringing on record some concrete material / evidence. Only on presumption, the explanation of the assessee cannot be disbelieved. Further, Section 69 uses the word ‘may’ which gives a discretion to the AO not to charge tax on such sum even if the explanation offered by the 3 Shri Rajesh Chadha, Ajmer Vs. DCIT, Circle (IT), Jaipur assessee is not satisfactory considering the facts and circumstances of the case and in support, reliance was placed on the decision of the Hon’ble Supreme Court in case of CIT vs. Smt. P. K. Noorjahan 237 ITR 570.

Per contra, the ld DR submitted that the assessee has failed to submit primary evidence in support of his explanation that the money so deposited in his bank account is out of the foreign exchange brought-in by him in the Country and exchanged with Indian Rupees and in absence of such evidence and establishing the necessary nexus, the Assessing officer has judiciously invoked the provisions of section 69 of the Act. It was further submitted that the ld CIT(A) has rightly appreciated the facts of the case and has confirmed the addition and our reference was drawn to the findings of the ld CIT(A) which read as under: “5.5 During the appellate proceedings, the appellant has reiterated his position. I find that the appellant has submitted the evidence regarding bringing of foreign currency in India through declaration form. The only missing link is the receipt issued by M/s Thomas Cook, Agra Gate Circle, Ajmer. The assessee was asked as to why the exchange money was not received through cheque. In this regard, the appellant submitted that Thomas cook staff offered higher rate of exchange in cash as against cheque payment. In the given set of facts, I find that the assessee has failed to demonstrate the nexus of foreign currency brought in India with the cash deposit in bank account. It may be relevant to add that the evidence of receipt issued by Thomas cook is critical to establish the nexus of cash deposit with foreign currency. The appellant argued that the receipts for exchange of foreign currency were not kept on record as per the advice of bank. However, this argument is without merit because the assessee is Shri Rajesh Chadha, Ajmer Vs. DCIT, Circle (IT), Jaipur responsible to explain the source of cash receipt in bank account as per the provisions of Income Tax Act.

We have heard the rival contentions and perused the material available on record. The limited issue under consideration is whether the assessee has provided reasonable explanation explaining the source and nature of cash deposit of Rs 9 lacs in his NRO account maintained with ICICI Bank and where the answer is not in the affirmative, whether the Assessing officer is correct in invoking the provisions of section 69 and bringing such receipts to tax in the hands of the assessee for the impugned assessment year. The reasonability of explanation has to be seen in the context of facts and circumstances of each case.

In the instant case, the explanation of the assessee is that the source of the cash deposit of Rs 8 lacs made in his NRO bank account on 27.05.2015 is the foreign exchange of USD 21,500/- which he brought in along with him when he arrived in the country on 22.05.2015. The evidence in support of said fact is the declaration filed by him before the Custom authorities at the IGI Airport and a copy thereof forms part of the assessment records. The assessee has further submitted that he has exchanged the US Dollars with Indian Rupees through Thomas Cook, 5 Shri Rajesh Chadha, Ajmer Vs. DCIT, Circle (IT), Jaipur authorized money exchanger and thereafter, out of money so received, he has deposited Rs 8 lacs in his NRO account. The case of the Revenue is that though the assessee has submitted the declaration in support of bringing the foreign exchange in the country, however, there is no proof which has been submitted in support of exchanging such foreign exchange with Indian Rupees.

To our mind, we find the explanation of the assessee as a plausible explanation given the facts and circumstances of the present case. The reason for the same is as follows. Firstly, source of cash deposit of Rs 8 lacs has been claimed to be out of foreign currency USD 21,500/- which at the relevant point of time would be worth Indian Rupees 13,65,680/- approx. (applying exchange rate of 1 USD equivalent to Indian Rupees 63.52). The ld AR has stated at the Bar that source of such foreign exchange is the salary income from United Nations and funds in his NRE account. Where the source of such foreign currency and the fact of bringing such foreign currency in the country has not been disputed by the Revenue, the explanation of the assessee that out of such funds, he has deposited Rs 8 lacs in his NRO bank account within a period of few days is a plausible explanation in terms of source, quantum and timing perspective. Secondly, where such salary income and interest on NRE account are exempt from tax in India at first place, a position which has been accepted by the Revenue and thus, not in dispute, then in such a scenario, subsequent deposit of the same or a part thereof in his NRO account maintained in India cannot be brought to tax in India. Thirdly, in his return of income, the assessee has disclosed long term capital gains on sale of plot on 27.11.2015 and the DLC Value has been shown as Rs 17,82,707 which is same as the sale consideration of Rs 17,82,707/- received by the assessee and there is no finding that the assessee has received any consideration over and above 6 Shri Rajesh Chadha, Ajmer Vs. DCIT, Circle (IT), Jaipur what has been shown in the return of income. Besides, the assessee has disclosed interest on FDR, Interest on NRO account, interest on IT refund in his return of income. There is thus no adverse finding recorded by the Assessing officer in terms of any source of income over and above the declared income in the return of income. Therefore, where there is no finding that the assessee has any other source of income, other than what has been declared by him, then in such a scenario, the explanation of the assessee cannot be discarded in absence of any adverse material on record. No doubt, the amount has been found deposited in his bank account and the onus is on the assessee to explain the nature and source of such deposit. But, once the assessee has provided an explanation which in the instant case, we find reasonable and plausible, the deposit so made cannot remain unexplained. In view of the same, we find that even though the assessee has failed to bring on record any evidence issued by Thomas Cook in support of exchange of foreign currency with Indian Rupees, looking at the entirety of facts and circumstances of the case, there is no basis for invoking the provisions of section 69 in the instant case. In the result, the addition so made is directed to be deleted and the matter is decided in favour of the assessee and against the Revenue.