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Facts
The assessee, a non-resident, filed an appeal against an order sustaining an addition for AY 2016-17. The AO initiated reassessment proceedings based on investment in property and interest income. The assessee claimed the reassessment was invalid due to time bar and lack of jurisdiction.
Held
The Tribunal held that the assessee provided a plausible explanation for the Rs. 7 lacs comprising cash and cheque deposits. Considering the lapse of time, the inability to produce all documentary evidence was understandable, and the addition was deleted.
Key Issues
The validity of reassessment proceedings initiated beyond the prescribed time limit, and whether the source of funds for investments was satisfactorily explained by the non-resident assessee.
Sections Cited
147, 148, 144C(5), 153, 144C, 69, 115BBE, 148A
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Income Tax Appellate Tribunal, “I” BENCH
(Assessment Year: 2016-17) Faisal Badruddin AO Ward 4(2)(1), Kautilya Shitware Bhavan, Bandra Kurla 307, 1A, Delux Nagar Vs. Complex, Mumbai 400051 Building, Jeevan Baug, Post Room No. 209, 2nd Floor, Office Road, Mumbra, Thane Aayakar Bhavan, M.K. Road, 400612 Mumbai 400020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: BVOPS1660L (Appellant) (Respondent) निर्ााररती की ओर से / Assessee by: Shri. Nishit Gandhi /Revenue by: Shri Krishna Kumar SR. DR Date of Hearing 06.08.2025 Date of Pronouncement 23.09.2025 आदेश/O R D E R PER RENU JAUHRI [A.M]: This appeal is filed by the assessee against the order of the AO ward 4(2)(1), Mumbai dated 17.12.2024 passed as per the directions of the Dispute Resolution Panel (DRP) u/s. 144C(5) of the Income Tax Act, 1961 [hereinafter referred to as "Act"] for Assessment Year [A.Y.] 2016-17.
The assessee has raised the following grounds of appeal:
“ON VALIDITY OF REASSESSMENT: 1.1. In the facts and circumstances of the case and in law, the re-assessment order us 144 r.w.s. 147 of the Income Tax Act, 1961 ["the Act" for short] passed by the Learned Income Tax Officer (Int Tax Ward) 4 (2)(1), Mumbai ["the Ld. AO" for short] is bad in law and void for want of jurisdiction.
AY 2016-17 Faisal Badruddin Shitware 1.2 In the facts and circumstances of the case and in law, the impugned re-assessment u/s 147/148 is bad in law and void also since: i. The entire re-assessment from initiation to completion is completely contrary to the extant law and deserves to be quashed; ii. The Petitioner, a Non-resident assessee, has no taxable income in India and therefore no income escaping assessment during the relevant year. iii. To the admission of the Ld. AO himself as per the draft assessment order, the income alleged to have escaped assessment is Rs.31,33,620/- and therefore the initiation of re-assessment is bad in law since it is initiated beyond a period of three years; iv. The entire re-assessment is initiated and conducted in violation of section 151A read with Notification 18 of 2022; 1.3 In the facts and circumstances of the case and in law, the impugned re-assessment be quashed and set aside. ON JURISDICTION AND VALIDITY OF PROCEEDINGS: 2.1 In the facts and circumstances of the case and in law, the assessment order as passed by the Ld. AO is barred by limitation since passed beyond the time limit prescribed u/s 153 of the Act and therefore void. 2.2 In the facts and circumstances of the case and in law, the Ld. AD stred in invoking the provisions of section 144C of the Act since the Assessee is not an eligible assessee as defined in section 144C of the Act and therefore the said provisions are not applicable in his case. ON MERITS: 3.1 In the facts and circumstances of the case and in law, the Ld. Dispute Resolution Panel-1. Mumbai ["the DRP"] erred in partly confirming the action of the Ld. AO and thereby sustaining an addition of Rs. 7,00,000/- u/s 69 in the hands of the Assessee. 3.2 While doing so, the Ld. DRP as well as the Ld. AO failed to appreciate that: i. Section 69 is not at all applicable in the present case in as much as the Assessee (the Appellant herein) is a non-resident and therefore even to invoke section 69, the first requisite is to satisfy the scope of income as defined u/s 5 of the Act and section 69 cannot be invoked to expand the scope of income for Non-resident: ii. The Appellant had duly explained the availability of funds before the Ld. AO as well as the DRP and therefore the additions as sustained are bad in law; iii. So far as the cash deposits of Rs.2,00,000/- are concerned the same were sourced out of earlier withdrawals for which due and complete details and evidences were furnished which is not disputed and therefore this addition springs out of surmises and suspicions and is therefore unsustainable; AY 2016-17 Faisal Badruddin Shitware iv. So far as the cash deposits of Rs.3,00,000/- are concerned, the same are in respect of sale of jewellery and since the matter is more than a decade old, the Assessee could not produce the bills, etc. though a declaration in this regard was duly furnished which is not refuted by any of the lower authorities. v. So far as the balance deposit of Rs.2,00,000/- is concerned the same is received in cheques and therefore could not be have been added u/s 69, vi. Even otherwise the additions are contrary to the provisions of the Act and therefore unsustainable; 3.3 In the facts and circumstances of the case and in law, the additions made by the Ld. AO and as confirmed by the Ld. DRP deserves to be deleted.
4. Without prejudice to the above, in the facts and circumstances of the case and in law, the Ld. AO erred in taxing the additions u/s 115BBE of the Act without appreciating that the said section was introduced to check evasion of tax and the same are not applicable in the facts of the present case.
5. The Appellant craves leave to add, amend, alter, delete or modify all or any the above grounds at the time of hearing.”
Brief facts of the case are that the assessee was a non-resident during the FY 2015-16 relevant to the assessment year under consideration. No return was filed by the assessee for AY 2016-17. It was observed by the Ld. AO from the departmental data base that the assessee had made investments to purchase immovable property for Rs. 55,03,000/-. Further interest of Rs. 13,138/- had also been received on which TDS had been deducted. In view of this facts the Ld. AO issued a notice u/s. 148 on 16.03.2023 on the ground that there was escapement of income to the tune of Rs. 55,16,138/- for the year under consideration. As the assessee did not response to the notice u/s. 148A(b) dated 16.02.2023, order u/s. 148A(d) was issued on 16.03.2023. Notice u/s. 148 of the Act, was also issued on 16.03.2023. Subsequently, in response to notices u/s. 142(1), the assessee and the show cause notice the assessee submitted replies
After considering the assesses replies and in the absence of supporting documentary evidence Ld. AO proposed to make an addition of Rs. 31,33,620/- vide draft order u/s. 144C(1) u/s. 69 of the Act as the assessee could not satisfactorily prove the source of investment of this amount. Aggrieved with the draft order, the assessee approached the Dispute Resolution Panel (DRP) and filed his objections to the proposed addition. After considering the assessee’s submissions, Ld. DRP reduced the proposed addition from Rs. 31,33,620/- to Rs. 7 lacs (comprising of cash deposit of Rs. 5 lacs and cheque deposit of Rs. 2 lacs in his account) after observing that the rest of the investments had been satisfactorily explained. Accordingly, final assessment order u/s. 147 r.w.s. 144 was passed on 17.12.2024 after making the addition of Rs. 7 lacs. Aggrieved with this order, the assesse has preferred an appeal before the Tribunal.
At the outset, it is noted that the appeal has been filed after a delay of 102 days. In this regard, the assesses has filed an affidavit for condonation of delay on the ground that due to disability caused by motor neuron disease, he could not sign the documents for filling of appeal. In support of it submissions, a certificate from the doctor has also been filed considering the serious health issues being faced by the assesses, we hereby condone the delay in filing the appeal.
Ground No. 1.2 (iii) : On Validity of Reassessment.
The assessee has submitted that the entire reassessment was bad in law since as per the draft assessment order, the Ld. AO had held that income alleged to have escaped assessment was Rs. 31,33,620/- and, therefore, the initiation of reassessment was bad in law as more than 3 years’ had elapsed and amount in figured was less than 50 lacs. As such under the amended provisions, no notice cold be issued after 3 years. In that regard Ld. AR has placed reliance on a decision of the Pune bench of ITAT in the case of Kalpana Vijay Kadam vs ITO Pune in wherein, the reopening beyond 3 years was held to be bad in law as the escapement of income was less than Rs. 50 lacs. However, it is seen, that the assessee case is distinguishable from the case of Kalpana Vijay Kadam. In the case, of Kalpana Vijay Kadam (supra) the assesses therein furnished requisite details in response to notice u/s. 148A(b) from which it was clear that her share in the purchase of property was 50% which was less than the threshold limit of Rs. 50 lacs and hence the order u/s. 148A(d) was AY 2016-17 Faisal Badruddin Shitware held to be bad in law by the co-ordinate bench. In the present case, the assesse did not file any response to the notice u/s. 148A(b) issued by the Ld. AO the action of the Ld. AO cannot be found fault with. We reject the argument advanced by Ld. AR in respect of Ground no. 1.2. (iii).
Ground No. 1.2(v) is last open to be adjudicated in appropriate circumstances as per the submission of Ld. AR.
Ground No. 3: 7. On merits, the assessee has challenged the directions of the DRP for sustaining the addition of Rs. 7 lacs u/s. 69 of the Act. Out of these, Rs. 5 lacs have been deposited in cash in the Canara Bank account as under: Date Particulars Type Amount Source of Income 27.10.2015 Canara Bank 0164101053416 Savings 2,00,000 Cash Deposit 30.10.2015 Canara Bank 0164101053416 Savings 2,00,000 Cash Deposit 03.11.2015 Canara Bank 0164101053416 Savings 1,00,000 Cash Deposit 7.1. Remaining Rs. 2 lacs have been receipt by cheque through clearing as under: Date Particulars Type Amount Source of Income 19.09.2015 Canara Bank Savings 1,00,000 By Clg, MUM CLG 0164101053416 SEC, ABS 07.11.2015 Canara Bank Savings 1,00,000 By Clg, MUM CLG 0164101053416 SEC, ABS AY 2016-17 Faisal Badruddin Shitware 7.2. During the course of assessment proceedings, the assessee could not satisfactorily explain the sources of this entries. However, before the DRP the assessee furnished computation showing sale of gold jewellery as under:
7.3. Assessee has thus, explained that part of the cash deposit was on account of sale of old jewellery whereas the remaining cash deposit of Rs. 2 lacs were out of cash withdrawals made during the year from assessee’s NRE account with Canara Bank. Copy of the NRE account had also been furnished showing substantial withdrawals in cash during the year.
However, Ld. DRP was of the view that the assessee’s explanation regarding sale of gold jewellery as well as the deposit of Rs. 2 lacs by cheque is not satisfactory as the assessee could not furnish any supporting documentary evidence relating to the cheque transaction.
AY 2016-17 Faisal Badruddin Shitware 9. After hearing the rival submissions on this issue, we are of the considered opinion that the assessee has given explanation with regard to the source of Rs. 7 lacs. Due to lapse of considerable time, he is unable to produce the requisite documentary evidences in support of its explanation. We also note that the assessee has shown sufficient withdrawal from its Canara Bank NRE account wherein his salary/remittance received from his employer in Dubai has been credited. Considering the overall facts and circumstances, we are of the view that it is not uncommon for a person to dispose off his old jewellery in order to finance the purchase of house. Further the assessee has substantial income by way of salary earned as well as sufficient withdrawals during the year. The total amount invested in the purchase of property was Rs. 60,80,854/- out of which loan of Rs. 27,74,580/- was taken from M/s. India Bulls Balance amount has been financed out of remittances from Dubai due to assessee’s employment, gift from mother and sale of old jewellery.
9.1. The above explanation has not been found fault with by the DRP. Section 69 can be invoked if the assessee is unable to offer explanation or the explanation offered by the assessee is found to be not satisfactorily. There is nothing on record filed by the revenue to come to such a conclusion.
9.2. Considering the overall facts and circumstances, we are of the view that no addition was called for with regard to Rs. 7 lacs comprising of cheque deposits of Rs. 2 lacs and cash deposits of Rs. 5 lacs for which the assessee has given a plausible explanation. Hence the addition of Rs. 7 lacs is hereby deleted.
Ground No. 4: Nothing has been argued by the Ld. AR on the issue and hence the same is not adjudicated.
10.1. Ground No. 1.1 & 5: Are general in nature and therefore, do not require adjudication.
10.2. In view of the above, as the assessee’s appeal is allowed on merits, the legal ground no. 2 is also not being adjudicated upon and is left open.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 23.09.2025