ACIT 8(2)(1), MUMBAI, MUMBAI vs. MINAL VAZIRANI, MUMBAI

The grounds of appeal raised by the assessee are as under:

Facts of the case, in brief, are that the assessee filed return of income for the AY 2022-23 on 31.07.2022 declaring total income of Rs.1,52,49,954/-. The case was selected for scrutiny under CASS and AO issued various notices and show-cause notice to the assessee. The assessee filed reply on 11.03.2024 and 13.03.2024 and finally a VC was conducted on 13.03.2024. There was increase in balance in the foreign bank accounts as compared to the preceding year. The assessee requested for adjournment several times but the she did not file relevant details. Considering these facts, the source of closing balance in foreign bank accounts amounting to Rs.5,86,72,163/- remained unexplained and was added to the total income. As a result, the total income was determined at Rs.7,33,87,601/- as against returned income of Rs.1,52,49,954/-. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The assessee filed detailed submission before the CIT(A) which has been extracted at para 5 of the appellate order. The CIT(A) has allowed the ground of the assessee by stating as under: “ The appellant is an individual and Director in Saffron Art Pvt. Ltd., earning salary. income from other sources and overseas income. She is a US citizen by birth and has maintained overseas bank accounts for several years. It is undisputed that she has regularly disclosed foreign income and assets in her returns. For A.Y. 2022-23, complete foreign bank account details were duly reported in Schedule FA. In A.Y. 2021-22, while the accounts were disclosed, the closing balance was inadvertently shown as "Nil." During assessment for A.Y. 2022-23, the appellant furnished complete bank statements and clarifications. Despite this, the Ld. AO treated the balances as unexplained and made an addition of Rs.5.81 crores u/s.69A of the I.T. Act.

Aggrieved by the order of CIT(A), the revenue has filed appeal before the Tribunal. The Ld. Sr. DR has relied on the order of the AO. He submitted that the assessee failed to provide specific reasons and source for the increase in the foreign bank account balances. Hence, the AO rightly made addition of Rs.5,81,37,647/- u/s 69A of the Act. The CIT(A) allowed relief without giving opportunity to the AO to contest the details and submission made by the assessee during appellate proceedings. 6. On the other hand, the Ld. Sr. DR supported the order of CIT(A). He has filed a written submission and Schedule FA (extract of ITR form uploaded foreign assets disclosure) for AYs 2021-22, 2022-23 and 2023-24. In the written submission, it was submitted that the reporting of Nil closing balance in the in Schedule FA of the ITR for A.Y. 2021-22 was owing to inadvertent oversight at the time of filing return. The Ld. AR enclosed copy of Schedule FA for A.Y.s 2021-22, 2022-23, and 2023-24 for ready reference. He submitted that a mere error at the time of filing the return of income cannot be treated as giving rise to a presumption of the unexplained income, particularly when the assessee has neither concealed nor attempted to conceal any income. He also submitted that complete bank statements of the bank accounts were duly furnished before the AO during the assessment proceedings. The source of funds is, therefore, fully explained. The Ld. AR also submitted that the assessee has been regularly disclosing her foreign assets each year as also foreign income even before advent of BMA. Bank accounts in question and consequent incomes therefrom have been regularly disclosed. Merely owing to oversight, the closing balances of the said accounts was inadvertently left to be entered at the time of the filing of the ROI for A.Y. 2021-22 (immediately preceding year) as a result of which the case for the year under consideration was selected for scrutiny, since balances allegedly showed huge rise. The ld. AR referred to the Schedule FA for the A.Y. 2023-24 and 4 submitted that the said foreign bank account and its closing balance have been correctly and fully disclosed. This indicates that the assessee has been consistently reporting the same and the Nil in A.Y. 2021-22 is an inadvertent mistake and not a pattern of concealment. The same was explained to the AO and the CIT(A). However, the AO made the addition but the CIT(A) allowed relief on appreciation of the said fact. The Ld. AR referred to the finding of the CIT(A) granting relief, which has been reproduced above at para 4 of this order. He therefore, requested to uphold the order of CIT(A). 7. We have heard both sides and perused the materials on record. We have also deliberated on the decision relied upon by the ld. AR. The CIT(A) has granted relief by stating that the impugned bank accounts are disclosed over several years and omission is in respect to closing balance only and not existence of the bank accounts. The AO, on the other hand, has not accepted the source of closing balance in Schedule FA. The appellant submitted that there was clerical mistake in making the entry while filing return of ITR from 20.01.2022. We find that the CIT(A) has accepted the explanation without calling for a report of the AO in this regard. Therefore, in the interest of justice, we consider it proper to set aside the order of CIT(A) and restore the impugned issue to the file of AO for the limited purpose verification as to whether the bank accounts are duly disclosed in the ITR of the assessee for different AYs and whether the Nil closing balance in Schedule FA for ITR 2021-22 was an inadvertent mistake, not supported by the entries in the bank statements. In the result, the order of CIT(A) is set aside and restored to the file of AO for verification and fresh assessment order as per law after granting adequate opportunity of being heard to the assessee. Accordingly, the ground is allowed for statistical purpose.

In the result, the appeal of the revenue is allowed for statistical purpose.