HARDIK HITESH SHAH,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

The learned Hon'ble CIT(A) has in facts and circumstances of the case and in law erred in upholding the penalty proceedings initiated under Section 270A of the Act by the Learned Additional Joint/Deputy Assistant Commissioner of Income Tax/ Income-tax Officer, National e-Assessment Centre for alleged under- reporting of income and Section 271AAC of the Act for alleged unexplained cash deposits.

The brief facts of the case are that during the impugned assessment year, the assessee filed the return showing status as ‘Resident & Ordinarily Resident in India’ under section 6 of the Act and offered the global tax in the return of income. The assessee was an employee and was sent to an international assignment to US (United States), rendered services in the US and accordingly received salary and perquisites amount o Rs.65,95,935/-. The assessment was completed with an addition of Rs.7,73,345/- related to unaccounted cash deposited in the bank account in USA during his stay in the US. The alleged amount was added back under section 68 read with section 115BE of the Act with the total income of the assessee. Further, the assessee had declared the perquisite for relocation charges received from the employer amount to Rs.32,79,300/- which was credited in the bank account held in the US and inadvertently omitted to be offered to tax in India. Further, in terms of the US assignment, the assessee has an agreement with the employer that any tax arising in India (after considering foreign tax credit) on US salary would be borne by the employer of the assessee. Therefore, upon realizing the inadvertent mistake, which was bonafide and unintentional errors, the assessee informed his employer and requested the employer to pay the necessary taxes under section 192 of the Act alongwith applicable interest under section 201(1A) of the Act.Accordingly, the employer paid the tax of the assessee amount to Rs.20,15,911/- and also the interest amount to Rs.13,18,067/- under section 201(1A) of the Act. Both the additions of Rs.32,79,300/- and Rs.20,15,911/- were duly accepted by the assessee. But the tax credit amount to Rs.20,15,911/- was not allowed by the Ld.AO during the assessment proceedings though the said taxwas reflected in assessee’s Form 26AS. Finally, the Ld.AO allowed a meager amount of TDS in respect of this income. The impugned assessment order was assailed before the Ld. CIT(A). The Ld.CIT(A), after considering the same rejected the appeal of the assessee. Being aggrieved on the appeal order, the assessee filed an appeal before us. 4. The Ld.AR argued and filed a written submission which is kept in the record. 4.1 The Ld.AR argued ground-wise, which is as follows:- Ground.1: Ground 1 is not pressed, so rejected. Ground.2: Related to the cash deposit, the Ld.AR stated that the Ld.AO had considered the deposit in bank account held in US and out of that U 1921.77 on 07/04/2017 was duly deposited as salary from employer was considered as cash deposit, which is not correct. Finally, the Ld.AO calculated total cash deposit of Rs.7,73,345/-; out of that the salary amount to Rs.1,23,185/- wrongly taken as cash deposit. So, the balance amount of Rs.6,50,160/- was related to the cash deposit in US. The assessee withdrew cash in US through the credit card U 1305.99 and it is further explained that the assessee had arranged tours for his family members and booked the cruise for different destinations to entertain his family during his stay in US. Accordingly, the family members had paid their proportionate touring expenses to assessee and depositing the same in bank account. The copies of confirmation / declaration of repayment of U 9,000 from concerned persons, on whose behalf the expenses were incurred by the assesseeare placed on record at pages 175 – 179 of APB. Further the assessee had completed these transactions in the said bank account during his stay in US. So, all transactions related withdrawals of cash and deposit of cash were completed in the US during his tenure of 9 months’ stay in the US. The copy of the foreign bank account statement is annexed in APB pages 37 to 129. We find that the assessee had sufficient cash to deposit in the bank account which was received from his family members. Finally, the assessee was not required to maintain books of account as it was not applicable for the assessee, being an employee. The assessee is filing the return by declaring total income amount to Rs.93,15,130/-. So, the cash transactions in US are duly supported with evidence and nature of cash deposits are explained properly. 5. The Ld.DR argued and fully relied on the order of the revenue authorities. 6. We heard the rival submissions and considered the documents available in the record. We find that the amount considered by the Ld.AO is wrongly taken as the salary in the list of cash deposit. So the addition of the amount of Rs.1,23,185/- related to the deposit of salary is deleted. For rest of the amount, tours during his stay in the US. All the transactions are duly completed during his stay in the US. Further the assessee is not liable for maintaining the books of account. So the separate cash book is not required for verification of the cash. The Ld.DR had not filed any contrary evidence against the submission of the Ld.AR. The veracity of the documents filed before the Ld. AO wasnever be challenged. Accordingly, we hold that the addition made by the Ld.AO is erroneous and is therefore, deleted. Grounds 2 of the assessee’s appeal is allowed. 7. Ground 3 & Additional Ground: In our considered opinion, the assessee had disclosed, during the assessment stage, the income received from the employer as a perquisite amounting to Rs.20,15,911/-, as well as the relocation allowance of Rs.32,79,300/-. Both amounts were duly added back to the total income and treated as part of the assessee's income. The Ld. AR drew our attention to a copy of Form 26AS for the A.Y. 2018–19, annexed in APB pages 130 to 133, where the tax amount is duly reflected. The amount was paid by the employer as a perquisite to the assessee and was disclosed in the total income. Upon review, we find that the disallowance of the tax credit of Rs.20,15,911/- is unjustified. However, at this stage, we are unable to verify the tax credit claimed by the assessee, even though it is reflected in Form 26AS. The Ld. DR did not raise any significant objections to the assessee's submissions.Therefore, we are remanding this issue to the file of the Ld. AO for verification of the tax credit and to allow it as per the provisions of the law. The reasonable opportunity should be granted to the assessee for hearing in set aside proceeding. Accordingly, Ground No. 3 and the additional ground of the assessee’s appeal are allowed for statistical purposes for limited issue. 8. Grounds 4 & 5 are consequential in nature. 9. In the result, appeal of the assessee bearing ITA 3331/Mum/2024 is allowed. Order pronounced in the open court on 16th day of January, 2025. (AMARJIT SINGH) JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 16/01/2025 Pavanan Copy of the Order forwarded to:

अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file.