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Income Tax Appellate Tribunal, VIRTUAL COURT
Before: SHRI S. RIFAUR RAHMAN, HONBLE & SHRI AMARJIT SINGH, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “A” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, HON'BLE JUDICIAL MEMBER ITA NO. 6949 & 6950/MUM/2019 (A.Y: 2010-11 & 2011-12) Ananya Ajay Mittal v. DCIT – Central Circle – 6(4) 62-A, 3rd Floor, Mittal Bhavan-2 Room No. 1925, 19th Floor Peddar Road, Mumbai – 400026 Air India Building, Nariman Point PAN: AZTPM4759N Mumbai – 400 021 (Appellant) (Respondent) Assessee by : Shri Piyush Chhajed Department by : Ms. Sailaja Rai
Date of Hearing : 03.01.2022 Date of Pronouncement : 23.03.2022
O R D E R PER S. RIFAUR RAHMAN (AM)
These appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals)–54, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 13.09.2019 for the A.Y.2010-11 and 2011-12.
Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed
2 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal off by this consolidated order. We are taking Appeal in ITA.No. 6949/Mum/2019 for Assessment Year 2010-11 as a lead case.
Brief facts of the case are, assessee filed return of income for A.Y.2010-11 on 30.07.2010 declaring total income of ₹.2,87,032/-. A search and seizure u/s. 132(1) of Income-tax Act, 1961 (in short “Act”) was carried out in the case of M/s. Arshiya Limited (earlier known as Arshiya International Ltd.,) and its group companies including the Promoters and Directors on 13.06.2014. The Arshiya group is owned, and controlled and managed by the promoter Mittal family, consisting of Shri Ajay S. Mittal, his wife Smt. Archana Mittal and his son Annaya Ajay Mittal i.e. assessee. In the search proceedings the premises of the assessee was also searched. During the course of the search certain details were found and Page Nos. 12-15 marked as annexure A-2 were found and seized, which contained details of Foreign Bank Account in the name of the assessee at United States of America (USA). It was seen that the Foreign Bank Account was not declared in the Income Tax Return filed by the assessee in the impugned assessment year. During post search proceedings the assessee submitted that for his Post Graduation (PG) for four years are required to stay in USA, it is mandatory for the student who were pursuing studies in USA to open an account in USA. It was also
3 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal submitted that all the expenses of the assessee in USA were exclusively borne by a family friend Dr. Prakash Sampath who is based in USA and the assessee was asked to furnish the statement of the Foreign Bank Account along with the sources of deposits and confirmation of Dr. Prakash Sampath and his relationship with the assessee. In this regard Ld. AR of the assessee submitted that Dr. Prakash Sampath is a family friend and the amount has been borne by him on account of his token of gesture. Therefore, it is not required to repay back the money spent by him. It was also informed that assessee was an ordinary resident Indian throughout his stay in USA for his PG and records of Foreign Bank Account were not maintained by him. During the assessment proceedings assessee failed to furnish copy of bank statement in USA. Assessing Officer sought details from USA Tax Authorities. When the Assessing Officer asked for the details of credits in the Foreign Bank Account with certain documentary evidences to explain the sources for the same, in response Ld. AR of the assessee submitted vide letter dated 20.12.2016 as under:
“With the above captioned reference and in continuation to my earlier submission, as per the provisions of section 6 of the income Tax Act (reproduced hereunder): “An individual is said to be resident in India in any previous year, if he
4 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal a. Is in India in that year for a period or periods amounting in all to one hundred and eighty two days or more or b. Having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.” Mr. Ananya Mittal F.Y 2009-2010 A.Y 2010-2011 Statement showing Stay outside India
NO. Date (From) Date (To) Country Days 1 1-Apr-09 13-May-09 USA 43 2 4-May-09 7-JUN-09 London 15 3. 17-Jun-09 20-Jun-09 USA 4 4. 4-Sep-09 17-Dec-09 USA 105 5 26-Jan-10 14-Feb-10 USA 20 6 23-Feb-10 26-Mar-10 USA 32 Total 219
From the above provision, it becomes very clear that the person, if whose stay outside India is more than 182 days or more shall be treated as Non-Resident. Accordingly, Since, my number of days of stay outside India for the captioned year was more than a 182 days, I shall be considered as Non-Resident of India (copy of statement towards detaisl of my number of days of stay outside India enclosed herewith vide Annexure A)” Further, the assessee in his reply dated 20.12.2016 had submitted that without prejudice to above submissions given by him any credit to foreign bank account along with expenses incured by Dr. Sampath on his behalf do not form part of the income which is taxable in India as he was a non resident during the said period.”
5 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal 4. The Assessing Officer rejected the above said contention of the assessee observing as under:- • The contention of the assessee that he is Non resident for the relevant A.Y. is an afterthought because in the original return of income the assessee has claimed the status of a resident and it is only after the search proceedings when the; undisclosed foreign bank account of Sh. Ananya Mittal came to notice that the assessee while filing of the revised return in response to notice u/s. 153A filed his status as a non resident. • Further the assessee in his submission dated 20.12.2016 has stated that any credit to his bank account along with the expenses were borne by Sh. Prakash Sampath on his; behalf and they do not form part of the income which is taxable in India as he was a non resident for the said period. This contention of the! assessee is not acceptable as the assessee Sh. Ananya Mittal has no independent source of income in U.S.A and had gone there to pursue higher studies. The source of his credits have arisen in India as employment is prohibited in U.S.A for students coming on student visas. Therefore the contention of the assessee cannot be accepted that the credits and its source are beyond the taxability of his income in India • Further with regards to the contention of the assessee with regards to the payments made by Dr. Sampath on his behalf. The assessee was required to prove relation with Dr. Prakash Sampath as per the provision of section 56(2)(v) of the Act which he has failed to do so. The provision of section 56(2) (v) of the Act states as below - Where any sum of money exceeding twenty five thousand rupees is received without consideration by an individual or Hindu undivided family from any person on or after the 1st day of September, 2004 [but before the 1st day of April, 2006], the whole of such sum ; Provided that this clause shall not apply to any sum of money received a) From any relative; or (b) On the occasion of the marriage of the individual; or (c) Under a will or by way of inheritance; or (d) In contemplation of death of the payer; or (e) [from any local authority as defined in the Explanation to clause (20) of section 10; or
6 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal (f) From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g) From any trust or institution registered u/s. 12AA.] Explanation -for the purposes of this clause, "relative" means - i. Spouse of the individual; ii Brother or sister of the individual; iii. brother or sister of the spouse of the individual; iv. brother or sister of either of the parents of the individual; v. any legal ascendant or descendent of the individual; vi. any legal ascendant or descendant of the spouse of the individual; vii. spouse of person referred to in clauses (ii) to (vi);] The provisions of the Act, clearly states that an individual or Hindu undivided family receiving any sum of money exceeding Rs. 25,000/- without any consideration from any person who does not fall in the definition of relative, the whole of the consideration received by the individual should be brought to tax. In the case of the assessee, the assessee has stated that Dr. Prakash Sampath is a family friend and the relation "family friend" does not fall within the provisions of section 56(2)(v).”
Subsequently Assessing Officer received FTD reference from the USA authorities and it was found that assessee has received total credits in the bank account to the extent of USD 6380.04 (equivalent to ₹.3,02,133/-). Since assessee failed to explain the credits in the bank account, Assessing Officer observed that even as per section 68 of the Act assessee has to explain the credits in the bank account and further all the expenses were incurred by Dr. Prakash Sampath for which assessee failed to furnish the details of relationship with him and it can also be added
7 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal within the provisions of section 56(2)(v) of the Act. Accordingly, he made the addition of ₹.3,02,133/-.
Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions countering the finding of the Assessing Officer. After considering the detailed submissions from the assessee Ld.CIT(A) dismissed the contention of the assessee that no incriminating material found during search therefore no addition can be made.
With regard to the addition on undisclosed Foreign Bank Account Ld.CIT(A) dismissed the ground raised by the assessee with the following observation: “5.8 The facts of the case, the assessment order and the submissions of the Learned Counsel have been carefully considered. The assessee had filed the return of income in the status of an ordinary resident but subsequently, during the assessment proceedings, filed revised return as a non resident. He had given evidence of his stay and stated that he was out of India for 212 days In the relevant FY. As he is a non resident, according to him, the Learned Counsel argued that the records of foreign bank accounts were not required to be maintained by him. He rebutted the AO’s statement regarding non-reporting of foreign assets in the return of income stating that requirement to report the foreign assets in the Income Tax return was introduced from AY 2012-13 and that too, the reporting requirement is applicable to individuals qualifying as Resident and Ordinary Resident and not to non-resident. According to him, the entire expenses of the appellant in USA was met by a family friend Dr. Prakash Sampath. However, in spite of questioning by the AO about the relationship between the appellant and Dr. Sampath, it was only mentioned that he was a family friend. As he is not covered in the term ‘Relative’ u/s. 56 of the Income Tax Act, the AO had made an addition of the credits in the foreign bank accounts to the tune of RS.3,02,133/u/s. 56(2)(v) of the Income Tax
8 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal Act. It is seen that the appellant was a student during that period and had no independent source of income in the USA. Even though the appellant claims that all the expenditure was met by Dr.Sampath, this remains only a claim with no substantiation. There is no confirmation issued by Dr. Sampath of having borne all the expenses of the appellant. When the appellant had no known source of income in the US, it has to be assumed that the credits in the foreign bank account were from his income arising out of India and he was under obligation to declare such income in his return of income. Even though it was not required by an assessee to disclose the foreign assets in the return of income prior to AY 2012-13, once the details of foreign account have come to the notice of the department during the search and seizure operation, it is for the assessee to explain the source of credits in such bank account. In this case, the foreign account details were unearthed during the search and the details of the credits for the said account were obtained by the AO through FTTR. It is also noteworthy to mention that in spite of the AO’s request, the assessee had not provided the details of the bank account. Once the AO had, in his possession, the details of the foreign bank account and the credits into it, the assessee had simply stated that all the expenditure were borne by Dr. Prakash Sampath. As already stated this remains a claim with no evidence. Therefore, the credits in the foreign bank account of the appellant to the tune of Rs.3,02,133/- have to be treated as his income and brought to tax. The addition made by the AO is upheld. This Ground of appeal is DISMISSED.”
Aggrieved assessee is in appeal before us raising following grounds in its appeal: - “1. On the facts and circumstances of the case, the Ld. CIT (Appeals) has erred in law and on facts in upholding the addition in respect of the foreign bank account u/s 153A in spite of the fact that no incriminating material was found/seized during search operation u/s 132 of the Act pertaining to the assessment year under appeal. 2. On the facts and circumstance of the case, the Ld. CIT (Appeals) has erred in law and on facts in upholding the additions without appreciating that the Ld. assessing officer made addition after considering the appellant as “Resident” even though it is admitted fact that he was non-resident and the assessment order also is passed assessing him as “Non-Resident”. 3. On the facts and circumstance of the case, the Ld. CIT (Appeals) has erred in law and on acts in upholding the additions of credit balance in Foreign Bank Account of ₹.3,02,133/-.”
9 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal 9. At the time of hearing, Ld. AR of the assessee submitted that assessee a Non-Resident Indian (NRI) and he brought to our notice return of income filed by the assessee pursuant to notice u/s.153A of the Act in which assessee has declared the residential status as NRI considering the fact that assessee was stayed more than 182 days outside India in this regard he brought to our notice Para No. 7.1 of the Assessment Order, and submitted that certain details were found relating to the Foreign Bank Account opened in the name of the assessee, he submitted that assessee went to USA for PG for four years and it is required to stay in USA, it is mandatory for the assessee to open the bank account.
With regard to the expenses for stay in USA he submitted that a family friend of the Mittal family Dr. Prakash Sampath has borne all the expenditure. In post search proceedings when the assessee was asked to furnish the details of Foreign Bank Account credits and relationship with Dr. Prakash Sampath the same was submitted before the Assessing Officer that all the expenses were incurred by Dr. Prakash Sampath and assessee is not required to maintain any bank details as he was not maintaining the same. Further he submitted that during the search no incriminating material was found therefore no addition can be made in hands of the assessee.
10 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal 11. On the other hand, Ld.DR submitted that assessee is required to declare income earned in India and accordingly, assessee has offered the income earned in India. He brought to our notice Page No. 5 of the Ld.CIT(A) order to counter the submissions of the Ld. AR that there is no incriminating material found during search. He submitted that Ld.CIT(A) has rightly brought on record that the finding of the undisclosed Foreign Bank Account details itself is an incriminating material. Further he submitted that as per section 6(1)(c) of the Act the assessee is a resident of India. With regard to expenses incurred in USA he submitted that assessee has not explained the relationship of the guardian, when the expenses incurred by non relative, it will be treated as gift. Therefore he supported the addition sustained by the Ld.CIT(A) under the head “income from other sources”.
In the rejoinder Ld. AR submitted that section 6(1)(c) provisions raised by the Ld.DR, it is submitted that Assessing Officer and Ld.CIT(A) has accepted that assessee is NRI, Ld.DR cannot improvise the case.
Considered the rival submissions and material placed on record, we observed that during the search proceedings certain details relating to Foreign Bank Account in the name of the assessee was unearthed in the
11 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal assessee’s premises. It is fact on record assessee has filed return of income during this year as NRI. It was submitted before the Assessing Officer in post search proceedings that assessee is NRI due to the fact that assessee went to USA for higher education and it was disclosed that assessee went for pursuing PG and assessee has not maintained any bank account. However, it is mandatory for assessee to open the bank account in USA. No details were furnished before the tax authorities. The Assessing Officer received the credits in the bank account form FTD reference from US Authorities and it was found that assessee has credits in the bank account equivalent to ₹.3,02,133/-. It was submitted that all the expenses were incurred by family friend Dr. Prakash Sampath who is not a relative but a family friend. After considering the submissions of both the parties we observe that even though assessee has filed its return of income as NRI, however, he went to USA for higher education. Therefore, assessee remained as student who does not have regular income outside India atleast not disclosed anywhere in the return of income. The source for his higher education has to be from India no doubt in order to reside outside India assessee has to have a bank account and record to maintain the bank account in order to survive outside India. No details were furnished before any Authorities. However, only a
12 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal statement was submitted that Dr. Prakash Sampath has borne all the expenditure relating for the stay in USA.
On careful analysis, we are in agreement with the Ld.DR that section 6 determines the residential status. As per which an individual is said to be a resident in India in any previous year, if he is in India in that year for a period or periods amounting in all to one hundred and eighty- two days or more; or having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.
From the above definition it is clear that not only clause 1(a) is required to be determined for the residential status, including clause 1(c). Therefore, assessee’s case falls in 6(1)(c) which also classifies the residential status as Indian resident. Nowhere in the record shows that assessee is non-resident as per section 6(1)(c) of the Act. We are not inclined to accept the submissions of the Ld. AR that assessee has filed return of income as NRI and also tax authorities have assessed the same as such it is important that when the assessee is pursuing higher education and also the non-resident as per clause 1(a), still, he remain as
13 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal Resident when he satisfies the condition as per clause 1(c) it is the duty of the assessee to disclose the source of income outside India.
In the given case assessee has disclosed only source of income which is taxable in India and only upon search it came to light that assessee has incurred certain expenditure outside India. Even though for higher education the source was never disclosed to the tax authorities. It is only after search proceedings it was submitted that Dr. Prakash Sampath incurred all the expenses relating his stay outside India. It is also fact on record that the relationship of Dr. Prakash Sampath never disclosed to the Tax Authorities and it is only confirmation letter filed on record which is part of the Paper Book, in which Dr. Prakash Sampath states that assessee is coming to the states for under graduate studies in the Brown University. For that purpose, he is willing to borne all the expenses. It was dated 21.04.2008 and in the letter head of Rhode Islan Neurosurgical Institute. Subsequently another letter dated 05.08.2015 he reconfirmed the above statement and it was submitted that he does not maintain any details of record. Therefore, it is clear on record that assessee has opened the bank account in USA and went for higher education and source of funds are from family friend who is not a relative. We are not inclined to accept the submissions of the Ld. AR that being an
14 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal NRI tax authorities cannot resort to make any addition unless and until the assessee discloses the sources in India and outside India.
In the given case it was found by the tax authorities that assessee has certain credits that to only upon receipt of information from US Tax Authorities and this was never disclosed by the assessee. Therefore, we are inclined to reject the contention of the assessee and the expenses borne by the non relative can only be treated as gift taxable u/s. 56(2)(v) of the Act. Therefore, appeal filed by the assessee is accordingly, dismissed.
Coming to the appeal relating to A.Y. 2011-12, since facts in these cases are mutatis mutandis, therefore the decision taken in A.Y. 2010-11 is applicable to the A.Y. 2011-12 also. We order accordingly.
In the result, appeals filed by the assessee are dismissed.
Order pronounced in the open court on 23.03.2022.
Sd/- Sd/- (AMARJIT SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 23.03.2022 Giridhar, Sr.PS
15 ITA NO. 6949 & 6950/MUM/2019 Ananya Ajay Mittal Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mum