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Income Tax Appellate Tribunal, “I” Bench, Mumbai
This appeal by the Revenue is directed against the order of learned CIT(A) dated 27.8.2019 pertaining to assessment year 2009-10.
2. The grounds of appeal
read as under :-
1. (a) "Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) violated Rule 46A(1) by accepting additional evidence in spite of the fact that the assessee did not produce details/ documents before AO without any reasonable cause and despite being given sufficient opportunities?" (b) "Whether on the facts and in circumstances of the case and in law, the action of the Ld. CIT(A) in accepting additional evidence is not correct as per judgment of the Delhi High Court in case of M/s. Manish Build Well (P) Ltd. (204Taxmann 106(Delhi) 2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that addition u/s. 68 of the I.T. Act, 1961 cannot be made in this case, because the AO has not made addition u/s. 68, but has made the addition as an unexplained investment which is subject matter of section 69 of the I.T. Act, 1 961 3. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the source of investment amounting to Rs. 25.37 Crs. In M/s. Rajesh Exports Ltd. by the assessee lies in Dubai on 2 Shri Sandeep Dhirajlal Dhakan the supposed basis of remand report where the AO has not given any such finding? 4. The Appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 5. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary."
Brief facts of the case are as under :- The case was reopened based on the specific information that the assessee entered into shares transactions and the bank account revealed that during the period from 01.04.2008 to 08.12.2008 there are huge debits mainly paid to M/s. Ventura Securities aggregating to Rs. 25.37 crores. The huge credits in the bank account were immediately Transferred to M/s. Ventura Securities. The ledger account of M/s. Ventura Securities revealed that share investments are made by Sandeep Dhakan and Shri Rohitkumar N. Piparia for the period from 01.04.2008 to 31.03.2009. On perusal of the same it was revealed that most of the shares purchased by Shri Sandeep Dhakan as well as by Shri Rohit Kumar N. Piparia are of M/s. Rajesh Export only. Since the assessee failed to furnish evidence in respect of the Investment made in securities of M/s. Rajesh Exports to the tune of Rs, 25.37 Crores, the Assessing Officer had reason to believe that there is an escapement of Income and accordingly the case of the assessee was reopened U/s. 147 of the I.T. Act, 1961. Accordingly the Assessing Officer issued notices to the assessee. After several notices the Assessing Officer noted the assessee’s response as under :- On 28.12.2016, assessee replied to notice U/s. 142(1) and 143(2) of the l.T. Act, that all the investments and purchases during the period are purely and only out of my own funds send through normal banking channels. All the transactions are done at Abu Dhabi Commercial Bank and payments are against those purchases to my brokers Ventura Securities Ltd., "I herewith attach my RBI permission for the same Bank Statements of above period sent with previous letter dated 26.12.2016. 1 am a nonresident Indian, as I have been staying in Dubai since 2nd October, 1983 - till date " I herewith attach my Passport copy with Dubai Visas. I have my own businesses of jewellery manufacturing and wholesales in Dubai, I herewith attach my trade Licence copy.
However, the Assessing Officer was not satisfied. He observed as under :
3 Shri Sandeep Dhirajlal Dhakan
“On perusal of the Bank statement of Abu Dhabi Commercial Bank A/c. No. 417076, it is seen that huge amount has been deposited in Indian currency through RTGS ICICI Bank, Notice U/s. 142(1] of the I.T. Act, 1961 was issued to the assessee on 29.12.2016, which was served on the assessee though e-mail on 29.12.2016, requiring to furnish copy of Bank account with ICICI Bank from where the deposits are made into Account SB/PRP/41076 with ADCB Bank. He was once again requested to furnish details of investment of Rs. 25.37 Crs. invested in the shares of M/s. Rajesh Exports through M/s, Ventura Securities Limited. These details were required to be complied by 30.12.2016 at 11.00 a.m.”
Assessing Officer further noted that the assessee has not provided bank account of the said ICICI Bank. The Assessing Officer concluded as under :-
“In view of the above facts, and in the absence of the required documents to prove the source of investments made of Rs. 25.37 Crores in the share of M/s. Rajesh Exports through M/s. Ventura Securities Limited, I am left with no other option but to make an addition of Rs. 25.37 Crores to the income of the assessee, as Unexplained Investments made by the assessee under the head Income from Other Sources. Penalty proceedings U/s. 271(l)(c) of the IT, Act, are initiated separately for concealment of Income.”
Against the above order the assessee is in appeal before learned CIT(A).
Before learned CIT(A) assessee submitted additional evidence. Learned CIT(A) obstained remand report from the Assessing Officer. The Assessing Officer objected to the additional evidence on the ground that despite reasonable opportunity the assessee has not submitted the same. However, learned CIT(A) noted that there was genuine reason for not submitting the evidence before the Assessing Officer. That the assessee is a non-resident. That many notices were not served to the assessee. Accordingly he admitted additional evidence. Thereafter learned CIT(A) noted the remand report and found that the Assessing Officer had accepted the same. Learned CIT(A) observed as under :-
“10. The report of appellant on merits concluded as under:
As per submission filed dated 22/09/2017 assessee has claimed that the assessee is engaged in business of jewellery in Dubai and he is issued business resident visa by UAE. His business is into the name of Radhakrishna jewellers (LLC) and business income is invested in shares. The assessee has NRE A/C no 417075. The assessee has 4 Shri Sandeep Dhirajlal Dhakan invested Rs. 25.37 Crores through M/s Ventura Securities Ltd for Purchase of 1,25,25,000 shares of M/s Rajesh Exports.
As per certificate produced dated 26.02.2009 from N.R. Doshi & Co. having office at Sharjah, UAE, the assessee had a net worth of USD 55.23 Million as on 31.12.2008.
Thus the assessee is NRI and invested in the 1,25,00,000 shares of M/s Rajesh Exports for Rs. 25.37 Crores through Ventura Securities Ltd from his repatriated funds. The origin of funds in Dubai is not ascertainable being out of country transactions.”
The above clearly reveals that the addition is unsustainable as it is established to be sourced from UAE.
In regard to last part of report of Assessing Officer, which deals with source of funds in Dubai, the issue to be decided is whether unexplained, income (under section 68 Income Tax Act 1961 since Assessing Officer treated income as cash credit) can be assessed in India or UAE. Since appellant is resident of UAE, Article 22 comes to fore. The clause is as under:
ARTICLE 22 OTHER INCOME
Subject to the provisions of paragraph (2), items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing articles of this Agreement, shall be taxable only in that Contracting State.
The provisions of paragraph (1) shall not apply to income, other than income from immovable property as defined in paragraph (2) of Article 6, if the recipient of such income, being a resident of a Contacting State., carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected, with such permanent establishment or fixed base. In such case, tile provisions of Article 7 or Article 14, as the case may be, shall apply.
From the above it is clear that the sum cannot be assessed under Income Tax Act 1961 in India as provisions of Double Taxation Avoidance Agreement override provisions of Income Tax Act 1961. As per paragraph 1 of assessment order, the appellant is nonresident. He is resident of 'UAE and income is not "from" immovable property. The income which is taxed by Assessing officer, if taxable, is taxable in UAE since appellant is resident of UAE. Hence I hold that the sums assessed under section 68 cannot be assessed in any case in India.
The aspect of TRC is not discussed since relevant provisions relating to TRC was introduced w.e.f. A.Y. 2013-14.
5 Shri Sandeep Dhirajlal Dhakan
In view of forgoing discussion and decision in paragraphs 10 and 11, I direct Assessing Officer to delete the addition made in assessment Accordingly ground 1 is allowed.”
Against the above order the Revenue is in appeal before us.
We have heard both the parties and perused the records. The first objection of the Revenue is acceptance of additional evidence by learned CIT(A). We note that learned CIT(A) has given due reasoning as to why there was delay in evidence in as much as assessee was NRI and there was some issues regarding service of notices to the assessee. Moreover, after admission of additional evidence the same has been forwarded to the Assessing Officer. The Assessing Officer on merits of the same has also commented upon. Hence, in our considered opinion this ground raised in this regard by the Revenue has no merit. As regards merits of the issue learned CIT(A) has duly noted that the assessee has business in Dubai. It is undisputed that the assessee is NRI. The impugned sums have been transferred from his Dubai account to account in India. In these circumstances the assessee has duly discharged its onus. This has been duly accepted by the Assessing Officer in the remand report. The Assessing Officer has observed that the source of assessee’s fund in Dubai was not examined by him being out of courty’s transaction. We note that the assessee has discharged its onus and addition under section 68 of the Act is not at all sustainable in as much as identity, creditworthiness and genuineness of the transaction has been duly explained. In this regard learned assessee’s counsel placed reliance upon the ITAT decision in ITO Vs.Rajeev Suresh Ghai (ITA No. 6290/Mum/2019 for A.Y. 2010-11 vide order dated 23.11.2021). The proposition preferred in the said order of the ITAT duly supports the view taken by learned CIT(A) wherein he has referred to Double Taxation Avoidance Agreement (DTAA). Learned CIT(A) has observed that taxability of sum in Dubai Bank account is beyond the jurisdiction of Indian tax authorities as the assessee is an NRI. Once it is clear and accepted by the Assessing Officer also that sums were sent to India from assessee’s (an NRI) foreign bank account in Dubai the provisions of DTAA are attracted. Hence,
6 Shri Sandeep Dhirajlal Dhakan the reasoning of the learned CIT(A) that sum in Dubai bank account are subject matter of taxation in Dubai and not in India is correct. Accordingly, we do not find any infirmity in the order of learned CIT(A). Hence, we uphold the same.
In the result, this appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 1.3.2022.