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Facts
The assessee, an NRI, had his assessment reopened for AY 2016-17 due to unexplained time deposits totaling Rs. 55,31,348/-. While the AO accepted Rs. 10 lakhs, the balance Rs. 45,31,348/- was added as unexplained investment under Section 69 despite the assessee's claim that the funds were from NRE accounts and auto-renewed FDs. The DRP upheld the addition, citing a lack of conclusive evidence.
Held
The Tribunal observed contradictory claims regarding the submission of evidence. It found that the assessee had furnished bank certificates and statements supporting the auto-renewal of existing FDs and the source of new deposits from NRE funds. Therefore, the case was remitted to the Assessing Officer for fresh verification of the submitted evidence and a decision in accordance with the law, with directions to delete the additions if the source is explained.
Key Issues
Whether the assessee, an NRI, adequately explained the source of time deposits in his NRE account, particularly those claimed as auto-renewed or transferred from outside India, or if they constitute unexplained investment under Section 69 of the Income Tax Act.
Sections Cited
147, 144C(13), 144C(5), 148, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
ORDER PER MANJUNATHA G. :
This appeal has been filed by the assessee against the Final Assessment Order dated 15.01.2025 passed by the Income Tax Officer [International Taxation]-1, Hyderabad u/sec.147 r.w.s.144C(13) of the Income Tax Act, 1961 [in short “the Act”] in pursuance to the Directions dated 23.12.2024 of the Disputes Resolution Panel-1, Bengaluru passed u/sec.144C(5) of the Income Tax Act, 1961.
2 ITA.No.329/Hyd./2025
Brief facts of the case are that, the assessee Shri Mohd. Younus, is an NRI and has not filed his return of income for the assessment year 2016-2017. In this case, there is an information on record, which suggest that, the assessee has made time deposits aggregating to Rs.55,31,348/- in bank and the source for the same is remained unexplained. Therefore, the assessment has been reopened under section 147 of the Income Tax Act 1961 and notice under section 148 of the Act dated 27.03.2023 was issued and served on the assessee. The assessee has filed his return of income in response to notice under section 148 of the Act on 26.04.2023 declaring total income of Rs.4,07,690/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer called-upon the assessee to file relevant evidences in support of source of income for the time deposit with banks. In response, the assessee submitted that, he is an NRI working at Saudi Arabia during the financial year relevant to assessment year under consideration and the source for time deposit of Rs.55,31,348/- in his State Bank of India is,
3 ITA.No.329/Hyd./2025 out of funds remitted from outside India. To this effect, the assessee has filed proof of NRI status, copy of ITR and salary certificate and also Non-Resident External [in short “NRE”] Bank account statement. The Assessing Officer, after considering relevant submissions of the assessee, accepted the source of time deposit of Rs.10 lakhs made on 27.04.2015 and 23.02.2016. However, the source for balance time deposit of Rs.45,31,348/- treated as unexplained investment under section 69 of the Act because, the assessee could not explain the source.
Aggrieved by the draft assessment order passed by the Assessing Officer, the assessee filed his objections before the Disputes Resolution Panel-1, Bengaluru and filed relevant details including date of account opening of time deposits, subsequent auto renewal by the bank along with the certificate from the bank and also relevant Bank account statement and submitted that, these time deposits were opened on various dates in earlier financial years and the same has been subsequently renewed by the bank upon completion of the period. Further, this fact has been 4 ITA.No.329/Hyd./2025 explained to the Assessing Officer by filing all the details. The DRP vide Directions dated 23.12.2024 issued under section 144C(5) of the Act, rejected the objections filed by the assessee on the ground that, although, the assessee claims to have explained source for time deposit of Rs.45,31,348/- out of auto renewal of earlier accounts, but, the assessee has failed to provide a conclusive and corroborative evidence to substantiate this assertion. Although, the assessee submitted NRE bank statement, but, no clear linkage or audit trail was established to demonstrate that, the alleged auto renewals were sourced entirely from earlier funds and thus, rejected the objections filed by the assessee.
The Assessing Officer, in pursuance to the Directions of the DRP issued under section 144C(5) of the Act, has passed Final Assessment Order under section 147 r.w.s. 144C(13) of the Act on 15.01.2015 and determined the total income at Rs.49,39,038/- by making addition of Rs.45,31,345/- towards time deposits as explained investment under section 69 of the Income Tax Act, 1961.
5 ITA.No.329/Hyd./2025
Aggrieved by the Final Assessment Order passed by the Assessing Officer, the assessee is now, in appeal before the Tribunal.
CA, Y V Bhanu Narayan Rao, Learned Counsel for the Assessee, referring to the paper book filed by the assessee submitted that, State Bank of India, Gunfoundry Branch, Hyderabad has issued a Certificate and specified the time deposit account number, date of deposit, subsequent transaction date, amount of TDR and balance as on the date. As per the details submitted by the bank, out of 6 TDR accounts, 5 accounts are auto renewed on existing TDR account, which were opened in earlier financial years and renewed during the financial year 2015-2016 relevant to assessment year 2016-2017. The remaining one account was opened on 27.04.2015 for Rs.5 lakhs and the source for the same is, out of funds transferred to NRE account on 20.04.2015. The assessee has filed relevant Certificate issued by the bank with corresponding particulars of TDR account and also bank statements. Therefore, he submitted that, although, the assessee has 6 ITA.No.329/Hyd./2025 filed all these details, the DRP without considering the relevant details, has simply rejected the objections filed by the assessee and the Assessing Officer, on the basis of DRP directions, has made addition. Therefore, he submitted that, the addition made by the Assessing Officer should be deleted.
Shri B Bala Krishna, learned CIT-DR for the Revenue, on the other hand, supporting the Directions of the DRP, submitted that, before the Assessing Officer the assessee has filed only NRE bank account statement without any particulars as to date of TDR and subsequent renewal and corresponding source for said deposit by filling relevant bank statements. On the basis of observation given by the DRP, it is very clear that, the assessee could not file relevant particulars to prove its case that, these deposits are auto renewal of earlier deposits. The DRP after considering the relevant facts, has rightly sustained the addition made by the Assessing Officer. Therefore, the directions of the DRP and the Final Assessment Order passed by the Assessing Officer pursuant to the Directions of the DRP
7 ITA.No.329/Hyd./2025 should be upheld. The learned DR further, in the alternative arguments submitted that, since, now the assessee has filed relevant details and the same were not filed before the Assessing Officer, the matter may be remitted back to the file of Assessing Officer for further verification and to decide the issue in accordance with law.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that, the assessee is an NRI and is working in Saudi Arabia for the financial year 2015-16 relevant assessment year 2016-2017. It is also not in dispute that, the assessee has made TDR in SBI, out of funds available in NRE account. It is an admitted fact that, for NRE account, funds can only be transferred from outside India. In otherwords, whatever funds available in NRE account, is out of income earned from outside India or funds remitted from outside India. Therefore, it is necessary for us to examine the claim of the assessee towards source for TDR account in SBI in 8 ITA.No.329/Hyd./2025 accordance with law with respect to residential status of the assessee and NRE bank account statement.
Admittedly, there are 7 TDR accounts in SBI Gun foundry Branch, Hyderabad. Out of 7 TDR accounts, the Assessing Officer has accepted 1 account opened on 09.10.2015 for Rs.10 lakhs. In otherwords, out of total term deposit amount of Rs.55,31,348/-, the Assessing Officer has accepted source for Rs.10 lakhs and the balance amount of Rs.45,31,348/- has been treated as unexplained. The assessee has filed one Certificate from the bank on all 7 TDR accounts, which contains account number, date of opening TDR account, subsequent transaction date, TDR amount and balance lying in the account. Out of 6 accounts, serial numbers 1, 2, 4, 5 and 6 are opened in earlier financial year and the same has been auto renewed during the financial year relevant to assessment year under consideration. This is evident from the Certificate issued by the Bank with corresponding transaction dates. Therefore, in our considered view, the assessee is able to explain the source for 5 TDR accounts, out of funds transferred from 9 ITA.No.329/Hyd./2025 outside India to NRE account maintained with SBI, which is the source for TDR account opened in SBI. The assessee had also opened 1 more account on 27.04.2015 for Rs.5 lakhs. The source for the above account is, transfer of funds to NRE account on 20.04.2015 which is evident from the relevant Bank account statement issued by the Bank, where, immediately after receipt of funds in NRE account, a sum of Rs.5 lakhs has been transferred to TDR account. From the above, it is undisputedly clear that, the assessee is able to explain the source for TDR account, out of funds transferred from outside India into his NRE account and thus, in our considered view, the assessee is satisfactorily explained the source with relevant evidences. However, the fact remains that, going by the observations of the Assessing Officer and the DRP, it is difficult to ascertain, whether the assessee has filed these details before the Assessing Officer or not ? Going by the evidences filed by the assessee, there is no dispute with regard to the fact that, the assessee is able to explain the source with relevant evidences, whereas going by the observations of the DRP,
10 ITA.No.329/Hyd./2025 the assessee has not filed relevant details. Since, the facts are contradictory, for the limited purpose of verification of these evidences, the issue needs to be set-aside to the file of Assessing Officer. Thus, we set-aside the issue to the file of jurisdictional Assessing Officer [JAO] and direct the Assessing Officer to verify the issue in accordance with law, in light of our discussion given hereinabove on the issue of additions made towards time deposit accounts for Rs.45,31,348/-, in light of various evidences filed before us and delete the additions made under section 69 of the Income Tax Act, 1961.
In the result, the appeal of the Assessee is allowed for statistical purposes.
Order pronounced in the open Court on 18.07.2025.