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Facts
The assessee, a non-resident individual, was subjected to reassessment proceedings for AY 2013-14 based on information regarding cash deposits and credit card payments aggregating to Rs. 42,57,319. The Assessing Officer reopened the case under Section 147 and made additions, treating these as unexplained money under Section 69A.
Held
The Tribunal held that while cash deposits amounting to Rs. 5,49,000 and Rs. 5,00,000 from East Delhi Finlease Co. were unexplained and thus taxable, the remittances of Rs. 25,07,984 from the assessee's foreign bank account were capital in nature and not taxable in India as per Sections 4 and 5 of the Income-tax Act. The credit card payments were also considered to be made from the already added amount.
Key Issues
Whether cash deposits and credit card payments made by a non-resident in their Indian bank account are taxable in India, and if remittances from a foreign bank account constitute income taxable in India.
Sections Cited
147, 144, 69A, 133(6), 148, 46A, 148A, 68, 69, 69A, 69B, 69C, 69D, 115BBE, 151, 144C, 153, 131, 4, 5
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Order PER LALIET KUMAR, J.M This appeal by the assessee is directed against the order dated 16/08/2023 passed by the Ld. CIT(A)-43, New Delhi, for the Assessment Year 2013-14, arising out of the reassessment order framed u/s 147 r.w.s. 144 of the Income-tax Act, 1961 (“the Act”).
Briefly, the facts of the case are that the assessee, a non-resident individual, was subjected to reassessment proceedings on the basis of information received by the Assessing Officer that cash deposits and credit-card payments aggregating to Rs. 42,57,319 were made in his Indian bank account during the relevant year. 2.1 The Assessing Officer reopened the case u/s 147 and made an addition of Rs. 42,57,319/-—comprising (i) cash deposits of Rs. 35,56,984 and (ii) credit-card payments of Rs. 7,00,335—treating them as unexplained money u/s 69A.
3. Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A), after calling for a remand report under Rule 46A, recorded the following findings (para 5.1 to 5.5 of the appellate order):
1. 5.1 From the perusal of the assessment order if it observed that the appellant is an NRI for the year under consideration and proceedings u/s 147 of the Act were initiated in this case based on an information wherein the appellant had deposited cash amounting to Rs 10,00,000/- on 20.02.2013 in his HDFC Bank account and had paid credit card bill worth Rs. 7,00,335/- on 31.03.2013 in this case, information was also sought u/s 133(6) from HDFC Bank, wherein it was reported that during the FY 2012-13, the appellant had made cash deposits and credit entries amounting to Rs.35,56,984/-. The appellant was served upon notice u/s 148 of the Act and several other statutory notices in addition to the show cause notice, which were never complied with by the appellant as per the assessment order. The AO after not getting any response from the appellant added the complete amount of Rs. 35,56,984/- as intimated by the HDFC Bank in compliance to notice under section 133(6) of the Act. In addition to the above mentioned amount, the AO has also added an amount of Rs. 7,00,335/- in lieu of credit card payments made by the appellant. Aggrieved with a total addition of Rs. 42,57,319/-, the appellant fled appeal before CIT(A) vide Form No. 35 dated 27.05.2022. 5.2 In view of the above facts, the grounds of appeal filed by the appellant were examined wherein the appellant has mainly contended that the Ld AD has erred in making addition to the tune of Rs. 42,57,319/- on account of cash deposited into bank account of the assessee and payment of credit card bills ignoring the fact that credit made in the account is from Income earned outside India. The ground-wise nearing of the main contentions is being discussed below after aggregating all the facts and circumstances of the case. 5.3 Taking cognizance of the gravity of the case, the grievances of the appellant were duly considered and the AO was asked to submit a remand report in response to the application under Rule 464 of the Income Tax Rules 1962 filed by the appellant. The remand report was received in this office vide letter no. JCIT(OSDI/intl. Txn./Chd/2022- 23/2853 (dated 13.01.2023 wherein it has been commented on the admissibility of additional evidences that the appellant's case does not fall in any of the four circumstances mentioned in Rule 46A(1) of the Income Tax Rules, 1962 and hence can't be admitted. In addition, it has also been reported in remand report that the appellant's plea that he had not received any notices can't be considered as the statutory notices were addressed to the address of the appellant already mentioned in the departmental records and alto adequate opportunities of being heard were provided to the appellant but none of them were responded by the appellant. Further, as per the comments on merits provided in the remand report, it is pertinent to mention here that the cash deposits amounting to 05,49,000/-till remain unexplained in the absence of any documentary evidence the credit entry dated 19.02.2013 amounting Rs. 5,00,000/- from East Delhi Finlease Co. to the appellant's bank account can't be ascertained as entry from the appellant's foreign bank account to his HDFC bank account and lastly the remaining transfer entries amounting to Rs 25,07,984/- also do not establish any direct nexus of these transactions with the Foreign tax Credit Statement (FTCS) with reference to the appellant's claim that due laxes have beady been paid by him on the aforementioned entries. 5.4 With reference to the above mentioned facts and circumstances of the case, the submissions fled by the appellant were examined meticulously including the rejoinder filed by the appellant against the remand report dated 13.01.2013. The analysis of the appellant's main contentions is as follows: Ground no.
1. That the Authorities below erred both in law and on the facts in issuing notice u/s 148 on the date mentioned le. 31.03.2021 in the notice, without having any reason to believe that the income has escaped assessment. The reason to believe has been specifically mentioned while framing the assessment order by the AO and hence appellant’s ground of appeal does not sustain here and this ground of appeal is dismissed. Ground no.
2. That the Ld AO erred in making addition to the tune of Rs. 42,57,319/-an account of cash deposited into bank account of the assessee and payment of credit card bills ignoring the fact that credit mode in the account is from Income earned outside India. With regard to the above ground of appeal a detailed discussion has already been made vide point no 53 of the Decision wherein based on the remand report and other material available on record it becomes pertinent to mention that out of an addition of Rs. 42,57,319/- the claim of the appellant for the amount of Rs. 35,56,984/- is not sustainable but at the same time the credit card bill payment of Rs. 7,00,335/can't be added to the income as this payment has been made out of the amount of Rs.35,56,984/- which has already been added to the income of the appellant. Hence, the addition of Rs.42,57,319/- is restricted to 35,56, 984/ only and the this ground of appeal is partly allowed. The appellant has contended through Ground no. 3 to 15 mainly about the procedural flaws during the assessment proceedings but after meticulously examining the material available on record. I find the assessment proceedings followed by the AO well within the limits and rules as provided in the statute of Income Tax laws being followed in India. Therefore, the grounds of appeal filed by the appellant don't have any base and hence dismissed. Ground nos 16 and 17 are general in nature and requires no adjudication, though appellant's pleas have been given due consideration while framing this order
55. With reference to the discussion made above it can finally be inferred that the claims made by the appellant with regard to the addition of Rs 35,56,984/-are not verified from the documentary evidences submitted and the remand report submitted by the AO and the addition of Rs.7,00,335/-on account of credit card bill payments can't be added as this amount has been paid out of the addition already made amounting to Rs.35,56,984/- Thus, the AO is directed to delete the addition of Rs 7,00,335/- made on account of credit card bill payment and restrict the final addition to Rs 35,56,984/ only. Therefore, appeal filed by the appellant is partly allowed.
4. Feeling aggrieved by the order of Ld. CIT(A) the assessee is in before the tribunal on the various legal and factual grounds as under:
1. That the jurisdictional LD.AO has erred, both in law and in facts, by assuming wrong jurisdiction in reopening the assessment, to issue notice under section 148, which is wholly without jurisdiction, thus reopening was bad in law and procedure, on all the parameters, laid down under the Act.
2. That the Id. AO erred both in law and on the facts in not complying with the mandatory provisions of law & procedure laid down u/s 147 to 153, in relation to both reopening u/s 148 and making reassessment, thus reassessment was bad in law and in procedure.
That notice u/s 148 dated 31.03.2021 was issued on 01.04.2021, therefore it would be governed by the re-assessment regime which came into effect on 01.04.2021, thus, assessment is not according to new procedure established by law.
That the Ld. AO has erred both in law and on the facts in not complying the mandatory provision of Sec 148A, since the notice u/s 148 dated 31.03.2021 was issued on 01.04.2021, thus reassessment was bad in law and in procedure.
5. That the order passed by LD.AO, was erroneous, illegal and against the principles of natural justice and equity as well as the well settled laws, thus reassessment was bad in law and in procedure.
6. That the LD. AO had erred, both in law and in facts, by taxing the income accrue outside India, without the mandate of law, thus reassessment was bad in law and in procedure.
7. That the LD. AO had erred, both in law and in facts, by not invoking any relevant charge as well as the mandate in relation to Sec 68/6969A/69B/69C/69D, thus taxing the total addition u/s 115BBE, was bad, both in law and in procedure.
8. That the jurisdictional LD.AO had erred, both in law and in facts, by not following the procedure laid down for reassessment under Income Tax Act, thus reassessment was bad, both in law and in procedure.
That the jurisdictional LD. AO had erred, both in law and in facts, by not issuing proper Show cause notice, to make addition and Impugned Assessment order travels beyond the scope of Show cause notice, thus the reassessment was bad, both, in law and in procedure.
The approval taken by Ld. AO from competent Authority u/s 151 of the Income Tax Act, was bad both in law and in procedure and Ld. CIT(A) has erred in law, in confirming the same.
That the Ld. AO has completed the assessment by just relying on the information received, has failed to conduct enquiry as required by the statute, was bad in law and in procedure and Ld. CIT(A) has erred in law, in confirming the same.
That the orders passed by below Authorities are also erroneous, illegal and against the principals of Natural Justice and Equity as well as against the well settled laws of the land.
The Ld. AR had at the outset submitted that the assessee is not pressing Ground No. 3 & 4 of the revised ground raised before the Tribunal. The Ld. AR had submitted that the notices sent by the Assessing Officer were on a wrong email id and he has drawn my attention to the pages 35, 38 and 50 of the paper book and submitted that the email address given in these pages was yshogya@gmail.com whereas the service was allegedly effected at sanjayranaca@gmail.com order. In view of the above it was submitted that since the service was not effected on the assessee therefore the order passed by the Assessing Officer is required to be quashed. 5.1 The Ld. AR had also drawn Bench attention to page 9 and page 1 of the paper book, and it was submitted that the authorities below have mechanically granted the approval under section 151 of the Act, and therefore the assessment is required to be quashed. For the above-said purposes, he relied upon the decision of the Delhi High Court placed at page 265, the ITAT Chandigarh decision at page 303. 5.2 The Ld. AR further submitted that the Assessing Officer made no inquiry before sending the notice under section 148 and the notices were send to the HDFC Bank at the last leg and therefore the assessment is required to be quashed.
5 5.3 The Ld. AR further submitted that there is a violation of provision of 144 C as the time limit provided under section 153 has not been adhere to by the Assessing Officer. 5.4 The Ld. AR had submitted that in the show cause notice that there is no mention of the charging provision in which the Assessing Officer sought to charge the assessee by making the addition. It was submitted that the requirements of Sections 68 to 69 B and 69C are different. The Ld. AR had further submitted that in view that there is no repeal and saving clause after insertion of the eligible assessee in section 144C(15), the assessment initially initiated under the old regime cannot be completed in the new regime and for the above-mentioned purposes, he relied upon the decision of Paypal of Bombay High Court. 5.5 Ld. AR had further submitted that the copy of the remand report had not been provided to the assessee on the application under Rule 46A by the Ld. CIT(A) and therefore the appellate proceedings are also required to be quashed.
After hearing the submissions of the Ld. AR the Bench has directed the Ld. DR to produce the record of service and to verify whether the notices were issued on the correct email id or not. The matter was adjourned at 2.00 pm on 12-11-2025. 6.1 At 2.00 pm the Ld. DR making the submission for the Revenue had drawn Bench attention to the statement of facts filed by the assessee reproduced by the Ld. CIT(A) at page 3 of his order. He more particularly drawn our attention to the following submissions:
Notice under section 148 of the Act was issued on 31.03.2021 but same was not received by the assessee as email id registered on the IT portal was that of the previous consultant, who never informed the same to the assessee. Also, No reasons recorded and approval from competent authority before issue of notice u/s 148 were provided to the assessee. No information was available with the Ld.AO at the time of initiation of proceedings u/s 147 of the Act.
2. The Ld.AO failed to conduct any inquiry under section 131/133(6) of the Act before issue of Notice u/s 148 of the Act. The Ld.AO has not applied his mind at the time of initiating proceedings u/s 147 of the Act, but has initiated assessment on the basis of borrowed satisfaction. Moreover, the Ld.AO has sought information from HDFC Bank by issuing notice u/s 133(6) on 25.11.2021,after issue of Notice u/s 148,which clearly proves that the Ld.AO has failed to follow the procedure laid down under the Act.
6 7 On the basis of the above facts the Ld. DR had submitted that the assessee has made a wrong and false submission before this Tribunal as the notices for section 148 and inquiry were duly served on the consultant and there was no failure on the part of the Revenue to serve the notices in accordance with law. This service of notices was duly admitted by the assessee in the statement of fact reproduced by the CIT(A). 7.1 The Ld. DR decide the above had submitted that the copy of the remand report. And it was submitted that the Remand Report was considered and thereafter the order was passed by the Ld. CIT(A). 7.2 The Ld. DR had submitted that the assessee has made a wrong submission before the Tribunal and therefore the assessee do not require any indulgence and leverage. 7.3 Being faced with the above-said situation, the Ld. AR had submitted that the order of the CIT(A) was cryptic and non-speaking and that the matter should be remanded back for fresh adjudication after providing the assessee a fair opportunity, and he is not pressing the legal grounds raised by the assessee . 7.4 The Ld. DR had submitted that the Ld. CIT(A) had already granted adequate relief and no interference was warranted. He had also submitted that the legal grounds are not sustainable in light of the assessee's submissions before the Ld. CIT(A).
8. I have considered the rival submissions and perused the orders of the authorities below. 8.1 In the present case, the Ld. CIT(A) has discussed the sequence of facts in paragraphs 5.1 to 5.5, and after considering the remand report, has restricted the addition to Rs 35,56,984 being unexplained cash deposits. Although it is the case before me that the remand report was not provided to the assessee by the Ld. CIT(A), the record of proceedings clearly indicates otherwise. The order of the Ld. CIT(A) itself, at paragraph 5.4, expressly records that the assessee had filed a rejoinder to the remand report, which was duly considered while deciding the appeal. Hence, the plea of non-supply of the remand report does not survive on facts.. 8.2 The Assessing Officer in the remand report has mentioned as under:
3.1 The assessee has produced additional evidence before your good self in the form of HDFC bank account statement showing the transfer entries and cash deposit entries against which explanation was sought during the course of assessment proceedings. The submission of the assessee was perused and it was found that assessee had made cash deposits of Rs. 5,49,000/- during the year under consideration. However, the assessee has not produced any detail of source/purpose of the said deposits with any documentary evidence before your good office. Thus, the deposits still remain unexplained. Further, the assessee, before your good office has submitted that other credit entries (Rs. 30,07,984/-) in his HDFC bank account relates to certain transfers made by him from his foreign bank account. Perusal of the HDFC bank account statement shows that out all the transfer entries (total amounting to Rs. 30,07,984/-), one credit entry dated 19.02.2013 amounting Rs. 5,00,000/- made from East Delhi Finlease Co. to the assessee's bank account. This entry cannot be ascertained as a transfer entry from assessee's foreign bank account t to his HDFC bank account. Also, although the remaining transfer entries (amounting Rs. 25,07,984/-, out of total transfer entries of Rs. 30,07,984/-) prima facie shows that these credit entries were made from some other bank account of the assessee to his HDFC bank account, perusal of Foreign Tax Credit Statement (FTCS) of the assessee does not establish the claim of the assessee that due taxes have been paid on these transfer entry amounts in the absence of evidence of direct nexus of these transactions with the FTCS. Against the credit card bills amounting to Rs. 7,00,335/-, the assessee has submitted that these entries were made to meet expenses. This can be verified from his HDFC bank account statement that these debit entries (bill payments) were made out of other credit entries made in his HDFC bank account. 8.3 Further, in the impugned order the Ld. CIT(A) recorded in para 5.4 of the CIT(A)’s order wherein it was mentioned as under:
5.4 With reference to the above mentioned facts and circumstances of the case, the submissions filed by the appellant were examined meticulously including the rejoinder filed by the appellant against the remand report dated 13.01.2013. The analysis of the appellant's mom contentions is as follows: Ground no. 1: That the Authorities below erred both in law and on the facts in issuing notice u/s 148 on the date mentioned i.e. 31.03,2021 in the notice, without having any reason to believe that the income has escaped assessment.
The reason to believe has been specifically mentioned while framing lhe assessment order by the AO and hence appellant's ground of appeal does not sustain here and this ground of appeal is dismissed.
Ground no. 2: That the Ld.AO erred in making addition to the tune of Rs. 42,57,319/-on account of cash deposited into bank account of the assessee and payment of credit card bills Ignoring the fact that credit made in the account is from income earned outside India. With regard to the above ground of appeal a detailed discussion has already been made vide point no. 5.3 of decision Wherein based on the remand report and other material available on record it becomes pertinent to mention that out of on addition of Rs.42.57,319/-, the claim of the appellant for the amount of Rs. 35,56,984/-is not sustainable but at the same time the credit card bill payment of Rs. 7,00,335/-can't be added to the income as this payment has been made out of the amount of Rs.35,56,984/- which has already been added to the income of the appellant. Hence, the addition of Rs.42,57,319/- is restricted to Rs.35,56,984/- only and this ground of appeal is partly allowed.
8 8.4 Before I deal with the issue on merits, At the very outset, I deem it appropriate to record my strong displeasure over the incorrect and misleading submissions advanced before the Bench regarding (i) service of notice and (ii) the filing of the remand report. Both assertions are demonstrably contrary to the material available on record. It is expected that the assessee as well as the Ld. AR shall, in future, exercise due care and restraint while making submissions before the Tribunal, and shall refrain from making statements which are inconsistent with the record. Any such lapses undermine the sanctity of the appellate proceedings and cannot be appreciated. 8.5 Having recorded the above, I have also carefully examined the contents of the remand report filed by the Assessing Officer and the supporting material placed on record. It is an admitted position that the assessee, being a non-resident during the relevant previous year, had transferred a sum of Rs. 25,07,984 from his foreign bank account maintained in the U.S.A. (as an NRI) to his HDFC Bank account in India. The remand report itself corroborates this fact. The assessee has also produced a copy of the U.S. income tax return and the corresponding assessment order, which evidences that the said amount has been duly offered for tax and assessed by the competent U.S. tax authorities. 8.6 Under Section 4 of the Income-tax Act, 1961, the total income of a person is chargeable to tax in accordance with and subject to the provisions of the Act. Section 5(2) further provides that in the case of a non-resident, only such income as is received or deemed to be received in India, or accrues or arises or is deemed to accrue or arise in India, shall be included in his total income. The impugned transfer represents the remittance of funds from an overseas account to an Indian account, being a mere movement of capital from one account of the assessee to another, and not an income that accrues or arises in India. Hence, such inward remittance cannot be taxed in India.In view of these facts, and applying the principles contained in Sections 4 and 5, I find no legal or factual basis to sustain the additions made in respect of Rs. 25,07,984 and the additions isaccordingly directed to be deleted. 8.7 With respect to the addition of Rs. 5,00,000/- it was noted in the remand report by the Assessing Officer “one credit entry dated 19.02.2013 amounting Rs. 5,00,000/- made from East Delhi Finlease Co. to the assessee's bank account.” The abovesaid credit 9 entry in the HDFC Bank account of the assessee have not been contradicted by the assessee and no evidence has been produced, in the rejoinder or in the evidence filed before the Ld. CIT(A) to prove the genuineness, creditworthiness and identity of M/s East Delhi Finlease Company. In view of the above, the assessee failed to explain the source of Rs. 5,00,000/- and therefore the Tribunal has no option but to sustain the addition of Rs. 5,00,000/-. 8.8 At this stage, it would be appropriate to record an important aspect. During the course of hearing, this Tribunal had indicated that the sum of Rs.5,00,000/– deserved to be deleted. However, while dictating and finalizing the order, it came to the notice of the Tribunal that the submissions of the assessee—namely, that (i) the remand report had not been received, and (ii) no rejoinder had been filed—were factually incorrect. 8.9 Upon perusal of the rejoinder referred by the Ld. CIT(A) in the order , it became evident that the findings recorded by the Ld. CIT(A) on this issue were duly supported by the material on record. Consequently, the view taken by the Ld. CIT(A) does not call for any interference and is liable to be upheld. 8.10 However, with respect to the cash deposits aggregating to Rs. 5,49,000, the assessee has failed to furnish any satisfactory explanation or documentary evidence either before the Assessing Officer, the Ld. CIT(A), or during the present proceedings. The Ld. Authorised Representative, in fairness, conceded that the assessee was unable to substantiate the source of the said cash deposits of Rs. 5,00,000/- and did not press this issue further. 8.11 Considering the above discussion and the settled legal position that only income accruing or arising in India can be taxed in the hands of a non-resident, I hold that the addition of Rs. 5,49,000 and Rs. 5,00,000/- on account of unexplained cash deposits and credit deserves to be confirmed, whereas the remaining additions aggregating to Rs. 25,07,984/-is to be deleted as they represent funds not taxable in India under the scheme of Sections 4 and 5 of the Act.
9. Accordingly, the addition of Rs.10,49,000 sustained by the Ld. CIT(A) is upheld and additions aggregating to Rs. 25,07,984/-is deleted.
10 10. The remaining legal grounds raised by the assessee—challenging the reopening u/s 147, procedural irregularities, and natural-justice issues—are not adjudicated, being academic in nature in the present factual context, and are left open to be decided in an appropriate case. The appeal of the assessee is partly allowed.
11. Order pronounced in the open Court on 17/11/2025. ( LALIET KUMAR) JUDICIAL MEMBER AG