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Facts
The assessee, an NRI, did not file a return for AY 2011-12. The AO reopened the assessment under Section 148 after discovering the assessee's significant land purchases and subsequently made an ex-parte addition of Rs. 1,62,28,000/- under Section 69, which the CIT(A) upheld. The assessee contended the funds were tax-paid income from Portugal transferred to India.
Held
The Tribunal held that the service of notice under Section 148 to the assessee's last known Indian address was valid as the assessee had not updated his non-resident status or address. However, the addition under Section 69 was set aside and remanded to the AO for fresh adjudication, allowing the assessee to provide evidence of the source and transmission of funds from Portugal.
Key Issues
1. Validity of Section 148 notice service on an NRI at his last known Indian address. 2. Justification of addition under Section 69 for unexplained investment where funds are claimed to be tax-paid foreign income.
Sections Cited
148, 133(6), 143(2), 142(1), 69, 144, 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
the order of the Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 13.07.2021 passed for assessment year 2011-12. The assessee has taken 17 grounds of appeal, which are not in consonance with Rule 8 of ITAT Rules, 1963. They are descriptive and argumentative in nature.
ITA No.279/CHD/2021 A.Y.2011-12 2
In brief the grievance of the assessee revolves around two issues, namely ;
a) The ld. CIT(A) has erred in confirming the action of AO vide which assessment was reopened by issuance of a notice under Section 148 of the Income Tax Act.
It is pertinent to submit that notice under Section 148 was not properly served upon the address of the assessee who happens to be a NRI. b) The ld. CIT(A) has erred in confirming the addition of Rs.1,62,28,000/- with the aid of Section 69 of the Income Tax Act.
The brief facts of the case are that assessee did not file return of income. It came to the notice of AO that assessee has purchased two pieces of land namely; 15 Kanal 11 ½ Marla situated in the revenue estate of village Bihran, District - Garhshankar and 71 Kanal 17 Marla situated in the revenue estate of Padrana. The consolidated amount spent by the assessee on purchase cost + Stamp Duty and other expenses have been worked out by the AO at Rs.1,62,28,000/- ( Rs.1,53,000/- + Rs.9,18,000 Stamp Duty + Rs.10,000/- Miscellaneous Expenses ). In order to verify this financial transaction, a letter was sent to the assessee A.Y.2011-12 3 on 12th September, 2017. Subsequently, an approval was taken from the competent authority and notice was sent under Section 133(6) of the Income Tax Act, but all these notices were not replied by the assessee nor he filed the return for this year. Therefore, on 30.03.2018, ld. AO has issued a notice under Section 148 of the Income Tax Act vide which the assessment of the assessee was reopened. This notice remained un-replied. However, the neighbour of the assessee Shri Paramjeet Singh informed the AO that assessee is a non-resident. He is resident of Portugal and he has given his address which read as under :
“RUA FERREORA DE CASTRO N2396 ID 1950-134 LOSBOA PORTUGAL
He requested the AO to send future notices to the assessee on his Portugal address. Since assessee did not file return of income, therefore, no notice under Section 143(2) was issued because Section 143(2) contemplates that assessee is to be given an opportunity what he wants to say in support of his return. This notice is to be given within statutory time limit provided under the Section but in case no return has been filed by the assessee, then straight away assessment machinery is set to be in A.Y.2011-12 4 motion by issuance of a notice under Section 142(1). The assessee was directed to explain the source of investment which according to the AO, not explained by the assessee because he has framed an ex-parte assessment order and he made the addition of Rs.1,62,28,000/- as unexplained income of the assessee under Section 69 of the Income Tax Act. This assessment order was passed on 12.12.2018 under Section 144 read with Section 147 of the Income Tax Act.
Dissatisfied with the assessment order, the assessee carried the matter in appeal before the CIT(A). It was contended by the assessee that he is assessable to tax in Portugal and he has tax paid money which has transmitted to India and out of that money, these purchases have been made. In support of his contention, he filed certified copies of the bank statements. However, ld. CIT(A) was not satisfied with the nature and quantum of evidence produced by the assessee. He concurred with the Assessing Officer.
Before us, ld. Counsel for the assessee emphasized that notice under Section 148 of the Act ought to have A.Y.2011-12 5 been issued on the address of the assessee in Portugal.
The AO has committed an error by affixing the notice on the last known address of the assessee in India.
With the assistance of ld. Representative, we have gone through the record carefully. We find that notice was sent by the AO on the address mentioned in the PAN of the assessee which is his last known address in India. The assessee has never intimated that his PAN be changed and he be exclusively treated as non-resident. It is the duty of the assessee to explain that transaction of investment done by him. Thus, AO has sent the notice to the last known address in India which has duly been recognized by the assessee also because his neighbour has sent back copies of those notices to the AO and apprised the AO about his latest address in Portugal. Copies of these letters are available at page No. 35 and 36 of the Paper Book. Therefore, as far as service of notice under Section 148 is concerned, we do not find any merit in the contention of ld. Counsel for the assessee. The more specific reason is that not only this notice was sent on the last date i.e. 30.03.2018 but in 2017 also, AO has been sending the letters for making an enquiry about the A.Y.2011-12 6 transaction but nothing was replied by the assessee nor he was apprised by his neighbour or relatives about such enquiries.
So far as the addition of Rs.1,62,28,000/- is concerned, we find that assessee has filed copies of the Sale Deed and thereafter photo copies of certain cheques which have been issued from the NRI Account with Axis Bank. After looking to the evidence submitted by the assessee, we deem it appropriate to set aside both the orders and restore this issue to the AO for fresh adjudication because if assessee has sufficient sources of income in Portugal which is a tax paid income in that country, it is an income available to the assessee for using anywhere. He has transmitted that money in India and purchased the land. A complete chain is required to be established by the assessee exhibiting the fact when this income was available to him in Portugal, how he has transmitted the income in India. He would submit a complete detail, date-wise exhibiting all such aspects and thereafter demonstrate a co-relation between the investment vis-à-vis source of funds. The AO would provide him due opportunity for hearing and the assessee A.Y.2011-12 7 will be at liberty to submit any detail for explaining the source of investment. Thereafter, the AO will decide the issue in accordance with law.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on 24.01.2025.