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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M.
These are the five appeals filed by the assessee against the combined order for Assessment Year 2001-02 to 2004-05 against the order of the ld CIT(A)-XXIX, New Delhi dated 11.08.2014 in case of the assessee which are preferred against the order passed by the ld AO, DDIT, circle- 3(1), International Taxation, New Delhi. The revenue has also filed the appeal for the Assessment Year 2003-04 in CIT (A). As these appeals are pertaining to the same assessee and the issue is similar for all the assessment Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) years, these appeals are heard together at the request of the parties and therefore, they are disposed of by this common order. 2. Grounds of appeal
for different years in case of the appeal of the assessee are as under:-
3. The assessee has raised the following ground of appeal in ITA NO. 5296/Del/2014 for the Assessment Year 2001-02:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the assessment order passed by Ld. AO without complying the mandatory conditions of section 147 to 151 of Income Tax Act, 1961 and reasons recorded are invalid in the eyes of law and reopening of the impugned case and framing of assessment orders are bad in law and beyond the jurisdiction of AO.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned ex-parte order passed by Ld. AO u/s 144 that too without assuming jurisdiction as per law and without giving adequate opportunity of being heard and without confronting the adverse material in department’s possession to the assessee in pursuance to The direction of Hon’ble Income Tax Appellate Tribunal and thus impugned assessment order is illegal and void ab initio being contrary to the directions of Hon’ble Income Tax Appellate Tribunal.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned assessment order which was framed by Ld. AO that too without complying with the direction of Hon’ble Income Tax Appellate Tribunal.
4. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the impugned assessment order which was framed by Ld. AO u/s 144 r.w.s. 143(3) and that too without complying with the directions of Hon’ble Income Tax Appellate Tribunal, more so when the assessee was non-resident Indian and was not assessable in India during the year under consideration and impugned amount was not chargeable to tax in India and without considering the evidences filed by the assessee and other material held on record and further erred in passing a non speaking order while upholding the addition made by Ld. AO.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs. 1,79,59,309/- on the ground that assessee has deposited amounts in various NRE Page | 2 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) account in India by treating it as taxable income for the impugned assessment year u/s 68 and that too without giving adequate opportunity of being heard.
6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in holding that interest accrued on FDR in NRE account is not exempt u/s 10(4)(ii) and has further erred in not grating, the benefit of exemption as per other provisions of the law.
7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment in violation of principles of natural justice and by recording incorrect facts and findings and without providing the entire adverse material and without proving the report of DIT(investigation)-II, Hyderabad in NRE account and without giving adequate opportunity of hearing to the assessee.
8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A and 234B of Income Tax Act, 1961.”
The assessee has raised the following ground of appeal in ITA NO. 5297/Del/2014 for the Assessment Year 2002-03:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the assessment order passed by Ld. AO without complying the mandatory conditions of section 147 to 151 of Income Tax Act, 1961 and reasons recorded are invalid in the eyes of law and reopening of the impugned case and framing of assessment orders are bad in law and beyond the jurisdiction of AO.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned ex-parte order passed by Ld. AO u/s 144 that too without assuming jurisdiction as per law and without giving adequate opportunity of being heard and without confronting the adverse material in department’s possession to the assessee in pursuance to The direction of Hon’ble Income Tax Appellate Tribunal and thus impugned assessment order is illegal and void ab initio being contrary to the directions of Hon’ble Income Tax Appellate Tribunal.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned assessment order which was framed by Ld. AO that too without complying with the direction of Hon’ble Income Tax Appellate Tribunal. Page | 3 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) 4. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the impugned assessment order which was framed by Ld. AO u/s 144 r.w.s. 143(3) and that too without complying with the directions of Hon’ble Income Tax Appellate Tribunal, more so when the assessee was non-resident Indian and was not assessable in India during the year under consideration and impugned amount was not chargeable to tax in India and without considering the evidences filed by the assessee and other material held on record and further erred in passing a non speaking order while upholding the addition made by Ld. AO.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs. 24,77,648/- on the ground that assessee has deposited amounts in various NRE account in India by treating it as taxable income for the impugned assessment year u/s 68 and that too without giving adequate opportunity of being heard.
6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in holding that interest accrued on FDR in NRE account is not exempt u/s 10(4)(ii) and has further erred in not grating, the benefit of exemption as per other provisions of the law.
7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment in violation of principles of natural justice and by recording incorrect facts and findings and without providing the entire adverse material and without proving the report of DIT(investigation)-II, Hyderabad in NRE account and without giving adequate opportunity of hearing to the assessee.
8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A and 234B of Income Tax Act, 1961.”
The assessee has raised the following ground of appeal in for the Assessment Year 2003-04:-
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the assessment order passed by Ld. AO without complying the mandatory conditions of section 147 to 151 of Income Tax Act, 1961 and reasons recorded are invalid in the eyes of law and Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) reopening of the impugned case and framing of assessment orders are bad in law and beyond the jurisdiction of AO.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned ex-parte order passed by Ld. AO u/s 144 that too without assuming jurisdiction as per law and without giving adequate opportunity of being heard and without confronting the adverse material in department’s possession to the assessee in pursuance to The direction of Hon’ble Income Tax Appellate Tribunal and thus impugned assessment order is illegal and void ab initio being contrary to the directions of Hon’ble Income Tax Appellate Tribunal.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned assessment order which was framed by Ld. AO that too without complying with the direction of Hon’ble Income Tax Appellate Tribunal.
4. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the impugned assessment order which was framed by Ld. AO u/s 144 r.w.s. 143(3) and that too without complying with the directions of Hon’ble Income Tax Appellate Tribunal, more so when the assessee was non-resident Indian and was not assessable in India during the year under consideration and impugned amount was not chargeable to tax in India and without considering the evidences filed by the assessee and other material held on record and further erred in passing a non speaking order while upholding the addition made by Ld. AO.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in sustaining the addition of Rs. 90,48,587/- out of total addition of Rs. 4,32,11,523/- on the ground that assessee has deposited amounts in various NRE account in India by treating it as taxable income for the impugned assessment year u/s 68 and that too without giving adequate opportunity of being heard.
6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in holding that interest accrued on FDR in NRE account is not exempt u/s 10(4)(ii) and has further erred in not grating, the benefit of exemption as per other provisions of the law.
7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment in violation of principles of natural justice and by recording incorrect facts and findings and without providing the entire adverse material and without proving Page | 5 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) the report of DIT(investigation)-II, Hyderabad in NRE account and without giving adequate opportunity of hearing to the assessee. 8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A and 234B of Income Tax Act, 1961.” 6. The assessee has raised the following ground of appeal in ITA NO. 5299/Del/2014 for the Assessment Year 2004-05:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the assessment order passed by Ld. AO without complying the mandatory conditions of section 147 to 151 of Income Tax Act, 1961 and reasons recorded are invalid in the eyes of law and reopening of the impugned case and framing of assessment orders are bad in law and beyond the jurisdiction of AO.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned ex-parte order passed by Ld. AO u/s 144 that too without assuming jurisdiction as per law and without giving adequate opportunity of being heard and without confronting the adverse material in department’s possession to the assessee in pursuance to The direction of Hon’ble Income Tax Appellate Tribunal and thus impugned assessment order is illegal and void ab initio being contrary to the directions of Hon’ble Income Tax Appellate Tribunal.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not quashing the impugned assessment order which was framed by Ld. AO that too without complying with the direction of Hon’ble Income Tax Appellate Tribunal.
4. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the impugned assessment order which was framed by Ld. AO u/s 144 r.w.s. 143(3) and that too without complying with the directions of Hon’ble Income Tax Appellate Tribunal, more so when the assessee was non-resident Indian and was not assessable in India during the year under consideration and impugned amount was not chargeable to tax in India and without considering the evidences filed by the assessee and other material held on record and further erred in passing a non speaking order while upholding the addition made by Ld. AO.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs. 1,13,34,144/- on the Page | 6 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) ground that assessee has deposited amounts in various NRE account in India by treating it as taxable income for the impugned assessment year u/s 68 and that too without giving adequate opportunity of being heard.
6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in holding that interest accrued on FDR in NRE account is not exempt u/s 10(4)(ii) and has further erred in not grating, the benefit of exemption as per other provisions of the law.
7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment in violation of principles of natural justice and by recording incorrect facts and findings and without providing the entire adverse material and without proving the report of DIT(investigation)-II, Hyderabad in NRE account and without giving adequate opportunity of hearing to the assessee.
8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A and 234B of Income Tax Act, 1961.”
The ld AO has raised the following ground of appeal in ITA NO. 5882/Del/2014 for the Assessment Year 2003-04:- “1. On the facts and in the circumstances of the case the ld CIT(A) has erred in deleting the whole of the addition of Rs. 2,44,77,845/- in Assessment Year 2003-04.
2. On the facts and in the circumstances of the case, the ld CIT(A) has failed to appreciate that an amount of Rs. 6518536/- out of addition of Rs. 2,44,77,845/- represents accrued interest income of the assessee out of addition of Rs. 2,44,77,845/- represents accrued interest income of the assessee that has already been held by him not exempt u/s 10(4)(ii) of the Income Tax Act, 1961 in the case of the assessee.”
8. We first state the facts of the case for AY 2001-02, render our decision thereon, and then apply the same to other assessment years. Assessee is an individual, a non resident who was earlier assessed for Assessment Year 2001-02 u/s 148 read with section 144 of the Income Tax Act, 1961, vide order dated 31.03.2006 passed by the DDIT, Circle-1(2), International Taxation, New Delhi determining the total income of the assessee of Rs. 1,79,59,309/-. The assessment order was framed Page | 7 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) pursuant to the reference from the DDIT (Investigation)-2, Mumbai, wherein, the photo copies of the various documents was forwarded, showing that the assessee has deposited huge sums in different bank accounts in different parts of the country (India) without any mandatory certificate of inward remittance or transfer from any existing NRE (non- resident external) account or FCNR deposits (Foreign Currency Non- resident Deposits). As the assessee has submitted form No. 60 before one of the corporative bank, it was clear that he is not assessed to tax in India. It was further declared by him that he is a Canadian citizen but he has shown his residential address in India at A-3, Greater Kailash, Part-1, New Delhi and B-5, Asola, New Delhi. Consequent to that, notice u/s 148 was issued on 07.07.2004 and several notices were issued on the addresses given. However, none attended before the ld AO, which resulted into passing of an exparte assessment order u/s 148 read with section 144 of the Act on 31.03.2006, determining the total income of Rs. 17959309/-.
9. The assessee challenged the appeal before the ld CIT (A)-XXV, New Delhi, who dismissed the appeal of the assessee on merits as the assessee failed to supply proper details or any satisfactory explanation to show the source of the money deposited in bank accounts.
10. The assessee challenged the same before the coordinate bench and coordinate bench set aside the whole issue vide order dated 27.04.2012 in ITA No. 53 to 56/Del/2012 for four Assessment Years back to the file of the ld AO, directing that it is necessary to have full facts on records as to how the funds were transferred to India what was the actual purpose of frequently moving the sums to different branch of different banks in different cities as such, it would be proper to restore the issue. Accordingly, the coordinate bench set aside the order of the ld AO, restored the issue back to the file of the ld AO with a direction to assessee with the material in possession with the department, and passes a speaking order on the objection, which the assessee may seek to file Page | 8 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) against the reopening. The assessee was granted an opportunity to file fresh evidence before the ld AO and the ld AO was directed to grant reasonable opportunity of hearing to the assessee. Consequently, the ld Assessing Officer passed order u/s 143(3) read with section 144 of the Act on 28.03.2014. During assessment proceedings, assessee was issued various notices, however, he did not respond and therefore, the ld Assessing Officer sought information from the Manager of Jai Hind Cooperative Bank, Global Trust Bank and Sri Labh Cooperative Bank. Notices were sent even to one of the banks also, which returned unserved. The Global Trust Bank replied that they could not get any detail of Mr. Subhash Mehta (assessee). The Jai Hind Cooperative Bank replied and submitted Xerox Copies of fixed deposit, ledger account and saving bank ledger account for financial year 2000-01 to 2003-04. It was also stated that bank is also under liquidation. The bank submitted documents containing hand written entries of various figures and narrations. There were several transactions in the bank account of the assessee and transfer of funds from one bank account to another bank. In response to the notice, assessee appeared once on 16.09.2013 and submitted incomplete information. Assessee was given further opportunity and assessee appeared on 13.12.2013 for adjournment, which was granted upto 16.12.2013. On the appointed date, the assessee did not appear but submitted a letter in the dak enclosing some photocopies of cheques. As assessee did not correlated these cheques with the bank account nor submitted any details of the source of the fund, and also did not avail any opportunity which was granted by ITAT , a final notice was issued to the assessee on 11.02.2014 but none appeared on that date. A further show cause notice u/s 144 was issued on 12.03.2014 and none appeared even in response to that. Therefore, the Assessing Officer did not have any option but to make the addition of Rs. 17959,309/- . such assessment order was passed on 28.03.2014.
Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) 11. Assessee filed an appeal before the ld CIT(A) wherein, assessee appeared along with his chartered accountant and the ld CIT(A) decided the appeal vide order dated 11.08.2014 for all the four years. The ld CIT (A) also noted that assessee stated before him that assessee does not have any business activity in India and is a non-resident; therefore, bank interest earned is exempt u/s 10(4) (ii) of the Act. The ld CIT (A) also noted that appellant sought to furnish some documents as additional evidence, which are photocopies of some of the fixed deposits receipts in Indian Bank. He sent these details to the ld AO for submission of the remand report and assessee submitted rejoinder to the remand report. The ld CIT (A) further held that, as it is a set aside matter and orders are required to be passed strictly in accordance with the direction of the coordinate bench and therefore, he did not admit the additional evidence furnished by the assessee. He granted partial relief of duplication of FDR, on renewal once again taxed by AO for AY 2003-04 but confirmed addition for all those years subject to deletion of double addition. On the merits he decided the issue for respective years as under:- “5.3 For AY 2001-02, the AO has made an addition of Rs. 1,79,59,309 as unexplained bank deposits in India. In this regard, the appellant has furnished a letter dated 02.11.2007 from The Jai Hind Cooperative Bank Ltd., Mumbai wherein it has been stated that fixed deposit (NR NR) a/c was opened on 03.04.2001 and the bank received remittance of deposit of Rs. 1,79,60,307 from HDFC bank, Hyderabad on a/c of Sh. Subash Mehta from his banker Charminar Cooperative bank, Hyderabad. The letter further says that this deposit was kept for 15 months carrying interest rate of 14% and on due date, the amount along with interest became Rs. 2,13,31,456. The maturity amount was again kept in a deposit for further period of 12 months at 14% interest rate and the amount on maturity became Rs. 2,44,77,845. 5.3.1 The appellant also furnished copy of letter dated 16.07.2004 of Addl.DIT (lnv), Unit-1, Hyderabad wherein result of enquiries in respect of amount of Rs. 1.79 crores belonging to Sh. Subash Mehta have been reported. This letter says that amount of Rs. 1.79 crores consisted of two components of Rs. 1,15,86,732 and Rs. 63,72,575. The first component consisted of fixed deposits of Rs. 1 Page | 10 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) crore and interest thereon of Rs. 15,86,732 with Charminar Cooperative Urban Bank Ltd., Hyderabad. The principal of Rs. 1 crore has flown from Tamilnadu Merchantile Bank, Hyderabad which intum has received the same from its New Delhi branch. Apparently, the funds constitute NR NR deposits held by Sh. Sanjay Mehta with New Delhi branch. The letter further says that second component consists of fixed deposit of Rs. 55 lakhs and interest thereon of Rs. 8,72,575 with Charminar Cooperative Urban Bank Ltd., Hyderabad. The principal amount of Rs. 55 lakhs is traced to have flown from Nedugadi Bank Ltd., Tuticorin. 5.3.2 The appellant has furnished another information according to which four fixed deposits each of Rs. 25,00,000 bearing no. 9175 to 9178 were made in name of Sh. Sanjay Mehta on 31.03.2000 at interest rate of 15% in Charminar Cooperative Urban Bank Ltd., Hyderabad and these were to mature on 31.03.2001. This information further says that amounts were received by Charminar Cooperative Urban Bank Ltd., Hyderabad from Tamilnadu Merchantile Bank, Hyderabad vide DD no. 023835 and maturity amounts were transferred by Charminar Cooperative Urban Bank Ltd., Hyderabad to account of Sh. Subash Mehta & Smt. Sunita Mehta in Jai Hind Cooperative Bank Ltd., Mumbai vide HDFC DD no. 728166. This information further says that there were two fixed deposits of Rs. 25,00,000 and Rs. 35,00,000 in name of Sh. Subash Mehta & Smt. Sunita Mehta in Charminar Cooperative Urban Bank Ltd., Hyderabad made on 31.03.2000 at interest rate of 15% and these were to mature on 31.03.2001. These amounts were received by Charminar Cooperative Urban Bank Ltd., Hyderabad from Nedugadi Bank Ltd., Tuticorin vide DD no. 52504 and maturity amounts were transferred by Charminar r ^operative Urban Bank Ltd., Hyderabad to account of Sh. Subash Mehta & Smt. Sunita Mehta in Jai Hind Cooperative Bank Ltd., Mumbai vide HDFC DD no. 728164. 5.3.3 The above information / details shows that amount of Rs. 1.79 crores has been transferred by Charminar Cooperative Urban Bank Ltd., Hyderabad to Jai Hind Cooperative Bank Ltd., Mumbai where it has been kept as fixed deposit on 03.04.2001. During the FY 2000-01 relevant to AY 2001-02 under consideration, fixed deposits of Rs. 1 crore and Rs. 55 lacs were lying with Charminar Cooperative Urban Bank Ltd., Hyderabad on which interest of Rs. 15.86,732 and Rs. 8,72,575 respectively has been earned. The appellant has simply contended that principal amounts represent NRE a/c and interest earned is therefore exempt u/s 10(4)(ii) of the Act.
Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) 5.4 For AY 2002-03, the AO has made addition of Rs. 24,77,648 which appears to be on account of interest accrued on fixed deposit of Rs. 1.79 crores. The appellant has contended that interest accrued during the period under consideration is not taxable as per section 10(4)(ii). 5.5 For AY 2003-04, the AO has made addition of Rs. 4,32,11,523 which appears to be on account of following deposits: (i) Maturity value of FDR : 2,44,77,845 (ii) Transfer of funds from Tamilnadu Merchantile : 71,03,587 Bank Ltd. to SBI Secunderabad (iii) Maturity value of FDR with Jai Hind Coop bank 86,85,091 (iv) FDR No. 484731 19,45,000 (v) Withdrawal of part proceeds of FDR No. 32503 10,00,000 5.5.1 In his remand report, the AO has accepted the contention of the appellant that Rs. 2,44,77,845 above represented FDR of Rs. 1.79 crores considered in AY 2001-02 plus interest accrued on it for subsequent years as the FDR was renewed on different occasions. Regarding withdrawal of Rs. 10,00,000 the AO has accepted contention of the appellant that it represented withdrawal and not deposit of amount. Regarding other amounts, the AO has submitted that the appellant has not explained the source of funds. 5 5 2 The appellant has submitted that amount of Rs. 86,85,091 represented maturity value of rDR of Rs. 63,72,575 held in Jai Hind Coop Bank considered during AY 2001-02. It appears that the AO has picked up this amount twice because maturity value of FDR of Rs. 1.79 crores which comprises Rs. 1,15,86,732 and Rs. 63,72,575) has already been considered in figure of Rs. 2,44,77,845 which has been added separately. Regarding transfer of funds from Tamilnadu Merchantile Bank Ltd. of Rs. 71,03,587, the appellant has submitted that it represented maturity amount of FDR. Regarding FDR of Rs. 19,45,000, the appellant has submitted that it is supported by SBI Secunderabad. 5.6 For AY 2004-05, the AO has made addition of Rs. 1,13,34,144 which appears to be on the basis of following fixed deposits with state bank of India: Page | 12 Subhash Mehta Vs DDIT ITA No.5296 to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) SNo. FDR No. Amount Date Maturity Date Interest Rate 484742 32,34,144 25.07.2003 04.08.2004 3.7% 1 484739 25,00.000 21.07.2003 04.08.2004 5% 2 3 484736 11.07.2003 04.08.2004 5% 26,00,000 4 484732 30,00,000 04.07.2003 04.08.2004 5% The appellant has furnished photocopies of such FDRs. The AO has reasoned has reasoned that the appellant has not explained source of these funds. 5.7 The basic issue involved in all these present appeals is whether the source of various fixed deposits held by the appellant is explained from NRE a/c and whether interest accrued on these fixed deposits is exempt u/s 10(4)(ii) of the Act which is reproduced as below: In the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 and rules made thereunder: Provided that such individual is a person resident outside India as defined in clause (q) of section 2 of the said Act or is person who has been permitted by the Reserve Bank of India to maintain aforesaid account 5.8 The appellant has attempted to explain the source of fixed deposits considered by the AO in initial AY 2001-02 and other subsequent years. However, the appellant has not furnished any evidence regarding any NRE a/c from which various fixed deposits have been made. The appellant has not furnished copy of such NRE a/c if there was any. Accordingly, the source of various FDRs remained unexplained and consequently even interest accrued on such FDRs is not exempt u/s 10(4)(ii). Despite clear direction of Hon’ble ITAT, the appellant could not substantiate his claim with any evidence regarding repeated shifting of funds from one bank to another. The appellant has simply contended that funds were transferred to a bank where he would get more interest but this contention remained substantiated. 5.9 In view of discussion supra, I uphold the addition made by the AO for AY 2001-02, 2002-03 and 2004-05. For AY 2003-04, the Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) appellant shall get relief for Rs. 2,44.77,845, Rs. 86,85,91 and Rs. 10,00,000 as discussed in para 5.5.1/5.5.2 supra.”
In the result, he upheld the addition for AY 2001-02, 2002-03 and 2004- 05, whereas, for AY 2003-04 he granted the relief to the assessee on account of maturity value of the FDR which are renewed. The assessee and revenue both aggrieved with the order of the ld CIT (A) are in appeal before us.
The ld Authorised Representative vehemently submitted that the ld CIT (A) should have admitted the additional evidence submitted by the assessee. He further referred to page No. 27 of the paper book, which is the detail of Charminar Cooperative Urban Bank Ltd, which shows the details of the fixed deposits of assessee and others in NRNR (Non- repatriable nonresident fixed deposits). He submitted that the deposits are not falling into the period of Assessment Year for which addition has been made. He further referred to the various deposits in A/c No. 9175, 9176, 9177 and 9178 where the deposits of Rs. 25 lakhs each have matured on 31.03.2000. He further stated that the direction of the coordinate bench while deciding the original issue was that assessee was entitled to file fresh evidences. He therefore, submitted that the ld CIT (A) has committed grave error in not admitting the additional evidence and considering the issue on merits of the case. He even otherwise stated that if the investment is found to be not pertaining to the year then addition cannot be made in the hands of the assessee. He further referred to his submission made before the ld CIT (A) placed at page No. 24 to 26 of the paper book. He therefore, stated that addition could not be made in the hands of the assessee.
The ld Departmental Representative vehemently submitted that repeatedly assessee has been given opportunity but he is not submitting any details, therefore, the addition has rightly been made. The order of the ld CIT (A) was extensively read out to show that there is no infirmity in the same. It was further submitted the chart submitted by the Page | 14 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) assessee, which is placed at page 27 of the paper book, is an unauthenticated document and does not show that the deposit is made beyond the years involved in this appeal. He further referred to column 6 of the chart and stated that all the deposit stated in the chart is pertaining to the relevant period. He further submitted that even the chart submitted by the assessee is incomplete as at the bottom of the page “contd…2” was mentioned but there is no such page found even before ITAT. He therefore stated that assessee has not given complete details. He further referred to paper book for AY 2002-03 and 2003-04 to show that the assessee files no new details. He also vehemently stated that this is the second round of appeal before the coordinate bench and both the times the plea of the assessee was for another opportunity. He therefore, vehemently objected to the submission of the assessee. He further stated that the ld AO has made ample efforts but could not get the details from the assessee as well as the banks. He further stated that assessee himself is privy to the information and which assessee is not submitting despite many opportunities granted. He further read out the order of the ld Assessing Officer to show that how much effort AO has put in and how many opportunity has been given. In view of this, he submitted that the order of the lower authorities deserves to be confirmed.
We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly, the assessee is a Canadian citizen who has opened many bank accounts in India giving different addresses, depositing money into those bank accounts, and transferring the money from one bank account to another bank account without disclosing the reason of such transaction. The DIT (Investigation) found that assessee has deposited Rs. 1.79 crores in Jai Hind Cooperative Bank, Mumbai, Tamil Nadu Mercantile Bank, New Delhi, Nedungadi Bank Ltd, Tuticorin, Charminar Cooperative Bank Ltd, Hyderabad. The information was passed on to the respective assessing officer and there from Page | 15 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) assessment proceedings, commenced after issue of proper notices. In the original proceedings the assessee did not submit complete details and therefore, the addition was made and hence, he assessee preferred an appeal before ITAT and matter was set aside to the file of the ld AO vide order dated 27.04.2012. The coordinate bench granted liberty to the assessee to file fresh evidence and in view of that assessee submitted certain fresh evidences before the ld CIT (A) in appellant proceedings in the second round of litigation. The ld CIT (A) rejected the additional evidence stating that there is no such direction of the coordinate bench. However, we found that there is a specific direction for filing additional evidences. In view of this, we are of the opinion that the additional evidence filed by the assessee needs to be considered before deciding the issue. We are also concerned about the approach of the assessee in not furnishing details at the right time before the revenue authorities. The assessee has submitted additional evidence but that too are incomplete. It is further true that it is for the assessee to show that the investment made by the assessee are from known sources of income and no burden can be put on revenue when assessee is not forthcoming with adequate details. If the fixed deposits are claimed to be falling beyond the financial year in which the addition is made, it is for the assessee to show it with proper and reliable evidence. The details submitted the assessee as additional evidence makes also incomplete and not providing information about the fixed deposit by the assessee. It is further apparent that before the ld Assessing Officer assessee has not submitted these evidences at all. Further, the evidences that were submitted as mentioned by the ld Assessing Officer in assessment order on 16.12.2013 is also to be reconciled by the assessee. The onus is squarely on the assessee to show that the fixed deposit receipts for which addition has been made is not required to be added in his hands. Further, according to the direction of the ITAT assessee has not at all challenged reopening proceedings before ld AO, therefore, the valuable opportunity granted to him was also not Page | 16 Subhash Mehta Vs DDIT to 5299/Del/2 (revenue) (Assessment Year: 2001-02 to 2004-05) availed, and therefore now the sole issue is with respect to the merit of the addition. In the result, we set aside the issue back to the file of the ld Assessing Officer with a direction to the assessee to submit the details whatever he wants to submit before the ld AO with respect to investment in fixed deposits as well as other deposits for which addition has been made. We direct the assessee to appear before the ld AO within three months of the date of this order with complete details of the information on which he would like to rely up on. The ld AO may decide the issue based on information submitted by the assessee. Ld AO may make any inquiry, which he may feel necessary after granting opportunity of hearing to the assessee. Before parting we also state that We are conscious of the facts that assessee has been given umpteen number of opportunities in this case but assessee is not forthcoming with the relevant details. These facts stare on the face of the records. However we are setting aside this issue to the file of the ld AO only for the reason that additional evidences submitted by the assessee were not considered and further assessee did not get an opportunity to substantiate the additional evidences. We are also conscious of the facts that assessee has been given umpteen number of opportunities in this case but assessee is not forthcoming with the relevant details. We held accordingly.
Accordingly, all the grounds on the merits of the addition are allowed with respect to addition are allowed with above direction. Further grounds relating reopening and other technical issues are dismissed as no objections have been raised on this count before the ld AO or CIT (A).
Accordingly, appeal of the assessee for Assessment Year 2001-02, 2002- 03, 2003-04 and 2004-05 are set aside to the file of the ld Assessing Officer.
Coming to the appeal of the revenue for Assessment Year, 2003-04 we find no infirmity in the order of the ld CIT (A) in deleting the addition of Rs. 24477845/- which is because of original FDR and accrued interest thereon which is already taxed in 2001-02. The deletion of Rs. 865091/- Page | 17