Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The above titled four appeals have been preferred by the Revenue against the orders dated 15.06.2016, 28.10.2016 08.08.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2006-07 & 2007-08.
(A.Y. 2006-07) 2. The grounds raised by the Revenue are as under:
2 & ors. Smt. Bhatia Pushpa Khimji “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the addition of Rs. 2,33,92,362/- being the peak balance lying in the applicant's HSBC Private Bank (Suisse) SA, Geneva made by the AO.
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is agreeing to the contention of the Assessee that it is fabricated/manufactured data with some malafide intention, and has ignored the fact that the assessee did not give any evidence/proof in this regard.
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A)has erred by ignoring the decision of the Hon'ble Bombay High Court in Writ Petition (L) No. 3172 of 2015 in the case of Soignee R. Kothari Vs. DCIT, Central Circle-8(3), Mumbai wherein it was held that "In the normal course of human conduct if a person has nothing to hide and serious allegations/questions are being raised about the funds a person would make available the documents which would put to rest all questions which seem to arise in the mind of the Authorities. The conduct on the part of the Petitioner and her uncle, in not being forthcoming, to our mind leads us to the conclusion that this is not a fit case where we should exercise our extra ordinary writ jurisdiction and/or interfere with the order passed by the authorities under the Act. If a person has nothing to hide, we believe the person would have co-operated in obtaining the Bank Statements. " Which squarely applies to the present case of the assessee.
4. The Ld. CIT(A) has also ignored the provisions of Section 114 of the Indian Evidence Act, 1872 which reads as under and amply applies to the case of the assessee:-
"Section 114. Court may presume existence of certain facts –
The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case.
The Court may presume – .... (g) That evidence which could be and is not produced would, if produced be unfavorable to the person who withholds it...... " Section 114(g) of The Indian Evidence Act, 1872, thus clearly says that the courts can presume existence of certain facts if the person liable to produce evidence which could be and is not produced, which if produced would have been unfavourable to the person who withholds it.
5. The appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored.
6. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.
3 & ors. Smt. Bhatia Pushpa Khimji 7. The Appellant prays that the order of the Id. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored. 8. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
3. The only effective issue raised by the Revenue in the various grounds of appeal is against the deletion of addition of Rs.2,33,92,362/- by Ld. CIT(A) as made by the AO on the basis of peak balance lying in assessee’s HSBC Private Bank, (Suisse) SA, Geneva.
The facts in brief are that the Government of India received information from French Government under DTAA in exercise of its sovereign powers that some Indian nationals and residents have foreign bank accounts in HSBC Private Bank, (Suisse) SA, Geneva which were undisclosed to the Indian taxation department. The said information was received in the form of base note wherein the various details of account holders such as name, date of birth, place of birth, residential address, nationality, along with date of opening of bank account and balance lying therein were mentioned. In the case of the assessee also a base note was received. Thereafter, these information/details were passed on to the AO. The AO after receiving the informations from DIT(Inv.) 2, Mumbai issued notice under section 148 of the Act dated 12.03.2015 after obtaining the approval from the Joint CIT, Mumbai after recording reasons to believe that income of the assessee to the tune of amount appearing in the said bank account has escaped assessment. Accordingly, notice under section 148 of the Act was issued to the assessee. The assessee is a non resident in India. The assessee during the assessment proceedings
4 & ors. Smt. Bhatia Pushpa Khimji submitted that assessment for the instant year has become barred by limitation under section 149(1) of the Act and provisions of section 149(1)(c) do not apply to the assessee as he is a non resident for the last 40 years and submitted the various documents as desired by the AO such as copy of the passport, copy of bank account of HSBC, Geneva, proof of not having any taxable income in India, address of the assessee in India etc. However, the AO did not find the reply of the assessee as acceptable and came to the conclusion that assessee has not filed any proofs of money deposits in her foreign account with HSBC Private Bank, (Suisse) SA, Geneva and the assessee has failed to offer any explanation of the sources of deposit made in her bank account abroad. Finally, the AO treated the peak amount appearing in HSBC bank account in A.Y. 2006-07 Rs.2,33,92,362/- by converting the same at $44.23 USD.
In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee after taking into consideration the submissions of the assessee. The submissions of the assessee are reproduced below: “2.2: During the appellate proceedings, assessee's CAs in their submissions have submitted as follows:
"5.1 The appellant is about 72 Years old non-resident India staying Muscat, Sultanate of Oman. She was married to late Mr.NarendraKhimji on 12.2.1966. He was carrying on business of construction and had made various investments and held various bank accounts in Muscat and other countries. Mr.NarendraKhimji expired on 15.7.1988 at Houston. USA and all the properties held by him were inherited by the appellant as per will executed on 5.7.1988.
5.2 The time allowed by the learned Assessing Of/leer was very short. The first notice u/s. 142(1) of the Act calling for information was issued on 12.3.2015 and the second notice on 27.3.2035. The appellant being non- resident was not in a position to collect and furnish before the learned Assessing Officer within the stipulated time. Ultimately he completed the 5 & ors. Smt. Bhatia Pushpa Khimji assessment on 31.3.2015 treating the peak amount appearing in the HSBC bank account as income of the appellant purely on the basis of presumption and conjecture.
5.3 The appellant opened the bank account No. 10388171 in Zurich Branch of HSBC on 13.8.2004 and transferred USD 704220.28 to this account on redemption of fixed deposits with ANZ Grind lays Bank. Jersey, which are as under: Fixed deposit No. Date of deposit Last Dale Maturity Amount of maturity
1229187-102 18.1.1990 15.9.2004 USD87,094.50 122918^-101 3.1.1990 30.9.2004 USD 1,68,224. 23 122918^-103 29.12.1989 29 11.2004 USD 4,48,901. 55
It may kindly be noted that the' aforesaid fixed deposits were made out of funds available from the husband of the appellant, late Shri Narendra J. Khimji. In this regard, copies of statements showing the details of date of initial deposit, date of periodical maturity, interest credited on the date of maturity, and any withdrawals, in respect of the aforesaid three FD account are enclosed ax Annexure A. Further, copies of confirmation of fixed deposits issued by ANZ Grindlays Bank, Jersey are also enclosed as Annexure B.
5.4 The appellant, as stated above, is non-resident and it is only her income which is received or accrued or arising in India which can be brought to tax under the I. T. Act. It is submitted that the appellant has neither earned nor has any income or income arisen or accrued to her in India. The source of deposits made in the HSBC account constitutes on maturity of redemption of various FDs narrated above, further, the appellant was not allowed to carry on any business in Muscat as per law prevailing there. On the other hand, it is for the learned Assessing Officer to establish that any income had. in fuel. accrued or arisen to the appellant in India. The appellant submits that she has no source of income, directly or indirectly, through or from (a) business connection in India, (b) property, asset, or source of income in India, (c) transfer of capital asset situated in India. Therefore, the question of any income deemed to accrue or arise in India to the appellant in terms of the provisions of Section 9 of the I. T. Act does not arise at all.
5.5 The learned Assessing Officer, merely on the basis of information that the appellant had account in HSBC Bank, has come to the conclusion that too within 18 days, that the peak amount of USD 528880 is sourced from India and hence the income of the appellant. The learned Assessing Officer has not made any independent investigation on his own nor found any 6 & ors. Smt. Bhatia Pushpa Khimji amount being sourced from India. In the absence of any such finding, there is no justification for the learned Assessing Officer that the peak amount in the hank account represents the income of the appellant. The appellant having stayed only 55 days in India during the F.Y. 2005-06 relevant to the Asstt. Year 2006-07 or stayed 365 days or more during the four preceding previous years. On this count also, she cannot be held to be a resident in India. On the other hand, the appellant has established that she is a non- resident and that the deposits in the Bank account with HSBC is from redemption of various F.Ds in ANZ Grindlays Bank, the investment of which were made by her from the money inherited by her from her husband on his death. "
Thereafter, the Ld. CIT(A), after taking into account the above submissions and contentions of the assessee, allowed the appeal of the assessee by observing and holding as under: “As regards Ground Nos. 4 &5, the crux of the matter emerging from the above details is that the AO relied on the information in the Base Note and reopened the assessment on the belief that the assessee did not show the balance of USD 528880 which was in the bank account of HSBC and did not file the Return of Income for the A.Y.2006-07. The Assessing Officer further believed that the accumulated balances were earned from India as the assessee was not permitted to undertake any employment abroad and this fact got strength from the perusal of passport which revealed that during the F.Y.2005-06 relevant to A.Y.2006-07 the assessee had made frequent visits to India and completed the re-assessment by holding that the source of the funds for the deposit of US Dollars 704220.28 on 30/11/2004 were relatable to a source in India and a discretionary trust was made by the assessee from sources in India and also had a source in India and assessed the total income at Rs.2,33,92,362/-only on the basis of a copy of Base-Note received from the Government sources. First notice under section 148 of l.T.Act, 1961 was issued on 18/3/2015 and 142(1) notice requisitioning details and documents on 27/3/2015(Friday) calling for details on 30/3/2015 [Monday) and assessee and its CAs tried to comply with the notices despite the assessee being a non-resident and yet compliance was made by the CA to the best level. And the assessment order was finalised on 31/3/2015 on total income of Rs.2(33,92,362/-. Thus assessee did not have sufficient opportunities to explain her case to the AO. Therefore, sufficient opportunities were given to the assessee's CA to submit details and documents and explain the case and therefore facts of the case were examined vis-a-vis these details and documents.
2.5: Prima facie it emerges from the details available on record that the assessee was a non-resident and was living in Muscat during previous year relevant to A.Y. 2006-07, and the source of the deposits of US Dollars 528880 in the HSBC Private Bank during previous year relevant to A.Y.2006-07 was the inheritance of the moveable and immoveable assets of Mr.Narendra Khimji Bhatia who expired on 15/7/1988 at Houston, USA and he was carrying on the construction business and held assets in Muscat and other countries. And the funds of US Dollars are the result of multiplying of various deposits with interest earned from time to time
7 & ors. Smt. Bhatia Pushpa Khimji from 1988 onwards in Grindlays Bank and ANZ Bank Muscat which was quantified to US Dolllars 704220 standing in bank account number 10388171 and this amount was deposited with IISHC Private Bank Suisse Geneva which is the bone of contention.
2.6: There are two pertinent issues of the case, whether the assessee is a non resident or not for the relevant assessment year and second is whether funds deposited in the HSBC Switzerland of US Dollars 528880 or US Dollars 704220 (87167 Plus 168297 Plus 448974) were attributable to a source of income and/or assets in India or not First of all it appears from records that the AO was in a hurry to pass assessment order since time barring date of 31.03.2015 was coming near and did not have the time to peruse the CD furnished by the assessee and/or access records from the Investigation Wing and/or ACIT 26(1), Mumbai, where the case records were there earlier before the transfer of case records. This is further evident from the observations of the AO who re-opened the assessment and recorded reasons and the AO who passed the assessment order as follows:
“The accumulated balances in the HSBC account appear to be from income sourced in India as she is not permitted to undertake employment abroad. This fact gets strength from the perusal of passport which reveals that during the F.Y.2005-06 relevant to A.Y.2006-07, the assessee has made frequent visits India and abroad.
The above facts and circumstances of the case when read with the jurisprudence as mentioned above points only to one thing with regard to the source of deposits in the HSBC, Geneva accounts, that the initial contribution to the HSBC, Geneva account while settling the discretionary trust was made by the assessee from sources in India which has not been disclosed in her return of income. Further, by applying the same principle, it can be concluded that the subsequent deposits in the account were also from sources in India which has not been disclosed in the assessee's return of income."
2.7 Prima facie it appears that the following initial deposits made by the assessee in December 1989 and January 1990 multiplied over a period of time every month with the credit of interest to it as per bank rules which ultimately resulted in the deposits of US Dollars 704220 with HSBC Bank Switzerland in 2004.
A. 15th September 2004 USD 87,167.50 transferred to HSBC Private Bank (Suisse) SA
B. 30th September 2004 USD 168,297.23 transferred to HSBC Private Bank (Suisse) SA
C. 29th November 2004 USD 448,974.55 transferred to HSBC Private Bank (Suisse) SA
Prima facie the deposit of funds of US Dollars 528880 and/or even US Dollars 704220 as per the affidavit and records is not at all relatable to any source of 8 & ors. Smt. Bhatia Pushpa Khimji business and/or assets in India and hence these deposits and any income thereon did not accrue and/or arise in India. As such these deposits were relatable to a source of deposits in Muscat and elsewhere. The details of the bank deposits are as under:
Fixed deposit No. Date of deposit Last Date of Maturity Amount maturity
1229187-102 18.1.1990 15.9.2004 USD87.094.50 1229187-101 3.1.1990 30.9,2004 USD 1.68,224.23 1229187-103 29.12.1989 29.11.2004 USD 4,48,901.55 Total USD 7,04,220.28
2.8 There is another aspect of the matter from which the AO has drawn adverse conclusions. Assessee is an Indian Passport Holder and has given her address on the passport as 16 Dev Darshan, 50, Ridge Road, Walkeshwar, Mumbai, M.S. Here also the AO has drawn adverse conclusions because he was in a hurry to pass assessment order. Just because the assessee owns or has given a Mumbai address on passport does not automatically prove that the source of these deposits and income accruing and/or arising thereon on deposits with a bank either in Muscat and/or Geneva are assessable to tax in India under Section 9 of the i.T.Act,1961 since the assessee is a non-resident In nutshell, the deposits of US Dollars of 528880 and/or US Dollars 704220 with Grindlays Bank /ANZ Grindlays Bank and later on with HSBC Private Bank Suisse Geneva and interest earned thereon during previous year relevant to A.Y.2006-07 did not accrue and arise in India and hence not taxable under the Income-tax Act,1961. Hence it is held that the amount of Rs.2,33,92,362/- equivalent to US Dollars 528880 and even US Dollars 704220 and interest earned thereon is not taxable and hence the addition of Rs.2,33,92,362/- made by the AO is hereby deleted. It is also submitted by the assessee's CA that most of the information/details required for making a fair and just assessment viz., the original CD of the HSBC Bank Account Statement right from the date of creation till date or date of closure, whichever was later and the assessee replied during the assessment proceedings stating that the assessee has submitted the original CD of the account from HSBC Bank, Geneva to the ACIT-26(1). Similarly, the assessee's CA has also submitted that copy of the passport/details of foreign travel was also made available to ACIT-26(1) vide letter dated 16.02.2015 and was verified by the AO, ACIT.26(1], Mumbai. However, it is seen from the assessment order that the Assessing Officer mentioned that the assessee did not provide any information. The assessee's CA, however, during the appellate proceedings filed the details again. The undersigned verified these details and based on which the decisions have been taken. Nevertheless, the assessee's CA is requested to provide the entire set of 13 page affidavit, 265 page documents and letter dated 27.05.2016 along with three annexures to the AO and AO will verify the authenticity of these documents, correlate figures of deposits made from December 1989/ January 1990 leading to the deposit/transfer of US Dollars 704220 (87167 Plus 168297 Plus 448974) with 9 & ors. Smt. Bhatia Pushpa Khimji HSBC Bank Switzerland in 2004 and give effect to this order after verifying the details. It may be mentioned here that the name of ANZ Grindlays Bank was changed to Standard Chartered Bank from ^000 onwards as per the information available on internet. 2.9 In nutshell, assessee's ground of appeals Nos,4 & 5 are allowed and the entire addition of Rs.2,33,92,363/- is deleted subject to verification of details as mentioned above”
The Ld. D.R. vehemently submitted before us that assessee has deposited money into foreign bank account in A.Y. 2006-07 source of which was not explained by the assessee, neither any disclosure was made to the Indian Income Tax Authorities. It came to be known only when the Government of India received information from French Government under DTAA in exercise of its sovereign powers that assessee was having account with foreign bank with HSBC Private Bank, (Suisse) SA, Geneva which was not disclosed to the Income Tax Department, Govt. of India. Thus, the Ld. D.R. relied heavily on the order of AO by submitting that the assessee was having deposits in the HSBC Private Bank, (Suisse) SA, Geneva which would not have been revealed if the Government of India have not received information under DTAA from the French Government and therefore the same was rightly treated as undisclosed income by the AO as the source was not explained at all. Therefore, the order of Ld. CIT(A) may kindly be reversed and that of the AO be restored.
The Ld. A.R., on the other hand, submitted before the Bench the details of how the assessee has received the money by heritance were filed before the authorities below. The Ld. A.R. submitted that assessee was a non resident and was living in Muscat in previous year relevant to AY. 2006-07. The ld AR
10 & ors. Smt. Bhatia Pushpa Khimji stated that source of deposit of USD 52880 in HSBC Private Bank, (Suisse) SA, Geneva during the previous year relevant to A.Y. 2006-07 was by way of inheritance of movable and immovable assets of Mr. Narendra Khimji Bhatia husband of the assessee who expired on 15.07.1988 at Houston, USA. The Ld. A.R. submitted that assessee was carrying on the construction business and has held assets in Muscat and other countries. The Ld. A.R. submitted that the source of these deposits were the deposits of the husband along with interest earned from time to time right from 1988 onwards in Grindlays Bank and ANZ Bank, Muscat which were quantified at USD 704220 standing in the bank account No.10388171 and this is the amount which was deposited with the HSBC Private Bank, (Suisse) SA, Geneva which is the bone of contention in the present case. The Ld. A.R. submitted before the Bench that the assessee is undisputedly a non resident Indian and even the Ld. CIT(A) has observed that AO was in a hurry to pass the assessment order since the time barring date was 31.03.2015 and probably did not have the time to examine the CD furnished by the assessee and the records from investigation wing, Mumbai. The Ld. A.R. submitted that the Ld. CIT(A) has given a finding of facts that the source of deposits as appearing in the HSBC Private Bank, (Suisse) SA, Geneva were out of the credit balance with the banks as stated above as increased by interest from time to time which were deposited in HSBC Private Bank, (Suisse) SA, Geneva in 2004 as per detail given hereinabove. The Ld. A.R. submitted that Ld. CIT(A) has even noted that assessee is a non resident and is not having any assets in India and the said income/deposits abroad is not relatable to any asset in India
11 & ors. Smt. Bhatia Pushpa Khimji and hence the said income did not accrue or arise in India. The Ld. CIT(A) also observed that these deposits were relatable to source of deposit in Muscat and elsewhere as given hereinabove and finally Ld. CIT(A) allowed the appeal of the assessee subject to verification of these documents by the AO. The Ld. A.R. therefore submitted that since the AO has been provided opportunity to verify these documents and if anything wrong is found AO would have taken decision accordingly but in the present case nothing of the sort has happened. The Ld. A.R. therefore submitted that the order of Ld. CIT(A) may kindly be affirmed as being reasoned and as per law.
After hearing both the parties and perusing the material on record, we observe that in this case the bone of contention was the source of deposits in HSBC Private Bank, (Suisse) SA, Geneva to the tune of 2,33,92,363/- the peak balance in financial year relevant to A.Y. 2006-07. We find merit in the contentions of the Ld. A.R. that the source of deposit was out of the funds held by the assessee’s husband in Muscat and other countries as assessee’s husband was engaged in the business of construction and builders abroad. The assessee received this money by way of inheritance on the death of her husband in 1988 who expired on 15.07.1988. We further find that the Ld. CIT(A) has allowed the appeal of the assessee after considering all these facts and information record subject to verification of these informations by the AO as AO has passed the assessment order in a hurried manner without examining all these facts. Under these circumstances, we do not find any reason to interfere in the order of Ld. CIT(A) and accordingly we uphold the same by dismissing the appeal of the Revenue.
ITA No.7405 (A.Y.2007-08) 10. Since we have decided an identical issue in A.Y. 2006-07 dismissing the appeal of the Revenue, our decision in ITA No.5947 A.Y. 2006-07 would, mutatis mutandis, apply to this appeal as well. Accordingly, the appeal of the Revenue is dismissed.
ITA No.1323/M/2017 & ITA No.1324/M/2016
The revenue has challenged the deletion of penalty under section 271(1)(c) of the Act in both these cases. Since we have dismissed the appeals of the Revenue challenging the quantum by upholding the order of Ld. CIT(A), the above two appeals become infructuous and are dismissed.
In the result, all the four appeals of the Revenue are dismissed.
Order pronounced in the open court on 30.04.2019.