ANIL DHANSUKHLAL,RAJKOT vs. INCOME TAX OFFICER (INT. TAXATION) GANDHIDHAM, GANDHIDHAM

Aggrieved by the order of Ld.DRP, the assessee is in further appeal before us.

Shri Bharat Kumar, Learned Counsel for the assessee, submitted the paper book, before the Bench, containing pages 1 to 243 and stated that assessee under consideration is a non-resident and who purchased immovable property in India on 25.02.2010, vide allotment letter issued by the Oberoi Realty Ltd, for a consideration of Rs.2,24,76,000/-, and a substantial amount was paid by the assessee at the time of allotment. However, sale agreement was made on 14.11.2017 by Oberoi Realty Ltd. Since the transaction was concluded in the assessment year 2010-11, therefore, the addition should not be made in the assessment year 2018- 19. During the assessment proceedings and during the DRP proceedings, the assessee furnished copy of income tax return for assessment year 2018–19, copy of income tax return for assessment year 2017–18, copy of allotment letter issued on 25.02.2010, copy of agreement to sale on 14.11.2017, copy of return of income filed for assessment year 2020–21, copy of return of income filed for assessment year 2017–18 in case of Chetna Chandrakant Mehta, bank statement of wife of the assessee and (AY-18-19) Anil Dhansukhlal 5 bank statement of Chetana Chandrakant Mehta, the bank statement of wife of the Chetana Chandrakant Mehta etc, were filed by the assessee before the assessing officer, and before the ld DRP. The assessee also furnished the copy of passport issued by Republic of Portuguese, before the assessing officer, as well as before the ld. DRP.The Ld. Counsel for the assessee submitted that the immovable property was purchased in the year 2010 and part payment was made in the year 2010, which clearly evident from the bank statement and moreover, the payment was made through banking channel. Therefore no addition should be made in the hands of assessee.

On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) for the Revenue submitted that the appeal filed by assessee is in a non-resident status and assessee has not filed the appropriate affidavit to the effect to appoint any person in India to argue his case. Besides the genuineness of the payment made by the assessee is not proved thus, the addition made by the assessing officer may be sustained.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. The ld. Counsel for the assessee, submitted before the Bench, the (AY-18-19) Anil Dhansukhlal 6 following documents and evidences, which were also on the file of the lower authorities:

The Copy of the allotment letter issued to the assessee, by Oberoi Realty Ltd, on 25.02.2010, is reproduced below, to the extent applicable for our analysis:

The whole exercise is to be based on facts and it is the duty of the assessing officer to marshal all the facts and come to a logical conclusion about the income of the assessee for the year under consideration. For that we rely on the Judgment of Hon'ble Supreme Court in case of SreelekhaBannerjee (491 ITR 122), wherein it was held that “ ..... before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence, which it has in possession ...”

From the above facts, we find that there was no mistake on the part of the assessee to submit the relevant documents and evidences and explanations before the assessing officer, as well as DRP. The assessing officer, as well as DRP, did not find any mistake in the documents and evidences and explanation submitted by the assessee, except to say that these documents and evidences are not acceptable. It is not tenable in the eye of law. The assessing officer and ld DRP, do not mention why they are not accepting these evidences, and when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises, as noted by us above, therefore, based on this score only, the addition made by the assessing officer should be deleted.

We note that Coordinate Bench of ITAT Delhi, in the case of Russian Technology Centre (P.) Ltd,[2013] 37 taxmann.com 400 (Delhi - Trib.) held that if identity of non-resident remitter is established and money has come in through banking channels, it cannot be treated as deemed income under section 68 or 69 of the Act. The detailed findings of the Coordinate Bench is reproduced below:

Under s. 5(2), the income accruing or arising outside India is not taxable unless it is received in India. Similarly, if any income is already received outside India, the same cannot be taxed in India merely on the ground that it is brought in India by way of remittances. Reference can be made to the judgment of Supreme Court in the case of Keshau Mills Ltd. (supra). If such income is shown in the books of account then it cannot be taxed in India merely because the assessee is unable to prove the source of such entry. For example, there may be appearing an entry of cash credit in the name of a person of USA by way of loan received through cheque and deposited in the bank account maintained at any city in USA. Such money, being received outside India, cannot be taxed under s. 5(2) unless it is proved that such money is relatable to the income accrued or arising in India. Therefore, the same cannot be taxed under s. 68 merely on the ground that assessee fails to prove the genuineness and source of such cash credit. Therefore, we are of the considered view that provisions of s. 68 or 69 would be applicable in the case of non-resident only with reference to those amounts whose origin of source can be located in India. Therefore, the provisions of s. 68 or 69, in our opinion, have limited application in the case of non-resident." 11.2 The decision in the case of Finlay Corporation Ltd. (supra) has been followed in the case of Smt. Susila Ramasamy (supra), holding as under : "The assessee, who is a non-resident, brought money into India through banking channel and the manner in which this money was utilized in India is described in the Annexure. We have observed in the above paras that because of the mode of banking channel, admittedly, used for the remittance in this case, the onus on the assessee under s. 69 stood discharged, and therefore, it was not taxable in India under s. 5(2) (b) of the Act. The CBDT circular (supra) squarely supports the case of the assessee. The fact that the transactions and events narrated in the Annexure look curious and suspicious makes no difference to the conclusions that we have drawn in this case, as per law, in the above paras." 11.3 Apropos applicability of CBDT Circular No/5, dt. 20th Feb., 1969, the Tribunal in the case of Saraswati Holding Corpn. Inc. (supra), while examining the issue in question in the light of CBDT Circular No. 5, dt. 20th Feb., 1969 and the decision of Finlay Corporation Ltd. (supra) held as under : "10. In the light of the above decision of the Tribunal, and Circular No. 5 of CBDT, we are of the view that the action of the Revenue authorities in bringing to tax the sum of Rs. 3,83,11,550 cannot be sustained. We have already held that the assessee is a tax resident of Mauritius. There is no basis for coming to the conclusion that any income of the assessee accrued, arose or was received in India. In these circumstances, we direct that the addition made be deleted. Ground Nos. 2 to 2.3 raised by the assessee are allowed." 11.4 The proviso of s. 68 though inserted w.e.f. 1st April, 2013 also reveals the legislative intent that if the shareholder is a non-resident and the money is by way of remittance from his account, the rigour of s. 68 would not be applicable. 11.5 We find merit in the contentions of learned counsel and reliance on the decisions of the Tribunal in the cases of Finlay CorporationLtd. (supra), Smt. Susila Ramasamy (supra) and Saraswati Holding Corpn. Inc. (supra) and the import of CBDT circular referred to above. Whenever remittances are made by the non- resident holding company for purchase of shares of its subsidiary in India, the money undoubtedly is capital in the nature and if documents like FIRC etc. are produced, it can safely be stated that the said money came in through banking channels. 11.6 In the absence of any evidence to show that the money remitted by the non-resident accrued in India, it cannot be held to be taxable in India. Hence, moneys remitted by non-residents whose identity is not in (AY-18-19) Anil Dhansukhlal 13 question through their bank accounts outside India have to be held as capital receipts not exigible to tax. It therefore naturally follows that if the identity of the non-resident remitter is established and the money has come in through banking channels, it would constitute a capital receipt and ordinarily cannot be treated as deemed income under s. 68 or 69 of the Act. This is clarified by the CBDT circular itself. 11.7 Taking into consideration of all the above, we find merit in the argument of the learned counsel for the assessee that the primary burden cast on the assessee was duly discharged. The issue of primary onus is to be weighed on the scale of evidence available on the record and the discharge of burden by the assessee is also to be decided on the basis of documents filed by the assessee and facts and circumstances of each case and on that basis a reasonable view is to be taken as to whether the assessee has discharged the primary onus of establishing the identity of share applicant, its creditworthiness and genuineness of the transaction. From the documents filed during the course of assessment and before CIT(A), the independent existence of the share applicants in Russia is clearly established. The assessee's application to FIPB for raising the capital contains all the relevant details which is favourably accepted by the Board, particularly by allowing the assessee to raise further capital without approaching the FIPB. The transactions are through banking channels. Thus, the gamut of evidence does not leave any doubt in the discharge of primary burden of the assessee. On the issue CBDT circular and Finlay Corporation Ltd.Judgment (supra) also we are in agreement with the learned counsel for the assessee that in these circumstances of the case, moneys remitted by non-residents through banking channel outside India have to be held as capital receipts, not exigible to tax and cannot be treated as deemed income on the fictions created by ss. 68 and 69 of the Act. In consideration of all these observations, we are inclined to hold that the share application money as raised in the grounds of appeal cannot be held as non-genuine and added as income of the assessee under s. 68 of the Act. Consequently, additions made on this count as raised in grounds of appeal are deleted. Assessee's grounds of appeal on this issue are allowed.

The Co-ordinate Bench of ITAT Delhi in the case of Finlay Corporation Ltd. [2003] 86 ITD 626 (DELHI), on identical facts held as follows:

Further, our view is fortified by the decision of the Coordinate Bench of ITAT Hyderabad in the case of Madhusudan Rao [2015] 57 taxmann.com 262 (Hyderabad - Trib.), wherein it was held that the provision of section 5 does not permit taxation of amounts remitted to India, from sources outside India which are not incomes under provisions of Act.

Further, in the assessee`s case under consideration, the assessee purchased the property on 25.02.2010, and major payment was made to Oberoi Realty Limited in the year 2010 itself. Therefore, it should not be taxable in the assessment year 2018–19. That is, no addition under section 69 could be made in year under consideration in respect of investment in immovable property made in earlier year(s). For that, reliance is placed on the decision of the Co-ordinate Bench of ITAT Delhi in the case of Km. Preeti Singh, [2019] 103 taxmann.com 293 (Delhi - Trib.). Moreover, Money brought in India by non-resident for investment or for other purposes is not liable to tax under provisions of Act and question of assessment to income-tax arises only when there is no evidence to show that amount in question in fact represents remittance from abroad, for that reliance is based on the decision of the Coordinate Bench of ITAT Panaji in the case of Iqbal Ismail Virani,[2021] 128 taxmann.com 181 (Panaji - Trib.). Therefore, based on these facts and circumstances, the addition made by the assessing officer/DRP needs to be deleted. Accordingly, we delete the addition.

In the result, the appeal of the assessee is allowed.