VEERATHAM SACHDEV,NEW DELHI vs. DCIT CIRCLE INTERNATIONAL TAXATION, NEW DELHI
Facts
An NRI assessee, an investor in SBI and BNP Paribas Mutual Funds, received amounts from these investments. During assessment, the Assessing Officer (AO) made additions for unexplained investments, and the assessee's non-compliance with notices. The Dispute Resolution Panel (DRP) directed the AO to pass a speaking order, but the AO reiterated the additions without fully complying with the DRP's instructions.
Held
The Income Tax Appellate Tribunal found that the Assessing Officer failed to follow the Dispute Resolution Panel's specific directions to pass a speaking order. Consequently, the Tribunal remitted the case back to the AO for a fresh assessment, instructing them to comply with the DRP's earlier guidance.
Key Issues
Whether the AO erred in making additions for unexplained investments in mutual funds without properly considering the source and explanations; whether the AO violated natural justice by not issuing a Show Cause Notice; and whether the AO failed to comply with the DRP's directions to pass a speaking order.
Sections Cited
Income Tax Act, 1961, Section 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘D’: NEW DELHI
Before: Dr. BRR KUMAR & SHRI SUDHIR PAREEK
PER SUDHIR PAREEK, JM
These instant appeals preferred by the assessee against the order dated
18.01.2023 passed by the Income Tax Department, Office of the Assistant
Commissioner of Income Tax, Circle INT Tax 3(1), Delhi, [hereinafter referred to
as the ‘Ld. ACIT] pertaining to Assessment Years 2013-14 and 2016-17.
The assessee has raised the following grounds of appeal:
ITA No.- 374/Del/2023
“1. That on the facts and in the circumstances of the case and in law, Ld AO erred in not considering the investment in BNP Paribas out of funds available with BNP Paribas wealth management. 2. That on the facts and in the circumstances of the case and in law, Ld AO erred in passing the assessment order, without considering the explanation and records submitted with DRP without any specific reasons. 3. That on the facts and in the circumstances of the case and in law, Ld AO in passing the impugned assessment order, without giving any Show Cause Notice which was unlawful and made in violation of principles of natural justice. 4. That the appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the
Page 2 of 7
ITA Nos.- 374 & 390 /Del/2023 Veeratham Sachdev. ITA No.- 390/Del/2023
“1. That on the facts and in the circumstances of the case and in law, Ld AO erred in not considering source of investment in SBI Mutual Fund. 2. That on the facts and in the circumstances of the case and in law, Ld AO erred in passing the assessment order, without considering the explanation and records submitted with DRP without any specific reasons. 3. That on the facts and in the circumstances of the case and in law, Ld AO erred in passing the assessment order, without doing any additional enquiry without any specific reasons. 4. That on the facts and in the circumstances of the case and in law, Ld AO in passing the impugned assessment order, without giving any Show Cause Notice which was unlawful and made in violation of principles of natural justice. 5. That the appellant craves leave to add add/alter any/all grounds of appeal before or at the time of hearing of the appeal.”
The assessee is an Non-Resident Indian (NRI) and a passport
holder of the Kingdom of Thailand. He is also an investor in SBI
Mutual fund as well as BNP Paribas Mutual Fund. The assessee
received amounts from the Bank of India, State Bank of India and
SBI Mutual Fund on account of investments made in SBI Mutual
Fund and BNP Mutual Fund. During the assessment proceedings,
the assessee could not comply with the notices issue by the
Assessing Officer (AO).
Page 3 of 7
ITA Nos.- 374 & 390 /Del/2023 Veeratham Sachdev. 4. In the assessment, the AO passed a draft assessment order,
making additions of the investments made in SBI Mutual Fund and
BNP Paribas Mutual Fund.
Aggrieved, the assessee filed objection with the Learned
Dispute Resolution Panel (Ld. DRP).
The Ld. DRP vide order dated 05.12.2022, directed the AO to
pass a speaking order after examining the explanation of the
assessee. For the sake of ready reference, the relevant part of the
DRP’s order is reproduced as under:
“The AO is directed to examine as to whether the assessee can explain from documents submitted regarding source of investment of Rs 1,00,00,000/-, from the available records, and deal with the issue by passing is a speaking order. The DRP hastens to state that AO need not conduct any fresh enquiry on this nor grant any additional opportunity to the assessee before drawing his inference.”
Upon receiving the directions from the DRP, the AO passed an
order repeating the additions made in the draft assessment order.
Aggrieved, the assessee filed appeal before the ITAT.
Page 4 of 7
ITA Nos.- 374 & 390 /Del/2023 Veeratham Sachdev. 9. At the outset, both parties fairly submitted that the directions
of the Ld. DRP, as mentioned in the para no. 5.4 of the order of the
Ld. DRP, had not been followed by the AO. Though, the tax
residency status of the assessee is on record, the AO made the
addition holding that no reply was received from SBI Mutual Fund
and BNP Paribas Mutual Fund. For the sake of ready reference, the
relevant part of the final assessment order is reproduced herein
below:-
“9(ii) Further, no reply was received from SBI Mutual Fund and BNP Paribas Mutual Fund with respect to the investment of Rs. 5,05,00,000/-. Since the tax residency status of the assessee has not been proven and the source of investments in the mutual funds amounting to Rs. 5,05,00,000/- remains unexplained, thus, the amount of Rs. 5,05,00,000/- is being added as unexplained investment u/s 69 of the Income Tax Act, 1961.”
Since the directions of the Ld. DRP have not been followed by
the AO, we deem it fit and proper that the interest of justice would
be served by remitting the matter to the file of the AO to pass a
speaking order duly following the directions of the Ld. DRP.
Page 5 of 7
ITA Nos.- 374 & 390 /Del/2023 Veeratham Sachdev. 11. In the result, both the appeal of the assessee are allowed for
statistical purpose.
Order pronounced in the Open Court on 31.05.2024
Sd/- Sd/- (BRR KUMAR) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31/05/2024 Pooja/-
