SHASHANK RATHI ,CHENNAI vs. INCOME TAX OFFICER INTERNATIONAL TAXATION WARD 4(1)(1), MUMBAI

Brief facts of the case are that the assessee is a non-resident individual and had not filed his return of income for the year under consideration. The assessee’s case was reopened vide notice u/s. 148 of the Act dated 17.06.2021 on the basis of the information received from the ‘non-filer under monitoring system’ and AIR that the assessee had purchased an immovable property for a sale consideration of Rs.5,04,10,775/- and the same was found to be undisclosed, thereafter materials and documents as per the requirement of section 148A(b) of the Act were furnished to the assessee on 20.05.2022 as per the direction of the Hon'ble Apex Court in the case of Ashish Agrawal vs. Union of India (in Civil Appeal No. 3005/2022 vide order dated 04.05.2022). Pursuant to the notice u/s. 148 dated 31.07.2022, after due approval, the assessee filed his return of income in response to the same dated 19.08.2022, declaring total income at Rs.19,15,010/-.

Aggrieved by the said order, the assessee is in appeal before us, challenging the impugned addition.

The learned Authorised Representative (ld. AR for short) for the assessee made a submission that the assessee had made payment of Rs.5,04,10,775/- towards the purchase of the immovable property at various tranches since 2013 upto 2016 and during the year under consideration, only Rs.1,14,48,580/- was paid as part consideration. The ld. AR further contended that the ld. A.O. in the draft assessment order has erroneously made an ld. AR further contended that the assessee had substantiated the source of Rs.1,14,48,580/- which was the part of the sale consideration that was paid during the year under consideration and the same was also acknowledged by the ld. A.O. during the assessment proceeding. The ld. AR further stated that the assessee has substantiated the entire sale consideration which was out of the salary earned by the assessee along with interest income and provident fund settlement from previous employment and transferred from his NRE and NRO account. The ld. AR prayed that the impugned addition be deleted.

The learned Departmental Representative (ld. DR for short), on the other hand, controverted the said facts and stated that not only the amount received during the year should be explained, but the assessee had the onus to explain the source of the entire sale consideration paid over the years. The ld. DR stated that the assessee has failed to explain the source for Rs.28,22,380/- before the Hon’ble DRP and that the ld. A.O. has rightly made an addition on the impugned order. The ld. DR relied on the order of the lower authorities.

We have heard the rival submissions and perused the materials available on record. It is observed that the main source of the income of the assessee was the salary income earned by the assessee who worked with Bank of America and later shifted his job to Capula Investment Management in Hongkong. The assessee vide agreement dated 21.07.2014 has purchased a property for a sale consideration of Rs.5,04,10,775/-, out of which Rs.1,14,48,580/- was paid as part sale consideration during the impugned year. the said investment to the extent that was paid during the impugned year where Rs.28,22,380/- as one installment dated 23.07.2014 and three installments of Rs.28,75,400/- on 13.05.2014, 01.10.2014 and 16.12.2014 were made, which aggregated to Rs.1,14,48,580/-, transferred from his salary account to his NRE and NRO accounts maintained with ICICI Bank. The assessee also furnished the bank statements of these payments and the employer’s return issued by Capula Investment Management Asia Ltd. for F.Y. 2014-15 where it was observed that the assessee has received a salary of HKD 10,40,909/- which equals to Rs.81,81,545/- (exchange rate of 1 HKD = INR 7.87 in 2014). The ld. A.O. made an addition on the balance amount of Rs.3,98,62,195/- as ‘unexplained investment’. The assessee contends that even otherwise there was a arithmetical error in computing the balance payment, which would be Rs.3,89,62,195/- (difference of Rs.9 lacs). The assessee in his objection filed before the Hon’ble DRP had furnished the complete details of the total sale consideration, including those which were paid during A.Ys. 2013-14, 2016-17 to 2020-21, along with the bank account statement of its NRE and NRO account maintained with ICICI and HDFC Bank account. The Hon’ble DRP considered the submission of the assessee and directed that only the initial payment of Rs.28,22,380/- has not been explained by the assessee and proposed the same to be added to the total income of the assessee u/s. 69 of the Act as ‘unexplained investment’.

Before us, the ld. AR for the assessee has filed a written submission, evidencing the payments, aggregating to Rs.5,50,68,738/- towards the sale consideration and other stamp duty, registration charges and interest on delayed payment of consideration. The same is tabulated herein under for ease of reference:

From the above factual matrix of the case, it is observed that the assessee has substantiated the nature of source of the investment over and above the sale consideration paid by him for the purchase of property along with the other incidental charges incurred by him at the time of the said purchase. We are of the considered view that the assessee has discharged the onus of proof casted upon him to explain the source of the investment grounds of appeal raised by the assessee and hereby direct the ld. A.O. to delete the addition made in the hands of the assessee.

In the result, the appeal filed by the assessee is allowed.