ACIT, CHENNAI vs. ERICH NESSEL HAUF, CHENNAI

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

ITA No.280/Mds/2016 :- 2 -: passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).

2. The Ld. CIT(A) has erred on the facts of the case and in law in deleting the addition of Rs. 89,02,180/- on account of Peak Credit relying merely on an affidavit which is a self serving document ignoring the fact of absence of any documentary evidence in this regard.

3. The Ld.CIT(A) has erred on the facts of the case and in law in deleting the addition of Rs. 1,34,88,000/- - on account of investment in House Property merely assuming it as "some value" required to be shown in ITR and without ascertaining the full value of investment and year of investment ignoring the fact that the return of income was verified and signed by the assessee and no revised return was ever filed by the assessee if there was any mistake in the ITR. Further the assessee himself has admitted in the ITR that investment was -made in the House Property in assessment year under consideration’’.

ITA No.280/Mds/2016 :- 3 -: case was selected for scrutiny and notice u/s.143(2) of the Act was issued and Due to change of jurisdiction notice was issued by concerned ld. Assessing Officer. In compliance to notice, the ld. Authorised Representative of the assessee appeared from time to time and filed information. The ld. Assessing Officer on perusal of the Income tax return found that assessee has followings foreign assets:-

Sl. Count Name of the Bank Address of the Bank Nam Peak No ry mentioned Balance code in the account Deutsche Bank Privat – Investment and Erich 24,95,280/ 1 49 UND Gesehaftskunden - finanzecenter Esslingen Nessel AG AM Hafenmark T 73728 Hauf Esslingen Mercedes – Benz Bank Kundenservice Postfach Erich 64,06,800/ 2 49 –AG 65 01 02 66141 Nessel Saarbrucken Hauf TOTAL 89,02,080 Details of immovable property Sl.No Country code Address of the property Total investment 1 49 Schartenbergstr 29, 76435 Baden-Baden 1,34,88,000 In the assessment proceedings, the ld. Assessing Officer called for the clarifications on Peak Balance as per Schedule in Return of income and investment in immovable property. The ld. Authorised Representative filed letter dated 10.03.2015 explaining that the assessee has two bank accounts in Germany namely Deutsche Bank and Mercedes –Benz Bank.

Its German practice for individuals to obtain the concerned bank account details on personally approaching the concerned Bank. The bank is not mandatorily required to issue statement and the same applies to interest.

The assessee due to his employment in India could not obtain supporting

ITA No.280/Mds/2016 :- 4 -: documents from his bank and because there is necessity to disclose details of Foreign bank accounts in schedule of Return of income. The assessee has estimated the Bank balance amount and converted into Indian currency and disclosed �89,02,080/- in the return of income. But the ld. Assessing Officer without considering the real facts and credit balance amount in the foreign bank accounts are Accumulated funds and interest on balances are offered to tax in India but on suspicion was under the presumption that the assessee has disclosed the said information based on some documents and the assessee has not explained the sources nor produced documentary proof in assessment proceedings. Hence treated as unexplained investment u/s.69 of the Act and made an addition.

Similarly in the same schedule, the assessee disclosed details of immovable property in Germany with total investment being �1,34,88,000/-. The ld. Authorised Representative also filed explanations in respect of possession of property being ancestral and was acquired in the year 1963. But the ld. Assessing Officer ignored the title of property and is of the opinion that there is no valuation report or other documentary evidence to support the value disclosed in Return of income and assumed that the assessee must have constructed the property during the financial year 2011-2012 and has spent �1,34,88,000/- and in the absence of any authenticated document that the said amount was not invested in the previous year treated the value of investment in ITA No.280/Mds/2016 :- 5 -: property at Germany as unexplained investment and assessed total income at �5,13,93,258/- and raised demand. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals).

The ld. Commissioner of Income Tax (Appeals) considered the facts on residential status and findings of the ld. Assessing Officer and grounds raised by the assessee. The ld. Commissioner of Income Tax (Appeals) dealt on grounds of appeal at page 3 & 4 of his order were the ld. Authorised Representative has explained with reasons, details on complying the conditions and violation of principles of justice. The ld. Commissioner of Income Tax (Appeals) dealt on addition of unexplained peak credits of �89,02,080/- were the assessee has filed exhaustive explanations vide letter dated 10.03.2015. The ld. Commissioner of ITA No.280/Mds/2016 :- 6 -:

Income Tax (Appeals) considered the earlier submissions of the assessee and also written submissions dated 27.10.2015 alongwith original affidavit executed affirming and explaining the facts. Further, the ld. Commissioner of Income Tax (Appeals) perused Foreign bank accounts and provided adequate opportunity to the assessee with supporting decisions on gross violation of principles of natural justice and found that the assessee has Income from salary and Income from other sources and as per the requirements of Disclosure of Foreign Assets in the Income Tax Returns, the assessee has reported the Bank balances of Deutsche Bank and Mercedes Benz Bank. The assessee has not made any investments during the relevant financial year 2011-12 and offered to tax interest income in Germany and in India. When the assessee was not a resident of India, the balance amounts in the Bank accounts was accumulated over years and produced copies of interest certificates offered to tax with supporting affidavit. The ld. Commissioner of Income Tax (Appeals) considering the fresh evidence and principles of natural justice has forwarded letter dated 27.10.1015 to the concerned Assessing Officer for his comments. The ld. Assessing Officer has filed a remand report dated 19.11.2015 and the assessee was provided an opportunity to file reply/comments and the same was filed by the assessee by letter dated 30.11.2015. The ld. Commissioner of Income Tax (Appeals) perused the findings of the ld. Assessing Officer on the documentary evidence

ITA No.280/Mds/2016 :- 7 -: produced and details submitted by the assessee referred at para 8.6 of his order. Further, the ld. . Commissioner of Income Tax (Appeals) considered the documents, Remand report of the Assessing Officer and affidavit of the assessee with evidence of amount in Bank accounts accumulated over a period being carry forward from earlier years and the guidelines on Income Tax Return disclosure. The assessee with a bonafide faith to comply with the Return of Income guideline has only disclosed the Balance and there is no suppression of investments during the previous year and ld. Commissioner of Income Tax (Appeals) with these observation relied on the legal provisions of the Act supported by the affidavit of the assessee and deleted the addition of Peak balance.

4.1 On the next ground under the disclosure of Foreign Asset, the assessee has disclosed immovable property dealt by the ld. Assessing Officer at para 9 in page 8 of order as under:-

"With regard to investment in property at Germany shown at Rs.1,34,88,000/- the representative has filed some document stating that the same is the proof for possession of a house property in Germany which is claimed to be an ancestral property of the assessee. No valuation report or any other documentary evidence produced how the above figures were arrived and the sources for the same. The property may be the assessee’s ancestral property and it is not known . whether the investment shown at Rs. 1, 34, 88~ 000/- is made during the year under consideration or not, in the absence of any documentary evidence to prove otherwise. The assessee might have constructed the property during this the Assessing Officer be restored. year and made investment of ₹1,34,88,000/- as admitted in his return of ITA No.280/Mds/2016 :- 8 -: income. The assessee failed to explain about the nature of investments in the house property and its sources. In the absence of any documentary proof showing that the amounts shown are not invested during the year under' consideration, the same is treated as unexplained investment u/s 68 of the Income Tax Act, 1961 and added to the income returned’’.

The assessee has explained before ld. Assessing Officer that the property is an ancestral property and the assessee has not made any investments during the previous year. The property was obtained from Grandfather in the year 1993 which the ld. Assessing Officer has overlooked the genuine explanations duly supported by the ownership document. The ld. Commissioner of Income Tax (Appeals) considered the arguments of the assessee that the immovable property was inherited in 1993 and no construction activity was undertaken in previous year. The assessee submitted registration documents of German Registration authorities to prove that the property held by the assessee very much before previous year 2011-2012 and filed detailed reply on 27.10.2015. The ld. Commissioner of Income Tax (Appeals) based on the remand report and findings by the ld. Assessing Officer and reply furnished by the assessee on the ld. Assessing Officer’s remand report on 30.11.2015 found that due to official requirement of disclosures of Assets outside the country, the assessee estimated the value of the property and mentioned the value irrespective of the fact that there is no investment during the previous year. The ld. CITA) considered the basic facts of ownership that the ITA No.280/Mds/2016 :- 9 -: property was inherited from the ancestor and the assessee is holding property from the year 1993 and Affidavit was filed with Documentary evidence that the assessee is a owner of the property much prior to relevant previous year were the property was inherited from his Grandfather and no money was paid and the value of property disclosed in the return of income is only estimated value. Further, there is no investments during the previous year by the assessee and deleted the addition of �1,34,88,000/- and allowed the appeal of the assessee.

Aggrieved by the Commissioner of Income Tax (Appeals) order, the Revenue has assailed an appeal before Tribunal.

ITA No.280/Mds/2016 :- 10 -:

ITA No.280/Mds/2016 :- 11 -: earned from Deutsche Bank and Mercedes-Benz Bank. The assessee due to mandatory requirement to report foreign assets has disclosed the Peak balance and explained in the assessment proceedings that in Germany, individual has to be physically present and approach the concerned authority with personal requisition for Bank statements. During the year 2011-12, the assessee was in India on assignment and he has only disclosed the accumulated balance of financial year 2011-2012 and no fresh investments were made and the reporting of investments was appreciated. The assessee could not get the clarifications on Peak balances as disclosed in the return of income was applicable for the first time from the assessment year 2012-2013. Considering the apparent facts, material on record, residential status of the assessee and disclosures under provisions of Income Tax, the ld. Commissioner of Income Tax (Appeals) has considered the material evidence viz-a-viz explanations of assessee and has dealt exhaustively on the explanations of the assessee and deleted the addition and we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) on this ground and dismiss the Revenue ground.

7.1 Similarly, the assessee has disclosed the value of the immovable property under Foreign Asset. The ld. Commissioner of Income Tax (Appeals) has considered the facts and the submissions of the ITA No.280/Mds/2016 :- 12 -: assessee with documentary evidence and called for the remand report from the ld. Assessing Officer and comments of the assessee. The ld. Assessing Officer gave findings that the assessee could not explain with evidence that the assessee has acquired the property by inheritance in the year 1993 from his Grandfather through a registered deed. The ld. Authorised Representative drew our attention to page 28 to 31 of paper book referring to the registered property documents alongwith schedule of the property and submitted translated copy. Further, the assessee confirmed the facts by filing the notarized affidavit mentioning that the property was inherited from his Grandfather and his assignment in India took place in the year 2008 and the assessee became resident and ordinary resident in said assessment year and with good faith has estimated market value of the property in relevant column and has not made any investment in the previous year 2011-2012. Considering the apparent facts, documentary legal evidence, and Germany registration document with translated copy, we are of the opinion that the ld. Commissioner of Income Tax (Appeals) has dealt on this issue in depth and concludes on merits that the property was inherited and the assessee has only disclosed market value in good faith in compliance to guidelines of Income Tax Act. Further, the ld. Commissioner of Income Tax (Appeals) has gave a categorical findings on the remand report and reply filed by the assessee and allowed the appeal of the assessee. Therefore,

ITA No.280/Mds/2016 :- 13 -: we are inclined to upheld the order of Commissioner of Income Tax (Appeals) in deleting the addition of �1,34,88,000/- and the ground of the Revenue is dismissed.

Order pronounced on Thursday, the 14th day of July , 2016 at Chennai.