DCIT, NEW DELHI vs. SHRI SANJEEV NANDA, NEW DELHI

PER CHANDRAMOHAN GARG, J.M.

I.T.A. No. 599/D/2013 for A.Y. 2001-02

“On the facts and in the circumstances of the case, the ld. CIT(A) has erred in fact and in the circumstances of the case in deleting the addition of Rs.50,00,000/- made by Assessing Officer on account of unexplained deposits in bank a/c of assessee.” 3. Apropos above ground, we have heard arguments of both the sides and carefully perused the relevant material placed on record before us. Learned Departmental Representative supported the stand and action of the Assessing Officer and submitted that the CIT(A) has grossly erred in deleting the addition made by the Assessing Officer on account of unexplained deposits in the bank account of the assessee. Ld. Counsel for the respondent/assessee strongly supported the impugned order and contended that if the amount or proceeds are found to be taxable in the hands of assessee’s father Shri Suresh Nanda and also taxed therein, then the question of taxing the receipts twice in the hands of assessee does not arise and the CIT(A) correctly granted relief to the respondent.

“5.4 I have carefully considered the submissions of the appellant and the facts of the case. It is not disputed that the aforesaid amount of Rs.50,00,000/- was received by the appellant from his father Sh. Suresh Nanda. These amounts were received by way of account payee cheques drawn on three dates, i.e. 10.5.2000, 11.5.2000 and 19.1.2001, from the NRE account of Sh Suresh Nanda with Deutsche Bank, New Delhi. On 29.4.2000, there is a credit of Rs. 1,04,44,617/- in the Deutsche Bank account being proceeds of NRNR deposit with SBI encashed by Sh. Suresh Nanda. The source of payment of Rs.25,00,000/- on 10.5.2000 and Rs. 15,00,000/- on 11.5.2000 to the appellant Sh. Sanjeev Nanda is out of this amount. On 18.1.2001, there is a credit of Rs. 17,50,000/- in the in the Deutsche Bank account being proceeds of interest on RBI Bonds invested by Sh. Suresh Nanda. The source of payment of Rs. 10,00,000/- on 19.1.2001 to the appellant Sh. Sanjeev Nanda is out of this amount. Thus, the source of money is clear and undisputed. There is no provision under the Income Tax Act, 1961 to tax an amount the source of which has been explained or stands established. If the source was not established, it could have been taxed u/s 68 of the Act. However, as the source is established in the case, section 68 is not attracted. The only provision under which the amount received can be brought to taxation is section 56. Under this section, any sum of money received without consideration is chargeable to tax under clause (v) or clause (vi) and clause (vii) to section 56(2). However, receipt of money from relatives is exempted under these provisions, and these provisions are applicable only from A/Y 2005-06. Section 56(1) can also be invoked provided the amount is unexplained or not taxed in some other hand. In the present case, the source of the amounts received stands established. The only reason it has been brought to tax, presumably u/s 56(1), is that Sh. Suresh Nanda being a nonresident has refused to disclose the source of his income abroad and, therefore, the source of money remains unexplained. As mentioned above, the source of these receipts by the appellant are proceeds of NRNR deposits and interest on RBI Bonds received by Sh. Suresh Nanda, father of the appellant. If these proceeds are found to be taxable, and also taxed, in the hands of the Sh. Suresh Nanda, the question of taxing the receipt in the hands of the appellant would not arise. No doubt, contrary to the stand of the revenue, the Hon’ble ITAT has held Sh. Suresh Nanda to be a non-resident vide its order dated 24.7.2012 in 1429 and 1430/Del/2012. However, income accruing or arising from assets held in India would still be taxable in India in the case of Sh.Suresh Nanda. The ITAT has remanded the matter on several issues to the file of the Assessing Officer in the case of Sh. Suresh Nanda in the above appeals. The Assessing Officer is directed to consider the taxability of proceeds of NRNR deposit and interest on RBI Bonds in the case of Sh. Suresh Nanda and bring it to taxation according to law. The amount can not be taxed in the hands of the appellant Sh. Sanjeev Nanda. The ground of the appellant is allowed and the addition is deleted. Appellant gets relief of Rs.50,00,000/-.”

In the present case, the source of impugned receipts by the assessee are proceeds of NRNR deposit and interest on RBI Bonds received by father of the assessee Shri Suresh Nanda and if these proceeds have been found to be taxable in the hands of Shri Suresh Nanda, then the question of taxing the same u/s 68 of the Act would not arise. Ld. DR could not controvert these findings of the ld. CIT(A), thus, we are unable to see any infirmity, perversity or any other valid reason to interfere with the order of the CIT(A) and we uphold the same.

Accordingly, sole ground of the revenue for assessment year 2001-02 being devoid of merits is dismissed.

I.T.A.No. 600/Del/2013 for A.Y. 2004-05

“On the facts and in the circumstances of the case, ld. CIT(A) has erred in deleting the addition of Rs.12,00,000/- made by Assessing Officer on a/c of unexplained deposit in bank a/c of assessee.” 7. Apropos above ground, we have heard arguments of both the sides and carefully perused the relevant material placed on record before us. Learned Departmental Representative supported the action and stand of the Assessing Officer in making addition on account of unexplained deposits in the bank account of the assessee. He further prayed that the impugned order may be set aside by restoring that of the Assessing Officer as the CIT(A) granted relief to the respondent without any basis and on incorrect premise. Learned counsel of the assessee supported the impugned first appellate order and submitted that the assessee received alleged amount from his father by way of account payee cheque drawn on 10.6.2003 from NRE account of Shri Suresh Nanda with Deutsche Bank, New Delhi and the source of alleged amount in question has been properly explained by the assessee, hence the CIT(A) was correct in allowing the issue in favour of the assessee.

“4. I have carefully considered the submissions of the appellant and the facts of the case, which are similar to the facts for A/Y 2001-02. It is not disputed that the aforesaid amount of Rs. 12,00,000/- was received by the appellant from his father Sh. Suresh Nanda. The amount was received by way of account payee cheque drawn on 10.6.2003, from the NRE account of Sh Suresh Nanda with Deutsche Bank,

New Delhi. On 9.4.2003, there is a credit of Rs.23,65,000/- in the Deutsche Bank account, New Delhi, being inward remittance from abroad received by Sh. Suresh Nanda. The remittance is from Deutsche Bank, Singapore, belonging to Sh. Suresh Nanda which has been credited to the capital account of Sh Suresh Nanda, father of the appellant. With this remittance, and after certain other debit and credit transactions, the credit balance on 1.6.2003 in the aforesaid bank account was Rs. 18,34,598.75p. The source of payment of Rs. 12,00,000/- on 10.06.2003 to the appellant Sh. Sanjeev Nanda is out of this balance in the account of Sh Suresh Nanda. Thus, the source of money is clear and undisputed. There is no provision under the Income Tax Act, 1961 to tax an amount the source of which has been explained or stands established. If the source was not established, it could have been taxed u/s 68 of the Act. However, as the source is established in the case, section 68 is not attracted. The only provision under which the amount received can be brought to taxation is section 56. Under this section, any sum of money received without consideration is chargeable to tax under clause (v) or clause (vi) and clause (vii) to section 56(2). However, receipt of money from relatives is exempted under these provisions, and these provisions are applicable only from A/Y 2005-06. Section 56(1) can also be invoked provided the amount is not taxed in some other hand. In the present case, the source of the amounts received stands established. The only reason it has been brought to tax, presumably u/s 56(1), is that Sh. Suresh Nanda being a non-resident has refused to disclose the source of his income abroad and, therefore, the source of money remains unexplained. As mentioned above, the source of these receipts by the appellant are remittances from the Singapore account to New Delhi account of Sh. Suresh Nanda, father of the appellant, with Deutsche Bank. If these proceeds are found to be taxable, and also taxed, in the hands of the Sh. Suresh Nanda, the question of taxing the same receipt in the hands of the appellant would not arise. The same amount cannot be taxed in the hands of the appellant Sh. Sanjeev Nanda. No doubt, contrary to the stand of the revenue, the Hon’ble ITAT has held Sh. Suresh Nanda to be a non-resident vide its order dated 24.7.2012 in 1429 and 1430/Del/2012. Even if taxability of this amount is not finally sustained in the hands of Sh

Suresh Nanda, father of the appellant, it cannot be taxed in the hands of the appellant - either as gift, being from a relative and no law existing during the period to tax it as such; or as unexplained receipt as its source stands clearly established. The only way this amount can be taxed in the hands of Sh Sanjeev Nanda, the appellant, is if it can be treated as a business receipt or salary or perquisite in his hands. This not being the case, the question of taxability of this amount in the hands of the appellants does not arise. The ground raised by the appellant is allowed and the addition is deleted. Appellant gets relief of Rs. 12,00,000/-.”

9. The aforesaid conclusion is similar to the order of assessment year 2001-02 (supra) and we clearly note that the assessee properly explained source of amount in question that the same was received from his non-resident father Shri Suresh Nanda from the deposits in his bank account by way of account payee cheque dated 10.6.2003 wherein there was a credit balance of Rs.23,65,000 on 9.4.2013 i.e. much prior to issuance of cheque to assessee. These facts have not been controverted by the Assessing Officer and the learned Departmental Representative and thus we are unable to see any infirmity or any other valid reason to interfere with the impugned order of the ld. CIT(A) and we uphold the same as the alleged amount cannot be treated as unexplained receipt of the assessee and cannot be taxed in the hands of respondent u/s 68 of the Act. Accordingly, sole ground of revenue for assessment year 2004-05 being devoid of merits is dismissed.

I.T.A. No. 601/D/2013 for A.Y. 2006-07

“On the facts and in the circumstances of the case, ld. CIT(A) has erred in law, fact and in circumstances of the case in deleting the addition of Rs.23,57,038/- made by Assessing Officer on a/c of unexplained investment by the assessee.” 11. Apropos aforesaid ground, we have heard arguments of both the parties and carefully perused the relevant material placed on record. Learned Departmental Representative supported the stand and action of the Assessing Officer and contended that the CIT(A) granted relief to the assessee without any basis, hence, the impugned order may be set aside by restoring that of the Assessing Officer. Ld. Counsel of the assessee has drawn our attention towards para 5.4 of the impugned order and strongly supported the first appellate order wherein the relief has been granted with following conclusion and observations:-

“5.4 I have carefully considered the observations of the Assessing Officer, submissions of the appellant and the facts of the case. It is seen that for A/Y 2006-07 in the case of Sh Suresh Nanda, father of the appellant, an addition of Rs.7,44,07,498/- was made in respect of payments to various parties with regard to various consultancy and other services in respect of Sonali Farms. It is seen that the these amounts, the break-up of which is available in the table at para 9.1 (pages-34 and 35 of the assessment order), includes the same payments made between 20.4.2005 and 16.7.2005 to Craig Roberts Associates Inc. against various invoices towards consultancy charges and professional services with regard to Sonali Farms. The total of these amounts also comes to USD 54,599. It was submitted by the appellant before the Assessing Officer that the remittances are from Deutsche Bank, Singapore, belonging to Sh. Suresh Nanda, father of the appellant, to which the appellant is a co-signatory and signs on the cheques in the absence of his father. The Assessing Officer disbelieved the submissions of the appellant assuming that the appellant held bank accounts abroad. The only reason for the Assessing Officer to conclude so was presence of an Amex card issued in the UK. Significantly, no evidence of any separate bank account belonging to the appellant was found during the course of search. It is not disputable that the amounts of payments totaling USD 54,599 made to Craig Roberts Associates Inc., which have been added in the case of the appellant as well as in the case of his father Sh. Suresh Nanda, were the same and related to various invoices towards consultancy charges and professional services with regard to Sonali Farms. This fact emerges from the two assessment orders passed by the same Assessing Officer in the case of the appellant and his father Sh Suresh Nanda. It has been submitted that these amounts were paid out of the Singapore account of Sh Suresh Nanda and also taxed in his hands. There is no evidence that there is some other source for the payment of these amounts. Thus, the source of investment is clear and undisputed. If the source is not established, the amount can be brought to taxation u/s 69C as unexplained expenditure. But as the source of payment is clear from the assessment order in the case of the appellant’s father Sh Suresh Nanda, and also taxed in his hands, it cannot be again brought to taxation in the hands of the appellant. The amount could have been taxed u/s 56 as residual income or gift. Under this section, any sum of money received without consideration is chargeable to tax under clause (v) or clause (vi) and clause (vii) to section 56(2). However, receipt of money from relatives is exempted under these provisions, and these provisions are applicable only from A/Y 2005-06. Section 56(1) can also be invoked provided the amount is not taxed in some other hand. In the present case, the source of the amounts received stands established. As mentioned above, the source of payments is from the Singapore account of Sh. Suresh Nanda, father of the appellant, with Deutsche Bank. If these amounts are found to be taxable, and also taxed, in the hands of the Sh. Suresh Nanda, the question of taxing the same amounts in the hands of the appellant would not arise. The same amount cannot be taxed in the hands of the appellant Sh. Sanjeev Nanda. No doubt, contrary to the stand of the revenue, the Hon’ble ITAT has held Sh. Suresh Nanda to be a non-resident vide its order dated 24.7.2012 in 1429 and 1430/Del/2012. Even if taxability of this amount is not finally sustained in the hands of Sh Suresh Nanda, father of the appellant, it cannot be taxed in the hands of the appellant - either as unexplained investment, as its source stands clearly established; or as gift, being from a relative and no law existing during the period to tax it as such. The amount could have been taxed in the hands of Sh Sanjeev Nanda, the appellant, if it could be treated as a business receipt or salary or perquisite in his hands. This not being the case, the question of taxability of this amount in the hands of the appellants does not arise. The ground raised by the appellant is allowed and the addition is deleted. Appellant gets relief of Rs.23,57,038/-.”

12. In view of above, when we proceed to analyze the facts and circumstances of the present case, we note that in the case of assessee’s father Shri Suresh Nanda, an addition of Rs.7,44,07,498 has been made in respect of various payments to various parties with regard to various consultancy and other services in respect of Sonali Farms. In the case of Shri Suresh Nanda for Assessment Year 2006-07, the Assessing Officer has given a chart at pages 34 & 35 wherein at page 35, last five entries include payments made between 20.4.2005 to 16.7.2005 to Craig Roberts Associates Inc. against various invoices towards consultation charges and professional services pertaining to Sonali Farms total of which comes to USD 54599. These facts have not been disputed or controverted by the Assessing Officer.

Ld. CIT(A) was right in holding that if the source of expenditure or investment is not established, then the amount can be brought to tax u/s 69C of the Act as unexplained expenditure but as the source is established, then no addition can be made in the hands of the assessee. The CIT(A) was very cautious about application of other taxing provisions as he also considered the applicability of section 56 of the Act and held that the amount could have been taxed u/s 56 of the Act as residual income or gift, however, the receipt of money from relatives is exempt under these provisions which are only applicable from Assessment Year 2005-06 onwards.

Order pronounced in the open court on 04.12.2015.