SHRI RAKESH JAIN,INDORE vs. I T O IT & TP, BHOPAL

This assessee’s appeal for A.Y. 2016-17, arises from order of the CIT(A)-13, Ahmedabad dated 30-10-2019, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.

The assessee has taken the following grounds of appeal:-

That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in determining the total income of the appellant u/s. 143(3) of the Income-Tax Act, 1961 at Rs.29,43,010/-, as against the Returned Income of Rs.5,46,600/- thereby making additions of Rs.23,96,410/- which is quite unjustified, unwarranted and bad-in-law.

That, the appellant further craves leave to add, alter or amend the forgoing ground of appeal as and when considered necessary.”

The brief facts of the case are that the assessee is an individual and was a non-resident for the assessment year under consideration. During the year under consideration, the assessee derived salary income working as chief engineer in a merchant ship. Besides, salary income, the assessee also derived income from capital gains on sale of mutual funds and rental income from house situated at Indore. During the year under consideration, the Assessing Officer observed that while the assessee had claimed a sum of Rs. 65,30,722/- as income from salary and bonus ( which was claimed as exempt since the assessee did not render any service in India and the salary was received from his overseas employer in his NRE account), whereas on perusal of the bank statements, the Assessing Officer observed that the assessee had received only a sum of Rs. 41,70,422/- as salary and bonus from his employer. The assessee submitted before Assessing Officer that this difference of Rs. 23,60,300/- was credited in his HBSC NRE Account but the Assessing Officer observed that in absence of any credit entries from his employer i.e. Bernhard Schulte Ship Management (Hong kong) having been found in the bank account, differential amount of Rs. 23,60,300/- is unexplained money of the assessee taxable u/s. 69 of the Act and added the same to the income of the assessee.

In appeal proceedings, the ld. CIT(A) observed that from a perusal of the chart/statement showing details of salary received by the assessee, it was seen that though certain amounts were credited to the bank account of the assessee during the year under consideration, however from the details of employment contract produced before him, the period of the employment began from 01-06-2015, therefore, the various amounts shown in the table, which according to the assessee was the differential amount which was sought to be taxed as unexplained income has been received by the assessee prior to his period of employment with M/s. Bernhard Schulte Ship Management (Hongkong). Accordingly, the ld. CIT(A) held that the claim of the assessee that the differential amount of Rs. 23,60,300/- is part of salary is not acceptable due to the fact that the impugned amount was deposited before the period of employment with M/s. Bernhard Schulte Ship Management (Hongkong) which began on 01-06-2015. Accordingly, the ld. CIT(A) held that the amount deposited by the assessee primarily in the month of April and May, 2015, which is prior to the period of employment, is the unexplained income of the assessee.

In response, the ld. Departmental Representative placed reliance on the observations made by the order of the Assessing Officer and ld. CIT(A).

We have heard rival contentions and perused the material on record. We observed that the assessee’s primary contention is that during the course of appellate proceedings, he did not get an opportunity to file the employment agreement between the assessee and his employer M/s. Bernhard Schulte Ship Management (Hongkong) to substantiate the fact that the aforesaid differentiate amount of Rs. 23,60,300/- was received by the assessee from his employer only and the same did not constitute any unexplained income of the assessee. Since, this is a material piece of evidence which goes to the root of matter and revenue authorities did not get an opportunity to analyse the same, the matter is being set aside to the file of CIT(A) to enable the assessee to produce the relevant employment contracts in support of the fact that the aforesaid sum of Rs. 23,60,300/- which was taxed as unexplained u/s. 69A of Act is in fact the salary income of the assessee received from his employer. In the remand proceedings, the ld. CIT(A) is directed to analyse the modus operandi of the assessee as to how salary income received by him from his employer in cash is converted into Indian rupees through authorized foreign exchange money exchanger and deposited in his bank account by way of account payee cheque. The ld. CIT(A) may also analyse the employment contracts for the period of April 2015 to June, 2015 to verify whether the assessee was in the employment of M/s. Bernhald Schulte Ship Management (Hongkong). However, we would also add that it is observed that the assessee is a senior citizen and he is following cash system of accounting and offers income as salary income in the year when the salary income received in cash is converted into Indian rupees by the authorized money exchanger in his bank account through account payee cheque. We also observe that this fact has not been disputed that the aforesaid income sought to be taxed as unexplained income has been received by the assessee during the year under consideration itself in his bank account. Accordingly, the ld. CIT(A) may verify whether the same has been received by the assessee from his employer after analyzing the employment agreement so produced before him for the period under consideration. In the result, the appeal of the assessee is set aside to the file of ld. CIT(A) with the aforesaid directions.

In the result, the appeal of the assessee is allowed for statistical purposes