NEELESHWAR BHATNAGAR,NEW DELHI vs. ACIT, CIRCLE INT.TAXATION 1(1)(2), NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI G.S. PANNU & SHRI SAKTIJIT DEY
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI
BEFORE SHRI G.S. PANNU, PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No. 1868/Del/2022 Assessment Year: 2019-20
Neelashwar Bhatnagar, Vs. ACIT, Mr. Shahid Khan, Circle International Tax 1(1)(2), M/s. Kochar & Co. New Delhi Advocates & Legal Consultants, 12th Floor, Tower-1, DLF Towers Jashola, Jashola District Centre, New Delhi PAN :ARQPB0007P (Appellant) (Respondent)
Assessee by S/Shri Ajay Vohra, Sr. Adv. Shahid Khan & Ms. Niharica Khanna, Adv. Department by Smt. Rashmita Jha, CIT-DR
Date of hearing 02.01.2022 Date of pronouncement 18.03.2023
ORDER PER SAKTIJIT DEY: JUDICIAL MEMBER: Present appeal by the assessee arises out of final assessment
order dated 21.07.2022 passed under Section 143(3) read with section
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144C(13) of the Income-Tax Act,1961 pertaining to assessment year
2019-20, in pursuance to the directions of learned Dispute Resolution
Panel (DRP).
The dispute in the present appeal is confined to addition of an
amount of Rs.143.94 crores under Section 69 of the Act.
Briefly, the facts are, the assessee is a non-resident individual
and is a resident of United Arab Emirates. The assessee is employed
with Standard Chartered Bank. For the assessment year under dispute,
the assessee filed his return of income on 27.09.2020 declaring
income of Rs.62,49,910.
In course of assessment proceedings, the Assessing Officer, on
verification of Form 26AS, noticed that in the financial year relevant
to assessment year under dispute, the assessee had invested an amount
of Rs.213,16,49,985 in fixed deposits with Standard Chartered Bank,
Mumbai Branch. When called upon to explain the source of such
investment, the assessee in his reply, as alleged by the Assessing
Officer, submitted that he had not made any fixed deposits. The
Assessing Officer issued notice under Section 133(6) of the Act to the
Standard Chartered Bank, Mumbai Branch seeking information. In
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response to the said notice the concerned Bank informed that the
assessee had invested in the following fixed deposits: i) 20.11.2018 : Rs.143,94,00,000 ii) 22.02.2019 : Rs. 69,70,00,000 Total: Rs.213,64,09,000
Alleging that the assessee did not furnish any reply to the show
cause notice dated 29.09.2021 issued seeking explanation as to why
the amount should not be added under Section 69 of the Act, the
Assessing Officer treated it as unexplained investment under Section
69 of the Act and added back to the income of the assessee.
Further, applying the provisions of section 115BBE of the Act,
the Assessing Officer taxed it @60%. The assessee contested the
addition by filing objections before learned DRP.
In the course of proceedings before learned DRP, the assessee
along with his submissions furnished various evidences explaining the
source of investment. It was submitted by the assessee that he along
with his wife has registered a company in the name and style of M/s.
NB Ventures Ltd. in British Virginia Island and also incorporated the
company at Dubai. It was submitted N.B. Ventures had availed loan
from Standard Chartered Bank, London/Singapore, out of which funds
4 ITA No.1868/Del./2022
were transferred to assessee’s account held with Standard Chartered
Bank, Mumbai, from which, the fixed deposits were made. After
verifying submissions of the assessee in the context of evidences
furnished, learned DRP accepted the source of fixed deposits made of
Rs.69,70,00,000 and accordingly, directed the Assessing Officer to
delete the addition. However, learned DRP sustained the addition of
Rs.143.94 crores by alleging that the identity, genuineness and
creditworthiness of M/s. NB. Ventures Ltd. was not proved.
Before us, Shri Ajay Vohra, learned senior counsel appearing for
the assessee submitted, the Non-Resident External (NRE) fixed
deposits were made through foreign remittances, hence, such deposits
and their interests are not taxable under the Income-Tax Act,1961. He
submitted, fixed deposits were made out of assessee’s contribution
and the loan advanced by foreign banks. He submitted, Standard Chartered Bank vide letter dated 13th September 2017 has provided a
credit facility (loan) of USD 35,000,000 to NV Ventures Ltd., Dubai.
He submitted, out of the loan availed, NV Venture had transferred
Rs.143.94 crores to assessee’s personal bank account on 16.11.2018.
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He submitted, after receiving the amount, the assessee on 19.11.2018
had made the fixed deposit by withdrawing from the bank account.
In this context, he drew our attention to loan account statement
and bank statement of NB Venture Ltd. and the personal account
statement of the assessee and his wife. As regards the creditworthiness
of NB Venture Ltd., learned counsel for the assessee submitted, as on
30.11.2018, the company had assets of USD 63,229,102.65 and
liability of USD 33,923,247.26. Thus, the company had net assets
over liability of USD 29,305,855.39. Thus, he submitted, neither the
identity nor creditworthiness of NB Venture Ltd. can be doubted. As
regards the genuineness of the loan transaction, learned counsel
submitted, since, the entire transaction is carried out through banking
channel and one to one co-relation has been established, genuineness
cannot be doubted.
Further, drawing our attention to letter dated 16.11.2018 issued
by Standard Chartered Bank, London to Standard Chartered Bank,
India with the instruction that the fixed deposit of Rs.143.94 crores be
placed under lien with them as a security, clearly establishes the
genuineness of transaction. Thus, he submitted, the source of the fixed
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deposit having been clearly established, it cannot be brought to tax in
India. In support of such contention, learned counsel relied upon the
following decisions: 1. DCIT Vs. Finlay Corporation Ltd.[MANU/ID/0335/2003]; 2. Smt. Sushila Ramasamy vs. ACIT, Central Cir-II(2), Chennai. [MANU/IX/0039/2009]; 3. Russia Technology Centre (P) Ltd. vs. DCIT dated 12.04.2013; 4. DCIT, Circle 16(1) Hyderabad vs. Madhusudan Rao. [2015 SCC Online ITAT 3912]; 5. DCIT, Ahmedabad vs. Pratibha Pankaj Patel [2018 SCC Online ITAT 18962]; 6. ITO (International Taxation) Vs. Rajeev Suresh Gehi dated 11.10.2022; &
He also relied upon Circular No.5 of 1969 issued by Central
Board of Direct Taxes. Further, he submitted, since, the assessee does
not maintain any books of account, provisions of section 69 of the Act
could not have been invoked.
Learned CIT(DR) strongly relied upon the observations of the
Assessing Officer and learned DRP.
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Further, she submitted, the addition of Rs.143.94 was sustained
by learned DRP, since, the assessee failed to furnish cogent evidence.
We have considered rival submissions in the light of decisions
relied upon and perused material on record.
It is evident, based on information reported in Form 26AS, the
Assessing Officer conducted inquiry regarding certain NRE
investments made by the assessee in fixed deposits with Standard
Chartered Bank, Mumbai Branch. After obtaining information from
the concerned bank, the Assessing Officer had added back an amount
of Rs.213.64 crores to the income of the assessee by invoking the
provisions of section 69 of the Act. Learned DRP, being convinced
with the submissions of the assessee and evidences furnished, deleted
the addition to the extent of Rs.69.70 crores while sustaining the
addition of Rs.143.94 crores. From the material and evidences placed
on record, which were also furnished before learned DRP, it is
observed that the assessee along with his wife had created a company
in the name and style of NB Venture Ltd. which is registered both in
British Virgin Island and Dubai. It is evident, Standard Chartered
Bank, London extended credit facility (loan) of USD 35 millions to
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NB Venture Ltd. in September 2017. Out of such loan availed from
Standard Chartered Bank, London, NB Venture on 19.11.2018,
transferred an amount of Rs.143.94 crores to the NRE Saving Account
of the assessee and his wife in Standard Chartered Bank, Mumbai.
These facts are clearly established from the bank statements of NB
Venture Ltd. and the assessee as one to one link between the
transactions have been established. Therefore, not only the source of
funds at the hands of NB Venture Ltd. but at the hands of the assessee
is also established. The facts on record clearly establish that the
assessee has made the investment of Rs.143.94 crores out of the
amount received from NB Venture Ltd., which in turn, received the
amount as loan from Standard Chartered Bank, London. The fact that
NRE account FD of Rs.143.94 crores is sourced from the loan/credit
facility advanced by Standard Chartered Bank, London is further
established from letter dated 16.11.2018 issued by Standard Chartered
Bank, London to Standard Chartered Bank, India with the instruction
to place FD amount of Rs.143.94 crores under lien with them as
security against the loan advanced to NV Venture Ltd. The letter
contains specific instruction that the lien over the fixed deposits can be
9 ITA No.1868/Del./2022
vacated only on written instructions of Standard Chartered Bank,
London. Thus, these facts clearly establish the source of fixed deposits
to be out of the loan advanced by Standard Chartered Bank, London to
NV Venture Ltd.
As regards the creditworthiness of NB Venture Ltd., as
discussed elsewhere in the order, as per portfolio statement of NB
Venture Ltd. issued by the Standard Chartered Bank, London, as
against the total liabilities of USD 33,93,247.26, the total assets of the
company as on 30.11.2018 stood at USD 63,229,102.65. These facts
provide ample proof of creditworthiness of NB Venture Ltd. As
regards the genuineness of NB Ventures Ltd., undisputedly, it is
registered both in British Virginia Iceland and Dubai. The certificate
of incorporation furnished in the paper books bears testimony to this
fact. Thus, the doubts raised by learned DRP regarding identity and
creditworthiness of NB Ventures Ltd. is found to be unsubstantiated.
As regards, the genuineness of the transaction between the NB
Venture Ltd. and the assessee, our discussion in the foregoing
paragraphs based on evidences/material available on record clearly
establish the transaction to be genuine. In fact, learned DRP has partly
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accepted assessee’s claim by deleting addition of Rs.69.70 crores. The
addition of Rs.143.94 crores was sustained merely on doubts and
suspicion. Thus, on overall analysis of facts and material on record,
we are convinced that the assessee has been able to explain the source
of fixed deposits of Rs.143.94 crores to have been made out of inward
remittances. Therefore, we do not find justification in sustaining the
addition of Rs.143.94 crores. Accordingly, Assessing Officer is
directed to delete the addition.
In the result, the appeal is allowed. Order pronounced in the open court on 31st March, 2023.
Sd/- Sd/- ( G.S. PANNU ) (SAKTIJIT DEY) PRESIDENT JUDICIAL MEMBER Dated: 31st March, 2023. Mohan Lal
