2025 (7) TMI 1498 - AT - Income Tax

Addition u/s 69A - source of funds is from sources outside India - assessee submitted that the assessee being Non-resident Indian residing outside India with his foreign address only on PAN was not served personally with the notice u/s 148 HELD THAT - Assessee has satisfied that he himself is a UK Citizen and a UK passport holder and his submission that he was a non-resident during the year has not been contradicted by the lower authorities. Similarly the assessee has satisfied that Shri Udit Pal Garg was a British National and filed his tax return for year 2014. Also Mrs. Bharti Dhimantrai Patel (sister-in-law of the assessee and wife of the Co-owner Mr. Dhimantrai Purshottam Patel has satisfied that she was an UK Citizen and a UK passport holder. Further on perusal of the above payments except for an amount paid through housing loan and paid by M/s Estate Cares the balance amount was paid from a source outside India or through the NRE Account of the assessee. Regarding the payment paid by M/s Estate Cares through HDFC Bank Panchshila Park prior to this transfer an amount was credited in the said bank account on 07.04.2014 (through conversion of GBP 50, 000/- @ 98.0300) and a sum was received from Shri Udit Pal Garg a British National on 09.04.2014. Thus the payment of Rs. 20, 00, 000/- though paid in India but it was sourced from outside India. Therefore the entire payment other than the housing loan amount being sourced from outside India will not be taxable in the hands of the assessee he being a non-resident during the FY 2014-15 relevant assessment year 2015-16. Similarly the payment paid through housing loan will not be taxable as the source of the same stands explained. Further the submissions of the assessee that the payment of Rs. 5 lakhs Rs. 10 lakhs on 28.11.2013 and 10.02.2014 were paid in Financial Year 2013-14 and therefore cannot be a subject matter of addition in the case of the assessee for AY 2015-16 is found to be acceptable. The fact that the above payment of Rs. 15, 00, 000/- was not made in FY 2014-15 was also confirmed by M/s Lokhandwala Kataria Construction Pvt. Ltd.. The same is mentioned in the notice u/s 142(1) of the Act dated 02.02.2022 as the said amount is shown as opening balance as on 01.04.2014 Therefore we are satisfied that the addition made by the Assessing Officer u/s 69 of the Act is not sustainable and the same is deleted. Appeal of the assessee is allowed.

Summary

ISSUES:

Whether reopening of assessment under section 147 read with section 144 of the Income Tax Act, 1961 was valid.Whether the Assessing Officer had jurisdiction to refer the draft assessment order to the Dispute Resolution Panel under section 144C(1) of the Act when no return of income was filed and no transfer pricing order was passed.Whether addition under section 69 of the Act of Rs. 5,17,67,531/- as unexplained investment was justified without proper inquiry, application of mind, and opportunity to the non-resident assessee.Whether the best judgment assessment under section 144 of the Act was correctly made.Whether the entire purchase consideration of immovable property could be added back without considering the assessee's submissions and without giving reasons in the assessment order.Whether additional evidence filed after assessment proceedings can be admitted under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963.

RULINGS / HOLDINGS:

Reopening of assessment under section 147 read with section 144 was upheld as the Assessing Officer acted on information received through AIR and issued notice under section 148; no specific ruling on invalidity of reopening was made as other grounds were disposed of.The Assessing Officer's reference of draft assessment to the Dispute Resolution Panel under section 144C(1) was held to be without jurisdiction and void-ab-initio since the assessee had not filed any return of income and was not an "eligible assessee" under section 144C(15), and no transfer pricing order was passed under section 92CA(3).The addition under section 69 of the Act of Rs. 5,17,67,531/- was deleted as the assessee satisfactorily demonstrated that the source of investment was from outside India and through housing loan, supported by documentary evidence including bank statements, loan sanction letters, and tax returns of related persons; the Assessing Officer's rejection of evidence was found unsustainable.The best judgment assessment under section 144 was not upheld as the addition under section 69 was deleted, rendering the basis of best judgment assessment unsustainable.The addition of the entire purchase consideration without considering the assessee's submissions and without giving reasons was held to be erroneous and disallowed.The Tribunal admitted additional evidence filed by the assessee under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, as the documents were relevant, went to the root of the matter, and were not in possession of the assessee during reassessment proceedings due to foreign law requirements.

RATIONALE:

The assessment was reopened under section 147 based on information from AIR indicating unexplained investment, which is a recognized ground for reopening.Jurisdictional provisions under section 144C require the assessee to have filed a return and be an "eligible assessee" as defined in section 144C(15); absence of transfer pricing order under section 92CA(3) and non-filing of return excluded the assessee from DRP proceedings, rendering the reference void-ab-initio.Additions under section 69 require that unexplained investments be established after proper inquiry and opportunity; here, the assessee provided detailed documentary evidence showing that funds originated from foreign sources and housing loan, consistent with non-resident status and supported by bank statements and tax returns of related persons.The Tribunal relied on verification of payments matching builder's receipts and cross-checked with information obtained under section 133(6), applying the principle that addition cannot be sustained if the source of investment is satisfactorily explained.The admission of additional evidence was justified as per Rule 29, considering that the documents were not available during reassessment due to compliance with foreign laws on record retention and were essential for fair adjudication.The Tribunal declined to decide on other grounds as the deletion of addition under section 69 rendered them academic.