TMI Blog2016 (4) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... nce advice of a foreign bank, confirmation of each companies, confirming that remittance were made at the instance of the assessee to whom substantial amounts were owed by them, certificate of incorporation of the said companies, confirmation that the amounts are not loans but were own funds, due from the said companies, thus, in the absence of any adverse material, we affirm the finding of the ld. Commissioner of Income Tax (Appeals). Even otherwise, addition u/s 68 can be made only when the three ingredients, contained in the section, are not satisfied by the assessee. The Revenue has not produced any material that the assessee violated the provision of the Act. Even otherwise, we are satisfied that the assessee has fulfilled the conditions enshrined in section 68 of the Act as identity, capacity and genuineness of the transaction has been satisfactorily explained by the assessee. The assessee has proved the source of receipt of the impugned amounts. We are aware that initial burden is upon the assessee to prove the source of such receipts but once it is discharged, no addition can be made u/s 68 of the Act. Even otherwise, if the Assessing Officer was still not satisfied with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is identical to the ground raised by contending that search action u/s 132 of the Act was carried out on 15/05/2008. The ld. CIT-DR also contended that the issue involved in all the assessment years is identical. It was pointed out that assessee is a resident and original passport was never produced by the assessee before the Assessing Officer. It was fairly agreed by the ld. CIT-DR that assessee was frequently going abroad and original passport was claimed to be lost. It was pleaded that there is contravention of Rule 46-A of the Rules by the ld. Commissioner of Income Tax (Appeals) but when questioned by the Bench and also objected by the assessee, it was again agreed that remand report was sought from the Assessing Officer by the ld. Commissioner of Income Tax (Appeals). Our attention was invited to section 6 of the Act by placing reliance upon the decision in 300 ITR 231 (SC). However, necessary enquiries were made by the Assessing Officer. Reliance was further placed upon the decision in 259 ITR 486 (SC). The crux of argument advanced by ld. CIT-DR is that the passport was not produced. At this stage, Shri Jitendra Sanghavi along with Shri Amit Khatiwala, the ld. counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in DIT vs Manoj Kumar Reddy Nare (2011) 245 CTR 350 (Karn.); (2011) 12 taxman.com 326 (Karn.) order dated 20/06/2011 and ITO vs Fausta C. Cordeiro (2012) 24 taxman.com 193 (Mumbai) order dated 29th June, 2012. The ld. counsel for the assessee also consented that the issue involved in all the appeals are identical. 2.2. We have considered the rival submissions and perused the material available on record. These appeals contains identical issues, were heard together, therefore, being disposed of by this common and consolidated order for the sake of brevity and convenience. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, the facts, in brief, are that the assessee is a non-resident Indian (as per statement of facts filed by the assessee). Undisputedly, his non-resident status was accepted by the Department all along in past as is evident from A.Y. 2005-06. The assessee was regularly filed its return of income in his individual capacity in the status of the non-resident and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated in the written submissions are as under:- Shri Binod Kumar Singh Slo Late Shri M P. Singh an Indian Citizen was born in India on 14.11.1960. After having completed his Higher Secondary Education at St. Xavier's College, Ranchi, Jharkhand, in 1978, was selected by the public sector undertaking MIs Heavy Engineering Corporation Ltd. Ranchi and sent to Soviet Union for further education. After completing the Russian language course at Lomonosova Institute at Kiev in 1978-79, the appellant secured admission at the Odessa Polytechnic Institute Ukraine in 1979, wherein he pursued his studies in Master of Engineering in Radio Technical Engineering. After having passed out from the aforesaid institute in 1984, the appellant did a short stint of working in a trading Pharma Company in Soviet Union. From 1989 to 1995 he worked in a trading company in Ukraine. He, thereafter, he set up his business of a trading House in the Pharmaceutical Sector in Russia, Ukraine and CIS Countries under the name of Trigram International The business venture was successful and consequently the appellant acquired residential properties in Ukraine in 1995 and 1997 The appellant continued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 was not traceable could not locate the same. The appellant with a desire to set up and make investments in India started a Pharmaceutical Company under the name and style of Brahma Drugs Pvt. Ltd which was incorporated in AY 1999- 00. Thereafter Genom Biotech Pvt. Ltd. was incorporated in 2001-02 having its manufacturing plant at MIDC Sinnar, Nasik (India) and its Registered Office at A- 601 / 602, Delphi, Orchard Avenue, Hiranandani Business Park, Powai, Mumbai. The aforesaid investment as also the investments made in acquiring various real estate properties in India were through remittances from Overseas. The investments in India in the Stock Exchange through Demat Accounts were all classified as non-resident. The Period of stay of the assessee in India as computed and verifiable from the original passports, as presently available, detailed ac under:- A.Y. F.Y. Days outside India Days in India Residential Status Remarks 1995-96 1994- 95 337 28 Non Resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 288 77 The Banking Accounts in the name of the appellant and all family were all classified as non-resident detailed as under:- 1 013-055678-006/0074/008 (NRE/NRO/PI) HSBC BANK Plot No.3/1, Eden Square NS Road, No- 10, JVPD, Scheme Juhu Vile Parle(W), Mumbai- 400049 29, Rushden Gardens, Ilfor City, Essex, UK, IG50BP 2 246010100129879/ 246010100125772 (NRO/NRE) AXIS BANK LTD Shop No.17 18, Gr. Flr. Ventura Bldgs, Hiranandani, Business Park, Powai, Mumbai- 400076 9 Hadrian way, Chilworth, Southampton, SO 16 7HZ 3 NJSB000052146 (NRE) Canara Bank New Marine Lines, Mumbai- 400020 STR STARONAVODNITSKAY A 6A, FLAT NO.44, KYIV, UKRAINE 4 10000019132/10000017974 (NRE/NRO) State Bank of India PBB Hiranandani, Hiranandani Complex, Powai, Mumbai STR STARONAVODNITSKAY A 6A, FLAT NO.44, KYIV, UKRAINE 5 01191083075 (SB) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect 7 Tivoli, Flat No. A-2702, B-2702, C-2702, D 2702 (amalgamated) Hiranandani Gardens Near Hiranandani Business Park, Powai, Mumbai 02/03/2004 A-2702, B-2702, C-2702, D-2702 Total- 2,61,60,966/- HSBC Loan ₹ 1,91,00,000 Balance SBI NRO HSBC ₹ 21,00,000/- 8 Office premises-Delphi, 601 602 (amalgamated), Hiranandani Business Park, Hiranandani Gardens, Powai, Mumbai 25/05/2004 601- 1,36,99871/- 602/- 1,37,24,917/- (Joint with Company) HDFC Loan ₹ 3.50 cr. And Direct Remittance from abroad 9 Residential house at Rusden Gardens, Ilfort Essex IGS OBP 20/07/2004 GBP 2,84,000/- (Rs.2.50 crore approx) Partly thru loan by mortgage 10 Residential house in USA at 32, Sand Stone Road, East Windsor, NJ08520 Sept,2005 USD 419,800/- (Rs.2 crores approx) 11 Office Premises No.604 605 (amalgamated) Powai Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue/Service of Notice u/s 153A Date of Issue/Service of Notice u/s 143(2) 1 2003-04 24/07/2008 17/11/2008 / 18/11/2008 2 2004-05 24/07/2008 17/11/2008 / 18/11/2008 3 2005-06 24/07/2008 17/11/2008 / 18/11/2008 4 2006-07 24/07/2008 17/11/2008 / 18/11/2008 5 2007-08 24/07/2008 17/11/2008 / 18/11/2008 6 2008-09 24/07/2008 17/11/2008 /18/11/2008 7 2009-10 NIL 27/04/2010 / 12/05/2010 The period of stay of appellant in India as computed and verified from original passports for A.Y. 2007-08 to 2009-10 as accepted by the AO in the Original assessment order is as under:- Date of arrival Dt. of departure as per immigration seal Previous Year No. of days in India Page no. in the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as against the status of non-resident with a declared income of ₹ 1,98,911/- resulting in an addition of ₹ 19,80,69,0031-. While framing the order, the A 0 has recorded findings as under;- A. Status: Held that clause (b) of explanation to Section 6(1)(c) is not applicable to the appellant. Held that nothing was brought on record to indicate that the appellant is permanently domiciled in UK despite documentary evidence having been filed. Held that the appellant is a resident and ordinarily resident in India liable to pay tax on global income. B. Additions u/s 68 of the Income Tax Act,1961 1 Alleged unexplained deposits in India Bank A/C s through Remittances from abroad. Rs.17,06,95,475 /- 2 Alleged unexplained Remittances from Overseas to Genom Biotech Pvt. Ltd. Rs.93,47,871/- 3 Alleged unexplained deposits in Bank A/c s maintained abroad -Rs.1,72,24,053/- 4 Alleged unsubstantiated liabilities Rs.7,91,604/- Total Rs.19,08,69,003/- The appellant file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n details of arrival/ departure only after November 20, 2005. The AO on the basis of the information received from the said agencies and as per the passport has re-computed the period of the stay of the appellant in India. The relevant excerpts from the information in the table submitted in the report for the AY 2007-08 to 2009-10 is as under: Dt. Of arrival Date of departure No. of days in India (Passport No) and Remarks No. of days as per assessee F.Y.2006-07 01/04/06 13/04/06 13 Z-1023527 12 22/10/06 06/11/06 16 Z-1023582 15 05/12/06 09/11/07 36 Z-1023582 35 25/02/07 31/03/07 35 Z-1023582 34 120 DAYS TOTAL TO READ 100 DAYS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not produced the original passport nos. Z-1023527, A-1280977 was incorrect and in presence of the AO the original passports were again produced. The AO accepted this fact as he stated that he was referring to non-production of the original passports bearing nos.Z-1023582 and U925873. The pointed out that the passport no. Z-1023582 was produced in the assessment proceedings and was not produced during proceedings of additional evidence. The passport no.U-925873 relating to the period ......to 18.06.200 1 was misplaced and neither a copy nor the original could be produced. The Counsel pleaded that the AO, pursuant to the petition for additional evidence was required to examine and submit his Remand Report with respect to the additional evidence sought to be admitted by the assessee under rule 46A. However, after receipt of the petition for additional evidence, instead of restricting the inquiry / investigation with respect to the additional evidence has unlawfully started re-examination of the status by making enquiries from FRRO Mumbai FRRO Delhi and Central Foreigners Bureau Delhi. The assumption of powers and jurisdiction under section 133(6) was not in accordance with law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority-held yes. Smt .Prabhavati S.Shah Vs CIT (Born) 2311TR 1 Production of additional evidence -Assessee taking loans from 2 creditors -ITO treating loans as Income from undisclosed sources as summons could not be served on creditors - ITO treating loans as income from undisclosed sources as summons couldn't be served on creditors -Assessee wanting to genuineness of loan by relying on fact that amount borrowed and repaid be cheques-Assessee producing additional evidences but AAC refused to admit-AAC should have considered it -Matter Remanded. ITO Vs Bajoria Foundation (Cal) 2541TR 65 Appeal CIT (A) -Powers of CIT (A)-Powers of CIT (A)-Power to admit additional evidence -Effect of sec 250 and rule 46A-No opportunity for trust to present evidence-CIT(A) justified in admitting the additional evidence. 3.20 Thus, having regard the submissions of the Counsel and the AO, and considering the report of the AO, I admit the additional evidence as submitted by the appellant as same goes to the root of the matter and is necessary for reaching a decision on the case. 4. Additional Ground:- That the Lid. A 0 has erred in computing the period of stay in India by in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly residing in India and undertook visits abroad. (iv) Holding that nothing was brought on record to indicate that the appellant was permanently settled abroad. 1 7 That while determining the status of the appellant as resident and ordinarily resident' the Learned A. 0. has failed to consider the period of stay of the appellant in India in the preceding nine / seven years, nor appreciate the provisions of Section 6(6). The AO has dealt with the issue relating to residential status at para 19 of order. TheAO has on the basis of the passport prepared a tabular chart stating the period of stay in India commencing from October 1, 2003 as the tort for the earlier period was not available. The AO has mentioned that records at para D, Page 20 of the order states as under:- In this case under consideration for F.Y.'s 2002-03, 2001- 02, 2000-01, 1999-00, no information has been submitted by the asses see, therefore in the absence of information his claim of NRI cannot be entertained. Records at Para 1, Page 23 of the order states that assessee can claim the benefit of relaxation provided in Explanation (b) only when it is established that the assessee is permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the period of stay for financial year 2002-03, 2001-02, 2000-2001 and 1999- 2000 and hence NRI status cannot be granted. The AO also invited intention of the appellant to explanation B of section 6(l)(c). The AO also held that the word Visitor means who comes and goes or meets a person but a person who has a residence and place of work in India cannot be treated as a visitor. The appellant has residence, place of work, parents stay in India and have not submitted any evidence to prove that why he is being outside in India and comes on a visit to India. However, AO held that the relaxation is available to a person who is outside India and is not available to person who has permanent residence in India and also place of work. The visa of the appellant has captioned a 'Residence Permit' and is an investor visa read as Tier I (Investor) Migrant. The date of issue of the visa is March 18, 2009. The assessee has furnished copies of certain documents to support his claim that he was domiciled in UK during the financial year 2002-03 to 2008-09. The documents relate to school certificate of his daughter, son, electricity bills, club card and property documents. These do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India in that year for a period or periods amounting in all to one hundred and eighty two days or more; or Having within the four years preceding that year been in India for a period of periods amounting in all to three hundred and sixty five days or more, is in India for a period or periods amounting in all sixty days or more in that year. Explanation-In the case of an individual:- Being a citizen of India, who leaves India in any previous year [as a member of the crew of India ship ..........I for the purpose of employment outside India, the provisions of sub- e (c) shall apply in relation to that year as if for the words sixty days the words one red eighty two days had been substituted Being a citizen of India or a person of Indian Origin within the meaning of Explanation to e (e) of Section 115C, who, being outside India, comes on a visit to India in any previous year, the provision of Sub-Clause (c) shall apply in relation to that year as if for the words sixty days occurring therein, the words one hundred and eighty two days had been substituted . In accordance with the provision aforesaid the residential status based on the physical presence in India is div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6 have been made by The Direct Tax Laws (Second Amendment) Act, 1989 - New Explanation has been substituted in Section 6(1)(c) for the then existing Explanation, with effect from 1st April, 1990, i.e. for and from Assessment Year 1990-91. On a comparison of the two Explanations, it may be seen that clause (a) of the new Explanation is, in substance, the same as clause (a) of the then existing Explanation. Clause (b) of the new Explanation also takes within its ambit a person of Indian origin within the meaning of Explanation to Section 115C(e). The scope and effect of these amendments have also been elaborated in the following portion of the departmental Circular No. 554 dated 13.02.1990, as under:- 'Liberalization of the criterion for determining the residential status in the case of non-resident Indians - Under the provisions of the Income-tax Act, 1961, an individual who is resident in India is taxable on his global income, i.e. in respect of income accruing or arising in India as well as outside India. Prior to the amendment by the Second Amending Act, 1989, a citizen. of India who was outside India and came to India on a visit in any previous year was held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring their visits, upto one hundred and eighty-one days in a previous year. The judicial authorities have had occasion to consider the implications of Section 6 of the Income Tax Act read with various Explanations which are as under: CIT Vs Avtar Singh Wadhwan, 247 ITR 260 (Born.) Section 6 indicates the meaning of residence in India. Section 6 lays down that for the purpose of the Income Tax Act an individual is said to be resident in India if he is in India for a prescribed period. Therefore section 6 emphasis physical presence of the person in India . ITO V/s. Dr. M.P. Konan Halli 55 lTD 266 Clause (a) of Explanation to Section 6(1) is intended to cover cases of Indians who go out of India for securing employment or being employed outside India during the relevant previous year only. If somebody is already settled abroad, his case is not covered by Clause (a) but falls within purview of Clause (b). ShriAnurag Chaudhary V/s. CIT(AAR) 839 / 2009 dated 11.02.2010 Section 6 sub-section (1), which determines the residential status of an individual, requires that either the applicant should have been in India for 182 days or more in four preceding years [vide clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hruv Choudhrie, Appeal No. 90/0809. A. Y. 2005-06 The Commissioner of Income Tax (Appeals) -XXIX, New Delhi vide Order dated 03.07.2009 on facts which are similar to that of the appellant has after due analysis of the provisions of Section 6 of the Income Tax Act recorded a finding that residential status is determined on the basis of physical presence of an assessee in India. Sudhir Sareen Appeal No. 490/09-10 CIT (A)-1, New Delhi. Order dated 31.03.2011 Held, on identical facts Para 1.9 The Legislature has been granting the benefit of extended stay to Indian Citizen / PlO's ..........period has been extended from 60 days to 181 days with the principal objective of granting more time to stay during each of the frequent visits to India to Indian Citizens / PIO residing abroad to manage their affairs in India. This has been clearly brought out by the various Circulars by the Central Board of Direct Taxes at each relevant time. It is also settled law that the Circulars of the CBDT are binding on the Revenue Officers. Similarly, in case a provision of law is possible of two opinions, the interpretation beneficial to the assessee is to be followed. Para 1.9.1 Held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yed in the execution of the Income Tax Act. Even if the Circular may amount to a deviation of a point to law conferring benefit to a assessee the same is binding on the department. Relying on the aforesaid judgments, the appellant submits that the Assessing Officer erred in rejecting the appellant's claim based on the Circular No. 684 of 1994 explaining section 6(1)(c) r.w. Explanation to Clause (e) to section 115C of the Income Tax Act, 1961. The status of the appellant, therefore, should have been considered as Non Resident. The decision of the Assessing Officer in this respect may be annulled. I have considered the submissions of the appellant and the order of the AO. The gist of the finding of the AO is as under: Clause (b) of explanation to section 6(1) (c) is not applicable to the appellant. The Complete details of his stay in India for 4 years prior to assessment year 2003-04 were not furnished. No evidence that the appellant is domiciled in UK. Therefore, the appellant is Resident and ordinarily resident in India and liable to tax the Global Income of the appellant. The period of stay of the applicant in India for the A.Y.2007-08 to 2009-10 are admittedly le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort (current/ expired) including any additional booklets issued Latest identical coloured passport size photographs (four). There is a coin-operated Photo Me machine installed in the Public Hall of the Consulate building (1st floor) which gives photographs of the required size at a charge of 3.50. This facility is open to public on all working days of the Consulate during the public hours. Self-addressed special delivery envelope (in case return of passport is desired by post) Fees The above clearly shows that passport could be issued to an Indian National by Indian Embassy in any country. Accordingly, the appellant was issued such passport by Indian Embassy 'in Kyiv, Ukraine and from London. This shows that the appellant was not in India at that point of time and was in Ukraine and United Kingdom. The learned counsel in order to establish that the appellant was settled abroad has filed and pleaded:- That the appellant was initially residing in Ukraine in a property purchased by him in 1975, evidence of purchase of property Flat No. 44, House No. N-6A, Staronavodnytskaya Street, apt. 44, Kyiv till shifting to UK in 2002-2003. The minor daughter was undergoing ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he preceding four financial years qualifies as a 'Resident' of India. This has been relaxed and can be extended to 182 days. Not meeting this criterion qualifies the individual for a non-resident status. NRIs based outside India can continue to enjoy non-resident status in India if their presence in India is more than 60 days but less than 182 days, even if their stay in India during the past four financial years is 365 days or more Having been deputed overseas for over 6 months also qualifies an individual for NRI status. The relaxation to 182 days applies to: Indian crew members sailing overseas on Indian ships - their stay abroad is treated as employment outside India In the case of Indian citizens as well as in the case of Persons of Indian Origin who are settled abroad but visit India for personal reasons. The concession of extended stay is available only to Indian citizens or to persons of Indian origin A Person of Indian origin is a person who is not an Indian citizen, but was born, or either of his parents or grandparents was born in India. In the case of C.N. Townsend vs. CIT [1974] 97 ITR 185 (Pat) is was held that if any of the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resident as his stay during the relevant previous year exceeded 60 days and stay during the four years immediately preceding the relevant previous year was more than 365 days. During the course of proceedings before the ITAT, an alternative contention was raised on behalf of the assessee. It was contended that period of 60 days referred to in section 6(1)(c) of the Act should exclude the period of stay in India while on a visit and that non-acceptance of this contention would lead to an absurd result Two examples were given in this regard: Example A: A person (citizen of India / PIO) who comes on a visit to India and stays in India for 120 days would be treated as non-resident, as the threshold in his case for being treated as resident in India would get extended to 182 days instead of 60 days by virtue of clause (b) of the Explanation. Example B: If a person (citizen of India /P10) comes on visit and stays in India for 90 days and returns abroad and later on comes back to India permanently and he stays in India for a period of 30 days, he will become a resident according to A 0. In this case, the threshold would not get extended to 182 days as the assessee has come back to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 6 (1) (c), the period of visit to India would be excluded and assessment shall be done considering his status as 'non-resident'. The above said finding of fact, cannot at all said to be perverse and arbitrary as it is well-founded and all the material available have been taken into consideration by the Appellate Authority and the Tribunal. Therefore, no substantial question of law arises for consideration in this appeal. Accordingly, appeal is dismissed. It is now relevant to understand the meaning of the word 'visit' and the context in which the same has been used in the explanation (b) to section 6(1)(c). As per Income Tax Act, first it should be determined whether a person is a resident or a non-resident. If a person is a nonresident, then one has to see whether a person is an NRI or not. Graphically, the position can be explained as under Person Resident or Non-resident NRI OR Non-NRI As per the income tax act - section 6(1), it is the number of days which determine the residential status. A person is considered as a non-resident for the previous year (he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SIT Synonyms: call (on or upon), drop in (on), see Antonyms: avoid, shun In the instant case, the AG has held that the visit to India cannot be for the purpose of looking after his business and stay at his own home/residence in India. However, in the absence of the definition being provided of the word 'visit' in the Indian Income Tax Act, 1961, the above definition can be adopted. The above definition covers the business, social, inspection, temporary visits. Therefore, it can safely be said that the purpose of visit is immaterial as far as the Income Tax Act is concerned. In the case of Pradip J. Mehta vs CIT (2002) 175 CTR 394 (Guj) it was held on 3 May, 2002, as under: From the condition of not being resident in India in nine out often preceding years laid down in sub-section (6) of section 6, it does not automatically follow that for being ordinarily resident in India, one should be resident in India for eight years. A resident in India will be an ordinarily resident in India unless he qualifies to be a 'not ordinarily resident in India' under section 6(6)(a). Ordinary residence is the country where a person normally lives or makes habitual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition is that he should not have during the seven years preceding that-year, been in India for a total period of seven hundred thirty or more days. The Tribunal has found as a fact that the assessee was a resident in India for eight years out often preceding years and his case, therefore, cannot fall under the first part of clause (a) of subsection (6) of section 6 of the Act. His case will also not fall in the second part of that clause, because, in the seven years preceding the relevant previous year, the assessee had been in India for o ze thousand four hundred and two days, i.e., much more than seven hundred thirty days being the upper limit referred to in that clause. For the above reasons, we are of the opinion that the Tribunal was justified in holding that the status of the assessee for the year in question was not that of not ordinarily resident as claimed by him, and that it has not committed any error in interpreting the provisions of section 6(6) of the Act. The question No. I referred to us is therefore answered in the affirmative in favour of the revenue and against the assessee and the question No. 2 is answered in the negative in favour of the revenue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after, along with his family, he shifted to England but his business interest continued in Ukraine, Russia and CSI countries. Thereafter, the assessee acquired further properties in UK, the addresses of which are provided in para 1.3 of the said letter. Thereafter, the assessee continued his business in Ukraine and his primary source of income was business ventures/investment made in Ukraine, USSR and CSI countries and Cyprus. 2.5. Now, we shall deal with the allegation of the Department that original passport was never produced by the assessee. As is evident from the record and the remand report sought by the ld. Commissioner of Income Tax (Appeals) from the Assessing Officer, it is evident that in fact, the assessee produced the original passport before the Assessing Officer and also before the ld. Commissioner of Income Tax (Appeals), the details of which are summarized hereunder along with their validity:- Sr. No. Passport No. Place of issue Validity 1. R-691005 KIEV /UKRAINE 30/06/1994 to 31/08/1998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997-98 337 28 Non-Resident 1997-98 1998-99 346 19 Non-Resident Passport for period 1st Sept. 1998 to 18th June 2001 not traceable at present. No. of days computed for the period 1st April 1998 to 31st August 98. 1998-99 1999-00 N.A. N.A. Passport for period 1st Sep. 1998 to 18th June, 2001 not traceable at present 1999-00 2000-01 N.A. N.A. Passport for period 1st Sep. 1998 to 18th June, 2001 not traceable at present 2000-01 2001-02 N.A. N.A. Passport for period 1st Sep. 1998 to 18th June, 2001 not traceable at present 2001-02 2002-03 215 150 Passport for period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 12/02/1996 3 08/03/1996 to 15/03/1996 7 20/15/1996 to 17/01/1997 28 28 1997-98 01/05/1997 to 08/05/1997 7 19 1998-99 24/07/1997 to 31/07/1997 7 22/09/1997 to 27/09/1997 5 17/04/1998 to 24/04/1998 8 39 1999-00 CIT(A) order of A.Y. 2003-04 Pages 12 13 10/071998 to 17/07/1998 8 29/12/1998 to 20/01/1999 23 8/4/1999 to 19/4/1999 11 123 2000-01 CIT(A) order of A.Y.2006-07 Pages 7 8 28/6/1999 to 1/9/1999 65 18/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) order of A.Y.2006-07 Pages 7 13 31/07/2005 to 05/09/2005 36 25/11/2005 to 28/11/2005 3 07/12/2005 to 08/01/2006 32 10/01/2006 to 03/02/2006 23 12/02/2006 to 28/03/2006 44 29/03/2006 to 31/03/2006 2 01/04/2006 to 13/04/2006 12 96 2007-08 22/10/206 to 06/11/2006 15 05/12/2006 to 09/11/2007 35 25/02/2007 to 31/03/2007 34 01/04/2007 to 18/04/2007 17 173 2008-09 CIT(A) order of A.Y.2008-09 Pages 9, 10 11 27/04/2007 to 13/05/2007 16 08/07/2007 to 11/08/2007 34 19/08/2007 to 16/09/2007 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 174 Non-Resident Not applicable 2006-07 2005-06 209 Resident Yes resident but not ordinary resident (refer note (ii) 2007-08 2006-07 96 Non-Resident Not applicable 2008-09 2007-08 173 Non-Resident Not applicable 2009-10 2008-09 75 Non-Resident Not applicable The assessee before the authorities put the following notes:- i. The assessee is an individual, citizen of India/person of Indian Origin, who comes on a visit to India , the provision of sub-clause (c) shall apply in relation to any year as if for the words sixty days the word one hundred and eighty two days has been substituted, therefore, in terms section 6 (1)(c), even if assessee is within India for a total of 365 days in four years preceding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.] If the factual position and the aforesaid provision of the Act are kept in juxtaposition, the incidents of tax depend upon the residential status of the assessee in India. In case of Non-resident only income arose in India i.e. income received or deemed to be received in India are taxable in India. Foreign income is not taxable in India. Business income in case of business, which is controlled wholly or partly from India (a) Income from profession/business set up in India. In case of a resident assessee , the income arising in India and foreign income are taxable in India. 2.9 So far as, the contention of the ld. CIT-DR that there is violation of Rule-46A of the Rules and further no opportunity was provided to the Assessing Officer is concerned, we note that the details, filed by the assessee, were examined by ld. Commissioner of Income Tax (Appeals) along with the contention of the Assessing Officer, who was very much present before the ld. Commissioner of Income Tax (Appeals) during first appellate stage proceedings as is evident from the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the assessee refused to explain the source and the nature of the remittances, therefore, the ld. Assessing Officer treated the remittance as unexplained credit u/s 68 of the Act and added to the total income of the assessee. The stand of the assessee is that necessary details were filed by the assessee before the Assessing Officer and if he was not satisfied with the explanation of the assessee, he should have asked for further details. We note that before the ld. Commissioner of Income Tax (Appeals), the assessee filed additional evidence in support of the remittances, which are as under:- (a) copy of HSBS Bank India FIRC in support of remittance of ₹ 13,57,72,439/-, received in India, in NRE Account of the assessee from a foreign bank account (b) copy of confirmation of ₹ 2,01,03,572/-, received from M/s Selesta Hoing Ltd. against the amounts owed by M/s Biogenetica ltd. (subsidiary of M/s Selesta Hoing Ltd.) to the assessee along with funds transfer advice from bank of Cyprus and FRIC issued by HSBC Bank, India. (C) copy of FRIC, issued by Axis Bank, India, in support of remittance of ₹ 18,08,83,727/-, received in India from foreign bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only when the three ingredients, contained in the section, are not satisfied by the assessee. The Revenue has not produced any material that the assessee violated the provision of the Act. Even otherwise, we are satisfied that the assessee has fulfilled the conditions enshrined in section 68 of the Act as identity, capacity and genuineness of the transaction has been satisfactorily explained by the assessee. The assessee has proved the source of receipt of the impugned amounts. We are aware that initial burden is upon the assessee to prove the source of such receipts but once it is discharged, no addition can be made u/s 68 of the Act. Even otherwise, if the Assessing Officer was still not satisfied with the explanation of the assessee, then the onus shifts to the Revenue to prove otherwise, consequently, we find no merit in the argument of the Department with respect to the impugned ground. The stand of the ld. Commissioner of Income Tax (Appeals), on this issue, is affirmed. 4. The next ground raised by the Revenue pertains to deleting the addition of ₹ 15,44,72,906/- made u/s 68 of the Act. The crux of argument advanced on behalf of the Revenue is in support to the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hata vs CIT (2008) 301 ITR 134 (MP) iv. CIT vs SMC Share Brokers Ltd. (2007) 288 ITR 345 (Del.) 4.4. The crux of the ratio laid down by Hon ble High Courts and also by Hon ble Apex Court are that the assessment proceedings are part of judicial process, thus, attract principle of natural justice and any evidence which is put forth against the assessee has to be confronted to the assessee subject to right of cross examination. The relevant portion of facts and decision in the case of Prakashchand Nahata (supra) is reproduced hereunder:- On a bare reading of the said provision it is manifest that the same empowers the Income-tax Officer to enforce the attendance of any person and examine him on oath. That power has been exercised by the Assessing Officer in the assessment proceeding. It is contended by Mr. Shrivastava that when a witness has been examined by the Assessing Officer and his statement has been pressed into service, the assessee should have been allowed to cross-examine, more so, when, he had filed an affidavit retracting from his earlier statements. 4.5. In P.S. Abdul Majeed v. Agricultural ITO and STO , the High Court of Kerala took note of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-tax (Appeals) and a contention was raised that request to cross-examine the analyst had not been allowed. The Commissioner of Income-tax (Appeals) accepted the contention of the assessee and concluded that the Assessing Officer had wrongly avoided granting permission to the assessee to cross-examine the analyst and held that the order of assessment is vitiated in law. 4.9. In the case of Prakashchand Nahata (supra) the Revenue preferred an appeal before the Tribunal and the Tribunal dismissed the appeal on the ground that in the absence of grant of permission to cross-examine the analyst who had prepared the test report the order of assessment was vulnerable. Against the order of the Tribunal the Revenue approached Hon ble High Court, wherein, while dismissing the appeal, filed by the Revenue, has held as under (page 108): There is no doubt that even if the strict rules of evidence may not apply, the basic principles of natural justice would apply to the facts of the case. The Assessing Officer placed reliance upon the report of the Shri Ram Institute for Industrial Research for deciding against the assessee. The report cannot be automatically accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in compliance with the principles of natural justice. The Hon ble High Court of Madhya Pradesh concluded as under:- In view of the aforesaid we answer the reference holding that as the Assessing Officer had not summoned Mohd. Rashid, the proprietor of M/s. Rashid and Co., Jabalpur, in spite of the request made under Section 131 of the Act, the evidence of the said Mohd. Rashid could not have been used against the assessee and in the absence of affording a reasonable opportunity of being heard by summoning the said witness the assessment order is vitiated and cannot be saved as the addition has been made on the foundation of his deposition. In the result, we answer the reference in the affirmative in favour of the assessee and against the Revenue. There shall be no order as to costs. Since, the assessee is a non-resident during the year, the amount found deposited in the foreign bank cannot be held to be taxable in India, hence, in view of the foregoing decisions and the uncontroverted factual matrix, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals), on this issue, and affirmed the same. 5. The next ground raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax (Appeals), which was claimed to be additional evidence by the Department:- property at 9HZ, Hadrian Way, Chilworth, Southampton, U.K. (GBP 7,75,000)-Rs. 7,00,00,000/-. Copy of Loan Sanction Letter (4,80,000 GBP) for purchase and against hypothecation of the property at 9HZ, Hadrian Way, Chilworth, Southampton, U.K. being part of the source for the purchase. Copy of Loan Sanction Letter (2,11,200 GBP) for purchase of the aforesaid property and against hypothecation of property at 29, Rushden Gardens Ilford, Essex, U.K. being part of the source for the purchase. The appellant in respect of addition u/s 69 of the Act relating to Residential House at 3 Civic Way, Ilford. (GBP 284000)-Rs.1,25,00,000/- has submitted that the Assessing Officer has without verification on facts, framed the assessment without application of mind, in a hazard manner, made the impugned addition ignoring the critical fact that the property was purchases in A.Y. 2003-04 as evidenced by copy of sale Deed placed on record, which has also available with the Assessing Officer. Thus, this addition is wholly opposed to facts and law. In any case the assessee has also placed on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee were opened and operated in the status of non-resident . This factual matrix was also consented to be correct by the Department. It is also noted when any accounts in the status of non-resident are opened at that stage even the bank authorities analyze the passport and other documents of the assessee. We further note that for initial years, the status of the assessee as non-resident was accepted by the Department itself. During hearing, the ld. CIT-DR, fairly admitted that for A.Y. 2005-06, the assessee was assessed as non-resident, therefore, without bringing any contrary material, on the principle of consistency also, the assessee is having a case in its favour as consistency has to be maintained. So far as, the date of arrival and departure are concerned, both these dates are to be excluded while counting the stay in India, for which we are fortified by the decision from Hon ble Karnataka High Court in 245 CTR 350 (Karnataka) DIT(IT) vs Manoj Kumar Reddy (2011) 201 taxman 30(Kar)-(2011) 12 taxman.com326 (Kar) and ITO vs Fausta C. Cordeiro (2012) 24 taxman.com 193 (Mum.). So far as, the issue of consistency is concerned, it has to be followed, for which, we have fortif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made elaborate discussions on facts on the issues in hand in preceding paras of this order, therefore, on the same reasoning, we find no merit in this appeal also, therefore, dismissed. 9.1. The Cross Objection no.150/Mum/2013 (against the ITA No.4598/Mum/2012) was not pressed by the ld. counsel for the assessee, therefore, it is dismissed as not pressed. 10. So far as, the appeal of the Revenue for A.Y. 2003- 04 (ITA No.5530/Mum/2012) is concerned, identical ground have been raised, therefore, on the same reasoning as discussed in preceding paras of this order, on identical facts/grounds, this appeal of the Revenue is dismissed. It is also noted that for A.Y. 2003-04, the status of the assessee was non-resident and was accepted by the Department. 10.1 So far as C.O. No.212/Mum/2013 (against the ITA No.5530/Mum/2012) is concerned, it was not pressed by the ld. counsel for the assessee, therefore dismissed as not pressed. 11. Identical is the situation for the appeal of the Revenue in ITA No.5531/Mum/2012 (A.Y. 2004-05), therefore, on the same reasoning, we find no merit in this appeal also, therefore, dismissed. 11.1 Identically, C.O. No.213/Mum/2013 (A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narily resident . On reading the corresponding provisions in the two Acts, it seems that there is little substantial change in the provisions. Clause (a) makes an individual not ordinarily resident if he has not been resident in India in nine out of the ten preceding previous years or has not, during the seven preceding previous years, been in India for a total period of at least 730 days or more. Clause (b) makes a Hindu undivided family not ordinarily resident if its manager* has not been resident in India in nine out of the ten preceding previous years or has not, during the seven preceding previous years, been in India for a total period of at least 730 days or more. Although the change is there in the phraseology, there is no change in the prescriptions. Section 4B(c) of the 1922 Act, which did not make any distinction between a resident and resident but not ordinarily resident , in the case of a company, firm or other association of persons, finds no place in the 1961 Act. In the facts of Dr. Surmukh Singh Uppaz v. CIT [(1983) 144 ITR 191 (Punj)], a case under the 1922 Act provisions it was held that the status of the assessee was correctly taken as 'resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less he satisfies both the conditions in section 4B(a), i.e.,- (i) he must have been a resident in nine out of ten preceding years; and (ii) he must have been in India for more than two years in the preceding seven years. Thus, a person will be resident and ordinarily resident if both these conditions are satisfied but he will be resident but not ordinarily resident if either of those conditions is not satisfied.' Thus, a person will become resident and ordinarily resident only if (a) he has been 'resident' in nine out of ten preceding previous years, and (b) has been in India for at least 730 days in the seven preceding previous years; and he will be treated as resident but not ordinarily resident if either of these conditions is not fulfilled [Advance Ruling Application No. P-5 of 1995, In re, (1997) 223 ITR 379, 385 (AAR)]. In the facts of that case, it has been held that the applicant will have the status of a resident but not ordinarily resident for assessment years 1996-97 to 2004-05. Also see, Advance Ruling Application No. P-12 of 1995, In re, (1997) 228 ITR 61,66 (AAR). In Morgenstern Werner v. CIT [(1998) 233 ITR 751, 755 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the High Court was of the opinion (p. 657) that the Tribunal was justified in holding that the status of the assessee for the year in question was not that of 'not ordinarily resident' as claimed by him and that the Tribunal has not committed any error in interpreting the provisions of section 6(6). Reversing the decision of Gujarat High Court [256 ITR 647 (Guj)], in Pradip J. Mehta v. CIT [(2008) 300 ITR 231 (SC)], it has been held that the assessee was 'not ordinarily resident' in India within the meaning of section 6(6)(a) as he was not resident for 9 out of 10 years. A person would become an ordinary resident only (1) if he had been residing in India in 9 out of 10 preceding years, and (2) he had been in India for at least 730 days in the previous seven years. Effect of the substitution (w.e.f. 1-4-2004) of section 6(6) by the Finance Act, 2003.-Section 6(6) has newly been substituted (w.e.f. 1-4-2004) by the Finance Act, 2003 (32 of 2003) [for the text of so-substituted section 6(6), see, ante]. On a comparison of the phraseology employed in the then existing section 6(6), and the newly substituted section 6(6), the following points of dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-clause (a) or (b) of clause (6) of section 6, that the two conditions contemplated in those sub-clauses are alternate and these are not cumulative. The fulfillment of either of the conditions would be sufficient to treat an individual or a Hindu undivided family as 'not ordinarily resident' in India. Section 6(6) was amended by the Finance Act 2003, with effect from 1-4-2004. As a result of the said amendment, an individual though resident, is not ordinarily resident in any previous year: (1) either where he has not been resident, i.e., has been a nonresident in 9 out of 10 previous years preceding that previous year; (2) or where he has not been in India (i.e., has been absent from India) for 730 days or more during the seven previous years preceding that year. Even though the Departmental Circular No. 7 of 2003 states that the amendment was made in order to remove doubts about the interpretation of the section and it is clarificatory in nature, nevertheless, it has been made applicable only from 1-4-2004. The said amendment cannot be held to be clarificatory, as the residential status of an assessee determines the tax burden of the assessee. Thus, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
