TMI Blog2018 (6) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... ned during the year 1997. Hence, the circumstantial evidences discussed above including the report of Indian express of 10 February 2015, relied by the learned AO nowhere conclusively establishes that the source of the deposits, since the inception, in the bank account was from India. In view of the above discussion, we do not find any infirmity in the order of CIT(A) for deleting the addition made in respect of deposits in HSBC Account, Geneva in the hands of non-resident assessee - decided against revenue - ITA No.4751/Mum/2016 And 4752/Mum/2016 - - - Dated:- 19-6-2018 - SHRI R.C.SHARMA, AM AND SHRI RAM LAL NEGI, JM For The Revenue : Shri Rajat Mittal For The Assessee : Shri Rohan Shah, Shri Hardik Choksi, Shri Vijay Riyani And Ms. Divya Jeswant ORDER PER R.C.SHARMA (A.M): These are appeals filed by the Revenue against the order of CIT(A) for the A.Y.2006-07 and 2007-08 in the matter of order passed u/s.143(3) r.w.s. 147 of the IT Act. 2. Common grounds have been taken by the Revenue in both the years which pertains to deletion of addition of amount credited in the HSBC Bank account Geneva, Switzerland. The ground taken by the Revenue in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stored. 7. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is an individual who is a non-resident as per section 6 of the Act. The case of the assessee was reopened under Section 147 of the Act and a notice under Section 148 of the Act was issued on 31 October 2014 by Addnl. CIT(IT)-1(1), Mumbai along with reasons for reopening the assessment. The case of the assessee was opened by the AO on the basis of information (called as 'Base Note ) which was received in respect of the assessee from the office of DIT(Inv.)-II, Mumbai pertaining to a bank account with HSBC Bank, Geneva, Switzerland. 5. The learned AO passed the assessment order, after considering the submissions of the assessee. In the assessment order, the learned AO, has made a strong presumption of the amounts in the HSBC Bank account being undisclosed lying therein being sourced from India. In support of this the AO has relied on the circumstantial evidences to decide the matter at hand. In the absence of anything contrary shown by the assessee, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the loords 'definite information' which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of sub-section (2) of section 5 of the Act. As per this section, a person who is a 'non-resident' has to pay tax only on that income which is either received or is deemed to be received by him in India, or accrues or arises or deemed to accrue or arise to him in India, during the year. It is therefore submitted that Mr. Dipendu Shah will be liable to tax only in respect of income received or accrued to him in India. Further, section 9 of the Act, lays down the provisions relating to income which is deemed to accrue or arise in India. As Mr. Dipendu Shah was not having any of his business operations in India during AY 2006-07 and AY 2007-08, there is no income which has either deemed to accrue or arise in India under section 9 of the Act, Thus, the initial contribution or even other amounts in the foreign bank account mentioned by you in the notice does not fall under the purview of section 5(2) read with section 9 of the Act' 21. In view of the above, Mr. Dipendu Shah needs to be first pass the aforesaid test of taxability of non-resident in India. It is a well settled position in law that a 'non-resident', having money in a foreign country cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at any city in USA. Such money being received outside India cannot be taxed under section 5(2) unless it is proved that such money is relatable to the income accrued or arising in India. Therefore, the same cannot be taxed under section 68 merely on the ground that the assessee fails to prove the genuineness and source of such cash credit. Therefore, we are of the considered view that the provisions of Section 68 or 69 would be applicable in the case of non-resident only with reference to those amounts whose origin of source can be located in India. Therefore, the provisions of section 68 or 69, in our opinion, have limited application in the case of non-resident. 24. The Appellant in his affidavit dated 13 October 2011 has clearly stated that the he was a settlor of a trust outside India which he had created for the benefit of his family members with his initial contribution. Further, he has also stated that none of the discretionary beneficiaries have contributed any funds to the said trust. 25. The AO observed that the Appellant has created an offshore discretionary trust out of his own initial contribution and the onus is on him to explain the source of deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with the submissions of the Appellant, that the source of deposits is no where proved by the four instances relied on by the AO being termed as circumstantial evidence. The learned AO has himself observed based on the survey report dated 18 November 2011 that the Appellant had retired from partnership of M/s Kanubhai B. Shah Co. since October 1978. Also, the learned AO observed in the next para that the Appellant became a non-resident as per section 6 of the Act since 1979 which is the year after which he retired from being the partner in the firm. Thus, the addition of undisclosed income of the firm M/s Kanubhai B. Shah : Co. during the FY 2011-12 has no connection with the Appellant, as he was not a partner during this period. In the instant case, even it is seen that the bank account with HSBC Bank, Geneva was opened during the year 1997. Hence, the circumstantial evidences discussed above including the report of Indian express of 10 February 2015, relied by the learned AO nowhere conclusively establishes that the source of the deposits, since the inception, in the bank account was from India. 31. Further, in the assessment order, the learned AO has made additions af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sociation. Learned counsel for the opposite party contended before us that there was no bar to tax being charged on the income in the hands of the association after it had already been charged to tax in the hands of the individual members of that association relying on the fact that in the Income-tax Act there is no specific provision barring such action of charging of tax by the Income-tax Officer. We do not think that any specific provision in this behalf was required. Section 3 of the Act, which is the main charging section, only talks of charging the income of certain persons and does not talk of income-tax being charged on persons. This implies that the charge is to be levied on an income only once. Whether it is to be charged in the hands of one person or another can certainly be determined under section 3 and other relevant provisions of the Income-tax Act Section 3 is clear enough to indicate that the same income cannot be charged repeatedly in the hands of different persons or in the hands of the same person. (Emphasis supplied) This view may be taken to be approved by their Lordships of the Supreme Court in Commissioner of Income-tax v. Kanpur Coal Syndicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since 1979, as per Section 6 of the IT Act. Assessment of the assessee was reopened on the basis of information (called as 'Base Note') which was received in respect of the assessee from the office of DIT(Inv.)-II, Mumbai pertaining to a bank account with HSBC Bank, Geneva, Switzerland. It was submitted by assessee before AO that he is a Non-resident as per section 6 of the Act since 1979. Copies of his passport were also submitted to the AO in order to substantiate his claim of being a non-resident under the Act. Since, he is a nonresident, he submitted that his non-Indian bank account does not fall within the purview of the Act. In support of his claim, he also submitted a duly notarized affidavit stating that He is a Non-resident as per section 6 of the Income-tax Act, 1961 since 1979. He holds a Belgian passport and his current passport number is El 721068. His PAN is BNBPS0099E. No income has either been received or accrued to him in India which was liable to tax under the provisions of the Income-tax Act, 1961 during the Assessment Year 2006-07 and 2007-08. The Indian funds are not the source of amounts deposited in bank accounts held by him o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Act, taxability of a non-resident is determined with reference to the provisions of section 5(2) read with section 9 of the Act. In the instant case undisputedly the assessee is a non-resident since 1979, as per the provisions of Section 6 of the IT Act. The scope of income in case of a non-resident is defined under the provisions of sub-section (2) of section 5 of the Act. As per this section, a person who is a 'non-resident' has to pay tax only on that income which is either received or is deemed to be received by him in India, or accrues or arises or deemed to accrue or arise to him in India, during the year, therefore assessee will be liable to tax only in respect of income received or accrued to him in India. Further, section 9 of the Act, lays down the provisions relating to income which is deemed to accrue or arise in India. As the assessee Mr. Dipendu Shah was not having any of his business operations in India during AY 2006-07 and AY 2007-08, there is no income which has either deemed to accrue or arise in India under section 9 of the Act, Thus, the initial contribution or even other amounts in the foreign bank account mentioned by AO in the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are sourced from India. The CIT(A) also recorded a finding to the effect that the source of deposits is no where proved by the four instances relied on by the AO being termed as circumstantial evidence. The learned AO has himself observed based on the survey report dated 18 November 2011 that the assessee had retired from partnership of M/s Kanubhai B. Shah Co. since October 1978. Also, the learned AO observed in the next para that the assessee became a non-resident as per section 6 of the Act since 1979 which is the year after which he retired from being the partner in the firm. Thus, the addition of undisclosed income of the firm M/s Kanubhai B. Shah : Co. during the FY 2011-12 has no connection with the assessee, as he was not a partner during this period. In the instant case, even it is seen that the bank account with HSBC Bank, Geneva was opened during the year 1997. Hence, the circumstantial evidences discussed above including the report of Indian express of 10 February 2015, relied by the learned AO nowhere conclusively establishes that the source of the deposits, since the inception, in the bank account was from India. In view of the above discussion, we do not find an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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