TMI Blog2022 (11) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the definition of income chargeable to tax in his hands. No doubt, base note before us shows the name of the assessee, however, such base note could have been used for income tax in the hands of this assessee only if he would have been resident in India. That is not the case, because assessee is a non-resident accepted by the learned Assessing Officer for last several years i.e. almost 2 decades. The assessee has also produced his Passport which also do not show that he was resident in India in any of these years. It is also clear that foreign bank accounts belong to non-resident Indians cannot be illegal for the reason that non-resident Indians are bound to have their bank accounts outside India. Apparently, in this case, there is no evidence available with the learned Assessing Officer that there is an amount deposited in the HSBC bank by the assessee during the year. In fact, there is no deposit during the year. There is no evidence that such deposit is income of a non-resident under Section 5(2) of the Act. Assessee is assessed to tax year to year basis as non-resident on his Indian income. In view of this, we do not find any infirmity in the order of the learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Parikh (supra) would apply squarely in this case? 3. The Appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored. 03. The facts of the case show that assessee is a non-resident. The information was received by the Government of India from the French Government that some Indian nationals are having foreign bank accounts in HSBC Private Bank SA, Geneva, which were not disclosed to Indian Tax Department. The information was received in the form of document stated to be Base note wherein the various details of account holder i.e. name, date of birth, place of birth, sex, residential address, date of opening of the bank account etc. are mentioned. In the case of Mr. Manish Vijay Mehta such base note was received wherein assessee was found to be having bank account in that bank. The date of opening of the bank account was 19th April, 2002 and the balance shown for A.Y. 2006-07 was USD 67,421/-. The information regarding the assessee of the balance of USD 67,421/- in that bank account was not disclosed to the Income Tax Department and therefore, the case of the assessee was reopened for A.Y. 2006-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Assessing Officer, preferred the appeal before the learned CIT (A). 08. Assessee reiterated the submission made before the learned Assessing Officer and further challenged that Assessing Officer has not disclosed the base information containing in base note stating that same is confidential information and further that the learned Assessing Officer has fallen into grave error in reopening the assessment on the basis of the base note . It was further argued that the base note does not mention any amount deposited during the relevant assessment year and thus, no addition can be made. It was further challenged that the addition has been made on the basis of base note only without any corroborative evidence that assessee has any connection with India. It was further stated that the false allegation are also made with respect to the assessee being a Partner or Director in some firm. The assessee also challenged that the same income is also taxed in the hands of his wife Mrs. Urvi Manish Mehta and therefore, the learned Assessing Officer has doubly taxed the income even otherwise. 09. The learned CIT (A) asked the learned Assessing Officer to submit the remand rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in hands of non-resident. CROSS OBJECTION ASSESSEE: 1. Reopening is bad in law. Non application of independent mind 2. Factual inaccuracy in the order thereby coming to wrong conclusion. 3. Assessee being nonresident not liable to be taxed in India. BACKGROUND OF ASSESSEE: A Assessee has been a Non Resident right from the assessment year 2001 02 till the year under appeal (and even today) which means for a continuous period of last 20 years; b) He has been working as an employee in Belgium; c) He has no business connections in India or outside India; and d) Sources of his income in India are only interest income on FD being duly declared by him year after year to the tax authorities in India. Copies of the returns of income filed for AYS 2003-04 to 2013-14 were filed with AO wherein the residential status was clearly mentioned as NON RESIDENT. AO accept the assessee is nonresident FACTS OF THE CASE: 1. In response to Notice u/s 148 dt 12/3/2014 for AY: 2006-07 AY: 2007-08 the appellant filed copy of the return of income and sought the reasons for reopening of the assessment. Pgs 57-58 59-61 2. Copies of the returns of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 11.03.2015.(Refer page 145 of the paper book). The AO completed the assessment on 31.03.2015, It means, the AO must have either received the files from the earlier jurisdiction with the Report of Inquiries made at their end or the AO must have made his independent inquiry within just a period of 19 days. 11. The first time Notice u/s 142(1) and 143(2) of the Act were issued by AO on 17.03.2015 and therefore in fact the assessment was completed within 13 days from the date of the issue of the Notice viz. on 31 March 2015. It means his inquiry must have been completed in 13 days. It is submitted that the time available to the AO to conduct enquiries was such short and there was not even an iota of evidence which was made available to the appellant in this regard. 12. Further the assessee's raised its objection against reopening vide letter dt 4/8/2014 pg 125-134 which was disposed off on 17/3/2015 pg 146. 13. Submission of assessee before AO vide letter dt 24/3/2015 pg 166-171. 14. Submission of assessee before AO vide letter dt 27/3/2015 pg 172-178 15. Thereafter the AO passed the assessment order on 31/3/2015 making an addition of Rs. 30,33,945 (US$ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22) 5. Recording the reasons for re-opening the assessment merely on the basis of the Base Note without application of independent mind by the AO is void. Base Note did not show that any amount was deposited during the relevant year. -CIT vs. Insecticides (India) Ltd (2013) 357 ITR 330 (Del). -CIT vs. Fair Invest Ltd. (2013) 357 ITR 146 (Del). -Sarthak Securities Co, Pvt Ltd. 329 ITR 110 (Delhi) -Recently in case of Sharvah Multitrade Company Private Limited. v/s. Income Tax Officer Ward 4(3)(1) Anr : [Writ Petition No. 3581 OF 2021; AY 2015-16; dt: 20/12/2021 (Bombay High Court)]. Held that Non application of mind by AO while recording the reasons - Non application of mind by PCIT while granting approval u/s. 151 of the Act rendered the reopening bad in law. 6. The AO didn't had any cogent and credible information or evidence in possession of the either at the time of recording of reasons or at the time of completion of assessment or even if he had, the same was never shared with assessee even at appellate stage. 7. A bare reading of the recorded reasons shows that there is not even a whisper or suggestion therein that information gathered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has demanded time and again put no such material was brought on record. Nor such material was providing during appellate proceeding. 15. The assessment made on the basis of materials not brought to the notice of the taxpayer are violating the principles of natural justice (East Coast Commercial Co. Ltd, 63 ITR 449 (SC)). Even if he collects information from private sources, he is duty-bound to disclose the substance of the enquiry to the assessee before making the assessment. 16. It is submitted that this is against the rule of natural justice and therefore the entire reassessment proceedings require to be held as null and void. Page 179 182 of paper book. 17. It was also incumbent upon AO to independently apply his mind before reopening the Assessment in the facts of the present case for following reasons: (a) The Minister of State in the Ministry of Finance, Shri S. S. Palanimanickam, clarified on the floor of the Lok Sabha on 2/12/2011 that mere holding of an account outside India does not lead to the conclusion that the amount is tax evaded. (b) The White Paper on Black Money introduced by the Government, the following example was given For exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 436-437] - Nivi Trading Limited v. UOI[2015] 375 ITR 308 (Bom.) (HC) (para 22) If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on the facts and law could reasonably entertain the belief, then, the exercise undertaken by the AO in reopening of assessment can be interfered with. 22. Where reopening is done only on the basis of information received from the investigation wing without application of independent mind by Ld AO, reopening is bad in law and same tantamount to roving/fishing enquiry. PCIT v Shodiman Investments Pvt Ltd. (2020) 422 ITR 337 (Bom)(HC) [Original Assessment u/s 143(1)] 23. Base Note relied upon by Ld AO is not admissible in evidence. A. There can be no Reason to believe as the alleged Base Note is unauthorized and unauthenticated and hence it is not admissible evidence. Therefore, the recording of the reasons and consequent section 148 proceedings based on such unreliable evidence are vague in law. The Id Assessing Officer has erred in holding that the alleged Base Note has evidentiary value in as much as the same was unauthenticated and hence conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; Thus unauthenticated base note is not an admissible evidence and re opening on the basis of such unauthenticated and inadmissible base note is bad in law. 24. Explanation 2 to Section 147 has created deeming fiction for income chargeable to tax that has escaped assessment and the fiction doesn't extend to Reason to believe and chargeability to tax . Hence, just because person is found to have any asset outside India would not justify reopening of Assessment. Ingram Micro (India) Exports (P.) Ltd. v DCIT [2017] 78 taxmann.com 140 (Bom)(HC) 7. However, it appears that for Explanation 2(a) of the Act (sic.) to apply, the income chargeable to tax which is deemed to have escaped assessment does not arise simplicitor on not filing of return of income but must also be coupled with the prima facie satisfaction of the Assessing Officer that the income of a person concerned is chargeable to income tax even if it exceeds the maximum amount not exigible to tax. Therefore, prima facie for Explanation 2(a) of Section 147 of the Act to be invoked, the reasons must indicate that the Assessing Officer has applied his mind to the fact that the income is chargeable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia are in the diamond business . The appellant's father who is based in India is not in the diamond business. II. It is held by the AO in paragraph 6.3 of the assessment order that; A. It can be seen that the assessee became a non-resident as per Sec. 6 of the Act since 1979 which is a year after he retired from being the partner in the firm . The appellant was born in 1975 and he became a Non Resident during the assessment year 2002-03 when he was 25 years of age and not 4 years of age, as stated by the AO. Secondly the appellant was never a partner in any firm (let apart a partner in any firm in diamond business). The appellant was not a partner in any diamond trading firm operating in India before he became Non Resident. On the basis of this incorrect data and information AO held B. Thus it is reasonable and prudent to assume that the deposits in his HSBC bank account were from the operations from his diamond business, i.e. representing income source from India. He has settled in Singapore where there is no income tax . AO goes on TO ASSUME that the deposits in his HSBC bank account were from the operations from his diamond business i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. It is submitted that the AO intended to reassess the appellant only on account of an asset located outside India but there is no information about the income in relation to such an asset earned in India. It is reason to believe that may give jurisdiction to reassess the income and not reason to suspect which is the case in the present case. 10. Even assuming without admitting, the extended period of sixteen years for issue of Notice u/s. 148 is available u/s. 149(1)(c) only in case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year. Thus, essential requirements are that b. there should be income. c. the income should be in relation to any asset located outside India. d. the income should be chargeable to tax; and e. such income would have escaped income. 11. The appellant who is a Non resident since last about 15 years to have a bank account outside India is not vital or important information. 12. Under Section 149(1)(c), and for the purpose of reassessment asset located outside is relevant if and only if there is inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s therefore for the department to establish that these receipts were chargeable to tax. DCIT(IT)-3(3)(2) vs. Shri Hemant Mansukhlal Pandya [ITA No. 4679 680/Mum/ 2016 dtd: 16/11/2018] (Mum) (Trib), [ pg 1- 25]: wherein it was held that since the assessee is a non-resident in India since 1990 and has no business connection in India during that period, mere holding of an account outside India does not lead to the conclusion that the amount is tax evaded. It was also held that it is the responsibility of the assessing officer to prove the source of income being connected to India and the assessing officer has failed to do so, as no evidence has been provided by the assessing officer to date. DCIT v Venu Raman Kumar ITA No 2977/M/2018 dtd 19/6/19 (Mum)(Trib)[Pg 54-64 ] DCIT vs. Shri Dipendu Bapalal shah, ITA No. 4751-52/M/2016, (Mum)(Trib) - [Pg 41-53]: the Mumbai Bench of the ITAT has decided an identical issue in favour of the taxpayer and against the Revenue. The facts in that case are identical to that of the Assessee. Mr Kamal Galani v ACIT ITA Nos 138,142,266,267,286,289/M/2019 dtd 10/9/2020 (Mum)(Trib) [P.Book III Pg 1-43] Addition of deposit in foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assets) and Imposition of Tax Act, 2015 is applicable only to residents. As per section 2(2) of the said Act, assessee means a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act, by whom tax in respect of undisclosed foreign income and assets, or any other sum of money, is payable under this Act and includes every person who is deemed to be an assessee in default under this Act. Since the Assessee in the present case is a non-resident, even this law does not apply to him. 20. The AO has taxed the SAME INCOME in the hands of his wife Smt. Urvi Manish Mehta (PAN: AAIPS0073M) independently and making a substantive assessment which amounts to double assessments and double addition resulting into double taxation of the alleged income. 21. In Subsequent year A.Y.: 2007-08 same balance amount carried forward is added back in hands of both assessees. 014. Cross Objections filed by the assessee are on the issue of reopening and on merits. They are merely supportive in the nature. 015. We have carefully considered the rival contentions and perused the orders of the lower authorities. Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o produced his Passport which also do not show that he was resident in India in any of these years. It is also clear that foreign bank accounts belong to non-resident Indians cannot be illegal for the reason that non-resident Indians are bound to have their bank accounts outside India. It is not the intention to tax foreign bank accounts of non-resident but to tax the foreign bank accounts of resident Indians. It is further not clear that how the learned Assessing Officer has also taxed the same income in the hands of his wife. Further, in A.Y. 2007-08, identical amount once again taxed in the hands of the assessee as well as in the hands of his wife. Apparently, in this case, there is no evidence available with the learned Assessing Officer that there is an amount deposited in the HSBC bank by the assessee during the year. In fact, there is no deposit during the year. There is no evidence that such deposit is income of a non-resident under Section 5(2) of the Act. Assessee is assessed to tax year to year basis as non-resident on his Indian income. In view of this, we do not find any infirmity in the order of the learned CIT (A) in deleting the addition of ₹30,33,945/- in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
