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TMI Blog2022 (11) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax (Appeals)-57, Mumbai [the learned CIT (A)] for A.Y. 2006-07 in ITA No.494/Mum/2021 are as under:- "1. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in holding that the onus was on the Department in this case to prove that credits in HSBC Bank account were within the taxing provisions of the Indian Income Tax Act. without appreciating that the onus lies on the assessee to prove the contents of the Base note incorrect in view of his refusal to sign the Consent-Waiver Form to bring back the complete bank statements as mentioned in the Base-Note received from the French Government which the AO has relied during the Scrutiny Proceedings? 2. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) has: erred in relying on the decision of DCIT(IT), Mumbai vs Hemant Mansukhial Pandya (100 taxmann.com 280) without appreciating that the decision of Hemant Pandya (supra) was distinguished from the decision of Mumbai ITAT in the case of DCIT(IT) vs Rahul Rajnikant Parikh (ITA NO. 5889/Mum/2016) on certain grounds which are absent in this case and hence, the observations of Hon'ble ITAT Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and prudent to assume that the deposits in HSBC bank account are form his operation of diamond business in India. Accordingly, the deposit represents income from source from India. As assessee has settled in Singapore, where there is no income tax and as per the base note the HSBC account in Geneva was opened on 19th April, 2002. Further, the assessee did not produce bank account statement and the source of deposit therein despite several opportunities, therefore, Income is presumably of the assessee, therefore, assessee has not produced any evidence that the deposits in the said HSBC account are income earned outside India same is required to be taxed in the hands of the assessee. Therefore, the learned Assessing Officer held that the amount as appearing in the 'base note' of the assessee's HSBC account in A.Y. 2006-07 being USD 67,421/- translated to Rs.30,33,945/- added to the total income of the assessee as income deemed to accrue or arise in India for which assessee has not offered any explanation about the source and nature thereof. Consequently, assessment order was passed on 31st March, 2015 under Section 143 read with section 147 of the Act. 07. Assessee aggrieved with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a non-resident since A.Y. 2001-02 and became a citizen of Belgium in 2007, he does not have any business communication. He further followed the decision of the co-ordinate Bench in case of Hemant Mansukhlal Pandya in ITA Nos. 4679 & 4680/Mum/2016 dated 18.10.2018. Therefore, he deleted the addition by the appellate order dated 24th September, 2020. The learned Assessing Officer is aggrieved with the above order. 011. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. At the time of hearing on 18th August, 2022, the learned Departmental Representative was asked to show the 'base note'. On 13th September, 2022, the 'base note' was produced by the learned Authorized Representative which was verified and returned back. 012. The base note also contained the noting that same was shown to the authorized representative of the assessee. This was pointed out to ld. AR. This was fairly agreed that assessee is aware of the contents of the based note. 013. The learned Authorized Representative reiterated the written submission made as under:- ""ISSUES: DEPT. APPEAL 1. Addition of Rs. 30,33,945/- made on basis of base note in hands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthenticity of the Base Note is being challenged because copy of the reasons which were handed over on 15.07.2015 lacked the authenticity inasmuch as the rubber stamp and official seal of the Income tax authority signing the same were missing in the recorded reasons. The appellant had also further asked for supplying the tangible material which was never given to the appellant. (pgs 125-144) Circular No. 3/2012 date: 12/06/2012 (Suppl. Memorandum explaining the amendments Finance Act 2012) Pg. No. 130-131 9. Written application for supply of " recorded reasons" and/or "substantial documentary evidence" was made on 18.05.2016, pg 179 for which the reply from the AO was received on 27/5/2016 pg 180 stating that the same appears in the order rejecting the objections to reopen the assessment in his order dated 17.03.2015. pg 146. This does not have either recorded reasons" and/or "substantial documentary evidence "and hence another written application was made on 08.06.2016 pg 181-182 which has not been responded by the AO. 10. The case papers were transferred to AO vide CIT 19, Mumbai vide his order dated 11.03.2015.(Refer page 145 of the paper book). The AO completed the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (Bom.) (HC)wherein it was held that since reasons as recorded in support of impugned notice to doubt genuineness of gift was not based on any material so as to form belief that assessee's income had escaped assessment on account of gift not being genuine and it was only a suspicion subject to enquiry, impugned reopening notice issued by Ld. Assessing Officer was unjustified. 4. The appellant was never provided with the source and details of information AO was relying on apart from the Base Note under the guise of confidential information which he has referred in his order/Remand report. -Durgo Prashad Goyal 98 ITD 227 (Asr) (SB) that "any general information contained in letter is not relevant material". -Secondly if any document or material is relied by the AO for reopening the assessment the same should be provided to the assessee so as to enable the assessee to meet its case. Kishinchand Chellaram v CIT (1980) 125 ITR 713 (SC). -Tata Capital Financial Services Limited v. ACIT (Bombay High Court) (WP NO. 546 OF 2022 dated February 15, 2022) 5. Recording the reasons for re-opening the assessment merely on the basis of the Base Note without application of independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation Wing of Mumbai and not based upon an enquiry/examination/verification of his own findings. Phool Chand Bajrang Lal (1993) 203 ITR 456 (SC) 12. The AO has violated the mandate of jurisdictional High Court in case of Asian Paints Ltd v/s. DCIT (2008) 296 ITR 96 (Bom) as assessment was completed within 4 weeks after disposal of the objections. Similar view has been taken by Hon. Bombay High Court in Bharat Jayantilal Patel v. UOI (2015) 378 ITR 596 (Bom.)(HC). 13. The Hon'ble Delhi High Court (Full Bench) in the case of Kelvinator of India Ltd, upheld by Hon'ble Supreme Court of India, 320 ITR 561 (SC) wherein Supreme Court interalia held the AO has power to re-open the assessment provided there is tangible material" to come to conclusion that there was escapement of income from assessment. Reason to believe' has to be construed in logical term'. 14. The AO had no such tangible material for the reopening except the photocopy of Base Note which is not justifiable legal evidence. Assessee 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 basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... burden on the Assessee of proving a negative i.e. foreign assets have not been sourced from income arising/ accruing in India. The reassessment proceedings cannot be initiated to undertake a fishing enquiry, especially when there is absolutely no material on record to even suggest that income chargeable to tax had escaped assessment. 20. Reopening is bad in law if there exist no "Reason to Believe" even if there was no original scrutiny assessment. -Ankita A Choksey v ITO [2019] 411 ITR 207 (Bom.) (para 5) -Khubchandani Health Parks Pvt Ltd v ITO (2016) 384 ITR 322 (Bom)(HC) (Para 5) -Sarthak Securities Co. (P) Ltd v ITO (2010) 329 ITR 110 (Del) (HC) 21. The reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. -ITO v. Lakhmani Merwal Das [1976] 103 ITR 437(SC) [Pg 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 instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered in any proceeding under this Act in evidence against him, or against him and any other person who is proceeded against jointly with him, the court or the Adjudicating Authority, as the case may be shall- a. Presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in handwriting of, any particular person, is in that person's handwriting and in case of document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested; b. Admit the document in evidence notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence; c. In a case falling under clause (i), also presume, unless the contrary is proved, the truth of the contents of such document.' 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E ORDER I. It is held by the AO in paragraph 6.2 of the assessment order that; A. "The appellant has his interest in India since his address as per the Base Note is in India". The address mentioned by the AO is the residential address of the appellant in India at which he is assessed to tax in India. (Parents Address). Liability to pay tax in India does not depend on residential address nor on Nationality or domicile of the taxpayer but depend on his residential status under IT Act. B. The AO further mentions that the appellant "is a Director in a company engaged in the Diamond business". The appellant was never in the past and not even till today a Director in any company engaged in the diamond business. The family of the appellant consists of his parents, self and his wife and minor children. C. The AO further also mentions that "family members who are still based in India 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 af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and cold simultaneously viz. he mentions that "in view of the factual position" it is "presumed that the deposits are from his Indian income". 6. The conclusions arrived at by the AO are WHOLLY AND TOTALLY factually and legally incorrect which goes to prove that his finding is vitiated by the reason of his indulging in conjectures, suspicions, surmises, assumptions and presumptions and without any authenticate material to support the same and that, in any case, it was perverse, and therefore it is submitted that the entire reassessment proceedings require to be held as null and void. 7. Even assuming without admitting, the scope of total income in case of a Non resident is enumerated in Section 5 (2). 8. The burden is on the revenue to prove that the income of the non-resident falls within the ambit of such section 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 assumi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the earlier grounds of the present appeal, even otherwise it would be incorrect to include the balance at the end of the accounting year as the alleged income. 18. The revenue is not justified in placing the onus of proving a negative on the Assessee. Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 (SC) [Pg 131-138] The Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. The case of the assessee was that the receipts did not fall within the taxing provision: it was not her case that being income the receipts were exempt from taxation because of a statutory provision. It was 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 lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i were partners inKR Gems, and Navinchand Navalchand & Co. Opera House Mumbai. The Assessment Order is set aside 19. Even the Hon'ble Finance Minister, has clarified that all accounts in foreign banks may not be illegal as they may belong to NRIs. Thus, even the Government has acknowledged the fact that an NRI's foreign bank account is not illegal. In the instant case, since the Assessee is an NRI, the Government does not seek to tax him in India in respect of his foreign bank account. Also, as per the official statement released to the media on 9/2/2015, the Government acknowledged that only residents' holding foreign bank accounts may be actionable. -Even the provisions of the Black Money (Undisclosed Foreign Income and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made in the assessment order are without any basis or evidence available with the learned Assessing Officer. If an income is to be taxed in the hands of non-resident assessee under Section 5(2) of the Act, then the burden is on the ld. AO to show that income of the non-resident assessee is falling within 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. 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 Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of appeals were preferred before the learned CIT (A)-57, Mumbai and by separate orders dated 24th September, 2020, deleted the addition. The main reason for deletion of the addition was deletion of addition by the learned CIT (A) for both the years in the hands of the husband of the assessee namely Mr. Manish Vijay Mehta. Therefore, the learned Assessing Officer has preferred the ITA No. 491 and 492/Mum/2021 for A.Y. 2006-07 and 2007-08 respectively. Assessee has preferred the Cross Objections in Co Nos. 153 & 154/Mum/2021 for both the years respectively. As we have already upheld the orders of the learned CIT (A) in the hands of Mr. Manish Vijay Mehta deleting the above addition and the orders under challenge in the hands of his wife are also identical, for the reason given in appeals related to Mr. Manish Vijay Mehta, we also dismissed the appeals of the assessee in case of M/s Urvi Manish Vijay Mehta. Similarly, both the cross objections are also supportive in nature and therefore, become infractuous and hence, dismissed. 024. In the result, appeals of the learned Assessing Officer and CO of the assessee for both the years are dismissed. 025. In the result, all the appeals o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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