9911796707
TMI Blog2023 (2) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory time limit. We, therefore, condone the delay and admit the Cross Objection for adjudication. 3. The Revenue has raised the following grounds of appeal: "1 The Ld. CIT (A) has erred on facts and law by deleting an addition of Rs. 1,73,77,481/-made on account of unexplained money by Assessing Officer under section 69A of Income Tax Act 1961. 2. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in estimating profit of Rs.13,90,198/- which is 8% of total cash deposit and consequently allowing the relief of Rs.1,59,87,283/- to the assessee treating the amount of cash deposit of Rs.1,73,77,481/- as turnover of out of book business. 3. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in not appreciating the fact that in the cash flow statement/ cash book submitted before the Assessing Officer the assessee has shown opening cash balance of Rs.81,93,269/-as major source of cash deposit whereas no return was filed and no books of accounts were maintained by the assessee and hence source of cash in hand could not be established. 4. Without prejudice to the merit of the case; considering the entire cash deposit of Rs.1,73,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73,77,481/- as unexplained money under section 69A of Income Tax Act 1961; the Ld. CIT (A) erred in law and facts by deleting the disallowance of Rs.28,27,141/-on account of interest and bank charges while estimating the net profit at 8% of cash deposit transactions which applied normally as net profit without further deduction on account of other expenses including depreciation and interest. 11. Without prejudice to the merit of the case; considering the entire cash deposit of Rs.1,73,77,481/- as unexplained money under section 69A of Income Tax Act 1961; the Ld. CIT (A) erred in law and facts by deleting the disallowance of Rs.28,27,141/-on account of interest and bank charges while estimating the net profit at 8% of cash deposit transactions by holding an income of Rs.13,90,198/- and gave a deduction of Rs.28,27,141/- from the profit estimated @8% on cash deposit of Rs.1,73,77,481/- 12. Without prejudice to the merit of the case; considering the entire cash deposit of Rs.1,73,77,481/- as unexplained money under section 69A of Income Tax Act 1961-the Ld. CIT (A) erred in law and facts by not initiating and / or imposing penalty u/s271A of Income Tax Act 1961 for failure to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onse, the assessee submitted that the source of alleged cash deposit is the cash withdrawal made from his bank accounts during the year and in the preceding years. Thereafter, notice u/s 148 of the Act issued and in compliance the assessee filed e-return on 13.03.2018 declaring income of Rs. 1,96,080/- subjected to normal tax and Rs. 18,05,847/- included in income chargeable to special rate of tax. Subsequently, notices u/s 143(2) & 142(1) of the Act were duly served upon the assessee. Thereafter, ld. AO called for details of the cash deposited during the year to which necessary submissions were made to prove that there were regular cash withdrawals from the bank and the assessee had sufficient cash in hand to explain the deposit. Ld. AO also noticed that the assessee gave interest free financial assistance to M/s. Soham Shipping Pvt. Ltd. Ld. AO, thus, was not satisfied with the submissions filed by the assessee and made the addition for unexplained money u/s 69A of the Act at Rs. 1,73,77,481/-. Further, ld. AO noticed that the assessee has claimed interest expenditure of Rs. 28,27,141/- paid on the cash credit limits availed from the bank against fixed deposits and reduced it fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed against the interest received on fixed deposits because Section 57(3) of the Act is applicable only for expenses incurred to earn the income, therefore, the alleged interest expenditure having no nexus with the interest earned during the year cannot be allowed as deduction. 9. Per contra ld. Counsel for the assessee vehemently argued referring to the paper book containing various details including cash flow statement for FY 2011-12 & 2012-13, placing reliance on the decision of coordinate Bench Chennai in the case of Mr. Shanmugam Ethiraj vs. ITO in ITA No. 822/Chny/2020 order dated 11.05.2022 and that of Mumbai Tribunal in the case of Ajit Bapu Satam vs. DCIT in ITA No. 1599/Mum/2021 order dated 29.08.2022 and further referring to the following written submissions: "I. Grounds No. 1 to 5 pertains to addition of Rs. 1,73,77.481/- by the AO which was partly deleted by the CIT(A). [CIT(A) reduced the addition to 8% of total cash deposit and allowed relief of Rs. 1,59,87,283/-]. Assessee is a non-resident (UAE Resident) and the case was reopened u/s 147 on the ground that the interest income of Rs. 20.05 lakh and the same was alleged to be not matching with interest received o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash in said bank account during F.Y 2011-22 (A.Y 2012-13) and it had sufficient cash balance as on 31.3.2012 which appeared as opening cash balance on 1.4.2012 i.e. opening date relevant to (F.Y 2012-13, A.Y 2013-14). Appellant also submitted the Cash Flow for A.Ys 2012-13 and 2013-14 and which duly showed the cash drawn and deposited and also cash balance as on 31.3.2012 which was duly carried forward to 1.4.2012 (i.e. F.Y 2012-13, A.Y 2013-14). The AO merely brushed aside the appellant's submission and despite such cash withdrawn and deposited in A.Y 2012-13, AO failed to conduct an enquiry for that year as well. Since revenue did not make any inquiry in that respect and hence mere assertion of the revenue of not accepting opening balance of cash (as on 1.4.2012) without any enquiry has no relevance and as such the opening balance of the cash has to be accepted as such. Moreover, the behaviour of assessee in having withdrawal and deposit from / to Bank account which is exhibited in A.Y 2013-14 as well cannot be seen with suspicion in absence of any evidence with AO and on the same there is also legally no bar. Hence, no adverse inference can be drawn. On the basis of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sident and is a tax resident of UAE and hence in terms of Article 12 of India UAE-DTAA the gross interest of R's. 46,36,912/- be taxed @ 10% of Article 12 of such DTAA Cross Objection of appellant: III. Ground No. 1 pertains to addition of Rs. 13,90,198/- u/s 69A sustained by CIT(A) (dealt in Ground No. 1 to 5) IV. Ground No. 2 pertains to addition of net interest of Rs. 118.09,771/- (dealt in Grounds No. 6 to 11)" 10. We have heard rival contentions and perused the records placed before us. The Revenue is aggrieved with the relief given by ld. CIT(A) and the assessee has filed Cross Objection challenging the additions sustained by ld. CIT(A) and also filing grounds in support of the relief given by ld. CIT(A). We notice that the assessee is a non-resident Indian and he holds bank accounts in India in which funds are transferred from outside India and also there are transactions carried out during the year in these bank accounts by way of withdrawal of cash, deposit of cash and also issuing cheques and receiving cheques from local parties. For the year under consideration, ld. AO came across the information about various transactions of cash deposits totalling to Rs. 1,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account took impression that they are carried out in the course of business. Before us, the assessee has filed a copy of bank statement for the preceding financial year i.e. FY 2011-12 and also the year under appeal i.e. FY 2012-13. The assessee has filed cash flow statement for FY 2011-12 & 2012-13. On bare perusal of the bank statement of these two years we notice that there is an opening balance of Rs. 28,14,882/- as on 01.04.2011. Thereafter, there are entries of cash withdrawals, cash deposits, credit through account payee cheques/clearing and transfers, from his own account or various other accounts including that of Soham Shipping Pvt. Ltd. It is evident that the assessee has entered into numerous transactions with Soham Shipping Pvt. Ltd. which are both debit and credit entries. As far as the position of cash in hand is concerned the assessee has placed before us a copy of cash book for FY 2011-12 & 2012-13. As per this cash book the assessee has stated to have opening cash in hand as on 01.04.2011 at Rs. 49,29,400/- and thereafter the assessee has incorporated all the cash withdrawals and cash deposits in this cash book which on our test check basis have been correctly inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d because the assessee was having sufficient balance in the bank as well as cash in hand to explain the said sum. Further, since the assessee is a non-resident Indian and except earning income from fixed deposits, there is no iota of evidence which could indicate that the assessee is carrying out any activity in the nature of business or otherwise to earn income from any other sources in India. Simply suspicion and behavioural pattern of frequent withdrawal by the assessee cannot be the basis of treating cash deposits as unexplained money u/s 69A of the Act and for this proposition we find support from the decision of the coordinate Bench of Lucknow in the case of DCIT vs Smt. Veena Awasthi in ITA No. 215/Lkw/2016 order dated 30.11.2018. Further, drawing support from the decision in the case of CIT vs. Shri Kulwant Rai (2007) 291 ITR 36 (Del) and the decision of the coordinate Bench of ITAT Delhi in the case of Shri Gordhan vs. ITO in ITA No. 811/Del/2015 order dated 19.10.2015 where it has been laid down that no addition can be made for cash deposits unless ld. AO brings evidence/material on record to prove that cash withdrawal is for some other purposes. Therefore, since in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of ld. CIT(A) is set aside since we have already held in the preceding para that the assessee is not carrying out any business activity. 16. Now, as far as the disallowance made by ld. AO is concerned, we notice that the assessee being a non-resident Indian transferred its income earned outside India in the bank accounts held in India and from such balances held in the bank, the assessee made fixed deposits from time to time. Further, the assessee took the cash credit limits against such fixed deposits and paid interest thereon. So, if we see the flow of the activity first, the assessee earned the income from outside India and from such income it made fixed deposits and earned interest thereon and thereafter took bank credit limit from bank against the mortgage of such fixed deposits and used for the purpose best known to the assessee. So, in this case the assessee has not incurred any expenditure to earn the income on fixed deposits. In case, the assessee had first taken loan and then utilised such amount for earning interest then the interest paid on such loan could have been claimed against the interest income but in the instant case the situation is reverse. For the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest in all other cases. 3. Notwithstanding the provisions of paragraph (2) interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by: (i) the Government, a political sub-division or a local authority of the other Contracting State; or (ii) the Central Bank of the other Contracting State. 4. The term "interest" as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, and in particular, income from Government securities and income from bonds or debentures including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. 5. The provisions of paragraphs (1) and (2) shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein or performs in that other State independent personal services from a fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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