TMI Blog2023 (2) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on its behalf withdrew and deposited the cash cannot be questioned 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 [ 2018 (12) TMI 206 - ITAT LUCKNOW ] On the overall analysis of the facts and circumstances of the case, examination of the bank statement for FY 2011-12 2012-13 and availability of cash in hand on various dates during the year as well as the availability of cash in the preceding FY 2011-12, we come to a conclusion that firstly, the assessee has successfully explained the source of alleged cash deposits and secondly, ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and UAE, we note that the same is applicable in the case of the assessee and the alleged interest earned on fixed deposit of Rs. 46,36,912/- is liable to be taxed at the beneficial rate i.e. @ 12.5%. Accordingly ground no. 4 raised in the Cross Objection is partly allowed. - I.T.A. No.: 2302/KOL/2019, C.O. No.: 6/KOL/2020 - - - Dated:- 23-1-2023 - Dr. Manish Borad, Accountant Member And Sonjoy Sarma, Judicial Member For the Assessee : Sh. S. Jhajharia, A/R For the Revenue : Smt. Ranu Biswas, Addl. CIT (D/R) ORDER PER MANISH BORAD, ACCOUNTANT MEMBER: This appeal filed by the Revenue and the Cross Objection filed by the assessee pertaining to the Assessment Year (in short AY ) 2013-14 are directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the Act ) by Commissioner of Income Tax (Appeals)-22, Kolkata [in short ld. CIT(A) ] dated 15.07.2019 arising out of the assessment order framed u/s 143(3) r.w.s. 147 of the Act dated 27.12.2018. 2. Registry has informed that the Cross Objection is time barred by 53 days. Condonation application has been filed by the assessee. After perusing the same, we find force in the reasons ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akh rupees. 6. The Ld. CIT (A) has erred on facts and law by giving relief of Rs.28,27,141/- on account of interest income. 7. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in deleting the disallowance of Rs.28,27,141/- made by the Assessing Officer rejecting the deduction claimed by the assessee on account of interest and bank charges, paid for OD facility, against FD interest income. 8. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in treating that interest and bank charges are connected to the out of book business whereas neither the assessee has claimed the same during the assessment or appellate proceedings nor has the Assessing Officer noticed such business angle during the assessment proceeding. 9. Without prejudice to the merit of the case; considering the interest of Rs.18,05,847/-and Rs.28,27,141/- as income chargeable at normal tax rate, the Ld. CIT (A) erred in not appreciating the argument of the assessee, made during the course of appellate proceeding, that the gross interest of Rs.46,36,912/- should be taxed at the beneficial rate of 12.5% as prescribed in DTAA between India and UAE as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case, the Ld. CIT(A) erred on facts and in law in confirming the addition of net interest income of Rs.18,09,771/- under the head 'Other Sources . 4. For that on the facts and in the circumstances of the case and without prejudice to the preceding ground, the AO be directed to tax the net interest income of Rs.18,09,771/- at the beneficial tax rate prescribed in the DTAA. 5. For that the appellant craves leave to submit additional grounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before. 5. Brief facts of the case as culled out from the records are that the assessee is a non-resident Indian and is a resident of United Arab Emirates (UAE). For the year under consideration, ld. AO came across the information about deposit of cash of Rs. 1,56,67,481/- in the bank account held in the name of the assessee, term deposit of Rs. 11,00,000/- made during the financial year and interest of Rs. 46,77,588/- received on deposits which were subject to tax deducted at source u/s 194/195 of the Act at Rs. 5,14,245/-. The assessee did not file the return of income as required u/s 139(1) of the Act. Ld. AO acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of business transactions and treating the alleged cash deposits as business turnover estimated the income @ 8% from the said deposit thereby sustaining the addition to Rs. 13,90,198/- deleting the remaining addition of Rs. 1,59,87,283/-. Further, as regards to the interest disallowance ld. CIT(A) deleted the said disallowance observing that it has also been incurred in the course of business and the same is eligible for set off against the interest on fixed deposit treating the same as business receipt. Thus, appeal of the assessee was partly allowed. 7. Aggrieved, the Revenue is now in appeal before this Tribunal raising various grounds and on the other hand, the assessee is in Cross Objection challenging the addition of Rs. 13,90,198/- confirmed by ld. CIT(A) and also supporting the finding of ld. CIT(A). 8. Ld. D/R vehemently argued supporting the detailed finding of ld. AO submitted that the assessee did not file the return of income even though he had taxable income during the year. Further, she submitted that the assessee is a non-resident Indian and therefore, what is the source of such huge amount of cash deposit made during the year and what is the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Withdrawal 111.11 lakh Pg 54-59 - Axis Bank 193.04 lakh Deposit 173.77 lakh Closing 19.27 lakh The AO's allegation on such addition were basically on the ground that: i) Assessee did not file Balance Sheet and Profit Loss Account along with R.O.I and hence the cash deposits are unsubstantiated. ii) Assessee was remaining mostly out of India. iii) Assessee did not satisfactorily prove cash deposits were out of cash balance and withdrawals from banks. The appellant duly submitted before the concerned authorities [i.e. AO CIT(A)] that - i) Assessee was a non-resident. Assessee was not carrying out any business in India hence it was not required to maintain any books of accounts u/s 44AA. Still the assessee furnished cash book for A.Ys 2012-13 and 2013-14 which duly corroborated with bank statement and substantiated the cash so deposited in the said bank account. ii) Even if the assessee was not remaining in India, the withdrawals and deposit were conducted by Authorised Signatory of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/- and hence the cash deposited is fully explained and no addition can be made in F.Y 2013-14 (A.Y 2014-15). iii) The appellant also places reliance on the following judicial pronouncements:- a) Since it is not case of revenue that money withdrawn has been utilized in expenses/ asset acquisition and hence deposit cannot be questioned and hence no addition can be made for cash deposited and hence reliance is placed on - i) Shamnugam Ethiraj [ITA 828/Cheny/2020 dt. l1.5.2022 (Paper book page 60 -73 -para 9-10] ii) Ajit Bapu Satam v. DCIT [ITA 1599/Mum/2021 dt. 29.8.2022] (Paper book page 79 - 81 - para 9-11) iii) Jashpal Singh Sehgal v. ITO (2017) 83 taxmann.com 246 (Mum) iv) Sudhirbhai Pravinkant Thakkar -88 taxmann.com 382 (Ahmadabad) b) Simply suspicion and behavioural pattern of frequent withdrawal by assessee cannot be basis of treating cash deposited as unexplained money u/s 69A. Veena Awasthi ITA 215/Lukw/2016 c) No addition can be made for cash deposited unless AO brings evidence/ material on record to prove that cash withdrawal is for some other purpose. i) CIT v. Shri Kulwant Rai (2007) 291 ITR 36 (Del) ii) Shri Gordha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of Rs. 1,73,77,481/-. Though, during the course of proceedings before the lower authorities it was submitted that the source of alleged cash deposit in cash in hand available with the assessee, however, the assessee failed to convince ld. AO who made the addition u/s 69A of the Act for unexplained money of Rs. 1,73,77,481/- and also disallowed the interest expenditure of Rs. 28,27,141/- claimed against the interest income earned during the year. 11. During the course of appellate proceedings ld. CIT(A) came to a conclusion that the frequent transactions carried out in the bank account are in the nature of business transactions which are controlled by the assessee staying outside India and also through its representative having authority to operate the bank account. Ld. CIT(A) also allowed the claim of interest expenditure of Rs. 28,27,141/- treating it to be a business expenditure against the business receipt in the form of alleged cash deposits as well as the interest earned on term deposits. Ld. CIT(A), thus, sustained the addition of Rs. 13,90,198/- estimating net profit @ 8% on the alleged cash deposit. 12. As far as the issue that whether ld. CIT(A) was justified in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of which ld. AO initiated the reassessment proceedings are duly shown in this cash book prepared for FY 2012-13. Now, an overall analysis except the opening cash balance as on 01.04.2011 at Rs. 49,59,400/- all the other transactions of cash deposits and cash withdrawals are duly verifiable from the bank statement filed by the assessee. 14. Now, the question arises that firstly, why the assessee carried out so many transactions of cash deposits and cash withdrawals in its bank account and secondly, what was the reason of carrying out transactions with Soham Shipping Pvt. Ltd. Now, as far as entering into the transactions with Soham Shipping Pvt. Ltd. is concerned it is contended by the assessee that they were merely in nature of giving advances and receiving the same from time to time. This contention of the assessee has not been verified at the end of the Revenue authorities by calling for any investigation in the case of Soham Shipping Pvt. Ltd. Ld. AO ought to have issued notice to this concern to know about the reason of entering into such transactions. Since ld. AO has not contended any inquiry on this issue nor had made any addition for these transactions, they are o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of cash in hand as on 01.04.2011 at Rs. 49,29,400/-, however looking to the flow of transactions in these two financial years and the assessee being a non-resident Indian for the last many years and also looking to the amount of deposits made by the assessee, it will not be justified to question the availability of cash in hand in the hands of the as on 01.04.2011. Therefore, on the overall analysis of the facts and circumstances of the case, examination of the bank statement for FY 2011-12 2012-13 and availability of cash in hand on various dates during the year as well as the availability of cash in the preceding FY 2011-12, we come to a conclusion that firstly, the assessee has successfully explained the source of alleged cash deposits of Rs. 1,73,77,481/- and secondly, ld. CIT(A) erred in treating the frequent transactions in the bank account as those carried out in the course of business and further, ld. CIT(A) erred in estimating the profit @ 8% of the alleged cash deposit without finding any evidence which could show that the assessee is carrying out the business activity. We, therefore, set aside the finding of ld. CIT(A) and delete the addition of unexplained money ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground nos. 6 to 8 are concerned, the same are allowed and the ground no. 3 raised by the assessee in the Cross Objection is dismissed. 17. Now, as far as ground no. 4 raised by the assessee in the Cross Objection is concerned, it is stated that without prejudice to the ground no. 3 of the Cross Objection, ld. AO may be directed to tax the net interest income of Rs. 18,09,771/- at the beneficial tax rate prescribed in Double Taxation Avoidance Agreement (DTAA). We find that firstly, since we have already disallowed the claim of interest expenditure made by the assessee the taxable interest income is the interest received on fixed deposits at Rs. 46,36,912/- along with savings bank interest on NRO at Rs. 40,676/- (total interest income comes to Rs. 46,77,588/-). It is claimed by the assessee that the same should be taxable at the beneficial tax rate as prescribed under the DTAA. 18. We note that the assessee is a non-resident Indian and is a resident of UAE and there is an agreement for avoidance of double taxation and the prevention of fiscal evasion between India and UAE. Vide Notification No. GSR 710(E) dated 18.11.1993 as amended by Notification No. SO 2001(E) dated 28.11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement. 19. Now, from perusal of the above Article we notice that the interest may be taxed in the Contracting State (i.e. in India) in which it arises and according to the law of that State and if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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