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TMI Blog2024 (1) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 69 of the Act. The confirmation of the addition is not justified. 2. Without prejudice to ground no 1, The Commissioner of Income Tax (Appeals) erred in upholding that the amount received by a Non Resident from sources out of India was taxable in India. 3. The Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 1000000 under the provisions of section 68 of the Act. The confirmation of the addition is not justified." ITA No. 51/Rjt/2018 "1. The Commissioner of Income Tax erred in upholding the addition of Rs. 3,93,68,064/- as unexplained investment under section 69 of the Act. The confirmation of the addition is not justified. 2. Without prejudice to ground no 1, The Commissioner of Income Tax (Appeals) erred in holding that the amount received by a Non Resident from sources out of India was taxable in India." We shall first take up the case of Shri Vinodkumar Hiralal Raja (ITA No. 50/Rjt/2018) and the observations made therein would apply to the case of Smt. Pratimaben Vinodkumar Raja (ITA No. 51/Rjt/2018) as well. 3. The brief facts of the case are that the assessee had invested a sum of Rs. 10,61,58,177/- in Mutual Funds during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ld. CIT(A) did not accept the contention of the assessee for the reason that the assessee had submitted that his son Mr. Binoy Raja had earned income from M/s. Bull Run Inc. (UK), however, the aforesaid company was facing liquidity crisis since a long time and was not in any active business. Accordingly, the assessee could not produce any evidence regarding income earned from said company i.e. M/s. Bull Run Inc. of UK by the son of the assessee. Though Ld. CIT(A) agreed that funds from outside India were transferred in the NRE account of the assessee out of which investment of Rs. 9,15,56,045/- has been made in Mutual Funds, however, the assessee has not been able to establish that the alleged amount was received by the assessee from his son since the company for which was son were working (Bull Run Inc. of UK) was not operational during the period under consideration. Ld. CIT(A) held that argument of the assessee that fund has been credited in the NRE account of the assessee as per RBI norms and transfer of funds from one NRE account to another NRE account cannot be taxed in India cannot be accepted since source of such funds has not been substantiated by any evidence and mere t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son, Mr. Binoy Raja, who is also a resident of UK. All the transactions have been carried out through banking channels as per RBI Guidelines. The NRI status of the assessee Shri Vinodkumar Hiralal Raja and his son Mr. Binoy Raja has not been disputed by the Department at any stage of the proceedings and admittedly, both the assessee and his son are residents of UK for the impugned year under consideration, and also for the earlier assessment years. The only reason on the basis of which the additions have been made are that the assessee has not been able to explain the source of funds received by the assessee in his NRE account (although it has not been disputed that the aforesaid amount has been received by way of wire transfer from another NRE account of the assessee's son). It would be useful to refer to the case of Tarun Kumar Sarkar 84 taxmann.com 91 (Kolkata - Trib.), wherein the ITAT held that where foreign employer directly credited salary for services rendered outside India into NRE bank account of non-resident seafarer in India, same could not be brought to tax in India in terms of section 5 of the Act. The ITAT observed as below, while passing the order: "It is found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the Department, with the following observations: "4.1. Though both the parties have raised various grounds in their respective appeal and Cross Objection. The short point is to be decided is whether the investment made by the assessee of Rs. 23.06 crores in Mutual Fund is assessable to tax in India. The assessee has proved beyond doubt that he is a Non-Resident Indian who borrowed for loans from Standard Chartered Bank, Chennai NRE Account. This is evident from Ld. CIT(A)'s order at Para 5.7 that from the letter dated 27.08.2008 from Manager Credit Operation addressed to the assessee at his address outside India, it is seen that the assessee was granted term loan of USD 44,80,000/- at the rate of 0.60% and that an amount of Rs. 23,06,83,200/- deposited on 29.08.2008 in the Standard Chartered Bank, Rajaji Salai, Chennai (account No. 427-1-029798-6 savings account in INR) and the amount was transferred on the same day for investment in the mutual fund. Thus it is clear the source of the fund is from outside India and not taxable in India. The assessee could not produce these documents during time barring period of reassessment, when the same were more than six years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his clause at the other place (see, Pondicherry Rly. Co. v. CIT [1931] 1 Comp Case 314 (Mad); CIT v. Diwan Bahadur S.L. Mathias [1939] 7 ITR 48 (PC). The observations made by the privy council in the above cases was quoted with approval by Hon'ble Supreme Court in the case of Keshav Mills Ltd. v. CIT [1953] 23 ITR 230 wherein it was held as follows :- "It was clear that under these circumstances there was no receipt of the moneys at all, either actual or constructive, in cash or in kind, by actual payment or by adjustment or settlement of accounts. There was also no scope for the argument that even though these sums might not be said to be either actually or constructively received they should be "deemed to be received". The expression "deemed to be received" only means deemed by the provisions of the Act to be received. An amount cannot be "deemed to be received" merely by the volition or sweet will of an individual. The profits earned which were credited in the books of account according to the mercantile system of accounting were at best "treated as having been received" which is neither "received" nor "deemed to be received" and therefore not within the purview of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the CBDT vide para 2 of the CBDT Circular No. 5 in [F.No.73A/2(69)-IT (A-II)], dated 20-2-1969. which extracted below :- "Migrant assessee - Money remitted to India through banks - Enquiries by Incometax Officers regarding origin of money - Instructions regarding. It has been represented to the Board that persons of Indian origin residing abroad but intending to return to India and settle here permanently, apprehend that the money brought in or remitted from abroad by such persons might be subjected to income-tax in India. The apprehension appears to be due to lack of information regarding the correct legal position about the taxability of the remittances of money from abroad. The general position, in this regard, is clarified below : (2) Money brought into India by non-residents for investments or other purposes is not liable to Indian income-tax. Therefore, there is no question of a remittance into the country being subjected to income-tax in India. The question of assessment to tax arises only when there is no evidence to show that the amount, in question, in fact, represents such remittance. In other words, in the absence of proper supporting evidence, the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of West Pakistan) claimed to have been brought exceeds Rs. 50,000; or (b) where the assessee had some sources of income either in India or in any foreign country, other than the one from which he had migrated, prior to migration; or (c) where the assessee was assessed as Resident in India either for the assessment year preceding the year of his/her migration or in the earlier years, will not be entitled to any special concession. Thus, any claim by such migrants that the funds or the jewellery have been brought from the abovementioned countries, will be accepted only if the persons concerned produce adequate evidence to show that they had sufficient funds/wealth in those countries and that the transfer of the cash/jewellery to India, can directly be linked with the said funds or wealth. In other words, these migrants will have to lead proper evidence like any other assessees, about the source of the cash/jewellery alleged to have been brought by them from these countries. In support of the claim that they had sufficient funds in those countries, they might produce before the income-tax authorities in India, their bank accounts in those countries as also copies of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises to him outside India during such year : Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.-For the removal of doubts, it is here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptance of explanation given as to the source of credits in the bank account of Bank of Baroda, Dubai is totally immaterial and had no relevance at all, as the Assessing Officer was not concerned about the taxability or otherwise of income received or accrued and arisen outside the taxable territories of India to Non-Resident. Therefore, the fact that the lower authorities had rejected the explanation as to the sources of credits in the Bank of Baroda, Dubai account does not come in the way of deleting the impugned additions. This is more so, in view of the fact that there is no material on record to show that the appellant had diverted the income which escaped the assessment to tax in India to deposit the money in the Bank of Baroda, Dubai account, in fact, it is not even the case of the Assessing Officer that the appellant had indulged in round tripping of money and there is no allegation as such against the appellant. 30. Therefore, in our considered opinion, the lower authorities not accepting the explanation offered by the assessee is not based on proper appreciation of material on record and other attending circumstances available on record. It is needless to say that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own funds abroad to India, said inward remittance could not be considered as unaccounted income of assessee under sections 68 and 69. Where assessee transferred his own fund from outside of India, said fund could not represent his unexplained investment under Section 69A of the Act. 14. In the case of Smt. Susila Ramasamy 37 SOT 146 (Chennai), the ITAT held that in case of remittances by way of banking channel onus on assessee under Section 69 stands discharged, and, therefore, section 5(2)(b) does not apply. 15. In view of the instant facts and the judicial precedents cited, above we are of the considered view that Ld. CIT(A) has erred in facts and law in confirming the additions made by the assessee received by way of wire transfer from NRE account of his son in UK to assessee's NRE account from which investments were made into Mutual Funds. In our considered view, in the instant facts, no addition is sustainable under Section 69 of the Act. 16. In the result, Ground No. 1 of the assessee's appeal is allowed. 17. Ground No. 3 (Addition of Rs. 10 lakh under Section 68 of the Act) is similar to Ground No. 1 of the assessee's appeal. In view of our observations made in Ground N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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