Foreign exchange remittance immunity limits tax inquiry into source, while joint account credits cannot be fastened to one assessee.

Credits in a joint savings bank account could not be fastened solely to the assessee as unexplained income where the Tribunal's view was followed in an earlier year on the same facts. The Court also treated the purchase of US dollars through remittances received by demand draft from abroad as protected by the statutory foreign exchange remittance immunity scheme; section 3(1) barred inquiry into the nature and source of those remittances, while section 4 and the CBDT circular reinforced that they could not be used prejudicially in income-tax assessment. On that basis, the additions were held unsustainable.

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Issues: (i) Whether credits in a joint savings bank account could be added as the assessee's income as unexplained deposits; (ii) Whether the addition made as unexplained investment in purchase of US dollars was sustainable despite the immunity under the foreign exchange remittance scheme.

Issue (i): Whether credits in a joint savings bank account could be added as the assessee's income as unexplained deposits.

Analysis: The issue was identical to the one decided for an earlier assessment year involving the same assessee. Following that decision, the Court accepted the Tribunal's view that the deposits in the joint account could not be fastened solely to the assessee as income in the manner suggested by the Revenue.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Issue (ii): Whether the addition made as unexplained investment in purchase of US dollars was sustainable despite the immunity under the foreign exchange remittance scheme.

Analysis: The remittances were received by demand drafts from abroad and fell within the protective umbrella of the statutory immunity scheme. Section 3(1) of the 1991 Act barred disclosure of the nature and source of such remittances, prohibited inquiry or investigation on that basis, and rendered the receipt of remittance inadmissible for proceedings under tax law. Section 4 and the CBDT circular reinforced that such remittances were not to be treated as prejudicial material in assessment. In these circumstances, the Revenue's attempt to trace the source of the foreign exchange or connect it with alleged withdrawals in India was impermissible.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: The additions were not sustainable, and the appeal failed in entirety.

Ratio Decidendi: Where remittances are received within the statutory immunity scheme for foreign exchange remittances, the tax authorities cannot inquire into the source of the remittance or use the mere receipt of such remittance as evidence for making an addition under the Income-tax Act.

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