2014 (11) TMI 14 - AT - Income Tax

Tribunal affirms CIT(A) deletions, cites lack of evidence & non-resident status, remits for verification.

The Tribunal upheld the CIT(A)'s deletions of various additions made by the AO due to lack of evidence and the assessee's non-resident status. Procedural ... Determination of status of assessee - Residential or not - Held that:- Following the decision in Shri Suresh Nanda Versus ACIT, Central Circle-13, New Delhi [2014 (4) TMI 739 - ITAT DELHI] - although, the assessee has, in the preceding 4 years been in India for a period in excess of 365 days in India, in none of years has he been in India for a period in excess of 182 days - assessee was not a resident of India - This is a pure question of fact based on a plain reading of the provisions of section 6 - All that has to be seen is the number of days that the respondent/assessee has spent in India in the year in question as also in the preceding 4 years – thus, the order of the CIT(A) is upheld – Decided against revenue. Addition of commission income earned in defence deals - Held that:- No addition can be made based on the document - Dr.MV Rao has not been questioned on these documents - The document does not indicate that services have been rendered by the assessee or that any commission was received - Thus, no addition can be made based on the document - no mention or a reference was made to the assessee Mr.Suresh Nanda, much less any suggestion being made that Mr. Suresh Nanda was involved in defence deals or that he had earned any commission - the statement does not support the contentions of the Revenue that the assessee has earned commission - Dr.MV Rao has not admitted the ownership of the document found in his premises though the presumption is against him - In any event the documents have not been demonstrated as those which belong to the assessee by the Revenue - no addition can be made without further evidence being brought on record, that the documents in question actually did not belong to Dr.MV Rao, but in fact belong to the assessee - Addition cannot be made based on presumption – thus, the order of the CIT(A) is upheld – Decided against revenue. Unexplained investments made in M/s Claridges Hotels Pvt.Ltd. and in M/s Claridges SEZ Pvt. Ltd. – Held that:- As the assessee being a non-resident, there is evidence of dividend having been received by him outside India from a company incorporated outside India which is the source of investment in UBS Mauritius to the extent of 20% - Hence that income cannot be subjected to tax - There is also finding of fact that the remaining 80% of the shareholding belong to Mr. Hamilton Andrews and the same has been confirmed by him - as decided in assessee’s own case for the earlier assessment year, it has been rightly held that the assessee was not a resident in India, it is axiomatic that the addition u/s 68 would have to be deleted because it was a transfer from the respondent/assessee’s foreign account to the domestic account - the burden to prove that a particular income has either accrued or received in India is on the Revenue, if it chooses to bring to tax a particular receipt as income - In cases where exemptions or deductions are claimed from taxable income, then the burden of proof is on the assessee. The statement given by the assessee to the DIT Investigation, does not better the case of the Revenue, as the assessee has claimed that his interest in M/s Claridges Hotels P.Ltd. is only by way of investments made through M/s UBS, Mauritius, in which company he has only 20% stake. Simply because the assessee is the Chairman of M/s Clardges Hotels P.Ltd. and because his son was Managing Director of the company, it does not support the addition, the investment in the hotel is made by M/s UBS Ltd., Mauritius in while the company which the assessee controls it is a minority share holder - The assessee has demonstrated that he controls only 20% stake holder in M/s UBS Ltd., Mauritius - The dividend earned by the assessee from a company controlled by him i.e. M/s UBS Trading FZC was invested in M/s UBS Ltd. Mauritius, through Infotech Services Ltd. – Decided against revenue. Unexplained deposits in Deutsche Bank, Singapore – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the decision with regard to it would depend on whether the assessee is regarded as a resident or a non-resident - In case he is regarded as a resident then, obviously, this addition would have to be made - But, if he is regarded as a non-resident then this addition will have to be deleted - This is exactly what the Tribunal has done - assessee was not a resident in India in the years, it is axiomatic that the addition u/s 68 would have to be deleted because it was a transfer from the assessee’s foreign account to the domestic account – Decided against revenue. Payment made to assessee’s wife – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the addition cannot be upheld inasmuch as both were separated by way of deed of settlement dated 4-4-1998 and the payments based thereon on were already made - The addition has been made not based on any evidence or incriminating material, indicating that any payment was made out of books - The sole basis of addition is an assumption that there was some unwritten understanding between the assessee and his estranged wife Smt. Renu Nanda - lesser amount for support was paid by the assessee as compared to earlier years - the basis of addition being only on presumptions, there being no material what so ever, the addition is deleted – Decided against revenue. Issues Involved:1. Residential status of the assessee.2. Commission income from defense deals.3. Unexplained investments in Hotel Claridges.4. Unexplained deposits in Deutsche Bank, Singapore.5. Payments to Mrs. Renu Nanda.6. Unexplained investments in Sonali Farms.7. Interim dividend from UBS Trading FZC, Dubai.8. Validity of proceedings under Section 153A/143(3).Detailed Analysis:1. Residential Status of the Assessee:The primary issue was whether the assessee should be treated as a resident or non-resident for tax purposes. The Tribunal and the Hon'ble Delhi High Court had previously ruled that the assessee was a non-resident based on the number of days spent in India, which was less than 182 days in each relevant year. The Tribunal upheld this finding, noting that the High Court's interpretation of Section 6 of the Income Tax Act was binding.2. Commission Income from Defense Deals:The Assessing Officer (AO) added significant amounts to the assessee's income, alleging commission income from defense deals based on documents seized from third parties (Dr. M.V. Rao and Mohan Jagtap). The Tribunal found that the documents did not directly implicate the assessee and lacked corroborative evidence. The Tribunal upheld the deletion of these additions by the Commissioner of Income Tax (Appeals) [CIT(A)].3. Unexplained Investments in Hotel Claridges:The AO alleged that the assessee made unexplained investments in Hotel Claridges through UBS Ltd., Mauritius. The Tribunal found that the investments were made by UBS Ltd., Mauritius, an independent entity, and not by the assessee. The Tribunal upheld the CIT(A)'s deletion of these additions, noting that the AO failed to provide evidence linking the investments to the assessee's undisclosed income.4. Unexplained Deposits in Deutsche Bank, Singapore:The AO added amounts based on deposits in the assessee's Deutsche Bank account in Singapore. The Tribunal, referring to the High Court's judgment, held that these were transfers from the assessee's foreign account and could not be taxed in India as the assessee was a non-resident. The Tribunal upheld the CIT(A)'s deletion of these additions.5. Payments to Mrs. Renu Nanda:The AO estimated payments made by the assessee to his estranged wife, Mrs. Renu Nanda, and added these amounts as undisclosed income. The Tribunal found that the additions were based on presumptions without any evidence of cash payments. The Tribunal upheld the CIT(A)'s deletion of these additions, noting that similar additions were previously deleted by the Tribunal and upheld by the High Court.6. Unexplained Investments in Sonali Farms:The AO added amounts based on discrepancies in running account bills for renovation work at Sonali Farms. The CIT(A) partially upheld the additions. The Tribunal found that there was no evidence of expenditure over and above the approved bills and remitted the matter to the AO for verification based on the valuation report.7. Interim Dividend from UBS Trading FZC, Dubai:The AO added amounts as interim dividends from UBS Trading FZC, Dubai. The Tribunal, consistent with its earlier findings, held that as the assessee was a non-resident and the dividends were earned abroad, they could not be taxed in India. The Tribunal upheld the CIT(A)'s deletion of these additions.8. Validity of Proceedings under Section 153A/143(3):The assessee challenged the validity of the proceedings under Section 153A/143(3), arguing that no incriminating material was found during the search. The Tribunal did not find merit in this argument as it was not pressed by the assessee. The Tribunal also noted that the CIT(A) had no power to set aside matters to the AO for fresh adjudication and corrected this procedural error.Conclusion:The Tribunal upheld the CIT(A)'s deletions of various additions made by the AO, based on the lack of evidence and the assessee's non-resident status. The Tribunal also corrected procedural errors and remitted certain matters for verification. The appeals and cross-objections were disposed of accordingly.