2021 (6) TMI 365 - AT - Income Tax

ITAT confirms non-taxability of inward remittances, citing lack of evidence.

The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeal. The ITAT found the assessee had adequately proven the source of funds and met ... Levy of tax on interest income - Status of the assessee - Resident but not ordinarily resident - NRI Account - Receipts brought in India - source of income earned outside India - HELD THAT:- As decided in own case [2015 (3) TMI 755 - ITAT HYDERABAD] provisions of Section 5(2) are also not applicable as the amount received is received from assessee's own account outside India and no income has accrued or arisen in India. These funds were also received through banking channels with necessary statutory approvals. Therefore, assessee has proved the sources of receipts and discharged the onus. It is the Revenue which failed in proving that this amount is unexplained income of assessee. We are of the opinion that various case laws relied by the Revenue does not apply and they are clearly distinguishable. In view of this, we have no hesitation in upholding the order of the CIT(A) and rejecting the Revenue's grounds. Issues Involved:1. Determination of the residential status of the assessee.2. Validity of addition made under Section 68 of the Income Tax Act regarding unexplained credits.3. Consideration of previous ITAT orders and pending appeals in higher courts.Detailed Analysis:1. Determination of the Residential Status of the Assessee:The primary issue was whether the assessee could be classified as a 'resident but not ordinarily resident' (RNOR) in India. The assessee argued that as an RNOR, the receipts brought into India from outside sources could not be taxed in India, citing Sections 5(1)(c) and 6(6) of the Income Tax Act. However, the Assessing Officer (AO) did not accept this claim as the assessee failed to provide sufficient evidence to support his residential status. The CIT(A) later accepted the assessee's claim, following the ITAT's previous orders for the assessment years 2011-12 and 2012-13.2. Validity of Addition Made Under Section 68 of the Income Tax Act Regarding Unexplained Credits:The AO observed credits amounting to Rs. 17,78,15,615 in the assessee's Axis Bank account, which were deposited in US dollars. The assessee claimed these funds were transferred from his NRI accounts in Mauritius, supported by inward remittance certificates. However, the AO doubted the genuineness of the transactions, particularly the source of the funds from M/s. Virtual International Limited, a company in which the assessee had substantial interest. The AO issued a show-cause notice asking for detailed information about the company and its financials, which the assessee did not fully satisfy. Consequently, the AO treated the amount as unexplained credit under Section 68 and added it to the taxable income.The CIT(A) granted relief to the assessee by following the ITAT's previous orders, which had accepted similar explanations for earlier years. The ITAT reiterated that the assessee had provided sufficient evidence to support the inward remittance, including certificates from M/s. Virtual International Limited. The ITAT emphasized that the AO should have conducted further inquiries through appropriate channels if he had doubts about the company’s legitimacy rather than outright rejecting the evidence provided.3. Consideration of Previous ITAT Orders and Pending Appeals in Higher Courts:The Revenue's appeal included grounds that the CIT(A) erred in its decision, particularly since an appeal on a similar issue for the assessment year 2011-12 was pending before the High Court. However, the ITAT noted that the facts and circumstances for the assessment year 2013-14 were similar to those in the previous years where the ITAT had ruled in favor of the assessee. The ITAT found no new material or contrary decisions presented by the Revenue to warrant a different conclusion.Conclusion:The ITAT upheld the CIT(A)'s order, dismissing the Revenue's appeal. The ITAT concluded that the assessee had adequately demonstrated the source of the funds and complied with regulatory requirements. The Revenue failed to provide substantial evidence to counter the assessee's claims or the CIT(A)'s findings. The ITAT emphasized the importance of following established legal principles and previous rulings in similar cases, thereby affirming the non-taxability of the inward remittances under the given circumstances.Order Pronounced:The Revenue's appeal was dismissed, and the order was pronounced in the open court on 9th June 2021.