2022 (3) TMI 664 - AT - Income Tax

ITAT affirms deletion of undisclosed deposits in foreign account. Revenue's appeal dismissed for lack of evidence.

DCIT (IT) -4 (2) (1), Mumbai Versus Ganpat Singhvi C/o Kanavat And Co.

The ITAT upheld the CIT(A)'s decision to delete deposits amounting to Rs. 1,32,72,864/- in HSBC, Geneva, in favor of the assessee. The revenue's appeal ... Addition on account of peak balance during the year in two bank accounts with HSBC Private Bank(Suisse) SA, Geneva - HELD THAT:- As decided in own case [2021 (10) TMI 557 - ITAT MUMBAI] source of the funds transferred from HSBC Abu Dhabi, UAE were stated to be out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976.After considering the facts of the case are in full agreement with the conclusion drawn by the ld CIT(A) that the assessee is not beneficial owner of the bank account held by Blueridge Investment Corporation with HSBC Geneva. Similarly, as regards the joint account of the assessee with his brother in HSBC Geneva CIT(A) recorded a finding on the basis of evidences that money was transferred in the bank account out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976 - we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue. Issues Involved:1. Deletion of deposits amounting to Rs. 1,32,72,864/- in HSBC, Geneva.2. Nexus and control over the funds by the assessee.3. Non-calling of 'Contractual Documentation' under Rule 46A(4).Issue-Wise Detailed Analysis:1. Deletion of deposits amounting to Rs. 1,32,72,864/- in HSBC, Geneva:The revenue appealed against the deletion of deposits amounting to Rs. 1,32,72,864/- in HSBC, Geneva, standing in the name of Blueridge Investment Corporation, where the assessee is a joint signatory. The AO observed that information received from the French Government under DTAA indicated that some Indian nationals had undisclosed foreign bank accounts. In the assessee's case, a Base Note indicated an account in HSBC Geneva with a peak balance of USD 300,494.55 in AY 2007-08. The AO issued notices to the assessee requesting details about the account, including the source of deposits. The assessee responded, stating he had been residing in the UAE for 35 years and the funds transferred to HSBC Geneva were from HSBC Abu Dhabi, with no source in India. The AO was not satisfied with the responses and added the peak amount to the assessee's total income, citing Section 5(2) of the Income Tax Act. However, the CIT(A) deleted the addition, referencing a similar decision in the assessee's favor for AY 2006-07, which the ITAT upheld.2. Nexus and control over the funds by the assessee:The AO contended that the assessee, being a joint signatory and holding a significant position in Blueridge Investment Corporation, had control over the funds and failed to provide evidence of the source of deposits. The AO argued that the assessee's status as a non-resident did not exempt him from disclosing the source of deposits, especially given his interests in India. The AO presumed that the deposits had sources in India and were undisclosed. The CIT(A), however, found that the department did not provide evidence showing the assessee's beneficial interest in the company or the bank account. The CIT(A) accepted the assessee's submissions, supported by independent/third-party evidence, that he had no beneficial interest in Blueridge Investment Corporation or its bank account.3. Non-calling of 'Contractual Documentation' under Rule 46A(4):The AO criticized the CIT(A) for not calling for the 'Contractual Documentation' referred to by HSBC, Geneva, which indicated an Iraqi national as the sole beneficiary of Blueridge Investment Corporation. The AO viewed this as a self-serving letter without documentary evidence. However, the CIT(A) admitted additional evidence under Rule 46A, including letters from Blueridge Investment Corporation and HSBC Geneva, certifying that the assessee had no beneficial interest in the company. The CIT(A) concluded that the department failed to prove the assessee's beneficial interest in the company or the bank account.Conclusion:The ITAT upheld the CIT(A)'s decision, referencing a similar case for AY 2006-07 where the issue was decided in favor of the assessee. The ITAT found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal. The judgment emphasized the importance of providing concrete evidence to establish a nexus and control over the funds and the necessity of adhering to procedural requirements under Rule 46A.