NRI assessee wins appeal against section 68 addition for unexplained demonetization deposits under Indo-Kuwait tax treaty benefits

The ITAT Mumbai allowed an NRI assessee's appeal against addition under section 68 regarding unexplained cash deposits during demonetization. The assessee, a Kuwait resident, had deposited currency notes of different denominations than those withdrawn. The tribunal held that since the assessee was entitled to Indo-Kuwait tax treaty benefits and conducted no economic activities in India, the addition was improper. Following precedent from a similar UAE treaty case, the tribunal remitted the matter to the Assessing Officer for reconsideration of treaty provisions and factual circumstances.

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Issues:
The appeal against the order of the Learned Commissioner of Income Tax (Appeals)-57, Mumbai for the A.Y. 2017-18.

Details of the Judgment:

Issue 1: Cash Deposit During Demonetization Period
The assessee, an NRI, deposited cash of Rs. 21,00,000 during demonetization, claiming it was from a withdrawal for house renovation. The Assessing Officer found discrepancies in the currency notes withdrawn and deposited, leading to the addition of Rs. 21,00,000 under section 69 of the Act. The CIT(A) upheld this decision based on precedents. The appellant challenged this addition.

Issue 2: Additional Ground on DTAA Benefit
The appellant raised an additional ground regarding eligibility for benefit under the Double Taxation Avoidance Agreement (DTAA) between India and Kuwait, claiming the Assessing Officer erred in not considering this due to NRI status. The appellant sought admission of this ground.

Judgment:
The Tribunal admitted the additional ground, citing legal nature and existing facts. Grounds 1 and 2 were dismissed. Regarding Ground 3, the appellant's NRI status, cash withdrawal before demonetization, and redeposit were highlighted. The appellant's right to claim treaty benefit under Indo-Kuwait treaty Article 22 was emphasized. The Tribunal noted the absence of doubt on income source and remitted the issue to the Assessing Officer for proper consideration, citing a similar case precedent. The appeal was allowed for statistical purposes, emphasizing the appellant's right to claim treaty benefits as an NRI from Kuwait.

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