Wire transfers from son's NRE account to non-resident's NRE account discharge Section 69 burden

ITAT Rajkot ruled in favor of the assessee regarding unexplained investment under Section 69. The non-resident assessee with UK passport received wire transfers from son's NRE account in UK to his own NRE account for mutual fund investments. Revenue authorities added the amount as unexplained investment solely because assessee couldn't explain the source, despite acknowledging the wire transfer from son's NRE account. ITAT held that money brought to India by non-residents through banking channels discharges the onus under Section 69, and no addition was sustainable. The appeal was allowed.

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Issues Involved:
1. Addition of Rs. 9,15,56,045/- as unexplained investment under section 69 of the Act.
2. Taxability of amounts received by a Non-Resident from sources outside India.
3. Addition of Rs. 10,00,000/- under section 68 of the Act as unexplained cash credits.

Summary:

Issue 1: Addition of Rs. 9,15,56,045/- as unexplained investment under section 69 of the Act

The assessee invested Rs. 10,61,58,177/- in Mutual Funds, with Rs. 9,15,56,045/- added as unexplained investment under Section 69. The assessee argued that the funds came from his son's overseas accounts, both being non-residents. The CIT(A) upheld the addition, citing insufficient evidence on the source of funds, despite acknowledging the transfer into the NRE account. The ITAT referred to precedents like Tarun Kumar Sarkar and Vijaykumar Vasantbhai Patel, concluding that funds transferred from NRE accounts of non-residents are not taxable in India. The ITAT held that no addition is sustainable under Section 69 in the instant facts, allowing the ground of appeal.

Issue 2: Taxability of amounts received by a Non-Resident from sources outside India

The assessee contended that funds received from his non-resident son's NRE account should not be taxed in India. The CIT(A) rejected this, citing lack of evidence on the son's income source. The ITAT, referencing cases like Iqbal Ismail Virani and Hemant Mansukhlal Pandya, ruled that remittances from abroad by non-residents are not taxable in India. The ITAT found the CIT(A)'s decision erroneous, allowing the appeal.

Issue 3: Addition of Rs. 10,00,000/- under section 68 of the Act as unexplained cash credits

The CIT(A) upheld an addition of Rs. 10,00,000/- under Section 68 as unexplained cash credits. The ITAT, applying its observations from Issue 1, allowed the appeal, concluding that the addition was not justified.

Conclusion:

The ITAT allowed the appeals, setting aside the additions under Sections 69 and 68, ruling that funds transferred from non-resident accounts are not taxable in India. This order was pronounced in open court on 20/12/2023.

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