Income from NRE Account Exempt from Taxation; Court Quashes Notices for A.Y. 2017-18 Following Precedent.

The HC quashed the order dated 8.4.2024 under Section 148A(d) and the notice under Section 148 for A.Y. 2017-18, allowing the petition. The Court held that income from the NRE account is exempt under Section 10(4) and cannot be treated as income escapement under Section 147, following a precedent by the Coordinate Bench.

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Issues:
Challenge to impugned order u/s.148A(d) for A.Y. 2017-18 and notice u/s.148 for the same year.

Analysis:
The petitioner, an individual residing in the USA, was issued a notice under Section 148A(a) of the Income-Tax Act, 1961, regarding a high-value transaction with ICICI Bank Ltd. The petitioner responded with relevant documents and explanations. Subsequently, a notice under Section 148A(b) was issued, and the petitioner provided a detailed reply with the source of funds. An order under Section 148A(d) was passed on 8.4.2024, alleging income escapement of Rs.1,59,00,000. The petitioner challenged these actions, contending that income generated in the NRE account cannot be considered as escapement under Section 147 of the Act.

The High Court considered the question of whether income from the NRE account could be deemed as escapement under Section 147. Referring to a previous judgment, the Court noted that funds from NRE accounts are beyond the authorities' reach and are exempt from inclusion in total income under Section 10(4). Citing the precedent set by the Coordinate Bench in a specific case, the Court concluded that the income from the NRE account cannot be treated as escapement. Consequently, the petition was allowed, and the order dated 8.4.2024 was quashed and set aside.

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