2025 (2) TMI 1418 - AT - Income Tax

Unexplained investment in time deposits: tribunal deletes section 69 addition after foreign business remittances confirmed as source

Assessment under unexplained investment provisions turned on whether deposits in an NRE account originated from the assessee's foreign business. The ... Unexplained Investment in Time Deposits u/s 69 - assessee is non-resident and investment sourced from the amounts received in his NRE account in India - No return of income was filed for the impugned year, and noting from the information available in the INSIGHT portal of the department that the assessee had made investments of approx. Rs. 2 crores in an immovable property purchased in Ahmedabad, the case of the assessee was reopened and subjected to re-assessment proceedings in terms of provisions of section 148A r/w section 147 Assessee contended that it is not that the assessee had only furnished copy of NRE account in India, or for that matter, only the evidences of carrying out the business in the UAE by way of licence issued to him. HELD THAT:- The exact reasons for rejecting the assessee’s explanation is that though admittedly, the amount is remitted in his NRE account from outside India, but the co-relation of the remitted amount to business carried out by the assessee outside India is not established. The assessee before us has suitably demonstrated that it was shown to the authority below that the amounts had been transferred from his foreign account, which was maintained, as partner in his business carried out outside India. Thus clearly the assessee had established the investment in FD being sourced from his business in UAE. The assessee has also demonstrated before us that the identical explanation furnished for source of investment in immovable property was accepted by the AO. We fail to understand, how the assessee can to be said to have not explained the source of investment in FDs to the tune of rupees one crores. The fact that the amount came to his NRE account from his business account maintained outside is sufficient to address the objection of the Department that the co-relation with the business of the amount remitted was not established by the assessee. As identical explanation furnished by the assessee for investment in immovable property was accepted by the AO, there is no reason, we find, for rejecting the same explanation for investment in FDs. In the light of the same, we hold that the addition to the income of the assessee u/s 69 of the Act, is not justified and the same is directed to be deleted. Appeal of the assessee is allowed. Issues: Whether the addition of Rs. 1,00,00,000 under section 69 of the Income-tax Act, 1961 as unexplained investment in fixed deposits is justified when the assessee received Rs. 1,00,00,000 in his NRE account by remittance from a foreign bank and asserted that the funds originated from business carried on abroad.Analysis: Relevant statutory provisions include Section 69 (unexplained investments) and the income-tax provisions governing taxation of amounts received in India by a non-resident. The assessment was reopened under provisions including Section 148/148A and finalized under Section 147 read with Section 144C(13). Authorities below treated the credit of Rs. 1,00,00,000 in the NRE account (dated 09.10.2014) as not satisfactorily substantiated because documentary links to the foreign business (audited accounts, foreign bank remittance advices, accounting entries) were not produced. The assessee, however, produced the NRE bank statement showing the credit, a foreign bank statement showing the debit from an account maintained as partner in the foreign business, and supporting business documentation (trading licence, MOA) and demonstrated an identical explanation accepted by the AO for a separate investment in immovable property. The material on record therefore showed remittance from a foreign business account into the assessee's NRE account and that the credited amount was used for fixed deposits in the relevant assessment year. The assessment of unexplained investment under Section 69 requires that the explanation offered be improper, unreasonable or unacceptable on the record; where contemporaneous banking evidence establishes remittance into the assessee's NRE account from a foreign account maintained in connection with the asserted foreign business and identical evidence was accepted for a separate transaction, the statutory test for deeming the amount unexplained is not met.Conclusion: The addition of Rs. 1,00,00,000 under Section 69 of the Income-tax Act, 1961 is not justified; the addition is deleted and the appeal is allowed in favour of the assessee.