Remittance From Taxed Share Gains Not Unexplained Money; s.69A Addition Deleted, Citing s.143(3) Earlier Assessment Year

The ITAT Ahmedabad allowed the assessee's appeal, deleting the addition made as unexplained money under s. 69A in respect of new capital introduced during the year. The assessee demonstrated that the impugned amount was remitted from an overseas bank account to an Indian bank account and represented funds arising from long-term capital gains on sale of shares in an earlier assessment year, which had already been disclosed and assessed under s. 143(3). The Tribunal held that the source of the remittance was satisfactorily established and no addition was warranted.

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1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the addition made as unexplained income under section 69A on account of new capital introduced during the year was justified when the assessee claimed that the capital represented remittances from foreign bank accounts sourced from earlier disclosed transactions.

(2) Whether, on the basis of the documentary evidence produced, the assessee had satisfactorily discharged the onus of explaining the source of funds credited in the capital account and remitted from the USA to India.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1) & (2): Justification of addition under section 69A in respect of capital introduced; adequacy of explanation and evidentiary discharge of onus

Legal framework (as discussed)

The addition was made and confirmed under section 69A of the Income-tax Act, 1961, treating the new capital introduced as "unexplained income" on the ground that the assessee allegedly failed to substantiate the source of deposits in the foreign bank account corresponding to remittances received in India.

Interpretation and reasoning

(a) The Tribunal noted the assessee's explanation that the impugned amount of Rs. 1,03,43,401/- represented funds remitted from the assessee's TD Bank account in the USA to his ICICI Bank account in India and did not constitute unexplained income.

(b) It was recorded that the underlying source of the remittances was long-term capital gains of Rs. 2,07,19,525/- arising in A.Y. 2012-13 from sale of shares of Sterling International Enterprises Ltd., which had been disclosed in the return of income and assessed under section 143(3) read with section 147. The exempt long-term capital gain under section 10(38) and business income for that year had been accepted by the Assessing Officer.

(c) The Tribunal examined the flow of funds beginning with the sale consideration of Rs. 2,26,63,648/- in F.Y. 2011-12 credited to the assessee's ICICI Bank savings account, followed by outward remittances aggregating to USD 4,00,000 to the assessee's JP Morgan Chase Bank account in the USA (USD 2,00,000 from assessee's own ICICI account and USD 2,00,000 from the brother's ICICI account).

(d) From these remitted funds, the assessee advanced USD 3,00,000 to one Rishi B. Parikh on 27.10.2011. Subsequent repayments from Rishi B. Parikh of USD 1,50,000 on 19.08.2013 and USD 30,000 on 29.08.2013 were credited into the assessee's TD Bank account in the USA.

(e) The Tribunal further noted that, during F.Y. 2014-15, remittances were made from the TD Bank account in the USA to the assessee's ICICI Bank account in India, aggregating to Rs. 1,02,79,600.20, corresponding to USD 50,000, USD 1,14,975 and USD 2,002.24 (including rate differences), which tallied with the credits questioned by the Assessing Officer.

(f) The Tribunal considered that the assessee had produced before the authorities and was on record: copies of assessment order for A.Y. 2012-13 under section 143(3) read with section 147, Indian bank statements for relevant years of the assessee and his brother, statements of JP Morgan Chase Bank, TD Bank and US Bank, bank advices and cheque clearings, remittance advices for the US-to-India transfers, and documents evidencing the receipt of funds from Rishi B. Parikh.

(g) On this material, the Tribunal found it to be "undisputed" that USD 4,00,000 had earlier been remitted to the USA in F.Y. 2011-12 and that the subsequent repayments from the borrower and remittances back to India formed a continuous and traceable chain from the exempt long-term capital gains already assessed.

(h) The Tribunal held that, in view of these "undisputable evidences", the assessee had proved the source of the impugned remittances and capital introduction "beyond doubt". It rejected the revenue's contention that the assessee had failed to furnish documentary evidence of the source of the deposits in the foreign bank accounts.

Conclusions

(i) The remittances from the USA to the assessee's ICICI Bank account and the resultant capital introduction stood duly explained as originating from earlier disclosed and assessed long-term capital gains and loan transactions, supported by contemporaneous banking and assessment records.

(ii) The necessary onus under section 69A regarding the nature and source of the funds had been fully discharged by the assessee; therefore, the treatment of the amount as "unexplained income" was unwarranted.

(iii) The addition of Rs. 1,03,43,401/- under section 69A was deleted, and no addition on this count was held to be sustainable.

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