TaxTMI 
TaxTMI 
2009 (4) TMI 554
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....the remittances had actually come from foreign countries, he should have held that no part of the income had accrued to the appellant in India. (3) He overlooked that only income that had accrued or arose or received in India alone is taxable in the case of non-resident. (4) He overlooked that, under Malaysian Law, foreign income of a Malayalam resident is not taxable under Malaysian Tax Laws and, therefore, erred in holding that these have not been disclosed to them. (5) He also overlooked that any omission to disclose to Malaysian Tax Authorities cannot automatically convert it as an income accrued in India. (6) He erred in relying on pieces of evidence obtained behind the back of the appellant and using them against the appellant without giving any opportunity for rebutting this evidence. (7) He had no material to dispute the genuineness of the certificate or the letters produced by the appellant. (8) He should have also appreciated that there was no allegation or finding by any Authority that the appellant had violated any of the provisions of Foreign Exchange Regulation Act. (9) He overlooked to consider various pieces of evidence produced before him by th....
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....f the Assessing Officer and the Commissioner (Appeals). He filed written submissions, dated 11-12-2008, and supplemen- tary submissions, dated 2-4-2009. The submissions made by him before us are summarized below : "that the impugned deposits aggregating to Rs. 4,68,85,540 were taxable under section 5(2)(b) of the Act, that the deposits represented deemed income of the assessee and were taxable under section 69 of the Act, that the provision of section 9 was inclusive in its scope and was not exhaustive, that the CBDT Circular No. 5, dated 20-2-1969 did not help the assessee in view of paragraph 4 thereof, that the Board would not have issued the said Circular if there was to be absolute immunity for funds coming through banking channel, that the situs of investment was India, that India has a DTAA with Malaysia, and cannot be powerless to question the source of money brought into Indian territory, just because the medium was the banking channel, that the Indian authorities are empowered under the Indian law to question as to how the assessee earned the money outside Malaysia, that the department's stand got indirect support from the decisions in the follo....
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.... while upholding the Assessing Officer's action has made some general and sweeping observations in paragraph 3.2 of his order such as : "(i)The Assessing Officer has been able to establish that the assessee was not having any source of income in UAE or Singapore, (ii)There is no evidence to support the assessee's claim that the money brought to India was earned abroad and its source was explained abroad. (iii)The fund whose source was unexplained abroad does not become explained in India. (iv)An undisclosed income does not become disclosed just for the reason that no source of income in India is disclosed by the assessee. (v)Since the sources of bank deposits in India are unexplained, they are within the jurisdiction of section 69. (vi)The provisions of section 69 are applicable to all assessees, whether resident or non-resident. (vii)One of the main purposes of Double Tax Avoidance Agreement is to prevent evasion of tax." 9. During the hearing of this appeal, one question which was repeatedly put by the Bench to the learned Standing Counsel was under which provision of the Income-tax Act, 1961, money brought by an NRI into the country through banking channe....
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.... "5. Scope of total income - (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a)is received or is deemed to be received in India in such year by or on behalf of such person; or (b)accrues or arises or is deemed to accrue or arise to him in India during such year; or (c)accrues or arises to him outside India during such year: Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a)is received or is deemed to be received in India in such year by or on behalf of such person ; or (b)accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be ....
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....n represented to the Board that persons of Indian origin residing abroad but intending to return to India and settle here permanently, apprehend that the money brought in or remitted from abroad by such persons might be subjected to income-tax in India. The apprehension appears to be due to lack of information regarding the correct legal position about the taxability of the remittances of money from abroad. The general position, in this regard, is clarified below : (2) Money brought into India by non-residents for investments or other purposes is not liable to Indian income-tax. Therefore, there is no question of a remittance into the country being subjected to income-tax in India. The question of assessment to tax arises only when there is no evidence to show that the amount, in question, in fact, represents such remittance. In other words, in the absence of proper supporting evidence, the taxpayers' story that the money has been brought into India from outside may be disbelieved by the Income-tax Officer who may then proceed to hold that the money had in fact been earned in India. (3) If the money has been brought into India through banking channels or in the form of assets....
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....r the assessment year preceding the year of his/her migration or in the earlier years, will not be entitled to any special concession. Thus, any claim by such migrants that the funds or the jewellery have been brought from the abovementioned countries, will be accepted only if the persons concerned produce adequate evidence to show that they had sufficient funds/wealth in those countries and that the transfer of the cash/jewellery to India, can directly be linked with the said funds or wealth. In other words, these migrants will have to lead proper evidence like any other assessees, about the source of the cash/jewellery alleged to have been brought by them from these countries. In support of the claim that they had sufficient funds in those countries, they might produce before the income-tax authorities in India, their bank accounts in those countries as also copies of the assessment orders passed in their cases by the income-tax authorities of those countries. The migrants would also then be required to prove that the amounts brought into India can directly be linked with the funds which they had possessed in those countries." 13. We now proceed to examine the above issue i....
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....control over it and it does not take the character of income, profit and gain after being brought in India. 14.4 There could, of course, be a situation where a non-resident has money in India, transmits it to a foreign country and then brings it back to India through a banking channel. If this circular motion of the money is conclusively proved with evidence then the non-resident will surely do the explaining under section 69 of the Act, despite the money having been brought into India through banking channel. But merely on suspicions or doubts, conjectures or surmises, no inference can be drawn against the assessee. It is trite law that there can be no presumption in favour of any illegality of a transaction. In fact, the presumption is the other way about- A.S. Sivan Pillai v. CIT [1958] 34 ITR 328 (Mad.). 14.5 Let us now examine the applicability of section 69 of the Act, which was relied upon by the learned Standing Counsel. It reads as under : "69. Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee o....
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.... is stated in paragraph (2) is expanded to include assets brought into India. It says, "If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no questions at all are asked by the ITO's as to the origin of the money or assets brought in......". 15.3 The second part of paragraph (3) and paragraph (4) talk about the second situation where the fact, that money or assets were brought from abroad cannot be conclusively proved by the non-resident. In cases of 'no evidence' for transfer of money, some concessions have been allowed in the Circular subject to conditions specified therein. 15.4 It is seen that in the instant case, the Assessing Officer while relying upon the CBDT Circular (supra), has committed an error of reproducing in his order from paragraph 4 of the Circular, which does not apply to the remittances through banking channels. He should have applied the paragraph (2) and the first part of paragraph (3) of the Circular. In the circumstances, therefore, his order has no merit and cannot be sustained. 16. The learned Standing Couns....