TaxTMI 
TaxTMI 
2018 (11) TMI 949
X X X X Extracts X X X X
X X X X Extracts X X X X
....de intention, and has ignored the fact that the assessee did not give any evidence/proof in this regard. 2. Ld. CIT(A) erred in ignoring the fact that the Assessee did not sign consent waiver form for carrying out any further enquiry from Swiss HSBC Branch which could have provided all relevant information. CIT(A) has ignored this vital issue in his order and stated that AO should have proved reliable and authentic evidence, whereas the assessee himself thwarted such attempt. More so when assessee has not denied before any authority that such account does not belong to him." 3. The brief facts of the case are that the assessee is a non resident since financial year 1995-96. The assessee is a director in a company in Japan and living in Japan on business visa since 1990. The assessee has got permanent residency certificate from Japan in 2001. The assessee has filed his return of income for AY 2006-07 on 29-03-2007 declaring total income of Rs. 5,51,667. The return of income was processed u/s 143(1) of the Income-tax Act, 1961 on 12-06-2007. 4. The assessment has been reopened u/s 147 of the Income-tax Act, 1961 for the reasons recorded as per which information was received by G....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2014. Thereafter, the assessee has filed a letter and stated that the return filed u/s 139(1) shall be treated as the return of income filed in response to notice u/s 148 of the Income-tax Act, 1961. The case has been taken up for scrutiny and accordingly, a notice u/s 142(1) of the Act dated 28-11-2014 was issued calling for various details including details of bank accounts maintained in HSBC, Geneva in original CD and other details. In response to notice, the assessee, vide his submission dated 19-12-2014 stated that he is a non resident for more than 25 years and being a non resident, he is not under obligation to declare his foreign assets and foreign income to the Indian Income-tax Authorities; hence, the question of submitting the CD of the HSBC Bank account or the consent waiver form does not arise. Further, the AO, issued notices u/s 143(2) and 142(1) of the Act on 22-02-2014 and asked the assessee to file necessary details in support of HSBC Bank account maintained in Geneva and also show cause as to why assessment shall not be framed u/s 144 of the Income-tax Act, 1961 based on material available on record. 6. In response to the notices, the assessee, vide his submissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rved that the assessee instead of furnishing relevant details to explain the source of deposits found in HSBC Bank, Geneva, questioned the genuineness and the authenticity of the base note, but fact remains that the genuineness and the authenticity of the base note has already been explained and the same has been provided to the assessee. Despite various opportunities given, the assessee chose not to offer any explanation to the source of deposits made in those accounts on the contention that as a non resident, he has under no obligation to provide such explanation. Although, the assessee claims to have no business connection in India, he had properties in India and also a demat account in which the portfolio valuation as on 16-02-2015 is Rs. 1,04,82,026 from 55 shares. During assessment proceedings, the assessee has produced permanent residency card of Japan which is valid from 27-11-2001. When he was asked to produce proof to show that he was permitted to have business / profession or work permit in Japan or any other country in which was earning his income prior to 2001, the assessee chose not to provide any details. Therefore, the only conclusion that can be drawn is that prior....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aw in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assessee company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the creditor the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee. 11.2 The Hon'ble Supreme Court in the case of Sumati Dayal Vs. Commissioner of Income Tax (1995) 214 ITR 801 (SC) held that income tax proceedings are civil proceedings and the degree of proof required is to be judged by preponderance of probabilities. The Hon'ble Supreme Court, in the case of CIT v Durga Prasad More [1971] 82 ITR 540 (SC), has held that "the taxing authorities were not required to put on blinkers while looking at the documents produced before them they were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents....The apparent must be considered as real only it is shown that there are that the apparent is not the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch explanations. 12.1 On the other hand the assessee has properties in India. He has a flat at Vile Parle (W), Mumbai for many years and also Demat Account No: 1201170000006304 in which the Portfolio valuation as on 16.2.2015 is Rs. 1,04,82,0267- from 55 shares held. During the assessment proceedings, the assessee has produced the permanent resident card of Japan which is valid from 27.11.2001. When asked to provide the proof to show that he was permitted to have business / profession or work permit in Japan or any other country in which he was earning his income prior to 2001; vide notice u/s 142(1) of the Act dt. 4.2.15, the assessee chose not to provide any details. Therefore, the only conclusion that can be drawn is that prior to this date, the assessee cannot be engaged in any business, profession or employment in Japan. The peak balance in his HSBC, Geneva account during the period 2005 to 2007 is USD 6237932.15 as on September, 2006 which translates to Rs. 28,75,68,6727- (@ Rs. 46.10 per USD). As per the Base Note the account was opened in 10.7.1998. What this shows is that the assessee could not have generated any income from Japan or any other country other than India pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The reopening of assessment on the basis of incorrect evidence has no legal sanctity. There is no live nexus between the reasons recorded for reopening of the assessment and escapement of income. The very basic reason for reopening of the assessment is on the premises that the assessee had not filed his return of income for the relevant assessment year, but fact remains that the assessee was regularly filing his return of income and he has filed his return of income for the relevant assessment year and therefore, reopening of assessment on incorrect reasons cannot survive under the law. The assessee has relied upon various judicial decisions, including the decision of Hon'ble Gujarat High Court in the case of Sagar Enterprises vs ACIT (2002) 257 ITR 335 (Guj). 9. The assessee also filed detailed submissions on additions made by the AO towards credits found in HSBC Bank, Geneva. The sum and substance of arguments of the assessee before the Ld.CIT(A) are that the information received from French Government is related to residents as mentioned by the AO, but the assessee is a non resident and his status as a non resident is not in dispute. The non residents are not under ob ligatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of income within the meaning of section 147 of the Income-tax Act, 1961. The case law cited by the assessee are distinguishable from the facts and there is no merit in the legal ground taken by the assessee and accordingly, the same has been dismissed. 11. Insofar as addition made by the AO towards credits found in HSBC Bank, Geneva, the Ld.CIT(A) held that the AO could not have made the addition without he himself applied his own independent mind to the facts and material gathered by the Investigation Wing. The AO should have made his own enquiries on the basis of information received from the Investigation Wing to establish the fact that there is a nexus between income derived in India and bank deposits found in HSBC Bank account. In the assessment order, the AO; however, did not in any manner discussed the source of information or evidences gathered on the basis of which it was held that the assessee held the HSBC Bank, Geneva account and balance in the same represents escaped income. On the other hands, the assessee has filed enough materials to prove that he is a non resident Indian since 1990 and he is working in Japan on business visa till 2001 and thereafter got perma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n could be made." 8.12 i. In the case before me also the AO has failed to substantiate its claim that the amount in question belonged to the appellant. ii. It is a proven fact that the assessee is a 'Non Resident' in terms of Section 6 of the Act since long and is filing its tax returns in India reflecting its status as Non Resident. It is also apt to note that the resident status of the assessee is not in dispute and the same was duly accepted by the Assessing Officer during the course of reassessment proceedings under Section 147/148 of the Act. iii. Also, the charging section for the purposes of the Act is section 5(2) in case of non-residents. In other words/ for a sum to be taxed in India in the hands of the Appellant, it must be received or deemed to be received in India or it accrues or arises or is deemed to accrue or arise to him in India. The residential status of the appellant i.e. Non-resident is duly accepted by the AO and is not in dispute. iv. Reliance is placed on the judgement in the case of DCIT v Finlay Corp, ltd(2003) 86ITD 626(Delhi), wherein it was held that: "The income of the non-resident is chargeable only under Section 5(2) and the provis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alls , within the ambit of Section 5(2). No such evidence has been brought upon by the AO to support his contentions and hence the AO's contentions stand no ground. In the present case, it is also observed that in the appellant's case the addition is made without referring to any Section. Such an act on part of the AO is not justified. ix. The Appellant had also filed an Affidavit declaring that any of Assessee's foreign account or foreign assets had no connection with India or with any Indian business. It is also categorically stated in the affidavit that the appellant does not have any proprietary or partnership business in India nor he is an employee or director of any company in India. He does not have any source of income in India except interest and dividend income which he has already declared in the Return filed. x. In this regard, the AO has acted mechanically in making addition to this effect without rebutting the appellant's clear and categoric stand. It is well settled law that affidavit is an important piece of evidence and if the same is not found faulty, any adverse view taken by the authorities concerned would lead to substantial question of law.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any details to prove that the said bank account does not have any link to income derived or sourced from India. In absence of any evidences filed by the assessee, the AO has taken the information received from the French Government to hold that the said deposit is sourced from income generated in India and accordingly made addition. The Ld.DR further submitted that although the assessee is maintaining the bank account, the details of such bank account were never before the Indian Income-tax authorities and also when specifically asked to prove the nature and source of credit, the assessee chose not to file any evidence. The Ld.CIT(A), without appreciating these facts deleted addition made by the AO by shifting the onus to the department ignoring the fact that when a credit is found, it is for the assessee to prove the said credit to the satisfaction of the AO. 13. The Ld.AR for the assessee, on the other hand, strongly supported the order of the Ld.CIT(A) and submitted that when the lower authorities never disputed fact that the assessee is a non resident since 1990, ignored the law, which clearly states that non residents are not required to declare their foreign bank accounts an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to tax in India with respect to those sums or the sums deposited may already have been disclosed to the Income-tax department. He also referred the statement of Minister of Finance published by Press Information Bureau on 04-04-2016 to clarify the position of non residents in respect of bank accounts found in HSBC Bank, Geneva, as per which, the Government itself does not wish to take any action in respect of non residents holding foreign bank accounts. Even the provisions of black money (undisclosed foreign income and assets) and imposition of tax Act, 2015 applicable only to residents. Even the FAQs to the blck money undisclosed foreign income and assets) and imposition of tax ACT, 2015, questions 22 & 32 clarified that non residents are not required to disclose foreign bank accounts and assets to Indian income-tax authorities. The Ld.AR further submitted that to determine whether a particular deposit in foreign bank account is sourced in India what needs to be considered is the withdrawals from the bank account of the assessee maintained in India. If one considers the withdrawals of the assessee from his bank account maintained in Dena Bank which is approximately Rs. 9.25 lakh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dent or non resident and the assessee also not filed any documentary evidence to prove that he is having business visa in Japan and earned income therefrom. The AO has shifted the burden on the assessee to prove negative. According to the AO, it is for the assessee to prove that the credits found in HSBC Bank is not sourced out of income derived from India. 16. The provisions of section 5 of the Act has defined the scope of 'total income' in the Indian Income-tax Act. As per provisions of section 5(2), the total income of any previous year of the person, who is a non resident includes all income from whatever source derived which received or is deemed to received in India in such year by or on behalf of such person or accrues or arises or is deemed to accrue or arises to him in India during such year. Explanation 1 provided to section 5 clarifies that income accruing or arising outside India shall not be deemed to receive in India within the meaning of this section by reason only of the fact that it is taken into account in a balancesheet prepared in India. Therefore, as per the provisions of section 5(2) of the Income-tax Act, 1961, only income that accrues / arises in India or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the onus of proving a negative that the deposits in foreign bank account are not sourced from India, on the assessee. In our considered view, the AO is not justified in placing the onus of proving a negative on the assessee. In fact, only a positive assertion can be proved, but not a negative. Furthermore, the onus of proving that an amount falls within the taxing ambit is on the department and it is incorrect to place the onus of proving negative on the assessee. This legal proposition is supported by the decision of Hon'ble Supreme Court in the case of Parimisetty Seetharaman vs CIT (1965) 57 ITR 532 (SC) where it was categorically held that the burden lies upon the department to prove that a particular asset is within the taxing provisions. Therefore, we are of the considered view that when the AO found that the assessee is a non resident Indian, was incorrect in making addition towards deposits found in foreign bank account maintained with HSBC Bank, Geneva without establishing the fact that the said deposit is sourced out of income derived in India, when the assessee has filed necessary evidences to prove that he is a non resident since 25 years and his foreign bank account....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r sum of money is payable under this Act and includes, every person who is deemed to be an assessee in default under this Act. Even, the FAQs to the black money (undisclosed foreign income and assets) and imposition of tax Act, 2015 reiterates the above position in questions No.24 & 32 where it was clarified that if a person, while he was a non-resident acquired or made a foreign asset out of income which is not chargeable to tax in India, such asset shall not be an undisclosed asset under the Act. The AO, without understanding these facts and also without answering the jurisdictional issue of whether the non resident assessee was liable to pay tax in India in respect of deposits in his foreign bank account, when he had proved that the source of deposit was not from India, went on to make addition on wrong footing only on the basis of information in the form of base note which is unverified and unauthenticated. On the other hand, the assessee has filed complete details in respect of his residential status which undoubtedly proves that he is a non resident in India since 1990 and the said bank account had been opened when he was a non resident in India. The assessee went abroad on b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m the record we found that assessee is a non-resident since 1979, as per Section 6 of the IT Act. Assessment of the assessee was reopened on the basis of information (called as 'Base Note') which was received in respect of the assessee from the office of DIT(Inv.)-II, Mumbai pertaining to a bank account with HSBC Bank, Geneva, Switzerland. It was submitted by assessee before AO that he is a Non-resident as per section 6 of the Act since 1979. Copies of his passport were also submitted to the AO in order to substantiate his claim of being a non-resident under the Act. Since, he is a nonresident, he submitted that his non-Indian bank account does not fall within the purview of the Act. In support of his claim, he also submitted a duly notarized affidavit stating that * He is a Non-resident as per section 6 of the Income-tax Act, 1961 since 1979. * He holds a Belgian passport and his current passport number is El 721068. * His PAN is BNBPS0099E. * No income has either been received or accrued to him in India which was liable to tax under the provisions of the Income-tax Act, 1961 during the Assessment Year 2006-07 and 2007-08. * The Indian funds are not the source of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by Commissioner of Income-tax (Appeals)-27 ('CIT(A)-27') in their respective cases was submitted to the AO for his consideration. 12. Further, both these assessees - Deepak Shah and Kunal Shah have paid taxes on the amount of addition to their respective computation of income. A summary of the taxes paid by them was also submitted to the AO for his consideration. However, AO did not agree with the assessee's contention and added peak credit in the account of HSBC Geneva in assessee's income. The AO has made additions in the case of assessee. 12. Further, both these assessees - Deepak Shah and Kunal Shah have paid taxes on the amount of addition to their respective computation of income. A summary of the taxes paid by them was also submitted to the AO for his consideration. However, AO did not agree with the assessee's contention and added peak credit in the account of HSBC Geneva in assessee's income. The AO has made additions in the case of assessee after taking cognizance of the fact that an addition of the same amount was made in the cases of Mr. Deepak Shah and Mr. Kunal Shah in their respective assessments by the Addl. Commissioner of Income Tax-16(2), Mumbai. 13....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso stated that none of the discretionary beneficiaries have contributed any funds to the said trust. However, the content of this affidavit was nowhere declined by the AO nor was held to be not true. In view of the above, the assessee being a non-resident, having money in a foreign country cannot be called upon to pay income tax on that money in India unless it satisfies the tests of taxability of non-resident under the provisions of the Act, which in the instant case is not getting satisfied in the case of the assessee. Thus, the bank account of HSBC Bank, Geneva is outside the preview of this Act. 15. We found that CIT(A) as dealt with the issue threadbare and after applying judicial pronouncements laid down by High Court and Supreme Court reached to the conclusion that assessee being non-resident is not liable to tax in respect of money lying in the foreign country unless AO bring something on record to show that assessee has not fulfilled the test of taxability of non-resident under the provisions of the Act. The detailed finding so recorded by CIT(A) are as per material on record and do not require any interference on our part. 16. The CIT(A) also observe that a circumstant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r which he retired from being the partner in the firm. Thus, the addition of undisclosed income of the firm M/s Kanubhai B. Shah &: Co. during the FY 2011-12 has no connection with the assessee, as he was not a partner during this period. In the instant case, even it is seen that 16. The CIT(A) also observe that a circumstantial evidence whenever used has to be conclusive in nature. Thus, the circumstantial evidences relied on by the learned AO nowhere lead to the conclusion that the amounts in the alleged foreign bank account are sourced from India. The CIT(A) also recorded a finding to the effect that the source of deposits is no where proved by the four instances relied on by the AO being termed as circumstantial evidence. The learned AO has himself observed based on the survey report dated 18 November 2011 that the assessee had retired from partnership of M/s Kanubhai B. Shah & Co. since October 1978. Also, the learned AO observed in the next para that the assessee became a non-resident as per section 6 of the Act since 1979 which is the year after which he retired from being the partner in the firm. Thus, the addition of undisclosed income of the firm M/s Kanubhai B. Shah &:....