TaxTMI 
TaxTMI 
2018 (11) TMI 949
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.... it is fabricated/manufactured data with some malafide 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 fo....
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....tion filed by the assessee has been duly disposed of by the AO vide his order dated 28-11-2014. 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 mate....
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.... of money deposited in HSBC account is undisclosed and sourced from India. The AO further observed 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 ch....
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....169(Del), highlighting the legal effect of section 68 of the Act, the Division Bench has observed in para 32 that "The tribunal also erred in law 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 re....
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....t to offer any explanation to the sources of deposits made in these accounts on the contention that as a non-resident he is under no obligation to provide such 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 No....
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....ings based on such unrelatable evidence are vague in law. The base note is motivated by malafide intentions which is false and fabricated and has been illegally attributed to the assessee. 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....
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....essee challenging reopening of the assessment on the ground that the AO had recorded a reason on the basis of information received from Investigation Wing, which, prima facie establishes escapement 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 inco....
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.... Considering the propositions of cases cited above it is clear that unless the AO brings on record material which substantively prove that amount of deposits in such account were income of the appellant, no addition 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....
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....ion in case of nonresident and since the appellant has disclosed all his income earned in India or accruing or arising to him in India by regularly filing his Return of Income as a non-resident, the appellant cannot be taxed for income earned outside India unless the Revenue proves that the income falls , 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 m....
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....ded all relevant information. The Ld.CIT(A) has ignored this vital fact and deleted addition on the premises that the AO should have proved reliable and authentic evidences whereas the assessee himself blocked / thwarted such attempt. The assessee neither denied of having maintained account in HSHC Bank, Geneva nor filed 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. 1....
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....ified on the floor of the Lok Sabha on 02-12-2011 that mere holding of an account outside India does not lead to the conclusion that the amount is not taxed in India. He also referred to white paper on black money introduced by Government to clarify that there may be cases where the account holders may be NRIs, is not assessed 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 t....
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....e fact that the assessee is a non resident since 2001. The AO also accepted the fact that the non residents are not required to disclose their foreign bank accounts and assets to the Indian Income-tax authorities. But, the AO has made addition on the ground that before 2001 it was not clear as to whether the assessee, is a resident 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 i....
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.... amounts have been transferred from his Dena Bank account in India to any of the bank accounts maintained including HSBC, Geneva. In fact, the balance in the account maintained in Dena Bank is so less that it cannot fund an amount of Rs. 4.28 crores which has been added by the AO as assessee's income. Despite this, the AO sought to put 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 In....
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....ssets) and imposition of tax Act, 2015 is applicable only to residence. As per section 2((2) of the said Act, an assessee means a person being a resident other than not ordinarily resident in India within the meaning of sub section (6) of section 6 of the Income-tax Act ,by whom tax in respect of undisclosed foreign income and assets or any other 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 inform....
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....w:- "8. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. From 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 Inco....
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....se of assessee. 11. Without prejudice to the above, he submitted that the peak balance appearing in the bank statement of this foreign bank account has already been added to the computation of income and subjected to tax in the hands of Deepak Shah and Kunal Shah in their respective assessments for AY 2006-07 and AY 2007-08. A copy of the order passed by Assistant Commissioner of Income-tax -16(2) and 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 ....
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.... it is received in India. Similarly, if any income is already received outside India, the same cannot be taxed in India merely on the ground that it is brought in India by way of remittances. We also found that the assessee in his affidavit dated 13 October 2011 has clearly stated that the he was a settlor of a trust outside India which he had created for the benefit of his family members with his initial contribution. Further, he has also 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 Cour....
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....at 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 &: 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 eviden....