TaxTMI 
TaxTMI 
2022 (11) TMI 530
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....y the ld. AO against the appellate order passed by the Commissioner of Income-tax (Appeals)-57, Mumbai [the learned CIT (A)] for A.Y. 2006-07 in ITA No.494/Mum/2021 are as under:- "1. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in holding that the onus was on the Department in this case to prove that credits in HSBC Bank account were within the taxing provisions of the Indian Income Tax Act. without appreciating that the onus lies on the assessee to prove the contents of the Base note incorrect in view of his refusal to sign the Consent-Waiver Form to bring back the complete bank statements as mentioned in the Base-Note received from the French Government which the AO has relied during the Scrutiny Proceedings? 2. Whether on the facts and circumstances of the case and in Law, the Ld. CIT(A) has: erred in relying on the decision of DCIT(IT), Mumbai vs Hemant Mansukhial Pandya (100 taxmann.com 280) without appreciating that the decision of Hemant Pandya (supra) was distinguished from the decision of Mumbai ITAT in the case of DCIT(IT) vs Rahul Rajnikant Parikh (ITA NO. 5889/Mum/2016) on certain grounds which are absent in ....
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....er that assessee continues to be in the diamond business, therefore, it is reasonable and prudent to assume that the deposits in HSBC bank account are form his operation of diamond business in India. Accordingly, the deposit represents income from source from India. As assessee has settled in Singapore, where there is no income tax and as per the base note the HSBC account in Geneva was opened on 19th April, 2002. Further, the assessee did not produce bank account statement and the source of deposit therein despite several opportunities, therefore, Income is presumably of the assessee, therefore, assessee has not produced any evidence that the deposits in the said HSBC account are income earned outside India same is required to be taxed in the hands of the assessee. Therefore, the learned Assessing Officer held that the amount as appearing in the 'base note' of the assessee's HSBC account in A.Y. 2006-07 being USD 67,421/- translated to Rs.30,33,945/- added to the total income of the assessee as income deemed to accrue or arise in India for which assessee has not offered any explanation about the source and nature thereof. Consequently, assessment order was passed on 31st March, 20....
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.... of the assessee by deleting the addition of Rs.4,78,39,775/-. He further held that assessee is a non-resident since A.Y. 2001-02 and became a citizen of Belgium in 2007, he does not have any business communication. He further followed the decision of the co-ordinate Bench in case of Hemant Mansukhlal Pandya in ITA Nos. 4679 & 4680/Mum/2016 dated 18.10.2018. Therefore, he deleted the addition by the appellate order dated 24th September, 2020. The learned Assessing Officer is aggrieved with the above order. 011. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. At the time of hearing on 18th August, 2022, the learned Departmental Representative was asked to show the 'base note'. On 13th September, 2022, the 'base note' was produced by the learned Authorized Representative which was verified and returned back. 012. The base note also contained the noting that same was shown to the authorized representative of the assessee. This was pointed out to ld. AR. This was fairly agreed that assessee is aware of the contents of the based note. 013. The learned Authorized Representative reiterated the written submission made as und....
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....n HSBC Private Bank (Suisse) SA, Geneva which were undisclosed to the Indian Taxation Department. This information was received in the form of a document (hereinafter referred to as "Base Note") wherein various details........... 8. The authenticity of the Base Note is being challenged because copy of the reasons which were handed over on 15.07.2015 lacked the authenticity inasmuch as the rubber stamp and official seal of the Income tax authority signing the same were missing in the recorded reasons. The appellant had also further asked for supplying the tangible material which was never given to the appellant. (pgs 125-144) Circular No. 3/2012 date: 12/06/2012 (Suppl. Memorandum explaining the amendments Finance Act 2012) Pg. No. 130-131 9. Written application for supply of " recorded reasons" and/or "substantial documentary evidence" was made on 18.05.2016, pg 179 for which the reply from the AO was received on 27/5/2016 pg 180 stating that the same appears in the order rejecting the objections to reopen the assessment in his order dated 17.03.2015. pg 146. This does not have either recorded reasons" and/or "substantial documentary evidence "and hence a....
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....aving a Bank Account in Geneva by a non-resident cannot be a reason to reopen. AO could have reopened only if he had any evidence to link the amounts in said account with source in India. Thus, there are a factual error. 3. Reliance is placed on the decision of the jurisdictional High Court in the case of PCIT v. Rajesh D. Nandu (HUF) (2019) 261 Taxman 110 (Bom.) (HC)wherein it was held that since reasons as recorded in support of impugned notice to doubt genuineness of gift was not based on any material so as to form belief that assessee's income had escaped assessment on account of gift not being genuine and it was only a suspicion subject to enquiry, impugned reopening notice issued by Ld. Assessing Officer was unjustified. 4. The appellant was never provided with the source and details of information AO was relying on apart from the Base Note under the guise of confidential information which he has referred in his order/Remand report. -Durgo Prashad Goyal 98 ITD 227 (Asr) (SB) that "any general information contained in letter is not relevant material". -Secondly if any document or material is relied by the AO for reopening the assessment ....
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....ank accounts and erred in recording reasons that due to holding of foreign bank account, income had escaped assessment. If the logic of the AD is upheld, the AO would be able to issue notice u/s 148 to each and every non-resident who has a bank account outside India and who does not file return of income in India without even considering whether they are supposed to file return of income in India or not. 11. The AO has merely acted upon the directions of Investigation Wing of Mumbai and not based upon an enquiry/examination/verification of his own findings. Phool Chand Bajrang Lal (1993) 203 ITR 456 (SC) 12. The AO has violated the mandate of jurisdictional High Court in case of Asian Paints Ltd v/s. DCIT (2008) 296 ITR 96 (Bom) as assessment was completed within 4 weeks after disposal of the objections. Similar view has been taken by Hon. Bombay High Court in Bharat Jayantilal Patel v. UOI (2015) 378 ITR 596 (Bom.)(HC). 13. The Hon'ble Delhi High Court (Full Bench) in the case of Kelvinator of India Ltd, upheld by Hon'ble Supreme Court of India, 320 ITR 561 (SC) wherein Supreme Court interalia held the AO has power to re-open the assessment provided there....
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.... mere possessing a foreign bank account could have led the AO to reopen the Assessee's assessment. No rational person could have entertained a belief that merely by holding a foreign bank account, non-resident Assessee's taxable income has escaped escapement within the meaning of section 147 of the Act. Thus, assessment has been reopened without application of mind. 19. The recorded reasons clearly shows that the reopening of assessment has been done in the instant case to undertake a fishing enquiry so as to cast an onerous burden on the Assessee of proving a negative i.e. foreign assets have not been sourced from income arising/ accruing in India. The reassessment proceedings cannot be initiated to undertake a fishing enquiry, especially when there is absolutely no material on record to even suggest that income chargeable to tax had escaped assessment. 20. Reopening is bad in law if there exist no "Reason to Believe" even if there was no original scrutiny assessment. -Ankita A Choksey v ITO [2019] 411 ITR 207 (Bom.) (para 5) -Khubchandani Health Parks Pvt Ltd v ITO (2016) 384 ITR 322 (Bom)(HC) (Para 5) -Sarthak Securities Co. (....
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....e utilized as evidence should be duly authenticated. The same is applicable even for Income Tax Act as per section 39(1) 'As per Section 39 of The Foreign Exchange Management Act, 1999, where any document is produced or furnished by any person or has been seized from the custody of any person in either case under this Act or under any other law; or ii) has been received from place outside India which is duly authenticated by such authority or person and in such manner as may be prescribed in the course of Investigation of any contravention under this Act alleged to have been committed by any person, and such a document is tendered in any proceeding under this Act in evidence against him, or against him and any other person who is proceeded against jointly with him, the court or the Adjudicating Authority, as the case may be shall- a. Presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in handwriting of, any particular person, is in that person's handwriting and in ca....
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....n who denies the allegation. When the appellant had categorically denied that he has no foreign bank account, the onus shifts towards the AO to prove that the photocopy of the document shown relates to him. This burden has not been discharged by the AO. It is well settled that mere suspicion cannot be the basis of addition. Moosa S Madha and Azam CIT, 89 ITR 65 (SC) 3. Also Refer: But if a foreign document is otherwise relevant and proved according to law, its photocopy can be admitted in evidence provided such copy is duly authenticated in the manner prescribed by the Diplomatic an Consular Officers (Oaths and Fees) Act, 1948 [Vimal Chandra Gulecha 134 ITR 119 (Raj) at 130]. 4. Factual inaccuracy in asst order: PERVERSE ORDER I. It is held by the AO in paragraph 6.2 of the assessment order that; A. "The appellant has his interest in India since his address as per the Base Note is in India". The address mentioned by the AO is the residential address of the appellant in India at which he is assessed to tax in India. (Parents Address). Liability to pay tax in India does not depend on residential address nor on Nationality....
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....s a prima facie presumption of amounts in the said account being undisclosed and sourced from India". Income tax is a tax on income and not on "presumed income" without any evidence being provided by the AO in this regard. D. The AO in his conclusion arrived at in paragraph 7 of the assessment order once again repeat the same factual incorrect information/findings and goes on to make presumption E. Even the conclusion in para 7.3 has been arrived at on wrong facts as under The appellant submits he was NEVER EVER a beneficiary of any discretionary trust and therefore the entire conclusion arrived at by the AO is factually and legally incorrect. 5. The AO held that "in view of the factual position regarding his earnings in India at mentioned at Para (1) and (ii) above, it is presumed that the deposits are from his Indian income". The AO has opted to blow hot and cold simultaneously viz. he mentions that "in view of the factual position" it is "presumed that the deposits are from his Indian income". 6. The conclusions arrived at by the AO are WHOLLY AND TOTALLY factually and legally incorrect which goes to prove that his finding is....
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....49(1)(c) and proviso 2 to Sec 147 make it clear that what is intended to be reassessed is only income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax that has escaped assessment for any assessment year. 15. The AO has not disclosed nor referred to any credible information in support of his finding that the said account had peak balances on any particular day during the Financial Year 2005-06. The AO, based only on hearsay and unverifiable information and adopted imaginary amounts as peak balance and proceeded to make additions. 16. The AO has wrongly taxed the alleged income by taking count of all the possible assumptions and probabilities only on suspicion It is submitted that judicially it has been held that suspicion however strong cannot take place of the evidence. 17 Conclusion should be on clear findings and not on presumptions and decision cannot be on the basis of assumption or presumption. Without prejudice to all the earlier grounds of the present appeal, even otherwise it would be incorrect to include the balance at the end of the accounting year as the alleged income. 18. ....
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....d kumar Singh (2019) 264 Taxman 335 (Bom)(HC) - wherein ITAT Mumbai held that if one has proved his status of being a non resident then his global income cannot be taxed in India. When it was noted that the assessee was a non resident, appeal was disposed off as global income of a non-resident cannot be taxed in India. The decision of Mumbai Tribunal in Renu T Tharani v DCIT [2020] 184 ITD 565 (Mumbai - Trib.) is not applicable in the facts of the present case. On the aspect of reopening, reopening was upheld as Assessee had filed ROI in India as a resident. It was not a case of nonresident. Also the above decision do not rely upon Bombay High decision in Pr.CIT-15 v Binod Kumar Singh (2019) 178 DTR 49 / 264 Taxman 335/ 310 CTR 243 (Bom.)(HC) which specifically deal with taxability in the hands of Non residents. Similarly decision in Rahul R Parikh AYS 2003-04 to 2008-09 & anr. Dated: 01/06/2018 (Mumbai ITAT) is not applicable in the facts of the present case. Assessee did not challenge the reopening before ITAT. There was a finding of fact that the assessee and Kalpesh Jhaveri were partners inKR Gems, and Navinchand Navalchand & Co. Opera House ....
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....A Nonresident is chargeable to tax in India only income falls under Section 5(2) of the Act. Accordingly, he is chargeable to tax only if the income is received or accrues or arises in India or deemed to be received or deemed to accrue or arise to him in India. Therefore, the assessee can be asked to file the details only with respect to the income falling under Section 5(2) of the Act. Therefore, it is an undisputed fact that assessee is a non resident is not obliged to disclose his assets situated outside India in the return of income filed in India. 017. The facts also shows that the appellant was born in India in 1975 and became non-resident in A.Y. 2002-03 when he was 25 years old and not four years as held by the learned Assessing Officer. It is also stated by the assessee that he was never a partner in any firm in India. This data and statement of facts was not rebutted by the learned Assessing Officer. Further, these facts are also not doubted that assessee is employed in Belgium after he became a non-resident. Assessee also denied that he was ever a beneficiary of any discretionary trust. Therefore, it is apparent that all the allegation made in the assessment order are....
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....leted the addition considering the facts in Assessee's own case for A.Y. 2006-07. We do not find any reason to sustain the order of the learned CIT (A) for A.Y. 2007-08. For the reason that, we have already upheld the order of the learned CIT (A) for A.Y. 2006-07, deleted the above addition. 020. Accordingly, the appeal of the learned Assessing Officer for A.Y. 2007-08 in ITA No.493/Mum/2021 is dismissed. 021. Assessee has filed cross objections in CO Nos. 155/Mum/2021 and 156/Mum/2021, both are supported in nature. As we have already upheld the order of the learned CIT (A) for both the years, deleted the impugned addition, these cross objections are infractuous and hence dismissed. 022. Accordingly, both the appeals of the learned Assessing Officer in case of Mr. Manish Vijay Mehta and both the CO of the assessee are dismissed. In case of Urvi Manish Mehta 023. Identical additions were made by the learned Assessing Officer in the hands of Mrs. Urvi Manish Mehta of the identical sum for A.Y. 2006-07 and 2007-08 by passing an order under Section 143(3) read with section 147 of the Act for A.Y. 2006-07 and 2007-08 on 31st March 2015. Both the years of appeals were p....