INCOME TAX APPELLATE
TRIBUNAL - MUMBAI
HEMANT MANSUKHLAL
PANDYA, MUMBAI VS DCIT (IT) 3(3)(2), MUMBAI
16 NOVEMBER, 2018
I.T.A No.4679/Mum/2016
(Assessment year: 2006-07)
&
I.T.A No.4680/Mum/2016
(Assessment year: 2007-08)
(Assessment year: 2006-07)
&
I.T.A No.4680/Mum/2016
(Assessment year: 2007-08)
2. The revenue, more or
less taken up common grounds of appeal for both the assessment years. For the
sake of brevity, grounds of appeal taken for AY 2006-07 are extracted below:-
"1. "Whether
CIT(Appeal) was correct in holding the contention of the Assessee that 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 Hemant Mansukhalal
Pandya 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 Government of India from the French
Government under DTAA in exercise of its sovereign powers that some Indian
nationals and residents have foreign bank accounts in HSBC Private Bank (Swisse
SA, Geneva) which were undisclosed to the Indian Income-tax department. This
information was received in the form of a document (hereinafter referred to as
'base note') wherein details of account holders such as name, date of birth,
place of birth, sex, residential address, profession, nationality alongwith
date of opening of the said bank account and also balance in certain years,
etc. are mentioned. The information received from the French government has
been processed with that of the assessee's Indian income-tax return and found
that the details contained in base note is matching with the information provided
by the assessee in his income-tax return. Accordingly, the DDIT(Inv), Unit
VII(4), Mumbai has sent information to the concerned AO for further action. The
AO issued notice u/s 148 of the Act on 20-11-2014 with the following reasons
recorded for reopening of the assessment:-
Hemant Mansukhalal
Pandya "The case of HEMANT MANSUKHLAL PANDYA was centralized with the
undersigned vide order No. DIT(IT)-lI/Juris.l27(2)/2014-15, dated 12.11.2014.
Information has been received in respect of him from the office of
DDJT(Inv.)Unit-VII(4), Mumbai. Tlie information pertains to his having a bank
account with HSBC Bank, Geneva bearing a number BUP_$IFIC_PER_ID - 5090145003.
From the said bank statement, it is seen that he is having a peak balance of
USD 6237932.15 in the said account during the period 2005 to 2007. It is
further seen from tfa said bank account that an amount of USD 444171 is
reflected in his credit in December 2005. The records of this office show that
there is no return of income filed by him for the relevant assessment year and
this income therefore has escaped assessment. This evidence has come into the
possession of the undersigned; I have reason to believe that the income to the
extent of atleast USD 444171 has escaped assessment within the meaning of para
(d) to the Explanation
2 below section 147of'the Act"
5. In response to
notice, the assessee, through his A.R. Shri V.A.Parikh, CA, has filed his
objection for reopening of the assessment, vide his letter dated 25-11-2014.
The objection 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 Hemant Mansukhalal Pandya 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 submissions dated 31- 12-2014 and 05-01-2015,
filed an affidavit dated 29-12-2014 and stated that his foreign bank accounts
and foreign assets have no connection with India or any Indian business. No
amounts from India have been transferred to any of his foreign accounts
directly or indirectly. Further, the assessee challenged the authenticity and
correctness of the base note and contended that no addition can be made merely
on assumptions or presumptions. The assessee further submitted that he is a non
resident Indian since 1990, i.e. for more than 15 years. He went to Japan on
business visa in 1990 and worked there till 2001 and after 2001, he become
permanent resident of Japan, therefore, the bank account maintained in HSBC,
Geneva is having no connection with India and accordingly question of
furnishing details of bank accounts and foreign assets does not arise. He
further stated that he has filed his income-tax return regularly in India in
the status of Non resident declaring whatever income accrued or deemed to
accrue in India and such returns have been accepted by Hemant Mansukhalal
Pandya the department. In the absence of any provisions to declare foreign bank
accounts and assets by non residents to Indian Income-tax department, the question
of disclosing those accounts to Indian Income-tax department does not arise and
consequently, the amount lying in HSBC Geneva account cannot be taxed in India.
7. The AO, after
considering the submissions of the assessee held that when the information received
from two sovereign countries shows that the assessee is having bank accounts in
HSBC, Geneva, it is for the assessee to prove that the said bank account had no
connection with Indian income or the said deposits are not sourced out of
income received or accrued in India. As the assessee has chosen not to produce
the details of his HSBC bank account and the source of deposits thereto, even
though he could have obtained all the details / evidences for the same, the
only corollary that could be drawn is that the assessee has decided to withhold
the information as it would have gone against him. Thus, as per the provisions
of section 114 of the Indian Evidence Act also it needs to be held that at this
stage that the information / details not furnished were unfavourable to the
assessee and that the source 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 Hemant Mansukhalal Pandya 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 to this date, the assessee cannot be
engaged in any business, profession of employment in Japan. Therefore, he
opined that credits found in HSBC Bank, Geneva is undisclosed to Indian
Income-tax department and accordingly made addition of Rs.4,28,95,304 to the
returned income. The relevant observations of the AO are extracted below:-
11. The submissions of
the assessee are considered. In this case, the source of money deposited in the
HSBC, Geneva Account has not been explained, then in absence of anything
contrary shown by assessee the only logical conclusion that can be inferred is
Hemant Mansukhalal Pandya that that the amounts deposited are unaccounted
deposits sourced from India and therefore taxable in India. This presumption is
as per the provisions of Section 114 of The Indian Evidence Act, 1872 which
reads as follows:
"Section 114.
Court may presume existence of certain facts- The Court may presume the
existence of any fact which it thinks likely to have happened, regard being had
to the common course of natural events, human conduct and public and private
business, in their relation to the facts of the particular case. The Court may
presume -
.... (g) That evidence
which could be and is not produced would, if produced be unfavorable to the
person who withholds it..,..."
Section 114(g) of The
Indian Evidence Act, 1872, thus clearly says that the Courts can presume
existence of certain facts if the person liable to produce evidence which could
be and is not produced, which if produced would have been unfavorable to the
person who withholds it.
11.1 As the assessee
has chosen not to produce the details of his HSBC bank accounts and the source
of deposits thereof, even though he could have been obtained all the
details/evidences for the same, the only corollary that could be drawn is that
the assessee has decided to withhold the information as if producing it would
have gone against him. Thus, as per the provisions of Section 114 of The Indian
Evidence Act, 1872 also, it needs to be held at this stage that the
information/details not furnished were unfavorable to the assessee and that the
source of the money deposited in the HSBC account is undisclosed and sourced
from India. In Nova Promoters and Finlease (P)Ltd. 342 ITR 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 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 real and that too taxing authorities are entitled to
founding circumstances to find out the reality and the matter has to be
considered by applying the test of human probability.... Science has not yet
invented any instrument to test the reliability of the evidence placed before a
court or tribunal. Therefore, the courts and tribunals have to judge the
evidence before them by applying the test of human probabilities. The Hon'ble
Punjab and Haryana High Court, in the case of SomNath Maini v CIT [2008] 306
ITR 414 (Punj. &Har.), has held that "the assessing officer is to
apply the test of human probabilities for deciding genuineness or otherwise of
a particular transaction. Mere leading of the evidence that the transaction was
genuine, cannot be conclusive. Any such evidence is required to be assessed by
the assessing officer in a reasonable way. Genuineness of the transaction can
be rejected in case the assessee needs evidence, which is not trustworthy, and
the Department does not need any evidence on such an issue. In case of Smt.
Vasantibai Shah 213 ITR 805 (Bom) the court observed that The Income tax
Officer is entitled to take into consideration the totality of the^ facts and
circumstances of the case and to draw his own inference on the basis thereof.
Circumstantial evidence in such cases is not impermissible. In Hemant
Mansukhalal Pandya cases like this it is only the circumstantial evidence which
will be available. No direct evidence can be expected........" In case of
J S Parker 94 ITR 616 (Bom) it was held that"the tax liability under the
Income tax Act is of civil nature. To fasten a tax payer with such a liability
it is not necessary that the evidence should be in the nature of "beyond
doubt" as is required to fix a criminal liability. Tax liability can be
fastened on the basis of preponderance of probabilities".
12. The assessee in
this case has not produced any evidence to proof that the money deposited in
his foreign bank accounts (HSBC Private Bank, Suisse (SA), Geneva) does not
have ajvy source from India. The genuineness and the authenticity of the Base
note is already explained in para 2 of this order. The same has been provided
to the assessee. Despite the various opportunities given, the assessee chose
not 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 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
prior to 2001 that could result into a bank balance of Rs. 28,75,68,672/- by
2006.
12.2 The assessee chose
not to disclose sources of income returned by him in Japan nor the bank
statement of his HSBC, Geneva accounts. Further, it is in the public domain
that HSBC, Geneva has been inquired regarding its role in facilitating its
clients to evade taxes. Also, the names of various individuals including the
assessee himself have been mentioned in the list of account holders in HSBC,
Geneva who has been suspected of tax evasion. Hence there is a prima-facie
presumption of amounts in the said account being undisclosed and sourced from
India. The assessment proceedings offer an opportunity to the assessee to rebut
these presumptions but he has chosen not to disclose his HSBC bank accounts and
the sources of deposit despite various opportunities given. The circumstances
of the case in view of the jurisprudence as mentioned above points only to one
thing with regard to the source of deposits in the HSBC, Geneva accounts; that
the deposits were made by the assessee in his HSBC, Geneva accounts from
sources in India which has not been disclosed in his return of income. 3001821.
13. In view of the
above, the peak amount as appearing in the Base Note of the assessee's HSBC
account in AY 2006-07 being USD USD 942339.71 which translates to Rs.
4J8,95,304/- (@ Rs. 45.52 per USD) is hereby added to the total income of the
assessee as income deemed to accrue or arise in India for which the assessee
offers no explanation about the source and nature thereof."
8. Aggrieved by the
assessment order, the assessee preferred appeal before the CIT(A). Before the
CIT(A), assessee has challenged the validity of reopening of assessment and
also addition made by the AO on merits. The assessee has Hemant Mansukhalal
Pandya filed elaborate written submissions on the issue of reopening of assessment
which has been reproduced at para 4 on pages 4 to 8 of his order. The sum and
substance of the arguments of the assessee before the Ld.CIT(A) are that the
alleged base note is fabricated, unauthorsied, unauthenticated and hence, not
admissible as evidence. Therefore, the recording of reasons and consequent
re-assessment proceedings 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 Hemant Mansukhalal
Pandya 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 ligation to disclose foreign bank
accounts to the Indian Income-tax department. The assessee also questioned the
authenticity of base note by stating that the base note is neither authorized
nor is it verified from the original. It is just astray sheet of paper
mentioning some information. On the basis of unauthenticated, unverified
document, no addition can be made. The assessee has reiterated his arguments
made before the AO to argue that he is a non resident since 1990 and he is
having no business connection, whatsoever, in India and also whatever income deemed
to accrue or arise in India has already been declared in his return of income;
filed for the relevant assessment year, therefore, merely some information has
been received from some source, the same cannot be considered to make an
assessment on non resident in India in respect of bank accounts and assets held
outside India. The assessee has filed an affidavit stating that he does not
have any business connection in India. The assessee also has given copy of his
bank account held with Dena Bank from 1998 onwards. It is clear from the bank
account that the assessee has not Hemant Mansukhalal Pandya remitted any amount
abroad from India. It is very much clear from the details furnished before the
AO that there is no connection between HSBC Bank account maintained in Geneva
and income accrued or deemed to accrue in India. The AO made additions only on
the basis of unauthenticated information received from outside source without
bringing on record any evidence to show that the assessee has diverted income from
India and remitted abroad to the bank account maintained in HSBC Bank, Geneva.
In the absence of anything contrary, the AO was erred in making the assessee to
prove negative when the assessee is not under obligation to file his foreign
bank account and asset details and the law also does not mandate to file those
details, which is highly incorrect on the part of the AO to make addition
merely on the basis of a base note which is a piece of stray paper having no
legal authenticity.
10. The Ld.CIT(A), after
considering the submissions of the assessee and also by relying upon various
judicial precedents rejected legal ground taken by the assessee 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 Hemant Mansukhalal Pandya
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 permanent residency certificate. The
assessee also filed his passports to prove he is in India for all those years
only for a limited period, i.e. less than 60 days. It is also an admitted fact
that the assessee has filed his income-tax return in the status of non resident
disclosing income accrued or deemed to accrue in India and such return has been
accepted by the department in the status of non-resident. Once, the AO having
accepted the status of non resident of the assessee, should not have Hemant
Mansukhalal Pandya questioned the source of amounts deposited in foreign bank
accounts without establishing the fact that the said deposit is sourced out of
income derived in India. The Ld.CIT(A) further observed that the assessee has
filed an affidavit and declared that none of his foreign assets had any
connection with India or any Indian business. It is also categorically stated
in the affidavit that the assessee does not have any source of income in India
except interest and dividend income which he had already declared in his
income-tax return for the relevant years. With these observations and also by
following certain judicial precedents, the CIT(A) deleted addition made by the
AO towards credits found in HSBC Bank account. The relevant observations of the
Ld.CIT(A) are extracted below:-
"8.11 During the
course of appellate proceedings, AR submitted the decision in the case of Anil
Kumar Jain Appeal No.: 145/14-l5/CIT(A)-4, wherein it was held by the Hon.
COMMISSIONER OF INCOME TAX [APPEALS]-4, NEW DELHI that: "It is dear that
for making an addition u/s 69 the onus is laid on the revenue to bring on
record material from which it could be concluded that the deposits in such
accounts pertained to assessee himself. In the present case the AO has not
brought on record any material which could conclusively prove that the deposits
in various accounts were made by the appellant himself or for that matter it
belonged to the assessee himself. It is also relevant to note that even the, AO
did not have any material to verify such transactions and therefore in absence
of any such material, addition could not be made merely based on some
information which has not been put to test.
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 Hemant Mansukhalal Pandya 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 provisions of
Section 68 cannot override the provisions of Section 5(2). Taxability of
non-resident can be seen only under Section 5(2) and the provisions of Section
69 could not be pressed into service since such provisions do not override the
provisions of Section 5(2). It is settled legal position that burden is on the
Revenue to prove that income of an assessee falls within the net of taxation.
Section 5(2) being the Charging section, the burden is on the Revenue to prove
that the income of the non-resident falls within the ambit of such
section." v. Reliance is placed on the judgement in the case of Saraswati
Holding Corporation vs. Deputy Director of Income Tax[20/07/2007] (111 TTJ
Delhi 334), wherein the Tribunal upheld the decision of Dy. CIT v. Finlay
Corporation Ltd. (2004) 84 TTJ (Del) 788 : (2003) 86 LTD 626 (Del), quoted at
point no. vi in which it was held that:
"The provisions of
Section 68 or Section 69 cannot enlarge the scope of Section 5(2). Under
Section 5(2), the income accruing or arising outside India is not taxable
unless it is received in India."
vi. Reliance is also
placed on the judgement in case of Vodafone International holding B.V v Union
of India in 2012(Supreme Court), wherein it was held that: "Under Section
5(2) of the Income Tax Act, in case of NRIs the income accrued and received
outside India cannot be subject to tax in India. What is not taxable under
Section 5(2), cannot be taxed under the provisions of Sections 68 and 69 as
undisclosed income"
vii. Thus, respectfully
following the decision in the case of DCIT v Finlay Corp. Ltd, Saraswati
Holding Corporation vs. Deputy Director of Income Tax and Vodafone
International holding B.V v Union of India in 2012(Supreme Court), it is held
that what is not taxable under Section 5(2) cannot be taxed under the
provisions of Section 68 or Section 69. Provisions of Section 68 or 69 would be
applicable in the case of nonresident only with reference to those amounts
whose origin of source can be located in India.
viii. Therefore,
provisions of Section 68 or 69 have limited application in case of non-
resident 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 Hemant Mansukhalal Pandya 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. Reliance is
placed on the judgment of apex court in case of Mehta Parikh & Co. [1956
AIR554] where their lordship has held as under, "Facts proved or admitted
may provide to support further conclusions to be deduced from them, which
conclusions may themselves be conclusions of fact and such inferences from
facts proved or admitted could be matters of law. The court would be entitled
to intervene if it appears that the fact finding authority has acted without
any evidence or upon a view of the facts, which could not reasonably be
entertained or the facts found are such that no person acting judicially and
properly instructed as to the relevant law would have come to the determination
in question."
xi. Thus, in view of
the above and considering the facts and circumstances of the case and
respectfully following the decisions in the case of DCIT v Finlay Corp.
Ltd(2003) 86 ITD 626(Delhi), Saraswati Holding Corporation vs. Deputy Director
of Income Tax[20/07/2007] (111 TTJ Delhi 334) and Vodafone International
holding B.V v Union of India in 20l2(Supreme Court) cited supra, I am unable to
subscribe to the view taken by the AO. Considering the facts I am inclined to
accept the arguments of the appellant and accordingly the addition of Rs.
4,28,95,304/- made in this case is hereby deleted and the Ground Nos. II (Sub-
Grounds 3 to 5), III (Sub-Grounds 6 to 11) are allowed in favour of the
appellant."
12. The Ld.DR submitted
that the Ld.CIT(A) was erred in holding that the AO has made addition on the
basis of fabricated / manufactured data with some mala fide intention without
appreciating the fact that the information has been exchanged between two
sovereign countries as per which some Indian nationals and residents have
maintained bank account in HSBC Bank, Geneva and said bank accounts are not
disclosed to Indian income-tax authorities. The Ld.DR further submitted that
the Ld.CIT(A) was erred in ignoring the fact that the assessee did not sign consent
waiver form for carrying out any further enquiry from HSHC Bank, Geneva which
could have provided all relevant information. The Ld.CIT(A) has ignored this
vital fact and deleted addition on Hemant Mansukhalal Pandya 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.
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 and assets to
the Indian Income-tax authorities. The Ld.AR Hemant Mansukhalal Pandya further
submitted that the assessee has explained the position before the AO but the
AO, ignored all evidences filed on the basis of unauthenticated base note
received from French Government to make addition towards credits found in HSBC
Bank, Geneva without establishing the fact that such credit is sourced from income
derived in India. The assessee has filed an affidavit and stated that he does
not have any business connection in India or employed in any Indian company. He
has filed his income-tax return in India in the status of 'non-resident'
disclosing income received and deemed to accrue or arise in India and such
returns have been accepted by the department. The assessee also filed bank
statements of his Indian bank account maintained in Dena Bank from 1998 onwards
to prove that there is no significant debits which can be linked to deposits
found in HSBC Bank, Geneva. The bank account maintained in India is credited
with income derived from India from his portfolio investment and the said
income has already been offered to tax in India. The AO, without carrying out
any independent enquiry to ascertain the fact that the deposits in HSBC Bank,
Geneva is having nexus to Indian income, made addition only on the basis of
base note which is unverified and unauthenticated. The assessee being a non
resident is under no obligation to disclose his foreign accounts and assets and
accordingly he never disclosed his bank account maintained in HSBC Bank, Geneva
to the Indian Income-tax Hemant Mansukhalal Pandya authorities.
14. The Ld.AR, further
referring to ITR form prescribed for filing of return of income by the
individuals, submitted that the moment a person chooses his status as 'non
resident', the columns provided for filling foreign bank accounts and assets
details do not appears in the return of non residents and hence, the question
of disclosing said information to the Indian Income-tax authorities does not
arise. The Ld.AR further referring to the statement of the Minister of State
for Finance, has clarified 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
Hemant Mansukhalal Pandya 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 lakhs, which could not have funded an
amount of Rs.4.28 crores in the foreign bank account. The AO, without bringing
on record any evidence to support the base note to prove that the credits found
in HSBC Bank, Geneva is sourced from income generated in India, asked the
assessee to prove negative without any basis. On the other hand, assessee has
filed complete details to prove that the said deposits is having no connection,
whatsoever to Indian income. The Ld.CIT(A), after apprising all these facts,
has rightly deleted addition made by the AO. In this regard he relied upon the
decision of ITAT, Delhi in the case of DCIT vs Finlay Corporation Ltd (2003) 86
ITD 626 (Del); Delhi High Court in the case of CIT vs Suresh Nanda (2013) 352
ITR 611 (Del); and ITAT, Chennai in the case of Smt. Susila Ramaswamy vs ACIT (2010)
37 SOT 146 (Chen).
15. We have heard both
the parties, considered the material available on Hemant Mansukhalal Pandya
record and gone through the orders of authorities below. We have also
considered the case laws cited by either parties. The AO made addition towards
amount found credited in HSBC Bank account, Geneva on the ground that the
assessee has failed to explain and prove that deposit is not having any
connection to income derived in India and not sourced from India. The AO has
made additions on the basis of a document called 'base note' received from
French Government, as per which the assessee is maintaining a bank account in
HSBC Bank, Geneva. The AO has analysed the contents of base note to the details
filed by the assessee in his income-tax return to come to the conclusion that
the information contained in the base note is matching with the details of the
assessee and accordingly opined that the said bank account is belonging to the
assessee. Except this, the AO has not conducted any independent enquiry or
applied his mind before coming to the conclusion that whether the information
contained in base note is verified or authenticated. The AO never disputed the
fact that the assessee is a non resident. The lower authorities have accepted
the 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 Hemant
Mansukhalal Pandya 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 balance- sheet 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 is deemed to accrue or arise in
India is taxable in India in case of non residents. Under this legal
background, when we examine the fact of the case of the assessee, whether
credits found in bank account maintained by the assessee in HSBC Bank Geneva is
accrued / arisen in India or is deemed to accrue or arisen in Hemant
Mansukhalal Pandya India and is taxable in India in the hands of non residents
has to be examined. Insofar as the residential status of the assessee, there is
no dispute. The AO has accepted the fact that the assessee is a non resident.
In fact, the assessee has filed his passport details right from AYs 1995-96 to
2011-12 as per which, the assessee was in India for less than 60 days in all
these years. The assessee also filed an affidavit stating that he does not have
any business connection in India either through a proprietory / partnership
concern or holding directorship in any of Indian companies. The assessee
further stated that he is neither in employment in India nor in business
activity in India. The assessee also filed details to prove that he is
regularly filing his income-tax return in India in the status of non resident
disclosing income accrued or arose in India during the relevant financial
years. The return filed by the assessee has been accepted by the department for
all these years. All these facts have not been disputed by the lower
authorities.
17. Having said, let us
examine, non residents are required to furnish details of his foreign bank
accounts and assets in India or not. The assessee has maintained only one bank
account in India in Dena Bank which is an NRO account. The said bank account
has been reflected in AIR information. In order to prove that the amount in
foreign bank account is not sourced from India, the assessee filed the bank
statement of his only bank account in India Hemant Mansukhalal Pandya from the
financial years 1998 to 2008. On perusal of the bank account filed by the
assessee, it was noticed that there are no debits in the bank account which
could have gone to the foreign bank account. Thus, it can be seen that no
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 Indian, was incorrect in making addition
towards deposits found in foreign bank account maintained with HSBC Bank,
Hemant Mansukhalal Pandya 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 and assets did not have any connection with India and that
the same have been acquired / sourced out of foreign income which has not
accrued / arisen in India.
18. Having said so, let
us examine whether the government / legislature intended to tax foreign
accounts of non residents. The Minister of State for Finance has clarified on
the floor of the Loksabha on 02-12-2011 that mere holding of an account outside
India does not have led to the conclusion that the amount is tax evaded.
Further, the white paper on black money introduced by the Government states
that if information is received about 100 Indians having bank accounts abroad,
it does not automatically prove that all those 100 accounts represent black
money of Indian citizens stashed abroad. There may be cases where the account
holder may be an NRI who is not assessed to tax in India or the sum deposited
may already have been disclosed to the Income-tax department. It is only after
enquiry and completion of assessment one can know whether the amount deposited
in the foreign account represents black money of an Indian citizen. Similarly,
in the statement dated 04-04-2016 issued by the Minister of Finance published
by Hemant Mansukhalal Pandya Press Information Bureau, it was clarified that
non residents found having foreign bank accounts were non actionable. Thus, it
is very clear from the clarifications issued by the Government itself that the
legislature does not wish to take any action in respect of non residents
holding foreign bank accounts. Further, even in the excel utility of return of
income in the income-tax department website, the moment a person fills his
residential status as non resident, the excel utility prevents filling of
columns pertaining to foreign assets. Even, the Hon'ble Finance Minister has
clarified that all accounts in foreign bank may not be illegal as they may
belong to NRI. Thus, even the government has acknowledged the fact that an NRI
foreign bank account is not illegal. We further notice that provisions of black
money (undisclosed foreign income and assets) 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 Hemant Mansukhalal Pandya 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 business visa and started business in 1990 and was earning income in Japan
since then. He got permanent residency certificate in the year 2001. The AO,
without appreciating these facts, made addition on wrong presumption that
before 2001 it was unknown that the assessee was a non resident Indian and he
has earned any income outside India which is not taxable in India. Further, the
AO has taken the information of foreign bank accounts of Indians to come to the
conclusion that the said information is even applicable to non residents
without appreciating the fact that even the government's intention is not to
tax NRIs in respect of foreign bank account Hemant Mansukhalal Pandya and
assets. No material was brought on record to show that the funds were diverted
by the assessee from India to source the deposits found in foreign bank
account. The suspicion, howsoever strong, cannot take place of proof and no
addition could be made on presumption and assumption. The AO has not proved
that impugned addition could be made within the ambit of section 5(2) r.w.s. 68
/ 69 of the Income-tax Act, 1961.
19. Coming to the case
laws relied upon by the assessee. The assessee has relied upon the decision of
ITAT, Mumbai Bench in the case of DCIT vs Dipendu Bapalal Shah in ITA
No.4751-4752/Mum/2016. We find that the co-ordinate bench of ITAT has decided
an identical issue in respect of foreign bank accounts of non residents and
held that when the AO failed to prove nexus between deposits found in foreign
bank account and source of income derived from India, erred in making addition
towards deposit u/s 68 / 69 of the I.T. Act, 1961. In the said case, the
assessee is a non resident in India since 1990 and have no business connection
in India during that period. Under those facts, the Tribunal came to the
conclusion that in the absence of any nexus between deposits found in foreign
bank account and source of income derived in India, no addition could be made
towards cash deposits u/s 68 / 69 of the I.T. Act, 1961. The relevant portion
of the order is extracted below:-
"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 Hemant Mansukhalal
Pandya 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 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 amounts deposited in bank accounts held by him outside India.
9. Further, it was
submitted that the scope of income in case of a nonresident is defined under
the provisions of sub-section (2) of section 5 of the Act. As per this section,
a person who is a 'non-resident' has to pay tax only on that income which is
either received or is deemed to be received by him in India, or accrues or
arises or deemed to accrue or arise to him in India, during the year. Thus, he
will be liable to tax only in respect of income received or accrued to him in India.
10. The assessee also
submitted that he was not having any of his business operations in India during
AY 2006-07 hence, there is no income which has either deemed to accrue or arise
in India under section 9 of the Act. Thus, the initial contribution or even
other amounts in the foreign bank account does not fall under the purview - of
section 9 of the Act. Thus, the peak balance appearing in the bank statement of
the foreign bank account should not be added to the total income of the
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 Hemant Mansukhalal Pandya 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.
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 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. By the impugned
order, CIT(A) deleted the addition by observing that assessee is indeed a
non-resident u/s.6 of the Act and this fact has not been disputed by the AO. As
per our considered view under the provisions of the Act, taxability of a
non-resident is determined with reference to the provisions of section 5(2)
read with section 9 of the Act. In the instant case undisputedly the assessee
is a non-resident since 1979, as per the provisions of Section 6 of the IT Act.
The scope of income in case of a non-resident is defined under the provisions
of subsection (2) of section 5 of the Act. As per this section, a person who is
a 'non-resident' has to pay tax only on that income which is either received or
is deemed to be received by him in India, or accrues or arises or deemed to accrue
or arise to him in India, during the year, therefore assessee will be liable to
tax only in respect of income received or accrued to him in India. Further,
section 9 of the Act, lays down the provisions relating to income which is
deemed to accrue or arise in India. As the assessee Mr. Dipendu Shah was not
having any of his business operations in India during AY 2006-07 and AY
2007-08, there is no income which has either deemed to accrue or arise in India
under section 9 of the Act, Thus, the initial contribution or even other
amounts in the foreign bank account mentioned by AO in the notice does not fall
under the purview of section 5(2) read with section 9 of the Act'. Accordingly,
assessee is required to be pass through aforesaid test of taxability of
nonresident. It is a well settled position in law that a 'non- Hemant
Mansukhalal Pandya resident', having money in a foreign country cannot be taxed
in India if such money has neither been received or deemed to be received, nor
has it accrued or arisen to him or deemed to accrue or arise to him in India.
14. Under section 5(2)
the income accruing or arising outside India is not taxable unless 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 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 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 &: 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 the bank account with
HSBC Bank, Geneva was opened during the year 1997. Hence, the circumstantial
evidences discussed above including the report of Indian express of 10 February
2015, relied by the learned AO nowhere conclusively establishes that the source
of the deposits, since the inception, in the bank account was from India. In
view of the above discussion, we do not find any infirmity in the order of
CIT(A) for deleting the addition made in respect of deposits in HSBC Account,
Geneva in the hands of non-resident assessee. Facts and circumstances in both
the years are same.
Hemant Mansukhalal
Pandya
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 &: 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 &: 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 the bank account with
HSBC Bank, Geneva was opened during the year 1997. Hence, the circumstantial
evidences discussed above including the report of Indian express of 10 February
2015, relied by the learned AO nowhere conclusively establishes that the source
of the deposits, since the inception, in the bank account was from India. In
view of the above discussion, we do not find any infirmity in the order of
CIT(A) for deleting the addition made in respect of deposits in HSBC Account,
Geneva in the hands of non-resident assessee. Facts and circumstances in both
the years are same."
20. Coming to the case
laws relied upon by the revenue. The Ld.DR has relied upon the decision of
ITAT, Mumbai Bench in the case of Rahul Rajnikant Parikh in ITA
No.5889/Mum/2016. We find that the case law relied upon by the revenue has no
application to the facts of the assessee's case, as in the said Hemant
Mansukhalal Pandya case, the Tribunal has not laid down any ratio. The matter
was set aside to the file of the AO by consent of both the parties. It is a
settled law that a judgement / order delivered by consent has no precedential
value. Even otherwise, the taxpayer in the said case had business connections
in India by way of being a partner in partnership firms. Under those facts, the
Tribunal has set aside the issue to the file of the AO for further examinations
on the request of both the parties. Admittedly, in this case, the assessee is a
non resident and he does not have any business connection / interest in India.
Therefore, the case law relied upon by the Ld.DR cannot be applied to the facts
of the present case.
21. In this view of the
matter and considering the ratios of the case laws discussed above, we are of
the considered view that the AO was erred in making addition towards deposits
found in HSBC Bank account, Geneva u/s 69 of the Act. The Ld.CIT(A), after
considering relevant facts, has rightly deleted addition made by the AO. We do
not find any error or infirmity in the order of Ld.CIT(A). Hence, we are
inclined to uphold the findings of Ld.CIT(A) and dismiss the appeal filed by
the revenue.
22. In the result, the
appeal filed by the revenue is dismissed. ITA No.4680/Mum/2016 - 2007-08.
23. The facts and
issues involved in this appeal are identical to the facts and Hemant
Mansukhalal Pandya issues which we have already considered in ITA No.4679/Mum/2016.
The reasons given by us in preceding paragraphs shall mutatis mutandis apply to
this appeal also. Therefore, for the details reasons given therein in ITA
No.4679/Mum/2016, we decide the issue in favour of the assessee and against the
revenue.
24. In the result,
appeal filed by the revenue is dismissed. Cos No.58 & 59/Mum/2018.
25. The assessee has
taken a legal ground in its cross objections on the issue of validity of
reopening of assessments for both the assessment years. Since we have already
decided the issue on merits in favour of the assessee and against the revenue,
the cross objections filed by the assessee challenging validity of reopening of
assessments becomes academic in nature. Therefore, the same are dismissed, as
infructuous.
26. As a result, both
the appeals filed by the revenue and the cross objections filed by the assessee
are dismissed.
Order pronounced in the
open court on 16th November, 2018.
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