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2017 (3) TMI 1638 - AT - Income TaxRevision u/s 263 - as per CIT-A the status of assessee being Non Resident was accepted by AO as per claim of the assessee without any submissions by assessee with respect to stay in India during previous year relevant to the assessment year - Held that - Hon ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT (2000 (2) TMI 10 - SUPREME Court) held that if the AO has accepted the entry in the statement of account filed by the taxpayer without making enquiry and application of mind , the said order of the AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of the Revenue. The facts of the case of the instant case are similar to the facts in the case of Malabar Industrial Co. Limited(supra) whereby no enquiry/verification is made by AO whatsoever with respect to residential status of the assessee as well as his holding of the bank account in Switzerland with HSBC at Geneva during relevant previous year and the same was accepted based on submissions of the assessee without application of mind as well without any verification/enquiry being made by the AO. Thus, in our considered view learned Pr. CIT rightly invoked provisions of Section 263. The assessee in her affidavit has averred that the assessee has filed an RTI application with FRRO on 05-11-2015 to obtain her entry into and out of India to confirm her residential staus. The assessee has also averred that she has lost her passport no Z003983 dated 26/12/2006 issued at Bahrain by Indian Consulate which was duly reported to Ministry of Interior at Kingdom of Bahrain , their certificate, but in our considered view, this is irrelevant as her residential status is to be determined u/s 6 of the Act w.r.t. previous year relevant to assessment year 1996-97 which is a relevant assessment year and any passport which is issued post this period i.e. in this case passport no Z003983 issued on 26-12-2006 is totally irrelevant to determine residential status of the assessee for assessment year 1996-97 under consideration . - Decided against assessee.
Issues Involved:
1. Validity of the Principal Commissioner of Income Tax's (Pr. CIT) order under Section 263 of the Income-tax Act, 1961. 2. Non-resident status of the assessee for the assessment year 1996-97. 3. Lack of inquiry and verification by the Assessing Officer (AO). 4. Relevance of the decisions cited by the Pr. CIT. 5. Taxability of income for a non-resident under Section 5(2) of the Act. Issue-wise Detailed Analysis: 1. Validity of the Principal Commissioner of Income Tax's (Pr. CIT) order under Section 263 of the Income-tax Act, 1961: The Pr. CIT invoked Section 263, deeming the AO’s assessment order dated 19.03.2014 as erroneous and prejudicial to the interest of revenue. The Pr. CIT observed that the AO accepted the assessee’s non-resident status without proper verification or inquiry. The Pr. CIT issued a show-cause notice to the assessee, which was not adequately responded to. Consequently, the Pr. CIT set aside the AO's order and directed a fresh assessment after due verification. 2. Non-resident status of the assessee for the assessment year 1996-97: The assessee claimed non-resident status based on her long-term residence in Bahrain and the loss of her passport in 2007. The AO accepted this claim without requiring documentary evidence of her stay in India during the relevant previous year. The Pr. CIT found this acceptance without verification to be erroneous and prejudicial to the revenue's interest. 3. Lack of inquiry and verification by the Assessing Officer (AO): The AO accepted the assessee's submissions without conducting any inquiries or verifications. The Pr. CIT highlighted that the AO should have verified the details of the assessee’s stay in India and the existence of the HSBC bank account in Geneva. The Tribunal concurred, noting that the AO’s failure to verify the information rendered the assessment order erroneous and prejudicial to the revenue. 4. Relevance of the decisions cited by the Pr. CIT: The Pr. CIT relied on decisions from the Supreme Court and the Madras High Court, which emphasize the necessity of thorough verification by the AO. The Tribunal upheld this reliance, noting that the AO’s lack of inquiry was contrary to these judicial precedents. 5. Taxability of income for a non-resident under Section 5(2) of the Act: The Tribunal noted that even if the assessee were a non-resident, any income received or accrued in India would still be taxable under Section 5(2) of the Act. The AO did not investigate whether the income in question fell within this provision, further justifying the Pr. CIT’s order under Section 263. Conclusion: The Tribunal upheld the Pr. CIT’s order under Section 263, agreeing that the AO’s assessment was erroneous and prejudicial to the interest of the revenue due to a complete lack of inquiry and verification. The Tribunal dismissed the assessee’s appeal, directing the AO to conduct a fresh assessment with proper verification. Order: The appeal filed by the assessee in ITA No. 2735/Mum/2016 for the assessment year 1996-97 is dismissed. The order was pronounced in the open court on 17th March, 2017.
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