2016 (4) TMI 668 - AT - Income Tax

Addition on account of peak deposits in HSBC, Geneva account and interest thereon - CIT(A) deleted the addition - Held that - Since the principle amount in the HSBC Geneva Bank account is itself not taxable due to the non-resident status of the assessee, and as there is no proof that the income has accrued or arisen in India consequently, there can t be any addition on account of interest income on the amount of deposits in the same bank account. - Decided in favour of assessee Addition on account of alleged non-utilisation of capital gains earned within the statutory period of three years - Held that - Since the total expenditure incurred by the assessee for construction of new house property at Sonali Farms (at Westend Greens, NH-8) far exceeded the capital gains of ₹ 1.58 crores accrued on sale of property at Colaba, Mumbai, we are of the opinion that the amount of ₹ 58,00,000/- lying in the account of the assessee should have been deemed to have utilized for acquiring the new asset and the revenue ought not to have made the addition on this count. This addition is, therefore, deleted.- Decided in favour of assessee.

Issues Involved:
1. Deletion of addition made by the AO on account of peak deposits in HSBC, Geneva account for AYs 2006-07 and 2007-08.
2. Deletion of additions made by the AO on account of documents seized from Shri Suresh Gulati's residence for AYs 2006-07 and 2007-08.
3. Deletion of addition on account of remittance in NRE account for AY 2007-08.
4. Deletion of additions on account of unexplained deposits in ICICI, London for AYs 2007-08 and 2008-09.
5. Deletion of addition on account of deemed dividend received for AYs 2008-09 and 2009-10.
6. Validity of assessment u/s 153A without incriminating evidence/document found during search.
7. Onus on the appellant to establish that the amount in HSBC account did not belong to him.
8. Liability of the appellant to pay tax on amounts in HSBC account despite deletion of addition.
9. Addition on account of deemed interest on amounts outstanding in HSBC account for AYs 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, and 2012-13.
10. Addition on account of non-utilisation of capital gains within the statutory period for AY 2009-10.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Peak Deposits in HSBC, Geneva Account:
The Revenue's appeals for AYs 2006-07 and 2007-08 pertained to the deletion of addition made by the AO on account of peak deposits in the HSBC, Geneva account. The CIT(A) deleted the addition, stating that there was no evidence to link the money in the foreign accounts with any Indian defense contract payments. The CIT(A) held that any conclusion that the amounts in the HSBC account were proceeds of commission from defense contracts would be premature and presumptive without requisite evidence. The ITAT upheld the CIT(A)'s order, noting that the Revenue could not provide evidence to link the money with any Indian defense contract payment, and the income had not accrued or arisen in India.

2. Deletion of Additions Based on Documents Seized from Shri Suresh Gulati's Residence:
For AYs 2006-07 and 2007-08, the AO made additions based on documents seized from Shri Suresh Gulati's residence. The CIT(A) deleted these additions, noting that the money kept in the appellant's account at Singapore was not taxable in India, and remittances made from the said account for expenses in India could not be held as unexplained expenditure/investments. The ITAT upheld the CIT(A)'s order, finding that the issue was covered in favor of the assessee by earlier judgments/orders.

3. Deletion of Addition on Account of Remittance in NRE Account:
For AY 2007-08, the AO made an addition of Rs. 3,44,18,350/- on account of remittance in the NRE account. The CIT(A) deleted the addition, stating that the issue of taxability of deposits in Deutsche Bank, Singapore, and transfer of funds to Deutsche Bank, India, was decided in favor of the appellant in earlier appeals. The ITAT upheld the CIT(A)'s order, finding that the issue was covered by earlier judgments/orders.

4. Deletion of Additions on Account of Unexplained Deposits in ICICI, London:
For AYs 2007-08 and 2008-09, the AO made additions on account of unexplained deposits in ICICI, London. The CIT(A) deleted these additions, stating that the amounts kept in the account held by the appellant in ICICI Bank, London, could not be taxed as the appellant was a non-resident. The ITAT upheld the CIT(A)'s order, finding that the issue was covered by earlier judgments/orders.

5. Deletion of Addition on Account of Deemed Dividend Received:
For AYs 2008-09 and 2009-10, the AO made additions on account of deemed dividend received. The CIT(A) deleted these additions, noting that the amounts received were security deposits against property let out and not loans or advances. The ITAT upheld the CIT(A)'s order, agreeing that the consideration received was not covered by section 2(22)(e) of the Act.

6. Validity of Assessment u/s 153A Without Incriminating Evidence/Document Found During Search:
The Cross Objections filed by the assessee challenged the validity of assessment u/s 153A without incriminating evidence/document found during search. The ITAT found that the additions were not based on any incriminating material found during the search, and the assessments were framed u/s 153A r.w.s. 143(3). Therefore, the Cross Objections became infructuous and were dismissed.

7. Onus on the Appellant to Establish That the Amount in HSBC Account Did Not Belong to Him:
The Cross Objections for AYs 2006-07 and 2007-08 challenged the CIT(A)'s finding that the onus was on the appellant to establish that the amount in the HSBC account did not belong to him. The ITAT held that since the addition made on account of the amount in the HSBC account was deleted, this ground became academic and was dismissed.

8. Liability of the Appellant to Pay Tax on Amounts in HSBC Account Despite Deletion of Addition:
The Cross Objections for AYs 2006-07 and 2007-08 challenged the CIT(A)'s view that the appellant was liable to pay tax on amounts in the HSBC account despite the deletion of the addition. The ITAT agreed with the appellant, stating that when the CIT(A) deleted the additions, the appellant was not liable to pay any tax or interest on the amounts in the HSBC account. The AO was directed to refund the excess tax paid.

9. Addition on Account of Deemed Interest on Amounts Outstanding in HSBC Account:
The Cross Objections for AYs 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, and 2012-13 challenged the addition on account of deemed interest on amounts outstanding in the HSBC account. The ITAT held that since the principal amount in the HSBC account was not taxable due to the non-resident status of the appellant, there could not be any addition on account of interest income on the deposits in the same account.

10. Addition on Account of Non-Utilisation of Capital Gains Within the Statutory Period:
For AY 2009-10, the AO made an addition of Rs. 58,00,000/- on account of non-utilisation of capital gains within the statutory period. The CIT(A) upheld this addition. However, the ITAT deleted the addition, noting that the total expenditure incurred by the appellant for constructing a new house far exceeded the capital gains accrued on the sale of the property. The ITAT held that the amount should be deemed to have been utilized for acquiring the new asset.

Conclusion:
All the appeals of the Revenue were dismissed, and the Cross Objections of the assessee were partly allowed. The ITAT upheld the CIT(A)'s orders on various issues, finding that the Revenue could not provide sufficient evidence to support the additions made by the AO. The ITAT also found that the issues were covered by earlier judgments/orders in favor of the assessee.

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