2017 (12) TMI 347 - AT - Income Tax

Resident in India - Taxability in India - period of stay in India - requirement to file return on India - Held that - The assessee s presence in India was only for 31 days in the relevant previous year. When, the assessee who is an U.S.A. citizen since 14.9.1999; and is living in USA since 1974; and his presence in India during the relevant previous year is less than 182 days, then in terms of section 6, the assessee cannot be held to be resident in India. The findings of the Learned CIT(Appeals) as well as that of the Assessing Officer in the wake of remand report itself gets vitiated. Now it is a matter of fact that the assessee was not a resident in India in terms of section 6 and was therefore, neither required to file any return of income in India not any income can be brought to tax in India. Therefore, the deposits made in the foreign bank account cannot be held to be included as taxable income in India. Similarly, with regard to the addition which represented deposits of US 7,000/- in ICICI Bank, New Delhi, we find that the assessee being an NRI was entitled to bring US 10,000 without any declaration in terms of Baggage Rules as given under FEMA. Thus the assessee being an American citizen who is otherwise permitted to convey US 10,000 in India without any explanation then the same cannot be taxed in India. Otherwise also, to be taxable in India, assessee has to be resident of India within the scope and meaning of section 6. Thus, on the merits we hold that the addition made by the Assessing Officer and sustained by the Learned CIT(Appeals) cannot be upheld for the reason that the assessee was neither liable to file return of income in India nor any income can be held to be chargeable in the hands of the assessee as he was not resident of in India in terms of section 6. Accordingly, the additions sustained by the Learned CIT(Appeals) is deleted. - Decided in favour of assessee.

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act.
2. Validity of the assessment order framed without disposing of objections.
3. Non-compliance with the jurisdictional High Court's order regarding time-barred assessment proceedings.
4. Assessment framed without proper inquiry and without confronting the source of information.
5. Residential status of the appellant.
6. Addition of ?3,42,020/- for deposits made in the bank account.
7. Addition of ?8,77,23,967/- for the balance in LGT Bank account.
8. Erroneous conversion rate applied for USD to INR.
9. Assessment order and notice of demand being time-barred.
10. Assessment order framed on surmises and conjectures.

Detailed Analysis:

1. Validity of Notice Issued Under Section 148:
The appellant contended that the notice issued under Section 148 was based on presumptions and should be quashed. However, this issue became academic as the Tribunal focused on the residential status and the merits of the additions.

2. Validity of Assessment Order Without Disposing Objections:
The appellant argued that the assessment order was framed without addressing objections, contrary to the law laid down by the Apex Court in GKN Driveshafts India Ltd Vs. ITO. This point was not the primary focus of the Tribunal's decision.

3. Non-Compliance with Jurisdictional High Court's Order:
The appellant claimed that the CIT(A) did not follow the jurisdictional High Court's order in the case of Haryana Acrylic Manufacturing Co. Vs. CIT, which would render the assessment proceedings time-barred. This issue was not elaborated upon in the Tribunal's decision.

4. Assessment Framed Without Proper Inquiry:
The appellant argued that the assessment was framed without proper inquiry and without confronting the source of information. The Tribunal did not delve deeply into this issue as the primary focus was on the appellant's residential status.

5. Residential Status of the Appellant:
The appellant, an American citizen since 1999 and residing in the USA since 1974, contended that he was a Non-Resident Indian (NRI) and not liable to tax in India. The remand report confirmed that the appellant was in India for only 31 days during the relevant year. Hence, under Section 6 of the Income Tax Act, the appellant was not a resident in India. The Tribunal accepted this and concluded that the appellant was not liable to file a return or be taxed in India.

6. Addition of ?3,42,020/- for Deposits Made in Bank Account:
The appellant argued that the deposit of US $7,000 in ICICI Bank was permissible under the Baggage Rules as an NRI. The Tribunal agreed, noting that as an NRI, the appellant was allowed to bring US $10,000 without declaration. Thus, the addition of ?3,42,020/- was deleted.

7. Addition of ?8,77,23,967/- for Balance in LGT Bank Account:
The appellant contended that the funds in the LGT Bank account were not taxable in India as he was an NRI. The Tribunal, considering the remand report and the appellant's non-resident status, held that the deposits in the foreign bank account could not be taxed in India. The addition of ?8,77,23,967/- was deleted.

8. Erroneous Conversion Rate Applied:
The appellant argued that the conversion rate of ?48.86 per USD was applied erroneously without evidence. The Tribunal did not specifically address this issue, as the primary focus was on the appellant's residential status and the merits of the additions.

9. Assessment Order and Notice of Demand Being Time-Barred:
The appellant claimed that the assessment order and notice of demand were time-barred. This issue was not the primary focus of the Tribunal's decision.

10. Assessment Order Framed on Surmises and Conjectures:
The appellant argued that the assessment order was based on surmises and conjectures. The Tribunal's decision to delete the additions was based on the appellant's non-resident status, rendering this issue secondary.

Conclusion:
The Tribunal allowed the appeal of the appellant, primarily based on the finding that the appellant was not a resident in India during the relevant year and thus not liable to be taxed in India. Consequently, the additions made by the Assessing Officer were deleted, and the appeal was allowed. The issues regarding the validity of the notice under Section 148 and other procedural aspects were rendered academic.

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