2020 (12) TMI 67 - AT - Income Tax

Maintainability of appeal - low tax effect - Unexplained money u/s 69A - undisclosed foreign income / undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account - HELD THAT - Assessee has received certain credits in ICICI Bank Account maintained in India. The said credit, inter-alia, represented transfer from assessee s own NRE account as well as reimbursement of expenses on behalf of certain corporate entities. As such, there was no undisclosed foreign income / undisclosed foreign assets (including financial assets)/ undisclosed foreign bank account in terms of clause (d) of para 10 of circular no. 3/2018 dated 11/07/2018 as amended vide circular dated 20/08/2018. The bank account under question was maintained in India in which remittances were received from abroad. Therefore, the plea raised by the revenue could not be accepted. No other exception could be pointed out by revenue which would preclude it to withdraw the appeal under question. Therefore, we concur with the submissions of Ld. AR that the tax effect of quantum additions being contested by the Revenue is, prima-facie, below threshold monetary limit of ₹ 50 Lacs and the appeal is not maintainable in terms of recently issued low tax effect Circular No. 17/2019 dated 08/08/2019 F.No.279/Misc. 142/2007- TTJ(Pt.) issued by CBDT. The appeal is not maintainable. The investigation arm of the Income Tax Department is an internal organ of the department and therefore, the same would not fall under the category of external sources in the nature of law enforcement agencies as envisaged by clause 10(e) of the said circular.

Summary

Issues:
1. Maintainability of appeal by revenue for Assessment Year 2009-10 based on monetary limits.
2. Assessment of additions made in the assessment year.
3. Disputed tax effect and exceptions regarding undisclosed foreign assets.

Issue 1: Maintainability of appeal based on monetary limits:
The appeal by the revenue for Assessment Year 2009-10 contests the order of the Ld. Commissioner of Income Tax (Appeals)-41, Mumbai. The Authorized Representative for Assessee argued that the tax effect of quantum additions is below the prescribed monetary limit of ?50 Lakhs as per Circular No. 17/2019 issued by CBDT. The Departmental Representative contended otherwise, stating that the tax effect for A.Y. 2009-10 was ?44 Lakhs. The dispute arose due to foreign remittances and the residential status of the assessee. The Tribunal examined the case records and concluded that the appeal was not maintainable as the tax effect was below the threshold limit, dismissing the appeal.

Issue 2: Assessment of additions made in the assessment year:
For AY 2009-10, the assessee faced additions of ?132.70 Lacs due to foreign remittances in an assessment framed under section 144 r.w.s. 147. The Assessing Officer added this amount as unexplained money u/s 69A. During appellate proceedings, the CIT(A) deleted the additions entirely as the Assessing Officer failed to prove the entries represented taxable income in India. Part of the additions was admitted by the AO as a transfer from the assessee's NRE Account. The Tribunal found that the credits in the bank account did not involve undisclosed foreign income or assets, leading to the deletion of the additions.

Issue 3: Disputed tax effect and exceptions regarding undisclosed foreign assets:
The Tribunal analyzed that the credits in the ICICI Bank Account were transfers from the assessee's NRE account and reimbursements for corporate expenses, not undisclosed foreign income or assets. The revenue's argument based on circulars was rejected, and it was held that the tax effect of the contested additions was below the monetary limit, making the appeal not maintainable. The Tribunal allowed the revenue to seek recall of the appeal if exceptions applied later or if the tax effect exceeded the prescribed limit. Ultimately, the appeal was dismissed on 5th August 2020.