2021 (10) TMI 557 - AT - Income Tax

Addition on account of peak balance during the year in two bank accounts with HSBC Private Bank(Suisse) SA, Geneva - HELD THAT - The source of the funds transferred from HSBC Abu Dhabi, UAE were stated to be out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976.After considering the facts of the case are in full agreement with the conclusion drawn by the ld CIT(A) that the assessee is not beneficial owner of the bank account held by Blueridge Investment Corporation with HSBC Geneva. Similarly, as regards the joint account of the assessee with his brother in HSBC Geneva , the ld CIT(A) recorded a finding on the basis of evidences that money was transferred in the bank account out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976 - we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue.

Summary

Issues Involved:
1. Deletion of addition of ?5,30,92,953/- by CIT(A) made by the AO on account of peak balance in two bank accounts with HSBC Private Bank (Suisse) SA, Geneva.
2. Determination of the respondent's residential status and its implications on tax liability.
3. Assessment of the respondent's beneficial interest in Blueridge Investment Corporation and its bank account.
4. Validity of reopening the assessment under Section 147 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?5,30,92,953/-:
The Revenue appealed against the CIT(A)'s order deleting the addition of ?5,30,92,953/- made by the AO, which was based on the peak balance in two bank accounts with HSBC Private Bank (Suisse) SA, Geneva. The AO had added the peak balance of USD 1,184,851 in an account under Blueridge Investment Corporation and USD 9,537 in a joint account held by the respondent and his brother. The CIT(A) deleted the addition, stating that the department failed to prove that the respondent had any beneficial interest in Blueridge Investment Corporation or its bank account.

2. Determination of Residential Status:
The respondent, an individual residing in Abu Dhabi, UAE since 1976, was a non-resident for AY 2006-07 as per Section 6 of the Income-tax Act, 1961. He resided in India for only 45 days during FY 2005-06, which did not exceed the threshold for being considered a resident. Consequently, under Section 5(2) of the Act, his foreign income was not required to be disclosed or taxed in India.

3. Beneficial Interest in Blueridge Investment Corporation:
The respondent claimed no beneficial interest in Blueridge Investment Corporation, a company incorporated in Liberia. He was only a treasurer and director, and a joint signatory of the company's bank account. The CIT(A) accepted additional evidence, including a letter from Blueridge Investment Corporation and affidavits, proving that the respondent had no beneficial interest in the company or its bank account. The CIT(A) observed that the department failed to provide evidence to the contrary.

4. Validity of Reopening the Assessment:
The assessment was reopened under Section 147 based on information received from the French Government under the DTTA, indicating that the respondent had a bank account in HSBC Geneva. The AO issued a notice under Section 148 and recorded reasons to believe that the respondent had undisclosed income. The respondent filed objections to the reopening, which were disposed of by the AO. The CIT(A) admitted additional evidence and concluded that the reopening was not justified as the respondent had no beneficial interest in the foreign bank accounts.

Conclusion:
The ITAT upheld the CIT(A)'s order, agreeing that the respondent had no beneficial interest in Blueridge Investment Corporation or its bank account. The funds in the joint account were sourced from the respondent's income earned in Abu Dhabi. The appeal by the Revenue was dismissed, and the addition of ?5,30,92,953/- was deleted. The ITAT emphasized the lack of evidence from the department to prove the respondent's beneficial interest in the foreign accounts and upheld the CIT(A)'s findings based on the additional evidence provided by the respondent.