2023 (11) TMI 987 - AT - Income Tax

Addition u/s 68 in hands of NRI - economic activities carried out in India - tax treaty provisions - non-matching of currency notes withdrawn and deposited - assessee is an NRI who is a resident of Kuwait - demonetization of currency notes of withdrawal of the cash and denomination of currency notes deposited by the assessee are different - HELD THAT - Issue involved in this case relating to Non-Resident of India and also there is no doubt on the issue of source of income and assessee has a right to claim the benefit under the treaty between Indo Kuwait. Assessee has relied on the decision of RAJEEV SURESH GHAI 2021 (12) TMI 697 - ITAT MUMBAI wherein the similar facts involved were considered relating to the issue of addition made under unexplained investment wherein as held that the assessee is a tax resident of United Arab Emirates and thus is entitled to the benefit of Indo-UAE tax treaty. When the rights to tax the income in question, under the applicable tax treaty provisions, are allocated to the residence jurisdiction, it is wholly immaterial whether or not the source jurisdiction has the right to tax that income , and, in any event, India is not even a source jurisdiction for the income in question as no economic activities have been carried out in India. Thus remit this issue to the file of the Assessing Officer to consider the facts in this case and re-decide the issue - Appeal filed by the assessee is allowed for statistical purpose.

Summary

Issues:
The appeal against the order of the Learned Commissioner of Income Tax (Appeals)-57, Mumbai for the A.Y. 2017-18.

Details of the Judgment:

Issue 1: Cash Deposit During Demonetization Period
The assessee, an NRI, deposited cash of Rs. 21,00,000 during demonetization, claiming it was from a withdrawal for house renovation. The Assessing Officer found discrepancies in the currency notes withdrawn and deposited, leading to the addition of Rs. 21,00,000 under section 69 of the Act. The CIT(A) upheld this decision based on precedents. The appellant challenged this addition.

Issue 2: Additional Ground on DTAA Benefit
The appellant raised an additional ground regarding eligibility for benefit under the Double Taxation Avoidance Agreement (DTAA) between India and Kuwait, claiming the Assessing Officer erred in not considering this due to NRI status. The appellant sought admission of this ground.

Judgment:
The Tribunal admitted the additional ground, citing legal nature and existing facts. Grounds 1 and 2 were dismissed. Regarding Ground 3, the appellant's NRI status, cash withdrawal before demonetization, and redeposit were highlighted. The appellant's right to claim treaty benefit under Indo-Kuwait treaty Article 22 was emphasized. The Tribunal noted the absence of doubt on income source and remitted the issue to the Assessing Officer for proper consideration, citing a similar case precedent. The appeal was allowed for statistical purposes, emphasizing the appellant's right to claim treaty benefits as an NRI from Kuwait.