2024 (9) TMI 151 - HC - Income Tax

AO Jurisdiction to issue notice u/s 148 to a Non-resident Indian - fixed deposits were made out of remittances from Dubai and maturity of existing term deposits, interest on NRE account and inter se transfer of funds between various bank accounts of the petitioner - HELD THAT - It is not in dispute that the petitioner is a Non-resident Indian residing at Saudi Arabia. Moreover, the address of the petitioner shown in the impugned order and notice is Vijayanagaram, Andhra Pradesh. Therefore, AO at Vapi, has no jurisdiction to issue the notice u/s 148A (a) or 148A (b) of the Act only on the basis of the information available on the insight portal. The petitioner has provided the details with regard to term deposits placed in two accounts with the HDFC Bank and has also provided bank statement with the reply. The petitioner has submitted the entire bank statement and the explanation that being NRE remittance in the account was made by the petitioner from Saudi Arabia out of salary credited and received outside India and out of maturity of the FDR. The petitioner has also provided the date wise details of all credit in the bank account with the HDFC bank during the year. Notice of reopening under section 148A of the Act could be issued only by an Officer who has jurisdiction over the petitioner and only the Commissioner of Income Tax (International Taxation) and from the communication placed on record at Annexure J, ITO, Ward 1, Vijayanagaram, Andhra Pradesh, has the jurisdiction considering the local address of the petitioner. Therefore, notice issued by the respondent, who did not have jurisdiction over the assessee, would be invalid. Moreover, in view of the explanation tendered by the petitioner that he has no taxable income during the year, there was no question of filing any income tax return as the interest accrued on the term deposit is exempted u/s 10 (4) of the Act. Reassessment proceddings set aside - Decided in favour of assessee.

Summary

Issues:
Jurisdiction of the Assessing Officer to issue notice under section 148 of the Income Tax Act, 1961 to a Non-resident Indian.
Validity of the impugned order and notice under section 148A (d) of the Act.
Consideration of evidence and reply provided by the petitioner in response to the notices.
Interpretation of provisions regarding Non-resident (External) Account and tax exemptions under section 10 (4) of the Act.

Detailed Analysis:
The judgment delivered by the Gujarat High Court involved a challenge to a notice issued under section 148 of the Income Tax Act, 1961 by a Non-resident Indian employed in Saudi Arabia. The petitioner contested the jurisdiction of the Assessing Officer, arguing that the notice was without jurisdiction as the petitioner was a Non-resident Indian. The petitioner had provided detailed information regarding term deposits and the source of funds, asserting that the deposits were made from NRE accounts and were exempt from tax under section 10 (4) of the Act.

The Respondent, on the other hand, contended that the petitioner failed to provide evidence that the accounts with HDFC Bank were created under the category of Non-resident (External) Account. The Respondent argued that it was a fit case to reopen the assessment as the petitioner had not filed any return of income and had not substantiated the source of the deposits. The Respondent emphasized that the petitioner did not provide evidence of the source of the deposit as per specific information available through the RMS Management Strategy.

The Court considered the facts of the case and noted that the petitioner was a Non-resident Indian residing in Saudi Arabia, with the address shown in the notice being Vijayanagaram, Andhra Pradesh. The Court held that the Assessing Officer at Vapi had no jurisdiction to issue the notice based solely on information available on the insight portal. The Court also observed that the petitioner had provided detailed information and bank statements, explaining the source of funds from NRE remittances and maturity of fixed deposits.

Furthermore, the Court highlighted that a notice of reopening under section 148A could only be issued by an Officer with jurisdiction over the petitioner. The Court noted that the Commissioner of Income Tax (International Taxation) or the ITO in Vijayanagaram, Andhra Pradesh had the jurisdiction over the petitioner, not the Assessing Officer at Vapi. The Court emphasized that the interest accrued on the term deposits was exempted under section 10 (4) of the Act, and therefore, there was no taxable income during the year.

In conclusion, the Court quashed and set aside the notice under section 148 of the Act and the impugned order under section 148A (d), ruling in favor of the petitioner. The Court held that the notice issued by the Assessing Officer without jurisdiction was invalid, and considering the explanation provided by the petitioner, there was no requirement to file an income tax return as the interest income was exempted under the Act.