2024 (10) TMI 1157 - HC - Income Tax

Reopening of assessment u/s 147 - income in relation to NRE Account - as argued source of income as well as deposits were from NRE Account and therefore, the same was not taxable in India - HELD THAT - From the bank details provided, it is evident that remittance of the loan was made from NRE account of the assessee, and source of that income was explained. Assesse s explanation is supported by the bank statement produced. The income earned in NRE Account is exempt u/s 10(4) (ii) of the Act and the source of income and the remittance of loan being explained by the assessee, we do not find any justification for issuance of Notice u/s 148, as also for passing of order u/s 148A (d) of the Act.

Summary

Issues:
Challenge to initiation of reassessment proceedings for Assessment Year 2016-17 under section 148 of the Income Tax Act based on incorrect facts and lack of full disclosure by the assessee.

Analysis:
The petition challenges the initiation of reassessment proceedings for Assessment Year 2016-17, arguing that the proceedings were based on incorrect facts and that there was no lack of full and true disclosure by the assessee. The petitioner, a Non-Resident Indian (NRI), earned income from overseas business, supported by a Certificate of residency from Uganda and registration by the Uganda Revenue Authority. Despite not filing a return of income in India for Assessment Year 2017-18, the petitioner received notices under various sections of the Act regarding the assessment. The petitioner provided detailed explanations regarding the source of income, deposits, and loans received, asserting that the income earned as an NRI was not taxable in India under specific provisions of the Act.

The petitioner contended that the initiation of reassessment proceedings was unjust and contrary to the law, citing the exemption of income earned from non-resident accounts under Section 10 (4) (ii) of the Act. Referring to a previous court decision, it was argued that income sourced from non-resident accounts is exempt, further supporting the petitioner's claim that there was no escapement of income.

On the other hand, the respondent argued that the reassessment proceedings were rightly initiated based on the information available, especially concerning unexplained loans received by the petitioner. The respondent relied on a CBDT Circular to justify the scrutiny of unexplained amounts in the NRE Account through reassessment proceedings.

After considering the submissions, the Court noted that the petitioner's status as an NRI was undisputed, and the source of income deposited in the account was explained to be from the NRE Account. The Court found that the explanations provided by the petitioner regarding the source of deposits and loans were supported by evidence, including bank statements. Citing the previous court decision and the provisions of the Act, the Court concluded that there was no justification for the issuance of the reassessment notice and the subsequent order.

Ultimately, the Court allowed the petition, quashing the Notice under section 148 of the Income Tax Act and the order under section 148A (d) of the Act, with no costs imposed on either party.