2024 (10) TMI 1573 - HC - Income Tax

Deposits made in the Non-Resident Ordinary (NRO) Account and the TDS was already deducted for the said deposits - petitioner is not liable to pay any tax amount for the same and since the shares were transferred from his deceased wife's account due to her demise, same is also not taxable - respondents had classified the petitioner as a Resident and demanded tax amount by adding the deposits made in his account as unexplained investments and also adding the shares, which were transferred to his account, after the demise of his wife, as purchase securities HELD THAT - In the present case, it appears that the due to the demise of petitioner's wife, her shares were transferred to the NRO account of petitioner. According to the petitioner, the said transaction is not taxable. Further, it appears that the alleged deposits were made in the Non- Resident Ordinary (NRO) Account of the petitioner, for which, the TDS was already deducted. Hence, the petitioner was under the impression that he is not liable to file any returns - show cause notice dated 21.03.2024 was issued and draft assessment order dated 28.03.2024 was also passed by the respondents. However, due to the demise of his wife and other personal commitments, the petitioner was not in a position to explain these aspects to the respondent. Therefore, the impugned order came to be passed by the 1st respondent on 21.05.2024. In the present case, it appears that the due to the demise of petitioner's wife, her shares were transferred to the NRO account of petitioner. According to the petitioner, the said transaction is not taxable. It appears that the alleged deposits were made in the Non- Resident Ordinary (NRO) Account of the petitioner, for which, the TDS was already deducted. Hence, the petitioner was under the impression that he is not liable to file any returns. Under these circumstances, the show cause notice dated 21.03.2024 was issued and draft assessment order dated 28.03.2024 was also passed by the respondents. However, due to the demise of his wife and other personal commitments, the petitioner was not in a position to explain these aspects to the respondent. Therefore, the impugned order came to be passed by the 1st respondent on 21.05.2024. It appears that no opportunity of personal hearing was provided to the petitioner prior to the passing of impugned order. Hence, this Court is of the view that the impugned order was passed in violation of principles of natural justice since it is just and necessary to provide an opportunity to the petitioner to establish their case on merits. That apart, the reason assigned by the petitioner for non-filing of reply, appears to be genuine. In such view of the matter, this Court is inclined to provide an opportunity to the petitioner by setting aside the impugned order dated 21.05.2024 passed by the 1st respondent. Accordingly, this Court passes the following order - (i) The impugned order dated 21.05.2024 is set aside and the matter is remanded to the 1st respondent for fresh consideration. (ii) The petitioner shall file their reply/objection along with the required documents, if any, within a period of three weeks from the date of receipt of copy of this order. (iii) On filing of such reply/objection by the petitioner, the 1st respondent shall consider the same and issue a 14 days clear notice, by fixing the date of personal hearing, to the petitioner and thereafter, pass appropriate orders on merits and in accordance with law, after hearing the petitioner, as expeditiously as possible.

Summary

Issues:
Challenge to assessment order dated 21.05.2024 by the 1st respondent.

Analysis:
The petitioner, a Non-Resident Indian, challenged the assessment order dated 21.05.2024, claiming that the respondents classified him as a "Resident" and demanded tax for alleged unexplained investments and purchase securities. The petitioner argued that the deposits were made in the Non-Resident Ordinary (NRO) Account with TDS already deducted, making him not liable for tax. Additionally, shares transferred after his wife's demise were not taxable. The petitioner sought an opportunity to explain these aspects. The respondents contended that the petitioner failed to file returns, leading to the assessment order. The Court noted that the petitioner's wife's shares were transferred to his NRO account and the alleged deposits had TDS deducted. The Court found that the petitioner's reasons for not filing a reply were genuine. It held that the impugned order violated principles of natural justice by not providing a personal hearing. The Court set aside the order, remanding the matter for fresh consideration by the 1st respondent.

The Court directed the petitioner to file a reply with required documents within three weeks. Upon receipt, the 1st respondent was instructed to issue a clear 14-day notice for a personal hearing and pass appropriate orders expeditiously. The Court disposed of the writ petition without costs, closing connected miscellaneous petitions. The judgment emphasized the importance of providing an opportunity for the petitioner to establish their case on merits and ensuring compliance with principles of natural justice in tax assessment proceedings.