2014 (8) TMI 306 - AT - Income Tax

Assessment u/s 153A - Additions on account of Deposits in bank account in the name of relatives deposit into NRE accounts - Held that - The compilation contained the statement of the assessee recorded at the time of search, the summary of the NRE accounts, the names and addresses of the NRI holding the bank accounts, their passport numbers, their respective declarations and their relationship with the assessee. On the basis of all those evidences, one thing has emerged undisputedly that the accounts seized at the time of search were NRE accounts - a non-resident external account can be funded only with foreign currency inward remittance through FCNR procedure - The foreign currency non-resident account FCNR can be funded through foreign remittance inward held by nonresident - the assessee s stand was that the purpose of having all those accounts was to issue pre-signed cheques for charity - the assessee and his brother had no connection with those bank accounts; hence, they have not derived any benefits from those accounts revenue has not established any nexus of those accounts with the business activity of the assessee - CIT(A) was right in holding that the addition was merely on a conjecture that the bank accounts belonged to poor and gullible relatives of the assessee Decided against Revenue.

Summary

Issues involved:
Challenge to deletion of addition pertaining to deposits in bank accounts stated to be in the names of relatives.

Analysis:

1. Ownership of Bank Accounts:
The Revenue challenged the deletion of addition made by the AO regarding deposits in bank accounts found during a search operation. The AO believed that since the bank pass-books were found in the possession of the assessee, he was the owner of those accounts. The AO also alleged that the account holders had left India due to financial difficulties, casting doubt on the legitimacy of the accounts.

2. Assessee's Explanation:
The assessee contended that the bank accounts belonged to close friends and relatives who were NRIs and held foreign citizenship. They deposited funds through legal channels from abroad, mainly for charity purposes in India. The accounts were NRE accounts, and the deposits were made through foreign remittances. The assessee denied any connection with the funds in those accounts and clarified that they only issued pre-signed cheques on the account holders' instructions.

3. CIT(A)'s Decision:
The CIT(A) considered the evidence provided by the assessee, including certificates from banks confirming the nature of the accounts as NRO/NRE accounts. The CIT(A) found no evidence contradicting the assessee's explanation and concluded that the additions made by the AO were based on conjecture. Therefore, the CIT(A) deleted the additions for all the assessment years under appeal.

4. Tribunal's Ruling:
The Tribunal upheld the CIT(A)'s decision after reviewing the statements recorded during the search, details of NRE accounts, and the relationship between the account holders and the assessee. The Tribunal noted that NRE accounts can only be funded through foreign currency, and the assessee had no benefits from those accounts. The Tribunal found no nexus between the accounts and the assessee's business activities, leading to the dismissal of the Revenue's grounds for appeal.

5. Final Verdict:
Ultimately, the Tribunal dismissed all the Revenue's appeals, affirming the deletion of additions related to the bank accounts. The decision was based on the lack of concrete evidence linking the accounts to the assessee and the consistent explanation provided by the assessee regarding the ownership and purpose of those accounts.

This detailed analysis highlights the key arguments, decisions, and reasoning presented in the judgment regarding the challenge to the deletion of additions concerning bank account deposits allegedly belonging to relatives.