2017 (1) TMI 1295 - HC - Income Tax

Reopening of assessment - existence of reason to believe - large withdrawals from the HSBC Bank account - no return of income was filed - Petitioner is a non-resident - Held that - The reasons recorded in support of the impugned notice proceeds on an assumption that the Petitioner has business interest in India merely because he had made large withdrawals from the HSBC Bank account. This is particularly so when, prima facie, it is undisputed that the deposits are sourced from abroad. Non-filing of return of income on accrued interest earned - Prima facie it is not sustainable as a non-resident, in these facts, is not required to file his return of income in view of Section 115G of the Act. Similarly, the other factors viz expenditure of ₹ 90,000/paid to Trade Mark Registry is explained in the objections being the withdrawal by the wife of the Petitioner from the joint account, an amount of ₹ 1.67 lakhs paid to C.A. was on account of professional services received and payment of ₹ 10.84 lakhs to insurance company was on account of car insurance. The payment of ₹ 2 lakhs to M/s. Sunny Vista Realtors Pvt. Ltd. does not establish, prima facie, any business connection of the Petitioner in India as it was, according to Petitioner, for booking of house to be constructed. None of these, prima facie, taken individually or together can form the basis of reasonable belief that the Petitioner has business connection in India which gives rise to income in India. These materials are indefinite/incomplete to form a reasonable belief of income escaping assessment by themselves. The above material would be at the highest could be reason to suspect but prima facie, not a reason to believe. - Decided in favour of assessee

Summary

Issues:
Challenge to notice under Section 148 of Income Tax Act for Assessment Year 2009-10 by a non-resident petitioner.

Analysis:
The High Court considered a petition challenging a notice issued under Section 148 of the Income Tax Act for the Assessment Year 2009-10. The notice sought to assess the petitioner, a non-resident, for not filing a return of income. The reasons cited in the notice included large withdrawals made by the petitioner from a bank account, payments made to various entities, and accrued interest income. The court noted that the reasons assumed the petitioner had business interests in India based on these transactions. However, the court found that the deposits were sourced from abroad, and certain expenditures were explained as personal or professional in nature. The court concluded that these reasons were insufficient to establish a reasonable belief that the petitioner had business connections in India leading to income, thus rendering the notice without jurisdiction.

The court specifically highlighted that as a non-resident, the petitioner was not required to file a return of income for the accrued interest earned. Moreover, certain payments made by the petitioner were clarified as personal or professional expenses, not indicative of business interests in India. The court emphasized that the materials presented were inconclusive and did not provide a solid basis for believing that the petitioner had income in India. While these materials could raise suspicion, they were deemed insufficient to form a reasonable belief of income escaping assessment. Consequently, the court held that the notice lacked jurisdiction as it failed to establish a prima facie case of the petitioner having business interests in India leading to taxable income.

In conclusion, the High Court granted interim relief to the petitioner based on the above analysis, highlighting that the notice under Section 148 of the Income Tax Act was without jurisdiction due to the lack of a reasonable belief regarding the petitioner's business connections in India and the income generated therefrom.