2023 (4) TMI 731 - AT - Income Tax

Addition of peak credit - As per assessee s submissions, the money deposited in NRE account was withdrawn by assessee s parents in India and same has been sourced to deposit the same in another NRO account from time to time - AO held that the cash was not re-deposited within a reasonable time frame - HELD THAT - Assessee is a NRI and living in USA for past more than 20 years. The income of the assessee is not subjected to tax in India and accordingly, he has not filed any return of income. This fact has not been appreciated by Ld. AO since Ld. AO has treated the assessee as resident only. Assessee is maintaining NRE account as well as NRO account at Erode to remit foreign savings. The assessee, apparently, has no source of income in India. Therefore, the reasoning of Ld. AO that the deposits are not within reasonable time frame could not be accepted. In fact, Ld. AO has admitted correlation between these two accounts and added only peak credit to assessee s income. On this fact alone, the impugned addition is not sustainable and presumption would arise in assessee s favor that the only source which could be used to make deposits would be assessee s NRE account only and nothing else. Therefore, delete the impugned addition. Assessee appeal allowed.

Summary

Issues:
1. Delay in filing the appeal.
2. Assessment of cash deposits in NRE and NRO accounts.
3. Taxability of cash deposits for a non-resident.

Analysis:
1. The appeal by the assessee for Assessment Year 2012-13 was delayed by 799 days due to an error in mentioning the date of the impugned order. However, as the correct date was considered, there was no actual delay, and the appeal proceeded on merits.

2. The assessee, a non-resident, deposited cash in their NRE account sourced from foreign income, which was later withdrawn and deposited in an NRO account in India. The Assessing Officer (AO) added the cash deposits as income due to not re-depositing within a reasonable time frame. The Appellate Tribunal found the AO's reasoning flawed, considering the non-resident status of the assessee and the correlation between the NRE and NRO accounts. The Tribunal concluded that the deposits were sourced from the NRE account and deleted the addition.

3. The Tribunal noted that the assessee, a Non-Resident Indian (NRI) living in the USA, does not have taxable income in India and has not filed any returns in India. The AO's treatment of the assessee as a resident was incorrect. The Tribunal emphasized that the deposits were sourced from the NRE account and that the AO's presumption about the time frame for re-depositing the cash was unfounded. Therefore, the Tribunal allowed the appeal and deleted the addition of cash deposits to the assessee's income.

In conclusion, the Appellate Tribunal ruled in favor of the assessee, a non-resident, by considering the source of cash deposits in NRE and NRO accounts, the non-taxable status of the assessee's income in India, and the incorrect treatment by the Assessing Officer. The Tribunal found the addition of cash deposits unsustainable and deleted the same, allowing the appeal.