2023 (5) TMI 1046 - AT - Income Tax

Validity of reopening u/s.147 r.w.s. 148 - income accrued and arisen in India - addition on the ground of balance appearing in HSBC Bank Account, Geneva undisclosed - HELD THAT - Once the AO while recording the reasons has accepted that assessee is a non-resident, then how balance in the bank account with HSBC bank, Geneva represents income which is accrued or arising or is deemed to accrue or arise in India so as to come within the scope of total income in terms of Section 5 of the Act. - AO should have mentioned it in the reasons recorded before acquiring jurisdiction to reopen an assessment for an extended period of 16 years that, firstly, assessee is a resident in terms of Section 6; and if not then secondly, the balance lying in the foreign bank account represents income which has accrued or arisen or deemed to accrue or arise in India u/s. 5. Once that fact has not been brought on record, ostensibly there cannot be any reason to believe that the income in relation to such an asset has escaped assessment for the A.Y.s 2006-07 and 2007-08 and extended time limit of 16 years is available The reasons recorded by the AO are not only vague and general but without any application of mind on the records and the material which was filed by the assessee before the Income Tax department right from the year 2011 to 2014, till the issuance of notice u/s.148. The reasons have been recorded in a very mechanical manner without even ascertaining the facts and material available on record. Even going by the so called Base Note as mentioned by the ld. AO refers to account holder, Amaya Ltd. which is a separate legal entity and incorporated outside India. At the time of recording, the reasons or even in the Base Note, nowhere it has been brought on record that the said entity Amaya Ltd. is fictitious or some kind of transparent entity. Nothing has been brought on record in reasons recorded or there is any material on record that assessee has any business connection in India and therefore amount deposited in said foreign bank account is income arisen or accrued or deemed to have arisen or deemed to have accrued in India. If at all there is some doubt about the said entity and deposits made therein, then, it is the UK Tax authorities which have to examine this issue. No jurisdiction to the AO to reopen the case of a non-resident u/s 147 of the Act based on some vague and general information as noted in the reasons recorded and without ascribing how income chargeable to tax has escaped assessment in India. Therefore, entire re-assessment order is held as null and void . Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening under Section 147 read with Section 148.
2. Addition of undisclosed income based on balances in HSBC Bank Account, Geneva.

Summary:

1. Validity of Reopening under Section 147 read with Section 148:
The assessee, a non-resident individual settled in London, challenged the reopening of her assessments for AY 2006-07 and 2007-08. The reopening was based on information received from the French Government indicating undisclosed balances in HSBC Bank, Geneva. The Tribunal noted that the assessee had provided all requisite details and bank statements to the Income Tax Department prior to the issuance of the notice under Section 148. The reasons recorded for reopening were found to be vague and general, without specific mention of how the income was chargeable to tax in India. The Tribunal emphasized that as a non-resident, the assessee was not required to disclose foreign assets in her Indian tax returns. Moreover, the extended time limit of 16 years under Section 149(1)(c) was applicable only to residents, not non-residents. The Tribunal concluded that the Assessing Officer did not have the jurisdiction to reopen the assessments based on the information provided.

2. Addition of Undisclosed Income:
The Assessing Officer added Rs. 2,27,36,790/- for AY 2006-07 and Rs. 2,68,89,629/- for AY 2007-08, based on the balances in the HSBC Bank, Geneva. The CIT(A) upheld the additions, reasoning that the income had a direct nexus with the assessee's activities in India. However, the Tribunal found that there was no material evidence to support the claim that the deposits in the HSBC accounts were sourced from India. The Tribunal highlighted that all deposits were from the assessee's income earned outside India, and there was no indication of any remittance from India. The Tribunal criticized the CIT(A) for relying on speculative information and Google searches to draw conclusions. The Tribunal reiterated that the assessee was a non-resident, and the income earned outside India was not taxable in India.

Conclusion:
The Tribunal quashed the entire proceedings under Section 147/148 and held the reassessment orders as "null and void." Both appeals of the assessee were allowed. The Tribunal emphasized the importance of specific and credible evidence in reopening assessments and making additions, especially in cases involving non-residents.