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TMI Blog2015 (5) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... resident Indian for purposes of the Act during AY 2007-08 and 2008-09. Whilst the Assessing Officer (AO) and CIT(Appeals) treated the assessee as a resident Indian since he was in India, during the said years for periods amounting in all to more than 182 days, the ITAT, by the impugned order, upturned the conclusion reached by the said two authorities and agreed with the assessee that his presence in India for the said period in the two AYs was under compulsion of legal process and, thus, unintentional. ITAT held that the assessee continued to enjoy the status of non-resident and, thus, not amenable to be held accountable under the Income Tax Act for income not earned here. 3. The Revenue, feeling aggrieved, challenges the said conclusion, raising the following as the substantial question of law:- "Whether the ITAT was correct in taking the view that the period for which the assessee was in India involuntarily on account of his passport having been impounded is not to be counted for purposes of Section 6(1)(a) of the Income Tax Act so as to hold him entitled to be a non-resident?" 4. ITA Nos. 722 and 723 of 2014 pertain to AY 2007-08. The first appeal arises out of the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revised return on 18.08.2009 now declaring the total income of Rs. 86,55,160/-. Another notice under Section 143(2) was issued on 29.01.2010 followed by yet another notice under Section 142(1) with detailed questionnaire issued on 13.09.2010. The proceedings culminated in assessment order being framed on 20.12.2010 for AY 2008-09. 9. From the effect summarized by ITAT in (para 2 of) the impugned order, it may be noted that the AO had made additions of the sum of Rs. 17,94,15,000/- and Rs. 3,96,87,500/- on account of investment in Claridges Hotel Pvt. Ltd. by Universal Business Solutions Ltd. during AY 2007-08 and AY 2008-09 respectively; the sum of Rs. 16,98,38,020/- and Rs. 7,92,19,406/- on account of investment by Palm Technologies in Mauritius Claridges during AY 2007-08 and 2008-09 respectively; Rs. 7,29,000/- and Rs. 23,66,190/- on account of unexplained cash found at the time of searches (for AY 2007-08); Rs. 28,47,533/- on account of investment made in renovation of Sonali Farms (AY 2007-08); Rs. 5,10,57,115/- on account of deposit in Deutsche Bank, Singapore (AY 2007-08); and Rs. 8,45,288/- on account of foreign remittance taxable in India (AY 2008-09). 10. Feeling aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- on account of possession of jewellery of that value found in the hands of the assessee's wife. The AO had added the said amount as taxable income of the assessee for the reasons the wife did not have an independent source of income. The CIT(Appeals), however, deleted the said addition on the ground that the asset had been explained ("for good reasons") in the case of the assessee's wife. 14. The ITAT, in the impugned order, has discussed at length the facts and circumstances in which the assessee was constrained to be in India for periods more than 182 days, inter alia, finding/concluding thus:- 43. ...on 10.10.2006 the CBI impounded assessee's Passport suspecting his alleged broker's role in purchase of Barak Missiles from Israel in contravention of defence purchase policies. On assessee's application against illegal impounding of passport, the ld. Special Judge, CBI Court by order dtd, 15.1.2007, directed for release of his passport on the fulfillment of certain conditions. Before assessee could comply with those stringent conditions, the CBI challenged CBI judge's order before Hon'ble Delhi High Court. By order dated 5.2.2007 Hon'ble Delhi High Court rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee from exercising his lawful right of travelling abroad." 15. Section 6(1)(a) of the Income Tax Act which is at the core of the dispute needs to be noted. It reads as under:- "6. Residence in India:- For the purposes of this Act,-- (i) An individual is said to be resident in India in any previous year, if he-- (a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more" 16. The ITAT, in the initial part of the impugned order, noted that the assessee has been treated as non-resident during the period 1985-2006. It is admitted that his presence in India in the said earlier period has been less than 182 days per assessment year. The assessee's claims that for most of the periods he was away from India, he had been living and working for gain from United Arab Emirates (UAE). 17. It has been an admitted case of the assessee that he had come to India on 28.09.2006. It is undisputed that it was during the visit to India beginning 28.09.2006 that his passport was impounded by CBI (on 10.10.2006). Further, the passport was released pursuant to Court orders, only on 21.09.2011. Thus, the assessee was in India continuously a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his movement were removed upon the passport being restored to him. 22. It must also be noted here that ITAT, the final fact-finding forum for purposes of Income Tax law, has also concluded that the action of the concerned governmental agencies in impounding of passport was unjustified, illegal and untenable and, therefore, in the nature of illegal restraint. The Revenue does not even remotely challenge the correctness of the said conclusions in these appeals. 23. As observed earlier, the Income Tax Act leaves the choice to the citizen to be in India and be treated as a resident for purposes of taxation or be not in India so as to avail the status of a non-resident. The simple test the muster of which is to be passed is the minimum prescribed period of presence in India in a particular financial year. It naturally follows that the option to be in India, or the period for which an Indian citizen desires to be here is a matter of his discretion. Conversely put, presence in India against the will or without the consent of the citizen, should not ordinarily be counted adverse to his chosen course or interest, particularly if it is brought about under compulsion or, to put it simply, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the light of facts and circumstances leading to "involuntary" stay, if any, in India. 28. Coming to other issues, the ITAT allowed the appeal of the assessee with regard to the addition made on account of deposit in Deutche Bank, Singapore (in AY 2007-08) and foreign remittance (in AY 2008-09), and rightly so, in the wake of conclusion that the assessee continues to be a non-resident for purpose of the said AYs. It directed the AO to further inquire and verify the facts with regard to the investment made in Sonali Farms and recovery of what is described as unexplained cash (both relevant for AY 2007-08). Since such directions turned more on facts, the result of the appeal before the ITAT in Claridges Hotels Pvt. Ltd., Mauritius Claridges. As noted above, the AO has not gathered any evidence showing nexus between the assessee, on one hand, and the entities from the coffers of which such investments came, on the other. At any rate, ITAT has not interfered with inquiries for which CIT(Appeals) had given certain directions. Addition on account of jewellery, in the given circumstances, was unfair since, as noted by the ITAT, the value of the jewellery was also added in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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