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TMI Blog2018 (11) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... making addition towards deposits found in HSBC Bank account, Geneva u/s 69 of the Act. CIT(A), after considering relevant facts, has rightly deleted addition made by the AO. We do not find any error or infirmity in the order of Ld.CIT(A). Hence, we are inclined to uphold the findings of Ld.CIT(A) and dismiss the appeal filed by the revenue. - I.T.A No.4679/Mum/2016, I.T.A No.4680/Mum/2016, C.O.58/Mum/2018, C.O.59/Mum/2018 - - - Dated:- 16-11-2018 - Shri Pawan Singh (Judicial Member) And Shri G Manjunatha (Accountant Member) For the Assessee : Dr K Shivram / Shri Rahul Sarda For the Respondent : Shri HM Singh / Shri Abi Rama Kartikeyan ORDER PER G MANJUNATHA, AM : These two appeals filed by the revenue and cross objections filed by the assessee are directed against separate, but identical orders of CIT(A)-56, Mumbai dated 21-03-2016 for the assessment years 2006-07 2007-08. Since facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed of by this common order. 2. The revenue, more or less taken up common grounds of appeal for both the assessment years. For the sake of brevity, grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act on 20-11-2014 with the following reasons recorded for reopening of the assessment:- The case of HEMANT MANSUKHLAL PANDYA was centralized with the undersigned vide order No. DIT(IT)-lI/Juris.l27(2)/2014-15, dated 12.11.2014. Information has been received in respect of him from the office of DDJT(Inv.)Unit-VII(4), Mumbai. Tlie information pertains to his having a bank account with HSBC Bank, Geneva bearing a number BUP_$IFIC_PER_ID -5090145003. From the said bank statement, it is seen that he is having a peak balance of USD 6237932.15 in the said account during the period 2005 to 2007. It is further seen from tfa said bank account that an amount of USD 444171 is reflected in his credit in December 2005. The records of this office show that there is no return of income filed by him for the relevant assessment year and this income therefore has escaped assessment. This evidence has come into the possession of the undersigned; I have reason to believe that the income to the extent of atleast USD 444171 has escaped assessment within the meaning of para (d) to the Explanation 2 below section 147of'the Act 5. In response to notice, the assessee, through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claring whatever income accrued or deemed to accrue in India and such returns have been accepted by the department. In the absence of any provisions to declare foreign bank accounts and assets by non residents to Indian Income-tax department, the question of disclosing those accounts to Indian Income-tax department does not arise and consequently, the amount lying in HSBC Geneva account cannot be taxed in India. 7. The AO, after considering the submissions of the assessee held that when the information received from two sovereign countries shows that the assessee is having bank accounts in HSBC, Geneva, it is for the assessee to prove that the said bank account had no connection with Indian income or the said deposits are not sourced out of income received or accrued in India. As the assessee has chosen not to produce the details of his HSBC bank account and the source of deposits thereto, even though he could have obtained all the details / evidences for the same, the only corollary that could be drawn is that the assessee has decided to withhold the information as it would have gone against him. Thus, as per the provisions of section 114 of the Indian Evidence Act also it need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. The Court may presume - .... (g) That evidence which could be and is not produced would, if produced be unfavorable to the person who withholds it..,... Section 114(g) of The Indian Evidence Act, 1872, thus clearly says that the Courts can presume existence of certain facts if the person liable to produce evidence which could be and is not produced, which if produced would have been unfavorable to the person who withholds it. 11.1 As the assessee has chosen not to produce the details of his HSBC bank accounts and the source of deposits thereof, even though he could have been obtained all the details/evidences for the same, the only corollary that could be drawn is that the assessee has decided to withhold the information as if producing it would have gone against him. Thus, as per the provisions of Section 114 of The Indian Evidence Act, 1872 also, it needs to be held at this stage that the information/details not furnished were unfavorable to the assessee and that the source of the money deposited in the HSB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trustworthy, and the Department does not need any evidence on such an issue. In case of Smt. Vasantibai Shah 213 ITR 805 (Bom) the court observed that The Income tax Officer is entitled to take into consideration the totality of the^ facts and circumstances of the case and to draw his own inference on the basis thereof. Circumstantial evidence in such cases is not impermissible. In cases like this it is only the circumstantial evidence which will be available. No direct evidence can be expected........ In case of J S Parker 94 ITR 616 (Bom) it was held that the tax liability under the Income tax Act is of civil nature. To fasten a tax payer with such a liability it is not necessary that the evidence should be in the nature of beyond doubt as is required to fix a criminal liability. Tax liability can be fastened on the basis of preponderance of probabilities . 12. The assessee in this case has not produced any evidence to proof that the money deposited in his foreign bank accounts (HSBC Private Bank, Suisse (SA), Geneva) does not have ajvy source from India. The genuineness and the authenticity of the Base note is already explained in para 2 of this order. The same has been pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts only to one thing with regard to the source of deposits in the HSBC, Geneva accounts; that the deposits were made by the assessee in his HSBC, Geneva accounts from sources in India which has not been disclosed in his return of income. 3001821(1: 13. In view of the above, the peak amount as appearing in the Base Note of the assessee's HSBC account in AY 2006-07 being USD USD 942339.71 which translates to ₹ 4J8,95,304/- (@ ₹ 45.52 per USD) is hereby added to the total income of the assessee as income deemed to accrue or arise in India for which the assessee offers no explanation about the source and nature thereof. 8. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before the CIT(A), assessee has challenged the validity of reopening of assessment and also addition made by the AO on merits. The assessee has filed elaborate written submissions on the issue of reopening of assessment which has been reproduced at para 4 on pages 4 to 8 of his order. The sum and substance of the arguments of the assessee before the Ld.CIT(A) are that the alleged base note is fabricated, unauthorsied, unauthenticated and hence, not admissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that he does not have any business connection in India. The assessee also has given copy of his bank account held with Dena Bank from 1998 onwards. It is clear from the bank account that the assessee has not remitted any amount abroad from India. It is very much clear from the details furnished before the AO that there is no connection between HSBC Bank account maintained in Geneva and income accrued or deemed to accrue in India. The AO made additions only on the basis of unauthenticated information received from outside source without bringing on record any evidence to show that the assessee has diverted income from India and remitted abroad to the bank account maintained in HSBC Bank, Geneva. In the absence of anything contrary, the AO was erred in making the assessee to prove negative when the assessee is not under obligation to file his foreign bank account and asset details and the law also does not mandate to file those details, which is highly incorrect on the part of the AO to make addition merely on the basis of a base note which is a piece of stray paper having no legal authenticity. 10. The Ld.CIT(A), after considering the submissions of the assessee and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of income in India except interest and dividend income which he had already declared in his income-tax return for the relevant years. With these observations and also by following certain judicial precedents, the CIT(A) deleted addition made by the AO towards credits found in HSBC Bank account. The relevant observations of the Ld.CIT(A) are extracted below:- 8.11 During the course of appellate proceedings, AR submitted the decision in the case of Anil Kumar Jain Appeal No.: 145/14-l5/CIT(A)-4, wherein it was held by the Hon. COMMISSIONER OF INCOME TAX [APPEALS]-4, NEW DELHI that: It is dear that for making an addition u/s 69 the onus is laid on the revenue to bring on record material from which it could be concluded that the deposits in such accounts pertained to assessee himself. In the present case the AO has not brought on record any material which could conclusively prove that the deposits in various accounts were made by the appellant himself or for that matter it belonged to the assessee himself. It is also relevant to note that even the, AO did not have any material to verify such transactions and therefore in absence of any such material, addition could not be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 68 or Section 69 cannot enlarge the scope of Section 5(2). Under Section 5(2), the income accruing or arising outside India is not taxable unless it is received in India. vi. Reliance is also placed on the judgement in case of Vodafone International holding B.V v Union of India in 2012(Supreme Court), wherein it was held that: Under Section 5(2) of the Income Tax Act, in case of NRIs the income accrued and received outside India cannot be subject to tax in India. What is not taxable under Section 5(2), cannot be taxed under the provisions of Sections 68 and 69 as undisclosed income vii. Thus, respectfully following the decision in the case of DCIT v Finlay Corp. Ltd, Saraswati Holding Corporation vs. Deputy Director of Income Tax and Vodafone International holding B.V v Union of India in 2012(Supreme Court), it is held that what is not taxable under Section 5(2) cannot be taxed under the provisions of Section 68 or Section 69. Provisions of Section 68 or 69 would be applicable in the case of nonresident only with reference to those amounts whose origin of source can be located in India. viii. Therefore, provisions of Section 68 or 69 have limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITD 626(Delhi), Saraswati Holding Corporation vs. Deputy Director of Income Tax[20/07/2007] (111 TTJ Delhi 334) and Vodafone International holding B.V v Union of India in 20l2(Supreme Court) cited supra, I am unable to subscribe to the view taken by the AO. Considering the facts I am inclined to accept the arguments of the appellant and accordingly the addition of ₹ 4,28,95,304/- made in this case is hereby deleted and the Ground Nos. II (Sub-Grounds 3 to 5), III (Sub-Grounds 6 to 11) are allowed in favour of the appellant. 12. The Ld.DR submitted that the Ld.CIT(A) was erred in holding that the AO has made addition on the basis of fabricated / manufactured data with some mala fide intention without appreciating the fact that the information has been exchanged between two sovereign countries as per which some Indian nationals and residents have maintained bank account in HSBC Bank, Geneva and said bank accounts are not disclosed to Indian income-tax authorities. The Ld.DR further submitted that the Ld.CIT(A) was erred in ignoring the fact that the assessee did not sign consent waiver form for carrying out any further enquiry from HSHC Bank, Geneva which could have provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debits which can be linked to deposits found in HSBC Bank, Geneva. The bank account maintained in India is credited with income derived from India from his portfolio investment and the said income has already been offered to tax in India. The AO, without carrying out any independent enquiry to ascertain the fact that the deposits in HSBC Bank, Geneva is having nexus to Indian income, made addition only on the basis of base note which is unverified and unauthenticated. The assessee being a non resident is under no obligation to disclose his foreign accounts and assets and accordingly he never disclosed his bank account maintained in HSBC Bank, Geneva to the Indian Income-tax authorities. 14. The Ld.AR, further referring to ITR form prescribed for filing of return of income by the individuals, submitted that the moment a person chooses his status as non resident , the columns provided for filling foreign bank accounts and assets details do not appears in the return of non residents and hence, the question of disclosing said information to the Indian Income-tax authorities does not arise. The Ld.AR further referring to the statement of the Minister of State for Finance, has clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the parties, considered the material available on record and gone through the orders of authorities below. We have also considered the case laws cited by either parties. The AO made addition towards amount found credited in HSBC Bank account, Geneva on the ground that the assessee has failed to explain and prove that deposit is not having any connection to income derived in India and not sourced from India. The AO has made additions on the basis of a document called base note received from French Government, as per which the assessee is maintaining a bank account in HSBC Bank, Geneva. The AO has analysed the contents of base note to the details filed by the assessee in his income-tax return to come to the conclusion that the information contained in the base note is matching with the details of the assessee and accordingly opined that the said bank account is belonging to the assessee. Except this, the AO has not conducted any independent enquiry or applied his mind before coming to the conclusion that whether the information contained in base note is verified or authenticated. The AO never disputed the fact that the assessee is a non resident. The lower authorities have accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding directorship in any of Indian companies. The assessee further stated that he is neither in employment in India nor in business activity in India. The assessee also filed details to prove that he is regularly filing his income-tax return in India in the status of non resident disclosing income accrued or arose in India during the relevant financial years. The return filed by the assessee has been accepted by the department for all these years. All these facts have not been disputed by the lower authorities. 17. Having said, let us examine, non residents are required to furnish details of his foreign bank accounts and assets in India or not. The assessee has maintained only one bank account in India in Dena Bank which is an NRO account. The said bank account has been reflected in AIR information. In order to prove that the amount in foreign bank account is not sourced from India, the assessee filed the bank statement of his only bank account in India from the financial years 1998 to 2008. On perusal of the bank account filed by the assessee, it was noticed that there are no debits in the bank account which could have gone to the foreign bank account. Thus, it can be seen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x in India or the sum deposited may already have been disclosed to the Income-tax department. It is only after enquiry and completion of assessment one can know whether the amount deposited in the foreign account represents black money of an Indian citizen. Similarly, in the statement dated 04-04-2016 issued by the Minister of Finance published by Press Information Bureau, it was clarified that non residents found having foreign bank accounts were non actionable. Thus, it is very clear from the clarifications issued by the Government itself that the legislature does not wish to take any action in respect of non residents holding foreign bank accounts. Further, even in the excel utility of return of income in the income-tax department website, the moment a person fills his residential status as non resident, the excel utility prevents filling of columns pertaining to foreign assets. Even, the Hon ble Finance Minister has clarified that all accounts in foreign bank may not be illegal as they may belong to NRI. Thus, even the government has acknowledged the fact that an NRI foreign bank account is not illegal. We further notice that provisions of black money (undisclosed foreign in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er strong, cannot take place of proof and no addition could be made on presumption and assumption. The AO has not proved that impugned addition could be made within the ambit of section 5(2) r.w.s. 68 / 69 of the Income-tax Act, 1961. 19. Coming to the case laws relied upon by the assessee. The assessee has relied upon the decision of ITAT, Mumbai Bench in the case of DCIT vs Dipendu Bapalal Shah in ITA No.4751-4752/Mum/2016. We find that the co-ordinate bench of ITAT has decided an identical issue in respect of foreign bank accounts of non residents and held that when the AO failed to prove nexus between deposits found in foreign bank account and source of income derived from India, erred in making addition towards deposit u/s 68 / 69 of the I.T. Act, 1961. In the said case, the assessee is a non resident in India since 1990 and have no business connection in India during that period. Under those facts, the Tribunal came to the conclusion that in the absence of any nexus between deposits found in foreign bank account and source of income derived in India, no addition could be made towards cash deposits u/s 68 / 69 of the I.T. Act, 1961. The relevant portion of the order is extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts in the foreign bank account does not fall under the purview - of section 9 of the Act. Thus, the peak balance appearing in the bank statement of the foreign bank account should not be added to the total income of the assessee. 11. Without prejudice to the above, he submitted that the peak balance appearing in the bank statement of this foreign bank account has already been added to the computation of income and subjected to tax in the hands of Deepak Shah and Kunal Shah in their respective assessments for AY 2006-07 and AY 2007-08. A copy of the order passed by Assistant Commissioner of Income-tax -16(2) and by Commissioner of Income-tax (Appeals)-27 ('CIT(A)-27') in their respective cases was submitted to the AO for his consideration. 12. Further, both these assessees - Deepak Shah and Kunal Shah have paid taxes on the amount of addition to their respective computation of income. A summary of the taxes paid by them was also submitted to the AO for his consideration. However, AO did not agree with the assessee s contention and added peak credit in the account of HSBC Geneva in assessee s income. The AO has made additions in the case of assessee. 11. Without prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, during the year, therefore assessee will be liable to tax only in respect of income received or accrued to him in India. Further, section 9 of the Act, lays down the provisions relating to income which is deemed to accrue or arise in India. As the assessee Mr. Dipendu Shah was not having any of his business operations in India during AY 2006-07 and AY 2007-08, there is no income which has either deemed to accrue or arise in India under section 9 of the Act, Thus, the initial contribution or even other amounts in the foreign bank account mentioned by AO in the notice does not fall under the purview of section 5(2) read with section 9 of the Act'. Accordingly, assessee is required to be pass through aforesaid test of taxability of nonresident. It is a well settled position in law that a 'non31 resident', having money in a foreign country cannot be taxed in India if such money has neither been received or deemed to be received, nor has it accrued or arisen to him or deemed to accrue or arise to him in India. 14. Under section 5(2) the income accruing or arising outside India is not taxable unless it is received in India. Similarly, if any income is already receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed income of the firm M/s Kanubhai B. Shah : Co. during the FY 2011-12 has no connection with the assessee, as he was not a partner during this period. In the instant case, even it is seen that the bank account with HSBC Bank, Geneva was opened during the year 1997. Hence, the circumstantial evidences discussed above including the report of Indian express of 10 February 2015, relied by the learned AO nowhere conclusively establishes that the source of the deposits, since the inception, in the bank account was from India. In view of the above discussion, we do not find any infirmity in the order of CIT(A) for deleting the addition made in respect of deposits in HSBC Account, Geneva in the hands of non-resident assessee. Facts and circumstances in both the years are same. 16. The CIT(A) also observe that a circumstantial evidence whenever used has to be conclusive in nature. Thus, the circumstantial evidences relied on by the learned AO nowhere lead to the conclusion that the amounts in the alleged foreign bank account are sourced from India. The CIT(A) also recorded a finding to the effect that the source of deposits is no where proved by the four instances relied on by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of ITAT, Mumbai Bench in the case of Rahul Rajnikant Parikh in ITA No.5889/Mum/2016. We find that the case law relied upon by the revenue has no application to the facts of the assessee s case, as in the said case, the Tribunal has not laid down any ratio. The matter was set aside to the file of the AO by consent of both the parties. It is a settled law that a judgement / order delivered by consent has no precedential value. Even otherwise, the taxpayer in the said case had business connections in India by way of being a partner in partnership firms. Under those facts, the Tribunal has set aside the issue to the file of the AO for further examinations on the request of both the parties. Admittedly, in this case, the assessee is a non resident and he does not have any business connection / interest in India. Therefore, the case law relied upon by the Ld.DR cannot be applied to the facts of the present case. 21. In this view of the matter and considering the ratios of the case laws discussed above, we are of the considered view that the AO was erred in making addition towards deposits found in HSBC Bank account, Geneva u/s 69 of the Act. The Ld.CIT(A), after con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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