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TMI Blog2021 (3) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant himself. The rational behind this legal proposition is that the word receipt implies two persons viz. the person who receives and the person from whom he receives; a person cannot receive a thing from himself. Appellant herein is Non-Resident for the last 30 years for income tax purpose and citizen of USA. The scope of tax liability of Non- Resident is required to be considered in the light of section 4 and 5 of the Income Tax Act. In the present case remittance received from the appellant s account Bank of Baroda, Dubai to appellant s account to SBI NRE SB Account, Mapusa, Goa or remittance to the vendors of the properties is neither income received or deemed to received in India or nor was accrued or arisen or deemed to be accrued or arisen in India, therefore, the question of chargeability to income tax in India does not arise. The impugned addition does not represent either income received or deemed to be received in India or income accrued or arisen or deemed to be accrued or arisen in India. The remittance brought to India which are subject matter of impugned additions are obviously income received at first instance outside taxable territories of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee directed against the order of the Learned Commissioner of Income Tax (Appeals)- 12, Bangalore ( CIT(A) for short) dated 31.03.2019 for the assessment year 2014-15. 2. The appellant raised the following grounds of appeal :- 1. On the facts and circumstances of the case, the learned AO and Hon. CIT(A), Bangalore-12, erred in treating the investment in residential properties as Unexplained Investment u/s 69 to the extent of ₹ 16,63,21,060/-. 2. On the facts and circumstances of the case, learned AO and Hon. CIT(A), Bangalore-12, erred in treating the investment as unexplained investment u/s 69 to the extent of ₹ 20,99,510/-. 3. On the facts and circumstances of the case, the learned AO and Hon. CIT, Bangalore-12, erred in treating funds transferred through banking channel earned by a Non-resident outside India as unexplained cash credit or unexplained investment. 4. On the facts and circumstances of the case to leave, to add, alter, amend, modify and correct the grounds of appeal at or before the time of hearing. 3. Briefly, the facts of the case are that the appellant herein, is an individual and Non-Resident Indian. The retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abhat Housing Society Ltd. Andheri (West), Mumbai Emgee Homes 16-12-2013 ₹ 2,63,50,000 ₹ 13,17,500 ₹ 32,080 Total ₹ 15,75,65,500 (A) ₹ 87,55,560 (B) Total payments (A+B)=15,75,65,500 + ₹ 87,55,560 =16,63,21,060 5. During the course of assessment proceedings, the appellant was called upon to explain the sources of money for investment in the above properties. Initially, the appellant vide his letter dated 27.07.2016 explained by stating that the above investments were made out of the income from the business of jewellery and hotel business carried out in USA etc. On receipt of this explanation, the Assessing Officer had further called upon the appellant vide letter dated 24.08.2016 to file the financial statement showing the business turnover and copies of returns of income filed in USA etc. In response of which, the appellant vide letter dated 15.09.2016 submitted as under :- As stated in my earlier submission, I am not havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer had disbelieved the explanation of the appellant that the appellant had sold gold bars in Dubai to two companies namely, Shantilal Jewellers and VIN Gold L.L.C., Dubai by observing that the activity of selling gold in Dubai is unusual and there is no proof of existence of stock of gold in Dubai. As regards to, credit of maturity proceeds of FDs of company i.e. Asia Pacific Investment INC, Dubai to the account of Bank of Baroda, Dubai, the appellant had filed copy of certificate incorporation of the said company in 2007 and copy of the certificate from Bank of Baroda certifying that an amount of AED 99,83,455 equivalent to ₹ 16,97,18,735/- was credited on 09.12.2013 to the account of Iqbal Virani and Nikita Virani. The Assessing Officer had held that the said certificates are not reliable, as they were not signed by the director and accordingly rejected the explanation. The Assessing Officer further held that since he had not paid taxes in USA for last two assessment years i.e. assessment year 2013-14, the appellant had not generated enough income to make investment in Asia Pacific Investment INC. Dubai. Citing the above circumstances, he disbelieved the explanation rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i West, Mumbai of ₹ 2,63,50,000/- other expenses on registration etc. of ₹ 13,17,500/- + ₹ 32,080/- totalling to ₹ 2,76,99,580/- and (ii) Flat No. A-301, Matulya Centre-A, 249, Senapati Bapat Marg, Lower Parel, (W), Mumbai of ₹ 13,12,15,500/- other expenses on registration etc. of ₹ 73,75,000/- + ₹ 30,980/- totalling to ₹ 13,86,21,480/-. Further, he took us through the Paper Book page no.19 which explains the sources and mode of discharge of the purchase consideration for the acquisition of the said properties. From the details mentioned in that page, it is evident that an amount of ₹ 2,11,00,000/- was paid to the sellers by way of swift remittance from New Jersey USA on 11.12.2013 and ₹ 52,50,000/- was paid by the legal consultants M/s. M and M Legal Ventures on 11.12.2013 out of a sum of ₹ 1 crore remitted to them by the appellant through remittance from Bank of Baroda, Dubai vide reference no.033MSOG1333902T9. The money towards stamp duty and registration charges etc was paid from the funds lying to the credit of SBI NRE SB A/c 11020405694. In support of this remittance, he also filed the copies of the advice issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Baroda, Dubai who, in turn, transferred the money to M.N. Dastur and Co. (vendor). The proof of the said swift remittance from the bank is placed before us vide page no.207 of the Paper Book and then on 12.12.2013 an amount of ₹ 73,75,000/- was paid from SBI-Mapusa NRE A/c No.11020405694. On 14.12.2013 a sum of ₹ 11,67,81,795/- was paid from SBI-Mapusa, Goa. It is further stated that the appellant had remitted a sum of ₹ 12 crores to SBI, Mapusa, Goa NRE A/c No.11020405694 by way of NEFT from Bank of Baroda, Dubai. The confirmation to this effect from the State Bank of India, Mapusa Branch was also filed at page no.224 of the Paper Book. The appellant also further explained that the source of credits appearing in the Bank of Baroda, Dubai, the copy of the statement is placed at page no.216 of the Paper Book. It is stated that a sum of AED 99,83,455 was credited to the said account on 09.12.2013 out of the closure proceeds of FDs held in the name of one company like Asia Pacific Investments INC. Dubai which is owned by the appellant along with his wife. The confirmation from the Bank of Baroda, Dubai is also placed at page no.219 of the Paper Book. Further, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book, paras 11 to 16). v. Purshottam Khatri v. CIT, 419 ITR 475 (SC). 17. On the other hand, ld. CIT-DR submitted that no credence can be given for the explanation in support of the sources for money for acquisition of the above properties in India in view of the fact that the appellant had filed USA tax returns disclosing loss in the business carried on by the appellant in USA. He further submitted that the appellant had failed to provide any documentary evidence in support of the money deposited in Bank of Baroda, Dubai out of the sale of gold bars and also the appellant had failed to prove the sources of the funds of Asia Pacific Investment INC, Dubai. In the absence of the same, the ld. CIT(A) was justified in confirming the addition made by the Assessing Officer. In the circumstances, he prayed that the order of the ld. CIT(A) be upheld. 18. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to whether or not the explanation tendered in support of the sources of money for investments in acquisition of two properties at Mumbai can be treated as explained. There is no dispute about the fact that during the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held to be books of account of the assessee and, therefore, the unexplained credits in the bank passbook cannot be assessed u/s 68 of the Act. Therefore, the addition, if at all, is required to be made for any unexplained credits in the bank passbook it can be only made under the provisions of section 69/69A of the Act. On mere reading of the provisions of section 69/69A of the Act, it is clear that it provides rather confers discretion on the Assessing Officer in case of sources of investment has not been satisfactorily explained by the assessee as income of an assessee, as the Parliament used the word may . Therefore, even if the assessee s explanation regarding source of investment is not found to be satisfactory in the opinion of the Assessing Officer, the AO has discretion to treat or not to treat such investment is assessee s income. In this regard, the decision of the Hon ble Supreme Court in the case of CIT vs. Smt. P. K. Noorjahan, 237 ITR 570 can be relied upon. The relevant observation of Hon ble Apex Court is extracted below :- 2. ........... The Tribunal took the view that although the explanation of the assessee was liable to be rejected. Section 69 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the Income-tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under Section 69 has to be considered in the light of the facts of each case. In other words a discretion has been conferred on the Income-tax Officer under Section 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. 4. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the Income-tax Officer and the Appellate Assistant Commissioner in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not signed by the director. As regards to, the credits appearing in the Bank of Baroda, Dubai stated to be on account of sale of gold bars to two companies namely, (i) Shantilal Co., Dubai and (ii) VIN Gold LLC, Dubai, the AO rejected the explanation by holding that the appellant had failed to prove the existence of gold sold in the accounted stock of the assessee. Even the ld. CIT(A) confirmed the findings of the Assessing Officer by holding that no evidence in support of the case was led before him. On consideration of totality of the circumstances and evidence filed before us, we are of the considered opinion that the conclusion reached by both the Assessing Officer and the ld. CIT(A) are based on mere ipse dixit and based on conjectures, surmises and presumptions. The appellant had discharged the primary onus lying upon it, by explaining the sources of the deposits, credits in Bank of Baroda, Dubai from where the remittances were brought to in India by leading evidence such as confirmation from the Bank of Baroda, Dubai Branch that the deposits represent maturity proceeds of FDs held in the name of Asia Pacific Investments INC, and sale of gold bars to two companies by f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the argument that even though these sums might not be said to be either actually or constructively received they should be deemed to be received . The expression deemed to be received only means deemed by the provisions of the Act to be received. An amount cannot be deemed to be received merely by the volition or sweet will of an individual. The profits earned which were credited in the books of account according to the mercantile system of accounting were at best treated as having been received which is neither received nor deemed to be received and therefore not within the purview of section 4 (1)(a) of 1922 Act. It is true that the words used in section 4(1)(a) of 1922 Act relate to the first receipt after the accrual of the income. Once it is received by the party entitled to it, in respect of any subsequent dealing with the said amount it cannot be said to be received as income on that occasion. The receipt of income refers to the first occasion when the recipient gets the money under his own control. Once an amount is received as income, any remittance or transmission of the amount to another place does not result in receipt , within the meaning of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correct legal position about the taxability of the remittances of money from abroad. The general position, in this regard, is clarified below : (2) Money brought into India by non-residents for investments or other purposes is not liable to Indian income-tax. Therefore, there is no question of a remittance into the country being subjected to income-tax in India. The question of assessment to tax arises only when there is no evidence to show that the amount, in question, in fact, represents such remittance. In other words, in the absence of proper supporting evidence, the taxpayers story that the money has been brought into India from outside may be disbelieved by the Income-tax Officer who may then proceed to hold that the money had in fact been earned in India. (3) If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no questions at all are asked by the Income- tax Officers as to the origin of the money or assets brought in. It is only in cases where the money is claimed to have been brought from outside otherwise than through ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons concerned produce adequate evidence to show that they had sufficient funds/wealth in those countries and that the transfer of the cash/jewellery to India, can directly be linked with the said funds or wealth. In other words, these migrants will have to lead proper evidence like any other assessees, about the source of the cash/jewellery alleged to have been brought by them from these countries. In support of the claim that they had sufficient funds in those countries, they might produce before the income-tax authorities in India, their bank accounts in those countries as also copies of the assessment orders passed in their cases by the income-tax authorities of those countries. The migrants would also then be required to prove that the amounts brought into India can directly be linked with the funds which they had possessed in those countries. 26. The position that emerges from the CBDT Circular as well as the Hon ble Supreme Court s decision in the case of Keshav Mills Ltd. (supra) is that the money brought in India by Non-Resident for investment or for other purpose is not liable to tax under the provisions of the Income Tax Act. The question of assessment to income tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.-For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India. 28. The provisions of sub-section (2) of section 5 provides that the Non- Resident is liable to tax in respect of (a) income received or deemed to be received in India and (b) income which accrues or arises or is deemed to be accrued or arise to him in India. Consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned additions. This is more so, in view of the fact that there is no material on record to show that the appellant had diverted the income which escaped the assessment to tax in India to deposit the money in the Bank of Baroda, Dubai account, in fact, it is not even the case of the Assessing Officer that the appellant had indulged in round tripping of money and there is no allegation as such against the appellant. 30. Therefore, in our considered opinion, the lower authorities not accepting the explanation offered by the assessee is not based on proper appreciation of material on record and other attending circumstances available on record. It is needless to say that the opinion of the Assessing Officer is required to be formed with reference to the material on record and application of mind in sin qua non for forming the opinion as held by the Hon ble Supreme Court in the case of CIT vs. P. Mohanakala, 291 ITR 278 (SC). In the present case, there is total lack of application of mind, the Assessing Officer had not formed the opinion objectively with reference to any material on record and is merely based on the surmises and conjectures. We fail to understand as to why the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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