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TMI Blog2023 (2) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... the cash on multiple occasions and has deposited also on multiple occasions. Now, why the assessee or the person authorised on its behalf withdrew and deposited the cash cannot be questioned because the assessee was having sufficient balance in the bank as well as cash in hand to explain the said sum. Further, since the assessee is a non-resident Indian and except earning income from fixed deposits, there is no iota of evidence which could indicate that the assessee is carrying out any activity in the nature of business or otherwise to earn income from any other sources in India. Simply suspicion and behavioural pattern of frequent withdrawal by the assessee cannot be the basis of treating cash deposits as unexplained money u/s 69A of the Act and for this proposition we find support from the decision of the coordinate Bench of Lucknow in the case of DCIT vs Smt. Veena Awasthi [ 2018 (12) TMI 206 - ITAT LUCKNOW ] On the overall analysis of the facts and circumstances of the case, examination of the bank statement for FY 2011-12 2012-13 and availability of cash in hand on various dates during the year as well as the availability of cash in the preceding FY 2011-12, we come to a concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the interest in all other cases. Now perusal of the above Article 11 of the DTAA between India and UAE, we note that the same is applicable in the case of the assessee and the alleged interest earned on fixed deposit of Rs. 46,36,912/- is liable to be taxed at the beneficial rate i.e. @ 12.5%. Accordingly ground no. 4 raised in the Cross Objection is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld. CIT (A) has erred on facts and law by giving relief of Rs.28,27,141/- on account of interest income. 7. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in deleting the disallowance of Rs.28,27,141/- made by the Assessing Officer rejecting the deduction claimed by the assessee on account of interest and bank charges, paid for OD facility, against FD interest income. 8. On the facts and circumstances of the case and in law the Ld. CIT (A) erred in treating that interest and bank charges are connected to the out of book business whereas neither the assessee has claimed the same during the assessment or appellate proceedings nor has the Assessing Officer noticed such business angle during the assessment proceeding. 9. Without prejudice to the merit of the case; considering the interest of Rs.18,05,847/-and Rs.28,27,141/- as income chargeable at normal tax rate, the Ld. CIT (A) erred in not appreciating the argument of the assessee, made during the course of appellate proceeding, that the gross interest of Rs.46,36,912/- should be taxed at the beneficial rate of 12.5% as prescribed in DTAA between India and UAE as the assessee was non-resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in law in confirming the addition of net interest income of Rs.18,09,771/- under the head 'Other Sources'. 4. For that on the facts and in the circumstances of the case and without prejudice to the preceding ground, the AO be directed to tax the net interest income of Rs.18,09,771/- at the beneficial tax rate prescribed in the DTAA. 5. For that the appellant craves leave to submit additional grounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before." 5. Brief facts of the case as culled out from the records are that the assessee is a non-resident Indian and is a resident of United Arab Emirates (UAE). For the year under consideration, ld. AO came across the information about deposit of cash of Rs. 1,56,67,481/- in the bank account held in the name of the assessee, term deposit of Rs. 11,00,000/- made during the financial year and interest of Rs. 46,77,588/- received on deposits which were subject to tax deducted at source u/s 194/195 of the Act at Rs. 5,14,245/-. The assessee did not file the return of income as required u/s 139(1) of the Act. Ld. AO accordingly issued notice u/s 276CC of the Act dated 12.07.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cash deposits as business turnover estimated the income @ 8% from the said deposit thereby sustaining the addition to Rs. 13,90,198/- deleting the remaining addition of Rs. 1,59,87,283/-. Further, as regards to the interest disallowance ld. CIT(A) deleted the said disallowance observing that it has also been incurred in the course of business and the same is eligible for set off against the interest on fixed deposit treating the same as business receipt. Thus, appeal of the assessee was partly allowed. 7. Aggrieved, the Revenue is now in appeal before this Tribunal raising various grounds and on the other hand, the assessee is in Cross Objection challenging the addition of Rs. 13,90,198/- confirmed by ld. CIT(A) and also supporting the finding of ld. CIT(A). 8. Ld. D/R vehemently argued supporting the detailed finding of ld. AO submitted that the assessee did not file the return of income even though he had taxable income during the year. Further, she submitted that the assessee is a non-resident Indian and therefore, what is the source of such huge amount of cash deposit made during the year and what is the reason for carrying out transactions with M/s. Soham Shipping Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are unsubstantiated. ii) Assessee was remaining mostly out of India. iii) Assessee did not satisfactorily prove cash deposits were out of cash balance and withdrawals from banks. The appellant duly submitted before the concerned authorities [i.e. AO & CIT(A)] that - i) Assessee was a non-resident. Assessee was not carrying out any business in India hence it was not required to maintain any books of accounts u/s 44AA. Still the assessee furnished cash book for A.Ys 2012-13 and 2013-14 which duly corroborated with bank statement and substantiated the cash so deposited in the said bank account. ii) Even if the assessee was not remaining in India, the withdrawals and deposit were conducted by Authorised Signatory of the appellant or on his behalf and hence mere absence for some period does not have any implication. iii) Money so withdrawn were deposited in such bank account only and it is nobody's case that same was utilized for acquisition of assets or incurring of personal expenses or expenses of any kind etc. In some cases, some amount was paid to "Soham Shipping Pvt. Ltd." which was an advance extended to them but the same was returned by such company and indeed despi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022 (Paper book page 60 -73 -para 9-10] ii) Ajit Bapu Satam v. DCIT [ITA 1599/Mum/2021 dt. 29.8.2022] (Paper book page 79 - 81 - para 9-11) iii) Jashpal Singh Sehgal v. ITO (2017) 83 taxmann.com 246 (Mum) iv) Sudhirbhai Pravinkant Thakkar -88 taxmann.com 382 (Ahmadabad) b) Simply suspicion and behavioural pattern of frequent withdrawal by assessee cannot be basis of treating cash deposited as unexplained money u/s 69A. Veena Awasthi ITA 215/Lukw/2016 c) No addition can be made for cash deposited unless AO brings evidence/ material on record to prove that cash withdrawal is for some other purpose. i) CIT v. Shri Kulwant Rai (2007) 291 ITR 36 (Del) ii) Shri Gordhan, Delhi v. ITO. Gurgaon. ITA 811/DEL/2015 dt 19.10.2015 Hence it may be held accordingly and addition of Rs. 1,73,77.481/- may kindly be deleted. II. Grounds No. 6 to 11 pertains to the disallowance of interest of Rs. 28,27,141/-. The appellant had earned gross interest of Rs. 46,36,912/- on FD and had incurred Rs. 28,27,141/- on O/D so taken and hence net interest was offered for tax Rs. 18.09.771/-. Ld. CIT(A) held interest as inextricably linked and allowed the claim of the appellant and hence relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the frequent transactions carried out in the bank account are in the nature of business transactions which are controlled by the assessee staying outside India and also through its representative having authority to operate the bank account. Ld. CIT(A) also allowed the claim of interest expenditure of Rs. 28,27,141/- treating it to be a business expenditure against the business receipt in the form of alleged cash deposits as well as the interest earned on term deposits. Ld. CIT(A), thus, sustained the addition of Rs. 13,90,198/- estimating net profit @ 8% on the alleged cash deposit. 12. As far as the issue that whether ld. CIT(A) was justified in estimating the profit @ 8% of the cash deposit and also whether ld. CIT(A) was justified in treating the transactions carried out in the bank account as part of the business carried out by the assessee we notice that the assessee is a resident of UAE and has nowhere stated to have carried out any business activity in India. The Revenue authorities have never disputed this fact that the assessee is a non-resident and also no evidence whatsoever has been put forth by the Revenue authorities which can indicate that the assessee is carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng out transactions with Soham Shipping Pvt. Ltd. Now, as far as entering into the transactions with Soham Shipping Pvt. Ltd. is concerned it is contended by the assessee that they were merely in nature of giving advances and receiving the same from time to time. This contention of the assessee has not been verified at the end of the Revenue authorities by calling for any investigation in the case of Soham Shipping Pvt. Ltd. Ld. AO ought to have issued notice to this concern to know about the reason of entering into such transactions. Since ld. AO has not contended any inquiry on this issue nor had made any addition for these transactions, they are out of the purview to be examined at this stage. Therefore, since ld. AO has not questioned the genuineness of these transactions, therefore, dealing with these issues which have not been referred in the impugned order, is not relevant at this stage. Now, what remains is the source of alleged cash deposit. On going through the bank statement as well as the cash book, we find that there are regular credits in this bank account through clearing and the assessee has withdrawn the cash on multiple occasions and has deposited also on multiple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on various dates during the year as well as the availability of cash in the preceding FY 2011-12, we come to a conclusion that firstly, the assessee has successfully explained the source of alleged cash deposits of Rs. 1,73,77,481/- and secondly, ld. CIT(A) erred in treating the frequent transactions in the bank account as those carried out in the course of business and further, ld. CIT(A) erred in estimating the profit @ 8% of the alleged cash deposit without finding any evidence which could show that the assessee is carrying out the business activity. We, therefore, set aside the finding of ld. CIT(A) and delete the addition of unexplained money made by ld. AO u/s 69A of the Act at Rs. 1,73,77,481/- and accordingly dismissed the Revenue's ground nos. 1 to 5 and allow the assessee's ground nos. 1 & 2 raised in the Cross Objection. 15. As regards the issue relating to the disallowance of interest of Rs. 28,27,141/- paid on cash credit limits availed by the assessee and claimed against the interest earned on fixed deposits at Rs. 46,36,912/-, ld. CIT(A) has allowed the said claim treating it to be a business expenditure. We, however, looking to the said transactions firstly, note t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure made by the assessee the taxable interest income is the interest received on fixed deposits at Rs. 46,36,912/- along with savings bank interest on NRO at Rs. 40,676/- (total interest income comes to Rs. 46,77,588/-). It is claimed by the assessee that the same should be taxable at the beneficial tax rate as prescribed under the DTAA. 18. We note that the assessee is a non-resident Indian and is a resident of UAE and there is an agreement for avoidance of double taxation and the prevention of fiscal evasion between India and UAE. Vide Notification No. GSR 710(E) dated 18.11.1993 as amended by Notification No. SO 2001(E) dated 28.11.2007, the Article 11 of the said Agreement reads as follows: "ARTICLE 11 - Interest - 1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such interest may be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed: (a) 5 per cent of the gross amount of the interest if such interest is paid on a loan granted by a bank ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement." 19. Now, from perusal of the above Article we notice that the interest may be taxed in the Contracting State (i.e. in India) in which it arises and according to the law of that State and if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed 5% of the gross amount of the interest if such interest is paid on a loan granted by a bank carrying on a bona fide banking business or by a similar financial institution and @ 12.5% of the gross amount of the interest in all other cases. 20. Now perusal of the above Article 11 of the DTAA between India and UAE, we note that the same is applicable in the case of the assessee and the alleged interest earned on fixed deposit of Rs. 46,36,912/- is liable to be taxed at the beneficial rat ..... 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