Case Law Details
Rekha Sanjeev Bhatt Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that addition towards cash deposit in bank account u/s. 69A as unexplained liable to be deleted since assessee satisfactorily explained the source. Accordingly, addition deleted.
Facts- The present appeal is preferred by assessee. The grievance of the assessee is against various additions made to her income on account of cash deposited in her bank account, as also investments made in immovable property, source of which allegedly remained to be satisfactorily explained by the assessee.
Conclusion- Held that the assessee, we have noted, also explained the relationship between the said company and herself by pointing out that her spouse is a director of the company, which was one director company. All these evidences have not been disputed by any of the authorities below. Thus, it is clearly evident that the assessee had explained the source of 50,000 USD and deposit of Rs.35,67,644/-, as being the withdrawals made from a company in SA i.e. “SPPL” in which her spouse was a director. Thus, we see no reason to confirm the order of the AO and the addition, therefore made of cash deposited in the bank account of the assessee of Rs. 35,67,644/-is accordingly directed to be deleted.
Held that the addition on account of unexplained investment in the immovable property has been made by the AO for no proper reasons despite the fact that the assessee has given proper explanation of the source of the same, evidenced with proper documentary evidences, substantiating with proper documentary evidences, which have not been doubted by the authorities below. Thus, the addition made of unexplained investment amounting to Rs.2,00,21,362/- is directed to be deleted.
Held that where the transactions whose genuineness is doubted in the case of a non-resident is from NRE account and the assessee has explained the source of the said transactions as either from withdrawals made from companies, in which she/her spouse are associated, outside India or from funds advanced by her son outside India, we have no hesitation in holding that the assessee has sufficiently discharged her onus of proving the genuineness of the transactions.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the assessee against the order of the Assessing Officer, viz. Income Tax Officer (International Taxation), Ahmedabad passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (“the Act” for short) pertaining to the Assessment Year 2021-22.
2. At the outset itself, it was stated that, the grievance of the assessee is against various additions made to her income on account of cash deposited in her bank account, as also investments made in immovable property, source of which allegedly remained to be satisfactorily explained by the assessee.
3. Briefly summarizing the additions in challenge before us, it was pointed that the following additions were made in the hands of the assessee for the aforementioned reason:
i) Cash deposit in bank account remaining unexplained, under section 69A of the Act, of Rs.35,67,644/-;
ii) Unexplained investment in immovable property, under section 69 of the Act ,of Rs.2,00,21,362/-;
iii) Unexplained investment by way of stamp duty charges and registration fees of Rs.26,19,000/- for the aforementioned immovable property.
iv) Unexplained cash deposit in bank account of the assessee of Rs.2,07,440/- ,under section 69A of the Act.
4. It was contended that the AO had proposed the above additions in a draft order passed in terms of provisions of section 144C(3) of the Act, to which the assessee had filed objections to the DRP, and the DRP accordingly, after considering the contentions of the assessee rejected all the objections of the assessee in its order passed under section 144C(5) of the Act. The AO accordingly thereafter passed final order in accordance with the directions of the DRP making all the aforementioned additions to the income of the assessee.
Aggrieved by the same the assessee has come up in appeal before us raising the following grounds:
01. That the Income Tax Officer, Ward -1, International Taxation Ahrnedabad and Ld DRP has erred both in law and on facts while making the various additions of Rs.2,64,45,446/- against the returned Income of Rs. 385/-, and therefore the additions made while passing the order u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 is requires to be deleted.
02. That the Ld. Assessing officer and DRP failed to appreciate the facts that the appellant and her husband are two different person as per Income Tax Act, 19(51, However various additions made which are the transactions of not the appellant is bad in law and therefore the order is totally erroneous and required to be quashed.
03. That the Ld. A.O. and DRP fails to appreciate the facts and DTAA between India – Mauritius and India -South Africa and therefore various addition made wil lout appreciating the submissions of the appellant during the DRP proceedings are bad in law and requires to be deleted.
04. That the Ld. A.O. and DRP has erred both in law and on facts while making the addition of Rs.35,67,644/- u/s 69A r.w.s. 115BBE and therefore it requires to be deleted.
05. That the Ld. assessing officer and DRP has erred in law and on facts while making the additions of Rs.2,00,21,362/- u/s 69 of the IT. Act of on account of unexplained investment is against the fact and documentary evidence available on record and therefore it required to be deleted.
5. Ground No.1 was stated to be general in nature, and is therefore not being adjudicated by us. Ground no.9 challenging the initiation of penalty proceedings, being premature, is dismissed.
Ground No.2 and 3 was stated to be argumentative concerning the grounds challenging the additions made on merits raised vide ground no.4 to 8, before us. It was, therefore, contended that the effective grounds, which needed to be adjudicated, were ground no.4 to 8.
6. We have heard both the parties, gone through the orders of the authorities below and have also taken note of various documents, which were referred during the course of hearing before us, as also case laws relied upon by both the parties.
7. The arguments of the ld.counsel for the assessee before us against various additions made on account of source of cash deposited in bank account of the assessee/ investment in immovable property remaining unexplained, was to the effect that, the assessee had discharged its onus of proving the source of the same with all documentary evidences, and its explanation had been rejected on flimsy ground, without properly considering the submissions made by the assessee.
The ld.DR, on the other hand supported the order of the AO.
8. Since the Ld.Counsel for the assessee referred to various documents in support of its contentions, it was directed to list in tabular form all the documents which were placed before the authorities below i.e. AO/DRP ,to prove the source of the cash deposited in bank account, and the investments made in immovable property. The said direction was complied with by the ld.counsel for the assessee, and shall be referred to in our order as and when required.
9. Taking up the first issue raised in ground no.4, regarding the source of cash deposited in the bank account of the assessee amounting to Rs.35,67,644/- remaining unexplained, we find that the assessee’s explanation of the same was to the effect that the same represented 50,000 USD deposited in her bank account, which was sourced from withdrawals made from a company in South Africa where the assessee’s spouse was a director; that this amount of 50,000 USD was carried in cash by the assessee immediately after withdrawing in SA to India; that the same was declared to the Custom Authority in India, and on reaching India, it was immediately deposited in Indian NRE bank account of the assessee.
It is noted that it is an undisputed fact that the assessee is a non-resident and all the transactions noted by the AO were effected through her NRE bank account .
10. As per the details filed before us in tabular form, explaining the source of cash deposits of Rs.35,67,644/- in her bank account with relevant documents to the authorities below, the same is as under:
11. We have noted that before the AO, the assessee had furnished copy of the account of Synthetic Polymers PTY Ltd. (“SPPL”), a foreign company, from which 50,000 USD was stated to have been withdrawn by the assessee and her spouse and deposited in their joint bank account in India with ICICI Bank. The said bank account is an NRE account. But the AO did not find the assessee’s explanation to be satisfactory, noting that, the bank statement of “SPPL” recorded a debit of 3,70,750 which on conversion to the USD at the rate of Rs. 71.50 came to Rs.2,65,08,625/-, and therefore, did not match with the amount of Rs.35,67,644/- deposited in the Indian NRE bank account. The AO also noted that no explanation of the relationship between the assessee and the company i.e. “SPPL” was given by the assessee, as also any copy of the return of the said company or a contra confirmation along with ledger account of the said company.
12. Before the DRP, the assessee submitted additional evidences explaining that the amount withdrawn from the “SPPL” was in South African currency “ZAR” and the AO had incorrectly converted it at US dollar exchange rate therefore arriving at a much larger figure of withdrawal in Indian Rupees. That on conversion of ZAR withdrawn in US Dollars it matched with the figure of 50,000 US Dollars and there was factually no discrepancy in the amount withdrawn from the South African Bank account and deposited in the Indian Bank account. That after withdrawal of this currency, it was converted in USD amounting to 50,000 USD, which was carried to India, and declared in currency declaration forms at Ahmedabad Airport, and thereafter deposited in NRE account of the assessee. It was pointed out that these amounts were withdrawn both by the assessee and her husband from “SPPL” and deposited in the NRE bank account in India which was a joint account with her husband. All the documents evidencing the above facts were filed before Ld.CIT(A), which being additional evidences were was sent to the AO for his comments, who agreed that the evidences filed by the assessee explained the fact that the amount withdrawn from “SPPL” was converted into 50,000 USD and they were deposited in the bank account in India. However, he stated in his remand report that the assessee still did not give explanation regarding the source of such funds. The AO noted that the assessee had failed to explain relationship between her and “SPPL” and had still not filed copy of the return of income of the “SPPL” as well as its contra confirmation. In response to this remand report of the AO, the assessee explained that her husband was the only director of the “SPPL” being one person company. Certificate of incorporation of the company issued by the Companies and Intellectual Property Commission was furnished by the assessee. It was pointed out that the company existed since 23rd of March, 2015 and the assessee also furnished the confirmation of the auditors regarding the amount of 50,000 USD given to her and her husband. Considering the above, the DRP still rejected the contentions of the assessee, holding as under:
13. Considering all the above, we find no substance in the reasoning of the DRP/AO for rejecting the assessee’s explanation of the source of cash deposited amounting to Rs.35,67,644/-. The assessee’s explanation of the amount having been sourced from the withdrawal made from the “SPPL” in which her husband was a director, is not disputed by the authorities below. In fact, as noted above by us, the assessee had filed all documentary evidences, proving the same ,right from bank statement of “SPPL” showing withdrawal of the necessary amount in the currency of the country of residence i.e. ZAR, the document evidencing the conversion of ZAR in 50,000 USD by the assessee and her husband, declaration of this 50,000 USD to the Custom Authority in India when the assessee and her husband carried the amount immediately after withdrawal from South Africa to India, and deposited the same immediately thereafter in the Indian Bank NRE account of the assessee, jointly held with her husband. The assessee has also filed confirmation of the said facts from the auditors of the “SPPL”. The assessee, we have noted, also explained the relationship between the said company and herself by pointing out that her spouse is a director of the company, which was one director company. All these evidences have not been disputed by any of the authorities below. Thus, it is clearly evident that the assessee had explained the source of 50,000 USD and deposit of Rs.35,67,644/-, as being the withdrawals made from a company in SA i.e. “SPPL” in which her spouse was a director.
14. The reason for rejection by the DRP that, it is baffling and beyond one’s logic as to why in this digital era any person would carry dollars physically. We agree with the ld.counsel for the assessee, is absolutely a flimsy reason and of no consequence for rejecting the assessee’s explanation. It is immaterial for the purpose of proving the genuineness of the transaction, we hold, as to why any person would carry dollars in cash ,as long as the fact of the assessee carrying the dollar in cash was duly evidenced with documents which is not disputed by the Department also.
15. The DRP has also noted that the assessee has failed to explain the source of 50,000 USD which we find is absolutely incorrect. All the documents filed by the assessee duly explain the source of 50,000 USD as being from withdrawals effected from SSPL. The DRP has not pointed out as to how the said documents failed to prove the source of 50,000 USD.
16. In view of the above, we find that the Revenue authority had no substantial reasons for rejecting the assessee’s explanation of the source of deposits in cash in her bank account of Rs.35,67,644/-, which we find was duly evidenced with proper supporting documents.
In the light of the same, we see no reason to confirm the order of the AO and the addition, therefore made of cash deposited in the bank account of the assessee of Rs. 35,67,644/-is accordingly directed to be deleted.
Ground no.4 raised by the assessee is, therefore, allowed.
17. Ground no.5 relates to addition made on account of investment made in an immovable property.
18. The facts being that the assessee was noted to have made investment in immovable property ,viz. Flat No.6501, Floor No.65 val. Majala, Building Name : Varidviv See Wing D, World Tovarsa, Block No. Appar Varali, Mumbai. Investment made in the impugned year was Rs.2,18,21,362/-, out of which source of Rs.18.00 lakhs made out of the ICICI Bank account of the assessee was accepted by the AO, and the remaining investment of Rs.2,00,21,362/- was held to be out of unexplained source. The orders of the authorities below record the explanation of the assessee regarding the source of the same as having been paid by a foreign company, Sea Horse Technologies Ltd. (“SHTL”), directly to the developer of the said plot i.e. Macrotech Developers in two instalments. On 17.3.2021 Rs.69,28,545/-, and on 30.3.2021 of Rs.1,30,92,817/-.
19. Before us, the assessee has listed evidences filed in this regard to the authorities below as under:
20. As is evident from the above, the assessee had filed bank statement of “SHTL” where the amount transferred to Macrotech Developers is reflected. The assessee has also filed confirmation of the said company of the payment of the impugned amount on behalf of the spouse of the assessee, confirmation of the management of the company of the said company was also filed. Thus as per the assessee, it had duly evidenced the source of investment of Rs.2,18,21,362/- in the impugned immovable property as from the foreign entity, “SHTL” and the assessee had also demonstrated the fact that the entire investment was made on behalf of the assessee’s spouse and it was not on her behalf.
21. The reason for rejection of the assessee’s explanation by the DRP are contained in para-7.3.1 to 7.3.3 as under:
22. On perusal of the above, it is revealed that the Revenue authorities did not dispute the fact of the amount being invested by “SHTL” and payment being made by them directly to the developers. The only reason apparently for rejecting the assessee’s explanation is that there is no explanation as to why this amount has been transferred by the said foreign company on behalf of the assessee, and also on account of proper confirmation of the said transaction not being filed by the assessee from the foreign entity.
23. As for the reason for rejecting the assessee’s explanation in the absence of any explanation furnished by the assessee, as to why the impugned investment was made by the foreign entity, we do not find any substance in the same. As long as there is no dispute about the fact of the investment being made by the said foreign entity, why the foreign entity made the investment, does not impinge in any way on the genuineness of the transaction. At least the Revenue authorities have not given any reasons as to how this reasoning would in any way effect the genuineness of the transaction. Therefore, this reason for rejecting the assessee’s explanation is dismissed by us, finding no substance in the same.
24. The other reason of no proper confirmation being filed by the assessee, we have noted that the even the DRP has noted the fact of confirmation being filed by the management of the foreign entity. Having noted so, we see no reason for doubting the genuineness of the same.
In view of the above, we find that the addition on account of unexplained investment in the immovable property has been made by the AO for no proper reasons despite the fact that the assessee has given proper explanation of the source of the same, evidenced with proper documentary evidences, substantiating with proper documentary evidences, which have not been doubted by the authorities below.
25. In the light of the same, the addition made of unexplained investment amounting to Rs.2,00,21,362/- is directed to be deleted, ground no.5 is accordingly allowed.
26. Ground No.6 relates to the addition made on account of unexplained investment pertaining to the amount paid for registration charges and stamp duty charges for purchase of aforementioned immovable property. The amount paid for the same was Rs.26,49,000/- and was paid from the bank account maintained with the ICICI Bank i.e. NRE bank account which was joint account with her husband Shri Sanjiv Bhatt. The orders of the authorities below reveal that the assessee had explained the source of the same, as coming from their son, Shri Kush Bhatt from whose account in South Africa money had been transferred in foreign currency to the ICICI Bank NRE account of the assessee, and before us, the assessee has tabulated following documents filed to the authorities below as evidence of the aforementioned explanation:
27. As is evident from the above, the assessee had submitted copy of her ICICI Bank account reflecting credit of 25,97,110/- as coming from the bank account of her son, from his foreign account viz. Investec Specialist Bank Account. Copy of the said account of the assessee’s son; confirmation from her son, along with foreign exchange advice and payment advice of investment bank was filed, as also ITR of his son.
The reason for rejecting the assessee’s explanation by the DRP is contained in para 8.3.1 to 8.3.4 as under:
“8.3.1 The panel has considered the content of the objection, the stand taken by the Ld. AO, submissions made and arguments presented by the Ld. AR. This panel notes that the explanation of the applicant regarding the proposed addition of Rs.26,49,000/- on account of unexplained investment u/s 69 of the I.T. Act, 1961 is carefully gone through, however, the same is not acceptable on the following grounds;
8.3.2 The applicant had paid an amount of Rs.2619000/- towards stamp duty and Rs.30000/- for registration fees. During the course of DRP proceeding the applicant stated that the amount of Rs.26,49,000/- has not been paid by the her and the amount of Rs.26,49,000/- was paid by Mr. Sanjeev Bhatt from his bank account with ICICI Bank account number 036601075099 on 22/03/2021. It is apparent from the submission of the applicant that the a/c no. 036601075099 is a joint account of Sanjeev G Bhatt and Rekha Sanjeev Bhatt, the applicant. Therefore, the contention of the applicant that the amount of Rs.26,19,000/- has not been paid by her is not tenable.
8.3.3 During the proceedings, the applicant was asked to explain the source of payment of stamp duty of Rs.26,19,000/- and registration fees of Rs.30,000/-. The perusal of the ICICI Bank Account Number 036601075099 of the applicant, reveals that an amount of Rs.25,97,110/- was credited in this account (i.e. US $36674.5) on 22.03.2021 and thereafter, the applicant had paid the stamp duty and registration fees of Rs.26,49,000/-. The applicant has failed to discharge her onus of explaining with supporting documents, the above transaction.
8.3.4 In view of the above, the panel notes, that the applicant has failed to explain the source of the amount of Rs.2619000/- for stamp duty and Rs.30000/- paid for registration fees. Therefore, this objection raised by the applicant is not tenable and is hereby rejected.”
28. A perusal of the above would reveal that the DRP has rejected the above contentions merely by stating that the assessee has failed to discharge her onus of explaining the source of the investment made. This is despite the fact that at para 8.3.3, the DRP notes credit of 36675 USD in her ICICI Bank account which was utilized for paying stamp duty and registration fee of Rs.26,49,000/-. As noted above, the assessee had explained USD being credited in the bank account as being advanced by her son Kush Bhatt from his bank account in Investec Specialist Bank Account. Even the ITR of son was filed by the assessee.
29. In the light of the same, we fail to understand as to what basis the DRP had for recording finding that the assessee had failed to discharge her onus of explaining the source of investment of Rs.26,49,000/- with the supporting documents, when the fact on record are completely to the contrary reflecting that the assessee had filed all supporting evidences, explaining the source of the said investment, as coming out of the advances given by her son to the assessee from his foreign account.
30. In the light of the same, the addition made of Rs.26,49,000/- on account of unexplained investment is held to be untenable on the facts, and the AO is directed to delete the same.
Ground No.6 is allowed.
31. Ground No.7 relates to the addition made to the income of the assessee on account of cash of Rs.2,07,440/- found deposited in her bank account, source of which remained unexplained. The orders of the authorities below as well as the arguments of the ld.counsel for the assessee before us are to the effect that the same pertained to the reimbursement of travelling expenses to the assessee by a company viz. “SHTL” in which she was a director; that the invoices of the travelling expenses viz. tickets purchased by the assessee were filed as evidence; ledger account of the company making reimbursement was also filed; as also the bank statement of “SHTL” and the ITR of the said company. The assessee, before us, has tabulated evidences so filed by in support of her explanation as under:
32. The reasons for rejecting the assessee’s explanation by the DRP are at para 9.3.1 as under:
“9.3 Discussion and Direction of the DRP:
9.3.1 The panel has considered the content of the objection, the stand taken by the Ld. AO, submissions made and arguments presented by the Ld. AR. This panel notes that the explanation of the applicant regarding the amount of Rs.2,07,440/- that was received from Sea Horse Technologies Private Limited as travelling expenses reimbursement is superfluous. The applicant has failed to explain the relationship between her and Sea Horse Technologies Private Limited and the rationale for the said transaction.
9.3.2 In view of the above, the panel notes, that the applicant has failed to explain the credit of Rs.2,07,440/- in her bank account. Therefore, this objection raised by the applicant is not tenable and is hereby rejected.”
33. As is evident from the above, the assessee’s explanation of the credit in her bank account of Rs.2,07,440/- being the reimbursement of her travelling expenses by “SHTL” was rejected for the reason that the assessee failed to explain the relationship between her and the said company and rationale for the said transaction. We have noted that the assessee had explained that she was promoter director of the said company, and she had visited also for the official purpose, and the company, therefore, reimbursed her travelling expenses. Therefore, the assessee, we find, had explained her relationship with “SHTL” and also rationale for the said transaction. The reasoning therefore by the DRP for rejecting the assessee’s explanation is arbitrary and without considering the facts on record.
34. The addition, therefore made, we hold, of Rs.2,07,440/- in her bank account is not tenable on the basis of facts on record itself, and is directed to be deleted.
The ground no.7 is therefore allowed.
35. We may add that it is an undisputed fact that the assessee is a non-resident in the impugned year. Further all transactions carried out from her bank account which are the subject matter of addition by the AO , be it cash deposit or amounts invested in immoveable property, were all carried out from her NRE account , which is an Indian Rupee savings account where foreign income earned outside India is parked.
36. In the light of the above facts where the transactions whose genuineness is doubted in the case of a non-resident is from NRE account and the assessee has explained the source of the said transactions as either from withdrawals made from companies, in which she/her spouse are associated, outside India or from funds advanced by her son outside India, we have no hesitation in holding that the assessee has sufficiently discharged her onus of proving the genuineness of the transactions. The Revenue, we have noted, has given no proper reason for finding the explanation not satisfactory.
The additions made in the hands of the assessee are, therefore, not sustainable.
37. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 19TH December, 2024 at Ahmedabad.
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