Ananya Ajay Mittal Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that income of non-resident not taxable in India merely because the status of the assessee was wrongly mentioned as resident in the original return of income.
Facts-
A search and seizure actions was carried out in the case of the assessee’s father, Shri Ajay Mittal and during the course of search action, certain documents were found which contained details of foreign bank account of the assessee, USA. It was also seen that the foreign bank account was not declared in the Income Tax Return filed by the assessee for the said assessment year.
AO has taxed the entire credit noticing that in the foreign bank account u/s 68 by holding that the so called explanation given that it was gift from a family friend resident of USA did not fall within section of 56(2)(v).
In the order of Ld. CIT(A), this issue was specifically raised that assessee was not a resident in India in terms of section 6 of the Act, has not rebutted this fact and dismissed the appeal of the assessee.
Conclusion-
The assessee is resident or non-resident has to been from the records whether he was outside India for more than 182 days or not and this fact has not been controverted and is also borne out from the records. Thus, merely mentioning the status as resident in the original return of income does not make the assessee as resident in India. Here in this case, assessment has been made u/s 153A and the assessee has declared the status as non-resident in return of income filed in response to the notice u/s 153A and the assessment has been completed in the status of non-resident. Therefore, this cannot be the ground for treating the assessee as resident. Once the assessee is non-resident, then income or deposit in the foreign bank account of the assessee who is not resident in India cannot be taxed in India. Therefore, on this ground the entire additions cannot be sustained.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeals have been filed by the assessee against the separate impugned order of even date 13.09.20 19, passed by Ld. CIT(A), Mumbai for the quantum of assessment passed u/s 153A/143(3) for the AYs 2010-11, 2011-12 & 2012-13 respectively.
2. Here in this case, the Tribunal has already passed the order for AY 2010-11 and 2011-12 vide order dated 23.03.2022, wherein additions made on certain credit in the foreign bank account of the assessee in USA was confirmed. However, the assessee had filed Misc. Application and pointed out that one very important fact raised vide ground no. 1 & 3 that assessee being an NRI was not resident in India during the relevant assessment year, therefore addition could not have been made. After considering this vital fact on record which was omitted to be considered, Tribunal has then recalled the order after observing as under:-
4. Considered the rival submissions and material placed on record. It is submitted before us that the assessee has not argued the issues raised in the Ground Nos. 1 and 3. Further, even on Ground No. 2, the Ld.AR has submitted that the assessment was completed treating the assessee as a NRI and the ITAT has adjudicated taking que from the original assessment and ROI, which was filed by the assessee herself as a resident. Since the Assessing Officer himself accepted the assessee as a NRI in the revised proceedings u/s 153A. Further he submitted that the Hon’ble bench while considering the applicability of section 6(1)(c) and failed to consider the Explanation 1 to section 6(1)(b) and decision of Hon’ble Delhi High Court in the case of Suresh Nanda (supra), non consideration of High Court decision is mistake apparent on record and prayed that the above said mistake be rectified.
5. After considering the submissions, we observe that the decision relied by the Ld AR in which the Hon’ble High Court has analyzed the status of the assessee based on the duration of stay in India. Further, there is no such discussion in the assessment order or in first appellate order. The issue raised by the assessee goes to root of the matter and we have also not dealt with the issue in the matter of search except dealt with the merit on upholding the addition. Therefore, in our considered view, to meet the ends of justice, we are inclined to give opportunities to both parties and rehear the matter to uphold the legal convention, we are recalling this order so that both parties can have proper opportunities to put forth their submissions and arguments. Hence, we direct the registry to fix the case for hearing in due course and inform the parties accordingly.
3. Thus, though the addition was sustained on the credit balance in the foreign bank account, the important fact which was missed to decide that, whether the assessee was resident or non-resident, during the relevant assessment years or not was not adjudicated which issue was raised vide ground no. 2, in the original memo of appeal, which reads as under:-
2. On the facts and circumstance of the case, the Ld. CIT (Appeals) has erred in law and on facts in upholding the additions without appreciating that the Ld. assessing officer made addition after considering the appellant as “Resident” even though it is admitted fact that he was non-resident and the assessment order also is passed assessing him as “Non-Resident”.
4. The brief facts qua the limited issue is that, assessee is an individual and in the AY 2008-09, he had gone to USA for his studies. A search and seizure actions was carried out in the case of assessee’s father, Shri Ajay Mittal and during the course of search action, certain documents were found which contained detail of foreign bank account of Shri Ananya Mittal, USA. The relevant facts as noted by the AO reads as under:-
7.1 During the course of search, pages 12 to 15 marked as Annexure A-2 were found and seized from Mittjal Bhawan II 62A Peddar Road, Mumbai, which contained details of foreign bank account of Shri Ananya Mittal in United States of America. It was also seen that the foreign bank account was not declared in the Income Tax Return filed by the assessee for the said assessment year.
7.2 During the post search proceedings it was stated by the Authorized Representative of the assessee, that the assessee for his post graduation for four years was required to stay in USA. It was also submitted that it was mandatory for a student pursuing studies in USA to open an account in USA. Further it was submitted that all the expenses of Shri Ananya Mittal in USA were exclusively borne by a family friend of Mittal family, Dr. Prakash Sampath based in USA.
7.5 Further it was also stated by the AR of the assessee, that the assessee was an ordinary resident Indian throughout his stay in USA for his post graduation and that the records of the foreign bank account were not maintained by him.
7.9 The submission of the assessee has been carefully perused but the same is not acceptable on account of the following :
