S. 147 : Reassessment-After the expiry of four years-Non-Resident-Swiss account funds of non-resident-Credits in HSBC (Geneva) accounts originated outside Indian Territories.-Income deemed to accrue or arise in India-No business connection-Limitation- Extended period of 16 years is not applicable to non-Residents- Reassessment notice and order is held to be bad in law and quashed-DTAA-India-UK-French. [S. 6(1), 6(6), 9(1)(i), 69, 139(1), 148, 149(1), 149(1)(c), Art. 28]
The Assessee is an individual who is married to a British citizen and is settled in London. She has been outside India since F.Y.1999-2000. Even prior to that, from F.Y. 1989-90 to 1998-99, she was a non-resident or not ordinarily resident. As a non-resident, the Assessee has been maintaining NRE account & NRO account in India. The Assessee was filing the return of income in India in the status of non-resident in respect of income chargeable to tax in India in accordance with the provisions of Income-tax Act, which generally comprises of capital gains and income from other sources like dividend, interest, etc. For the A.Y. 2006-07 and 2007 08 the Assessee filed the return of income as non -Resident. ADI (Inv.) has issued summons under section 131 of the Act prior to issue of notice u/s 148 of the Act. In response to summons the representative of the Assessee has given explanation about the status of the Assessee and the amount deposited in the Swiss Account. The Assessing Officer issued notice under section 148 of the Act on 12-3-2014 for failure to disclose the bank account in HSBC, Geneva which is an asset located outside India and that the income in relation to such asset has escaped assessment for the assessment year 2008-07, for which as per Section 149(1)(c), sixteen years time limit is available. In reply to notice under section 148 the Assessee stated that that Assessee being a non-resident, therefore, in terms of fourth proviso to Section 139(1), she is not required to disclose foreign asset and therefore, provision of Section 149(1)(c) extending the period of 16 years will also not apply. The objection of the Assessee was rejected and the Assessing Officer made addition as undisclosed income of the Assessee. Order of the Assessing Officer was affirmed by the CIT(A). On appeal the Tribunal held that, the entire edifice for reopening is based on some “Base Note” received by Government of India under Article 28 of DTAA from the French authorities, on the basis of which, belief has been entertained that Assessee holds a bank account with HSBC Bank, Geneva and thus, the balance lying in the said bank accounts is taxable in India and therefore, income chargeable to tax has escaped assessment. Prior to the recording of the reasons, the investigation wing had issued notices u/s. 131 and asked for all the requisite details of the bank statements, accounts and the relevant information which was placed before the Investigation wing, as well as before the Assessing Officer also prior to the issuance of notice u/s.148. Perusal of the reasons‟ recorded, it is seen that nowhere these documents have been mentioned nor the bank statements as was supplied by the Assessee to the Income Tax department. These bank accounts have been provided to the ADIT way back in the year 2011, then again to ACIT in the year 2013 and at no point of time they asked any clarification with regard to various entries appearing in the said bank statement. The reasons recorded are so general in nature which only mentioned about information received by the Government of India and how Investigation wing of the Income Tax department after conducting enquiries, found large number of Assesses have admitted of holding accounts in HSBC bank. Even the Schedule FA of 2015 explains object behind various amendments made by the Finance Act 2012 in Section 139(1) which only refers to the cases of resident assesses. Thus, the Assessee being a non-resident was not required to disclose any asset held outside India in the return of income to be filed in India. This basic tenet has been missed by the Assessing Officer while recording the reasons as well as in the assessment order. The Revenue relied upon Section 149(1)(c) to justify the availability of extended time period of 16 years within which the notice can be issued would be available, provided the income in relation to any asset is located outside India which is chargeable to tax has escaped assessment. However, section 149(1)(c) and the period of 16 years is only applicable for reopening the assessment of the persons who are residents and are required to disclose the assets outside India The asset can be said to be “found” when an Assessee who is resident is required to disclose the said asset in the return of income within the provisions of the Income-tax Act. For a non- resident there is no obligation to disclose any foreign asset / account in its return of income in India as per section 139 itself, nor there is any column in the return of income to disclose foreign assets. The Assessee in terms of Section 6 of the Income -tax Act was never a resident of nothing has been brought on record in reasons recorded or there is any material on record that the Assessee has any business connection in India and therefore amount deposited in foreign bank account is income arisen or accrued or deemed to have arisen or deemed to have accrued in India. If at all there is some doubt about the said entity and deposits made therein, then, it is the UK Tax authorities which have to examine this issue. The Tribunal quashed the reassessment notice and the assessment order. The Tribunal has not decided the issue on merits. (ITA No.6096/Mum/2016 dt. 19-5-2023)(AY. 2007-08)
Amrita Jhaveri (Ms.) v. Dy. CIT (Mum.)(Trib.) www.itatonline.org
[Coram : Hon’ble Shri Amit Shukla, Judicial Member and Hon’ble Shri S Rifaur Rahman, Accountant Member]