Appellant: Neeleshwar Bhatnagar, represented by Mr. Shahid Khan, M/s. Kochar & Co. Advocates & Legal Consultants, 12th Floor, Tower-1, DLF Towers Jashola, Jashola District Centre, New Delhi
Respondent: ACIT, Circle International Tax 1(1)(2), New Delhi
PAN: ARQPB0007P
PER SAKTIJIT DEY: JUDICIAL MEMBER:
Present appeal by the assessee arises out of final assessment order dated 21.07.2022 passed under Section 143(3) read with section 144C(13) of the Income-Tax Act, 1961 pertaining to assessment year 2019-20, in pursuance to the directions of learned Dispute Resolution Panel (DRP).
The dispute in the present appeal is confined to the addition of an amount of Rs.143.94 crores under Section 69 of the Act.
Briefly, the facts are, the assessee is a non-resident individual and is a resident of the United Arab Emirates. The assessee is employed with Standard Chartered Bank. For the assessment year under dispute, the assessee filed his return of income on 27.09.2020 declaring income of Rs.62,49,910.
In the course of assessment proceedings, the Assessing Officer, on verification of Form 26AS, noticed that in the financial year relevant to the assessment year under dispute, the assessee had invested an amount of Rs.213,16,49,985 in fixed deposits with Standard Chartered Bank, Mumbai Branch. When called upon to explain the source of such investment, the assessee in his reply, as alleged by the Assessing Officer, submitted that he had not made any fixed deposits. The Assessing Officer issued notice under Section 133(6) of the Act to the Standard Chartered Bank, Mumbai Branch seeking information.
In response to the said notice, the concerned Bank informed that the assessee had invested in the following fixed deposits:
Total: Rs.213,64,09,000
Alleging that the assessee did not furnish any reply to the show cause notice dated 29.09.2021 issued seeking explanation as to why the amount should not be added under Section 69 of the Act, the Assessing Officer treated it as unexplained investment under Section 69 of the Act and added back to the income of the assessee.
Further, applying the provisions of section 115BBE of the Act, the Assessing Officer taxed it @60%. The assessee contested the addition by filing objections before learned DRP.
In the course of proceedings before learned DRP, the assessee along with his submissions furnished various evidences explaining the source of investment. It was submitted by the assessee that he along with his wife has registered a company in the name and style of M/s. NB Ventures Ltd. in British Virginia Island and also incorporated the company at Dubai. It was submitted NB Ventures had availed loan from Standard Chartered Bank, London/Singapore, out of which funds were transferred to assessee’s account held with Standard Chartered Bank, Mumbai, from which, the fixed deposits were made. After verifying submissions of the assessee in the context of evidences furnished, learned DRP accepted the source of fixed deposits made of Rs.69,70,00,000 and accordingly, directed the Assessing Officer to delete the addition. However, learned DRP sustained the addition of Rs.143.94 crores by alleging that the identity, genuineness and creditworthiness of M/s. NB. Ventures Ltd. was not proved.
Before us, Shri Ajay Vohra, learned senior counsel appearing for the assessee submitted, the Non-Resident External (NRE) fixed deposits were made through foreign remittances, hence, such deposits and their interests are not taxable under the Income-Tax Act,1961. He submitted, fixed deposits were made out of assessee’s contribution and the loan advanced by foreign banks. He submitted, Standard Chartered Bank vide letter dated 13th September 2017 has provided a credit facility (loan) of USD 35,000,000 to NV Ventures Ltd., Dubai. He submitted, out of the loan availed, NV Venture had transferred Rs.143.94 crores to assessee’s personal bank account on 16.11.2018.
He submitted, after receiving the amount, the assessee on 19.11.2018 had made the fixed deposit by withdrawing from the bank account.
In this context, he drew our attention to loan account statement and bank statement of NB Venture Ltd. and the personal account statement of the assessee and his wife. As regards the creditworthiness of NB Venture Ltd., learned counsel for the assessee submitted, as on 30.11.2018, the company had assets of USD 63,229,102.65 and liability of USD 33,923,247.26. Thus, the company had net assets over liability of USD 29,305,855.39. Thus, he submitted, neither the identity nor creditworthiness of NB Venture Ltd. can be doubted. As regards the genuineness of the loan transaction, learned counsel submitted, since, the entire transaction is carried out through banking channel and one to one co-relation has been established, genuineness cannot be doubted.
Further, drawing our attention to letter dated 16.11.2018 issued by Standard Chartered Bank, London to Standard Chartered Bank, India with the instruction that the fixed deposit of Rs.143.94 crores be placed under lien with them as a security, clearly establishes the genuineness of transaction. Thus, he submitted, the source of the fixed deposit having been clearly established, it cannot be brought to tax in India. In support of such contention, learned counsel relied upon the following decisions:
He also relied upon Circular No.5 of 1969 issued by Central Board of Direct Taxes. Further, he submitted, since, the assessee does not maintain any books of account, provisions of section 69 of the Act could not have been invoked.
Learned CIT(DR) strongly relied upon the observations of the Assessing Officer and learned DRP.
Further, she submitted, the addition of Rs.143.94 was sustained by learned DRP, since, the assessee failed to furnish cogent evidence.
We have considered rival submissions in the light of decisions relied upon and perused material on record.
It is evident, based on information reported in Form 26AS, the Assessing Officer conducted inquiry regarding certain NRE investments made by the assessee in fixed deposits with Standard Chartered Bank, Mumbai Branch. After obtaining information from the concerned bank, the Assessing Officer had added back an amount of Rs.213.64 crores under section 69 of the Act, alleging it to be unexplained investment.
However, learned DRP after considering the submissions of the assessee in the context of evidences furnished, was convinced that source of investment of Rs.69.70 crores in fixed deposit made on 22.02.2019 has been duly explained. Accordingly, it deleted the addition of Rs.69.70 crores. The dispute before us is confined to the addition of Rs.143.94 crores made on 20.11.2018.
It is evident, in course of proceedings before learned DRP, the assessee has furnished details of the loan obtained by NB Venture Ltd. from Standard Chartered Bank, London, against which, fixed deposits of Rs.143.94 crores were made. In fact, the letter dated 16.11.2018 issued by Standard Chartered Bank, London to Standard Chartered Bank, India clearly indicates that the fixed deposit made of Rs.143.94 crores was to be kept under lien. It is evident, the funds received as loan from Standard Chartered Bank, London was transferred to the assessee’s personal bank account held with Standard Chartered Bank, Mumbai. Out of which, the fixed deposits were made.
Thus, one to one co-relation has been established. Further, the financial position of NB Venture Ltd. as on the date of loan advanced clearly proves the creditworthiness of the company.
Therefore, the doubt entertained by learned DRP regarding the identity, creditworthiness and genuineness of the transaction is unsubstantiated.
As regards, applicability of section 69 of the Act, it is the specific contention of the assessee, since, he does not maintain any books of account, provisions of section 69 cannot be applied. Though, the assessee has taken this plea, however, we are not convinced with such submissions of the learned counsel for the assessee. As it appears, this plea has been taken without prejudice to the other submissions of the assessee. Be that as it may, facts on record clearly establish the source of the investment made in fixed deposit. That being the factual position emerging on record, we are of the view that the addition made of Rs.143.94 crores under section 69 of the Act is unsustainable.
Accordingly, we delete the addition.
Order pronounced in the open court on 31.03.2023
Neeleshwar Bhatnagar vs ACIT: Assessment Year 2019-20, Case Filed on 2022-08-18
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