Income Tax Appellate Tribunal - Lucknow
Mohammed Nashruddin,Uttar Pradesh vs Ddit/Adit, Int.Tax on 28 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH 'A', LUCKNOW
BEFORE SHRI KUL BHARAT, VICE PRESIDENT &
SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
I.T (IT) A. No.217/Lkw/2025
Assessment Year: 2019-20
Mohammed Nashruddin, Vs. DDIT/ADIT,
Shamsuddin Banraha, Pratyaksh Kar Bhawan,
Rampur, Madhuban, 57, Ram Tirath Marg,
Uttar Pradesh-221602 Uttar Pradesh-226001.
PAN:AXEPA8230F
(Appellant) (Respondent)
Appellant by Sh. Mahendra Kumar, FCA
Revenue by Shri R. K. Agarwal, CIT-DR
ORDER
PER ANADEE NATH MISSHRA:A.M. (A) This appeal has been filed by the assessee against the order passed by Assessing Officer wherein the proposed addition was approved by Dispute Resolution Panel (for short 'DRP) of Income Tax Department. The assessee has raised the following grounds of appeal:
"A. That on the facts and in the circumstances of the case and in law, the AO erred in passing order u/s 148A (d) and issuing notice u/s 148 without making any inquiry as provided under clause (a) to clause (d) of section 148A of the Act.
B. The AO was not justified in initiating proceedings u/s 148 without application of mind and in total disregard to the objections and documents placed on record.
I.T (IT) A. No. 217/Lkw/2025 2 Assessment Year:2019-20 C. That the assumption of jurisdiction u/s 148 being merely on the basis of information from the bank and in absence of independent inquiry, the order u/s 148 A (d) and notice u/s 148 are solely based on borrowed satisfaction and hence untenable and contrary to law.
D. That in the absence of approval of specified authority, the order passed is invalid and void ab-initio.
E. That the appellant having Non-resident status and having no source of income in India, the FCNR deposit and NRE account being as per the RBI guidelines, there is no case of any incidence of tax in India and thus the impugned addition is in total disregard to provision of Section 5 r/w Section 9 of the Act.
F. That the Id. AO grossly erred in blindly relying on the bank information relating to foreign exchange remittance and ought to have made inquiry from the bank especially when he found that the same bank has supplied incorrect information under the code SFT-011, SFT-005 and FRM-61B in respect of the appellant. The order passed by the AO is against the principle of natural justice and bad in law.
G. That the Ld. AO made a huge addition of Rs 99,04,05,611/-as unexplained investment u/s 69 without appreciating the facts of the case which is incorrect and bad in law H. That the Ld. AO made a huge addition of Rs 99,04,05,611/- as unexplained investment u/s 69 in AY 2019-20 without pointing out a single investment that has been made in the Financial year 2018-19 and thus the order passed by the AO is bad in law and contrary to the provisions of section 69 of the Act.
I. That the Ld. AO and the Ld. DRP ought to have appreciated the fact that the provisions of section 69 are not applicable in the case of Non-Resident assessees.
J. That Ld. AO failed to pass a lucid and clear order stating as to how the FCNR deposits when received in India were treated as 'explained' and on remitting back became unexplained investments for the purpose of section 69 of the Act.
I.T (IT) A. No. 217/Lkw/2025 3 Assessment Year:2019-20 K. That the Ld. AO failed to appreciate the fact that the foreign exchange remittances were made under the Purpose code 'S0014' which, as per RBI guidelines, pertain to 'Repatriation of FCNR deposits'. By no stretch of imagination, the repatriation of the deposits can be held as unexplained when the deposits have been received as per banking guideline.
L. That the Id. AO has failed to appreciate the fact that the appellant being Non-Resident, his income is liable to be assessed in accordance with the provisions of section 5 r.w. Section 9 of the Act and that the onus is on the Assessing authority to prove Indian connection of the income assessed.
M. The AO was not justified in making an impugned addition of Rs.99,04,05,611/- u/s 69 on the alleged ground of unexplained investment in total disregard to documentary evidence and explanation furnished.
N. That there has been no case of income earned, accruing in or arising or deemed to accrue or arise India, the impugned addition of Rs 99,04,05,611/- u/s 69 is highly arbitrary, misconceived and not tenable in law.
O. That the directions given by Ld. DRP are cryptic, silent on the applicability of section 69, against the provisions of section 5 r.w. section 9, against the principles of natural justice and in complete disregard to the documents and material on record and hence unjustified on facts and are bad in law.
P. That the Id. AO has erred in computing Total Income at Rs.99,04,05,611/- in the computation sheet in spite of the fact that income under all the heads of income has been shown as 'Nil".
Q. That the Id. AO has wrongly applied the provisions of section 115JC(3) of the Act in the computation sheet attached with the assessment order.
R. It is prayed that-
a. That it is requested that the demand raised by Id. AO of Rs. 1,66,86,45,285 may kindly be stayed as the order of the Ld. AO is erroneous and bad in law.
b. The order of the Ld. AO being erroneous in law and on facts needs to be vacated.
I.T (IT) A. No. 217/Lkw/2025 4 Assessment Year:2019-20 c. That it is further requested that the appeal may kindly be heard at an early date on priority basis.
d. That the appellant craves to add or amend anyone or more of the grounds of appeal as stated above as and when the need for doing so may arise."
(B) In this case proceedings under section 148A of the Income Tax Act, 1961 (the Act) were initiated vide notice dated 09.02.2023 on the basis of information contained in 'Insight' portal of Income Tax Department. Interalia, the information included Foreign Exchange Remittance by the assessee amounting to Rs. 99,04,05,611/-. There were other pieces of information also on the 'Insight' portal; however the dispute in the present appeal relates to the aforesaid outward foreign currency Remittance (from India to abroad) amounting to Rs. 99,04,05,611/-. In respect of other pieces of information, the learned Assessing Officer accepted the explanation furnished by the assessee and did not draw any adverse inference. In response to the aforesaid notice dated 09.02.203 issued under section 148A of the Act the assessee furnished reply. However, the Assessing Officer went ahead and issued notice under section 148 of the Act, thereby initiating proceedings for assessment under section 147 of the Act. During the assessment proceedings thus initiated under section 147 of the Act, the learned Assessing Officer issued notices dated 1.09.2023, 17.10.2023 and 18.03.2024 under section 142(1) of the Act. In the draft assessment order, the Assessing Officer proposed the aforesaid addition of Rs. 99,04,05,611/- under section 69 of the Act, treating the aforesaid outward foreign currency remittance as unexplained. The relevant portion of the draft assessment order is reproduced as under:
I.T (IT) A. No. 217/Lkw/2025 5 Assessment Year:2019-20 "11.2 On the issue of foreign remittance vide submission dated 22.11.2023, assessee has submitted as under:
In India the Assessee is maintaining a NRI account with HDFC Bank, and all the credits into the this account have been transferred from the assessee business account in name of firm MN Khan Jewellers FZE, in the UAE the funds were transferred into the NRI account. It is pertinent to mention here that for perusal of the department FCNR receipts for the assessment 2019-20 has been annexed with the present letter. That As per the SWIFT copy which is serving as a documented confirmation, is generated and retained upon the completion of the remittance process. This SWIFT copy provides a comprehensive record of the transaction details, including the pertinent information such as the sender mentioned in front of 50K wherein my name is written and beneficiary details mentioned in front of 59 - M/s MNK Khan Jewellers FZE in Bahrain transaction amount, date, and any accompanying instructions or messages 11.3 I have gone through with the submission of the assessee with regard to issue of foreign remittance of Rs 99,04,05,611/. The same are considered but not found acceptable in view of discussion made as below:
a) Assessee has provided copies of Swift Messages' which pertains to FY 2017-18 relevant to AY 2018-19. No purpose is solved as these swift messages does not pertains to FY 2018-19 relevant to AY 2019-20.
b) Assessee is claiming that Assessee is maintaining a NRI account with HDFC Bank, and all the credits into the this account have been transferred from the assessee business account in name of firm MN Khan Jewellers FZE, in the UAE the funds were transferred into the NRI account. To verify his contention, assessee has submitted documents like license certificate issued by foreign authorities. i.e Government of Sharjah. Memorandum of Articles & Association which are placed on record. In this regard, this is to inform that these are bare minimum documents to run the business activities.
Assessee furnished bank statements on 30.03.2024, majority of account(s) has no transaction. On pages 7 to 9 of statement (don't have any account number) there are certain transactions which are in US$. It appears that swift messages provided by assessee for FY 2017-18 are appearing in these pages. In absence of narration to entries, for FY 2018-19 with sufficient documentary evidences like FIRC, Bank remittance certificate etc, no cognizance can be taken.
I.T (IT) A. No. 217/Lkw/2025 6 Assessment Year:2019-20
c) Assessee has not provided copy of bank statement MN Khan Jewellers FZE to prove transfer into NRI account of the assessee. In absence, of bank statement with narration, no cognizance can be taken.
d) Assessee was asked to provide Copy of VAT Return filed with foreign authorities. Details of bank account linked for the purpose of VAT with documentary evidences Assessee admitted in his reply dated 30.03.2024 that Filed online, No details available. In this regard, it is beyond imagination that data filed online is available on the server of concerned department which can be retrieved globally anytime. Further, there must be some offshore account wherein assesse might be receiving day to day sale proceeds. Assessee has failed to provide that account details with statement. Hence, this contention of assessee is that Filed Online cannot be accepted. In absence of bank statement of MN Khan Jewellers FZE and VAT return, it is concluded that as claimed by assessee from MN Khan Jewellers FZE to NRI a/c cannot verified.
e) As evident from form 15CC, it is observed that Shri Mohammad Nashruddin is remitter of foreign remittance of Rs 99,04,05,611/- and MN Khan Jewellers FZE is remittee. In absence of VAT return, Offshore bank statement of MN Khan Jewellers FZE, foreign remittance remains unexplained.
f) After considering facts and circumstances as narrated above, It is established that assessee has remitted Rs.99,04,05,611/- to M/s MN Khan Jewellers FZE which remains unexplained. I hold that sum of Rs 99,04,05,611/- is added as unexplained investment u/s 69 of I.T. Act r.w.s 115BBE to the income of the assessee. Penalty u/s 271AAC(1) is also being initiated.
(Addition: Rs.99,04,05,611/-)"
(C) The assessee disputed the aforesaid proposed addition of Rs.
99,04,05,611/-. The dispute travelled to The Dispute Resolution Panel ('DRP' for short) of Income Tax Department vide directions issued on 17.12.2024, the DRP approved the aforesaid proposed addition of Rs. 99,04,05,611/-. The relevant portion of order of DRP is reproduced as under:
I.T (IT) A. No. 217/Lkw/2025 7 Assessment Year:2019-20 "16. Hon'ble DRP has issued directions u/s 144C(5) of the Income Tax Act, 1961 vide DIN: ITBA/DRP/M/144C(5)/2024-25/1071290864(1) on17.12.2024, which has been received in this office on 23.12.2024. As per directions of the Hon'ble DRP (refer para4) a copy of these directions is placed with this order as under:
4. Directions of DRP:
(i) Panel has carefully considered the written submissions of assessee and DAD passed by AO.
(ii) During the course of assessment proceeding, it was noticed by the AD that the assessee has entered into the following transactions during the financial year 2018-19 purchase of foreign currency of Rs. 8,81.061-, purchase of time deposits (other than a time deposit made through renewal of another time deposit) amounting to Ra. 29,65,000/-, closing balance reportable u/s 285BA(1) as per insight data of Rs 3,03,70,155/-
and foreign remittance of Rs. 99,04,05,611/reported in form 15CC
(iii) On perusal of the DAO, it is seen that on the basis of the reply and the documentary evidences filed by the assessee, the AO accepted the contention of the assessee with the issues pertaining to purchase of foreign currency of Rs. 8,81,061/, term deposit of Rs. 29, 65,000/, and closing balance of Rs. 3,03,70,155/- reported in bank statement.
(iv) Further, w.r.t the issue of foreign remittance of Rs. 99,04,05,611/-, it w noted by the AO that HDFC bank has reported that as per Form 15CC Mohanuned Nasiruddin has remitted amount to M/s MN Khan Jewellers FZE during the year. The AO has stated in the DAO that the assessee failed to furnish the documentary evidence such as copy VAT return, offshore bank statement of M/s MN Khan Jewellers FZE, copy of bank statement of Mohammed Nashruddin and in the absence of these documentary evidences, transaction under taken by the assessce of Rs. 99,04,05,611/- remained unexplained and therefore, addition u/s 69 of the Income Tax Act, 1961 was made by the AO treating the said transaction as unexplained investment.
(v) During the course of DRP proceedings, it was stated by the assessee that he is a Non-Resident in India and resident of United Arab Emirates for several years. Assessee in the owner/proprietor of M/s MN Khan Jewellers FZE, a jewellery store located at Sharjah Airport International Free Zone (UAE). He has further stated that he has no income in India and thus he is not liable to file any Return of Income for the Assessment Year 2019-20. With respect to the issue of remittance, it was stated by the assessee that the entire amounts were received in the NRE bank from M/s MN Khan Jewellers FZE for the purpose of making deposits in Foreign I.T (IT) A. No. 217/Lkw/2025 8 Assessment Year:2019-20 Currency Non Resident Account (PCNR) in order to earn some interest income. It was further stated by the assessee that the entire Interest Income in NRI Account is exempt as per section 10(15)(iv)(fa) of the Income Tax Act, 1961. Further it was stated by the assessee that the PCNR deposits lying in the NRE bank account of the assessce were created out of funds remitted by his own proprietary firm M/s MN Khan Jewellers FZE from UAE. The said PCNR deposits created from the fund transferred from proprietary firm M/s MN Khan Jewellers FZE were taken out before their maturity and the amount was repatriated back to the account of M/s. MN Khan Jewellers FZE. Thus, the assessee has stated that there is no case of any unexplained investment in the hands of the assessee as the source of foreign remittance is to the proprietorship concern of assessee only Le. M/s MN Khan Jewellers FZE. It was further stated by the assessee that during the course of re-assessment proceedings, he has filed various documents in the form of transaction sweep account receipts showing the initial transfer of funds in his bank account, formation of FCNR deposits, redemption of FCNR deposits and then repatriation of funds to MN khan Jewellers FZE.
(vi) Further, it is noted by the Panel that during the course of DRP proceedings no fresh document have been furnished by the assessee as all the documents submitted before the DRP have already been filed by the assessee during the course of assessment proceedings. AO in his DAO, elaborately discussed the issue and also commented on inadequacy/incomplete nature of the documents furnished by the assessee as under:-
"I have gone through with the submission of the assessee with regard to issue of foreign remittance of Rs 99,04,05,611/. The same are considered but not found acceptable in view of discussion made as below:
a) Assessee has provided copies of Swift Messages which pertains to FY 2017-18 relevant to AY 2018-19. No purpose is solved as these swift messages does not pertains to FY 2018-19 relevant to AV 2019-20.
b) Assessee is claiming that Assessee is maintaining a NRI account with HDFC Bank, and all the credits into the this account have been transferred from the assessee business account in name of firm. MN Khan Jewellera FZE, in the UAE the funds were transferred into the NRI account. To verify his contention, assessee has submitted documents like license certificate issued by foreign authorities, i.e. Government of Sharjah. Memorandum of Articles & Association which are placed on record. In this regard, this is to inform that these are bare minimum documents to run the business activities. Assessee furnished bank statements on 30.03.2024. majority of account(s) has no transaction. On pages 7 to 9 of statement (don't have any account number) there are I.T (IT) A. No. 217/Lkw/2025 9 Assessment Year:2019-20 certain transactions which are in USS I appears that swift messages provided by assessee for FY 2017-18 are appearing in these pages. In absence of narration to entries, for FY 2018-19 with sufficient documentary evidences like FIRC, Bank remittance certificate etc, no cognizance can be taken.
c) Assessee has not provided copy of bank statement MN Khan Jewellers FZE to prove transfer into NRI account of the assessee. In absence, of bank statement with narration, no cognizance can be taken.
d) Assessee was asked to provide Copy of VAT Return filed with foreign authorities. Details of bank account linked for the purpose of VAT with documentary evidences Assessee admitted in his reply dated 30.03.2024 that filed online, No details available. In this regard, it is beyond imagination that data filed online is available on the server of concerned department which can be retrieved globally anytime. Further, there must be some offshore account wherein assessee might be receiving day to day sale proceeds. Assessee has failed to provide that account details with statement. Hence, this contention of assessee is that Piled Online cannot be accepted. In absence of bank statement of MN Khoo Jewellers FZE and VAT return, it is concluded that as claimed by assessee from MN Khan Jewellers FZE to NRI a/c cannot verified.
e) As evident from 15CC, it is observed that Shri Mohammad Nashruddin is remitter of foreign remittance of Rs 99,04,05,611/- and MN Khan Jewellers FZE is remittee. In absence of VAT return, Offshore bank statement of MN Khan Jewellers FZE, foreign remittance remains unexplained.
[vii] The Panel observes that during the course of DRP proceedings, the assessee has furnished copy of incomplete bank statement of M/s MN KHAN JEWELLERS FZE. Assessee was expected to file complete trail of the transaction pertaining to Rs 99,04,05,611/- which has been remitted by Mohammed Nasiruddin to M/s M N Khan Jewellers FZE during the year. But it is observed that the assessee has not even submitted complete copy of relevant bank statements of his proprietorship firm M/s MN KHAN JEWELLERS FZE and copy of his personal bank statement in the name of Mohammed Nashruddin maintained in India, for the year under consideration. Further, on perusal of copy of bank statement in the name of proprietorship firm M/s MN KHAN JEWELLERS FZE maintained by Emirates NBD Bank, furnished by the assessee, it is noticed that the assessee has submitted statement for partial periods and not submitted statement for the complete year under reference. The statement pertains to the following dated only: statement date: 14.11.2017 (in page 1 of 1), statement date: 01.11.2017 (in page 11 of 16), statement date:
01.11.2017 (in page 15 of 16), statement date: 01.12.2017 (in page 14 of I.T (IT) A. No. 217/Lkw/2025 10 Assessment Year:2019-20
14), statement date: 01.01.2018 (in page 2 of 17. page 7 of 17, page 12 of
17). Therefore, from the above discussion it can be seen that the assessee has provided details of only few transactions and that too have not been linked to the funds which have been transferred by him to the firm.
Further, assessee has also furnished bank statement of RAKBANK for the period from 01.10.2017 to 31.12.2017 which is also incomplete.
(viii) It is observed by the Panel that the assessee was having ample opportunity before the DRP to provide complete trail of the above- mentioned transaction undertaken by him, for example copies of relevant bank accounts alongwith narration for the year under consideration, proofs to substantiate his earnings in his proprietorship firm and a detailed written submission explaining the complete transaction as undertaken by him. Based on the above detailed discussion, as the assessee has not provided requisite details as mentioned above, the DAO passed by the AO is upheld. On perusal of the grounds of objection filed by the assessee it is seen that they are not properly drafted and are narration of facts. As all the Grounds of objection filed by the assessee are interlinked, therefore, they are disposed off accordingly."
(D) The Assessing Officer passed order wherein addition of the aforesaid amount of Rs. Rs. 99,04,05,611/- was made. The present appeal before us has been filed by the assessee against the aforesaid addition made in the assessment order. During the pendency of appellate proceedings in Income Tax Appellate Tribunal (ITAT), direction was issued to the assessee by Bench, vide order-sheet dated 01.08.2025 to file concise grounds of appeal separately. The assessee filed concise grounds of appeal, but also simultaneously filed an additional ground of appeal. The concise and additional grounds of appeal are as under:
"A. That on the facts and in the circumstances of the case and in law, the AO erred in passing order u/s 148A(d) and issuing notice u/s 148 without making any inquiry as provided under clause (a) to clause (d) of section 148A of the Act.
B. The AO was not justified in initiating proceedings u/s 148 without application of mind and in total disregard to the objections and documents placed on record I.T (IT) A. No. 217/Lkw/2025 11 Assessment Year:2019-20 C. That the assumption of jurisdiction u/s 148 being merely on the basis of information from the bank and in absence of independent inquiry, the order u/s 148A(d) and notice u/s 148 are solely based on borrowed satisfaction and hence untenable and contrary to law.
D. That in the absence of approval of specified authority, the order passed is invalid and void ab-initio.
E. That the appellant having Non-resident status and having no source of income in India, the FCNR deposit and NRE account being as per the RBI guidelines, there is no case of any incidence of tax in India and thus the impugned addition is in total disregard to provision of Section 5 r.w.s. 9 of the Act.
F. That the Ld. AO grossly erred in blindly relying on the bank information relating to foreign exchange remittance and ought to have made inquiry from the bank especially when he found that the same bank has supplied incorrect information under the code SFT-011, SFT-005 and FRM-61B in respect of the appellant. The order passed by the AO is) against the principle of natural justice and bad in law.
G. That the Ld. AO made a huge addition of Rs 99,04,05,611/-as unexplained investment u/s 69 without appreciating the facts of the case which is incorrect and bad in law.
H. That the Ld. AO made a huge addition of Rs 99,04,05,611/- as unexplained investment u/s 69 in AY 2019-20 without pointing out a single investment that has been made in the Financial Year 2018-19 and thus the order passed by the AO is bad in law and contrary to the provisions of section 69 of the Act.
I. That the Ld. AO and the Ld. DRP ought to have appreciated the fact that the provisions of section 69 are not applicable in the case of Non-Resident assessees.
J. That Ld. AO failed to pass a lucid and clear order stating as to how the FCNR deposits when received in India were treated as 'explained' and on remitting back became unexplained investments for the purpose of section 69 of the Act.
I.T (IT) A. No. 217/Lkw/2025 12 Assessment Year:2019-20 K. That the Ld. AO failed to appreciate the fact that the foreign exchange remittances were made under the Purpose code "S0014' which, as per RBI guidelines, pertain to Repatriation of FCNR deposits. By no stretch of imagination, the repatriation of the deposits can be held as unexplained when the deposits have been received as per banking guideline.
L. That the Ld. AO has failed to appreciate the fact that the appellant being Non-Resident, his income is liable to be assessed in accordance with the provisions of section 5 r.w.s. 9 of the Act and that the onus is on the Assessing authority to prove Indian connection of the income assessed.
M. The AO was not justified in making an impugned addition of Rs. 99,04,05,611/- u/s 69 on the alleged ground of unexplained investment in total disregard to documentary evidence and explanation furnished.
N. That there has been no case of income earned, accruing in or arising or deemed to accrue or arise India, the impugned addition of Rs 99,04,05,611/- u/s 69 is highly arbitrary, misconceived and not tenable in law.
O. That the directions given by Ld. DRP are cryptic, silent on the applicability of section 69 against the provisions of section 5 r.w.s. 9, against the principles of natural justice and in complete disregard to the documents and material on record and hence unjustified on facts and are bad in law.
P. That the Ld. AO has erred in computing Total Income at Rs 99,04,05,611/- in the computation sheet in spite of the fact that income under all the heads of income has been shown as 'Nil'.
Q. That the Ld. AO has wrongly applied the provisions of section 115JC(3) of the Act in the computation sheet attached with the assessment order.
R. It is prayed that-
a. That it is requested that the demand raised by Ld. AO of Rs. 1,66,86,45,285 may kindly be stayed as the order of the Ld. AO is erroneous and bad in law.
b. The order of the Ld. AO being erroneous in law and on facts needs to be vacated.
I.T (IT) A. No. 217/Lkw/2025 13 Assessment Year:2019-20 c. That it is further requested that the appeal may kindly be heard at an early date on priority basis.
d. That the appellant craves to add or amend anyone or more of the grounds of appeal as stated above as and when the need for doing so may arise.
For the sake of brevity the above grounds are grouped into the following grounds of Appeal with permission of Hon'ble Bench which may kindly be considered while adjudicating the case.
1. Because the Ld. Assessing Officer (JAO-ITO, Mau and DDIT/ADIT, International Taxation, Lucknow) (AO) erred on facts and law while passing the order w/s 148Aldi and issuing the notice without appreciating the facts of the case and related law and without making any enquiry as provided under clause (a) or analyzing information submitted by Bank and response submitted by Appellant during 148A(b) proceedings of the Act Further, Specified Authority also failed to appreciate facts and circumstances of the case while giving approval for passing of order u/s 148A(d) of the Act. Hence, notice issued u/s 148 thereafter is contrary to the facts of case and related law.
2. Because after accepting Residential status of Appellant as Non-Resident, a heavy onus lied on the Revenue to prove that the addition of Rs.99,04,05,611/- represents income which has been received/accrued/arisen in India or deemed to have been received/accrued/arisen in India i.e. the additions have been made against the provisions of Section 5(2) r.w.s. 9 of the Income-tax Act, 1961, resulting to which order passed us 154 r.w.s. 147 is bad in law and is liable to be quashed.
3. Because the Ld. AO erred on facts and law in making addition of Rs. 99,04,05,611/9/69 without considering applicability of said provision. The addition has been made merely on assumptions and surmises requiring the assessee to provide information relating to his offshore account which is not permissible in law. The order passed by AO is bad in lan and provisions of section 69 of the Act are not applicable on the facts and circumstances of the case.
4. That the directions issued by Ld. DRP u/s 144C(5) are cryptic, silent on applicability of section 69 and also without appreciation of facts and circumstances of the case and submissions made before them and also against I.T (IT) A. No. 217/Lkw/2025 14 Assessment Year:2019-20 the principle of natural justice. Hence, directions issued by Ld. DRP were unjustified on facts and are bad in law.
5. Any other grounds of appeal raised at the time of hearing in accordance with law and Appellant craves to add or amend anyone or more of the grounds of appeal as stated above as and when the need for doing so may arise.
Appellant also hereby request to allow, to raise additional ground of appeal which is having the legal roots of the case and also arises from the facts of the case and due to oversight was omitted while filing the ground of appeal.
Additional Ground of Appeal
1. Because the notice issued u/s 148A(b) and 148 by Jurisdictional Assessing Officer is not according to 'Faceless Jurisdiction of Income-tax Authorities Scheme, 2022' and 'e-Assessment of Income Escaping Assessment Scheme, 2022', hence, reassessment proceeding is liable to be quashed.
The above legal ground of appeal may kindly be admitted while adjudicating the case. Reliance is also placed on '[1998] 97 Taxman 358 (SC) SUPREME COURT OF INDIA National Thermal Power Co. Ltd. v. Commissioner of Income-tax'.
1. Because the Ld. Assessing Officer (JAO-ITO, Mau and DDIT/ADIT, International Taxation, Lucknow) (AO) erred on facts and law while passing the order u/s 148A(d) and issuing the notice u/s 148 without considering the residential status of Appellant being Non-Resident, without making enquiry and analyzing of information submitted by Bank carrying glaring mistakes and without appreciating the facts of the case and related law and response submitted by Appellant during 148A(b) proceedings of the Act. Further, Specified Authority also failed to appreciate facts and circumstances of the case while giving approval for passing of order u/s 148A(d) of the Act.
2. Because the Ld. AO erred on facts and law in making addition of Rs. 99,04,05,611/- u/s 69 without considering applicability of said provision and merely on assumptions and surmises requiring the assessee to provide information relating to his off shore account which is not permissible in law. The order passed by AO is bad in law and provisions of section 69 of the Income Tax Act are not applicable on the facts and circumstances of the case.
I.T (IT) A. No. 217/Lkw/2025 15 Assessment Year:2019-20
3. That the directions issued by Ld. DRP u/s 144C(5) are cryptic, silent on applicability of section 69 and also without appreciation of facts and circumstances of the case and submissions made before them and also against the principle of natural justice. Hence, directions issued by Ld. DRP were unjustified on facts and are bad in law.
4. Any other grounds of appeal raised at the time of hearing in accordance with law and Appellant craves to add or amend anyone or more of the grounds of appeal as stated above as and when the need for doing so may arise."
(D.1) During the appellate proceedings, further Additional ground were taken by the assessee which are as under:
"1. Because the notice issued u/s 148A(b) and 148 by Jurisdictional Assessing Officer is not according to 'Faceless Jurisdiction of Income-tax Authorities Scheme, 2022' and 'e-Assessment of Income Escaping Assessment Scheme, 2022', hence, reassessment proceedings is liable to be quashed."
(D.2) Separately, the following additional grounds were also taken by the assessee:
"1. Because the Ld. AO erred on facts and law while passing the Assessment Order on 31.05.2024 u/s 147 rws 144 during pendency of objection before DRP u/s 144C(2) of the Act, where Form-35A was filed on 29.04.2024 and intimated to AO on even date and order was passed u/s 144C(5) on 17.12.2024. Accordingly order passed on 15/01/2025 u/s 154 rws 147 is against the facts & circumstances of the case and not accordance with law liable to be quashed.
2. The above legal grounds of appeal may kindly be admitted while adjudicating the case. Reliance is also placed on '[1998] 97 Taxman 358 (SC) SUPREME COURT OF INDIA National Thermal Power Co. Ltd. vs. Commissioner of Income Tax'."
(D.2.1) In the course of appellate proceedings, the following particulars were filed from the assessee's side:
I.T (IT) A. No. 217/Lkw/2025 16 Assessment Year:2019-20 "1. Submission as per Grounds of Appeal
2. Notices issued u/s 148A proceedings by JAO (ITO-Mau and DDIT/ADIT. International Taxation, Lucknow) & Replies filed by Appellant (date wise)
3. Order passed u/s 148A(d)
4. Notices issued u/s 148 and during reassessment proceedings by JAO (NeFAC & DDIT/ADIT, International Taxation, Lucknow) & Replies filed by Appellant (date wise)
5. Order passed u/s 144C(1)
6. Objection filed before Ld. DRP and notice issued by Ld. DRP and Replies filed by Appellant (date wise)
7. Order passed by Ld. DRP u/s 144C(5)
8. Order passed by JAO (IT) u/s 154 r.w.s. 147 of the Act
9. Copy of Order Sheet along with application
10. Board Circular 5 [F.No. 73A/2/69-IT(A-11)] dt. 20.02.1969
11. POA"
12. SYNOPSIS AND CASE LAWS RELIED
13. Table-A
14. Table-B
15. Table-C
16. Table-D
17. Classification of Outward Remittance and Purpose Code (as per RBI)
18. Smt. Susila Ramasamy vs. ACIT. [2011] 130 TTJ 363 (Chennai)
19. Madhusudan Rao [2015] 57 taxmann.com 262 (Hyderabad - Trib.)
20. Iqbal Ismail Virani 128 taxmann.com 181 (Panaji - Trib.)
21. Shri Vinodkumar Hiralal Raja ITA No. 50/RJT/2018
22. Namrata Jain vs. ITO [2025] 174 taxmann.com 746 (Rajasthan)
23. Anand Kumar Dugar vs Income Tax Officer Ward 1 Vapi on 23 August, 2024
24. Ito (International Taxation) 2(3) (1),... vs Shri Rajeev Suresh Gehi, Mumbai on 11 October, 2022."
Citation
1. Order dated 18.03.2015 of Hyderabad Bench of ITAT in the case of DCIT vs. Madhusudan Rao (ITA No. 1482/Hyd/2014).
2. Order dated 16.11.2018 of Mumbai Bench of ITAT in the case of DCIT vs.Shri Hemant Mansukhlal Pandya (ITA No. 4679 & 4680/Mum/2026).
I.T (IT) A. No. 217/Lkw/2025 17 Assessment Year:2019-20
3.Order dated 20.12.203 of Rajkot Bench of ITAT in the case of Shri Vinodkumar Hiralal Raja vs. Income Tax Officer (ITA No. 50 & 51/Rjt/2018)
4.Order dated 11.10.2022 of Mumbai Bench of ITAT in the case of Income Tax Officer vs. Shri Rajeev Suresh Gehi (ITA No. 792/Mum/2022).
5. Order dated 16.12.2022 of Ahmedabad Bench of ITAT in the case of ACIT vs. Shri Vijaykuamr Vasantibhai Patel (ITA No. 40/Ahd/2021).
(D.3) At the time of hearing, neither the Learned A. R. for the assessee nor the learned D. R. for the Revenue made any submissions or arguments in respect of the aforesaid additional grounds referred to in foregoing paragraphs (D), (D.1) and (D.2) of this order. Hence, the additional grounds are not being adjudicated in this order.
(E) Learned A. R. for the assessee as well as Learned D. R. for the Revenue restricted their arguments and submissions to the merits of the aforesaid addition of Rs. Rs. 99,04,05,611/- in terms of the concise grounds of appeal referred to in foregoing paragraph (D) of this order. The learned A. R. for the assessee placed reliance on the 'Statement of Facts' annexed with assessee's appeal memo in Form-36. For the ease of reference, the aforesaid 'Statement of Facts' is reproduced as under:
"1. The appellant, an NRI is a resident of UAE for several years and is running a jewellary store as proprietor of M/s MN Khan Jewellers FZE, UAE. His status as per provisions of Section 6 of Income tax Act, 1961 is 'Non- resident'. This has been accepted by the Assessing Officer in his order u/s 148A (d) as well as section 144C of the Act. Being a Non-resident, he is liable to be assessed as per provisions of Section 5 r.w Section 9 of the Act, i.e, only in respect o income received/ accrued/arisen, deemed to have been received/accrued in India. The appellant has been maintaining an NRE account and also having FCNR deposits in India which were sourced from his proprietary firm, MM Khan Jewellers, FZE. The appellant has no business I.T (IT) A. No. 217/Lkw/2025 18 Assessment Year:2019-20 connection in India and the only income earned in India is from interest on FCNR deposits, exempt u/s 10(15)(iv)(fa) of the Act and also accepted by the Assessing authority.
2. The Assessing Officer initiated proceedings u/s 148A for A.Y. 2019-20 by issue of notice dated 9.2.2023 under clause (b) of the Act on the basis of information received/uploaded by the HDFC Bank under the following codes:
"a. SFT-011 Purchase of foreign currency Rs. 8,81,661/-
b. SFT-005 Time Deposit Rs. 29,65,000/- c. FRM-61B Closing balance in the Account Rs. 30370155/- d. FRM-15CC Foreign Exchange remittance Rs. 99,0405611/-
3. In response to the notice, the appellant denied having made any purchase reign currency, Time deposit in INR, that the closing balance was incurred that the foreign exchange remittances relate to FCNR deposits, sour m his business account MNK Jewelers, as per the norms laid by the Reserve Bank of India. It was submitted that the information uploaded by the bank was wrong and the AO was requested to provide the Information as uploaded by the bank and also to confront the bank regarding submission of incorrect information. Neither any enquiry was made by the AO from the bank nor requisite information was provided to the assessee. Simply, a notice u/s 133(6) was issued to the bank on 14.03.2023 which was never complied with. As the matter was time barring, the AO passed the order u/s 148A (d) on 31.03.2023, without making any inquiry and issued notice u/s 148 in complete disregard to the provisions prescribed u/s 148A of the Act.
4. During assessment proceedings, the contention of the appellant regarding incorrectness of the information was found to be true and accordingly no additions were made under the code SFT-011, SFT-005 & FRM-61B. As regards foreign exchange remittances of Rs. 99,04,05,611, the Assessing Officer summarily rejected appellant's explanation and taxed the entire amount u/s 69 of the Act, without pointing out as to how the remittance became un-explained, when the same deposits have been accepted as explained by him, in the year of receipt. Even, the interest on deposits has been treated as exempt.
5. The appellant made several requests to the AO for providing him with a copy of Form 15CC on the basis of which addition of Rs. 99,04,05,611/- was proposed. The Form was never made available but on-----, an excel sheet I.T (IT) A. No. 217/Lkw/2025 19 Assessment Year:2019-20 containing the relevant information was provided. This sheet clearly shows the details of all the 10 transactions, such as, the name and PAN of Remitter and Remittee, date and amount of remittance, purpose code as per RBI guidelines and the countries to which remittances were made. The Purpose code in respect of all the transactions have been shown as S0014, which as per RBI guidelines refers to, 'Repatriation of Non-Resident Deposits, (FCNR B/N.RERA etc.) on Capital Account. Keeping in view the purpose code, the onus was squarely on the AO to prove that the foreign exchange remittances were connected with the Indian income of the appellant.
6. The appellant explained all the transactions by furnishing copies of 'swift messages' which is a comprehensive record of the transactions, such as name of the sender, beneficiary details, transaction amount, currency, date and accompanying instructions. He also prepared a chart linking all the remittances to the FCNR deposits. To prove the ownership of MN Khan jewellers, license certificate issued by the foreign Authority, Memorandum of Article of Association etc. were provided. The AO summarily rejected the explanation of the assessee on the ground that the 'Swift messages pertain to FY 2017-18 which are not relevant to AY 2019-20, copy of VAT return and offshore bank statement of MN Khan Jewellers along with explanation of each entry was not provided and accordingly made an addition of Rs. 99,04,05,611/- u/s 69 of the Income tax Act as per Draft Assessment order passed u/s 144C(1)of the Act on 31.03.2024. Basically, the AO wanted to scrutinise foreign account of the assessee, which is not permitted in law, as his status is 'Non-Resident'
7. The appellant filed objections and written submissions before the Ld. Dispute Resolution Panel (DRP) in Form 35A as well as in response to notice u/s 144(11) received from DRP. The Id. DRP did not consider the fact that the appellant was non-resident and the remittances related to repatriation of FCNR deposits, which are governed by the RBI guidelines and that provisions of section 69 have no application. The Panel completely ignored the facts and submissions of the assessee and simply upheld the findings of the AO with the following observations.
"It is observed by the Panel that the assessee was having ample opportunity before the DRP to provide complete trail of the above mentioned transactions undertaken by him, for example copies of relevant bank accounts alongwith narration for year under consideration, proofs to substantiate his earnings in his proprietorship I.T (IT) A. No. 217/Lkw/2025 20 Assessment Year:2019-20 firm and a detailed written submission explaining the complete transaction as undertaken by him. Based on the above detailed discussion, as the assessee has not provided requisite details as mentioned above, the DAO passed by the AO is upheld."
It is surprising that neither the AO nor the DRP has written a word about the applicability of section 69 to the facts of present case, while making/upholding huge addition of Rs.99,04,05,611/-
8. In accordance with the directions given by the Id. DRP, the AO passed order dated 15.01.2025 u/s 144C(13) of the Act, making addition of Rs. 99,04,05,611/- u/s 69, which is subject matter of the present appeal. In the computation sheet attached with the order, the amount has not been shown under any of the 5 'heads of income' but separately shown as income chargeable to tax at special rate u/s115BBE and deemed income u/s115JC(3) of schedule AMT
9. It is submitted that the addition has been made without application of mind, based on frivolous, irrelevant factors, suspicion and conjectures in total disregard to facts available on record and provisions of law. Having accepted the status of the assessee as non-resident, the onus was on the AD to prove received/accrued/arisen or deemed to have received/accrued or arisen in India. Rs.99,04,05,611/- represents Income amount of The addition is based on the information received from the HDFC Bank which clearly shows the purpose code as 50014 confirming that the remittances represented Repatriation of FCNR deposits on capital account. These deposits have been made as per RBI guidelines and never treated as unexplained. The deposits were further explained by referring to Swift messages, but summarily rejected on the ground that it related to FY 2017-18 and not FY 2018-19 relevant to AY 2019-20. He failed to understand that the remittances made in the A.Y 2019-20 relate to FCNR deposits received in FY 2017-18 only as the purpose was to earn interest and minimum period of deposit was one year. This aspect has been totally overlooked by the DRP.
10. Further, neither the AO nor the DRP considered the fact that for invoking the provisions of section 69, the investment must have been made in the financial year immediately preceding the assessment year, such investments are not recorded in the books of accounts, the assessee does not furnish explanation or the explanation is not satisfactory. None of the condition is satisfied, as the deposits were received in India as per RBI guidelines and I.T (IT) A. No. 217/Lkw/2025 21 Assessment Year:2019-20 treated as explained by the AO. Surprisingly, the same deposits on remittance, become unexplained. Obviously, the addition is based on irrelevant considerations and ignored, the detailed submission made by appellant u/s 144C (11) has been completely ignored."
(E.1) The learned AR for the assessee also placed reliance on the materials referred to in foregoing paragraph (D.2.1) of this order. This included a Synopsis which is reproduced below for the ease of reference:
"FACTS 1.1 The appellant, an NRI was running a business in the name of M/S MN KHAN JEWELLERS FZE, Sharjah, UAE, during the relevant period and his status has been accepted as "Non Resident" under the provisions of section 6 of the Income tax Act, 1961. During the period relevant to AY 2018-19 and AY 2019-20, he had remitted funds from his business account M/S MN KHAN JEWELLERS FZE, to his NRE bank account in India through normal banking channel for purchase of FCNR deposits. A copy of the relevant bank accounts along with 'Swift Receipts containing details of Remitter, Remittee, nature of transactions etc. were submitted before the AO. In accordance with the settled law, these deposits were treated as explained and accordingly no additions were made during AY 2018-19 and AY 2019-20 under the provisions of section 68/69 of the Act. Even the interest earned on the deposits has been treated as exempt u/s 10(15)(iv)(fa) of the Act...
1.2. During the period relevant to AY 2019-20, these deposits along with interest were repatriated back to the business A/c of the appellant from which these were received. Surprisingly, the repatriation of these explained deposits amounting to Rs 99,04,05,611 have been brought to tax by the AO invoking the provisions of section 69 of the Act and the same has also been confirmed by the Id. DRP.
1.3 The only issue involved in the present appeal relates to initiation of proceedings u/s 148A and issuance of notice u/s 148 and taxability of these outward remittances u/s 69 of the Act. The issues in details, are discussed hereunder:
A. Proceedings u/s 148A and consequent issue of notice u/s 148 of the Act.
Misreporting by Bank (HDFC) I.T (IT) A. No. 217/Lkw/2025 22 Assessment Year:2019-20 2.1 Notice u/s 148A(b) dt. 09.02.2023 was issued carrying information as reported by the HDFC Bank under following codes.
(i) SFT-011 Rs. 8,81,661/- Purchase of Foreign Currency.
(ii) SFT-005 Rs. 29,65,000/- Time deposit (ii) FRM 61B Rs. 3,03,70,155 Closing Balance in the account (iv) FRM 15CC Rs. 99,04,05,611 Foreign Remittance
The information uploaded by the Bank contained several glaring mistakes as the information reported at (i) and (iii) was wrong, the information at (ii) was not in Rupees but USD and the foreign exchange remittances were in USD but converted in rupees. Even the places of remittance were wrongly shown. During assessment proceedings, the AO found the assessee's contention to be true and accordingly no adverse inference was drawn by AO in respect of items listed at (i), (ii) and (ii) above as discussed in Assessment Order at para 8, 9 & 10. As regards outward foreign exchange remittances, Form 15CC was never provided during proceedings u/s 148A. It implies that either the information was not available with the AO when he issued notice u/s 148A(b) or he deliberately withheld the information knowing that information cannot be relied upon for reopening of assessment. The information was later provided in the form of an excel sheet on 18.03.2024 i.e. just 12 days before the limitation period u/s 144C(1), hardly providing any time for the assessee to confront the bank for providing wrong data to the department. Subsequently, when confronted by the assessee, the bank admitted its mistakes vide mail dated 20.04.2024 and specifically accepted that outward remittance (Repatriation) were made from liquidation of FCNR deposits. However, communication of Banker though addressed to AO was completely ignored by him and also not considered by id. DRP. It is obvious that if the information uploaded by the Bank was carefully scrutinized, there would have been no occasion to issue notice u/s 148 of the Act.
No enquiry by AO before issuing notice u/s 148A(b) and response of the assessee as provided u/s 148 A(c) of the Act not considered.
2.2 A notice was issued u/s 148A(b) on 09.02.2023 on the basis of information uploaded by the HDFC Bank under various codes and after receipt of reply by the Assessee, the AO (JAO-Mau) took approval for conducting enquiry from PCIT, Gorakhpur on 1203.2023. Thereafter, notice u/s 133(6) dt. 14.03.2023 was issued to the Bank BUT no enquiry from the bank was ever conducted. The AO vide reply dated 20.03.2023 forwarded I.T (IT) A. No. 217/Lkw/2025 23 Assessment Year:2019-20 copy of his NRE bank account statements and account relating to FCNR deposits which disclosed incorrectness of the information relied upon by the AO. Had the AO pursued the matter with the bank and considered the reply of the assessee in accordance with provisions of clause (c), there would have been no occasion to issue notice u/s 148. The JAO (ITO Mau) simply accepted the residential status of assessee being Non Resident and transferred the case to ADIT/DDIT (Int.tax) (JAO). The JAO also did not consider the submissions of the appellant and forwarded his proposal to issue notice u/s 148 to the Addl. CIT on the ground that "source of such transaction could not be explained in unambiguous terms and on conclusive basis as the assessee did not disclose the nature of transaction through which remittance was received and sent back." This is absolutely false as the relevant bank statements showing incorrectness of the transactions were submitted before the AO and also accepted by him during assessment proceedings as discussed in preceding para 2.3 The Id. Addl. CIT also did not consider the submissions of the appellant and simply forwarded the proposal to the Ld. CIT with the remark that the assessee has not furnished sufficient evidence to establish the source of the transactions. The proposal was forwarded to the Id. CIT (Specified authority) on the last day of the limitation i.e. on 31.03.2023 providing no time to him for issue of any directions and he simply accorded his approval to the proposal for issuance of notice u/s 148 of the Act.
Non-Resident status of the assessee overlooked 2.4 Having accepted the status of appellant as Non-Resident, it was expected that the tax authorities will get some enquiries conducted to ensure that these transactions represented income which has been received/accrued/arisen in India or deemed to have been so earned as provided u/s 5(2) r.w. section 9 of the Act. No such enquiries were got conducted before according approval to issue notice u/s 148 or even during assessment proceedings. On the other hand, the appellant discharged his onus by submitting copy of his NRE and FCNR deposits accounts which showed that all the inward remittances were through banking channels The detailed submissions made by the appellant before the ITO Mau are dated 20/03/2023 (page no. 69 to 113 of) Paper Book and similar submissions made before the ADIT/DDIT (Int.Tax.), Lucknow are enclosed at pp 120-193 and 196 to 204 of Paper Book. In the light of these facts, it is clear that there was no information with the "Specified Authority' that these transactions represent income which has been I.T (IT) A. No. 217/Lkw/2025 24 Assessment Year:2019-20 received/accrued/arisen in India or so earned under the deeming provisions. It may also be mentioned here that Circular No. 5 issued from F. No. 73A/2(69)- IT (A-II), dated 20-2-1969, by the Central Board of Direct Taxes, New Delhi specifically provide: Money brought into India by non-residents for investment or other purposes is not liable to Indian Income Tax. Therefore, there is no question of remittance into the country being subjected to income tax in India.
2.5 In nutshell, order u/s 148A(d) has been passed merely on suspicion, for conducting further enquiry, which is not permitted in law. As mentioned above, the information uploaded by the Bank under the Codes SFT-005, SFT- 011 and FRM-61B was found to be incorrect and no additions were made. As regards remittances of Rs, 99,04,05,611/-, the purpose code 'S0014' itself suggests that the amount represents repatriation of FCNR deposits. In any case, outward remittance can never be unexplained where its source (PCNR deposits in the present case)) have been treated as explained. In this case, no doubts have been cast by the AO in respect of inward remittance and the credits in the bank account, hence, question of income escaping assessment in the form of outward remittance is un-imaginable. Thus, the order passed by the AO is in total disregard to the provisions of section 148A of the Act, non- application of mind and ignoring the submissions/documents on record and is liable to be quashed.
If B. Addition of Rs.99,04,06,511/- u/s 69 of the Act I.T (IT) A. No. 217/Lkw/2025 25 Assessment Year:2019-20 3.1 At the outset, it is submitted that the information contained in Form 15CC about foreign exchange remittances made during F.Y.2018-19 was for the first time supplied to the assessee on 18.3.2024 (just 12 days before the limitation period for passing of Draft Assessment Order) in the form of following excel sheet..
The above chart depicts 10 transactions showing remittances in Rupees whereas these were made in USD It is further noted from the second last column titled 'countries to which remittance is made" that the names of countries like USA, Canada etc are mentioned whereas the fact remains that no remittance was ever made to these countries. Thus, the information provided by the bank is false and misleading. These facts were pointed out to the AO at various stages of proceedings and thereafter the AO issued a notice to the Bank u/s 133(6) of the Act which was conveniently ignored by the Bank but no further action was taken, even though it was clearly reiterated in the notice that failure to furnish the requisite information may invite penalty of Rs.500/- for each day of default as per provisions of 272A(2)(C) of the Act. Surprisingly instead of imposing penalty/fee on the banker for non- compliance and making enquiries by issue of summons u/s 131, the AO made addition in the hands of appellant on surmises and conjectures. The Id. DRP also overlooked this aspect of the matter. It may also be stated here that with a view to seeking clarification, the assessee sent an email to the Bank. The bank admitted its mistakes in the information uploaded on the portal of the department and also confirmed that all the remittances represent repatriation of FCNR deposits matured earlier. The letter received from the Bank dated 20.04.2024, is on page 1349 of the Paper Book.
3.2 It is further submitted that the assessee provided complete trail of transactions during assessment proceedings such as, inward receipts (Table- A), FCNR deposit (Table-B), FCNR Maturity (Table-C) and Outward Remittance from FCNR proceeds (Table-D) along with supporting documents. For ready reference these tables are enclosed with pg. no of Paper Book. All transactions of inward remittances are from business a/c of assessee, viz. MN Khan Jewellers, FZE, and outward remittances are also to the same account. In support, relevant Bank statements, Swift Transactions Receipts containing name of remitter, remittee, transaction details, along with license certificate issued by Foreign Authorities, Memorandum showing ownership of M N Khan Jewellers FZE etc. were all placed on record. These details were also provided before the Ld. DRP in the objections filed u/s 35A (pg.no. 1263-1431) of the Paper Book. In the light of these facts and the settled legal principles, the FCNR deposits were treated as explained and no I.T (IT) A. No. 217/Lkw/2025 26 Assessment Year:2019-20 additions were made by the AO u/s 68/69 of the Act and this proposition has also been accepted by the Id. DRP as evident from order u/s 144C(13) of the Act. Surprisingly, the same Assessing Officer held that repatriation of these explained deposits is unexplained investment and made addition invoking provisions of section 69 of the Act. It is submitted that the addition has been made on surmises, conjectures, on frivolous and irrelevant grounds, such as non-furnishing of VAT return, inward remittances pertain to FY 2017-18. narration of each entry of foreign account has not been furnished.
3.3 It may kindly be noted that the provisions of section 69 are not applicable to the facts of the case as the assessee has not made any investment during the relevant year but simply remitted the maturity proceeds of FCNR deposits. It is not investment but liquidation of investment in FCNR deposits which have been treated as explained by the AO himself. As the AO has failed to point out existence of any unexplained investment, the provisions of section 69 are not applicable. Surprisingly, the Id DRP while confirming the addition has not written a word as to how provisions of section 69 were applicable to the facts of this case.
3.4 Reference is also invited to the judgment in the case of Anand Kumar Dugar vs Income Tax Officer Ward 1 Vapi on 23August, 2024 held as under:
Where assessee, a non-resident employed in Saudi Arabia, made term deposit/ fixed deposits out of remittances from Dubai, since maturity of existing term deposits, interest on NRE account and inter se transfer of funds between various accounts were exempted under section 10(4) (ii), reopening of assessment in connection with said fixed deposit was unsustainable.
3.5 Reference is also invited to the judgment in the case of ITO vs. Rajeev Suresh Ghai [2021] 132 taxmann.com 234 (Mumbai trib.) wherein the Hon'ble Mumbai tribunal held that Non-Resident cannot be taxed u/s 69 unless it is proved that investments are made out of income generated in India.
Keeping in view the facts discussed above and the settled legal position, it is prayed that the addition is unjustified and may kindly be deleted.
Relevant citations:
I.T (IT) A. No. 217/Lkw/2025 27 Assessment Year:2019-20
1. Smt. Susila Ramasamy vs. Assistant Commissioner of Income-tax, Central Circle-II(2), Chennai [2011] 130 TTJ 363 (Chennai) Para 16.2 The assessee, who is a non-resident, brought money into India through banking channel and the manner in which this money was utilized in India is described in the Annexure. We have observed in the above paragraphs that because of the mode of banking channel, admittedly, used for the remittance in this case, the onus on the assessee under section 69 stood discharged, and, therefore, it was not taxable in India under section 5(2)(b) of the Act. The CBDT Circular (supra) squarely supports the case of the assessee. The fact that the transactions and events narrated in the Annexure look curious and suspicious, makes no difference to the conclusions that we have drawn in this case, as per law, in the above paragraphs.
2. Deputy Commissioner of Income-tax, Circle-16 (1), Hyderabad vs. Madhusudan Rao [2015] 57 taxmann.com 262 (Hyderabad -Trib.) after relying on citation of Smt. Susila Ramasamy Supra Para 19. In view of the legal principles as stated above, provisions of Section 5(2) are also not applicable as the amount received is received from assessee's own account outside India and no income has accrued or arisen in India.
These funds were also received through banking channels with necessary statutory approvals. Therefore, assessee has proved the sources of receipts and discharged the onus. It is the Revenue which failed in proving that this amount is unexplained income of assessee. In view of these facts of the case, we are of the opinion that various case laws relied by the Revenue does not apply and they are clearly distinguishable. In view of this, we have no hesitation in upholding the order of the CIT(A) and rejecting the Revenue's grounds.
3. Iqbal Ismail Virani vs. Income Tax Officer (International Taxation), Ward-1, Panaji [2021] 128 taxmann.com 181 (Panaji - Trib.) Para 29. Admittedly, the appellant herein is Non-Resident Indian for income tax purpose for last 30 years. As noted by us (supra). an Indian resident is liable to tax in respect of income received or deemed to be received in India and income which accrues or arises or deemed to be accrued or arisen in India. In the preceding paragraphs, we held that the impugned addition does not represent either income received or deemed to be received in India or income accrued or arisen or deemed to be accrued or arisen in India. The remittance brought to India which are subject matter of impugned additions I.T (IT) A. No. 217/Lkw/2025 28 Assessment Year:2019-20 are obviously income received at first instance outside taxable territories of India or accrued or arisen outside taxable territories of India. Therefore, it is beyond the scope of jurisdiction of the Assessing Officer to go into the source of income earned outside taxable territories of India, once the Assessing Officer is satisfied that the source of money for acquisition of property represent remittance from the abroad from the appellant himself. Therefore, rejection and acceptance of explanation given as to the source of credits in the bank account of Bank of Baroda, Dubai is totally immaterial and had no relevance at all, as the Assessing Officer was not concerned about the taxability or otherwise of income received or accrued and arisen outside the taxable territories of India to Non-Resident. Therefore, the fact that the lower authorities had rejected the explanation as to the sources of credits in the Bank of Baroda, Dubai account does not come in the way of deleting the impugned additions. This is more so, in view of the fact that there is no material on record to show that the appellant had diverted the income which escaped the assessment to tax in India to deposit the money in the Bank of Baroda, Dubai account, in fact, it is not even the case of the Assessing Officer that the appellant had indulged in round tripping of money and there is no allegation as such against the appellant.
30. Therefore, in our considered opinion, the lower authorities not accepting the explanation offered by the assessee is not based on proper appreciation of material on record and other attending circumstances available on record. It is needless to say that the opinion of the Assessing Officer is required to be formed with reference to the material on record and application of mind in sin qua non for forming the opinion as held by the Hon'ble Supreme Court in the case of CIT v. P. Mohanakala [2007] 161 Taxman 169/291 ITR 278. In the present case, there is total lack of application of mind, the Assessing Officer had not formed the opinion objectively with reference to any material on record and is merely based on the surmises and conjectures. We fail to understand as to why the Assessing Officer, having rightly taken note of the correct legal position governing the credits in the bank account i.e. he had chosen to bring the same to tax u/s 68 of the Act instead of section 69 of the Act. This itself goes to show the mala fides on the part of the Assessing Officer, perhaps he intends to assess to tax in the hands of the appellant under more vigorous the provisions of section 68 of the Act than provisions of section 69 of the Act. In the circumstances, we are of the considered opinion that the addition made by the Assessing Officer cannot be sustained and the orders of both the Assessing Officer and the ld. CIT(A) are hereby set-aside. We direct the Assessing Officer to delete the impugned additions.
I.T (IT) A. No. 217/Lkw/2025 29 Assessment Year:2019-20
31. In the result, the appeal of the assessee stands allowed.
4. Shri Vinodkumar Hiralal Raja Vs. Income Tax Officer ITA No. 50/RJT/2018
15. In view of the instant facts and the judicial precedents cited above we are of the considered view that Ld. CIT(A) has erred in facts and law in confirming the additions made by the assessee received by way of wire transfer from NRE account of his son in UK to assessee's NRE account from which investments were made into Mutual Funds. In our considered view, in the instant facts, no addition is sustainable under Section 69 of the Act.
5. Namrata Jain vs. Income-tax Officer [2025] 174 taxmann.com 746 (Rajasthan) Para 7. The Supreme Court in the case of Chhugamal Rajpal v. S.P. Chaliha and Ors. reported in [1971] 79 ITR 603 (SC) held that the AO must have a prima-facie ground for taking action under Section 148 of the Act and a need for further enquiry cannot be equated for reason for issuing notice under Section 148.
8. Apart from the information of petitioner having purchased an immovable property in India during the relevant year, there is no information with the department to suggest that the income having been earned by petitioner in India or liable to be taxed under the Act had escaped assessment. No such averment is there either in the show cause notice or in the impugned order. It is clear that preliminary inquiry can be held by AO prior to issuance of notice under Section 1484(b). Rather the AO while acting under the Act wanted to verify the source of income in USA. Once the source of investment was duly explained and it was established that it originated in foreign country there was no basis for the AO to proceed under Section 148.
Humble Prayer: In the background of a written submission dt. 25.07.2025 and above submissions, we humbly request that appeal may kindly be allowed and additions may kindly be deleted."
(E.1.1) In his oral submission at the time of hearing, the learned Counsel for the assessee further contended that the assessee had brought inward foreign I.T (IT) A. No. 217/Lkw/2025 30 Assessment Year:2019-20 currency remittance in the preceding year (i.e. from outside India to India) from out of the business receipts of M/s M.N. Khan Jewelers, of which the assessee was the owner. The aforesaid M/s M.N. Khan Jewelers is based in UAE, in the name and style of M.N. Khan Jewelers FZE. These inward foreign currency remittances were deposited by the assessee, the Learned A. R. for the assessee submitted, in the assessee's FCNR Account in HDFC Bank. He further submitted that these deposits matured in the current financial year and the maturity proceeds (including interest) were utilized by the assessee for outward foreign currency remittance during the year. He submitted that the maturity proceeds were adequate for making the outward foreign currency remittance during the year. He further submitted that the inward foreign currency remittances in the preceding year and the outward foreign currency remittances during the current year were fully compliant with laws in force and norms prescribed by the Reserve Bank of India. He also drew it to our attention that the interest income on the aforesaid inward foreign currency remittance in the preceding year was already accepted and taxed as assessee's income by the Income Tax Department during the preceding year and therefore the genuineness of these inward remittances and the maturity proceeds thereon during the current year should not be doubted.
(E.1.2) The Learned D. R. for the Revenue submitted that the assessee did not provide copies of bank statements of the assessees aforesaid FCNR Account in HDFC Bank for the entire period of the preceding year and the current year, He pointed out that the assessee only provided copies of bank statements of period during which inward foreign currency remittances were brought in by the assessee in the preceding year and during which the outward foreign currency remittances were made by the assessee in the current year. He also I.T (IT) A. No. 217/Lkw/2025 31 Assessment Year:2019-20 submitted that the assessee did not provide copies of bank statements of M/s M.N. Khan Jewelers (of which the assessee is the owner). In the absence of these details that were specifically required from the assessee by Assessing Officer during the assessment proceedings and by the DRP during the proceedings before the DRP; the contention of Learned DR for the Revenue contended that the assessee's claim, that the outwards foreign currency remittances during the year were explained by maturity proceeds of inward foreign currency remittances in the preceding year, cannot be readily accepted. Therefore, he submitted, either the addition should be confirmed, or in the alternative, the entire dispute regarding the aforesaid amount of Rs. 99,04,05,611/- should be restored back to the file of Assessing Officer so that the FCNR A/c of assessee in HDFC Bank and the Bank A/c of the aforesaid M/s M.N.Khan Jewelers for the entire duration of the preceding and for the current year are examined by the Assessing Officer.
(E.2) In his rejoinder the Learned A. R. for the assessee submitted that in similar facts and circumstances, a few Benches of ITAT have already taken a view in support of the assessee in particular, he drew our attention to the aforesaid precedents, namely
1. Order dated 18.03.2015 of Hyderabad Bench of ITAT in the case of DCIT vs. Madhusudan Rao (ITA No. 1482/Hyd/2014).
2. Order dated 16.11.2018 of Mumbai Bench of ITAT in the case of DCIT vs.Shri Hemant Mansukhlal Pandya (ITA No. 4679 & 4680/Mum/2026).
3.Order dated 20.12.203 of Rajkot Bench of ITAT in the case of Shri Vinodkumar Hiralal Raja vs. Income Tax Officer (ITA No. 50 & 51/Rjt/2018)
4.Order dated 11.10.2022 of Mumbai Bench of ITAT in the case of Income Tax Officer vs. Shri Rajeev Suresh Gehi (ITA No. 792/Mum/2022).
I.T (IT) A. No. 217/Lkw/2025 32 Assessment Year:2019-20
5. Order dated 16.12.2022 of Ahmedabad Bench of ITAT in the case of ACIT vs. Shri Vijaykuamr Vasantibhai Patel (ITA No. 40/Ahd/2021).
In response to a specific query from the Bench, the Learned A. R. for the assessee submitted that the bank statement of the assessee's FCNR Bank Account in HDFC Bank and the Bank Account of M/s M.N. Khan Jewelers for the entire duration of the preceding year and the current year could not be submitted during the assessment proceedings and during the proceedings before the DRP, because the same were not readily available, and due to shortage of time available.
(E.2.1) We have heard both sides. We have perused the materials on record. It is not in dispute that the assessee brought inward foreign currency remittances during the preceding year, which were deposited in the assessee's FCNR Account in HDFC Bank during the preceding year. It is also not in dispute that the maturity proceeds of these inward foreign currency remittances in the preceding year were sufficient for making outward foreign currency remittances made by the assessee during the year. It is further not in dispute that the interest income on the inward foreign currency remittances deposited in assessee's FCNR Account in HDFC Bank was taxed as assessee's income during the preceding year. However, it is not established either way, based on materials on record, whether the maturity proceeds of the inward foreign currency remittances of the assessee in the preceding year and the maturity proceeds of the same, upon maturity during the current year, had a proximate connection and direct nexus with the outwards foreign currency remittances made during the year. The possibility that the maturity proceeds were used by the assessee, partly or wholly for some other purpose, and some other deposits were brought in by the assessee in the assessee's bank account for making I.T (IT) A. No. 217/Lkw/2025 33 Assessment Year:2019-20 outward foreign currency remittances during the year. The Departmental Authority (i.e. the Assessing Officer and the DRP) were prevented from making this inquiry due to failure of the assessee to make the full bank statements for the entire duration of the preceding year, and the current year, in respect of bank accounts of the assessee, and M/s M. N. Khan Jewelers FZE (in UAE) available. We are cognizant of the submissions made by Learned A. R. for the assessee that these were not provided because the same were not readily available, and due to shortage of time available. However, in the absence of these crucial details, the affairs of the assessee are not transparently available on records. We are also conscious of the fact that the assessee did not file return of income either under section 139 of the Act or in response to notice under section 148 of the Act; because of which the assessment made is a best Judgment Assessment. Due to these facts and circumstances, the affairs of the assessee are found to be unclear, foggy and shrouded in mystery, as far as materials on record are concerned. Therefore, the contention made on behalf of the assessee by the Learned A. R. for the assessee that the maturity proceeds during the current year in respect of inward foreign currency remittances in the preceding year was the legitimate source of outward foreign currency remittances during the year cannot be accepted as established. In order to draw a firm inference whether or not the maturity proceeds of the inward foreign currency remittances in the preceding year were the legitimate source of outward foreign currency remittances during the year, the bank account of the assessee in HDFC Bank and bank account of the aforesaid M/s M.N.Khan Jewelers for the entire period of the preceding year and the current year is required to be considered and the assessee is required to show that the outward foreign currency remittances during the year had a proximate connection and direct nexus with outward I.T (IT) A. No. 217/Lkw/2025 34 Assessment Year:2019-20 foreign currency remittances during the year. As far as the action on the part of Revenue is concerned; it is found that the addition is based on withdrawals (in the nature of outward foreign currency remittances) and not based on deposits in the bank account. It is understandable that Revenue was constrained due to non availability of bank accounts. Therefore, we find merit in the alternative submissions made by the Learned D. R. for Revenue [discussed in foregoing paragraph (E.2.1) of this order] that the dispute regarding aforesaid addition of Rs. 99,04,05,611/- should be restored back to the file of the Assessing Officer. We agree that the entire issue regarding the aforesaid outward foreign currency remittance of Rs. 99,04,05,611/- is required to be examined afresh at the level of the Assessing Officer. The precedents relied upon by the Learned A. R. for the assessee do not advance the assessee's case because of the specific facts and circumstances of this case which are distinguishable from facts and circumstances of the precedents relied upon on behalf of the assessee. Accordingly, we restore the dispute regarding addition of the aforesaid amount of Rs. 99,04,05,611/-; back to the file of the Assessing Officer, with a direction to pass denovo order in accordance with law after providing reasonable opportunity to the assessee.
(E.2.2) In the result, the appeal of assessee is partly allowed, for statistical purposes.
(Order was pronounced in the open court on 28/04/2026 ) Sd/- Sd/-
(KUL BHARAT) (ANADEE NATH MISSHRA)
Vice President Accountant Member
Date:28/04/2026
SK, Sr.PS
I.T (IT) A. No. 217/Lkw/2025
35
Assessment Year:2019-20
Copy of the order forwarded to :
1. The Appellant
2. The Respondent.
3. Concerned CIT
4. D.R., I.T.A.T.,
5. CIT(A)
Senior Private Secretary
Income Tax Appellate Tribunal
Lucknow