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| The Tax Publishers2020 TaxPub(DT) 1357 (Mum-Trib) INCOME TAX ACT, 1961
Section 68
Since assessee had received sums abroad from foreign concern on account of services rendered in India, it was incumbent upon assessee to cogently rebut that assessee had not received any sums abroad for services rendered in India which could have been transferred from abroad in his Indian account through these concerns. The sole reliance upon FIRC which was only a certificate of remittance from abroad in absence of overwhelming surrounding circumstances, was not at all sustainable and AO rightly taxed money found credited in assessee's NRE account under section 68.
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Income from undisclosed sources - Addition under section 68 - Credits in NRE Bank account -
During search and seizure action assessee being an NRI accepted that he rendered services in India to Gulf finance house (GFH) Bahrain which was executing certain projects in association with Valuable group. During search email from Gulf Finance House addressed to assessee was found wherein it was mentioned that GFH over the years had made payments to US 51.5 million to DAR Capital Ltd. and US dollar 41.5 million to Thurles International Ltd. Mauritius. These two companies were hundred percent owned by assessee. In these circumstances, money found credited in assessee's NRE account was enquired by AO. The narration in NRE account in particulars referred to GFH and DAR Investment Ltd. In these circumstances upon enquiry, assessee informed that his concern Thurles was not incorporated in that assessment year and assessee was required to submit necessary certificate from GFH that amount did not relate to any services rendered by assessee in India. The assessee did not give any such certificate. He only relied upon the FIRC (foreign inward remittance certificate). In absence of assessee cogently showing source of fund in his bank account to be not originating from entities who had received sums from GFH Bahrain for rendering services in India AO added said sum as assessee's undisclosed income under section 68. CIT(A) referred to the FIRC and CBDT Circular No. 5, dt. 20-2-1969 and concluded that assessee need not show the source of its income in its NRE acount as it had been received from abroad and assessee was a NRI. Held: CIT(A)'s reliance on Board Circular No. 5, dt. 20-2-1969 was not correct in as much as in the said circular it was mentioned that it was applicable when there is no evidence for transfer of money. By no stretch of imagination it could be submitted that section 68 is not applicable in the case where persons of India origin residing abroad but intending to return to India and settle here permanently, the money brought in or remitted from abroad by such persons through banking channels, no question at all to be asked by the department as to the origin of the money. Furtherever, the instant case, assessee was not a person who intending to return to India and settle here permanently. CIT(A) totally ignored the facts of search and the incriminating material found. The facts of the case and search predominantly pointed that assessee had received sums through its entitles abroad as consultation fee received from GFH Bahrain for rendering services in India. The entries in bank account did mention the name of GFH and Dar Capital. In these circumstances it was incumbent upon assessee to give a confirmation from GFH that no fee was paid to assessee through its entities during concerned assessment year for services rendered to GFH in connection with projects in India. Since assessee failed to do so, CIT(A) totally erred in ignoring detailed finding of. AO and, therefore, order of AO as set asdie by CIT(A) was restored.
Supported by:Sumati Dayal v. CIT 1995 AIR 2109 (SC) and CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) : 1971 TaxPub(DT) 375 (SC).
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