Background of the Case
Sanjeeta Chatterjee, a Non-Resident Indian (NRI) residing in Dubai since December 1997, challenged the orders of the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld additions made by the Assessing Officer (AO) under Section 69A of the Income Tax Act, 1961. These additions stemmed from amounts credited to her Non-Resident External (NRE) account with HSBC Bank, which the AO deemed unexplained income.
Grounds of Appeal
For the lead case (A.Y. 2013-14), Sanjeeta Chatterjee raised the following grounds before the ITAT:
- Erroneous Addition by AO: The AO added Rs. 1,28,47,999- deposited in her NRE accountas unexplained income under Section 69A, relying solely on an Investigation Wing report, despite the funds being received through banking channels and the appellant having no income accruing or arising in India.
- Non-Consideration of Objections: The AO ignored the appellant’s objections to the draft order, making the addition without inquiry or verification, based merely on suspicion.
- Disregard of Case Law: The AO overlooked relevant judicial precedents cited by the appellant.
- CIT(A)’s Error: The CIT(A) erred in upholding the addition without obtaining a remand report under Rule 46A and dismissed all grounds raised by the appellant.
- Incorrect Interest Charges: The AO wrongly levied interest under Sections 234B and 234C of the Act.
- Penalty Initiation: The AO erred in initiating penalty proceedings under Section 271(1)(c).
Similar grounds were raised for the other assessment years, adjusted for the respective amounts involved.
Facts of the Case
The AO received information from the Investigation Wing that Rs. 1,31,99,368 was credited to Sanjeeta Chatterjee’s HSBC NRE Account (No. 052582665006) during the financial year 2012-13. Unable to verify the source, the AO reopened the assessment under Section 147 after obtaining approval, issuing a notice under Section 148 on October 30, 2019. Despite issuing statutory notices under Section 142(1) and Show Cause Notices (SCNs), the appellant neither filed a return of income under Section 148 nor had she originally filed one under Section 139.
In response to the SCNs, Chatterjee submitted that Rs. 1,28,47,999 credited to her NRE account was an interest-free friendly loan, supported by a plain paper confirmation. However, the AO found the confirmation’s genuineness and the lender’s creditworthiness unproven, leading to the addition of Rs. 1,28,47,999 under Section 69A, taxed at rates prescribed under Section 115BBE. With no objections filed before the Dispute Resolution Panel (DRP), the AO finalized the assessment under Section 143(3) read with Section 144C(3)(a).
First Appeal Before CIT(A)
Aggrieved, Chatterjee appealed to the CIT(A), asserting her status as an NRI since 1997, with no taxable income in India. She explained her employment with a travel agency in Dubai and her family background- residing with her parents in Gautam Budh Nagar until 1997, after which her father relocated to Greater Noida post-retirement in 2011. She submitted bank statements, a consent letter from the lender (Mr. Sanjay Shailesh Parikh, a close family friend and fellow NRI in Dubai), her salary certificate, an affidavit from Parikh, and passport copies showing her stay in India was less than 182 days annually.
The appellant argued that notices sent to outdated addresses were not received, though one notice (dated March 9, 2021) reached her father, who responded on her behalf. Despite these submissions, the CIT(A) upheld the AO’s order on December 28, 2023, citing the absence of Parikh’s bank statements to establish his creditworthiness and the transaction’s genuineness.
Proceedings Before ITAT
Before the ITAT, the appellant’s counsel, Shri Ashok Kumar, argued that the authorities below failed to consider documents proving the lender’s identity, source, and creditworthiness. The CIT(A) dismissed the appeal solely for lack of Parikh’s bank statements-a private document beyond the appellant’s control. To remedy this, the appellant sought to introduce additional evidence, including Parikh’s bank statements, remittance slips, and exchange advice, which were unavailable earlier due to their third-party nature. These documents, now submitted, demonstrated Parikh’s financial capacity and the withdrawal of the loan amount from his account.
The Senior Departmental Representative (Sr. DR), Ms. Ambika Aggarwal, countered that the appellant’s failure to produce these details earlier justified the AO and CIT(A)’s actions, though both parties agreed the matter could be remanded to the AO for fresh assessment.
Tribunal’s Decision
After reviewing the material and hearing both sides, the ITAT admitted the additional evidence, deeming it crucial to the case’s core issues. In the interest of justice, the tribunal set aside the orders of the AO and CIT(A) and remitted the matter to the AO for a de novo reassessment. The AO was directed to consider all evidence, provide the appellant a fair hearing, and frame a new assessment on merits per the law. The appellant was instructed to cooperate fully and submit any further details requested.
The tribunal refrained from commenting on the merits, leaving all contentions open. The appeal for A.Y. 2013-14 (ITA No. 849/Del/2024) was allowed for statistical purposes. For A.Y. 2014-15 to 2016-17 (ITA Nos. 2241, 2242, and 2243/Del/2024), where similar additions were made and upheld, the tribunal applied the same reasoning, remanding these cases to the AO as well, given the identical facts barring the amounts involved.
Conclusion
The ITAT’s ruling underscores the importance of procedural fairness and the admissibility of relevant evidence, even at an appellate stage, to ensure a just outcome. Sanjeeta Chatterjee’s appeals highlight challenges faced by NRIs in tax disputes involving overseas transactions, emphasizing the need for comprehensive documentation. The matter now awaits a fresh assessment by the AO, with the outcome potentially setting a precedent for similar cases.
The order was pronounced in open court on April 3, 2025, and formally issued on April 7, 2025, marking a significant step in this ongoing tax litigation.
Citation: Sanjeeta Chatterjee vs DCIT, InternationalTaxation, ITA Nos. 849, 2241, 2242 &2243/Del /2024Asstt. Yrs: 2013-14, 2014-15, 2015-16 & 2016-17
