The Mumbai ITAT has allowed an individual Assessee’s appeal and held that a mere mention of the residential status as a resident in the original return of income cannot be the sole ground for treating the Assessee as a resident. The Assessee had declared his residential status as non-resident in the income tax return for post-search assessment. Therefore, the ITAT has deleted the entire credit in the Assessee’s foreign bank account by holding the Assessee to be a non-resident. The ITAT has further stated that income or deposits in the foreign bank account of an individual who is not a resident in India cannot be taxed in India.
The case pertains to an individual Assessee who was issued a notice under Section 153A for Assessment year 2010-11, based on a search and seizure wherein certain documents containing details of a foreign bank account of the Assessee were found. The Revenue noted that during the relevant Assessment year, the Assessee was outside India for 290 days. However, the Revenue made an addition of the entire credit in the Assessee’s foreign bank account of Rs. 3,02,133/- under Section 68 by holding that the Assessee’s explanation that the amount was a gift from a family friend, who is a US resident, did not fall within the ambit of Section 56(2)(v).
The CIT(A) confirmed the assessment order, aggrieved with which the Assessee preferred the present appeal. The ITAT perused Section 6(1)(a) and observed that an individual is said to be a resident in India if he has stayed in India for 182 days or more in the relevant Assessment year. The ITAT pointed out that the Assessee cannot be considered a resident in India, in terms of Section 6(1)(a) as he stayed outside of India for 290 days i.e. more than 182 days for the relevant Assessment year.
The ITAT dismissed the Revenue’s argument that Section 6(1)(c) shall be applicable to the Assessee, as he is of Indian origin and a citizen of India. The ITAT observed that the provisions of Section 6(1)(c) are not applicable to the Assessee by virtue of Clause (b) of Explanation 1 to section 6. Thus, the ITAT opined that the Assessee was a non-resident for the relevant Assessment year.
The ITAT further observed that the Assessee had mentioned his residential status as a resident in the original return of income. However, the Assessee changed it to non-resident in the ITR filed in response to the notice under Section 153A, and even the assessment order was passed in the status of a non-resident. Therefore, the ITAT held that a mere mention of the status as a resident in the original return of income cannot be the ground for treating the Assessee as a resident.
The ITAT further stated that once an Assessee is a non-resident, then income or deposits in the foreign bank account of the Assessee, who is not a resident in India, cannot be taxed in India. Therefore, the ITAT deleted the addition of the entire credit in the Assessee’s foreign bank account.
In conclusion, the Mumbai ITAT has held that a mere mention of the residential status as a resident in the original return of income cannot be the sole ground for treating the Assessee as a resident. The ITAT has also held that once an Assessee is a non-resident, then income or deposits in the foreign bank account of the Assessee, who is not a resident in India, cannot be taxed in India. This decision provides clarity.
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