LI Network
Published on: December 18, 2023 at 18:21 IST
The Delhi High Court has underscored that Section 69A of the Income Tax Act can only be invoked when books of account are maintained.
The bench, comprising Justice Rajiv Shakdher and Justice Girish Kathpalia, emphasized that the specific language of Section 69A, particularly the term “if any,” signifies that the provision applies only if books of account are kept.
The case involved a non-resident Indian (NRI) whose income in India comprises of interest on bank accounts and interest on income tax refunds.
The Court observed that as a non-resident Indian, the assessee is not obligated to maintain any books of account in India. The court highlighted that the expression “if any” in Section 69A indicates that if books of account are not maintained, the provision cannot be invoked.
Section 69A of the Income Tax Act deals with unexplained money and its inclusion in the aggregation of income under Chapter VI of the Act.
The section stipulates that if, in any financial year, the assessee is found to be the owner of money, bullion, jewelry, or another valuable article not recorded in the books of account maintained for any source of income, and the assessee fails to provide a satisfactory explanation, the money may be deemed as the income of the assessee for that financial year.
The case involved a non-resident individual residing in the United Arab Emirates (UAE), whose income, declared for the Assessment Year 2017-18, was subject to scrutiny.
The Assessing Officer made additions under Section 69A on various grounds. The Commissioner of Income Tax (Appeals) partly allowed the appeal, and the Income Tax Appellate Tribunal later fully allowed the appeal, stating that Section 69A did not apply to the non-resident assessee.
The High Court upheld the Tribunal’s decision, emphasizing that the provision does not apply to the assessee, who is a non-resident, and therefore, the addition made under Section 69A was not sustainable.
The Court rejected the department’s argument that accepting the Tribunal’s view would exempt all non-resident Indians from the rigors of Section 69A, emphasizing the importance of specific circumstances in applying the provision.