ITAT Holds Income Earned by German Resident from Independent Professional Services Not Taxable in India

The Income Tax Appellate Tribunal (ITAT), Mumbai, set aside the ex parte assessment order and restored the matter to the Assessing Officer’s file for fresh adjudication.

The assessee is an NRI residing in the United States since 2012, and he did not file his return of income for the assessment year 2017-18. Based on information available on the Income Tax Department’s Insight Portal, the AO observed some high-value transactions by the assessee.

Consequently, reassessment proceedings were initiated under Sections 147 and 148 of the Income Tax Act, 1961. The assessee did not respond to the notices issued, and the AO completed the assessment ex parte under Section 144 of the Act.

The AO treated Rs 38.33 lakh invested in foreign currency purchases and time deposits as unexplained investments under Section 69, including the interest added to the assessee’s bank account. Aggrieved by the draft assessment order, the assessee approached the Dispute Resolution Panel, which rejected the technical grounds raised by the assessee.

The Tribunal rejected the assessee’s contention that proceedings under Section 144C were invalid. It was observed that the assessee, being a non-resident, was rightly governed by the procedure prescribed under Section 144C of the Act. The Bench further noted that the assessee had not responded to notices issued during the assessment proceedings, and therefore, the authorities were justified in proceeding ex parte.

However, the Bench observed that the assessee had not been able to explain the source of investments in time deposits and foreign currency purchases before the earlier authorities. In the interest of justice, the Tribunal held that the assessee should be granted one final opportunity to substantiate the source of the disputed investments and transactions.

Accordingly, the appeal was allowed for statistical purposes and set aside the impugned assessment. The AO was directed to re-examine the issues after providing the assessee with a reasonable opportunity for a hearing.