Vibhuti Bhargava vs ACIT
In a key ruling providing relief to an NRI taxpayer, the Income Tax Appellate Tribunal (ITAT), Delhi, in the case of Vibhuti Bhargava vs Assistant Commissioner of Income Tax, Circle Intl. Taxation 1(1)(2) (ITA No. 2515/DEL/2024) quashed two separate additions totaling ₹14.26 lakhs.
Background:
- The assessee, a non-resident individual, jointly purchased a villa in the Kalhaar Blues & Greens (KBG) real estate project, partially financed through an HDFC home loan and foreign remittance from Singapore.
- Based on an excel sheet recovered from a third party (builder group search), the AO assumed on-money payment of ₹9.06 lakh, calculated as the difference between the actual consideration and the registered value.
Key Findings of the ITAT:
No Basis for On-Money Allegation (₹9.06 lakh)
- The entire purchase consideration was paid through verifiable channels—a mix of bank loan and NRE remittance.
- The AO simply presumed the gap between market value and registered value to be on-money, without any evidence or undisclosed income source in India.
- Tribunal noted: “Holding such difference as on-money is bizarre.”
- Thus, Section 69 was held to be inapplicable, and addition deleted.
DRP Direction Beyond Jurisdiction (₹5.20 lakh)
- DRP directed AO to conduct fresh verifications after issuing its directions, which the ITAT found ultra vires of Section 144C(7).
- DRP’s power is limited to verification before issuing directions, not post-facto instructions to AO for additions.
- Accordingly, the ₹5.20 lakh addition for unexplained NRO transaction was also quashed as invalid.
Observations on Law:
- Section 69 requires undisclosed Indian income, which was not present.
- Section 144C(7) limits DRP’s jurisdiction strictly to the review of documents available during DRP proceedings.
- DRP cannot delegate back verification to AO after issuing directions, rendering the final addition invalid.
Penalty Proceedings (271(1)(c))
- Challenge to penalty initiation was held to be premature, and the matter is kept open for future adjudication.
Conclusion:
This ruling reiterates that:
- Mere suspicion or excel entries from third parties are not enough to establish on-money.
- DRP must operate within its legal mandate, and any overreach leads to nullity.
- NRI assessees making payments through legitimate, traceable foreign channels enjoy protection from arbitrary assumptions.