Core Issue:-The principal controversy before the Delhi Bench of the Income Tax Appellate Tribunal was whether investments made in foreign shares in the names of the assessee’s minor daughters could be treated as unexplained investments under section 69 of the Income-tax Act, 1961 merely on the allegation that no separate documentary evidence of source was furnished, despite the fact that the assessee had fully disclosed such investments in the return of income, including Schedule FA, and had sufficient disclosed income to justify the investment.

 

A connected issue arose as to whether foreign tax credit claimed under sections 90/91 could be denied on the ground that Form No. 67 was allegedly not filed within the due date under section 139(1), even though the form had been filed within the extended statutory time and prior to completion of assessment.

 

 

Case Citation:-Deputy Commissioner of Income Tax, Circle 19(1), Delhi v. Malvinder Mohan Singh, Delhi

ITAT Delhi Bench

ITA No. 3029/DEL/2024

Assessment Year: 2017-18

Order dated: 10 December 2025

 

Facts:-The assessee, an individual and a high-net-worth taxpayer, filed his return of income for Assessment Year 2017-18 declaring a total taxable income of ₹26.80 crore and paid taxes aggregating to ₹9.50 crore. His income comprised salary, house property income, capital gains and income from other sources. In accordance with section 64(1A) of the Act, the income of his three minor daughters was duly clubbed in his return.

 

The case was selected for limited scrutiny primarily on two aspects: claim of double taxation relief under sections 90/91 and disclosure of foreign assets. During the year, the assessee had invested in shares of a foreign company, Clonberg Holding Ltd., in the names of two minor daughters, Nanaki Parvinder Singh and Nandini Parvinder Singh, amounting to ₹1.64 crore and ₹1.66 crore respectively, aggregating to ₹3.31 crore.

 

The Assessing Officer treated the aforesaid investments as unexplained under section 69 on the ground that, according to him, the assessee failed to furnish documentary evidence explaining the source and mode of investment. He further denied foreign tax credit of ₹23.02 lakh claimed in respect of taxes paid in Singapore, invoking Rule 128 on the allegation that Form No. 67 had not been filed within the due date under section 139(1). The additions were taxed under section 115BBE.

 

On appeal, the Commissioner of Income Tax (Appeals) deleted both the addition under section 69 and the disallowance of foreign tax credit. Aggrieved by the relief granted, the Revenue preferred an appeal before the Tribunal.

 

Notably, none appeared on behalf of the assessee before the Tribunal, and the matter was decided ex parte with the assistance of the Departmental Representative.

 

Findings:-The Tribunal, after examining the record, found that the assessee had made complete and transparent disclosures of the impugned foreign investments in the original return of income itself. The investments were specifically reflected in Schedule FA, detailing foreign assets, and were supported by disclosure of relevant bank accounts maintained with an Indian bank, through which the investments were routed.

 

The Tribunal attached significance to the fact that the assessee’s returned income was ₹26.80 crore, which also included clubbed income of the minor daughters amounting to over ₹3.42 crore. In this factual backdrop, the Tribunal held that it would be unreasonable to entertain any serious doubt regarding the source of investment of ₹3.31 crore, given the magnitude of disclosed income and the absence of any material brought on record by the Assessing Officer to suggest that the investment emanated from undisclosed sources.

 

The Tribunal observed that section 69 cannot be invoked in a mechanical manner merely because the Assessing Officer was dissatisfied with the explanation, especially when the investments were duly disclosed in the return and the assessee demonstrably had sufficient explained funds. Disclosure in Schedule FA, coupled with banking trail and high returned income, was held to be a strong indicator of explained source.

 

On the issue of foreign tax credit, the Tribunal concurred with the findings of the CIT(A) that Form No. 67 had, in fact, been filed on 22 December 2017, well within the time permitted under section 139(4), and much prior to completion of assessment. The Tribunal reaffirmed that Rule 128 is procedural in nature and cannot be interpreted so as to deny substantive relief where taxes have already been paid abroad and the income has been offered to tax in India. Denial of credit in such circumstances would result in impermissible double taxation.

 

The Tribunal also rejected the Revenue’s grievance regarding absence of a remand report, holding that once the material was already available on record and no prejudice was demonstrated, the order of the CIT(A) could not be faulted on this ground alone.

 

Decision:-The Delhi Bench of the Income Tax Appellate Tribunal upheld the order of the Commissioner of Income Tax (Appeals) in entirety. The addition of ₹3.31 crore made under section 69 on account of alleged unexplained foreign investment was deleted, and the denial of foreign tax credit of ₹23.02 lakh under sections 90/91 was set aside.

 

Accordingly, the appeal filed by the Revenue in ITA No. 3029/DEL/2024 was dismissed.