25 September 2013
My wife (housewife) had received IT notice in March 2013 under 148 for the F.Y - 2005-06, based on which i'd file her returns in April 2013. Based on that recently i received notice under 143(2) & 142(1) asking details of bank account statements& mutual fund details . The mutual fund investments which were of high value were in my name with my wife being the 2nd joint holder. The source of funds were from my NRE account on repatriable basis. Accordingly i provided the details to the IT officer. He now has asked me to provide my returns for the FY 2005-06. My queries are 1. Can the IT officer demand the husband IT returns and should i provide it. 2. Instead can i provide the my bank statement of NRE account which shows the source of the funds? 3. I returned back to India in Sep 2005 and was resident in India and had filed my returns for FY 2005-06 as Resident individual for the income i earned in india eventhough my nre account was still open and the mutual fund investment was in Feb 2006. What can be the consequence of the same? 4. How should i proceed now?
04 August 2024
In the situation you described, here’s a detailed breakdown of how to handle the notice under Sections 143(2) and 148, and the related queries:
### 1. **Demand for Husband's IT Returns**
**Can the IT officer demand the husband's IT returns, and should you provide it?**
- **Relevance of Returns**: The Income Tax Officer (ITO) can request your husband's income tax returns if they are relevant to the scrutiny of your wife's financial transactions, particularly if there are indications that funds from your account were used for investments in your wife's name.
- **Provision of Returns**: While the ITO’s request is not uncommon in cases where there is a potential connection between the taxpayer’s and their spouse’s finances, it is important to ensure that the demand is justified. Generally, if the funds in question are from a joint account or are linked to your financial transactions, providing your returns might help clarify the source of funds.
### 2. **Providing NRE Bank Statement**
**Can you provide the NRE bank statement instead of the husband’s IT returns?**
- **Bank Statements**: Providing the bank statements from your NRE account, showing the source of funds and the repatriation details, is a valid and relevant response. These documents can help substantiate the source of the investments made by your wife.
- **Supplementary Information**: It is often helpful to provide a detailed explanation along with the bank statements, such as how the funds were transferred and used. This can help in establishing the legitimacy of the funds.
### 3. **Impact of Mutual Fund Investments and Residency Status**
**What can be the consequence of the mutual fund investment made in February 2006, and your residency status?**
- **Investment Timing**: Since you returned to India in September 2005 and were a resident for the FY 2005-06, the mutual fund investment made in February 2006 should be considered in the context of your residency status for that year.
- **Taxability of Income**: As you were a resident in India for FY 2005-06, any income from investments made during this period, including mutual funds, would be subject to Indian tax laws. However, the fact that the funds came from an NRE account and were repatriated could also impact the taxability, especially if the funds were exempt from tax in India under NRE rules.
### 4. **Steps to Proceed**
**How should you proceed now?**
1. **Compile and Provide Documents**: - **Submit Bank Statements**: Provide the NRE account bank statements showing the source of funds. - **Prepare Explanation**: Draft a clear explanation of how the funds were acquired and transferred, and how they relate to the investments made by your wife.
2. **Respond to Notices**: - **Respond to 143(2) and 142(1)**: Ensure you respond promptly to the notices, providing all requested details. It is crucial to comply with the requirements and deadlines specified in the notices.
3. **Provide IT Returns**: - If you believe the ITO’s request for your returns is justified, you should provide them. If you have concerns about the request, it may be useful to clarify why the returns are relevant to your wife’s assessment.
4. **Consult a Tax Professional**: - **Seek Advice**: Given the complexity of the situation involving NRE accounts, mutual fund investments, and residency status, consulting a tax professional or a Chartered Accountant (CA) is highly recommended. They can provide specific guidance based on your financial details and help ensure that all legal requirements are met.
5. **Documentation**: - **Keep Records**: Maintain a record of all communications, submissions, and responses related to the notices. This documentation can be crucial in case of further inquiries or disputes.
### Summary
- The ITO can request your husband’s IT returns if they are relevant to the investigation of your wife’s finances. - Providing your NRE bank statements is a valid response and should be accompanied by a detailed explanation. - Ensure that the mutual fund investments and their source of funds are properly documented. - Follow up promptly with the ITO and consider consulting a tax professional for detailed guidance.
By addressing these points and cooperating fully with the ITO, you can help resolve the issues raised in the notices effectively.
CAclubindia
