TaxTMI 
TaxTMI 
2010 (10) TMI 506
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....) of the IT Act, 1961. 3. On the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in holding that provisions of s. 292BB of IT Act, 1961 were not applicable prior to asst. yr. 2008-09 whereas the provisions of this section are procedural in nature and are applicable to any proceedings after 1st April, 2008. 4. On the facts and circumstances of the case, the learned CIT(A) has erred as he failed to note the huge gap between the receipt of sale proceeds of M/s Sylverton Hotel and the gift to the assessee and the failure of the assessee to establish an accounting link between the two. 5. On the facts and circumstances of the case, the learned CIT(A) has erred as he failed to note that the income returned by Shri Ashok Kumar Jain was far below his capacity to give gifts of the amounts given to the assessee and that his so-called creditworthiness was based almost entirely on the basis of market value of ancestral property which was not indicative of his capacity to give gifts. 6. On the facts and circumstances of the case, the leaned CIT(A) has erred by way of ignoring the findings of Addl. Director of IT (Inv.....
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....], in terms of various decisions of the Hon'ble Supreme Court cited by the AO in his assessment order. 5. On the facts and circumstances of the case, the learned CIT(A) has erred in assuming that the AO has invalidated the certificate issued by the CIT-X, when the AO has only denied the benefits of Circular No. 754 to the assessee in view of his finding that the declarations and subsequent conduct of the declarants were not in accordance with the provisions of VDIS, 1997. 6. On the facts and circumstances of the case, the learned CIT(A) has erred in law and failed to appreciate that even otherwise the AO was bound to follow the judgments of the Supreme Court and various other Courts in the case of Ratan Lal (supra) and various other cases, in view of the decision of the Supreme Court in CCE vs. Ratan Melting and Wire Industries (2008) 220 CTR (SC) 98 : (2008) 14 DTR (SC) 324 : (2008) 13 SCC 1. 7. On the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in holding that the case of Ratan Lal (supra) is distinguishable from that of the assessee without ascribing any reasons for the same. 8. On the facts and ci....
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.... case, the learned CIT(A) has erred in holding that assessee was denied permission to cross-examine witnesses ignoring the fact that the assessee first asked permission to produce witnesses and when given the opportunity to produce any person that assessee wished, declined to produce these persons and filed a petition requesting the Department to produce them for cross-examination. Learned CIT(A) has further failed to appreciate that before him also the assessee submitted that assessee did not wish to cross-examine the witnesses. Hence, learned CIT(A) erred in not appreciating that the assessee was not serious about producing these witnesses. 15. On the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in stating that there is no evidence to prove that the contents of the affidavits from statements are untrue, ignoring the plethora of evidences collected by the AO which showed how the assessee had manipulated the deposits into the bank account and the declarations before the CIT. 16. On the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts and failed to appreciate that the AO has proved from....
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....uine. Similarly, gifts received from Shri Surender Singh were also not genuine as he was an accommodation entry operator. In respect of Shri Ajay Aggarwal, who gifted Rs. 5 lacs to the assessee, the income of donor was below taxable limit, therefore, the donor was not found to be a man of means. Therefore, it is mentioned in the assessment order that genuineness of gifts and creditworthiness of the donors were neither proved from the donor side nor the amount was reflected in the return of income. 6. Further, it was found that the assessee had declared short-term and long-term capital gains. Short-term capital gain was declared at nil. The genuineness of sale transactions and source of purchase of jewellery were also not subject to verification as supporting evidences were not filed along with return and in view of these facts, the AO having reasons to believe that the assessee had not declared full and true particulars of her income, the reassessment proceedings were started. A proposal was moved by the AO to Addl. CIT, Central Range-3, New Delhi for reopening of the case under s. 147 of the Act on 25th March, 2008 and approval was accorded on 25th March, 2008. According....
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....on 13th Feb., 2009 and, thereafter, 14 days being available to the AO were ended on 26th Feb., 2009. The AO has also mentioned about the issue of notice under s. 142(1) on 19th Feb., 2009 whereby the assessee was required to furnish details/explanation as per questionnaire already issued vide letter No. Asstt. CIT/CC-11/2008-09/159, dt. 3rd Nov., 2008. The copy of the said letter was also enclosed with the notice under s. 142(1) in response to which the assessee filed the reply which has been reproduced by the AO in para 12 of his order. The contention of the assessee in the said letter was that according to notice issued to the assessee on 25th March, 2008 under s. 148, which was received on 15th Dec., 2008, the assessee was required to furnish a return within 30 days of the receipt of the notice. The assessee challenged the validity of reassessment proceedings before the Hon'ble High Court vide Writ Petn. No. 8768 of 2008 stating therein that notice under s. 148 was time-barred and, therefore, the proceedings are void ab initio. Reference was made to the affidavit filed by the Revenue before Hon'ble High Court in which it was submitted that notice should be deemed to be served on....
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....ng also. However, the assessee has said nothing in support of her claim and somehow the assessee is prolonging the proceedings on technical and other grounds. In view of all these facts mentioned above, I have no alternative except to complete the assessment on the basis of material available on record as ex parte under s. 144 of the IT Act, 1961." 10. Thereafter, the AO has made the following impugned additions to the income of the assessee considering the merits of the case:- Income from sale of jewellery, etc. Rs. 12,52,585 Income from undisclosed sources under s. 69 being unexplained gifts Rs. 24 lacs 11. In the appeal filed before the CIT(A), the assessee contested the validity of the reassessment proceedings on the ground of non-issue of notice under s. 143(2) and the additions on merits were also contested as according to the assessee the assessment was not valid and the additions were not sustainable according to the facts and circumstances and evidences. 12. It may be mentioned here that during the course of hearing of appeal learned CIT(A) had required the remand report from the AO on all the issues and the said report was submitt....
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.... assessee and, therefore, it has been held that proviso to Expln. 1 to s. 153 being applicable, the assessment was not time-barred on 26th Feb., 2009 as alleged by the AO. The time was available to the AO upto 14th April, 2009. 16. On merits, after examining the facts and evidence placed by the assessee on record, learned CIT(A) has come to the conclusion that additions were not liable to be sustained. 17. The Department in its appeal is aggrieved by such findings of the CIT(A). 18. Both the parties have argued extensively on the issue of validity or otherwise of the assessment on the ground of non-issue of notice under s. 143(2) and, therefore, it is necessary to discuss this issue in detail. 19. The case of the Department was argued by Smt. Sangeeta Gupta, CIT-Departmental Representative. The first and foremost argument of learned CIT-Departmental Representative was that learned CIT(A) was wrong in holding that assessment was not valid. She submitted that the case of the Department is that the present assessment is framed under s. 147/144 of the Act and not under s. 147/143(3) of the Act. She submitted that the assessee despite issue of sev....
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....nt Baba Mohan Singh vs. CIT (1973) 90 ITR 197 (All). 22. She pleaded that the AO has recorded a finding in the remand proceedings that adequate opportunity is afforded to the assessee to present her case and learned CIT[A) has also considered the views of the AO and the evidence led by the assessee in the remand proceedings and, therefore, one fails to understand that how the assessment can be quashed by taking recourse to judgment of Hon'ble Supreme Court in the case of CIT vs. Hotel Blue Moon (supra) as the defect was rectified by the CIT(A) himself by remanding the proceedings to the AO and such plea of the Department is without prejudice to the belief that assessment was validly framed under s. 144(1)(b) of the Act. 23. She further pleaded that provisions of s. 292BB are procedural provisions, therefore, applicable even prior to asst. yr. 2008-09. Therefore, she pleaded that learned CIT(A) could not have quashed the assessment. 24. Coming to the merits of the additions, the submissions of learned CIT-Departmental Representative, as mentioned in the synopsis, are as under:- 4. Learned CIT(A) has erred in failing to note the huge gap bet....
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....th these facts and obtained her reply. In not doing so he has abdicated his responsibility in the matter which makes his order liable to be set aside for finding on these issues. More details in this regard are given at page Nos. 12 to 14 of the remand report of the AO. 7. Learned CIT(A) has erred in law and on facts in failing to note that the assessee has not been able to furnish any evidence of receiving gold Mukuts/Talwars from her supporters in the said assessment year. This issue has been detailed in para 6 at page Nos. 14 to 16 of the remand report submitted by the AO. 8. Learned CIT(A) has erred in law and on facts in ignoring the fact that not only the authenticity of the so-called wills of the assessee's grandfather and his brother could not be proved by the assessee but also the fact that the assessee has no other proof to show that these donors were in fact the donors or had the creditworthiness to make such gifts. Further, there was no proof brought forward by the assessee to show that these donors were in fact the donors or had the creditworthiness and capacity to make such gifts. The CIT(A) has chosen to lay on the onus of the AO without noticing th....
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....e table reproduced in the order of the CIT(A) in para 6 and which is also reproduced here for the sake of convenience. Sl. No. Particulars Date 1. Issue of notice under s. 148 25-3-2008 2. Service of notice under s. 148 29-3-2008 3. Date of order passed by High Court for stay of proceedings 18-12-2008 4. Date of order passed by the High Court for disposing of writ petition 13-2-2009 5. Numbers of days remaining for making assessment 14 days 6. Excluded period as per Expln. 1(ii) to s. 153 8-12-2008 to 13-2-2009 7. Date by which assessment must be made under Expln. 1(ii) to s. 153. 13-2-2009 + 14 days i.e., 27-2-2009 8. Since number of days available for making assessment is 14 days, which is less than 6.0 days, proviso to Explanation to s. 153 is applicable. Therefore, number of days remaining with the AO for making assessment would be 60 days from 13 Feb., 2009 and not 14 days. Hence, the limitation date would be 14-4-2009 9. Assessment order under s. 144 passed on 27-2-2009 28. Thus, learned Authorised Representative submitted that it is not a case where it was impossible for the A....
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....vs. Rajeev Sharma (2010) 40 DTR 129 (All); (iii) CIT vs. M. Chellappan (2005) 198 CTR (Mad) 490 : (2006) 281 ITR 444 (Mad); (iv) ITO vs. Smt. Sukhini P. Modi (2008) 113 TTJ (and) 63 : (2008) 112 ITD 1 (Aha); (v) Dy. CIT vs. Indian Syntans Investments (P) Ltd. (2007) 106 TTJ (Chennai) 388 : (2007) 107 ITD 457 (Chennai). 32. For the proposition that the return even if belatedly filed is a valid return and if the notice under s. 143(2) is not issued the assessment will be invalid, he relied upon the following decisions:- (i) Late Janak K. Kansara vs. Dy. CIT (2008) 116 TTJ (and) 415 : (2008) 7 DTR (Ahd)(Trib) 127; (ii) H. Gouthamchand vs. Addl. CIT (supra); (iii) CIT vs. Rajeev Sharma (supra). 33. With regard to the submissions of CIT-Departmental Representative that in the present case assessment is framed under s. 144(1)(b) he submitted that irrespective of the fact that assessment is framed under s. 144, the notice is mandatory to be issued under s. 143(2) as the return was filed by the assessee on 26th Feb., 2009. Reference was made to the decision of Hon'ble Supreme Court in the case of Hotel Blue Moon (supra) ....
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....a man of means and he received substantial amount by way of sale proceeds of Hotel Sylverton and that out of the very amount, he had given a gift of Rs. 10 lakhs to the assessee in asst. yr. 2003-04 which was accepted by learned AO in the assessment framed under s. 143(3). Assessee furnished voluminous evidences in support of the gift of Rs. 5 lakhs in this year. Paper book 38-40 are the affidavits of the donor Mr. Ajay Aggarwal confirming the gift to the assessee through banking mode not only in this year but in asst. yr. 2003-04 also. Paper book 41-43 are the details of property/assets owned by the donor to show that he was a man of means. Paper book 44-60 are the family partition deed of Shri Ajay Aggarwal to show that he received substantial amount of properties. Paper book 61-71 are the copy of ITCC issued by the IT Department for the sale of Sylverton Estate, Mussorie. Paper book 338-340 are the copy of bank statement of Mr. Ajay Aggarwal showing the substantial amount of deposit by way of sale deeds. If cash was withdrawn and redeposited, it cannot be disbelieved in case there is no adverse evidence against the asse....
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....given by account payee cheques and submitting substantial evidences. Paper book 104-107 are the affidavits of Mr. Ashok Kumar Jain confirming the impugned gift and the gifts made by him in asst. yrs. 2003-04 and 2004-05. Paper book 98-103 are the bank statements of the donor from which the impugned gifts of Rs. 2 lakhs and Rs. 1 lakh were given and it may be noticed that the source of the gifts was out of the amount received from Mr. Shalender Kumar Jain (Rs. 1,90,000) and Rs. 1,00,000 from M/s P. Jain and Co. Paper book 108-109 are the copy of IT return of Mr. Jain. Paper book 487 is the certificate from Andhra Bank certifying that credit of Rs. 1,90,000 in the bank account of Mr. Ashok Jain was from the account of Mr. Shalender Kumar Jain. Paper book 488 is bank certificate from Andhra Bank certifying that credit of Rs. 1 lakh in the account of Shri Ashok Kumar Jain was out of the bank account of M/s P. Jain and Co. Paper book 489 is the certificate from M/s P. Jain and Co. Paper book 110-178 are other evidences, the details of which are given at paper book H showing that Mr. Jain was a man of means. ....
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....AO establishing the identity, capacity of donors and genuineness of the gifts. Paper book 179-205 are the evidences as mentioned at Paper book I-J in respect of Sangeeta Jain. Paper book K-L are submissions regarding Mr. Shailender Kumar Jain, with paper book 255-290. Paper book J-K are the submissions regarding Lata Jain with paper book 209-254. Paper book L-M are the submissions regarding Mr. Surender Singh with paper book 291-310. Paper book 331, 332, 333, 334, 335 and 336 are another submissions to learned AO regarding Mr. Shailender Kumar Jain, bank certificate, bank statement of Time Capital Ltd. and Rishab Cold Storage in respect of Mr. Shailender Kumar Jain. Paper book 509-514 are the copy of the remand report. Paper book 543-548 are our reply to remand report. Mrs. Sangeeta Jain (paper book 182) and Mrs. Lata Jain (paper book 210) have given gifts in asst. yr. 2004-05 also which have been accepted as per Hon'ble Tribunal order in asst. yr. 2004-05 at paper book 602 to 685. Reliance is placed on the decisions cited before Hon'ble Tribunal in asst. yr. 2003-04 (paper book 555-556-557, 573-574-575....
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....s of doubts, without disproving the assessee's evidence.-Badri Prasad Gupta vs. Asstt. CIT (2008) 14 DTR (Agra) 348. Income-Cash credit-Genuineness of gifts-Identity of the donors not being in dispute and the gift transactions having been channelized through banks and all gifts except one having been made by the assessee's relatives, the findings of the CIT(A) and the Tribunal accepting the genuineness of gifts do not warrant any interference in the absence of any tangible material on record which may cast any doubt on the genuineness of the gifts.-CIT vs. Ram Dev Kumar Chitlangia (2008) 8 DTR (Raj) 263. Income-Cash credit-Genuineness of NRI gifts-Assessee having produced copies of gift deeds and affidavits of NRI donors, in the absence of anything to show that the transaction was by way of money laundering, addition could not be made in the hands of assessee donee for absence of blood relationship between the donor and the donee-CJT us. Padam Singh Chouhan (2008) 215 CTR (Raj) 303 : (2008) 3 DTR (Raj) 190. Income-Cash credit-Gifts-Affidavits of donors, their voters' identity cards, PAN cards, copies of returns of income and wealth and copies of their ....
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....; Paper book 2-3 are the will of grandfather of the assessee whereas paper book 6-7 are the will of grandfather's brother. Regarding Mukuts/Talwars, paper book 8-9 are the paper cuttings. Paper book 10-12 are the registered valuers report showing existence of jewellery and Mukuts etc. Paper book 13-14 are bill of the jewellery converting the old jewellery into new jewellery which was also dt. 26th March, 2000 and 31st March, 2000. Paper book 15-19 are the copies of sale bills of jewellery. Paper book 514-515 are remand report. Paper book 551 are reply to remand report. Thus, there is no adverse evidence regarding the will nor rejected by AO and therefore, these documents have to be accepted as correct. Wills need not be registered. Wills are written like this only and it is not uncommon for the older people to bequeath the properties through will. Obviously, the author of the will would not be alive as will comes into effect only after the death of the author. How can this situation be viewed adverse to the assessee? Apparent is real unless proved otherwise is the dictum known to the world of law-230 ITR 518 (SC) (sic) CIT vs. Pi....
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.... under s. 143(2) as there is no pre-requisite condition for serving the notice under s. 143(2) when the assessment is framed under the provisions of s. 144(1)(b). She submitted that the AO is not precluded from framing the assessment prior to the date of limitation. Therefore, the AO was right in holding that it was impossible for him to serve the notice and, therefore, he was well within his right to frame the assessment under s. 144(1)(b) of the Act. 36. We have carefully considered the rival submissions in the light of the material placed before us. In the present case, reassessment proceedings were initiated vide notice dt. 25th March, 2008. There has been a controversy regarding service of notice under s. 148. According to the reply furnished by the assessee before the AO dt. 26th Feb., 2009, the said notice was received by the assessee on 15th Dec., 2008 and through that notice the assessee was required to furnish a return within 30 days of the receipt of the notice. The assessee challenged the validity of the said notice by way of Writ Petn. No. 8768 of 2008 before the Hon'ble High Court of Delhi stating therein that the notice served by the Department under s. 148....
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....see notice under s. 148 requiring the assessee to file return of income within 30 days was received on 15th Dec., 2008. Within a few days the assessee challenged the validity of issue of notice under s. 148 on the ground of expiry of time limitation of issue of such notices and assessee was granted stay on 18th Dec., 2008 by the Hon'ble High Court and the said stay continued upto 13th Feb., 2009. Vide letter dt. 26th Feb., 2009 the assessee submitted that the return originally filed be treated as return filed in response to notice under s. 148. If the period of stay is excluded, then it cannot be said that from the viewpoint of the assessee any unreasonable delay happened on account of inaction on behalf of the assessee. 38. In this regard, it is the contention of learned CIT-Departmental Representative that the AO has validly framed assessment under s. 144(1)(b) in the facts and circumstances of the case and as against that it is the case of the assessee that the AO is wrong in observing that the case was going to be time-barred on the date of framing the assessment. According to the assessee there was ample time available to the AO and the case was not going to be time-....
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....e Act and, in that event, the earlier return will be treated as the fresh return submitted in response to the notice under s. 148 of the Act." 40. Therefore, the return is considered to be filed by the assessee in response to notice under s. 148 on 26th Feb., 2009. Thus, it will be a case where the assessee has submitted a return of income in response to notice under s. 148 and it is not a case where the assessee did not submit any return. 41. Sec. 144 reads as under:- "144 (1) If any person:- (a) fails to make the return required under sub-s. (1) of s. 139 and has not made a return or a revised return under sub-s. (4) or sub-s. (5) of that section, or (b) fails to comply with all the terms of a notice issued under sub-s. (1) of s. 142 or fails to comply with a direction issued under sub-s. (2A) of that section, or (c) having made a return, fails to comply with all the terms of a notice issued under sub-s. (2) of s. 143. The AO after taking into account all relevant material which the AO has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss t....
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....th all the terms of a notice issued under sub-s. (2) of s. 143. As observed earlier, it is a case where the assessee has filed the return. If it is a case where the assessee has filed the return, then for framing the assessment under s. 144, it is necessary under cl. (c), that there must be a notice issued under s. 143(2) and in case of failure of the assessee to comply with all terms of such notice issued under s. 143(2), then only the AO will be within his authority to frame assessment under s. 144. 44. According to well established law, if the case of the assessee falls within a particular clause of a section, then, the said clause cannot be ignored and another clause cannot be applied to the case of the assessee. Learned CIT-Departmental Representative has relied upon s. 144(1)(b) which has not been shown to be applicable to the case of the assessee and which has not been applied even by the AO. Because the assessee has filed return of income in response to notice under s. 148, cl. (c) of s. 144(1) only will be applicable and even cl. (c) cannot be applied as admittedly no notice under s. 143(2) is issued. This fact is admitted by the AO in the assessment order itself....
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....i on 29th March, 2008 since those were the premises allotted to her by the Government of India in her status as a Member of Parliament. We do not have to give a definitive answer on this issue since it is the position of the Revenue that the petitioner must be deemed to have been served in Lucknow on 2nd April, 2008. According to the Revenue, the notice dt. 25th March, 2008 was dispatched to C-1/11. Humayun Road, New Delhi-03 by speed post on 29th March, 2008. We have perused the envelope and the postal receipt bears this statement to be correct. The Court cannot but presume that the postman had visited property No. 3, Survey No. 105, Nehru Road, Cantonment, Lucknow, Uttar Pradesh and was thereupon redirected to serve the notice at 5, Kalidas Marg, Lucknow, Uttar Pradesh. The postman's endorsements translated from Hindi reads thus:- 'Stated that the notice was not received at the official residence of the Chief Minister, 5, Kalidas Marg and was told to deliver it at the earlier written address, that is, property No. 3, Survey No. 105, Nehru Road, Cantonment, Lucknow, Uttar Pradesh'." (Emphasis, italicized in print, ours) 46. As it can be seen from above observat....
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....e deemed to be extended accordingly." 49. Thus, even if the date of issue or service of notice under s. 148 is considered, then the assessment was going to be time-barred on 14th April, 2009 and not on 27th Feb., 2009, as alleged by the AO, in the assessment order. It cannot be presumed that the AO is not aware of the provisions of the Act. He is an Act administration authority and is deemed to be well versed with the provisions of law and proviso to Expln. 1 is part of the Expln. 1. This Explanation has been referred to by the AO in para 12 of his order and the AO is computing the limitation with reference to that Explanation only. Probably, legislature being aware of the situation, that in a case where the stay/injunction is granted by the Court and even if the period of stay is excluded, then also the AO may not have the sufficient time to complete the assessment within normal statutory period, has enacted the first proviso to Expln. 1 to s. 153 whereby if the time available to AO, even after exclusion of period of stay, is less than 60 days, then the remaining period will be extended to 60 days. Thus, the period of 60 days has been considered to be sufficient by the l....
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.... where the AO is not inclined to accept the return for undisclosed income filed by the assessee, issuance of notice under s. 143(2) is a pre-requisite for framing the block assessment. If an assessment order is passed in such a situation without complying with s. 143(2), it would be invalid and not be mere irregular. Though the said decision was rendered with respect to provisions of s. 158BC, the decision is applicable to the main provision itself and it is clear from the following observations of their Lordships:- "We are of the view that s. 143(2) is a mandatory provision whether we look at it from the standpoint of a regular assessment or from the standpoint of an assessment under Chapter XIV-B." 52. It is further observed by their Lordships that issue of notice under s. 143(2) is not empty formality. It is a substantive right of the assessee to be presented with the fullest opportunity to support the return filed by him. If such right is denied to the assessee, it would amount to a travesty of justice apart from being in violation of the statutory prescription of s. 143(2) and 143(3). The relevant observations are reproduced below:- "However, wher....
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....e under s. 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under s. 143(2) cannot be dispensed with. The relevant observations are as under:- "An analysis of this sub-section indicates that after the return is filed, this clause enables the AO to complete the assessment by following the procedure like issue of notice under s. 143(2)/142 and complete the assessment under s. 143(3). This section does not provide for accepting the return as provided under s. 143(1)(a). The AO has to complete the assessment under s. 143(3) only. In case of default in not filing the return or not complying with the notice under s. 143(2)/142, the AO is authorized to complete the assessment ex parte under s. 144. Clause (b) of s. 158BC by referring to s. 143(2) and (3) would appear to imply that the provisions of s. 143(1) are excluded. But, s. 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under s. 143(2). However, if an assessment is to be com....
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....e said notice. Vide reply dt. 17th March, 2009, the assessee submitted that the return originally filed may be treated as return filed in response to notice under s. 148 and such statement was accepted by the AO. Thereafter, notice under s. 143(2) dt. 22nd April, 2009 was issued. The reason for reopening of the assessment was stated to be an information received by the AO from Investigation Wing at Ludhiana regarding gifts of Rs. 70,21,000 received by the assessee during the year under consideration. The gifts have been tabulated as under:- Sl. No. Name and address of the donor Date Amount 1. Shri Nand Kishore s/o Late Shri Muneshawar Ram, Village Shiori, P.O. Sihori, District Ghaziabad (UP) 4-9-2001 25,000 2. Smt. Gurcharan Kaur w/o Shri Ranjit Singh, A-27, Inderpuri, New Delhi 20-11-2001 23,33,000 3. Smt. Kulwant Kaur w/o Shri Gurbachan Singh, EF-6R, Inderpuri, New Delhi-110 012 3-12-2001 23,32,000 4. Smt. Swaran Kaur w/o Shri Jalora Singh, D-89, Naraina Vihar, New Delhi-110 028 3-12-2001 23,32,000 Total 70,21,000 60. According to the report of the Investigation Wing, three donor ladie....
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....g on the question No. 14 and answer thereto given in the circular, it was pleaded that the case of United Trading and Construction Co. (supra) shall have no bearing on the case of the assessee as the said case relates to earlier scheme of voluntary disclosure issued in 1965. 62. The AO disposed of such objections of the assessee by holding that the provisions of Scheme of 1965 and 1997 are pari materia and the decision of Hon'ble Supreme Court in the case of United Trading and Construction Co. (supra) will be applicable. The AO also discussed the financial status of all the three ladies individually and the provisions of Voluntary Disclosure of Income Scheme, 1997 and referring to various judicial pronouncements, he has come to the conclusion that the declarations made by the three lady donors were not in accordance with s. 64 of VDIS, 1997, therefore, benefit of question No. 14 and answer thereto as contained in Circular No. 754, dt. 10th June, 1997, could not be given in the case of the assessee. The AO referred to the questions and answers relating to earlier schemes i.e., Circular No. 180, dt. 15th Oct., 1975 and clarification dt. 17th Feb., 1986 and held that in view....
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....declarations were made by the creditors under the VDS. He held that as the gifts were received by the assessee in the financial year relevant to asst. yr. 2002-03 and in that year only the money came to the bank account of the assessee. The language of ss. 68 and 69 is clear to the extent that the unexplained deposit can be assessed in the year in which it is credited in the books of the assessee. 64. With respect to the objection of the assessee that Investigation Wing called the donor ladies to investigate about the declaration made by them under the scheme as no proceedings were pending against the assessee and Circular No. 754, dt. 10th June, 1997 prohibits such inquiry, learned AO has observed that such contention of the assessee is not correct. The Department was conducting the inquiries in accordance with the decision of Hon'ble Supreme Court in the case of Taj Heritage Corridor Project and, thus, the inquiry made by the Investigation Wing was a proper inquiry. 65. So far as it relates to the request of the assessee vide letter dt. 24th Dec., 2009 for permission to cross-examine a number of people like Shri Jaswinder Singh, village Sarpanch, three donor l....
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....nyone else, apart from the lady donors, opened the bank accounts relating to them. Thus, the AO observed that no purpose would be served by cross-examining Shri Rakesh Sharma in view of the fact that the case is going to be time-barred shortly, the request for cross-examining is denied. So far as it relates to the cross-examination of the officers who examined the donor ladies, etc., the AO observed that all the facts collected by those officials have been presented to the assessee for rebuttal and the assessee has exercised her option to rebut these facts, therefore, there is no need for further cross-examination of the officials. The AO observed that principles of natural justice have been adhered to and the assessee could not have any cause to complain about the manner in which the Department conducts its investigations. 66. Finally, the AO observed that the mere fact that the donees have declared this amount under VDIS, 1997 is not enough to hold that these gifts were explained in the hands of the assessee. There is sufficient evidence to show that the assessee played a significant role in opening of the bank accounts and declaration under section VDIS, 1997. The asse....
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....se is made by the Parliament that there will be a confidentiality of the declarations made, it was submitted that the inquiries made by the Investigation Wing, on which the AO has placed reliance, have become null and void due to s. 72 of the scheme. Further reference was made to questions and answers given in Circular Nos. 754 and 755, dt. 10th June, 1997 and 25th July, 1997 [(1997) 141 CTR (St) 1], Nos. 9, 11, 14, 15, 44 and 51 and it was submitted that the AO was wrong in stating that the declarations made by the three ladies were not covered by Circular No. 754, dt. 10th June, 1997. It was submitted that the gifts were made by the donors out of the bank accounts owned and operated by them. The amount deposited in the bank accounts of the donor ladies is covered by the Voluntary Disclosure Scheme and the amount remained deposited till the same was given to the assessee. The assessee was known to those ladies. Their statements were recorded by the Department and, therefore, it cannot be said that either identity or their capacity could be doubted and they have admitted to have made the gift and gift is through banking channel and is genuine, therefore, all the three ingredients o....
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....partmental officers, all the statements and inquiry indicate that the donors were from respectable family having their own house, business, agricultural income, etc. The donor ladies have also declared their income under VDIS, 1997 and held a valid certificate of declaration of income. The money declared was deposited in the bank account which remained in the bank account for four years and, therefore, the declaration of income and the credit of money in the bank account is a proof of creditworthiness which needs acceptance. Therefore, he allowed this ground of the assessee that the donors were having creditworthiness and capacity to advance the gift. 71. So far as it relates to the contention of the assessee that provisions of s. 69 could not be applied to the impugned amount, learned CIT(A) observed that keeping in view the fact of subsisting valid declaration and acceptance of the Department of the donor ladies in respect of VDIS, 1997, it could not be held by the AO that the declarations of the donor ladies were not in accordance with the provisions of VDIS, 1997. The affidavits filed by donor ladies and various statements made by them during the course of investigati....
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....s to claim the immunity by the assessee and it was held by Hon'ble Court that immunity under the scheme is confined to the declarants and it does not extend to any other party receiving gifts/amounts from the declarants. She submitted that the principles of law laid down in the said case are clearly applicable to the case of the assessee as, in to the present case, the assessee has received gifts from the declarants of VDIS, 1997 and the assessee has claimed immunity from investigation and, therefore, the case law in the case of Ratan Lal (supra) is applicable to the case of the assessee. 74. She further submitted that according to the decisions of Hon'ble Supreme Court in the cases of Hemlata Gargya vs. CIT (2003) 182 CTR (SC) 107 : (2003) 259 ITR 1 (SC) and Tanna and Modi us. CIT (2007) 210 CTR (SC) 273 : (2007) 292 ITR 209 (SC), when an assessee claims the benefit of exemption scheme, he is bound to apply strictly with the requirement of the scheme and further all the conditions precedent, otherwise such benefit may be denied to him. She submitted that in the instant case the AO has outlined a long list of false declarations and omissions by the three ladies in the dec....
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....ng the creditworthiness and financial capacities of the donor ladies, learned CIT(A) has greatly relied upon the statement of Sarpanch who had given the contrary statements at different points of time. She submitted that the CIT(A) failed to note that the Sarpanch had given his statement based on mere hearsay and there is no single piece of material evidence placed on record to substantiate his statement that the father of the three ladies was a man of good means and could afford to make gifts of that magnitude to his daughters. She submitted that the CIT(A) has ignored the plethora of evidence collected by the AO in this regard. He could not rely simply upon the statement of Sarpanch and, thus, the order of CIT(A) vide which it has been held that Shri Hari Singh was creditworthy is perverse. 77. She submitted that the assessee herself asked permission to produce Sarpanch of the village and also many other persons who were aware of the social status of late Shri Kanshi Ram and his family and when the assessee was given such opportunity to produce them on 24th Dec., 2009, the assessee, instead of producing those persons filed a petition requesting the Department to produce....
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.... 80. It was submitted by learned Authorised Representative that the three donor ladies were very close to the assessee and they have given gifts out of their own income which was declared by them in VDIS, 1997 on which the taxes were paid and declarations were accepted as such by CIT and necessary certificates were issued and subsisting. He submitted that vide copies of reply submitted before the AO at pp. 4, 10 and 16 of the paper book, the assessee had submitted all the facts and had enclosed various evidences in which the donors had confirmed the fact of having made gifts by way of affidavit and by way of statements recorded on oath and these gifts were out of sum declared in VDIS as back as 1997 and the amount was lying in their respective bank accounts since then. 81. Coming to evidence submitted in respect of each donor, learned Authorised Representative referred to the following pages of paper book:- Mrs. Kulwant Kaur:- (i) Page 136 which is copy of affidavit of Mrs. Kulwant Kaur, stating that the impugned gift has been made to the assessee. (ii) Paper Book pp. 148 and 149 being copy of bank pass book of Mrs. Kulwant Kaur showing th....
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....the declared cash of Rs. 28,60,000 has been accepted by the CIT. (iv) Pages 46 to 54 are the copy of statement recorded by the Department on 30th Jan., 2004 wherein she has stated that she knows the assessee and the assessee is a social worker and the gift was given as per wish of her father and the money was received by her from her father 10-12 years back. (v) Pages 121 to 125 contains the details of assets owned by Mrs. Kulwant Kaur. 82. Then, learned Authorised Representative carried us through submissions made before the AO and CIT(A). He referred to pp. 22 to 32 which are the submissions made before the AO vide letter dt. 24th Dec., 2009 the copy of which is filed at pp. 19 to 42 of the paper book regarding the creditworthiness of the donors and their father. Then, he referred to the submissions made before the CIT(A) vide letter dt. 18th March, 2010 copy of which is filed at pp. 175 to 229 of the paper book. 83. He submitted that a request was made to the AO for making available to the assessee the adverse material and such request was made as per submissions made before the CIT(A) and reference was made to pp. 208 and 209 of the paper....
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....es he relied upon the following decisions:- (i) UCO Bank vs. CIT (1999) 154 CTR (SC) 88 : (1999) 237 ITR 889 (SC); (ii) Union of India vs. Azadi Bachao Andolan and Anr. (2003) 184 CTR (SC) 450 : (2003) 263 ITR 706 (SC). 87. It was further contended by learned Authorised Representative that the AO has no authority to look into the validity of declarations issued by CIT under the VDIS, 1997 and in this behalf he has relied upon the following decisions:- 1. Nitin P. Shah Alias Modi vs. Dy. CIT (2005) 194 CTR (Guj) 306 : (2005) 276 ITR 411 (Guj); 2. Dy. CIT vs. Smt. Ranjit Kaur and Ors. (2003) 81 TTJ (Chd) 269; 3. Bhagwat Prasad vs. CIT (2003) 183 CTR (All) 626 : (2003) 263 ITR 119 (All); 4. Uma Corporation vs. Krishna Prabhakar, Asstt. CIT (2006) 204 CTR (Bom) 282 : (2006) 284 ITR 67 (Bom); 5. CIT vs. Uttamchand Jain (2009) 224 CTR (Bom) 473 : (2009) 26 DTR (Bom) 23 : (2010) 320 ITR 554 (Bom). 88. It was further submitted that the assessment order in itself is contradictory as the AO while deciding the issue against the assessee is relying upon the questions and answers given in respect of earlie....
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.... in the cases of Navnit Lal C. Javeri vs. K.K. Sen, AAC (1965) 56 ITR 198 (SC). 93. Without prejudice to the above arguments, it was submitted by learned Authorised Representative that even if the case of the AO is accepted that the gifts were the money of the assessee, then, the addition could not be made in the year of the deposits in the bank accounts of the donors and to support such contention he relied upon the decisions oi Hon'ble Delhi High Court in the cases of Sat Parkash Agarwal (supra) and CIT vs. Jauharimal Goel (supra). 94. He, however, submitted that the AO has misplaced reliance on the decision of Hon'ble Supreme Court in the case of Sumati Dayal (supra) as the AO despite the request of the assessee failed to provide opportunity to cross-examine the persons upon whose statements the AO has placed reliance and he submitted that case law relied upon by the AO and CIT(A) in this regard are also relied upon here. 95. Thus, it was submitted by learned Authorised Representative that the CIT(A) has rightly deleted the addition and his order should be upheld. 96. We have carefully considered the rival submissions in the light of the m....
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....h the scheme. To examine such aspect, one has to consider the judicial precedents available on this issue. 98. Reference in this regard can be made to the decision in the case of Nitin P. Shah (supra). In that case, it was the case of the AO that declaration made by the assessee was not in accordance with the s. 68(1) of VDIS, 1997, therefore, declarant was not entitled to immunity provided under the scheme. It was also observed by the AO that the declarant did not comply with the provisions of s. 64(l)(a) of the scheme. On this contention, it was observed by the Hon'ble Gujarat High Court that the CIT having issued certificate under s. 68(2) of the scheme, judicial discipline requires that the authorities entrusted with the administering the law proceed on the basis that the certificate granted by the CIT would indicate satisfaction of all the requisite conditions as required by the provisions of the scheme and it is not open to subordinate authority to sit in judgment over the certificate granted by the CIT. Their Lordships have referred to the decision of Hon'ble Supreme Court in the case of Gestetner Duplicators (P) Ltd. vs. CIT (1979) 8 CTR (SC) 371 : (1979) 117 ITR ....
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....nt fund satisfies all the conditions under r. 4 of Part A of the Fourth Schedule to the Act and not sit in judgment over it. There is ample power conferred upon the CIT under r. 3 of Part A of the Fourth Schedule to withdraw at any time the recognition already granted if, in his opinion, the provident fund contravenes any of the conditions required to be satisfied for its recognition and if during the assessment proceedings for any particular assessment year the taxing authority finds that the provident fund maintained by an assessee has contravened any of the conditions of recognition, he may refer the question of withdrawal of recognition to the CIT, but until the CIT acting under the powers reserved to him, withdraws such recognition the taxing authority must proceed on the basis that the provident fund has satisfied all the requisite conditions for its recognition for that year; any other course is bound to result in chaos and uncertainty which has to be avoided'." (p. 15) Therefore, it is not open to the AO to go behind the certificate issued by the CIT and by ignoring same, assess an income which has already borne tax under VDIS. 99. In the case of CIT vs.....
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....ns of the AO are contrary to the judicial discipline as the CIT, after having satisfied himself about the fulfilment of all the conditions, has granted the certificates to the declarants which are subsisting as on the date. Therefore, it is not permissible to the AO to go behind the certificates issued by the CIT and to hold that the declarations filed by the donor ladies were not valid. We find no infirmity in the findings recorded by CIT(A) that in view of the existence of valid certificates issued by CIT, the AO could not say that the declarations submitted by the declarant ladies were not in accordance with the scheme. 102. Now, coming to the second objection of the AO, there cannot be any dispute to the proposition that if the decision of apex Court/High Court is contrary to the view expressed in the circular/clarification, then, the decision rendered by the Court will have overriding effect and administering authorities and Courts working under their jurisdiction will be bound to follow the said decision in preference to the circular/clarification. Such proposition of law is now supported by the decision of Hon'ble apex Court in the case of Ratan Melting and Wire In....
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.... be the view of the Department, particularly whether the AO can investigate into the source of the amounts so credited? [Refer to Supreme Court decision in ITO vs. Ratan Lal and Ors. (1984) 38 CTR (SC) 382 : (1984) 145 ITR 183 (SC)]? Answer:- The declarant lady or minor should first credit the amount declared in their own books of account or any other record. Thereafter, the advance can be made to other persons. Where the amounts credited in the books of the other persons are equal to or less than the amount declared by the lady or the minor then the AO should accept the credit entries in the books of the firm. If the amount credited is more than the amount declared the AO will be free to enquire into such excess." 103. There was an apprehension in the mind of the public regarding the applicability of decision of Hon'ble Supreme Court in the case of ITO vs. Ratan Lal (supra) and therefore, doubts were raised as represented in question No. 14 and a question was raised that in the case of ladies and minors who are making declarations and amounts are later on credited in the books of account of the firms, etc., a clarification is needed as to what will be the view ....
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....the Department which resulted in an assessable income of Rs. 29,000 and Rs. 90,000 for asst. yrs. 1960-61 and 1961-62 respectively. The AO reopened the assessment for those years under s. 147(a) of IT Act, 1961. It was claimed by the assessee that losses of those years should be determined in the reassessment proceedings. Tribunal held that the original proceedings relating to losses had become final and since the items of loss were unconnected with the income escaping assessment to be assessed under s. 147, it was not permissible for the assessee to seek a review of the original order. The assessee placed reliance on the decision of Hon'ble Supreme Court in the case of V. Jaganmohan Rao and Ors. vs. CIT (1970) 75 ITR 373 (SC) and it was claimed that as per that decision the previous underassessment is set aside and the whole assessment proceedings to start afresh. Their Lordships of Hon'ble Supreme Court held that the decision in the case of V. Jaganmohan Rao vs. CIT (supra) cannot be read without the context. The principle laid down in that decision was only to the extent that once an assessment is validly reopened by issuance of notice under s. 22(2) of 1922 Act, the previous un....
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.... vs. Union of India (1971) 3 SCR 9 this Court cautioned:- 'It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment.' 38. Although, s. 147 is part of a taxing statute, it imposes no charge on the subject but deals merely with the machinery of assessment and in interpreting a provision of that kind, the rule is that construction should be preferred which makes the machinery workable. Since the proceedings under s. 147 are for the benefit of the Revenue and not an assessee and are aimed at garnering the 'escaped income' of an assessee, the same cannot be allowed to be converted as 'revisional' or 'review' proceedings at the instance of the assessee, thereby making the machinery unworkable." (Emphasis, italicized in print, ours) 105. In view of the above proposition of law explained by Hon'ble Supreme Court, it cannot be said that the decision of apex Court in the case of ITO us. Ratan Lal (supra) is applicable to VDIS, 1997 irrespective of the fact that the s....