TaxTMI 
TaxTMI 
2016 (2) TMI 630
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....assessee was in London. The Assessing Officer, served a notice under Section 143 of the Income Tax Act,1961 (hereinafter referred to as "the Act"), addressed queries to the assessee, obtained information through the Central Board of Direct Taxes, from the Inland Revenue, Great Britain, examined Dr. O.S.Gill but as he was not satisfied with the explanation proffered by the assessee, on the basis of material on record, held that the assessee has not been able to prove the genuineness of the gifts. The Assessing Officer, therefore, raised an inference, under Section 69-A of the Act and held that the gifts represent the income of the assessee and added these amounts to the income of the assessee. A protective assessment was made in the hands of Ms Monica and Ruchica Oswal. The assessee and his daughters filed separate appeals, which were partly allowed by the Commissioner of Income Tax (Appeals) by accepting the gift made by Dr. O.S.Gill but rejecting the gift made by Shri B.P.Bhardwaj. Aggrieved by this order, both the assessee and the revenue, filed separate appeals. The Tribunal, vide the impugned orders, accepted the appeals filed by the assessee and his daughters but rejecte....
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....on Bench. In my view, the following points of law need determination by the Court:- (i) Whether the assessee had discharged the onus of establishing that gifts of $200,000 made in favour of Ms Monica Oswal and Ms Ruchika Oswal through him by Shri O.S.Gill and Shri B.P. Bhardwaj were valid? (ii) Whether the amounts gifted by Shri O.S.Gill and Shri B.P.Bhardwaj to Miss Monica Oswal and Miss Ruchika Oswal are to be treated as the income of the assessee under section 69A of the Act?" At this stage, it would be appropriate to point out that neither the revenue nor the assessee have challenged order dated 8.4.2002 and have, in fact, prayed that questions framed vide order dated 8.4.2002, alone have to be answered. The appeals shall, therefore, be decided by answering the questions of law framed, on 08.4.2002. The nature of the questions framed, namely, whether onus to prove genuineness of gifts, has been discharged and whether these amounts are to be treated as the deemed income of the assessee under Section 69-A of the Act required an appraisal of the opinion recorded by the Assessing Officer, under Section 143(2) (i) or Section 143(2)(ii) of the Act, th....
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....Appeals) and the ITAT have shifted the onus to the revenue. As regards Mr. B.P Bhardwaj, the other donor, counsel for the revenue submits that the fact that he did not appear before the Assessing Officer, is by itself sufficient to answer the first question against the assessee. The fact that his account was verified by the Inland Revenue Great Britain or that money was received by a demand draft, is not sufficient to raise an inference regarding his financial capacity or the source of these funds or the bona fides of the gift, particularly as he stated that money was given to him by one Shri Varinder Sharma, who is an associate of the assessee. A further perusal of the statement made by the assessee reveals that there is no reference to any exchange of letters or gifts between the assessee and the donors. Both the Assessing Officer and the CIT (Appeals), therefore, rightly recorded that the assessee has failed to discharge his onus to prove the genuineness of the gift made by Mr. B.P.Bhardwaj but the Tribunal has reversed this finding by assigning perverse and arbitrary reasons namely:- verification from the Inland Revenue Services of Great Britain, which neither proves the gen....
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....ded by the CIT (Appeals) (in the case of Dr. O.S.Gill) and the Tribunal (in the case of both gifts) is plausible and, therefore, cannot be said to raise a substantial question of law. Counsel for the assessee further submits that Section 69-A of the Act is a deeming provision that places the initial onus on the revenue and then if sufficient material is available shifts the onus to the assessee but if the assessee adduces evidence and proves relevant facts within his knowledge, the onus reverts to the revenue to prove that facts disclosed by the assessee are incorrect or that the material on record is sufficient to raise an inference that the gifts reflect the income of the assessee. The Assessing Officer based his opinion primarily on the quantum, his ill conceived perceptions and drew an inference without referring to concrete facts. The Assessing Officer held that as B.P.Bhardwaj has stated that the amount was given to him by Shri Varinder Sharma and as Varinder Sharma is an associate of the assessee, the failure of the assessee to disclose the whereabouts of Varinder Sharma or disclose his address is sufficient to raise an inference that the gifts are the deemed income of th....
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....e revenue asserting that gifts made by Dr. O.S.Gill and Shri B.P.Bhardwaj have been wrongly accepted. The Tribunal, after referring to the principles for proving whether a gift is genuine or not held that, the Assessing Officer was required, at the out-set, to raise a doubt as to the genuineness of a gift by reference to material available before him. The onus, thereafter, shifts under section 69-A of the Act to the assessee to prove that the money, the jewellary and articles etc. received as gifts, are genuine. If thereafter the assessee fails to adduce credible evidence, to prove the genuineness of the gifts, the Assessing Officer may legitimately treat the gifts as the deemed income of the assessee, under Section 69-A of the Act. If, however, the assessee proffers a credible explanation, the onus reverts to the revenue to adduce evidence sufficient to raise an inference, under Section 69-A of the Act, that the gifts reflect the deemed income of the assessee. Counsel for the parties do not disagree with these principles but assert that the assessee has or has not discharged this onus, depending upon which side is addressing arguments. After holding as above, the Tribu....
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....ollowing specific replies:- "Q 11: Please give name and address/designation of the officer with whom you are assessed to income tax in U.K. Ans: I do not have the name of the assessing officer. However, my accountant knows the same. Q.12 Please let me know the bank account maintained in U.K. Ans: I maintain account with Midland Bank, however, I don't remember the account number which is maintained by our account department. Q : Have you brought with you the copy of your bank account out of which gift of 2 lac U.S dollars was made and can you produce any evidence in regard with to prove your creditworthiness. Ans. No, I have not got copy of bank account since I was not asked to produce the copy and evidence in regard with creditworthiness. 30.2 In our opinion, the replies given by Shri O.S.Gill were those expected from a person placed in his position, i.e., a NRI visiting India and deposing before the AO about a gift made to an Indian citizen. The statement has to be read as a whole and conclusions drawn and in the present case these cannot be adverse as Shri O.S.Gill has stated all relevant facts on oath reaffirming....
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....employee. The other allegation on the part of the revenue was that Sh. Jawahar Lal Oswal was the Managing Director of certain companies which were carrying on business with Russia and these were the unaccounted funds of such business which were coming back in the form of gifts. This allegation according to us is entirely in the field of suspicion, surmises and conjectures for which there is no room while invoking a deeming provision which assumes a position different from what is obvious. No evidence was placed on record by the revenue. For all intents and purposes Sh. B.P.Bhardwaj is treated as the donor as the gift has been given by him and this being an arrangement between him and Shri Varinder Sharma. 29.1 Another allegation on the part of the revenue was that Shri Varinder Sharma was physically present in the U.K on the relevant date when the gift was received by Shri Jawahar Lal Oswal on the basis of the power of attorney but there is no evidence for this allegation, the assessee Sh. Jawahar Lal Oswal denying and no such fact emerging from the enquiry made by Inland Revenue, U.K." A perusal of the impugned orders, particularly the extracts reproduced above, reveal....
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.... of Shri O.S.Gill and further delete the addition in respect of the gift of Sh. B.P.Bhardwaj." The Tribunal has also set aside the protective assessments made in the cases of Ms.Monica and Ruchica Oswal. Before answering the questions posed, it would be appropriate to record that suspicion and doubt may be the starting point of an investigation but can not, at the final stage of assessment, take the place of relevant facts, particularly where a deeming provision is sought to be invoked. The principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, invo....
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....e suspicion about their genuineness but was apparently so convinced of the nature of the funds that he forgot that he is dealing with a deeming provision and proceeded to initiate an inquisition instead of an inquiry. The assessee replied to the queries, addressed by the Assessing Officer, disclosed the identity of donors and denied that the gifts were his income. The assessee produced Dr. O.S.Gill, before the Assessing Officer, who stated that he had an annual income of $ 12,0000. The Assessing Officer was dissatisfied and sought information through the Central Board of Direct Taxes, which, in turn, sought information from the Inland Revenue Service, Great Britain. The information received, confirmed that Dr. O.S.Gill and B.P.Bhardwaj had accounts in Midland Bank, United Kingdom and the demand drafts were prepared by this bank. The income of Dr.O.S.Gill was verified. Dr.O.S.Gill appeared before the Assessing Officer and admitted the gift. As regards the gift made by Shri B.P.Bhardwaj, the latter did not appear before the Assessing Officer but his account was verified from the Inland Revenue Service, Great Britain. The question that arises from an examination of the material ....
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....ce and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions. It would also be necessary to reiterate that it is not perceptions but concrete facts that underline quasi judicial determinations and where concrete facts are not available, relevant facts, as would raise a credible inference of culpability requiring an assessee to rebut the inference so raised. More often than not, revenue authorities, for want of relevant material, institute "inquisitions", as opposed to inquiries and by addressing questions that the more inculpatory in nature, seek to build their case, from answers proffered by an assessee. The findings of fact recorded by the CIT (A) and the Tribunal regarding the gift made by Dr. O.S.Gill are plausible, though de....
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.... money of his donor. A suspicion may, however, arise that Shri Varinder Sharma was in some way connected with the assessee. The Assessing Officer was required to investigate this matter but for reasons that have not been spelt out or explained whether in the assessment order or by counsel for the revenue, did not investigate the matter any further and raised an inference against the assessee. The assessee having denied any connection or any knowledge about the whereabouts of Shri Varinder Sharma, the onus squarely fell upon the Assessing Officer to enquire into the matter and then by reference to some material establish the link between Varinder Sharma and the assessee, to raise a valid inference that the gifts reflect the income of the assessee. The revenue may have a credible argument based upon the fact that Shri B.P.Bhardwaj did not appear before the Assessing Officer or that he has stated that he has received money from one Shri Varinder Sharma, but it was for the revenue, to establish a link between Shri Varinder Sharma and the assessee, which, as already, recorded, it has failed to establish. At this stage, it would be appropriate to point out that to a specific query ....