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Kulbhushan Khosla Versus Commissioner of Income Tax

Reopening the assessment originally framed under Section 143 (3) - genuineness of the gifts and to scrutinize the corresponding entries in their books of account in their respective countries - Held that:- Below the office note, list of 16 donors has been set out. The office note states that in order to verify the genuineness of the gifts and to scrutinize the corresponding entries in their books of account in their respective countries, a detailed letter has been sent to the FTD Branch of the C .....

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ate on what basis the AO could form the “reasons to believe”, that for the AY in question any income has escaped assessment. What seems to have been overlooked by the CIT (A) as well as the ITAT is that the original assessment was framed after detailed questionnaires were sent to the Assessee and replies furnished by him thereto giving the details of all the donors as well as their affidavits. These were examined by the AO. The mere fact that the AO may not have mentioned in the assessment order .....

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D, it could not be said that there was any adverse material which could justify the formation of ‘reasons of believe’ within the meaning of Section 147/148 of the Act for reopening the assessment. - Decided in favour of assessee. - ITA 33/2004 - Dated:- 14-12-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Dr. Rakesh Gupta with Ms. Poonam Ahuja and Mr. Rohit Kumar Gupta, Advocates For the Respondent : Mr. Rohit Madan, Senior standing counsel with Mr. Akash Vajpai, Advocate ORDER D .....

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originally framed under Section 143 (3)? 3. The facts leading to the filing of the present appeal are that the Appellant-Assessee, Kulbhushan Khosla, filed his return for the AY 1994-95 on 14th November 1994 declaring an income of ₹ 3,36,970. The Assessee showed income from salary, business and other sources during AY in question. The Assessee had also done export business. 4. The return was picked up for scrutiny, and enquiries were raised by the Assessing Officer ( AO ) during the course .....

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g the AY 1994-95 from the donors from their concerned Non-resident external account is hereby enclosed along with certificate from the bank maintaining the non-resident external account of the respective donors. 5. A further reply was submitted by the Assessee pursuant to the hearing on 25th January 1996. In this reply he stated, with particular reference to the donors of the gifts, as under: 1. The donors are family friends for the last several years. 2. The bank certificates certifying the pay .....

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d affidavits before the Assessing Officer ( AO ). Harjinder Singh, resident of Darmstadt, Germany confirmed that he had gifted a sum of ₹ 3,25,000 to the Assessee out of natural love and affection on different dates. This was an affidavit dated 27th December 1993. A letter of confirmation from Deutsche Bank, New Delhi Branch addressed to Vijaya Bank, Bhikaji Cama Place, New Delhi with whom the Assessee had an account confirming the clearance of the cheques issued to the Assessee in his fav .....

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8377; 3,34,841. A perusal of the said assessment order reveals that the AO was satisfied with the explanation offered regarding the donors or the foreign donors of the gifts since there was no mention of that fact in the assessment order, although as noticed hereinbefore, detailed enquiries were made on that behalf. 8. On 9th February 2001, the AO addressed a letter to the Assessee informing him that the assessment was reopened on the basis of the valuation report received from the Departmental .....

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er 1994 should be treated as his return in response to the aforementioned notice. 9. At this stage it is necessary to examine the reasons for reopening of the proceedings under Section 147/148 of the Act. Two broad grounds were urged. One ground was the underestimation of investment in the construction of factory and shop in around two locations and the second ground was the receipt of foreign gifts. After considering the Assessee s explanation, that the properties in question were built in 1981 .....

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e total income of the Assessee. 10. In the appeal filed before the Commissioner of Income Tax (Appeals) [ CIT (A) ] the validity of the above addition was examined. In the order sheet dated 7th December 1998 it was inter alia noted by the AO as under: Further the Assessee had during the year under consideration received foreign gifts amounting to ₹ 22,55,000 in his name and in the names of Anil Khosla, Rakesh Khosla, Yogesh Khosla and Virendra Khosla. It is also seen that during the AY 93- .....

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of notice under Section 148. 11. The Assessee did point out that all the information in his possession had already been disclosed by him during the original assessment proceeding and that unless some new information had been received by the AO regarding the NRI gifts, he would not file any further details. The CIT (A), however, viewed that as an attempt to block further investigation in the matter and detract the attention of the AO from the main issue. The CIT (A) took the view that the said i .....

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ere vague, indefinite, farfetched or remote. Accordingly, the addition was upheld. 12. The Assessee then appealed to the ITAT. By the impugned order dated 22nd May 2003, the ITAT upheld the orders of the AO as well as the CIT (A). It was noted by the ITAT that the AO had made a reference to the Foreign Tax Division ( FTD ) of the Central Board of Direct Taxes ( CBDT ) for making inquiries abroad about the real identity and financial status of the donors. As the inquiries were pending and the ass .....

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CIT (A) and concluded that: nothing prevented the Assessing Officer in the initial assessment from perusing the evidence which had been placed before him and his initial duty was to peruse such evidence and come to the conclusion whether onus which lay on the Assessee had been discharged or not. This exercise does not seem to have been carried out. The other course, which was open to the Assessing Officer was to have accepted the Assessee s stand and not making an addition and vis-a-vis the offi .....

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material from the FTD. ITAT held that a mistake committed by one Assessing Officer cannot be perpetrated and in case the office note is in direct conflict with a legal provision it cannot bind the successor Assessing Officer, who if he feels that an item of income had escaped assessment, then he bound to act with reference to a provision of law and not allow the proceedings to lapse only because the report of the FTD as in the present case is not receive. 15. This Court has heard the submission .....

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, New Delhi who guided me to make a reference to the F.T.D. Branch to ascertain the genuineness of these NRI gifts. Also make reference to the valuation cell to ascertain the correct value of the assets for Health Tax Purposes. It has been observed that the Assessee has received huge gifts from NRI's last year relevant to the Asst. Year 1993-94, the gift received have been declared ₹ 6,75,000 and in this year he has shown at ₹ 5,65,000 investigations were made from the banks and .....

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anything achieve received from the FTD (Foreign Tax Division) Branch the assessment shall be reopened . In other words, the reopening of the assessment was made contingent upon some material being received from the FTD. It is not denied by the Revenue that till date no such adverse material qua the Assessee has been received from the FTD. 18. In the absence of any material, as anticipated by the AO in the office note, it is difficult to appreciate on what basis the AO could form the reasons to .....

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n that he did not pay attention to the materials before him. There was no warrant for the ITAT to have drawn such presumption. In fact the affidavits of the donors coupled with the confirmation letters of the Bank, as noted hereinabove, were materials touching upon the aspects of genuineness of the identity of the donors. Unless there was material which controverted the said documents produced by the Assessee in the form of the report of the FTD, it could not be said that there was any adverse m .....

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change of opinion of the AO that some income had escaped assessment. This was impermissible under Section 147 of the Act. 20. As noted by the decision of this court in CIT v. Multiplex Trading & Industrial Co. Ltd. (decision dated 22nd September 2015 in ITA 356/2013), it would be impermissible for the AO to reopen the assessment unless the AO, on the basis of credible and tangible material, which was not in his possession during the initial assessment, believes that income of the Assessee h .....

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