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The Commissioner of Income-tax (Central) Ludhiana Versus Shri Jawahar Lal Oswal and Others

2016 (2) TMI 630 - PUNJAB AND HARYANA HIGH COURT

Genuity of gift - whether gifts represent the income of the assessee? - Held that:- The Tribunal has held that there is no evidence or material to link Varinder Sharma to the assessee and that findings have been recorded on mere suspicion, conjectures and surmises. The Tribunal has also held that the assessee, who accepted the gift for and on behalf of his daughters, was not privy to any information regarding the source of funds with Mr. B.P.Bhardwaj. One cannot be oblivious to the fact that suc .....

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eived from the Central Board of Direct Taxes from the Inland Revenue Service, Great Britain and failed to follow the matter any further with respect to Shri Varinder Sharma and on the basis of suspicion, held that gifts are not genuine. Having already held that it was for the revenue to proceed to investigate the matter further, I find no error in the opinion recorded by the Tribunal, which has been reproduced in detail in preceding paragraphs or that in the facts and circumstances of the case, .....

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Rajesh Katoch, Advocate For The Respondent : Mr. Sanjay Bansal, Senior Advocate with Mr. B.M.Monga, Advocate RAJIVE BHALLA, J. The revenue has filed Income Tax Appeal Nos.48, 49, 169 of 1999 and GTA 10 of 2004 challenging orders passed by the Income Tax Appellate Tribunal, Chandigarh (for short the Tribunal ). As the controversy and the substantial questions of law are common to all appeals, facts are being taken from ITA No. 49 of 1999. The dispute in hand, briefly put, relates to the genuinen .....

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reat 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 .....

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genuineness of the gifts. The Tribunal has held that the revenue has not brought forth any credible material that would raise an inference under the deeming provision of Section 69-A of the Act that the gifts represent the income of the assessee. The appeal against orders imposing gift tax was decided in terms of the order passed by the Tribunal. The revenue filed four appeals, one in the case of Jawahar Lal Oswal, two each in the case of his daughters and the fourth pertaining to gift Tax. The .....

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wered. The respondents, however, urged to the contrary and prayed that the matter may be decided by ascertaining and answering the divergence of opinion. After examining the divergent opinion, it was held that though points of divergence have not been spelt out, this discrepancy is at best, a technical irregularity and after examining the divergent opinion, fresh questions of law can be framed and answered. A relevant extract from order dated 08.4.2002 reads as follows:- In my opinion, failure o .....

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is held that omission on the part of the Division Bench to state the point of law is inconsequential and the appeals deserve to be heard with reference to the questions of law which arise from the order of the Tribunal and the divergent opinion expressed by the Hon'ble members of the Division 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 Oswa .....

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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, the queries addressed to the assessee, r .....

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t $200,000, each for and on behalf of his daughters Ms. Monica Oswal and Ruchika Oswal, from Dr. O.S.Gill and Shri B.P.Bhardwaj, respectively, in London. The onus to prove that the gifts are genuine and not a mere devise to evade tax, lay upon the assesssee. The assessee has failed to discharge this onus by producing any tangible evidence that would even remotely prove the genuineness of the gifts. The assessee has failed to prove that the donors had a close relationship, whether personal or pro .....

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e has an annual income of $120000 is not sufficient to discharge the onus or prove the genuineness of the gifts, particularly in the absence of any evidence of any relationship, or business dealings. The answers proferred by Mr. Gill to queries addressed by the Assessing Officer are vague and unclear and though Dr. O. S.Gill has proved that he was drawing an annual salary of $ 120000 and came all the way from England to depose before the Income Tax Officer but as he could not disclose his bank a .....

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t 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 t .....

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Services of Great Britain, which neither proves the genuineness of the gifts nor the capacity of the donor to make such a gift or a relationship between the parties. The donors may have stayed with the assessee on two occasions but this merely proves a causal relationship and nothing more. The argument that gifts were made, out of love and affection to the daughters on occasion of their wedding, is too far fetch to believe, as the amounts gifted are too large. Counsel for the revenue further su .....

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deemed income. Counsel for the assessees submits that the Commissioner of Income Tax (Appeals) has rightly accepted the genuineness of the gift made by Dr.O.S.Gill. The Tribunal has also affirmed this finding and dismissed the appeal filed by the revenue. The Tribunal has recorded detailed reasons after appraising the entire record and as the process of reasoning and the reasons assigned are legal, valid and plausible, the impugned orders do not call for interference. Counsel for the assessee s .....

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cannot be set aside by reappreciating evidence. An appeal under Section 260A of the Act confines consideration to appraisal of impugned orders to ascertain whether the process of reasoning and the reasons assigned are perverse, arbitrary, contrary to law and give rise to a substantial question of law. The fact that two Hon'ble Judges of this Court recorded divergent opinion, on the same facts, is indicative of the fact that the opinion recorded by the CIT (Appeals) (in the case of Dr. O.S.G .....

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e 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 .....

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eabouts of Shri Varinder Sharma and only if Shri Varinder Sharma was proved to be an employee or an associate of Shri Jawahar Lal Oswal, could the Assessing Officer raise an inference that the gifted amount is the deemed income of the assessee. The Assessing Officer could not call upon the assessee to prove the source of the money with Shri B.P.Bhardwaj. The learned Tribunal has, therefore, rightly reversed the orders passed by the Assessing Officer and the CIT (Appeals) and has affirmed the gen .....

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of Income Tax, Central Circle-V, Ludhiana, exercising the power of the Assessing Officer, called upon the assessee to prove the genuineness of gifts received for and on behalf of his daughters. The Assessing Officer addressed various queries to the assessee, collected evidence and one of the donors Dr. O.S.Gill appeared in evidence. The Assessing Officer rejected the explanation and evidence adduced by the assessee and by invoking Section 69-A of the Act, raised an inference that the amount rece .....

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rdwaj has been wrongly rejected and the 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 jewe .....

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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 Tribunal went on to hold as follows:- 30 Coming to the two gifts in question, we will first take up the case of Shri O.S.Gill and see the nature of evidence placed on record which is as under:- 1. Memorandum of Gift dated 22-3-94 written in London confirming the gift of $ 200000 .....

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which it was drawn. 5. Reconfirmation of the gift vide letter dated 24-5- 96 filed by the donor with the A.O. 6. Relevant extract from the Passport of the donor showing that he was a British citizen. 7. Copy of Special Power of Attorney given by Miss Ruchika Oswal authorising her father Sh.Jawahar Lal Oswal to receive the gift on her behalf in London and the confirmation of this by the donor Shri O.S.Gill. In addition, the Inland Revenue also investigated the matter and did not find anything adv .....

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n a visit to India was examined by the AO and his statement was also recorded. According to the AO the financial capability of Shri O.S.Gill was not proved as he did not file any evidence to prove his creditworthiness. The specific reference was to the copy of the bank account and income tax assessment order. It must be appreciated that Shri O.S.Gill was on a visit to India and could not be carrying such documents with him expecting that he would be asked to file these with the A.O. On being ask .....

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ccount 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 .....

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e non appearance of the said person before the AO in India whereas Shri O.S.Gill the other donor deposed and his statement was recorded. As already stated by us the main fact which weighed in the case of Sh. Varinder Sharma but we have already dealt with this aspect of the matter at length earlier in this order. At this stage, it would be appropriate to reproduce findings recorded by the Tribunal with respect to the gift received from Shri B.P.Bhardwaj:- 28. In the present case, the Inland Reven .....

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March 1994. The funds were provided by Mr. Varinder Sharma of Flat 184, Building 9A, Raminki Moscow. Mr. Sharma arranged the draft and gave it to Mr. Bhardwaj. Mr. Bhardwaj handed it over to Miss Oswal s father who was at the time passing through London. 29. What has weighed with the AO and the CIT(A) is the reply allegedly given by Shri B.P.Bhardwaj that the funds were provided by Shri Varinder Sharma of Moscow. It must be appreciated that neither the AO nor the assessee participated in the enq .....

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is 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 .....

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see 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 that the Tribunal has, after an appraisal of the evidence, the questions put and answers proffered by the assessee, the material received from the Central Board of Direct Taxes, i.e., the bank statements, the documents received from the Inland Revenue Service, Great Britain, the statement made by Dr. O.S.Gil .....

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wal, the only connection which he had with the gifts was that he received these in U.K. being authorised to do so by his daughters who were the donees. The moneys were deposited in the bank accounts of the daughters who were majors and there was nothing on record to show that Sh.Jawahar Lal Oswal was the beneficiary in any way. The entire documentary evidence mentioned the names or the daughters and there was not an iota of evidence brought on record by the revenue to prove that Sh.Jawahar Lal O .....

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Jawahar Lal Oswal. 44 The CIT(A) has drawn some distinction between the gifts of Sh. O.S. Gill and Sh. B.P.Bhardwaj but even if both of these are considered on the touchstone of section 69A, the entire addition stands to be deleted. As regards the distinguishing features, i.e., the role of Sh.Varinder Sharma and the non appearance of Shri B.P.Bhardwaj before the A.O. in India, we have already dealt at length with the effect on the gift. 45 In the final analysis, we uphold the action of the CIT(A .....

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ming 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 an .....

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e quantum shall determine the exercise of jurisdiction by the Assessing Officer. The above exposition shall not be misconstrued to restrict the power of the revenue to raise an inference as to the efficacy of material produced by or before the Assessing Officer. At this stage, it would also be necessary to deal with the submissions regarding jurisdiction under Section 260A of the Act. The exercise of appellate power under Section 260A of the Act is statutorily circumscribed by the word substanti .....

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ings are so incomprehensible as to be perverse and/or arbitrary. If, however, the findings admit to two views and the view adopted by the Tribunal is plausible, though debatable, a court exercising power under Section 260-A of the Act, must desist from substituting its own opinion for the opinion of the Tribunal. The quantum of tax or the alleged amount of evasion are irrelevant as what is relevant is the substantial question of law that arises for adjudication. The first substantial question of .....

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he Assessing Officer may have been right in serving a notice and initiating an investigation as these large monetary gifts would raise 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. .....

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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 on record and the findings recorded by the Tribunal, which have been reproduced in detail in preceding paragraphs, particularly in the context of the questions of law framed .....

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t made by B.P.Bhardwaj. The findings are neither perverse nor arbitrary and may, if at all, be debatable. Dr. O.S.Gill appeared before the Assessing Officer, his income and accounts were verified from the Inland Revenue Service, Great Britain but the Assessing Officer drew an inference against the assessee as Dr. O.S.Gill could not disclose his account number, his answers were held to be vague and there does not appear to be any such relationship between the parties that would warrant such a lar .....

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m the basis for raising an inference against an assessee. The Assessing Officer was apparently over-awed by the amount of the gift and, therefore, proceeded to base his opinion on his perception that no one would gift such a large amount. A deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly rai .....

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f 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 a .....

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swered against the revenue as regards the gift made by Dr. O.S.Gill. As regards the gift made by B.P.Bhardwaj, a perusal of orders passed by the Assessing Officer and the CIT (Appeals) reveal that the reasons assigned by them for rejecting the gift made by Shri B.P.Bhardwaj are, firstly, failure to produce Shri B.P.Bhardwaj, secondly that B.P.Bhardwaj stated that the money was given to him by Shri Varinder Sharma and other reasons that are similar to the reasons assigned in the case of Dr. O.S.G .....

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ction with Sh. Varinder Sharma. The assessee denied any association, business or otherwise with Shri Varinder Sharma but admitted that Shri Varinder Sharma was known to him. The onus, therefore, shifted to the revenue to prove that Shri Varinder Sharma was an associate or an employee and only thereafter could the revenue raise an inference that the assessee had routed his funds through Shri Varinder Sharma, in the garb of a gift drawn in the name of his daughters. A perusal of the record reveals .....

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nor and another is an arrangement between the donor and his source of money. The onus to probe and prove this aspect lies upon the revenue and not upon the assessee, particularly where the income is being dealt with under a deeming provision. A person who receives a gift, is not required to prove the source of the 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 .....

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se 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 specif .....

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ts. The assessee disclosed the identity of the donors, the Assessing Officer collected information from the Inland revenue, B.P.Bhardwaj made a statement that Varinder Sharma gave him the money, the assessee was asked to disclose the whereabouts of Varinder Sharma but the Assessing Officer rejected the gift by holding that Varinder Sharma is an associate of the assessee, without reference to any material or evidence before him. The Assessing Officer would have been justified in raising such an i .....

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