TMI Blog2017 (9) TMI 1914X X X X Extracts X X X X X X X X Extracts X X X X ..... the declaration so made before the ITO, Mumbai affects his jurisdiction and such declaration cannot be accepted? - As coming to the Circular issued in 1969, wherein it is clearly provided that Indians migrating from Pakistan were not required to produce documentary evidence in support of their claim for transfer of money and personal jewellery but had to prove the resources in Pakistan to which such money or jewellery could be reasonably attributed. We find merit in the order of CIT(A) in this regard in holding that the Income Tax Officer at Mumbai is a functionary of the Income Tax Department. We hold that he is competent to receive the said declaration and to issue certificate in this regard. Even if there is default in filing the said declaration before the ITO in Mumbai but the default is of venial breach in nature and does not affect the declaration so made by the assessee and the subsequent order passed by the ITO, Mumbai - vide said certificate after having considered all the facts of the case and on going through the documents produced, stated that the declaration made by the above person is accepted. In the said certificate, the Assessing Officer referred to the CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey was transferred and brought into India cannot be looked into by the Assessing Officer, in view of clear-cut guidelines issued by the CBDT and once the assessee is holding requisite amount of cash balance in her bank account, out of which the assessee claims that she had brought the money into India in cash, then the availability of such cash stands explained and does not warrant any addition under section 68 Whether the said amount has been brought into by hawala transaction or hawala means or not? - Admittedly, the transactions through hawala are not to be accepted as such but in the absence of any direct banking facilities between India and Pakistan, modes other than the banking channels are used for the transfer of funds by the migrants from Pakistan to India. The assessee had sought her migration to India because of compelling circumstances, where she has migrated along with her five children. The learned Authorized Representative for the assessee clarified that the husband of assessee is still in Pakistan but on her migration for her settlement, she brought the said cash through unauthorized channels; but in the absence of banking channels between Pakistan and India, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the case of Revenue that the said transfers in the name of purchasers was made without taking consideration due for the said transfers. We find no merit in the plea of learned Departmental Representative for the Revenue in this regard and dismiss the same. We uphold the order of CIT(A) in deleting the aforesaid addition under section 68 - Decided in favour of assessee. - ITA No.1565/PUN/2015 - - - Dated:- 27-9-2017 - MS. SUSHMA CHOWLA AND SHRI ANIL CHATURVEDI, JJ. Appellant by : Shri Ajay Modi Respondent by : S/Shri Nikhil Pathak and Deepak Sharma ORDER PER SUSHMA CHOWLA, J. The appeal filed by the Revenue is against order of CIT(A)-2, Aurangabad, dated 30.09.2015 relating to assessment year 2010-11 against order passed under section 143(3) of the Income Tax Act 1961 (in short the Act ). 2. The Revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case the CIT(A)-2, Aurangabad has erred in deleting the addition made on account of unexplained cash credit u/s 68 of the IT Act at ₹ 2,71,00,000/-; 2. On the facts and in the circumstances of the case the CIT(A)-2 Aurangabad has erred in taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ornaments and jewellery valuing about ₹ 22,01,500/-. In this regard, the assessee explained that she had filed declaration about bringing the cash and jewellery both before the ITO, Ward 22(1)(2), Mumbai on 15.09.2009 in terms of Board Circular F.No.73/16/68-IT(A-II), dated 03.02.1969. The assessee further contended that Hindus in Pakistan were suppressed class and were under the tremendous religious compulsions and inhuman treatment was given to them by the Pakistanis. In the circumstances, the Hindus do not disclose their migration to India, because they fear for their life, safety and security of their families. It was further pointed out that safe passage was not allowed to them neither by the civilians nor by the Pakistan authorities. Further, there was no rule of law so far as income tax and other revenue laws were concerned and they were hardly any obligations to file regular returns, etc. since that lead to disclosing the financial position, which was again exploited with kidnappings, extortions and death threats. It was pointed out that keeping these aspects in mind, the Board had instructed the Department that the persons migrating from West Pakistan to India need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claration, if any, filed by her before the Customs authorities under the Baggage Rules for bringing hard currency and jewellery into India, etc. 5. The Assessing Officer from the copy of declaration made noted that the assessee had mentioned the address of flat at Ghatkopar. She was asked to furnish full name of the person who owns / stays in the said flat and also to explain her relationship with him and also to produce certain proofs such as electricity bills, municipal corporation bills, etc. to show that at the given address, flat really exists. Besides, another discrepancy was noted in the copy of declaration filed before the ITO, Mumbai and certificate issued by him. The certificate mentions that the assessee had filed the declaration on 30.07.2009 while the copy of declaration acknowledged by his office bears date of 15.09.2009. The assessee was asked to explain the discrepancy in dates also. The assessee in this regard furnished copies of LTVs, Residential Permits, etc. As for the declaration made under the Baggage Rules, she contended that she had made no such declaration. As regards the date in the Mumbai ITO s certificate, she explained that it was simply an inadverte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to reasonably satisfy that the assessee had sufficient resources in Pakistan to cover the amount of money and jewellery brought into India. The Assessing Officer referred and reproduced Board s Circular dated 03.02.1969 at pages 8 and 9 of the assessment order and was of the view that it divides migrant assessees into two categories viz. (i) those who bring into India cash / jewellery up to ₹ 50,000/- and (ii) those who bring into India cash / jewellery exceeding ₹ 50,000/-. Further, the Assessing Officer noted from Board s instruction that there was no requirement to produce documentary evidence in support of their claim for transfer of money and jewellery brought by them subject to two conditions; (a) that she / he had sufficient resources in West Pakistan to which the money / jewellery brought into India could be reasonably attributed and (b) she / he gives intimation about the money / jewellery brought by him/her and all his/her family members and its introduction in the books of account, within two months from his / her arrival. The Assessing Officer was of the view that the assessee had to establish existence of sufficient resources in West Pakistan, to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no merit in the aforesaid addition. The CIT(A) remitted the matter back to the file of Assessing Officer with direction to verify the assessee s contentions and claim and furnish his report. The Assessing Officer vide report dated 28.04.2014 stated that the assessee must come out with truth of modus operandi of how the huge sums were transferred from Pakistan to India when there were no banking channels between India and Pakistan. He also stated that the assessee had failed to make any explanation even in the appeal filed and the addition made under section 68 of the Act deserved to be confirmed. The CIT(A) first referred to the Circular which is reproduced under para 8 at pages 9 and 10 of the appellate order and pointed out that the Circular was issued keeping in mind the concerns of migrant persons who were migrating from Pakistan, where they live a troubled life. The Circular was specifically issued for specific purpose that such migrants need not require to produce documentary evidence in support of their claim for transfer of money and personal jewellery brought by them and their family members from Pakistan. Reference was made to unequivocal contents of Circular. The CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as against jurisdictional Assessing Officer at Aurangabad, the CIT(A) dealt with the issue in para 10 and observed that there was no mischief in the fact that the assessee had filed her declaration before the ITO at Mumbai, where he was also a functionary of the Income Tax Department and was competent to receive information and issue certificate. The belief of assessee was that the said declaration could not be filed with Income Tax Department at Aurangabad was held to be technical violation which could not make the said declaration filed before the ITO, Mumbai to be invalid, void or bad in the eyes of law. The subsequent order accepting the said declaration also could not be said to be invalid, where the competent Officer mentioned in Circular means any officer of the Income Tax Department, who was technically competent to receive such information and pass orders, was the proposition laid down by the CIT(A). He further held that it was mere a venial breach which does not have adversarial effect on the declaration made and the subsequent order passed by the ITO, Mumbai. With regard to comments of Assessing Officer on the financial statements filed by the assessee, it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crease in prices. Another doubt raised by the Assessing Officer was that the bank accounts of assessee do not reflect any receipt on account of consideration and all credits were on account of internal transfers was looked into by the CIT(A) and the contention of Assessing Officer was found to be incorrect. The CIT(A) noted that bank accounts reveal that the assessee had received ₹ 4.38 crores out of which, she herself had withdrawn ₹ 4.30 crores vide cheque No.2995081 drawn on Muslim Commercial Bank, Marich Baazar Branch, Sukkur on 25.07.2009. The assessee also produced the certificate from the said bank that the aforesaid withdrawal was cash withdrawal. The CIT(A) held that in view of clinching evidence in support of assessee s contention that she had sufficient resources to cover the amount of ₹ 2.70 crores brought into India and declared before the Assessing Officer in Mumbai, hence the plea of assessee in this regard was accepted. The CIT(A) held that where the assessee was having sufficient bank balance as on the date of withdrawal and whether the cash was drawn by her or through her agent or through anybody for accommodation, against which she received cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreements. The learned Departmental Representative for the Revenue after taking us through factual aspects of the case pointed out that the deposits were made on 04.09.2009 in Saraswat Bank, Aurangabad i.e. before making any declaration. The declaration was filed before the ITO, Mumbai on 15.09.2009, copy of which is placed at page 379 of the Paper Book and the Assessing Officer accepts the declaration, copy of which is placed at page 381 of the Paper Book. The learned Departmental Representative for the Revenue took us through the observations of Assessing Officer at pages 10 and 11 and pointed out that the Hon ble High Court of Madras had also decided the issue on the basis that resources were available in Sri Lanka. However, the assessee had miserably failed to explain the availability of sources in her hands before the Assessing Officer and hence, the addition in the hands of assessee. 11. The learned Authorized Representative for the assessee in reply, pointed out that the declaration was made before the ITO, Mumbai, who in turn, issued certificate, since the ITO at Aurangabad had refused to take her declaration. The learned Authorized Representative for the assessee how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arded to the Assessing Officer and in the remand report, he has not further commented on the same. He again referred to the bank statement placed at page 383 and stressed that since the assessee had sufficient amount in her bank account, resources has been proved and there is no merit in the order of Assessing Officer. The learned Authorized Representative for the assessee pointed out that in assessment year 2010-11, the assessee was though resident in India, but was not an ordinary resident and as per proviso to section 5 of the Act, only income in India was taxable in the hands of assessee. 12. Another aspect raised by the learned Authorized Representative for the assessee was the theory of probability, wherein jewellery which was brought into India by the assessee has been accepted but the cash declared has not been accepted. The learned Authorized Representative for the assessee pointed out that both the cash and jewellery was declared simultaneously before the ITO, Mumbai, who issued a certificate in this regard. However, the Assessing Officer while completing the assessment has only questioned the cash and had not made any addition on account of jewellery brought into Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee claimed that she had brought into India sum of ₹ 2.71 crores in cash and jewellery weighing 1387.50 grms. approximately worth ₹ 22,01,500/- at the time of migration. The assessee explained the resources for the said cash brought into India to be out of property and business sold by the assessee and her husband. The details of the same are as under:- (1) Amount received on sale of property at R.S. No.268, Deh Old Sukkur, Shikarpur Road, Sukkur, representing her 40% share in the firm of M/s. G.N.S. CNG Station ₹ 2,00,00,000/- (2) Amount received from her husband Shri Kotoomal Esrani on sale of property bearing C.S. No.2088/A, Ward B, at Rohri, Dist. Sukkur, representing his 40% share in B.N.S. CNG Station, Rohri, for ₹ 2,00,00,000/- ₹ 1,50,00,000/- (3) Amount received from her husband Shri Kotoomal Esrani on sale of his flat No.301, In Sellani Guardian, situated at Bihar Musli C.H.S Block No.3, Karachi, for ₹ 1,10,00,000/- ₹ 1,10,00,000/- ₹ 4,60,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are satisfied, viz. i) that the person concerned had sufficient resources in West Pakistan to which the money s/personal jewellery brought to India could be reasonably attributed; ii) that an intimation about the money's/personal jewellery brought over by such person and all his family members and the date(s) of their introduction in the books of account, has been given to the concerned ITO within two months of the date of his/her arrival in India, and in the case of persons who have already migrated to India, by 31st March, 1969; iii) the aggregate value of the cash and/or personal jewellery brought by the migrant and the members of his family does not exceed ₹ 50,000/- 2. However, where the amount of moneys/value of jewellery brought into India, exceeds ₹ 50,000 or where the person has some sources of income either in India or in any foreign country other than West Pakistan, prior to migration or where he/she was assessed as resident in India whether for the assessment year preceding the year in which he/she migrated or for either years, he/she will be required to produce adequate evidence, like any other assessee, to reasonably satisfy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we are also of the opinion that it would be rather unjust to enforce against the appellant, the provisions of FERA, applicable as per paragraph 7D4 of Chapter 7 of ECM (Government of India's Notification No.F1/107/EC/73,. dated 1st January 1974, issued under powers conferred by Section 13(1) of FERA 1973). Further, it is also a fact that one department of Government of India (Income Tax Department) has already regularized the issue, by assessing the money/wealth brought in by the migrants. In the circumstances, Enforcement Directorate may consider advising the migrants to obtain post-facto approval from reserve Bank of India for regularizing the action from FERA angle. 19. Now, coming to the Circular issued in 1969, wherein it is clearly provided that Indians migrating from Pakistan were not required to produce documentary evidence in support of their claim for transfer of money and personal jewellery but had to prove the resources in Pakistan to which such money or jewellery could be reasonably attributed. In this regard, another condition was to give an intimation to the concerned Assessing Officer within period of two months from the date of his / her arrival and whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, she came to settle permanently in India and she brought in sum of ₹ 2.71 crores in cash and gold ornaments jewellery weighing 1387.50 grms. In support thereof, she produced the passport, Visa and RP number. 20. Now, let us come to the next stand of Assessing Officer in not accepting the declaration made by the assessee on the ground that the assessee did not prove that it had transferred the assets which it claims to have sold by her and her husband. The case of Assessing Officer was on the basis of said documents being not registered and various documents not being filed. In this regard, at the outset, it may be pointed out that the explanation of assessee before the CIT(A) was that after the documents were filed before the Assessing Officer, no further query was raised and no further explanation was filed, in the absence of the same, no further documents were filed. However, before the CIT(A), the assessee filed various documents and evidences to prove that the business was being carried out in the firms and the assessee was running CNG stations which were giving good returns to the assessee and also one of the stations was sold by the assessee and another by her hu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty Husband s Flat, as stated above, has been transferred in the name of purchaser in the records of the housing society. It is also a common knowledge that transfer of property would not be effected till the seller receives the entire sales consideration. Therefore, though the assessee has not produced the details of bank account effectively showing the entries of amounts received from buyers, it will be inconceivable to imagine that the properties in question stood transferred in the names of buyers without consideration having passed through to the sellers of the properties in question. 21. The Assessing Officer had also noted that the credits in the bank accounts were internal transfers and hence, do not reflect receipts on account of considerations. In this regard, the CIT(A) referred to the bank statements of Muslim Commercial Bank, Marich Bazaar Branch, Sukkur, wherein transactions on various dates i.e. 15.07.2009, 24.07.2009 and 25.07.2009 clearly declared the credits received from different bank accounts. The perusal of bank statements reflects the assessee to have received ₹ 4.38 crores out of which sum of ₹ 4.30 crores was withdrawn on 25.07.2009 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued by CBDT in this regard and the Reserve Bank of India in its letter to the Asst. Director (FERA) had insisted upon a lenient and liberal view in such circumstances in respect of such monies brought into India. The Hon ble High Court of Madras in S.R. Lakshmanan Vs. CIT (supra) had held that if resources were established to have been available in Sri Lanka, then the manner in which those resources were repatriated to India, though not recognized as one, would not be questioned, but would be accepted. In the case of ITO Vs. Shri Harichand N. Matani (supra), the assessee had produced the photocopy of pass book of bank account in Pakistan and no addition was made in the hands of said person. After the close of hearing, the learned Authorized Representative for the assessee placed on record certain material from the web in respect of lack of direct banking facilities between India and Pakistan. In another report dated 20.09.2016, wherein it is mentioned that trade between India and Pakistan had increased but there was lack of direct banking channels, limited connectivity and hence, the same was affecting the trade. Accordingly, we uphold the order of CIT(A) in deleting the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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