TMI Blog1999 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi, who in turn approached the Inland Revenue, U.K. The AO also asked the assessee to produce the alleged donors and in compliance Shri O. S. Gill was produced and his statement was recorded by the AO whereas the other alleged donor, namely, Shri B. P. Bhardwaj, was not produced. According to the AO, the assessee could not prove the financial capability of the alleged donors since copies of their bank accounts and tax assessment orders were not filed. In coming to the same conclusion the AO also took into account the investigations conducted by the Inland Revenue, U.K. noting with specific reference to the case of Shri B. P. Bhardwaj that the funds were provided by one Mr. Varinder Sharma stated to be a resident of Moscow. This led the AO to conclude that Shri Bhardwaj was not the donor but he had been used as an 'instrument' for delivering the draft from Mr. Varinder Sharma to the assessee i.e., Shri Jawahar Lal Oswal. We may mention at this stage that the AO gave a specific opportunity to the assessee to prove the financial capability of Shri Varinder Sharma by furnishing necessary evidence and also informed him that both the demand drafts through which the alleged gifts were g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account. Income-tax assessment order to prove the creditworthiness of the donor. While the assessee has stated that the donor Shri B. P. Bhardwaj but Sh. Bhardwaj has stated before the inland service U.K. that the funds were provided by Mr. Varinder Sharma of Moscow. This is contradictory position. The assessee has failed to prove the financial capability. In the same way, it could not be proved that the draft of Rs. 2 lakh U.S. Dollar alleged to have been gifted by Shri O.S. Gill has been received by Shri J. L. Oswal from the donor or from somebody else because both the draft numbers were in consecutive serial numbers. In view of the above facts, it becomes clear that in both the cases, neither the donors are genuine nor the transactions of gifts are genuine. Even the friendship could not be proved because the assessee admitted that he has never given any gift to any of the donors and he has never stayed with them. It may be mentioned here that Sh. J. L. Oswal might be visiting U.K. every year. The entire facts lead to the conclusion that the assessee has failed to prove the financial capability of the donors and the transactions of the gifts. He has simply introduced his own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Sarogi Credit Corpn. vs Commissioner of Income-tax [1976] 103 ITR 344. Reliance was also placed on certain unreported decisions of the ITAT as also those of the CIT(A). The Assessing Officer also filed written submissions before the CIT(A) reiterating that the financial capacity of the donors was not proved, that Shri Bhardwaj was not produced for examination and the fact that both the drafts bore consecutive numbers proved that there was only one person behind the whole transaction. Further, the presence of the assessee at the time of preparation of drafts was relevant and that Shri Varinder Sharma who provided the funds for one of the gifts happened to be an employee of Shri J. L. Oswal who had been carrying on business in Moscow. In concluding, the Assessing Officer urged that the addition be sustained. 6. The CIT(A) considered the submissions as also the facts on record and at the outset he observed that the two gifts were required to be examined separately as circumstances were different. He, therefore, took up the case of Shri B. P. Bhardwaj first confirming the view of the Assessing Officer stressing that it was Shri Varinder Sharma who was the donor as he had passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the Assessing Officer which proved that Shri Gill had not made the gift or the source of funds remained unproved, the Assessing Officer would be at liberty to reopen the assessment under section 148 and make an addition. None of the parties before us offered any opinion on these observations of the CIT(A). 7. The Id. counsel for the first mentioned appellant stated that he ie. Shri J. L. Oswal had nothing to do with the drafts as his two major daughters were the recipients and the occasion being their respective marriages. According to him there was no evidence to show that the assessee had earned any money outside India. It was the argument that the burden had been wrongly placed on Shri Oswal but in spite of that the gift from Shri O. S. Gill had been satisfactorily explained. It was also pointed out that in the cases of the daughters, provisions of section 68 had been invoked and additions made on protective basis and whereas the CIT(A) had upheld applicability of the said section, he had deleted the same in the light of his decision in the case of Shri Oswal. According to Id. counsel, both the Assessing Officer and the CIT(A) in Shri Oswal's case had stated that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggesting ownership by Shri Oswal of the funds in question. According to the Id. counsel, whenever a cheque / draft received from a foreign country had to be encashed in India, the source of funds was required to be given to the Reserve Bank of India. According to him, the non-proving of the financial capacity of a donor could not lead to the automatic conclusion that the amount in question belonged to the donee or any other person and which in this case was the assessee, ie. Shri Jawahar Lal Oswal. The further submission was to the effect that the addition was based entirely on surmises and conjectures and in doing so the department had rejected all types of evidence including good evidence. On the assumption that the onus lay on the assessee the Id. counsel argued that all relevant evidence to discharge such onus had been filed. The Id. counsel at this stage took us to another aspect of the matter contending that one had to examine the entire issue from a practical angle rather than apply the analogy of cash credits as understood in section 68 of the Income-tax Act, 1961. According to the Id. counsel, the following facts were required to he kept in mind and considered :- 1. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owings :- 1. Parimisetti Seetharamma vs Commissioner of Income-tax [1965] 57 ITR 532 (SC), 2. Commissioner of Income-tax vs Daulat Ram Rawatmull's case (supra), 3. Sarogi Credit Corpn.'s case (supra), 4. Shankar Industries vs Commissioner of Income-tax [1978] 114 ITR 689 (Cal), 5. Commissioner of Income-tax vs Mrs. Sunita Vachani's case (supra), 6. Commissioner of Income-tax vs Ram Narain Goel [1997] 224 ITR 180 (Punj Har); and 7. Income-tax Officer vs Suresh S. Kalmadi 1988 SOT (TM), Poona Bench. 11. The Id. D.R. in respect of the appeal filed by the assessee vis-a-vis the addition sustained in respect of the alleged gift of Shri B. P. Bhardwaj stated at the outset that large amounts were coming into the country through NRI gifts and on verification many of these had been found to be bogus. The other main arguments of the Id. D.R. were to the following effect :- 1. The documents pertaining to the gift had been purchased by the same person as would be apparent from the print of the documents. 2. The value of both the drafts was the same i.e. $ 2 lakh and not in pound sterling although the alleged gifts were sent from the U.K. 3. The serial order of the two d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce his bank account and nor whether he was assessed to tax and this was quite strange. 18. No final report had been received from the Inland Revenue, U.K. regarding the two alleged donors. 19. The CIT(A) should not have drawn a distinction between the facts of the two cases, namely, the gift by Shri O. S. Gill and Shri B. P. Bhardwaj since they were on equal footing and further no evidence had been tendered with reference to the alleged gift by Shri O. S. Gill that he had the requisite money to prepare a draft. Further, he had not produced his bank account at any stage of the proceedings. In support of the agreements advanced vis-a-vis the assessee's appeal as also the revenue's appeal in the case of Shri J. L. Oswal, the Id. D.R. placed reliance on the following decisions:- 1. D. C. Rastogi's case (supra), 2. Commissioner of Income-tax vs Durga Prasad More [1971] 82 ITR 540 (SC); and 3. Lall Chand Kalra vs Commissioner of Income-tax 22 CTR (P H) 135. As regards the decisions cited by the Id. counsel for the assessee, the submission of the Id. D.R. was to the effect that these were distinguishable on facts. Referring specifically to the judgment of the Delhi High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in respect of the other gift and the parties having advanced arguments on both the grounds at the same time, the present order may contain and in fact it does a combination of facts pertaining to both the gifts, the arguments of the parties before the Tribunal and which in turn would mean an adjudication on both the grounds in the respective appeals simultaneously and in continuity. 14. In reply to assessee's appeal as also the revenue's appeal, the Id. counsel made the following submissions :- 1. No evidence had been adduced by the department to show that the money pertaining to the gifts generated from Shri Jawahar Lal Oswal. 2. Whichever section of the Income-tax Act was taken into a account, the addition could not be made. 3. The money received as gifts had not been spent on the marriages and on the assumption that no marriage ultimately took place it would not mean that the amounts sent by the two drafts ceased to be gifts. 4. The assessee had not earned any income outside India and there was no iota of evidence available with the department to prove so. 5. The beneficiary of the gifts was not Shri Jawahar Lal Oswal. 6. The identical language of the decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e asked them to obtain particulars of the bank account of the two alleged donors but which it did not do. 15. The department could not discharge its onus by negating good evidence produced by the assessee. 16. The onus in the case of a gift was lighter and not heavier as was argued by the Id. D.R. The Id. counsel also sought to distinguish the judgments relied upon by the Id. D.R., more so the one of Delhi Bench of the Tribunal in the case of D. C. Rastogi (HUF) (supra). According to him, the distinguishable features were that section 68 had been applied in that case and the assessee in question did not furnish any information or evidence whereas in the present case provisions of section 69A had been applied and necessary information and evidence had been placed on record. Referring to the same judgment, the Id. counsel stated that onus in the case of a gift had been held to be lighter by the Delhi Bench of the Tribunal and not heavier as argued by the Id. D.R. 15. In a short reply to the arguments of the assessee's counsel vis-a-vis the cross appeal of Shri Jawahar Lal Oswal, the Id. D.R. contended that by taking the gifts abroad the assessee had avoided gift-tax. We may m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the said power of attorney in the gift deeds. Referring to the copies of the powers of attorney filed, the Id. D.R. stated that the copies of the reverse had not been filed. The ultimate submission on the part of the Id. D.R. was to the effect that the gifts themselves were invalid as there was no proper acceptance. In continuing his arguments further, the Id. D.R. contended that since the gifts were not valid, the moneys became that of Shri Jawahar Lal Oswal who had converted these into drafts and delivered the same to his daughters through the guise of gifts from Shri O.S. Gill and Shri B. P. Bhardwaj. As regards the certificate from the Allahabad Bank appended at page 9 of the further compilation filed by the assessee's counsel, the Id. D.R. did not advance any argument. 17. In reply to the arguments of the Id. D.R., the assessee's counsel stated that the powers of attorney had not been fabricated as alleged by the revenue and referring to the certificates filed at pages 5 and 6 once again of the fresh compilation these being issued by the donors, he stated that the original powers of attorney had been delivered to the donors as stated by them. The Id. counsel in fact to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.K. it transpired that the "funds were provided" by one Shri Varinder Sharma of Moscow to Shri B. P. Bhardwaj who handed over the draft to Shri Jawahar Lal Oswal. The further discussion in the assessment order pertains to the examination of Shri Jawahar Lal Oswal under section 131 but we need not detain ourselves further on reiterating the facts which we have already discussed at length in the earlier part of the present order while dealing with the appeals of Shri Jawahar Lal Oswal. Taking note of the fact that the alleged gift from Shri B. P. Bhardwaj had been considered as deemed income of Shri Jawahar Lal Oswal under section 69A of the Act on substantive basis, the Assessing Officer made addition on protective basis in the case of Miss Monica Oswal repeating a similar addition in the case of Miss Ruchika Oswal on absolutely identical lines. 20. On further appeals, the CIT(A) passed leading order in the case of Miss Ruchika Oswal. According to the CIT(A), the addition apparently had been made by the Assessing Officer by resort to the provisions of section 68 of the Income-tax Act, 1961. It was also noted by him as a fact that the bank draft of $ 2 lakh was received by Shri Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the amount in the account of the assessee alone is not sufficient to make any addition under section 68 unless it is established that the nature and source of credit have not been proved. In this case, the draft in question was received by the father of the appellant when he was in U. K. The acquisition or possession of the draft by Sh. Oswal has not been doubted. If that be so, then it is Shri Oswal who has to prove the genuineness of the transaction, as the gift was allegedly made by his (Mr. Oswal's) friend. So far the appellant is concerned, she had discharged the onus by proving that the impugned amount was received through her father. The Assessing Officer has not been able to bring any evidence to connect the acquisition and source of draft with the appellant. As mentioned above, the matter was referred to the Inland Revenue Service of U.K. The Inland Revenue Service has not furnished any information on the basis of which the genuineness of the transaction could be doubted, Accordingly, I hold that the provisions of section 68 are not applicable in this case and no addition is called for in the hands of the appellant. The addition made by the Assessing Officer is, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 81 Taxman 222 / 213 ITR 820 (Ker) and 8. D. C. Rastogi (HUF) case (supra). 23. In rebutting the arguments of the Id. D.R., the Id. counsel for the assessees pointed out that no ground had been raised by the revenue in its appeals contending that the CIT(A) should have converted the protective assessments into substantive ones. The Id. counsel in fact stated a legal proposition to the effect that a protective addition could not be made by invoking section 68 of the Income-tax Act, 1961. According to him, a relationship of debtor and creditor should exist whereas the assessees, i.e. Miss Monica Oswal and Miss Ruchika Oswal, categorically stated that the moneys belonged to them and it was only in a case where they denied the ownership of the money that section 68 would come into play. It was the submission of the Id. counsel that the relevant section could only be section 69A. As regards the entries in the bank account, the Id. counsel placed reliance on the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income-tax vs Bhaichand H. Gandhi [1983] 141 ITR 67 / 11 Taxman 59, contending that these could not be treated as entries in the books of account for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as also the material on record to which our attention was invited during the course of the hearing. At the out set we would like to set out as follows section 69A which has been applied by the revenue authorities in the case of Shri Jawahar Lal Oswal :- "69A. - Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." It is to be noted that the conditions precedent to the application of the provisions of the said section are (1) the money, bullion, jewellery or other valuable articles in question are not recorded in the books of account, if any, maintained by the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that we are with him not on the relaxation of the three conditions but on the degree of evidence and proof that has to be given by an assessee. The provisions of section 68 or 69A as facts warrant are applicable whether funds have come from abroad or they have emanated in India. We are very clear in our mind that all the three conditions have to be fulfilled but considering (1) that adverse inference under given circumstances may not be drawn in case the donor abroad does not appear before the Assessing Officer based in any part of India, (2) the material or evidence collected by a Government agency abroad and passed on to the tax department in India has to be confronted to the assessee fully well realising that the said Government agency had made enquiries as it deemed fit and these may not be on the lines which the tax authorities in India would make while confronting a donor or creditor located in India and (3) neither the Assessing Officer in India nor for that matter the assessee has any say in the enquiry made abroad, whether through the foreign Government or for that matter the Indian Embassy, High Commission, Consulate etc. In other words, both of them have to depend on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed on record by the revenue. For all intents and purposes Shri 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 Shri Jawahar Lal Oswal denying and no such fact emerging from the enquiry made by Inland Revenue, U.K. 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 $ 2,00,000 to Miss Ruchika Oswal, daughter of Shri Jawahar Lal Oswal. 2. Copy of Bank A/c of Miss Ruchika Oswal with Allahabad Bank showing deposit of Rs. 62,10,442 equivalent of $ 2,00,000. 3. Copy of declaration of inward remittance sent to the Reserve Bank of India by Miss Ruchika Oswal. 4. Letter dated 14-3-96 sent by Shri O. S. Gill to the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer 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 the gift and also indicating amply his financial status ie. annual salary, shifting to a larger residence etc. No untruth or inconsistency has been pointed out by the Assessing Officer in the statement vis-a-vis the evidence placed on record. 30.3 Even in the case of Shri B. P. Bhardwaj, identical documents were filed the only distinguishing feature being the non-appearance of the said person before the Assessing Officer 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 Shri B. P. Bhardwaj was the role of Shri Varinder Sharma but we have already dealt with this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be viewed adversely as even their attending would not have converted a non-genuine event, as held by the Assessing Officer, into a genuine one as this had to be tested on numerous other facts and considerations. 30.9 Referring to item No. 15, it is not necessary to show that a person has been making gifts in the past to prove the genuineness of the gift in question since on the facts of a case a single gift by a donor may be found genuine whereas a number of them by the same person may not satisfy the test of genuineness. Each gift has to be tested on its own facts. 31. The other points made by the Id. D.R. in para 11 of the present order have either been dealt with separately by us and those not adverted to are not relevant to the point at issue. We must, however, make one thing clear at this stage and that is the revenue cannot pick and choose a few facts to express an adverse opinion and it is necessary for them to appreciate all the facts together as also the evidence to arrive at a conclusion. In the present case it has been the former approach rather than the latter. 32. At this stage we would like to discuss the various authorities cited before us at the Bar by either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the onus at this stage shifts to the revenue. We would now refer to the decisions cited dealing further with this matter afterwards. 34. On the question of conversion of a wrong section into the relevant one, the first decision relied upon by the Id. D.R. was that of the Hon'ble Supreme Court in the case of L. Hawri Mal Kuthiala (supra). This was a case concerning the jurisdiction of the Commissioner to direct a case to be assessed by a particular ITO and not the other one and, on the facts of the case, his order was held to be valid in law but this would not be applicable to the issue before us where the department is canvassing that an addition under section 68 be held to be good even for purposes of section 69A or the one made under section 69A be confirmed under section 69. 35. Another decision of the Hon'ble Supreme Court relied upon by the Id. D.R. was in the case of Hukumchand Mills Ltd. (supra). This judgment pertained to certain amendments in the law by issue of certain notifications without making mention of the particular section. The other issue under consideration was the repeal of a section by necessary implication although not specifically mentioned in the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctures, suspicion and doubt. 39. We now come to some of the decisions relied upon by the Id. counsel for the various assessees before the Tribunal. The first is that of the Hon'ble Supreme Court in the case of Parimisetti Seetharamamma (supra), and this deals with the question of burden and on whom it lies. The assessee in this case explained before the tax authorities that jewellery and cash received in the relevant years were in the nature of gifts made by the Maharani of Baroda. Relying on the admission of the assessee that she acted as the local agent of the Maharani for disbursing salaries to her servants and in a bill issued by a garage the assessee was described as private secretary of the Maharani and further observing that she had failed to place before the income-tax authorities all the evidence in support of her contention, the Tribunal held that what was given to the assessee by the Maharani was remuneration for services rendered or to be rendered. Their Lordships of the Hon'ble Supreme Court held that the burden of proof was wrongly placed by the Tribunal on the assessee and, on the facts and circumstances relied on by the Tribunal, did not establish that what but wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by draft were outside the purview of section 68. On the facts of the case, it was noted that the assessee had merely furnished confirmation letters from the alleged donors some of whom were NRIs but failed to furnish their present addresses or evidence regarding their financial capacity. As section 68 has been applied in the aforesaid judgment, it would be safe to presume that the amounts received as gifts were in the books of account of the assessee as it is not clear from the decision whereas in the cases of the two daughters of Shri Jawahar Lal Oswal, the amounts find place in their respective bank accounts as noted in the assessment orders. 42. Their Lordships of the Hon'ble Bombay High Court in the case of Bhaichand H. Gandhi (supra) have taken the view that entries in the bank pass-book of an assessee cannot be equated with entries in the books of account and, therefore, provisions of section 68 would not apply and the amount so credited would not be chargeable to tax as the income of the assessee. No decision to the contrary has been cited by the Id. D.R. Moreover, in the present cases, complete evidence has been filed in respect of the foreign gifts which include enquirie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delete the addition in respect of the gift of Shri B. P. Bhardwaj. 46. Before we part with the cross appeals of Shri Jawahar Lal Oswal, we would categorically like to state that we have not found it necessary to deal with certain arguments of the parties and these are the validity of the POAs given by Miss Ruchika and Miss Monica Oswal to their father authorising him to receive the gifts in U.K. This was an issue raised before the Tribunal for the first time by the revenue although they expressed no doubt earlier. Arguments were also advanced about the onus having been wrongly placed on Shri Jawahar Lal Oswal under section 69A and the consequential decision therefore being vitiated in law. In the view that we have taken to delete the entire addition on the basis of section 69A itself and the evidence pursued, we do not feel that any separate discussion is necessary. 47. Taking up the appeals of Monica and Ruchika Oswal, provisions of section 68, in our opinion, do not get attracted to entries in the bank passbook in the light of the judgment of the Hon'ble Bombay High Court in the case of Bhaichand H. Gandhi (supra) no decision to the contrary cited by the revenue. Then again, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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