Madhya Pradesh High Court
Commissioner Of Income-Tax vs Smt. Savitri Devi Shukla (No. 2) on 2 March, 2005
Equivalent citations: [2008]296ITR737(MP)
Author: R.V. Raveendran
Bench: R.V. Raveendran, Chief Justice, Shantanu Kemkar
JUDGMENT R.V. Raveendran, C.J.
1. This appeal by the Revenue under Section 260A of the Income-tax Act, 1961 ("the Act" for short), relates to the assessment year 1992-93. The appeal was admitted on the following two questions of law raised by the Revenue:
1. Whether the Income-tax Appellate Tribunal was justified in law in holding that the addition of Rs. 4,056 cannot be made in the income of the assessee on account of unexplained deposits in the savings bank account No.-13272 in the State Bank of India, Hamidiya Road, Bhopal, held by the assessee jointly with Smt. Kashibai even though Smt. Kashibai did not sign the account opening form nor operated the bank account at all?
2. Whether the Income-tax Appellate Tribunal was justified in law in holding that the addition of Rs. 2,56,102 cannot be made to the income of the assessee on account of unexplained investment in purchase of US dollars 10,000 even though the entries in the diary marked as document No. 1-2 seized during the course of search at the premises of the assessee on October 30, 1992, clearly indicated that these dollars were purchased in India out of undisclosed income of the assessee and the same were not in the nature of foreign remittance entitled for immunity under the Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991?
2. The matter arises out of the order of assessment dated September 28, 1995, passed by the Assessing Officer whereby he added as income of the assessee, the following: (i) Rs. 4,050 deposited to the account No. 13272 in the joint names of Kashibai and assessee and Rs. 21,415 being the interest that accrued on the credit balance in that account; and (ii) Rs. 2,56,102 being the amount allegedly spent by the assessee for purchase of US dollars 10,000 received by the assessee as foreign remittance. The Commissioner of Income-tax (Appeals), Bhopal, by order dated April 17, 1997, in IT-29/95-96 deleted the said additions and the Income-tax Appellate Tribunal, Indore Bench, dismissed ITA No. 721/IND/97 filed by the Revenue upholding the deletion.
Re: Question No. (1)
3. This relates to credits (deposits) made in joint savings account No. 13272 in the State Bank of India, Hamidia Road branch, Bhopal, held in the name of the assessee and her mother Kashibai. The contention of the Revenue is that Kashibai was only a benamidar and remittance to this account was made exclusively by the assessee. On that reasoning, the Assessing Officer had treated the deposit of Rs. 4,050 made to that account and Rs. 21,415 being the interest accrued on the amount as credit in the said account, as income of the assessee, while dealing with the identical contention of the Revenue in regard to the assessee for the assessment year 1987-88 in M.A. (IT) No. 62/2003 CIT v. Savitri Devi Shukla [2008] 296 ITR 180 (MP)--disposed of today, we have upheld the decision of the Tribunal and answered the question in the affirmative. For the reason stated therein and following the said decision, this question is answered in the affirmative against the Revenue.
Re: Question No. (2)
4. The Assessing Officer has added a sum of Rs. 2,56,102 under Section 69 of the Income-tax Act on the ground that the same represented unexplained investment in purchase of US dollars 10,000 which was received by the assessee, during the year in question under the remittances in the Foreign Exchange (Immunities) Scheme, 1991, ("the Scheme" for short). A diary L-2 seized from the business premises of Shukla group contained following notes: "3,70,000 Ke 10000 Dollar Liye" and "6,85,000 Ke 18500 Dollar Liye" total "Rs. 10,55,000 = Dollars 28500". The Assessing Officer also found that the Shukla group had withdrawn Rs. 6,00,000 from Bombay on November 26, 1991. Linking the two factors, the Assessing Officer inferred that the assessee and other family members must have purchased US dollars in the Indian unofficial market by using the amount so withdrawn and other amounts and subsequently obtained it by way of foreign remittance. In view of it, he added the rupee equivalent of US dollars 10,000", that is Rs. 2,56,102 (as unexplained investment from undisclosed income) to the income of the assessee.
5. In appeal, the Commissioner of Income-tax (Appeals) deleted the said addition relying on the provisions of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 ("the Act" for short) and the instructions contained in CBDT Circular No. 611, dated September 30, 1991 ([1991] 191 ITR (St.) 319). The Commissioner of Income-tax (Appeals) also examined the factual aspect and the fact that as against Rs. 6,00,000 drawn on November 26, 1991, a sum of Rs. 5,00,000 was deposited in cash on November 28, 1991, to the account of Shapers Constructions P. Ltd., Bhopal. The Commissioner of Income-tax (Appeals) also noted that the diary and papers seized, were not in the possession of the assessee nor in her handwriting. It was also noted that the remittances were received by way of drafts issued in foreign countries. The Tribunal also agreed with the findings of the Commissioner of Income-tax (Appeals).
6. We may refer to the relevant provisions. Sub-section (1) of Section 3 of the said Act, which is relevant, is extracted below:
3. Immunities.-(1) Notwithstanding anything contained in any other law for the time being in force,-
(a) no recipient who claims immunity under this Chapter in accordance with such scheme as the Reserve Bank of India may, by notification in the Official Gazette, specify for the purposes of receiving remittance under this Chapter, shall be required to disclose, for any purpose whatsoever, the nature and source of the remittance made to him,
(b) no inquiry or investigation shall be commenced against the recipient under any such law on the ground that he has received such remittance, and
(c) the fact that the recipient has received a remittance shall not be taken into account and shall be inadmissible as evidence in any proceedings relating to any offence or the imposition of any penalty under any such law.
7. The scheme formed by the Reserve Bank of India enabled any person resident in India to arrange to get remittances in foreign exchange from any person resident outside (not necessarily a relative) in the form of drafts, travellers' cheques, TT, MT, etc., or by transfer from NRE/FCNR accounts maintained in India from September 18, 1991, to end of 1992.
8. The relevant portion of CBDT circular dated September 30, 1991, reads thus (see [1991] 191 ITR (St.) 319, 320):
Apprehension has been expressed in some quarters that the Income-tax Department would prejudicially view the remittances received under the Remittances in Foreign Exchange (Immunities) Scheme, 1991, and the gifts of the India Development Bonds from an overseas subscriber/holder. Fears have been expressed of hardship to recipient of remittances and donees of the India Development Bonds at the hands of the Assessing Officers during the course of assessment for the assessment year 1992-93 and subsequent years. Sub-section (1) of Section 3 of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 (the Act), provides that notwithstanding anything contained in any law for the time being in force...(omitted as unnecessary).
Section 4 of the said Act further provides that any remittance of the nature referred to above will not be taken into account for the purpose of any proceeding under the Income-tax Act, 1961....
The relevant provisions of the Act, as briefly explained above, make it very clear that the Assessing Officers, in any proceedings under the direct tax laws, will not make any enquiry with regard to remittances in foreign exchange received under the Remittances in Foreign Exchange (Immunities) Scheme, 1991, or gift of any India Development Bonds from a non-resident Indian/overseas corporate body. There should, therefore, be no apprehension of any prejudice against the persons in receipt of remittances under the scheme or donees of India Development Bonds. There should also be no fear of any harassment by the tax authorities.
9. In this case, admittedly, US $ 10,000 were received by way of demand drafts from abroad. It is not a case of purchase of dollar notes in India. The said remittances were squarely covered by the said scheme and the immunity extended by the Act. The Commissioner of Income-tax (Appeals) and the Tribunal found that documents relied on by the Assessing Officer were neither seized from the possession of the assessee nor were they in her handwriting. The appellate authority and the Tribunal found that the assessee was entitled to the benefit of the immunity given under the said scheme. The Tribunal has also pointed out that the allegation of the Assessing Officer that the assessee and other family members must have acquired foreign currency by purchasing them in India was referred to the Enforcement Directorate, which sent the following reply dated November 17, 1996:
The receipt of the remittances by Shri B.L. Shukla and his family members, pertains to the period of Immunity Scheme, 1991 and in view of the above and in the absence of corroborative material evidence, we have treated the matter as closed, subject to approval of our zonal office.
10. We are, therefore, of the view that the Commissioner of Income-tax (Appeals) had rightly deleted the addition with reference to the immunity extended under the provisions of the Act and the question of trying to find out the source of the foreign exchange remittance or trying to link the same with reference to any withdrawals made by the family does not arise. In fact such an exercise will violate the provisions of the Act and therefore impermissible. We therefore, answer the second question also in the affirmative and against the Revenue. As a consequence, the appeal is dismissed. The parties to bear respective costs.