Income Tax Appellate Tribunal - Delhi
Smt. Angoori Devi Jain vs Ito on 22 September, 2004
Equivalent citations: [2005]1SOT413(DELHI)
ORDER
1. This appeal has been filed by the assessee on 3-6-2003 against the order of the learned CIT (A), Panchkula dated 17-3-2003 in the case of the assessee in relation to assessment order under section 143(3) read with section 147 for assessment year 1993-94.
2. In this appeal the assessee has disputed re-opening of assessment under section 147 and addition of Rs. 1,15,000 made to the declared income on the ground of unexplained gift. Facts of the case leading to this appeal briefly are that the assessee filed a return of income on 23-6-1993 declaring total income at Rs. 1,37,580. This return of income was processed under section 143(1)(a) on 28-7-1993. Thereafter, the assessing officer issued a notice under section 148 of the Act after recording the reasons on the basis of certain information. In response the assessee filed her return of income on 28-6-2001 declaring the same income as in the earlier returns filed on 23-6-1993.
3. According to the assessing officer, information was received from DDI (Investigation), Faridabad that the assessee had received a sum of Rs. 1 lakh by way of cheque drawn on NRE account of Shri Subhash Sethi bearing No. 320169733 on American Express Bank, New Delhi. Subsequently, Shri Subhash Sethi, the alleged donor in his letter dated 25-7-1995 addressed to Shri N.K. Katyal, Enforcement Officer stated that during his visit to India in February, 1993 he had met one Shri Mittal, Chartered Accountant, who advised him to open an NRE Bank account in American Express Bank. A representative of Shri Mittal viz. Shri Umesh Mendiratta was appointed as Mandatee for this account. According to Mr. Subhash Sethi Shri Mittal assured that everything was perfectly legal and he would get margin of 30 per cent. On this understanding Shri Mittal agreed to arrange the funds to be deposited in the NRE account. Even the initial deposit was made by Mr. Mittal. According to Shri Subbash Sethi, he did not remit any funds to India. On his return to India in February, 1994, he came to know that some enquiries were being made about the NRE account. Shri Sethi stated that he was totally unaware about the transactions in his bank account because he had not remitted any money from England. Further, he had not executed any gift deed and he had never gifted any amount to anyone. Neither he nor his brother Mukesh Sethi ever deposited cash in the above mentioned NRE account. According to the assessing officer, an analysis of NRE account of Shri Subhash Sethi revealed that most of the foreign currency deposited in the said account was locally managed. All the withdrawals made from this account were drafts or cheques issued to different persons by way of bogus gifts. it was not possible that a single person would make gifts running into crores of rupees to so many persons without even knowing them. In the case of Shri Lalchand v. CIT 22 CTR 135, Honble Punjab & Haryana High Court had clearly held that for a gift to be accepted as genuine, the capacity and identity of the donor and occasion for making gifts was required to be examined in detail. In the instant case, the alleged donor was not known to any person including the assessee.
4. During the course of assessment proceedings, the learned assessing officer issued questionnaires dated 3-9-2001 and 8-10-2001 to the assessee. He also requested the assessee to either produce the donor for examination or file the requisite details in the form of an affidavit from the donor. The assessee replied that the donor had gifted Rs. 1 lakh and duly executed an affidavit and memorandum of gift to Smt. Angoori Devi. The payment had been made through American Express Bank. These particulars had been furnished with the original return and accepted by the department while processing the case under section 143(1)(a). The donor was living in United Kingdom and, therefore, it was not possible to produce him. The assessee was helpless in giving replies regarding the personal life and account of the donor which only the donor was the competent person to reply. The learned assessing officer considered this reply of the assessee and found the same to be not tenable. Shri Subhash Sethi had already categorically denied all transactions in the NRE Bank account from where the assessee had received cheque payment of Rs. 1 lakh. Shri Sethi had also stated that he had not deposited any money in this account. Once the donor had denied the genuineness of the transaction, the documents relied upon by the assessee ceased to have a sanctity and to be sufficient material or evidence. In these circumstances, the assessing officer was required to consider the relevant circumstances having bearing on the issue. According to the learned assessing officer, the assessee had been furnished copy of statement of Shri Umesh Mendiratta, who also had admitted in his statement that he did not know Mr. Subhash Sethi and he was operating the account in question with American Express Bank at the instructions of his employer Shri S.K. Mittal. Shri Umesh Mendiratta stated that he did not know from where the foreign currency deposited in the account in question was procured because it was Mr. S.K. Mittal, who used to procure the foreign exchange. At the same time Shri Umesh Mendiratta stated that to the best of his knowledge Shri Subbash Sethi never deposited any foreign currency in this account. According to the assessing officer though the assessee was confronted with this letter of Shri Umesh Mendiratta, no explanation whatsoever was furnished by the assessee. Thus, there was clear inference that the alleged gift of Rs. 1 lakh purported to have been received from NRE account was locally purchased. The assessee had failed to adduce any substantive evidence to substantiate her claim of having received the gift from NRE account. The learned assessing officer, therefore, added the sum of Rs. 1 lakh being the amount of gift disclosed by the assessee. He also added another sum of Rs. 15,000 on estimate as expenditure incurred by the assessee for having arranged the gift of Rs. 1 lakh from the aforesaid NRE account.
5. During the course of hearing before the CIT (A), the assessee disputed initiation of proceedings under section 147. He argued that the assessing officer had issued notice under section 148 without application of mind at the directions of CIT, Rohtak. For this purpose, the assessee submitted that on 21-5-2001, DDI (Investigations) wrote to CIT, Rohtak suggesting that action under section 147 be taken. Thereafter on 23-5-2001, Income Tax Officer (Hq) wrote to the assessing officer that CIT, Rohtak desired necessary action to be taken immediately as suggested by DDI (Investigation). On 24-5-2001, the assessing officer recorded the reasons and sought sanction. Thereafter on 25-5-2001, Addl. CIT granted sanction. The assessee also. argued that there was no proper service of notice under section 148. The notice served by affixture on the premises of the assessee was not an original notice under section 148 but photostat copy of the notice allegedly issued by the assessing officer. Likewise, order under section 282 of the Act served by affixture was also not an original order but the photostat copy. In support, the assessee produced the documents that had been served by affixture and showed that the same were photostat copies. The assessee also pointed out that on these photocopies the signature of the notice servers were clearly visible. The assessee also pointed out that a notice under section 148 had been sent by registered post on 31-5-2001 and the same had been received by the assessee on 1-6-2001. As the notice under section 148 was required to be served on or before 31-5-2001, the service of notice under section 148 was beyond time. The learned CIT (A) considered these arguments of the assessee. He held that service of notice under section 148 had been effected on the assessee on 31-5-2001 by affixture. That the notice was a photocopy was not material. The fact remained that the notice under section 148 was duly served on the assessee. The assessee could not be allowed to get the benefit of a trivial, innocuous lapse, if the same at all could be considered to be a lapse, in the given facts and circumstances of the case. As to the contention of the assessee that the learned assessing officer had not applied his mind, the learned CIT (A) held that it was not in dispute that the assessing officer had recorded reasons before issuing the notice under section 148. He had also obtained the approval before issuing a notice. The CIT, Rohtak had only directed the assessing officer to take immediate action and there was nothing wrong or abnormal in such directions. On merits, the legal heir of the assessee argued before the learned CIT (A) that there was also an affidavit of Shri Subhash Sethi duly attested by Notary Public along with the gift deed. The learned assessing officer was notjustified in ignoring that document. Regarding the subsequent statement of Shri Subhash Sethi, the legal heir argued that assessee had not been given any opportunity to cross examine Shri Subhash Sethi. It was the revenue who relied upon the subsequent statement of Shri Subhash Sethi and, therefore, it was incumbent upon the revenue to afford an opportunity of cross examination to the assessee. The legal heir, therefore, argued that the contents of the subsequent statement of Shri Subhash Sethi could not be used against the assessee to the detriment of the assessee. The legal heir also relied upon the fact that a civil suit had been filed by the assessee against Shri Subhash Sethi in the court of Senior Sub Judge, Delhi. In respect of the judgment in the case of Lalchand (supra) relied upon by the learned assessing officer, the legal heir argued that the facts of that case were different. The legal heir instead relied upon the decision of the Delhi High Court in 184 ITR 121, that genuineness of a gift was a question of fact and unless there was something more tangible than suspicion, it would be difficult to regard that money received in India from abroad represented the income of the assessee in India. The legal heir also relied upon the decisions of the Tribunal in Atmaram J Manghirmalani v. ITO (1998) 67 ITD 289 (Mum) and Smt. BhagwatiDevi v. ITO(1993) 47 ITD 58 (Cal). The assessee also argued that in the statement of Shri Subhash Sethi relied upon by the revenue, the assessee had not been specifically named.
6. The learned CIT (A) considered these submissions. He held that on facts and circumstances of the case, it was quite clear that Shri Subhash Sethi had not given any genuine gift to anybody. The NRE account had been obtained as a result of a conspiracy with a view of give sham gifts to different persons so as to earn commission. This was done to defraud the revenue. As to the opportunity of cross examination of Shri Subhash Sethi, the learned CIT (A) held that as he was not resident in India, the request of the assessee was not justified. According to the learned CIT (A), during the course of appellate proceedings, he specifically informed the assessee that the issue before him was wide open and primary onus to establish the genuineness of the gift was with the assessee. The assessee also expressed inability to produce Shri Sethi. In this view of the matter, the learned CIT (A) held that assessee was not entitled to relief as prayed for. The assessee had not been able to prove genuineness of the gift. He, therefore, dismissed the appeal filed by the assessee. Still aggrieved, the assessee is in appeal before me.
7. During the course of hearing before me, the learned counsel for the assessee challenged initiation of proceedings under section 147 on the ground that the statement of Shri Subhash Sethi was not authenticated and, therefore, the same could not constitute a basis for initiation of proceedings against the assessee. The assessee was in possession of statement duly notarized given by Mr. Subhash Sethi confirming that the had withdrawn a sum of Rs. 1 lakh from his NRE account and given that amount to the assessee by way of gift. The assessee pointed out that he signature on these two documents did not tally. At any rate the alleged statement of Shri Subhash Sethi was given in a general way and did not name the assessee in particular. The reasons for which Mr. Sethi denied having made gifts to anyone were best known to him. Therefore, the assessing officer did not have sufficient material to form the belief that the assessees income chargeable to tax had escaped assessment. The learned authorised representative also argued that in the case of the assessee, there was no proper service of notice under section 148. That notice was served by affixture without fulfilling the requirements of service by affixture. As there was no proper service of notice under section 148 on the assessee within the prescribed time, the subsequent proceedings taken against the assessee were bad in law. The proper service of notice on the assessee was only on 1-6-2001 after the expiry of time limit of 31-5-2001. The proceedings under section 147 were also vitiated because the assessing officer did not furnish the assessee reasons recorded by him for reopening of assessment.
8. On merits, the learned authorised representative of the assessee argued that the subsequent statement of Mr. Subbash Sethi should not have been relied upon. That statement had not been authenticated and the signature of Mr. Subhash Sethi did not match with the signature on affidavit sworn on by him before notary public. It was merely a letter of denial sent from U.K. instead of a proper statement having been given before FERA authorities. That letter was also not given by Mr. Subhash Sethi by way of statement on oath or an affidavit. The letter also lacked specific such as the name of the mandatee, NRE account number and the period to which the denial related. There was no specific denial of gift made in the year 1993 to the assessee or the affidavit sworn by him on 9-3-1993 and the gift deed executive by him. Unless the genuineness of Mr. Subhash Sethiss letter addressed to FERA authorities was established, no reliance could be placed on that letter. The assessee requested that handwriting expert should be appointed to match the signature on the letter of denial and the affidavit sworn before notary public.
9. The learned counsel for the assessee argued that reliance placed on the subsequent letter of Mr. Subhash Sethi was misconceived also for the reason that no opportunity to cross examine him had been afforded to the assessee. It appeared that the alleged letter had been written by Shri Subhash Sethi to bail out his brother Mukesh Sethi. At any rate Mr. Subhash Sethi had given a mandate to Umesh Mendiratta and, therefore, all acts and deeds done by mandatee, in the eyes of law, were acts and deeds of Mr. Sethi in person. Mr. Sethi could not, therefore, disown the responsibility of transactions done through Mr. Mendiratta. As to the statement of Mr. Umesh Mendiratta, the learned counsel for the assessee argued that the same was full of contradictions. At one place Mr. Mendiratta said that he recognized Mr. Sethi and at other place, he stated that Mr. Sethi was not known to him.
10. The learned counsel argued that the assessee had relied upon the gift deed, affidavit of Mr. Subhash Sethi and the certificate of M/s. American Express Bank certifying the withdrawal of the sum of Rs. 1 lakh. Thus, the assessee had discharged the primary onus to prove the nature, source of funds, identity of donor and genuineness of transactions. It was established legal position that apparent state of affairs is true until contrary is proved. It was for the assessing officer to establish that the documents relied upon by the assessee were false and that the transaction was not genuine. The department did not produce Shri Subhash Sethi for cross examination on the ground that he was in the U.K. and merely relied upon the letter and the statement of the mandatee. The learned CIT (A), therefore, sustained the addition made by assessing officer on inadequate ground. The assessing officer directed the assessee to produce Mr. Subhash Sethi which was not necessary because the assessee had filed relevant documents.
11. The learned counsel for the assessee relied upon the judgments in CIT v. A. Krishnaswami Mudaliar (1964) 53 ITR 122 (Mad), Parinisetti Seetharamainina v. CIT (1965) 57 ITR 532 (SC) and argued that the burden to prove that the receipt in the hands of the assessee was in the nature of income was upon the revenue. Thereafter, the learned counsel referred to the judgment in S. Hastimal v. CIT (1963) 49 ITR 273 (Mad) and argued that after the lapse of a decade, an assessee could not be placed upon the rack and called upon to explain not only the source of money received by him but also the source of the source. For this purpose, the learned counsel also placed reliance on the judgment of Honble Supreme Court in the case of ITO v. Lakhmani Meival Das (1976) 103 ITR 437. Reference was made to the judgment in the case of Kishinchana Chellaranz v. CIT (1980) 125 ITR 713 (SC) and 261 ITR 644 (sic). Reference was also made to Tribunal decisions in 47 ITD 158, 68 TTJ (Ch) 658 (sic) CIT v. R.S. Sibal (2004) 135 Taxman 492 (Delhi). On the basis of these citations, the assessee argued that the burden was on the revenue to prove that the gift was collusive and it was the assessees own money which had been introduced in the garb of gift. It was not necessary for the assessee to establish relationship with the donor. The learned counsel argued that there were certain undisputed facts which also pointed to the genuineness of the case. It is not denied that Shri Subhash Sethi was present at the time of the opening of the account of 10-2-1993 and that he made initial deposit of US $ 4500. There was nothing to establish that it was assessees money which had first been deposited in the NRE account. The learned counsel also argued upon the judgment of FERA Board in the case of Shri Rajiv Seth delivered on 30-6-1997 and 21-8-1997.
12. The learned Departmental Representative argued that in every case where a claim is made of having received gift, there has to be love and affection between donor and donee otherwise the transaction could not be a gift. There was not even a fraction of material on record that any kind of relationship existed between the alleged donor and the alleged donee. Both of them were and have been total stranger to each other. It is for that reason that throughout the proceedings the assessee could not produce an iota of evidence apart from tailor made documents acquired by him by arranging receipt of funds by way of bogus gifts. It was not even the case of the assessee that the donor and the donee have met ever during their life time. These circumstances were sufficient to prove that it was the subsequent statemerit of Shri Subhash Sethi which narrated the true state of affairs. The learned Departmental Representative strongly relied upon the reasonings of the assessing officer and the order of learned CIT (A). He has also placed considerable reliance on the judgment of Honble Punjab & Haryana High Court in the case of Lalchand (supra).
13. I have carefully considered the rival submissions. I shall address to the assessees challenge to initiation of proceedings under section 147 first. The assessees attack is two fold. First, he argues that nofice under section 148 was not served on the assessee in time. Secondly, he argues that the assessing officer did not have sufficient material for taking recourse to the provisions of section 147. As to the first aspect, I find that the assessing officer served the notice by affixture as the assessee was not traceable. Mere fact that the notice affixed was a photocopy could not have the effect of rendering the proceedings void in the eyes of law. As to the sufficiency of material, the argument of the learned counsel for the assessee is that from the statement of Shri Subhash Sethi, the assessee could not have entertained the reasons to believe that the gift was not genuine. It is because the statement given by Shri Subhash Sethi was not authenticated whereas the assessee was in possession of a duly notarized statement of Shri Subhash Sethi. According to the assessee, the signatures between these two statements did not tally. I do not see any force in this contention. The statement of Shri Subhash Sethi was given by him directly addressed to Shri NK Katiyal, Enforcement Officer. How can that statement be treated to be un-authenticated ? If there is any variation in the signature, the probability of notarized statement not being from Sh. Subhash Sethi on the peculiar facts of this case are much more. Enforcement Officer has carried out investiaation in detail and, therefore, could not have committed a mistake about the identity of the person. Be that as it may, the case of the assessee is that Sh. Subhash Sethi was so dear and near that he made a gift of Rs. 1 lakh out of natural love and affection. In these circumstances, it should have always been possible for the assessee to elicit the cooperation of Shri Subbash Setbi so as to verify whether or not he had given the statement in question before the Enforcement authorities. Moreover, as to the sufficiency of the material, the legal position is that the assessing officer should be in possession of relevant material but sufficiency or adequacy of the same cannot be called in question. Reference in this respect is invited to the judgment of Honble Supreme Court in the case of Rayinond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (SC).
14. During the course of hearing before me, the learned counsel for the assessee has relied upon a number of judgments and argued that the assessing officer had disbelieved the assessees claim of gift on suspicion, conjectures and surmises. I find that this issue is squarely covered against the assessee and in favour of the revenue by the judgment of Honble Delhi High Court in the case of Sajan Dass & Sons v. Cl T (2004) 264 ITR 435 (Del). In that judgment, Honble Delhi High Court had the occasion to consider the facts of a gift made by the very same Subhash Sethi to the appellant before them. After consideration, the Honble Delhi High Court leld as under :
"We have heard Mr. P.C. Jain, learned counsel for the appellant and Ms. Prem Lata Bansal, learned senior standing counsel for the revenue. It is vehemently submitted by Mr. Jain on behalf of the assessee that the assessing officer having relied on a letter, issued to a third party, namely, D.R.I., without confronting the assessee with the same, the assessment order is violative of principles of natural justice and that the assessee having furnished the documents in the form of affidavit of Subhash Sethi and the pay order issued by the American Express Bank, he had discharged the burden to prove that the gift was genuine. It is asserted that since the donor was not in India, he could not be produced before the assessing officer and, therefore, no adverse inference should have been drawn on that score. It is, thus, urged that the Tribunal having ignored these essential factors, its findings to the effect that the gift was not proved gives rise to a substantial question of law.
We are unable to persuade ourselves to agree with learned counsel for the assessee. As rightly observed by the Tribunal, a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift. Since the claim of gift is made by the assessee, the onus lies on him not only to establish the identity of the persons making the gift but also his capacity to make a gift and that it has actually been received as a gift from the donor. Having regard to the inquiries conducted by the assessing officer from the bank, with which the assessee was admittedly confronted and bearing in mind the fact that admittedly said Subhash Sethi was not related to the assessee, we are of the view that the findings recorded by the Tribunal are pure findings of fact warranting no interference. We find it difficult to hold that on the facts of the instant case proper opportunity had not been granted to the assessee to prove the gift."
15. I find that facts of the case speak for themselves. Here is the case of a non-resident Indian having opened an NRE account of India. Not a single penny has been deposited in that account by any remittances from abroad. Foreign currency has been deposited from time to time in cash. Thereafter drafts or cheques are issued to different persons. The learned assessing officer has rightly held that it was not possible that a single person would make gifts running into crores of rupees to so many persons. The learned assessing officer has rightly relied upon the judgment in the case of ShriLal Chand (supra). The assessee in the instant case has argued that an opportunity to examine Shri Subhash Sethi was not allowed. I am unable to appreciate this contention of the assessee. Shri Subhash Sethi is alleged to have made gift of Rs. 1 lakh to the assessee out of natural love and affection. It should have always been possible for the assessee to obtain a statement from Shri Subhash Sethi either repudiating his statement before Enforcement Directorate or asserting that as far as gift to the assessee was concerned that the same was genuine. The assessee has not relied upon any piece of evidence/material or any circumstances whatsoever except the initial notarized statement. In the circumstances, it cannot be said that the assessee has discharged the burden of proof which lay upon him. In the case of D.C. Rastogi, HUF v, Assistant CIT (1996) 57 ITD 295 (Delhi), the Tribunal has held that it is the duty of the assessee to establish by necessary evidence the genuineness of gift, Mere confirmation from the party that the gift had been made was not enough. In the case of Sumati Dayal v. CIT (1995) 214 ITR 801 (SC), Honble Supreme Court have held that such issues are required to be decided after considering the surrounding circumstances and applying the test of human probabilities. Taking into overall facts and circum. stances of the case and respectfully following the judgment of Honble Delhi High Court in Sajan Das & Sons case (supra) 1 held that the learned CIT (A) is amply justified in the impugned order to take the view that the alleged gift from Shri Subhash Sethi was not satisfactorily explained and, therefore, an addition under the provisions of the Act was called for.
16. In the result, this appeal fails and accordingly dismissed.