Income Tax Appellate Tribunal - Delhi
Mayawati , New Delhi vs Department Of Income Tax on 7 April, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : E : NEW DELHI
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No. 3157 & 3158/Del/2010
Assessment Years : 2001-02 & 2002-03
DCIT, Vs. Ms Mayawati,
Central Circle-11, Property No.3, Survey No.105,
New Delhi. Nehru Road Cantonment,
Lucknow, UP.
PAN : APCPM1284D
(Appellant) (Respondent)
Revenue by : Smt. Sangeeta Gupta, CIT, DR
Assessee by : Dr. Rakesh Gupta, Shri Ashwani Taneja,
& Shri Tarun Kumar, Advocates
ORDER
PER BENCH:
Both these appeals are filed by the revenue. They are directed against two separate orders of CIT (A) dated 7th April, 2010 and 19th April, 2010 in respect of assessment years 2001-02 and 2002-03 respectively. Grounds of appeal in both the appeals are as under:-ITA No.3157/Del/2010 (A.Y. 2001-02)
1. The order of the learned CIT(A) is not correct in law and facts
2. On the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in quashing the assessment on the grounds that the Assessing Officer did not issue and serve notice under section 143(2) of Income-
tax Act 1961 without appreciating that the assessment was completed under section 147/144 in view of continued non compliance to notice u/s 142(1) dated 3.11.2008, as per the provisions of section 144(1)(b) of the Income-tax Act, 1961.
2 ITA No.3157 & 3158/Del/20101961.
3. On the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in holding that provisions of section 292BB of Income- tax Act 1961 were not applicable prior to assessment year 2008-09 whereas the provisions of this section are procedural in nature and are applicable to any proceedings after 01.04.2008.
4. On the facts and circumstances of the case, the learned CIT(A) has erred as he failed to note the huge gap between the receipt of sale proceeds of M/s Sylverton Hotel and the gift to the assessee and the failure of the assessee to establish an accounting link between the two.
5. On the facts and circumstances of the case, the learned CIT(A) has erred as he failed to note that the income returned by Shri Ashok Kumar Jain was far below his capacity to give gifts of the amounts given to the assessee and that his so called creditworthiness was based almost entirely on the basis of market value of ancestral property which was not indicative of his capacity to give gifts.
6. On the facts and circumstances of the case, the learned CIT(A) has erred by way of ignoring the findings of ADIT(Inv.) Ghaziabad, which were reproduced by the Assessing Officer in the remand report, regarding the genuineness of transactions /and creditworthiness of donors after he had himself remanded the issue of gifts back to the Assessing Officer for re-examination.
7. On the facts and circumstances of the case, the learned CIT(A) has erred as he failed to note that the assessee has not been able to furnish any evidence of receiving Gold Mukuts/Talwars from her supporters in the said assessment year .
8. On the facts and circumstances of the case, the learned CIT(A) has erred by way of ignoring the fact that not only the authenticity of the so called wills of the assessee's grandfather and his brother could not be proved by the assessee but also the fact that the assessee had no other proof to show that these donors were in fact the donors and had the creditworthiness to make such gifts.
3 ITA No.3157 & 3158/Del/20109. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
ITA No.3158/Del/2010 (A.Y. 2002-03)1. The order of the Ld. CIT(Appeals) is not correct in law and facts
2. On the facts and circumstances of the case, the Learned CIT (A) has erred in law and on facts in deleting the addition of Rs. 69,96,000/- towards unexplained investment under section 69 of Income tax Act 1961 whereas donors namely Mrs. Gurcharan Kaur, Mrs. Kulwant Kaur and Mrs. Swarn Kaur had no capacity and creditworthiness to advance gifts to the assessee and genuineness of transaction was not proved.
3. On the facts and circumstances of the case, the Learned CIT (A) has erred in law and on facts in allowing benefit of immunity of VDIS declaration by donors to the assessee in violation of the judgement of the Hon'ble Supreme Court in the cases of Rattan Lal 145 ITR 0183 and M/s.United Trading Construction CO.247 ITR 0819.
4. On the facts and circumstances of the case, the Learned CIT (A) has erred and failed to appreciate the various points highlighted in the assessment order which showed that the declaration by donors was not in accordance with the requirement of VDIS 1997 and therefore did not entitle the assessee to claim immunity under circular nO.754 dated 10.6.1997, in terms of various decisions of the Hon'ble Supreme Court cited by the Assessing Officer in his assessment order.
5. On the facts and circumstances of the case, the Learned CIT(A) has erred in assuming that the Assessing Officer has invalidated the certificate issued by the CIT-X, when the A.O. has only denied the benefits of circular no 754 to the assessee in view of his finding that the declarations and subsequent conduct of the declarants was not in 4 ITA No.3157 & 3158/Del/2010 accordance with the provisions of VDIS 1997.
6. On the facts and circumstances of the case, the Learned CIT (A) has erred in law and failed to appreciate that even otherwise the Assessing Officer was bound to follow the judgments of the Supreme Court and various other courts in the case of Rattan Lal 145 ITR 0183 and various other cases, in view of the decision of the Supreme Court in Rattan Melting & Wire Industries(2008) 13 SCC 1.
7. On the facts and circumstances of the case, the Learned CIT (A) has erred in law and on facts in holding that the case of Rattan Lal is distinguishable from that of the assessee without ascribing any reasons for the same.
8. On the facts and circumstances of the case, the Learned CIT (A) has erred in law in ignoring various judgments cited by the Assessing Officer which held that the certificate of· VDIS declaration issued by the Commissioner does not in any way preclude charging of tax in the hands of the assessee as such certificates are neither final nor conclusive in respect of proceedings against persons who are not declarants.
9. On the facts and circumstances of the case, the Learned CIT(A) has erred in law in ignoring the judgments cited by the Assessing Officer in which the Courts held that certificates issued by the Commissioner under Voluntary Disclosure Schemes cannot be final, as in such schemes certificates issued by the Commissioner do not involve any investigation into the correctness of the declaration or any determination that the amounts belong to the declarants.
10. On the facts and circumstances of the case, the Learned CIT(A) has erred in law and failed to observe that 5 ITA No.3157 & 3158/Del/2010 since the provisions in various Voluntary Disclosure Schemes are para materia, judgments in respect of one would lay down the principles of law governing the other .
11. On the facts and circumstances of the case, the Learned CIT(A) has erred in law and in facts in holding that the inquiries conducted by the Income Tax Department were irregular and in violation of Section 72 of VDIS 1997, ignoring the fact that such inquiries were taken up in accordance with the orders of the Hon'ble Supreme Court, to investigate the income and assets of the assessee as pointed out by the Assessing Officer in his order.
12. On the facts and circumstances of the case, the Learned CIT (A) has erred in law and on facts in relying on the statement of village Sarpanch, Shri Jaswinder Singh to certify creditworthiness and financial standing of Late Sh.Hari Singh, ignoring the fact that such person was giving contradictory statements and that his statements were based on hearsay and not backed up by any material or tangible evidence.
13. On the facts and circumstances of the case, the Learned CIT (A) has erred in facts in giving certificate of creditworthiness and respectability to the donors without inquiring as to the date of acquisition of various properties by them and ignoring the irrelevance of such certificate as the gifts made to the assessee had never been claimed to have been made out of such income or assets.
14. On the facts and circumstances of the case, the Learned CIT (A) has erred in holding that Assessee was denied permission to cross examine witnesses ignoring the fact that the assessee first asked permission to produce witnesses and when given the opportunity to produce any person that assessee wished, declined to produce these persons and filed a petition requesting the department to produce them for cross examination. Learned CIT (A) has further failed to appreciate that before him also the assessee submitted that assessee did not wish to cross examine the witnesses. Hence, Ld.CIT(A) erred in not appreciating that the assessee was not serious about producing these witnesses.
15. On the facts and circumstances of the case, the Learned CIT (A) has erred in law and on facts in stating that there is no evidence to prove that the contents of the affidavits from statements are untrue, ignoring the plethora of evidences collected by the Assessing Officer 6 ITA No.3157 & 3158/Del/2010 which showed how the assessee had manipulated the deposits into the bank account and the declarations before the Commissioner.
16. On the facts and circumstances of the case, the Learned CIT(A) has erred in law and on facts and failed to appreciate that the AO has proved from a critical examination of the statements and the evidences collected about the financial position of the donors and their father, that the receipts of gifts of that amounts from the daughters of Shri Hari Singh to the assessee, arising out of gifts from their father were an impossibility.
17. On the facts and circumstances of the case, the Learned CIT (A) has erred in law and on facts and failed to appreciate that the Assessing Officer had clearly made out a case whereby he has proved that the apparent is not the real in terms of the judgement of the Hon'ble Supreme Court in the case of Sumati Dayal VS.CIT 214 ITR 801.
18. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.
2. Both the parties have filed synopsis of their arguments on the basis of which they have advanced their arguments. Both the parties have also filed paper books which are placed on record. Both these appeals were argued together and, for the sake of convenience, both these appeals are disposed of by this consolidated order.
ITA No.3157/Del/2010 (Assessment Year 2001-2001-02)
3. Brief facts relevant to decide the present appeal are as under.
4. The return of income originally was filed on 11th June, 2001 at an income of `15,45,810/-. The said return was processed u/s 143 (1) of Income- tax Act, 1961 (the Act) on 27th February, 2002. On the basis of report of Investigation Wing, the assessment records of the assessee were examined and it was found that during the year under consideration the assessee had received gifts of `24 lac details of which are as follows:-
7 ITA No.3157 & 3158/Del/2010 Sl.No. Name of the donor Amount
Amount
1. Sh. Ajay Aggarwal 5,00,000
2. Shri Ashok Kujmar Jain 3,00,000
3. Smt. Lata Jain 2,00,000
4. Sh. Shailender Jain 8,00,000
5. Smt. Sangeeta Jain 1,00,000
6. Sh. Surender Singh 5,00,000
Total 24,00,000
5. According to assessment order the aforementioned gifts were not found declared in the return of income or in the balance sheet annexed with the return of income. Therefore, those gifts were not subject to verification. According to inquiries conducted by Investigation Wing, gifts received from Shri Ashok Kumar Jain and his family members were not genuine. Similarly, gifts received from Shri Surender Singh were also not genuine as he was an accommodation entry operator. In respect of Shri Ajay Aggarwal, who gifted `5 lac to the assessee, the income of donor was below taxable limit, therefore, the donor was not found to be a man of means. Therefore, it is mentioned in the assessment order that genuineness of gifts and credit worthiness of the donors was neither proved from the donor side nor the amount was reflected in the return of income.
6. Further, it was found that the assessee had declared short-term and long term capital gains. Short term capital gain was declared at nil. The genuineness of sale transactions and source of purchase of jewellery were also not subject to verification as supporting evidences were not filed along with return and, in view of these facts, the Assessing Officer having reasons to believe that the assessee had not declared full and true particulars of her income, the re-assessment proceedings were started. A proposal was moved by the Assessing Officer to Addl. CIT, Central Range-3, New Delhi for reopening of the case u/s 147 of the Act on 25th March, 2008 and approval was accorded on 25th March, 2008. Accordingly, notice u/s 148 was issued on 25th March, 2008.
8 ITA No.3157 & 3158/Del/20107. The aforementioned notice dated 25th March, 2008 was sent for service to the assessee to the address available on record i.e., C-1/11, Humayun Road, New Delhi from the Inspector's Office. The Inspector submitted his report dated 29th March, 2008 and, according to the said report, he was advised to send the notice to the assessee's Lucknow address which was provided as 3-Nehru Road, Cantonment, Lucknow, UP and the notice to the Lucknow address was sent on 29th March, 2008 by speed post. There was a dispute with regard to service of notice u/s 148 and the matter was carried by the assessee to Hon'ble Delhi High Court and vide their order dated 18th December, 2008 the proceedings were stayed. Hon'ble High Court vide their order dated 13th February, 2009 dismissed the Writ Petition filed by the assessee in which the assessee had challenged the validity of initiation of re- assessment proceedings.
8. An affidavit was filed by the department before the Hon'ble High Court according to which a view was taken by the revenue that notice u/s 148 was issued on 25th March, 2008, but it should be deemed to be served on the assessee on 2nd April, 2008 i.e., the date on which the refusal to receive the notice at Lucknow was recorded by the postman. However, according to the Assessing Officer, the Hon'ble High Court has held that notice was deemed to be served on 29th March, 2008 i.e., the date on which the Inspector of the Department took the notice to the officially allotted residence of the assessee at Delhi and was told to send the notice to Lucknow. All these facts are stated by the Assessing Officer in the assessment order. Thereafter, the Assessing Officer referred to provisions of Explanation to Section 153 (1)(ii) and to compute the limitation to frame the re-assessment, Ld. Assessing Officer had arrived at a conclusion that the assessment was going to be time barred on the date of framing the assessment order which was 26th February, 2009. According to the Assessing Officer, the normal time limit to frame the assessment was to expire on 31st December, 2008 and as the proceedings were stayed by the Hon'ble High Court vide order dated 18th December, 2008 and on the date of grant of stay, 14 days were left for completing the assessment. Later on, final order was pronounced by Hon'ble High Court on 13th February, 2009 and, thereafter, 14 days being available to the Assessing 9 ITA No.3157 & 3158/Del/2010 Officer were ended on 26th February, 2009. The Assessing Officer has also mentioned about the issue of notice u/s 142 (1) on 19th February, 2009 whereby the assessee was required to furnish details/explanation as per questionnaire already issued vide letter No.ACIT/CC-11/2008-9/159 dated 3.11.2008. The copy of the said letter was also enclosed with the notice u/s 142 (1) in response to which the assessee filed the reply which has been reproduced by the Assessing Officer in para 12 of his order. The contention of the assessee in the said letter was that according to notice issued to the assessee on 25th March, 2008 u/s 148, which was received on 15th December, 2008, the assessee was required to furnish a return within 30 days of the receipt of the notice. The assessee challenged the validity of re-assessment proceedings before the Hon'ble High Court vide Writ Petition No.8768/2008 stating therein that notice u/s 148 was time barred and, therefore, the proceedings are void ab initio. Reference was made to the affidavit filed by the revenue before Hon'ble High Court in which it was submitted that notice should be deemed to be served on 2nd April, 2008. Thus it was pleaded by the assessee that period of limitation for passing re-assessment order will expire on 31st December, 2009 instead of 31st December, 2008 as mentioned by the Assessing Officer. It was submitted that the assessee has filed Special Leave Petition against the said order of Hon'ble High Court. Reference was made to the fresh notice issued u/s 142 (1) dated 19th February, 2009 asking the assessee to file the return with various information as per questionnaire dated 03.11.2008. It was submitted that without prejudice to the rights of the assessee to challenge the notice and the order of Hon'ble High Court, the assessee under protest is submitting the return originally field by her for assessment year 2001-02 on 11th June, 2001 to be treated as a return filed in response to notice issued to assessee u/s 148 of the Act. The assessee also sought reasons for re-opening of the case as according to assessee's belief the income for the year was properly disclosed in the return filed by her and it was claimed that the initiation of re-assessment proceedings was not valid.
9. The Assessing Officer, considering the above reply of the assessee has observed that limitation will be expired "after today" i.e., 26th February, 2009 and the assessee's move to declare filing of the return at the last moment is 10 ITA No.3157 & 3158/Del/2010 nothing, but a gambit to obfuscate issues. According to the Assessing Officer, it is not possible to issue notice u/s 143 (2) on the last day of limitation and await the reply from the assessee and yet to complete the assessment within the statutory limitation. The assessee has already been provided with so many opportunities to reply on merits of the case. The observations of the Assessing Officer in this regard being important to decide the issue are reproduced below for the sake of convenience:-
"13. The assessee's reply has been considered for the detailed reasons given in the foregoing paragraph and cannot be accepted. The limitation is due to expire after today and the assessee's move to declare filing of return at the last moment is nothing but a gambit to obfuscate issues. It is not possible to issue notice u/s 143 (2) today and await a reply from the assessee and yet complete the assessment within the statutory limitation. The assessee has already been provided so many opportunities to reply on the merits of the case vide our numerous show cause notices cited above contained the reasons for reopening also. However, the assessee has said nothing in support of her claim and somehow the assessee is prolonging the proceedings on technical and other grounds. In view of all these facts mentioned above, I have no alternative except to complete the assessment on the basis of material available on record as ex-parte u/s 144 of the Income Tax Act, 1961."
10. Thereafter, the Assessing Officer has made the following impugned additions to the income of the assessee considering the merits of the case:-
Income from sale of jewellery, etc. - `12,52,585/-
Income from undisclosed sources - ` 24 lac.
u/s 69 being unexplained gifts
11. In the appeal filed before the CIT (A) the assesse contested the validity of the re-assessment proceedings on the ground of non-issue of notice u/s 143 (2) and the additions on merits were also contested as according to the assessee the assessment was not valid and the additions were not sustainable according to the facts and circumstances and evidences.
12. It may be mentioned here that during the course of hearing of appeal Ld. CIT (A) had required the remand report from the Assessing Officer on all the issues and the said report was submitted by the Assessing Officer vide letter dated 16th March, 2010. A copy of such report is furnished by the department in its paper book at pages 30-46.11 ITA No.3157 & 3158/Del/2010
13. So far as it relates to validity of assessment order, it has been held by CIT (A) that since the fact of non-issue of notice u/s 143 (2) is not disputed and the said notice was never issued or served upon the assessee, therefore, the assessment is not valid. For holding so, Ld. CIT (A), apart from other decisions, has mainly relied upon the following decisions:-
(i) CIT vs. Hotel Bluemoon 321 ITR 362 (SC)
(ii) CIT vs. Lunar Diamonds 281 ITR 1 (Del)
14. In the remand report filed before CIT (A), it is the contention of Assessing Officer that notice u/s 143 (2) was issued during the remand proceedings and, therefore, the irregularity of non-issue of notice u/s 143 (2) was, thus, regularized, therefore, according to the provisions of Section 292 BB the proceedings cannot be held to be invalid. Such contention of the Assessing Officer has been rejected by Ld. CIT (A) by holding that issue of notice u/s 143 (2) is mandatory and the irregularity of non-issue of notice cannot be regularized or cured by the service of such notice during the remand proceedings. It is further held that Section 292 BB is applicable w.e.f.
A.Y. 2008-09 and for holding so he has relied upon the decision of Special Bench in the case of Kuber Tobacco Pvt. Ltd. 117 ITD 273 (Del) (SB).
15. So as it relates to the Assessing Officer's remarks regarding non- availability of sufficient time to issue notice u/s 143 (2), Ld. CIT (A) has observed that in any case the assessment was not going to be time barred on 26th February, 2009 and, according to the proviso to Explanation of Section 153 if the time available to complete the assessment, after excluding the period of stay, remains less than 60 days, then, the said short period will be extended to 60 days and, in this manner, the assessment was going to be time barred on 14th April, 2009 and not on 26th February, 2009 as held by the Assessing Officer. Thus, it has been held by Ld. CIT (A) that the Assessing Officer was wrong in observing that due to non-availability of sufficient time, the notice u/s 143 (2) could not be issued to the assessee and, therefore, it has been held that proviso to Explanation 1 of Section 153 being applicable, the assessment was not time barred on 26th February, 2009 as alleged by the 12 ITA No.3157 & 3158/Del/2010 Assessing Officer. The time was available to the Assessing Officer upto 14th April, 2009.
16. On merits, after examining the facts and evidence placed by the assessee on record, Ld. CIT (A) has come to the conclusion that additions were not liable to be sustained.
17. The department in its appeal is aggrieved by such findings of the CIT (A).
18. Both the parties have argued extensively on the issue of validity or otherwise of the assessment on the ground of non-issue of notice u/s 143 (2) and, therefore, it is necessary to discuss this issue in detail.
19. The case of the department was argued by Smt. Sangeeta Gupta, CIT, (DR). The first and foremost argument of Ld. CIT (DR) was that Ld. CIT (A) was wrong in holding that assessment was not valid. She submitted that the case of the department is that the present assessment is framed u/s 147/144 of the Act and not u/s 147/143 (3) of the Act. She submitted that the assessee despite issue of several notices asking her to furnish various details, did not response to such notices. The Assessing Officer had issued notice u/s 142 (1) and in the absence of any response from the assessee, the Assessing Officer was authorized to frame assessment u/s 144 and the assessment is valid as per Section 144 (1) (b) of the Act. She submitted that the issue of notice u/s 142 (1) is not in dispute and she referred to the provisions of Section 144 (1) (b). Section 144 is reproduced elsewhere in this order.
20. She contended that in the present case the assessee has failed to comply with all the terms of a notice issued under sub-section (1) of Section 142 and, therefore, the Assessing Officer was well within his power to frame the assessment u/s 144 without adhering to the requirement of issue of notice u/s 143 (2). She submitted that notice u/s 142 (1) was issued on 3rd November, 2008 over and above the notices issued u/s 148 and 142 (1) requesting her to file the return of income. She submitted that the assesse has adopted dilatory tactics to file the return of income on the last date of limitation and seeking the reasons to believe when these reasons were 13 ITA No.3157 & 3158/Del/2010 already communicated to the assessee as those reasons were outlined in para 4 of the letter dated 3rd November, 2008. She submitted that even if the case of CIT (A) is accepted that additional time was available to Assessing Officer to frame the assessment, then also, that will not cure the default of the assessee for non-compliance of notices u/s 142 (1) and it is nowhere written in the Act or in any case law that notice u/s 143 (2) must precede notice u/s 142 (1) and if repeated non-compliances are made to a notice u/s 142 (1) issued prior to filing of the return, the Assessing Officer is entitled to pass an order u/s 144.
21. She submitted that non-service of notice u/s 143 (2) at best can be seen in the context of non-grant of proper opportunity to the assessee to present her case and, according to the facts of the present case such opportunity is not lacking. She pleaded that according to following decisions, the failure to serve notice u/s 143 (2) is only a defect which is rectifiable in the remand proceedings by the Assessing Officer:-
(i) Areva T and D India Ltd. 294 ITR 233 (Mad)
(ii) CIT vs. Gyan Prakash Gupta 165 ITR 501 (Raj)
(iii) CIT vs. Baba Mohan Singh 90 ITR 197 (All)
22. She pleaded that the Assessing Officer has recorded a finding in the remand proceedings that adequate opportunity is afforded to the assessee to present her case and Ld. CIT (A) has also considered the views of the Assessing Officer and the evidence led by the assessee in the remand proceedings and, therefore, one fails to understand that how the assessment can be quashed by taking recourse to judgement of Hon'ble Supreme Court in the case of CIT vs. Hotel Bluemoon (supra) as the defect was rectified by the CIT (A) himself by remanding the proceedings to the Assessing Officer and such plea of the department is without prejudice to the belief that assessment was validly framed u/s 144 (1) (b) of the Act.
23. She further pleaded that provisions of Section 292 BB are procedural provisions, therefore, applicable even prior to assessment year 2008-09. Therefore, she pleaded that Ld. CIT (A) could not have quashed the assessment.
14 ITA No.3157 & 3158/Del/201024. Coming to the merits of the additions, the submissions of Ld. CIT (DR), as mentioned in the synopsis, are as under:-
4 Learned CIT(A) has erred in That there was a huge gap between the failing to note the huge gap deposits of sale proceeds of M/s Sylverton between the receipts of sale Hotel & the gift given by Mr. Ajay Aggarwal proceeds of M/s Sylverton Hotel to Ms. Mayawati, and this gap was and the gift to the assessee and interspersed with many deposits and failure of the assessee to withdrawals. Therefore, the source of establish an accounting link credit in Ajay Aggarwal's bank account between the two. from which the gift was given could not be said to arise out of the said transaction which has been used to justify the gift.
In para 5(a) page number 6 of the remand report referred to supra this issue has been discussed in detail.
5 Learned CIT(A) has erred in law That the income returned by Ashok and on facts in failing to note Kumar Jain is far below his capacity to give that the income returned by Sh. gifts of magnitude given to the assessee Ashok Kumar Jain was far below and that so called credit worthiness of Sh. his capacity to give gifts of the Ashok Kumar Jain, as held by ITAT in magnitude given to the assessment year 2003-04, is almost assessee and that his so called entirely on the basis of market value of creditworthiness was based ancestral property which is not indicative almost entirely on the basis of of his capacity to give gifts.
market value of ancestral
property which was not In para 5(b) page numbers 7 and 8 of
indicative of his capacity to give the remand report referred to supra this gifts. issue has been discussed in detail.
However, as far other gifts are concerned details are given in para 5(c) to (f) at pages number 9 to 12.
6 Learned CIT(A) has erred in law The CIT(A) has totally ignored the and on facts ignoring the observations of ADIT(Inv) Ghaziabad which findings of ADIT(Inv), Ghaziabad, have been reproduced by the Assessing which were reproduced by the Officer in the remand report regarding the Assessing Officer in the remand genuineness of the transactions and the report, regarding the creditworthiness of the donors on the genuineness of transactions and ground that these have been gathered creditworthiness of donors after behind the back of the assessee. Since he he had himself remanded the had stepped into the shoes of the issue of gifts back to the Assessing Officer and was causing Assessing Officer for re- enquiries in the assessee's case he could examination. certainly have confronted the assessee with these facts and obtained her reply. In not doing so he has abdicated his responsibility in the matter which makes his order liable to be set aside for finding on these issues.
More details in this regard are given at 15 ITA No.3157 & 3158/Del/2010 pages number 12 to 14 of the remand report of the Assessing Officer.
7 7. Learned CIT(A) has erred in This issue has been detailed in para 6 law and on facts in failing to note at pages number 14 to 16 of the remand & that the assessee has not been report submitted by the Assessing Officer.
able to furnish any evidence of 8 receiving gold Mukuts/Talwars Further, there was no proof brought from her supporters in the said forward by the assessee to show that these assessment year . donors were in fact the donors or had the
8. Learned CIT(A) has erred in creditworthiness and capacity to make law and on facts in ignoring the such gifts. The CIT(A) has chosen to lay on fact that not only the the onus of the Assessing Officer without authenticity of the so called noticing that the assessee had failed to WILLs of the assessee's discharge her own onus by furnishing any grandfather and his brother tangible proof in support of her claims. could not be proved by the assessee but also the fact that the assessee has no other proof to show that these donors were in fact the donors or had the creditworthiness to make such gifts.
9 Learned CIT(A) has erred in law This issue has been detailed in para 6 and on facts in allowing at pages number 16 & 17 of the remand expenditure on engagement of report submitted by the Assessing Officer.
agents to seel books without the
assessee submitting any
evidence of actual services
rendered by the so called agents
or being able to show the need
for engagement of agents.
25. On the other hand, it was submitted by Ld. Counsel appearing on behalf of the assessee that the assessment was not going to be time barred on 26th February, 2009 as observed by the Assessing Officer in the assessment order. The Assessing Officer had sufficient time to issue notice u/s 143 (2) before completion of the assessment. He submitted that non- issue of notice u/s 143 (2) will render the assessment invalid and this law has now become final with the judgement of Hon'ble Supreme Court in the case of CIT vs. Hotel Bluemoon (supra). He contended that apart from that Hon'ble Jurisdictional High Court also in the case of CIT vs. Pawan Kumar Gupta 223 CTR 487 has held that notice u/s 143 (2) is mandatory.
26. He submitted that the fact that no notice u/s 143 (2) was issued is undisputed fact. The issue of notice u/s 143 (2) was mandatory and not procedural, therefore, such defect is not curable. He submitted that the issue 16 ITA No.3157 & 3158/Del/2010 of notice u/s 143 (2) during the remand proceedings also does not cure the defect as the said notice has not been issued within the prescribed period.
27. Coming to the computation of limitation period, he submitted that according to the affidavit filed by the department before the Hon'ble High Court in Writ proceedings, the notice was served on 2nd April, 2008 and if it is the position taken as per the version of the revenue as stated in the affidavit, then, the normal time limit to frame the assessment will be 31st December, 2009. He submitted that even if the date of issue of notice u/s 48 is taken into consideration, then also the period of 14 days as stated by the Assessing Officer was to be extended to 60 days as per proviso to Explanation 1 of Section 153. Therefore, Ld. CIT (A) was right in holding that the limitation to frame the assessment was expiring on 14th April, 2009. He in this regard referred to the table reproduced in the order of the CIT (A) in para 6 and which is also reproduced here for the sake of convenience.
S.No. Particulars Date
1. Issue of Notice u/s 148 25.3.2008
2. Service of Notice u/s 148 29.03.2008
3. Date of order passed by High Court for stay of 18.12.2008 proceedings
4. Date of order passed by the High Court for 13.02.2009 disposing of writ petition
5. No. of days remaining for making assessment 14
6. Excluded period das per Explanation 1 (ii) to 18.12.2008 Section 153 to 13.2.2009
7. Date by which assessment must be made 13.2.2009 + 14 under Explanation 1 (ii) of Section 153.
days i.e.,
27.2.2009
8. Since number of days available for making 14.04.2009
assessment is 14 days, which is less than 60
days, proviso to explanation to Section 153 is
applicable. Therefore, number of days
remaining with the LAO for making
assessment would be 60 days from
13.02.2009 and not 14 days. Hence, the
limitation date would be
9. Assessment order u/s 144 passed on 27.02.2009.
17 ITA No.3157 & 3158/Del/2010
28. Thus, Ld. AR submitted that it is not a case where it was impossible for the Assessing Officer to issue notice u/s 143 (2) for adhering to the mandatory statutory requirement to frame the valid assessment. Thus, he pleaded that the CIT (A) has rightly held that the assessment was invalid in view of the non-issue and service of notice u/s 143 (2).
29. It was further submitted by Ld. AR that Ld. CIT (A) has rightly held that even Section 292 BB cannot be applied to hold that the assessment is valid as according to the decision of Special Bench in the case of Kuber Tobacco Products Pvt. Ltd. (supra) the provisions of Section 292BB are applicable from assessment year 2008-09 and the present assessment year is only A.Y. 2001-
02.
30. He also relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Mani Kakar 18 DTR 145 (Del) wherein the similar proposition has been laid down. Ld. AR submitted that Ld. Assessing Officer in remand report has mentioned that notice u/s 143 (2) is not a statutory notice and the purpose of such notice is to give opportunity only and it is not fatal to the validity of the assessment and to complete that irregularity the notice u/s 143 (2) is being issued on 27th January, 2010 in the remand proceedings. He invited our attention towards the findings recorded by Ld. CIT (A) in para 5.3 at page 26 to 28 of the appellate order that notice u/s 143 (2) was not issued though return was filed in response to notice u/s 148. He submitted that the assessee in her letter has clearly stated that the return originally filed may be treated as return in response to notice u/s 148 and such fact is recorded in the assessment order itself in para 12 at page 6 and 7 of the assessment order. He submitted that though the date of assessee's letter is not mentioned, but it is dated 26th February, 2009 and such letter is return of income as held in the following cases:-
(i) Dr. K.C. Verma vs. ACIT 84 ITD 33
(ii) Tiwari Kanhaya Lal and Ors vs. CIT 154 ITR 109 (Raj)
31. He further submitted that even in the proceedings initiated u/s 148, the issue of notice u/s 143 (2) is a must and he relied upon the following decisions:-
18 ITA No.3157 & 3158/Del/2010 i) H. Gouthamchand vs. Addl. CIT 131 TTJ 204 (Bang)
ii) CIT vs. Rajeev Sharma 40 DTR 129 (All)
iii) CIT vs. M. Chellapan 281 ITR 444 (Mad)
iv) ITO vs. Sukhini P. Modi 112 ITD 1 (Ahd)
v) DCIT vs. Indian Syntans Investments P. Ltd. 107 ITD 457
(Chennai)
32. For the proposition that the return even if belatedly filed is a valid return and if the notice u/s 143 (2) is not issued the assessment will be invalid, he relied upon the following decisions:-
i) Janak Kansara vs. DCIT 116 TTJ 415 (Ahd)
ii) H. Gouthamchand vs. Addl. CIT 131 TTJ 204 (Bang)
iii) CIT vs. Rajeev Sharma 40 DTR 129 (All)
33. With regard to the submissions of CIT (DR) that in the present case assessment is framed u/s 144 (1) (b) he submitted that irrespective of the fact that assessment is framed u/s 144, the notice is mandatory to be issued u/s 143 (2) as the return was filed by the assessee on 26th February, 2009. Reference was made to the decision of Hon'ble Supreme Court in the case of Hotel Bluemoon (supra) wherein it has been held that in case the Assessing Officer wants to vary the return, it is mandatory for him to issue notice u/s 143 (2) and since the Assessing Officer in the present case has sought to vary the return filed, then it was mandatory for him to issue notice u/s 143 (2).
34. In respect of merits, he submitted that the CIT (A) has rightly deleted the addition by appreciating the facts and evidence placed by the assessee on record and after going through the remand report submitted by the Assessing Officer. His submissions on merits as stated in the synopsis are as under:-
GROUND NO.4 This ground of the revenue relates to the gift received by the assessee from Mr. Ajay Agrawal and the challenge of the revenue is specific.19 ITA No.3157 & 3158/Del/2010
In Ground No.4, revenue has raised about the gift from Mr. Ajay Kumar Agarwal on the ground that CIT (A) failed to note huge gap between the receipt of sale proceeds of MIs Sylverton Hotel and gift to the assessee and the failure of the assessee to establish and accounting link between the two:
A.O has discussed of this issue of gift from Mr. Ajay Kumar Agarwal in Para-23 at Page 11 & 12 of the Assessment order whereas Ld. CIT (A) has discussed this issue in Para 7.1, 7.2 at Page 32 to 36 of the Appeal Order.
Though, ground of the revenue is specific yet assessee would show about the all the ingredients of section 68 in this regard. But before that few important submissions are being made:-
Case of the assessee was reopened after almost 6-7 years. Best & positive evidences available to prove the case were filed by the assessee. There is no adverse evidence against the assessee. These evidences have not been rejected by AO as may be seen from the remand report. (PB 501-517). No further evidence was asked by AO. These proceeding are u/s 147 where burden to prove is on revenue as held in the following judicial decisions:-
CIT. vs Pradeep Kumar Gupta 303 ITR 95 (Del) CIT vs Anupam Kapoor. 299 ITR 179 (P&H) Hakumat Rai ITA 48/Asr/2007 PB E-G are the submission before Ld. A.O. in the remand proceeding according to which gift of Rs.5 lakh was received by the assessee from Mr. Ajay Kumar Agarwal through banking channel and that Mr. Ajay Agarwal was a man of means and he received substantial amount by way of sale proceeds of Hotel Sylverton and that out of the very amount, he had given a gift of Rs. 10 lakh to the assesee in A.Y. 2003- 04 which was accepted by Ld. A.O. in the assessment framed u/s 143(3).
Assessee furnished voluminous evidences in support of the gift of Rs. 5 lakh in this year.
PB 38- 38-40 are the affidavits of the donor Mr. Ajay Agarwal confirming the gift to the assessee through banking mode not only in this year but in A.Y. 2003-04 also.
20 ITA No.3157 & 3158/Del/2010PB 41- 41-43 is the details of property / assets owned by the donor to show that he was a man of means.
PB 44- 44-60 is the family partition deed of Sh. Ajay Agarwal to show that he received substantial amount of properties PB 61- 61-71 is the copy of ITCC issued by the Income-tax Department for the sale of Sylverton Estate, Mussorie.
PB 338 -340 is the copy ,of bank statement of Mr. Ajay Agarwal showing the substantial amount of deposit by way of sale deeds. If cash was withdrawn and re-deposited, it can not be disbelieved in case there is no adverse evidence against the assessee to prove that cash withdrawn was used elsewhere.
PB 341- 341-485 are the copies of sale deeds of Mr. Ajay Agarwal.
PB 506- 506-507 is the copy of the remand report.
PB 537- 537-539 are our reply to remand report submitting that statement of Mr. Ajay Agarwal was recorded and he accepted the amount of gift given to the assessee.
PB 545 - 580 is the copy of the decision of Hon'ble Tribunal in A.Y. 2003-04 in assessee's own case in appeal against order u/s 143(3) wherein at PB 551, 553, 554 it has been mentioned that AO has accepted the gift of Rs. 10 lakh from Mr. Ajay Agarwal.
PB 581- 581-601 is the copy of order of Hon'ble Tribunal in A.Y. 2003-04 only in appeal against order us/ 263 wherein Hon'ble Tribunal has reproduced at PB 589 about the affidavit of Mr. Ajay Agarwal, at PB 589, 591, 592 about the reply given in assessment and at PB 586, the office note given in the Assessment Order of A.Y.2003-04 about the gift of Rs. 10 lakh from Mr. Ajay Agarwal. Hon'ble Tribunal at PB 598- 598-599- 599- 600 has also taken not of the impugned gift.
PB 592 is part of Tribunal's order in which the portion of affidavit filed before Hon'ble Delhi High Court was reproduced in which CrT had mentioned that gift from Ajay Agrawal was accepted in assessment of 21 ITA No.3157 & 3158/Del/2010 A.Y. 2003-.04 as creditworthiness of the donor was proved.
Therefore there is no substance in the grounds of the appeal of the revenue.
GROUND NO.5 its relates to the gift of Rs.3 lakh received from Mr. Ashok Kumar Jain on the ground that CrT(A) failed to note the income returned by Sh. Ashok Jain which was below his capacity to make the gift and his creditworthiness was based on the market value of the ancestral properties.
Ld. A.O. has discussed this issue in Para 24 at Page 12- 12-13 of the Assessment Order whereas Ld. CrT (A) has discussed this issue in Para 7.3 at page 36 to 40 of the appeal order.
Though the ground of appeal of the revenue is quite specific yet assessee proves all the ingredients of section 68 as under:-
G-H are the submission before Ld. A.a. submitting that donor Mr. PB G-
Ashok Jain was practicing tax consultant for last twenty .years and the assessee was his Rakhi sister and the gift was given by account payee cheques and submitting substantial evidences.
PB 104- 104-107 are the affidavits of Mr. Ashok Kumar Jain confirming the impugned gift and the gifts made by him in A.Y. 2003-04 and 2004-05.
PB 98- 98-103 is the bank statements of the donor from which the impugned gift of RS.2 lakh and RS.l lakh was given and it may be noticed that the source of the gifts was out of the amount received from Mr. Shalender Kumar Jain (Rs.l,90,000/-) and Rs.l,OO,OOO/- from Mis P. Jain & Company.
PB 108- 108-109 is the copy of income tax return of Mr. Jain.
PB 487 is the certificate from Andhra bank certifying that credit ofRs.l,90,000/in the bank account of Mr. Ashok Jain was from the account of Mr. Shalender Kumar Jain.
PB 488 is bank certificate from Andhra bank certifying that credit of Rs. 1 lakh in the account of Sh. Ashok Kumar Jain was out of the bank account of Mis P. Jain & Company.22 ITA No.3157 & 3158/Del/2010
PB 489 s the certificate from MIs P. Jain & Company PB 110-178 are other evidences the details of which are given at PB-H showing that Mr. Jain was a man of means.
PB 507-508 is the copy of remand report ofLd. A.O. PB 540-543 are the reply to the remand report.
Thus source of the gift was very well explained.
PB 545-580 is the order of the tribunal in assessee's own case for A.Y. 2003-04 wherein the gift given by Mr. A.K.J ain was accepted.
PB 602-685 is the order of Hon'ble Tribunal for A.Y. 2004-05 in which also Mr. Jain gave the gift to the assessee, which was accepted by the Tribunal vide PB 636, 605 by noting that he was income tax assessee, confirmed the gift and was creditworthy & his statement was recorded.
Hon'ble Tribunal in A.Y. 2004-05 at PB 625 records in para 7.2 that Ld. DR admitted that the facts of the case in A.Y. 2004-05 were similar to A.Y. 2003-04.
Contention of Revenue in the grounds of appeal about the creditworthiness is repelled by us on the basis that evidence of immediate source of the amount of gift has been given in this case (please see below) and thus, creditworthiness is to be seen to that extent only.
PB 98- 98-103 is the bank statements of the donor from which the impugned gift of RS.2 lakh and RS.l lakh was given and it may be noticed that the source of the gifts was out of the amount received from Mr. Shalender Kumar Jain (Rs.l,90,OOO/-) and Rs.l,OO,OOO/- from Mis P. Jain & Company.
PB 487 is the certificate from Andhra bank certifying that credit ofRs.l,90,OOO/in the bank account of Mr. Ashok Jain was from the account of Mr. Shalender Kumar Jain.
PB 488 is bank certificate from Andhra bank certifying that credit of Rs. 1 lakh in the account of Sh. Ashok Kumar Jain was out of the bank account of Mis P. Jain & Company.
23 ITA No.3157 & 3158/Del/2010PB 489 s the certificate from Mis P. Jain & Company GROUND NO.6 relates to the grievance of the revenue that CIT (A) ignored the findings of ADIT regarding the genuineness of the gifts and creditworthiness of the donors with out specifying any of the donors.
Ld. A.O. has discussed this issue Para 24 to 30 at Page Page 12- 12-15 of the Assessment Order whereas Ld. CIT(A) had dealt this issue in Para 7.4 to 7.6 at Page 40- 40-44 of the Appeal Order.
PB I-
I-M are the submissions before Ld. A.a. establishing the identity, capacity of donors and genuineness of the gifts PB 179- 179-205 are the evidences as mentioned at PB I-
I-J in respect of Sangeeta Jain.
PB K-L are submissions regarding Mr. Shalender Kumar Jain, with PB 255-290.
PB-J-K are the submission regarding Lata Jain with PB 209-254.
PB L-M are the submissions regarding Mr. Surender Singh with PB 291-
310. PB 331, 332,333, 334, 335 & 336 is another submissions to Ld. A.a. regarding Mr. Shalender Kumar Jain, bank certificate, bank statement of time Capital Ltd. & Rishab Cold Storage in respect of Mr. Shalender Kumar Jain.
PB 509-514 is the copy of the remand report.
PB 543-548 are our reply to remand report.
Mrs. Sangeeta Jain (PB 182), Mrs. Lata Jain (PB 210) have given gifts in A.Y. 2004-05 also which has been accepted as per Hon'ble Tribunal Order in A.Y. 2004-05 at PB 602 to 685.
Reliance is placed on the decisions cited before Hon'ble Tribunal in A.Y. 200304 (PB 555-556-557, 573-574-575) and taken note by Tribunal in its order of that year.
24 ITA No.3157 & 3158/Del/2010Coming to the revenue's grounds of appeal specifically, it is submitted that ADIT report has been referred in remand report (PB 512-514) but it was never made available to the assessee and hence it can not be taken into account in view of 125 ITR 713 (SC), 288 ITR 345(Del).
Even on the basis of these alleged findings of ADIT, impugned gifts can not be held in-genuine & even Ld. ADIT is not sure of his alleged findings as he has mentioned at several places as if it "appears" to him.
In any case, the genuineness of the gifts can not be doubted in view of above mentioned comprehensive pleadings & evidences.
--Cash credit-Genuineness of gifts-Assessee having filed declaration of gifts and affidavits of donors confirming the gifts made to the assessee, and there being no finding that he alleged donors did not have sufficient income to make the impugned gifts to the assessee or that their identities are doubtful, gifts cannot be treated as non- genuine merely because there is not relationship between the donors and the assessee.-Sarla Lakhotia vs. Dv. CIT 126 TTJ 679 (Jd.)
- --Genuineness of gift-Donor having confirmed the gift by filing an affidavit as well as in examination on oath before the AO and explained that the gift was made from the amount received on repayment of a deposit made by him with a firm, the impugned gift received by assessee through demand draft by a declaration deed has to be treated as genuine gift, and the addition under s. 68 made by the AO cannot be sustained.-Avnish Kumar Singh vs. ITO 27 DTR 241(Agra)(TM)
- Income from undisclosed sources---Additions under s. 69--- Genuineness of gift---Assessee having produced a copy of the gift deed, a copy of the computation of income, comparison chart, a copy ofP&L ale, a copy of explanation of the assessee submitted vide letter dt.14 th Dec., 2005, a copy of bank account of V. the donor, the statement of V. amongst others, to prove the factum of gift, the fact of gift is apparent and the same has to be treated as real and no addition can be made only on the basis of doubts, without disproving the assessee's evidence.---Badri Prasad Gupta vs. Asstt. CIT 14 DTR 348(Agra)
- Income--Cash credit---Genuineness of gifts-Identity of the donors not being in dispute and the gift transactions having been channelized through banks, and all gifts except one having been made by the assessee's relatives, the findings of the CIT(A) and the Tribunal accepting the genuineness of gifts do not warrant any interference in the absence of any tangible material on record which may cast any doubt on the genuineness of the gifts.---CIT vs. Ram Dev Kumar Chitlangia 8 DTR 263(Ra;.) 25 ITA No.3157 & 3158/Del/2010 Income - Cash credit - Genuineness of NRI gifts - Assessee having produced copies of gift deeds and affidavits of NRI donors, in the absence of anything to show that the transaction was by way of money laundering, addition could not be made in the hands of assessee donee for absence of blood relationship between the donor and the donee - CIT VS. PADAM SINGH CHOUHAN 215 CTR 303 (RAJ).
Income - Cash credit - Gifts - Affidavits of donors, their voters identity cards, PAN cards, copies of returns of income and wealth and copies of their bank accounts from which gifts were given by issue of pay orders, having been produced, initial burden on assessee stood discharged and the Departmental authorities were not justified in adding the amount of Rs. 5 lacs as the income of the assessee. - MRS. RANJANA KATYAL VS. ASSTT. CIT 113 TTJ 479 (DEL 'F').
CIT vs Kusum Gupta ITA 831/2010 dated 16.7.2010 (Delhi HC) IN FACT, SOURCE OF THE SOURCE CAN NOT BE ASKED TO BE PROVED- 49 ITR 273(Mad) Where entire material is on record, issue is to be decided on merits:-
Raja Vikrama Ditya Singh Vs. CIT 169 ITR 55 (MP) CIT Vs. Hindustan Sanitary Ware and Industries 180 ITR 21 (Cal.) Kanak Kumari 28 ITR 462 (Patna) Neena Syal Vs. ACIT 70 ITD 62 (Chd.) ACIT Vs. Kumar Ice Patna 237 ITR 1 (Pat) (AT) GROUND NO.7 & 8 these two grounds of the revenue are quite specific in as much in Ground no.7, revenue has raised the issue of gold mukuts / talwars and in Ground No.8 revenue has raised the issue of the gift of Jewellery from grand father and the brother of the grand father.
Ld. A.O. has dealt this issue in Para 15 at Page 8 of the Assessment Order whereas Ld. CIT (A) has discussed this issue in Para 8-8.1 at Page 44-49 of the Appeal Order.
Assessee showed an aggregate amount of Rs.8,02,103/- as sale proceeds of 1956.350 grams of jewelry etc. as is clear from Para 15 of the Assessment Order & and Para 8.1 of the Appeal Order.
Assessee received 601.1 gram jewellery from the grand father late Mr. Mangla through his will dated 7-1-1960 and 860.370 grams from the brother the grand father late Mr. Hitwa vide will dated 16-05-1950. The total of this comes to 1461.4 7 grams.26 ITA No.3157 & 3158/Del/2010
Assessee claimed to have received 846.3-30 grams of gold mukuts and talwars from her supporters but she has sold totaljewellery only 1956.350 grams.
Therefore, the difference of 1956.350 grams -1461.47 viz. 494.880 grams is relevant for the present issue and not 846.330 grams of gold mukuts / talwars claimed by the assessee.
Above thing would be made clear by the chart made at PB-
PB- B PB 2- 2-3 is the will of grand father of the assessee whereas PB 6- 6-7 is the will of grand father's brother.
Regarding mukuts / tal wars, PB 8- 8-9 are the paper cuttings.
PB 10- 10-12 are the registered valuers report showing existence of jwellery & mukuts etc. PB 13- 13-14 is bill of the jewellery converting the old jewellery into new jewellery which was also dated 26-03-2000 and 31-03-2000 PB 15- 15-19 are the copies of sale bills of jewellery. PB 514 514- 14-515 is remand report. PB 551 are reply to remand report.
Thus, there is no adverse evidence regarding the will nor rejected by AO and therefore, these documents have to be accepted as correct. Wills need not be registered. Wills are written like this only and it is not uncommon for the older people to bequeath the properties through will. Obviously, the author of the will would not be alive as will comes into effect only after the death of the author. How can this situation be viewed adverse to the assessee? Apparent is real unless proved otherwise is the dictum known to the world of law (230 ITR 518(SC). Revenue has not said or brought any evidence on record to prove that the will in question was not genuine. Suspicion can not partake character of evidence (224 ITR 180 (P&H) (37 ITR 271(SC).
Moreover, this much of jewellery is of quite reasonable quantity & is not such which old persons of yesteryears in our families can not be expected to have. There is public perception to this effect also. So much CBDT in its instruction no. 1916 dated 11.5.1994 has accepted in case of married man to have jewellery (70 ITD 62 Chd).27 ITA No.3157 & 3158/Del/2010
Regarding mukut/talwar, politicians including the assessee do receive them as is evident from few paper cuttings (PB 8-9). It is not always possible to have paper cuttings/evidence of such gifts.
Gifting of mukut/talwar by the public to their leaders has to be appreciated in the backdrop of custom/aspirations in our society who has been ruled by the rulers in the past. Mukut is the symbol of a person being head and tal war is the symbol of the power of the ruler. This is manifestation of the desires of the public to see their leader with that kind of symbol of power.
In any case, registered valuer report (PB 10-12) proves the impugned possession of the assessee.
Without prejudice to above, if explanation of the assessee is not accepted, the existence of jewellery is evident from the registered valuer's reports which are dated 05-01-1997 (PB 10- 10-12) & conversion in to new jewellery in FY. 99-00 (PB 13- 13-14) and therefore addition cannot be made in the impugned year.
DCIT VS. AMOD PETROCHEM P. LTD 307 ITR 265 (GUJARAT) VARDHAMAN OVERSEAS LTD. Vs. ACIT 24 SOT 393 (Del) CIT vs. SAT PARKASH AGARWAL 140 ITR 880 (Del) 201 CTR 54 (All)-
(All)-(PB 885 885-892)"
35. In rejoinder, vehemently relying upon Section 144 (1)(b), it was pleaded by Ld. CIT (DR) that assessment has validly been framed and it could not have been struck down by the CIT (A) on the basis of non-issue of notice u/s 143 (2) as there is no pre-requisite condition for serving the notice u/s 143 (2) when the assessment is framed under the provisions of Section 144 (1)(b). She submitted that the Assessing Officer is not precluded from framing the assessment prior to the date of limitation. Therefore, the Assessing Officer was right in holding that it was impossible for him to serve the notice and, therefore, he was well within his right to frame the assessment u/s 144 (1)(b) of the Act.]
36. We have carefully considered the rival submissions in the light of the material placed before us. In the present case, re-assessment proceedings were initiated vide notice dated 25th March, 2008. There has been a 28 ITA No.3157 & 3158/Del/2010 controversy regarding service of notice u/s 148. According to the reply furnished by the assessee before the Assessing Officer dated 26th February, 2009, the said notice was received by the assessee on 15th December, 2008 and through that notice the assessee was required to furnish a return within 30 days of the receipt of the notice. The assessee challenged the validity of the said notice by way of writ petition No.8768/2008 before the Hon'ble High Court of Delhi stating therein that the notice served by the department u/s 148 is time barred and, therefore, initiation of re-assessment proceedings is void ab initio. Stay was granted by Hon'ble High Court on 18.12.2008 and the stay so granted came to an end on 13.02.2009 by dismissal of Writ Petition. Thus, according to assessee notice u/s 148 was served on her on 15.12.2008 and the validity of the said notice was challenged in High Court and on 18.12.2008 stay was granted which continued upto 13.02.2009. Vide letter dated 26.02.2009 the assessee submitted that the return originally filed may be treated as return filed in response to notice u/s 148 and it is on that very return the Assessing Officer has framed the impugned assessment.
The Assessing Officer has discussed the said letter of the assessee in para 13 of his order and the said letter is reproduced by the Assessing Officer in para 12 of the assessment order.
37. In para 13, the Assessing Officer has recorded that the above reply of the assessee has been considered and for the reasons discussed in detail in the foregoing paras the reply of the assessee cannot be accepted. According to the Assessing Officer, limitation to frame the re-assessment was to expire "after today" (date of the assessment order is 26th February, 2009) and it is observed by the Assessing Officer that it is the assessee's move to declare filing of the return at the last moment which is nothing but a gambit to obfuscate the issues. The Assessing Officer has observed that it is not possible to issue any notice u/s 143 (2) "today" and await the reply from the assessee and yet to complete the assessment within the statutory limitation. He further observed that the assessee has already been provided with so many opportunities to reply on merits of the case vide numerous show cause notices mentioned in the assessment order and the reasons for reopening also. The assessee has submitted nothing in support of her claim and some 29 ITA No.3157 & 3158/Del/2010 how the assessee is prolonging the proceedings on technical and other grounds and in this view of the situation he has no alternative but to complete the assessment on the basis of material available on record ex parte u/s 144 of the Act. Firstly, it is to be examined that whether the Assessing Officer has rightly observed that the letter dated 26.02.2009 submitted by the assessee was a "move to declare filing of return at the last moment is nothing but a gambit to obfuscate issues." It is a matter of fact on record that according to claim of the assessee notice u/s 148 requiring the assessee to file return of income within 30 days was received on 15.12.2008. Within a few days the assessee challenged the validity of issue of notice u/s 148 on the ground of expiry of time limitation of issue of such notices and assessee was granted stay on 18.12.2008 by the Hon'ble High Court and the said stay continued upto 13.02.2009. Vide letter dated 26.02.2009 the assessee submitted that the return originally filed be treated as return filed in response to notice u/s 148. If the period of stay is excluded, then it cannot be said that from the view point of the assessee any unreasonable delay happened on account of inaction on behalf of the assessee.
38. In this regard, it is the contention of Ld. CIT (DR) that the Assessing Officer has validly framed assessment u/s 144 (1)(b) in the facts and circumstances of the case and as against that it is the case of the assessee that the Assessing Officer is wrong in observing that the case was going to be time barred on the date of framing the assessment. According to the assessee there was ample time available to the Assessing Officer and the case was not going to be time barred on 26th February, 2009 and, thus, the Assessing Officer has failed to comply with the mandatory provisions of issuing notice u/s 143 (2) and, thus, the assessment framed has rightly been held to be invalid by the CIT (A).
39. The first contention of the Ld. CIT, DR to support the case of the department is that the assessment is framed by the Assessing Officer u/s 144 (1)(b), therefore, there was no necessity to issue notice u/s 143 (2) and, thus, the CIT (A) is wrong in holding that assessment is invalid. The return of income for assessment year 2001-02 was originally filed on 11th June, 2001 30 ITA No.3157 & 3158/Del/2010 wherein taxable income of `15,45,810/- was declared. The return was th processed on 27 February, 2002 and, accordingly, intimation u/s 143 (1) was issued (page 518 of paper book). Vide letter dated 26th February, 2009, the assessee had submitted that the return originally filed on 11th June, 2001 be treated as a return filed in response to notice u/s 148. The Assessing Officer while making computation of the assessable income has taken into consideration the return originally filed by the assessee and has started the computation of assessable income with the words "Income as per return of income." As a matter of general practice, whenever notice u/s 148 is issued requiring the assessee to file the return of income, if the assessee feels that it is not necessary to file a fresh return, then he can submit a letter informing his decision to the Assessing Officer to treat his previous return as return filed in response to notice u/s 148 and in that event the return submitted earlier will be treated as fresh return submitted in response to notice u/s 148. Such practice is supported by the decision of Hon'ble Rajasthan High Court in the case of Tiwari Kanhaya Lal (supra) and reference can be made to the following observations:-
"In our opinion, the notice issued under s.148 requiring the assessee to file a fresh return carries with it an obligation to file the fresh return in pursuance of the said notice. In case the assessee feels that it is not necessary to file a fresh return and that the earlier return filed by him under s.139 of the Act should be treated as the return for the purpose of reassessment under ss.147 and 148 of the Act, he may inform the ITO of his decision to treat his previous return as the return filed in response to the notice under s.148 of the Act and, in that event, the earlier return will be treated as the fresh return submitted in response to the notice under s.148 of the Act."
40. Therefore, the return is considered to be filed by the assessee in response to notice u/s 148 on 26th February, 2009. Thus, it will be a case where the assessee has submitted a return of income in response to notice u/s 148 and it is not a case where the assessee did not submit any return.
41. Section 144 read as under:-
"144 144 (1) If any person -
(a) fails to make the return required under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or 31 ITA No.3157 & 3158/Del/2010
(b) fails to comply with all the terms of a notice issued under sub-
section (1) of section 142 or fails to comply with a direction issued under sub-section (2A) of that section, or
(c) Having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, The Assessing Officer after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment.
Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgement:
Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section.
(2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year."
42. As it can be seen from the above provision that the Assessing Officer can resort to framing of assessment u/s 144 which is called "best judgement assessment" in three independent contingencies which have been described in clauses (a), (b) and (c) of Section 144 (1). Though it has been the case of the Ld. CIT (DR) that the assessment is framed u/s 144 (1)(b), but careful perusal of the assessment order will reveal that it is not even the case of the Assessing Officer that the assessment is framed u/s 144 (1)(b) as the Assessing Officer has nowhere mentioned that he is framing assessment u/s 144 for the reason that the assessee has failed to comply with all the terms of notice issued u/s.s (1) of Section 142. The case of the Assessing Officer for framing the assessment u/s 144 is that it is impossible for him to issue notice u/s 143 (2) as the assessment is going to be time barred "after today." Therefore, we find no substance in the argument of Ld. CIT (DR) that the Assessing Officer was well within his authority to frame assessment u/s 144 32 ITA No.3157 & 3158/Del/2010 without issue of notice u/s 143 (2) because it is an assessment framed u/s 144 (1)(b).
43. There is one more aspect of the matter. Out of clauses (a) to (c), clause (c) states the contingency where the assessee has made a return and failed to comply with all the terms of a notice issued under sub-section (2) of Section 143. As observed earlier, it is a case where the assessee has filed the return. If it is a case where the assessee has filed the return, than for framing the assessment u/s 144, it is necessary under clause (c), that there must be a notice issued u/s 143 (2) and in case of failure of the assessee to comply with all terms of such notice issued u/s 143 (2), then only the Assessing Officer will be within his authority to frame assessment u/s 144.
44. According to well established law, if the case of the assessee falls within a particular clause of a Section, then, the said clause cannot be ignored and another clause cannot be applied to the case of the assessee. Ld. CIT (DR) has relied upon Section 144 (1)(b) which has not been shown to be applicable to the case of the assessee and which has not been applied even by the Assessing Officer. Because the assessee having filed return of income in response to notice u/s 148, clause (c) of Section 144 (1) only will be applicable and even clause (c) cannot be applied as admittedly no notice u/s 143 (2) is issued. This fact is admitted by the Assessing Officer in the assessment order itself. Therefore, the contention of Ld. CIT (DR) that assessment in the present case was validly framed u/s 144, in absence of notice u/s 143 (2), cannot be accepted and is rejected for the reasons recorded as above.
45. It is also to be examined that according to facts of the case whether it was impossible for the Assessing Officer to issue the notice u/s 143 (2) due to paucity of time as mentioned by the Assessing Officer in para 13 of the assessment order. The sequence of date has been tabulated in the order of CIT (A) in para 6. Section 153 (2) governs the time limit for completion of re- assessment. According to second proviso to sub-section (2) of Section 153, in a case where the notice u/s 148 was served on or after first day of April, 2005, the provisions of sub-section (2) shall have effect as if the words "one 33 ITA No.3157 & 3158/Del/2010 year", the words "nine months" had been substituted. Therefore, the time limit to frame the re-assessment proceedings in the present case will be after the expiry of nine months from the end of the financial year in which the notice u/s 148 was served. The revenue in the present case has furnished an affidavit before the Hon'ble High Court in the Writ Proceedings that the assessee must be deemed to have been served in Lucknow on 2nd April, 2008. The observations of their Lordships on this issue in the order dated 13th February, 2009 vide which the assessee's writ was dismissed are as under:-
"An important question is whether a noticee can insist that service must be effected upon him/her only at a specified address. It would be recalled that the notice dated 25.3.2008 had been personally taken to C-1/11, Hamayun Road, New Delhi where the Inspector was told to dispatch it to property No.3, Survey No.105, Nehru Road, Cantonment, Lucknow, Uttar Pradesh. There is no averment in the petition to the effect that on 29.3.2008 the petitioner was not in Delhi or that she would have gained knowledge of the contents of the notice unless it had been served upon her in Lucknow. In today's day and age reaching even the remotest parts of the globe is possible within 3 day. Even if the petitioner was not in Delhi on 29.3.2008, she could have been informed almost instantaneously of the service of the notice even if she was in Lucknow. It is, therefore, a moot question that the petitioner must be deemed to have been served in New Delhi on 29.3.2008 since those were the premises allotted to her by the Government of India in her status as a Member of Parliament. We do not have to give a definitive answer on this issue since it is the position of the Revenue that that the petitioner must be deemed to have been served in Lucknow on 2.4.2008. According to the Revenue, the notice dated 25.3.2008 was dispatched to C-1/11, Humayun Road, New Delhi- 03 by speed post on 29.3.2008. We have perused the envelope and the postal receipt bears this statement to be correct. The Court cannot but presume that the postman had visited property No.3, survey No.105, Nehru Road, Cantonment, Lucknow, Uttar Pradesh and was thereupon redirected to serve the notice at 5, Kalidas Marg, Lucknow, Uttar Pradesh. The Postman's endorsements translated from Hindi reads thus:-
"Stated that the notice was not received at the official residence of the Chief Minister, 5, Kalidas Marg and was told to deliver it at the earlier written address, that is, property No.3, Survey No.105, Nehru Road, Cantonment, Lucknow, Uttar Pradesh."
(emphasis ours)
46. As it can be seen from above observations, their Lordships have not given any definite answer to this issue as the case of revenue itself was that 34 ITA No.3157 & 3158/Del/2010 the assessee must be deemed to have been served in Lucknow on 2nd April, 2008. If such situation is accepted, then, the assessment even according to normal provisions of the Act, will be going to be time barred on 31st December, 2009 and the assessment in the present case has been framed by the Assessing Officer on 26th February, 2009 and, thus it cannot be said that the Assessing Officer was left with no time to frame the assessment. There was ample time to frame the re-assessment proceedings.
47. Even if the date of service of notice is considered to be 29th March, 2008, as observed by their Lordships of Delhi High Court, though their Lordships have not given definite answer to this question as it was the case of the revenue that notice must be deemed to have been served in Lucknow on 2nd April, 2008, then also the time limit to complete the re-assessment will be 14.4.2009 as described in the forthcoming discussion.
48. The initiation of re-assessment proceedings were stayed by Hon'ble jurisdictional High Court vide their order dated 18th December, 2008 in Civil Miscellaneous No.16843/2008 in Writ Petition (Civil) No.8768/2008. The said writ was finally disposed of vide aforementioned order dated 13th February, 2009. According to clause (ii) of Explanation 1 to Section 153, "the period during which the assessment proceedings is stayed by an order in injunction of any court" is to be excluded in computing the period of limitation. The number of days from 18th December, 2008 to 13th February, 2009 comes to 58 days. Thus, the period of 58 days is to be added to 31st December, 2008 and the last date to frame assessment will be 27th February, 2009. Since the period available with the Assessing Officer to frame the re-assessment proceedings after the dismissal of Writ Petition filed by the assessee was less than 60 days, the said period was to be extended to 60 days as per first proviso to Explanation 1 of Section 153, which read as under:--
"Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-sections (1) (1A), (1B), (), (2A) and (4) available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly."35 ITA No.3157 & 3158/Del/2010
49. Thus, even if the date of issue or service of notice u/s 148 is considered, then the assessment was going to be time barred on 14th April, 2009 and not on 27th February, 2009, as alleged by the Assessing Officer, in the assessment order. It cannot be presumed that the Assessing Officer is not aware of the provisions of the Act. He is an Act administration authority and is deemed to be well versed with the provisions of law and proviso to Explanation 1 is part of the Explanation 1. This Explanation has been referred to by the Assessing Officer in para 12 of his order and the Assessing Officer is computing the limitation with reference to that Explanation only. Probably, legislature being aware of the situation, that in a case where the stay/injunction is granted by the Court and even if the period of stay is excluded, then also the Assessing Officer may not have the sufficient time to complete the assessment within normal statutory period, has enacted the first proviso to Explanation1 to Section 153 whereby if the time available to Assessing Officer, even after exclusion of period of stay, is less than 60 days, then the remaining period will be extended to 60 days. Thus, the period of 60 days has been considered to be sufficient by the legislature to frame the assessment in the manner provided in the Act. When a period of 60 days is available with the Assessing Officer after the vacation of stay, then, the Assessing Officer cannot take shelter of the excuse of non-availability of sufficient time as within that period the Assessing Officer could adhere to the mandatory requirement of service of notice and even after that he could have ample time to complete the assessment in the manner provided in the Act. Therefore, it has to be held that the Assessing Officer had sufficient time to adhere to the mandatory requirement of service of notice u/s 143 (2) as well as for completing the assessment. The assessment was going to be time barred on 14.4.09 and not on 27.2.09.
50. So far as it relates to the issue that whether the service of notice u/s 143 (2) is procedural or mandatory it has been the case of Ld. CIT (DR) that these are procedural provisions and, for this purpose, she has relied upon certain judicial pronouncements which have been listed in the above part of this order. In the case of Areva T and D India Ltd. (supra) it has been held that where the re-assessment is framed by the Assessing Officer without 36 ITA No.3157 & 3158/Del/2010 considering the objection of the assessee in response to notice u/s 148 and without giving statutory notice u/s 143 (2) will amount to nothing, but procedural irregularities and this would not make re-assessment a nullity in law. In the case of Sant Baba Mohan Singh vs. CIT (supra), it was held that the omission of Assessing Officer to issue notice u/s 23 (2) [corresponding section 143 (2)] does not affect the ab initio jurisdiction enjoyed by the ITO. Omission to issue a notice u/s 23 (2) merely prevents the Assessing Officer from making an assessment order u/s 23 (3) and after he rectifies the omission by issuing that notice he can proceed further to the next stage.
51. In the case of CIT vs. Gyan Prakash Gupta (supra), it was held that assessment framed without serving notice u/s 143 (2) on all the legal representatives of the deceased assessee is not a defect of fundamental nature so as to warrant annulling of the assessment, but merely makes assessment order invalid. None of these decisions pertains to jurisdictional High Court. Jurisdictional High Court in the case of CIT vs. Pawan Gupta 318 ITR 322 has held that in a case where the Assessing Officer is not inclined to accept the return for undisclosed income filed by the assessee, issuance of notice u/s 143 (2) is a pre-requisite for framing the block assessment. If an assessment order is passed in such a situation without complying with Section 143 (2), it would be invalid and not be mere irregular. Though the said decision was rendered with respect to provisions of Section 158BC, the decision is applicable to the main provision itself and it is clear from the following observations of their Lordships:-
"We are of the view that section 143 (2) is a mandatory provision whether we look at it from the standpoint of a regular assessment or from the standpoint of an assessment under Chapter XIV-B."
52. It is further observed by their Lordships that issue of notice u/s 143 (2) is not empty formality. It is a substantive right of the assesee to be presented with the fullest opportunity to support the return filed by him. If such right is denied to the assessee, it would amount to a travesty of justice apart from being in violation of the statutory prescription of section 143 (2) and 143 (3). The relevant observations are reproduced below:-
37 ITA No.3157 & 3158/Del/2010"However, where the Assessing Officer is not inclined to accept the return of undisclosed income filed by the assessee then the procedure prescribed in section 143 (2) would have to be followed. If he does not issue a notice under section 143 (2) and completes the assessment all the same, such an assessment order would not be a mere irregularity but would be invalid. The requirement of making an assessment order pursuant to the grant of hearing and an opportunity to the assessee to produce material in support of his return is not an empty formality. It is a substantive right of the assesee to be presented with the fullest opportunity to support the return filed by him. If such right is denied to the assessee, it would amount to a travesty of justice apart from being in violation of the statutory prescription of section 143 (2) and 143 (3) read with section 158BC (b) of the said Act."
53. If such is the position and judicial pronouncement by jurisdictional High Court, then, can it be said that the revenue can rely upon the aforementioned decision of non-jurisdictional High Courts. Moreover, the aforementioned decision of Hon'ble Delhi High Court in the case of CIT vs. Pawan Gupta (supra) was subject matter of appeal by the revenue before the Hon'ble Supreme Court which has been disposed of with the case, namely, ACIT vs. Hotel Bluemoon (supra) wherein their Lordships have upheld the view taken by the Delhi High Court. Their Lordships of Apex Court in the said case have clearly observed that where the Assessing Officer in repudiation of the return filed proceeds to make an inquiry, he has to necessarily follow the provisions of Section 142, sub-section (2) and (3) of Section 143. The relevant observations are reproduced below:-
"The case of the Revenue is that the expression "so far as may be apply' indicates that it is not expected to follow the provisions of section 142, sub-sections (2) and (3) of section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the revenue, since we do not see any reason to restrict the scope and meaning of the expression "so far as may be apply." In our view, where the Assessing Officer in repudiation of the return filed under section 158BC (a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143."
54. Their Lordships have observed that omission on the part of the assessing authority to issue notice u/s 143 (2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice u/s 143 (2) cannot be dispensed with. The relevant observations are as under:-
38 ITA No.3157 & 3158/Del/2010"An analysis of this sub-section indicates that after the return is filed, this clause enables the Assessing Officer to complete the assessment by following the procedure like issue of notice under section 143 (2)/142 and complete the assessment under section 143 (3). This section does not provide for accepting the return as provided under section 143 (1) (a). The Assessing Officer has to complete the assessment under section 143 (3) only. In case of default in not filing the return or not complying with the notice under section 143 (2)/142, the Assessing Officer is authorized to complete the assessment ex parte under section 144. Clause (b) of Section 158 BC by referring to section 143 (2) and (3) would appear to imply that the provisions of section 143 (1) are excluded. But, Section 143 (2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under section 143 (2). However, if an assessment is to be completed under section 143 (3) read with section 158BC, notice under section 143 (2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143 (2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143 (2) cannot be dispensed with."
(emphasis ours)
55. From the above, it is clear that in a case where return is filed and Assessing Officer is not satisfied with the return so filed and he also proceeded to make the assessment, then, unless notice u/s 143 (2) is issued, assessment cannot be validly framed. The issue and service of notice u/s 143 (2) is not a procedural irregularity and the same is not curable and the requirement to issue notice u/s 143 (2) cannot be dispensed with.
56. In view of the above discussion, the factual position being that notice u/s 143 (2) is not issued and return filed by the assessee has been tinkered, therefore, the absence of notice u/s 143 (2) will invalidate the assessment proceedings and that has rightly been held by CIT (A) that the assessment is invalid and void ab initio in the absence of notice u/s 143 (2). The finding of the Ld. CIT (A) are based on facts and is in accordance with the law explained by Hon'ble Supreme Court in the case of ACIT vs. Hotel Bluemoon (supra) and jurisdictional High Court in the case of DCIT vs. Pawan Gupta (supra) and these findings of the CIT (A) are upheld.
39 ITA No.3157 & 3158/Del/201057. Since the assessment has been held to be invalid and void ab initio, the consideration of additions on merits will be academic only. The merits of the additions though argued by both the parties are not being adjudicated being academic.
ITA No.3158/Del/2010 (Assessment Year 2002-2002-03)
58. The brief facts relevant to decide the present appeal are as under.
59. The return of income for the year under consideration was filed on 10th June, 2002 at an income of ` 11,01,573/- plus agricultural income of ` 3,27,469/-. The return was processed u/s 143 (1) (a) on 25th February, 2003. Subsequently, the proceedings u/s 147 were initiated after getting the necessary approval from competent authority. Notice u/s 148 dated 6th March, 2009 was issued requiring the assessee to submit the return within 30 days of the service of the said notice. Vide reply dated 17th March, 2009, the assessee submitted that the return originally filed may be treated as return filed in response to notice u/s 148 and such statement was accepted by the Assessing Officer. Thereafter, notice u/s 143 (2) dated 22nd April, 2009 was issued. The reasons for reopening of the assessment was stated to be an information received by the Assessing Officer from Investigation Wing at Ludhiana regarding gifts of ` 70,21,000/- received by the assessee during the year under consideration. The gifts have been tabulated as under:-
S.No. Name & Address of the donor Date Amount
1. Shri Nand Kishore, S/o Late Sh. 04.09.2001 25,000/-
Muneshwar Ram, Village Sihori, P.O.
Sihori, Distt. Ghaziabad (UP).
2. Smt. Gurcharan Kaur, W/o Sh. Ranjit 20.11.2001 23,33,000/-
Singh, A-27, Inderpuri, New Delhi.
3. Smt. Kulwant Kaur, W/o Sh. Gurbachan 03.12.2001 23,31,000
Singh, EF-6R, Inderpuri, New Delhi - 110
012.
4. Smt. Swaran Kaur, W/o Sh. Jalora Singh, 03.12.2001 23,32,000/-
D-89, Naraina Vihar,
New Delhi - 110 028.
Total 70,21,000/-
40 ITA No.3157 & 3158/Del/2010
60. According to the report of the Investigation Wing, three donor ladies stated at Sr. Nos. 2, 3 & 4, were not able to tell all the facts clearly regarding the gifts made by them to the assessee. The ladies stated that they had received this money from their father Shri Hari Singh, on his death before 12 years of making the gifts and the said money was kept with them at home during the entire period and was not disclosed to the family members. According to the reasons recorded for reopening, those inquiries made by the Investigation Wing have made it clear that family income of the donors was meager and it was difficult for them to gift the money to anyone as they were hand to mouth. Considering these aspects the Assessing Officer had reason to believe that unnatural treatment of the money of holding for long 12 years without disclosing it to the family members and the deposit being in bank account in another city in which the donors did not reside and had little knowledge about the donors about the deposit and withdrawal of that money coupled with other facts will create a doubt about the source of the deposit in the bank account and the genuineness of the gift transaction. It is recoded in the reason that even though the source of the gifts are disclosed under VDIS, but according to the decision of Hon'ble Supreme Court in the case of CIT vs. United Trading and Construction Company 247 ITR 819 (SC), the Assessing Officer had reason to believe that donors in question did not have the capacity to make such gifts to the assessee. The gift received by the assessee from such sources are her unexplained income which had escaped assessment within the meaning of Section 147.
61. The assessee vide letter dated 8th May, 2009 objected to the issuance of notice u/s 147 stating therein that the gifts were received by her and gifts were from the money declared by the donors under VDIS 1997 and to support such contention, the copies of affidavit, gift deeds, copies of VDIS certificates, copies of bank statement/passbooks of donor ladies were furnished. Reference was made to the VDIS, 97 (Scheme) according to which the immunity is granted to the declarant and, thus, it was contended that the inquiries made by the Investigation Wing, Ludhiana were illegal. Reference was made to Section 71 and 72 of the Finance (Amendment) Act and also to the CBDT Circulars No. 753 and 754. Emphasizing on the question No.14 and 41 ITA No.3157 & 3158/Del/2010 answer thereto given in the Circular, it was pleaded that the case of United Trading and Construction Company (supra) shall have no bearing on the case of the assessee as the said case relates to earlier scheme of voluntary disclosure issued in 1965.
62. The Assessing Officer disposed of such objections of the assessee by holding that the provisions of Scheme of 1965 and 1997 are pari materia and the decision of Hon'ble Supreme Court in the case of United Trading and Construction Company (supra) will be applicable. The Assessing Officer also discussed the financial status of all the three ladies individually and the provisions of voluntary disclosure of Income Scheme, 1997 and referring to various judicial pronouncements, he has come to the conclusion that the declarations made by the three lady donors was not in accordance with Section 64 of VDIS, 1997, therefore, benefit of question No.14 and answer thereto as contained in Circular No.754 dated 10th June, 1997, could not be given in the case of the assessee. The Assessing Officer referred to the question and answers relating to earlier schemes i.e., Circular No.180 dated 15th October, 1975 and clarification dated 17th February, 1986 and held that in view of the aforementioned clarifications and in view of the decision of Hon'ble Supreme Court in the case of Rattan Lal 145 ITR 183, the benefit of Circular could not be extended to the donee i.e., "other person". The Assessing Officer disbelieved the contention of the assessee that donor ladies were enjoying good financial status. The Assessing Officer has observed that husband of the ladies were employed in lowly paid jobs and their status was also not in consonance to the amount gifted by them. He also disbelieved the financial status enjoyed by Shri Hari Singh (father of the donor ladies) who was stated to have given the said amount to his daughters on his death. He also disbelieved the fact that money could be kept by the donor ladies at home for such a long duration. The Assessing Officer observed that even if the story narrated by the donors are true, then also the fact cannot be denied that wrong facts were deliberately presented before the Commissioner in VDIS declaration regarding the address of the declarants, year in which the disclosed income was earned. The Assessing Officer observed that the amount did not represent income of the declarants at all, but it was wealth 42 ITA No.3157 & 3158/Del/2010 which could not be the subject matter of VDIS declaration. The ladies did not pay wealth tax in subsequent years. Therefore, the Assessing Officer held that the declarations are not valid declarations u/s 64 of VDIS, 1997, as the donor ladies did not make a proper declaration u/s VDIS 1997. Therefore, the assessee cannot claim shelter under Question No.14 of the Circular No.754 dated 10th June, 2007 and, thus, the said circular was not binding upon the Assessing Officer.
63. The Assessing Officer referred to the decision of Hon'ble Supreme Court in the case of Rattan Rattan Melting & Wire Industries 13 SCC 1 to state that when there is a decision of Hon'ble Supreme Court or High Court, the authorities are bound to follow that decision in place of circular or instructions of the Board which explains the statutory provisions otherwise. The Hon'ble Supreme Court in the case of Rattan Lal (supra), in a case of a voluntary disclosure scheme, have held that the scheme can confer immunity on the declarant but not to any other assessee and the Assessing Officer would be fully competent to inquire into the genuineness of the sources of the amount credited in the books of the other assessee in spite of the fact that declarations were made by the creditors under the voluntary disclosure scheme. He held that as the gifts were received by the assessee in the financial year relevant to assessment year 2002-03 and in that year only the money came to the bank account of the assessee. The language of Section 68 and 69 is clear to the extent that the unexplained deposit can be assessed in the year in which it is credited in the books of the assessee.
64. With respect to the objection of the assessee that Investigation Wing called the donor ladies to investigate about the declaration made by them under the scheme as no proceedings were pending against the assessee and Circular No.754 dated 10th June, 1997 prohibits such inquiry, Ld. Assessing Officer has observed that such contention of the assessee is not correct. The department was conducting the inquiries in accordance with the decision of Hon'ble Supreme Court in the case of Taj Heritage Corridor Project and, thus, the inquiry made by the Investigation Wing was a proper inquiry.
43 ITA No.3157 & 3158/Del/201065. So as it relates to the request of the assessee vide letter dated 24th December, 2009 for permission to cross examine a number of people like Shri Jaswinder Singh, Village Sarpanch, three donor ladies, Shri Rakesh Sharma, an employee of Canara Bank and the officers who have made the inquiry in the year 2004, the Assessing Officer observed that it will be worthwhile to examine the necessity for granting such opportunity in each case. So as it relates to Shri Jaswinder Singh and two of the donor ladies namely, Gurucharan Kaur and Smt. Swaran Kaur, the Assessing Officer referred to the letter filed by the assessee on 11th December, 2009 in which it was submitted that the assessee wish to produce Shri Jaswinder Singh, the Sarpanch and also other eminent person from the village who were well aware of the social status of late Shri Kanshi Ram, founder of the Bahujan Samaj Party and his family members including the donor ladies and vide letter dated 17th December, 2009, the Assessing Officer had informed the assessee that permission is granted to produce those persons on 24th December, 2009 at 11 AM. The Assessing Officer observed that instead of producing those witnesses on 24th December, 2009, the assessee has filed an application asking the department to produce them for cross examination and, thus, the Assessing Officer inferred that the assessee is not really serious about examination of those witnesses and has merely put in request to desperately create some legal lacuna as a diversionary technique to cover up her failure to produce witness in support of her case. The assessee has changed her stance of production of Shri Jaswinder Singh on the pretext that the department has specifically examined him. The Assessing Officer observed that copy of statement of Shri Jaswinder Singh who was examined by Investigation Wing on 14th December, 2009 was given to the assessee on 17th December, 2009 and the assessee is relying on the said statement to argue her case. The assessee is also relying on the statement given by three donor ladies to contend that they have confirmed the fact of giving gifts to the assessee and when the assessee herself is relying upon those statements and has not availed opportunity to produce them, in view of these facts the request of the assessee for cross examine, when the case is shortly to be time barred by limitation, is nothing more than a dilatory tactics. In regard to the statement of Shri Rakesh Sharma, the Assessing Officer observed that no 44 ITA No.3157 & 3158/Del/2010 such statement of Shri Rakesh Sharma is available on record or is in his knowledge and no such statement is being used against the assessee. It is also observed by the Assessing Officer that the department has never alleged that any one else, apart from the lady donors, opened the bank accounts relating to them. Thus, the Assessing Officer observed that no purpose would be served by cross examining Shri Rakesh Sharma in view of the fact that the case is going to be time barred shortly, the request for cross examining is denied. So as it relates to the cross examination of the officers who examined the donor ladies, etc., the Assessing Officer observed that all the facts collected by those officials have been presented to the assessee for rebuttal and the assessee has exercised her option to rebut these facts, therefore, there is no need for further cross examination of the officials. The Assessing Officer observed that principles of natural justice have been adhered to and the assessee could not have any cause to complain about the manner in which the department conducts its investigations.
66. Finally, the Assessing Officer observed that the mere fact that the donees have declared this amount under VDIS, 1997 is not enough to hold that these gifts were explained in the hands of the assessee. There is sufficient evidence to show that the assessee played a significant role in opening of the bank accounts and declaration u/s VDIS, 1997. The assessee is specifically seen to be the beneficiary of such efforts and that is a good evidence to consider such gifts as unexplained investment u/s 69. The declarations made by donor ladies is not in accordance with the provisions of VDIS, 1997. The assessee cannot claim benefit of Circular No.754 which is applicable only to valid declarations and even if it is argued the declarations are valid, the law laid down by Hon'ble Supreme Court in the case of Rattan Lal (supra) must prevail in terms of aforementioned decision of Hon'ble Supreme Court in the case of Rattan Melting & Wire Industries (supra).
67. The Assessing Officer observed that the money is assessable as unexplained income in the hands of the assessee in the year under consideration and, in this manner, the amount of ` 69,96,000/- being gift 45 ITA No.3157 & 3158/Del/2010 received by the assessee from three donor ladies has been added to the income of the assessee as unexplained investment.
68. In the appeal filed before CIT (A), apart from agitating the addition of Rs.69,96,000/-, the issue of validity of initiation of re-assessment proceedings was also raised. The issue of validity of reassessment has been decided against the assessee. The assesse is not in further appeal against the said issue. Therefore, the only question pertains to the issue that whether or not, in the facts and circumstances of the case, the addition has rightly been deleted by the CIT (A) with respect to gifts received by the assessee from aforementioned three ladies aggregating to ` 69,96,000/- . It was submitted before the CIT (A) that the assessee had received gifts from donors who had made disclosures under VDIS 1997. It was submitted that VDIS, 1997 granted a very clear immunity to the declarants from inquiries of any kind about the disclosures made by them. Valid declarations under VDIS, 1997 are possessed by the donors which are subsisting. Reference was made to Sections 64, 71 and 72 of the Finance (Amendment) Act, 1997 and it was pleaded that Section 72 clearly mention that no court or any other authority shall be entitled to require any public servant or the declarant to produce before it any such declaration or any part thereof or to give any evidence thereto in respect thereof. Reference was also made to the clarification given by Finance Minister at the India Merchant Chambers on 31st October, 1997 in which it was stated that a solemn promise is made by the Parliament that there will be a confidentiality of the declarations made. It was submitted that the inquiries made by the Investigation Wing, on which the Assessing Officer has placed reliance, have become null and void due to Section 72 of the scheme. Further reference was made to questions and answers given in Circular No.754 and 755 dated 10th June, 1997 and 25th July, 1997, Nos. 9, 11, 14, 15, 44 and 51 and it was submitted that the Assessing Officer was wrong in stating that the declarations made by the three ladies were not covered by Circular No.754 dated 10th June, 1997. It was submitted that the gifts were made by the donors out of the bank accounts owned and operated by them. The amount deposited in the bank accounts of the donor ladies is covered by the voluntary deposit scheme and the amount remained deposited till the 46 ITA No.3157 & 3158/Del/2010 same was given to the assessee. The assessee was known to those ladies. Their statements were recorded by the department and, therefore, it cannot be said that either identity or their capacity could be doubted and they have admitted to have made the gift and gift is through banking channel and are genuine, therefore, all the three ingredients of making gifts were proved.
69. It was submitted that the Assessing Officer has relied upon the earlier scheme and clarification dated 17th February, 1986 which was issued in respect of earlier scheme whereas in the case of the assessee question No.14 & 51 of the Circular No.754 relating to the relevant scheme were applicable. Reference was also made to question No.11 and answer thereto wherein it was stated that declaration issued by the Commissioner shall be final. It was submitted that the facts that the donor ladies were not having place of residence in Delhi and they had opened their bank account in Delhi and Mr. Rakesh Sharma, a bank employee introduced their bank account were not having much relevance to the question of capacity of the donors and the deposit in the bank accounts of the donors is a concrete proof of credit worthiness and financial capabilities of the donors. It was submitted that the case law relied upon by the Assessing Officer was not applicable at all as that was in respect of earlier schemes.
70. It was submitted that the factum of gift was supported by the affidavit- cum-gift deed filed by all the lady donors. The ladies had appeared before the Investigation Wing and had admitted the fact of gifts having been made and various evidences were filed before the Assessing Officer to prove the financial status of the ladies. It was submitted that the Assessing Officer did not give opportunity to cross examine. Reference was made to the decision of Delhi High Court in the case of CIT vs. SMC Share Brokers Ltd. 288 ITR 354 to contend that in the absence of opportunity to cross examine, the assessment would be null and void. Ld. CIT (A) has accepted such submission of the assessee and referring to the decision of Hon'ble Supreme Court in the case of Kishan Chand Chela Ram 125 ITR 713 and Delhi High Court in the case of CIT vs. S.M. Aggarwal 293 ITR 43 (Del) he has held that where such opportunity of cross examine is not provided, the assessment is 47 ITA No.3157 & 3158/Del/2010 required to be quashed. So as it relates to financial capacity of the donors, Ld. CIT (A) after having considered the evidence referred to by the assessee has observed in para 5.2 that after having considered the submissions of the assessee and statement of Sarpanch of village as well as secret inquiries made by the departmental officers, all the statement and inquiry indicate that the donors were from respectable family having their own house, business, agricultural income, etc. The donor ladies have also declared their income under VDIS, 1997 and held a valid certificate of declaration of income. The money declared was deposited in the bank account which remained in the bank account for four years and, therefore, the declaration of income and the credit of money in the bank account is a proof of credit worthiness which needs acceptance. Therefore, he allowed this ground of the assessee that the donors were having credit worthiness and capacity to advance the gift.
71. So as it relates to the contention of the assessee that provisions of Section 69 could not be applied to the impugned amount, Ld. CIT (A) observed that keeping in view the fact of subsisting valid declaration and acceptance of the department of the donor laides in respect of VDIS 1997, it could not be held by the Assessing Officer that the declarations of the donor ladies were not in accordance with the provisions of VDIS, 1997. The affidavits filed by donor ladies and various statements made by them during the course of investigation and assessment proceedings have clarified that these gifts made by them were out of love and affection and without consideration and the same were accepted by the donee. There is no evidence on record to prove that the contents of the affidavit or submissions were not true, therefore, the Assessing Officer was wrong in holding that money received by the assessee belonged to the assessee herself as the same is not factually correct and legally acceptable. Ld. CIT (A) has recorded a finding that these gifts had directly come from the respective bank accounts of the donors by account payee cheques and credited to the account of the assessee and such fact is not disproved by the Assessing Officer and since the source of amount credited is clearly established and the amount having been received from bank accounts of the donor ladies, the 48 ITA No.3157 & 3158/Del/2010 source of which were valid declarations made under the VDIS scheme, 1997, the conclusion of the Assessing Officer that amounts are unexplained investment of the assessee is unfounded and has no factual or legal basis. The source of ` 69,96,000/- has been clearly explained and, thus, he has deleted the addition. The revenue is aggrieved and has raised the aforementioned grounds of appeal.
72. After narrating the facts, Ld. CIT (DR) argued that the Assessing Officer while making the addition has relied upon the following decisions:-
i) P. Mohanakala vs. CIT 291 ITR 278 (SC)
ii) Radhey Shyam Tibrewal vs. CIT 145 ITR 186 (SC)
iii) Pioneer Trading Syndicate vs. CIT 120 ITR 5 (All)
iv) Sajan Dass & Sons vs. CIT 264 ITR 435 (Del)
v) Sandeep Kumar (HUF) vs. CIT 293 ITR 294.
73. She submitted that Ld. CIT (A) himself has agreed that the voluntary disclosure schemes of 1976 and 97 are pari materia and if it is so the principles of law laid down by the decisions of Hon'ble Supreme Court with respect to earlier scheme will automatically apply to the new scheme. She submitted that the CIT (A) has wrongly stated that the facts of Rattan Lal's case are different from the facts of the case of the assessee as in that case also certain declarations were made by other declarants under the scheme of 1965 which was sought to be made the basis to claim the immunity by the assessee and it was held by Hon'ble Court that immunity under the scheme is confined to the declarants and it does not extend to any other party receiving gifts/amounts from the declarants. She submitted that the principles of law laid down in the said case are clearly applicable to the case of the assessee as, in the present case, the assessee has received gifts from the declarants of VDIS, 1997 and the assessee has claimed immunity from investigation and, therefore, the case law in the case of Rattan Lal (supra) is applicable to the case of the assessee.
49 ITA No.3157 & 3158/Del/201074. She further submitted that according to the decision of Hon'ble Supreme Court in the case of Hemlata Gargayi vs. CIT 215 ITR 1 and Jamuna Modi 292 ITR 209, when an assessee claims the benefit of exemption scheme, they are bound to apply strictly with the requirement of the scheme and further all the conditions precedent, otherwise such benefit may be denied to them. She submitted that in the instant case the Assessing Officer has outlined a long list of false declarations and omissions by the three ladies in the declaration made before the Commissioner and in the subsequent conduct of the declarants and, thus, the Assessing Officer has rightly concluded that such declarations are not valid declarations u/s 64 of VDIS, 1997 and, thus, the assessee cannot enjoy the benefit of Circular No.754. Reference was made to the decision of Hon'ble Allahabad High Court in the case of Pioneer Trading Syndicate vs. CIT 120 ITR 5 (All) to contend that the certificate issued by the Commissioner does not in any way change the fact of invalid declaration as CIT did not have option, but to accept the declaration made by the declarant. Referring to the decision of Hon'ble Gauhati High Court in the case of Radhey Shyam Tibrewal vs. CIT 125 ITR 393, it was submitted that there is nothing in the scheme that makes declaration and certificate to be final or conclusive in respect of proceedings against persons who are not declarants. While declarations made and certificate granted by the Commissioner were relevant pieces of evidence and they are neither final nor conclusive and if the revenue finds that the credit represents the income of the assessee, the same can be assessed as income of the assessee from undisclosed sources. She pleaded that the amount may be added in the income of the assessee notwithstanding the fact that the declarations were accepted by the department in the donors' hand and to support such contention reliance was placed on the decision in the case of Rattan Lal (supra) and she pleaded that all these decisions have been ignored by the CIT (A). She pleaded that the decision of CIT (A) that benefit of Circular No.754 is to be given to the assessee is perverse since the same is against the judicial precedence laid down by the various courts.
75. It was submitted that the Assessing Officer did not question the validity of the certificate issued by CIT under the scheme and he was also not 50 ITA No.3157 & 3158/Del/2010 required to do so as even the presence of these certificates does not debar the Assessing Officer from proceeding against the assessee. Thus, she pleaded that Ld. CIT (A) is incorrect in holding that the Assessing Officer has questioned the validity of these certificates. What the Assessing Officer has done is that he has denied the benefit of Circular No.754 to the assessee on account of the fact that the declarations made by the declarants were not in accordance with Section 64 and 68 of VDIS, 1997.
76. It was submitted that while upholding the credit worthiness and financial capacities of the donor ladies, Ld. CIT (A) has greatly relied upon the statement of Sarpanch who had given the contrary statements at different points of time. She submitted that the CIT (A) failed to note that the Sarpanch had given his statement based on mere hearsay and there no single piece of material evidence placed on record to substantiate his statement that the father of the three ladies was a man of good means and could afford to make gifts of that magnitude to his daughters. She submitted that the CIT (A) has ignored the plethora of evidence collected by the Assessing Officer in this regard. He could not rely simply upon the statement of Sarpanch and, thus, the order of CIT (A) vide which it has been held that Shri Hari Singh was credit worthy is perverse.
77. She submitted that the assessee herself asked permission to produce Sarpanch of the village and, also many other persons who were aware of the social status of late Shri Kanshi Ram and his family and when the assessee was given such opportunity to produce them on 24th December, 2009, the assessee, instead of producing those persons filed a petition requesting the department to produce them for cross examination and, therefore, the Assessing Officer was right in holding that the assessee was not serious about producing those witnesses and was only putting such request to create some legal lacuna to cover up her failure to produce witnesses. She submitted that even specifically during the course of assessment proceedings the assessee submitted that she does not want to cross examine the witnesses as she considered the entire inquiry as illegal. Thus, it was pleaded by CIT, DR that the CIT (A) has erred in holding that the assessee 51 ITA No.3157 & 3158/Del/2010 was not allowed opportunity to cross examine the witness and his findings in this regard are perverse because Ld. CIT (A) has overlooked the conduct of the assessee at all stages of the proceedings.
78. She submitted that Ld. CIT (A) has erred in holding that the donors came from respectable families and cited certain properties in support of this fact, but Ld. CIT (A) has failed to observe that most of the properties pertained to the period much later than the purported gifts and, thus, they cannot constitute the proof of credit worthiness of the donors. She submitted that it is also not the claim of the donors that they have paid the amounts of gifts out of their own income from properties. She submitted that there is no evidence on record to show that Shri Hari Singh was having credit worthiness to give the money to his daughters.
79. She submitted that Ld. CIT (A) is also incorrect in citing that there is no evidence to prove that the contents of affidavits and statements are untrue as he has ignored the plethora of evidence collected by the Assessing Officer which showed that how the assessee had manipulated the deposits into the bank account. She submitted that the providing of money by Shri Hari Singh to his daughters of that magnitude was a mathematical mistake. Finally she submitted that the Assessing Officer has clearly made a different case whereby he has virtually proved that apparent is not real and referring to the decision of Hon'ble Supreme Court in the case of Sumati Dayal vs CIT 201 ITR 802, it was pleaded that what has been presented by the assessee is not real and Ld. CIT (A) has chosen to ignore all the surrounding circumstances and, therefore, the order passed by the CIT (A) is perverse and should be set aside and that of Assessing Officer be restored.
80. It was submitted by Ld. AR that the three donor ladies were very close to the assessee and they have given gifts out of their own income which was declared by them in VDIS, 1997 on which the taxes were paid and declarations were accepted as such by CIT and necessary certificates were issued and subsisting. He submitted that vide copies of reply submitted before the Assessing Officer at pages 4, 10 and 16 of the paper book, the 52 ITA No.3157 & 3158/Del/2010 assessee had submitted all the facts and had enclosed various evidences in which the donors had confirmed the fact of having made gifts by way of affidavit and by way of statements recorded on oath and these gifts were out of sum declared in VDIS as back as 1997 and the amount was lying in their respective bank accounts since then.
81. Coming to evidence submitted in respect of each donor, Ld. AR referred to the following pages of paper book:-
Mrs. Kulwant Kaur
i) Page 136 which is copy of affidavit of Mrs. Kulwant Kaur, stating that the impugned gift has been made to the assessee.
ii) Paper Book page 148 and 149 being copy of bank passbook of Mrs. Kulwant Kaur showing the impugned gift made on 4th December, 2001 and submitted that it was paid out of a sum of ` 28,60,000/-
deposited by her in her bank account on 2nd December, 1997 being income declared in VDIS.
iii) Page 150 is VDIS certificate wherein the declared cash of ` 28,60,000/- has been accepted by the CIT.
iv) Page 55 and 56 is the copy of the statement given by Smt. Kulwant Kaur recorded on oath on 31st January, 2004 wherein she has stated that she knows the assessee who is a social worker and she had given the gift to the assessee and the said gift was given as per wish of her father and the money was received by her from her father 10-12 years back.
v) Paper book pages 126 to 135 contains the details of nature of the assets owned by her.
vi) Paper book page No.100 to 107, statement of Sarpanch Mr. Jaswinder Singh recorded on 14th December, 2009 in which he has stated that Shri Hari Singh, father of three donor ladies had good financial position.
53 ITA No.3157 & 3158/Del/2010Mrs. Swaran Singh
i) Page No.137, affidavit of Smt. Swaran Kaur, stating the gift having been made to the assessee.
ii) Paper book page Nos.142 to 146 copy of the bank passbook of Mrs. Swaran Kaur showing the gift made on 3rd December, 2001 and the same was paid out of a sum of ` 28,60,000/- deposited by her in her bank account on 2nd December, 1997 being income declared in VDIS.
iii) Page No.151 is VDIS certificate of Smt. Swaran Kaur in which she declared cash of ` 28,60,000/- and it is accepted by the CIT.
iv) Paper book page 63 to 70, the statement of Mrs. Swaran Kaur recorded on 30th January, 2004 wherein she has stated that she knows the assessee who is a social worker and she made the gift to the assessee and similarly she has accepted that this gift was made as per wish of her father and she got the money from her father about 11-12 years back.
Mrs. Gurcharan Kaur
i) Paper book page 136 is an affidavit by Smt. Gurcharan Kaur stating that the impugned gift was made to the assessee.
ii) Paper book pages 139 to 141 is the copy of bank passbook of Mrs. Gurcharan Kaur showing the impugned gift made on 3rd December, 2001 out of ` 28,60,000/- deposited by her in the bank account on 2nd December, 2001 being income declared under VDIS, 1997.
iii) Page 152 is VDIS certificate issued to Smt. Gurcharan Kaur where the declared cash of ` 28,60,000/- has been accepted by the CIT.
iv) Page 46 to 54 is the copy of statement recorded by the department on 30th January, 2004 wherein she has stated that she knows the assessee and the assessee is a social worker and the gift was given as per wish of her father and the money was received by her from her father 10-12 years back.
54 ITA No.3157 & 3158/Del/2010v) Pages 121 to 125 contains the details of assets owned by Mrs. Kulwant Kaur.
82. Then, Ld. AR carried us through submissions made before the Assessing Officer and CIT (A). He referred to pages 22 to 32 which are the submissions made before the Assessing Officer vide letter dated 24th December, 009 the copy of which is filed at pages 19 to 42 of the paper book regarding the credit worthiness of the donor and their father. Then, he referred to the submissions made before the CIT (A) vide letter dated 18th March, 2010 copy of which is filed at pages 175 to 229 of the paper book.
83. He submitted that a request was made to the Assessing Officer for making available to the assessee the adverse material and such request was made as per submissions made before the CIT (A) and reference was made to pages 208 and 209 of the paper book wherein the assessee has raised the issue that the Assessing Officer erred in passing assessment order of the assessee without providing opportunity to cross examine the person whose report/statements have been relied upon and has passed the order without following the principles of natural justice.
84. Then, Ld. AR referred to the submissions made before the Assessing Officer vide aforementioned letter dated 24th December, 2009 the copy of which is placed at pages 19 to 42 of the paper book and invited our attention towards the submissions made before the Assessing Officer regarding validity of VDIS declaration and year of assessability and reference was made to pages 32 to 42 of the paper book. Ld. AR further placed reliance on the following decisions to contend that once declaration stood accepted and sums have been given from the said amount, the same cannot be added as unexplained income:-
"99 TTJ 744 (Jp) (PB 858-877) 78 ITD 280 (Mum) (PB 878-884) (Jamnalal Kanhaiya Lal distinguished) 201 CTR 54 (All) (PB 885-892 (Jamna Lal Kanhaiya Lal, Rattan Lal, United Trading all discussed) 282 ITR 236 (All) (PB 893-903) Ratan Lal & United Trading considered. 116 TTJ 102 (Asr) (PB 812-833) 97 ITD 235 (Cal) (SB) (PB 834-857) 55 ITA No.3157 & 3158/Del/2010 CBDT Circular NO.754 DATED 10.6.1997 question no.14 & its answer (paper-book 156)"
85. He further contended that the decision in the cases of Rattan Lal (supra), Jamna Prasad Kanhaiyalal (supra) and United Trading and Construction (supra) cannot be applied to the present case as those decisions were in respect of earlier VDIS schemes and question No.14 and answer thereto of CBDT Circular No. 754 specifically covers the issue in which the department has clarified that if the amount credited in the books is less or equal to the amount declared, the credit should be accepted.
86. To contend that CBDT Circulars are binding on tax authorities he relied upon the following decisions:-
i) UCO Bank vs. CIT 237 ITR 889 (SC)
ii) Union of India vs. Azadi Bachao Andolan 263 ITR 706.
87. It was further contended by Ld. AR that the Assessing Officer has no authority to look into the validity of declarations issued by CIT under the VDIS, 1997 and in this behalf he has relied upon the following decisions:-
1. Nitin P. Shah vs. CIT 276 ITR 411 (Guj)
2. DCIT vs. Ranjit Kaur 81 TTJ 269 (Chd)
3. Bhagwat Prasad vs. CIT 263 ITR 119 (All)
4. Uma Corporation vs. ACIT 284 ITR 67 (Bom)
5. CIT vs. Uttam Chand Jain 320 ITR 554 (Bom)
88. It was further submitted that the assessment order in itself is contradictory as the Assessing Officer while deciding the issue against the assessee is relying upon the questions and answers given in respect of earlier schemes and ignoring the questions and answers given in respect of the scheme which is applicable in the case of the assessee.
89. He submitted that the reliance by the Assessing Officer on the decision in the case of CIT vs. K. Palaniappan 242 ITR 719 (Mad) is not relevant as in 56 ITA No.3157 & 3158/Del/2010 that case declaration was not accepted whereas in the case of the assessee CIT had issued declarations which are subsisting.
90. He further submitted that the reliance by the Assessing Officer on the decision in the case of Radheshyam Tibrewal vs. CIT 125 ITR 393 as affirmed in 145 ITR 186 is also incorrect as, in that case, money depositors were not declarants and declarants used the name of the other persons and the Hon'ble Supreme Court followed earlier decision of Hon'ble Supreme Court in the case of Jamna Prasad Kanhaiyalal (supra) which was also in the case of Rattan Lal (supra) and the case of Rattan Lal (supra) was considered by CBDT in Circular No.754 as per question No.14 and an opinion was given that if the deposit is covered by the declared amount, the same will be accepted by the Assessing Officer. He submitted that in the case of Tibrewal (supra) it has been observed that the declarants did not appear for deposition as against that in the case of the assessee all the three declarants have appeared and they deposed before the department.
91. Similarly, Ld. AR distinguished the decision in the case of Pioneer Traders Syndicate, 120 ITR 5 (All) which was approved in Jamunala Prasad Kanhaiyalal (supra) which decision was followed by the Apex Court in the case of Rattan Lal (supra) and the decision in Rattan Lal (supra) has been explained in the Board's Circular No.754.
92. It was further submitted that the Assessing Officer has again committed an error while holding that Circular is contrary to the decision of Apex Court in the case of Rattan Lal (supra) as it was explained by the Board upon the apprehensions of the assessee that the decision in the case of Rattan Lal will not be applied where the declared amount does not exceed the deposits made in the hands of other person. He submitted that as against that it has been held by Hon'ble Supreme Court that a benevolent Circular is binding on the department and, in this regard, he referred to the decision of Hon'ble Supreme Court in the case of Navneet C. Jhaveri 56 ITR 198 (SC) 57 ITA No.3157 & 3158/Del/2010
93. Without prejudice to the above arguments, it was submitted by Ld. AR that even if the case of the Assessing Officer is accepted that the gifts were the money of the assessee, then, the addition could not be made in the year of the deposits in the bank accounts of the donors and to support such contention he relied upon the decision of Hon'ble Delhi High Court in the case of Satyaprakash 140 ITR 880 and 201 CTR 54 (All), CIT vs. Johari Mal Goel.
94. He, however, submitted that the Assessing Officer has misplaced reliance on the decision of Hon'ble Supreme Court in the case of Sumati Dayal (supra) as the Assessing Officer despite the request of the assessee failed to provide opportunity to cross examine the persons upon whose statements the Assessing Officer has placed reliance and he submitted that case law relied upon by the Assessing Officer and CIT (A) in this regard are also relied upon here.
95. Thus, it was submitted by Ld. AR that the CIT (A) has rightly deleted the addition and his order should be upheld.
96. We have carefully considered the rival submissions in the light of the material placed before us. The case of Assessing Officer broadly is based upon the following grounds:-
i) The ladies did not make proper declarations under VDIS, 1997, hence, the assessee cannot claim shelter under Question No.14 of Circular No.754 dated 10th June, 2007. According to the Assessing Officer, the provisions of VDIS, 1997 were applicable only in respect of income in the hands of the declarants which was chargeable to tax, but was not declared earlier. Therefore, the declarations filed by the declarants were questionable. The declarations filed by the declarants were not in accordance with Section 64 of VDIS, 1997, therefore, the benefit of Question No.14 to the Circular cannot be granted.
ii) Since earlier voluntary disclosure schemes are pari materia with VDIS, 1997, therefore, the decisions rendered by Apex Court in the 58 ITA No.3157 & 3158/Del/2010 case of ITO vs. Rattan Lal (supra) and CIT vs. United Trading and Construction Ltd. (supra) are applicable to the assessee's case, therefore, the benefit given by Question No.14 of the Circular cannot be extended to the assessee as the decision of Constitution Bench of Apex Court in the case of Rattan Melting & Wire Industries (supra) shall have an overriding effect over the answer given in respect of Question No.14.
iii) The donor ladies were not having financial capacity/credit worthiness to make such huge gifts to the assessee.
iv) The amount being unexplained in the hands of the assessee is assessable as undisclosed income of the assessee only in the year under consideration as against the claim of the asessee that if the said amount is considered to be unexplained income of the assessee, then, it should have been assessed in the year of deposit in the bank account of the donor ladies.
97. So far as it relates to the first objection of the Assessing Officer, it may be mentioned that the declarations filed by the donor ladies are supported by the certificates issued by the CIT (Competent Authority) and those certificates are valid and subsisting. No material has been brought on record to show that those certificates were either ever cancelled or revoked. If the certificate granted by the Competent Authority are valid and subsisting then, whether it is permissible to Assessing Officer to say that declarations against which those certificates are given were not valid declarations as those declarations were not made in accordance with the scheme. To examine such aspect, one has to consider the judicial precedents available on this issue.
98. Reference in this regard can be made to the decision in the case of Nitin P. Shah (supra). In that case, it was the case of the Assessing Officer that declarations made by the assessee was not in accordance with the Section 68 (1) of VDIS, 1997, therefore, declarant was not entitled to 59 ITA No.3157 & 3158/Del/2010 immunity provided under the scheme. It was also observed by the Assessing Officer that the declarant did not comply with the provisions of Section 64 (1)
(a) of the scheme. On this contention, it was observed by the Hon'ble Gujarat High Court that the CIT having issued certificate u/s 68(2) of the scheme, judicial discipline requires that the authorities entrusted with the administering the law proceed on the basis that the certificate granted by the CIT would indicate satisfaction of all the requisite conditions as required by the provisions of the scheme and it is not open to subordinate authority to sit in judgement over the certificate granted by the CIT. Their Lordships have referred to the decision of Hon'ble Supreme Court in the case of Gestetner Duplicators (P.) Ltd. v. CIT [1979] 117 ITR 1 and it was held that it was not open to go behind the certificate issued by the CIT. The relevant observations of their Lordships from the said decisions are reproduced below:-
27. The CIT, having issued certificate under section 68(2) of the Scheme, judicial discipline requires that the authorities entrusted with administering law proceed on the basis that the certificate granted by the CIT would indicate satisfaction of all the requisite conditions as required by the provisions of the scheme and it is not open to subordinate authority to sit in judgment over the certificate granted by the CIT. The Assessing Officer in the present case has, while making addition of Rs. 137 lakhs in the fresh assessment made pursuant to order of set aside, taken upon himself to give go-bye to the certificate issued by the CIT as if the said certificate had been issued by the CIT without verification or application of mind. The Court is not prepared to proceed on such an assumption, though it was so contended by the learned counsel for the Revenue. The fact that the CIT is superior authority insofar as the Assessing Officer is concerned, is not in dispute and could not be disputed by the learned counsel for the Revenue.
Once that is the position, the following observations made by the Apex Court in case of Gestetner Duplicators (P.) Ltd. v. CIT [1979] 117 ITR 1 would apply. In a case where a private company employed salesmen with a fixed monthly salary and also commission at fixed percentage of the turnover achieved by the salesmen, the assessee-company paid employer's contribution to a provident fund maintained by the company after computing the same by considering both as salary. The fund was recognised by the CIT. According to the Assessing Officer, the commission so paid did not partake the character of salary and, hence, the contribution made in relation to such commission was proportionately disallowed in the assessment proceedings. After deciding on the merits of the dispute between the parties and taking into consideration the terms of the contract, it was observed by the Court that :
". . . It would be conducive to judicial discipline and the maintaining of certainty and uniformity in administering the law that the taxing authorities should proceed on the 60 ITA No.3157 & 3158/Del/2010 basis that the recognition granted and available for any particular assessment year implies that the provident fund satisfies all the conditions under rule 4 of Part A of the Fourth Schedule to the Act and not sit in judgment over it. There is ample power conferred upon the CIT under rule 3 of Part A of the Fourth Schedule to withdraw at any time the recognition already granted if, in his opinion, the provident fund contravenes any of the conditions required to be satisfied for its recognition and if during the assessment proceedings for any particular assessment year the taxing authority finds that the provident fund maintained by an assessee has contravened any of the conditions of recognition, he may refer the question of withdrawal of recognition to the CIT, but until the CIT acting under the powers reserved to him, withdraws such recognition the taxing authority must proceed on the basis that the provident fund has satisfied all the requisite conditions for its recognition for that year; any other course is bound to result in chaos and uncertainty which has to be avoided." (p. 15) Therefore, it is not open to the Assessing Officer to go behind the certificate issued by the CIT and by ignoring same, assess an income which has already borne tax under VDIS.
99. In the case of CIT vs. Uttam Chand Jain 320 ITR 554 (Bom), the assessee being a dealer in diamond jewellery, diamond jewellery weighing 65.75 carats was declared under VDIS 1997. The said declaration was accepted by the department and a certificate was issued to the assessee under VDIS 1997. The revenue doubted the existence of the said diamond jewellery and their Lordships rejected the said contention of the assessee with the following observations:-
12. We see no merit in the above contentions. At the outset, we may note that the certificate issued by the revenue under VDIS, 1997 to the effect that the assessee had diamond jewellery weighing 65.75 carats continues to be valid and subsisting. In fact, no proceedings have been initiated so far to cancel the certificate issued to the assessee under VDIS, 1997.
It was further observed:-
16. As the VDIS, 1997 certificate issued by the department is valid and subsisting, it is not open to the revenue to contend that there was no jewellery which could be sold by the assessee on 20-1-1999. It is not the case of the revenue that the assessee continues to be in possession of the said diamond jewellery even after the alleged sale effected on 20-1-1999 or that the said jewellery has been sold to third parties. In these circumstances, the decision of the Tribunal in 61 ITA No.3157 & 3158/Del/2010 accepting the claim of the assessee that the amount of Rs. 10,35,562 represented the sale proceeds of the diamond jewellery declared under VDIS, 1997 cannot be faulted.
100. Similar view has been taken by co-ordinate Bench in the case of DCIT vs. Ranjit Kaur 681 TTJ 269 (Chd).
101. If the principles of law laid down in the aforementioned decisions are considered, then, it has to be held that in a case where declaration is supported by the certificate given by the Competent Authority (in the present case, the CIT) and the said certificate is valid and subsisting, then, the Assessing Officer being subordinate authority to the certificate issuing authority cannot hold that the declarants did not make valid declaration, therefore, the benefit of VDIS, 1997 is not available to the declarants. In the present case, the Assessing Officer has ignored the valid and subsisting certificate issued by the CIT on the ground that the declaration submitted by them were not valid declarations as they did not fulfill the conditions laid down in the scheme. Such observations of the Assessing Officer are contrary to the judicial discipline as the CIT, after having satisfied himself about the fulfillment of all the conditions, has granted the certificate to the declarants which are subsisting as on the date. Therefore, it is not permissible to the Assessing Officer to go behind the certificate issued by the CIT and to hold that the declarations filed by the donor ladies were not valid. We find no infirmity in the findings recorded by CIT (A) that in view of the existence of valid certificates issued by CIT, the Assessing Officer could not say that the declarations submitted by the declarant ladies were not in accordance with the scheme.
102. Now, coming to the second objection of the Assessing Officer, there cannot be any dispute to the proposition that if the decision of Apex Court/High Court is contrary to the view expressed in the Circular/clarification, then, the decision rendered by the court will have overriding effect and administering authorities and courts working under their jurisdiction will be bound to follow the said decision in preference to the Circular/clarification. Such proposition of law is now supported by the 62 ITA No.3157 & 3158/Del/2010 decision of Hon'ble Apex Court in the case of Rattan Melting & Wire Industries (supra). It is the case of Assessing Officer that earlier schemes are pari materia to VDIS, 1997, therefore, as per law laid down by Hon'ble Supreme Court in the case of Rattan Lal (supra), the answer to Question No.14 given in Circular No.754 should be ignored. The voluntary disclosure schemes are issued by the Government and public at large is invited to submit declarations. Before the applicability of the schemes the doubts raised by the public at large are clarified in the form of questions and answers, so that there should not be any difficulty in the implementation of the scheme. Vide questions and answers, clarifications are issued to facilitate the department as well as the declarants to work on the scheme, so that the scheme works smoothly. As it can be seen from the questions and answers issued under the earlier schemes, it was not the intention of the legislature to extend the benefit of declared income in the hands of other persons whereas under the VDIS 1997 it has been clearly observed by the CBDT in answer to Question No.14 that benefit will be given to the other person to the extent of amount declared. VDIS 1997 was brought on the statute by the Finance Act, 1997 and it was made applicable w.e.f. 1st July, 1997. While issuing Circular No.754 dated 10th June, 1997 i.e., prior to the date of applicability of the scheme, the Board had received number of queries from public about the scope of the scheme and the procedure to be followed and after considering those queries received from the public, the CBDT had decided to clarify the doubts raised by the public in the form of question and answer through Annexure annexed to that Circular. While issuing such clarification, the observations of the Board are as under:-
"The Finance Act, 1997,has introduced a Voluntary Disclosure of Income Scheme, 1997. In regard to the Scheme, a number of queries have been received from the public about the scope of the scheme and the procedure to be followed. The Board has considered the same and decided to clarify the points raised by issue of Circular in the form of questions and answers as per annexure."
Question No.14 and answer thereto read as under:-
"Question No.14: In the case of ladies and minors making declaration and amounts are later credited in the books of account of 63 ITA No.3157 & 3158/Del/2010 the firm, etc., it needs to be clarified as to what will be the view of the Department, particularly whether the Assessing Officer can investigate into the source of the amounts so credited? (refer to Supreme Court decision in Rattan Lal's case [1984] 145 ITR 183) Answer: The declarant lady or minor should first credit the amount declared in their own books of account or any other record. Thereafter, the advance can be made to other persons. Where the mounts credited in the books of the other persons are equal to or less than the amount declared by the lady or the minor then the Assessing Officer should accept the credit entries in the books of the firm. If the amount credited is more than the amount declared the Assessing Officer will be free to enquire into such excess."
103. There was an apprehension in the mind of the public regarding the applicability of decision of Hon'ble Supreme Court in the case of ITO vs. Rattan Lal (supra) and, therefore, doubts were raised as represented in Question No.14 and a question was raised that in the case of ladies and minors who are making declarations and amounts are later on credited in the books of account of the firms, etc., a clarification is needed as to what will be the view of the department, particularly whether the Assessing Officer can investigate the source of the amount so credited and reference was specifically made to the decision in the case of Rattan Lal (supra). It was clarified by the CBDT that the declarant ladies or minors should first credit the amount declared in their books of accounts or any other record. Thereafter, the advance can be made to other persons. Thus, if the amounts are declared by the ladies and minors and they are first credited in any of the record maintained by them, then, the credit can be given to the other person. And, in a case where the amount credited in the books of other person is equal to or less than the amounts declared by the lady or the minor, then, the Assessing Officer should accept the credit entries in the books of other person. The word used by the CBDT is "should." Therefore, an assurance was given by the CBDT to the public at large that to the extent the amount of credit in the hands of other person does not exceed the declared amount in the hands of ladies and minors the Assessing Officer should accept the credit. Such was not the position under the earlier schemes. The decision of Hon'ble Supreme Court in the case of ITO vs. Rattan Lal (supra) was rendered in the context of 1965 Scheme and the Assessing Officer has also admitted such fact. No direct decision has been supplied by the department in respect of 64 ITA No.3157 & 3158/Del/2010 VDIS 1997 where such position is not accepted by the Court. Therefore, it cannot be said that earlier schemes were in pari materia with the VDIS 1997.
104. The decision of Hon'ble Supreme Court rendered in the case of ITO vs. Rattan Lal (supra) has to be read as a whole and the ratio laid down therein cannot be divorced from the context in which said decision was rendered. This proposition of law has been explained by Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works Pvt. Ltd. 198 ITR 297. In that case, the respondent company had submitted returns of income for assessment year 1960-61 and 1962-63 showing losses. The returns being filed belatedly, the losses were not determined by the Assessing Officer. Appellate Asstt. Commissioner held that though the losses ought to have been determined, but no relief could be granted to the assessee as assessee had filed belated returns. Later on, the assessee filed disclosure petition in respect of certain hundi loans and a settlement was arrived at between the assessee and the department which resulted in an assessable income of ` 29,000/- and ` 90,000/- for assessment years 1960-61 and 1961-62 respectively. The Assessing Officer reopened the assessment for those years u/s 147 (a) of IT Act, 1961. It was claimed by the assessee that losses of those years should be determined in the re-assessment proceedings. ITAT held that the original proceedings relating to losses had become final and since the item of loss were unconnected with the income escaping assessment to be assessed u/s 147, it was not permissible for the assessee to seek a review of the original order. The assessee placed reliance on the decision of Hon'ble Supreme Court in the case of Jaganmohan Rao vs. CIT 75 ITR 373 and it was claimed that as per that decision the previous under assessment is set aside and the whole assessment proceedings to start afresh. Their Lordships of Hon'ble Supreme Court held that the decision in the case of Jaganmohan Rao vs. CIT (supra) cannot be read without the context. The principle laid down in that decision was only to the extent that once an assessment is validly reopened by issuance of notice u/s 22 (2) of 1922 Act, the previous under assessment is set aside and the ITO has the jurisdiction and duty to levy tax on the entire income that had escaped assessment during the previous year. It was observed that what was set aside was only the previous under assessment 65 ITA No.3157 & 3158/Del/2010 and not the original assessment proceedings. Therefore, the emphasis was on the set aside of the escaped assessment and not the assessment at large. Their Lordships rejected the contention of the assessee as the interpretation sought to be taken by the assessee was totally out of context and the observations are reproduced below: -
"Of course, in the reassessment proceedings it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgment in V. Jaganmohan Roa's case (supra) as if laying down that reassessment wipes out the original assessment and that reassessment is not only confined to 'escaped assessment' or 'under- assessment' but to the entire assessment for the year and start the assessment proceedings de novo giving right to an assessee to reagitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of section 147 and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a latter case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. In H.H. Maharajadhiraja Madhav Rao Jiwaji Rao Scindia Bahadur v. Union of India [1971] 3 SCR 9 this Court cautioned:
"It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment."
38. Although, section 147 is part of a taxing statute, it imposes no charge on the subject but deals merely with the machinery of assessment and in interpreting a provision of that kind, the rule is that construction should be preferred which makes the machinery workable. Since the proceedings under section 147 are for the benefit of the revenue and not an assessee and are aimed at garnering the 'escaped income' of an assessee, the same cannot be 66 ITA No.3157 & 3158/Del/2010 allowed to be converted as 'revisional' or 'review' proceedings at the instance of the assessee, thereby making the machinery unworkable.
(Emphasis ours)
105. In view of the above proposition of law explained by Hon'ble Supreme Court, it cannot be said that the decision of Apex Court in the case of ITO vs. Rattan Lal (supra) is applicable to VDIS 1997 irrespective of the fact that the said decision, according to the opinion of the Board was not applicable to VDIS 1997. It has already been mentioned that all the decisions relied upon by the revenue pertains to the earlier schemes and no decision has been referred by the revenue in which the proposition of law laid down in the case of ITO vs. Rattan Lal (supra) has been applied to VDIS, 1997 by considering the question No.14 and answer thereto. The Assessing Officer would have been right if the decision in the case of ITO vs. Rattan Lal (supra) is rendered under VDIS Scheme, 1997 then, the said decision will prevail over the view expressed by the CBDT. In this view of the situation, we find no infirmity in the order of the CIT (A) vide which it has been held that the benefit given by answer to question No.14 is applicable to the case of the assessee as the amount received by the assessee did not exceed the amount declared by donor ladies under VDIS 1997.
106. So far as it relates to the third objection of the Assessing Officer regarding the financial capacities and credit worthiness of the donor ladies to give the gifts, it may be observed that to validly explain an amount of credit or gift the three requirements are to be fulfilled, namely, (i) identity of the creditor/donor, (ii) credit worthiness and (iii) the genuineness of the transaction. So as it relates to identity of the declarants/creditor is concerned, there is no dispute that all of them had appeared before the Investigation Wing and their statements were recoded. The Assessing Officer is also not disputing about the identity of these donor ladies and reference in this regard can be made to the observation of the Assessing Officer at page 14 of the impugned assessment order where he has observed that in the instant case capacity and credit worthiness of these three donor ladies have not been proved. The financial capacity of the donor ladies has to be seen 67 ITA No.3157 & 3158/Del/2010 vis-a-vis the amount given by them to the assessee. It is a fact that declared amount was supported by the certificate and was lying in the bank account of the donor ladies since 1997. The amount deposited in the bank accounts relating to donor ladies did not change its shape and the money remained in the bank account of the respective declarants until it was given as gift to the assessee by way of account payee cheques. There is no material on record to show that the bank accounts owned by those declarant ladies could also be operated by any person other than the declarants. Though the Assessing Officer at page 28 has mentioned that the assessee has played a significant role in the opening of the bank accounts and not submission of declarations under VDIS 1997, but there appears to be no material on record to support such observations. The amount given by the donor ladies to the assessee are supported by declarations made by them on which the tax was duly paid by them and a certificate was issued by the CIT. To that extent, the financial capacity and credit worthiness of donor ladies could not be denied and the other factors on which the Assessing Officer is placing reliance for disproving financial capacity of those ladies and their families will become irrelevant. It is already pointed out that such financial capacity and credit worthiness is to be examined only in the context of amount advanced by them to the assessee. Therefore, we find no infirmity in the order of the CIT (A) vide which he has held that the donor ladies were having the financial capacity and credit worthiness to make gifts to the assessee.
107. So as it relates to the genuineness of the transaction, it is already observed that money in the bank of the donor ladies was lying since 1997 and it did not change shape till it was given to the assessee. The amount of gift was made vide account payee cheques. The donor ladies have been stated to have admitted the fact of gift. The relevant evidences were produced on record to support such gifts. There is no material on record to controvert such evidence. In this view of the situation, we are of the opinion that the CIT (A) has rightly held that the gifts made by those donor ladies to the assessee were genuine.
68 ITA No.3157 & 3158/Del/2010108. In view of above discussion, we are of the opinion that there is no infirmity in the order of Ld. CIT (A) vide which the impugned addition is deleted. We decline to interfere and the appeal is dismissed.
109. In the result, both the appeals filed by the Department are dismissed.
The order pronounced in the open court on 22.10.2010.
Sd/- Sd/-
[B.C. MEENA] [I.P. BANSAL]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, , 2010.
dk
Copy forwarded to: -
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2. Respondent
3. CIT
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5. DR, ITAT
TRUE COPY
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