Madras High Court
Swami Premananda @ Premkumar vs The Commissioner Of Income Tax-I on 16 December, 2008
Author: Prabha Sridevan
Bench: Prabha Sridevan, K. K. Sasidharan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 16 - 12-2008 CORAM: THE HONOURABLE MRS. JUSTICE PRABHA SRIDEVAN AND THE HONOURABLE MR. JUSTICE K. K. SASIDHARAN W.P.Nos.15527 to 15537 of 2003 and W.P.M.P.Nos.19502, 19504,19506, 19508, 19510, 19512, 19514, 19516, 19518, 19520, 19522 of 2003 Swami Premananda @ Premkumar S/o Somasundaram Central Prison Cuddalore ... Petitioner Vs. 1. The Commissioner of Income Tax-I Office of the Commissioner of Income Tax I No.4, Williams Road, Cantonment Tiruchirapalli 620 001 2. Sri Premananda Trust Rep. by its Managing Trustee Dhamayanthi Mathaji, Premananda Ashram Melapatchakudi Village,Fathima Nagar Via Viralimalai,Pudukkottai District ... Respondents For petitioner :: Mr. V. Ramachandran Senior Counsel For respondents :: Mr. Murali Kumaran, Senior Standing Counsel Writ petitions filed under Article 226 of the Constitution of India praying for a writ of certiorarified mandamus as stated therein. JUDGMENT
(PRABHA SRIDEVAN,J.) The petitioner, who headed an Ashram, accumulated properties, both movable and immovable. His premises were raided by the Income Tax Authorities on 23-11-1994 and 29-11-1994. In pursuance of the search conducted in the said premises assessment orders were passed for the assessment years 1985-86 to 1995-96.
2. Against the assessment orders, Appeal Nos.75 to 85 of 1997-98 were filed. The Commissioner of Income Tax(Appeals) (CIT(Appeals) in short) remanded the matter with certain directions to the Assessing Officer. The petitioner filed W.P.No.17649 of 1999 contending that the Trustee of the Premananda Trust( 2nd Respondent herein) should be given an opportunity before any assessment is made. On 02-11-1999, the above Writ petition was disposed of with certain directions. On 29-03-2000, assessment orders were passed. The assessee filed revision petitions which were dismissed on merit. So these writ petitions have been filed.
3. The learned Senior Counsel Thiru. V. Ramachandran, appearing for the assessee submitted that the assessment orders must be quashed. The assessee was not given a fair opportunity. Though the CIT(Appeals) remanded the matter on 27-02-1998 , the Assessing Officer issued the show cause notice only on 19-09-1999 after nearly 18 months. This gave the assessee very little time to present his case effectively. To make matters worse, he was in prison and this too prevented him from effective participation in the proceedings. Though it is claimed that adequate opportunity was given, it was more an illusion of an opportunity. In the show cause notice, the assessee was asked to give his explanation regarding the source of his properties. There is a great variation in the items of properties listed in the show cause notice and in the assessment orders. Therefore, even with regard to items for which no explanations were called for, the assessing officer had on his own arrived at a conclusion and passed orders. This also amounted to violation of principles of natural justice. The learned Senior Counsel submitted that when the matter was remitted by the CIT(Appeals), he gave directions that the affdavits given by various donors which were treated as unexplained income should be considered and the said donors should be examined. But the assessing officer ignoring the directions had not summoned these foreign donors. According to the learned Senior Counsel, the Supreme Court had repeatedly frowned upon such judicial indiscipline amongst the authorities and on this ground alone the assessment order deserves to be quashed. It was also submitted that the assessing officer had blindly applied Krishna Menon's case to the donations. Krishna Menon's case revolved round the peculiar facts of the said case where there was proof that the donors had given the gifts for the Vedanta teachings imparted by the assessee. In the present case, there is no such evidence and had those foreign donors been examined, it would have revealed that the donations have been given for the Trust. The Learned Senior Counsel submitted that the Assessing Officer had relied on a stray sentence in the letter given by one such donor to arrive at the conclusion that Krishna Menon's case applied to this case. The learned Senior Counsel submitted that though these donations were credited in the assessee's account, it was meant for the Trust, and the alleged non-application of the funds towards the objects of the Trust would at worst be breach of trust and nothing more. On that ground, the Trust's income cannot be assessed as income in the assessee's hands. Further the income was actually applied for construction of orphanage etc, that is it was actually used only for charitable activities. The learned Senior Counsel submitted that at the relevant point of time anyone could make a gift and there were no restrictions. The learned Senior Counsel relied on several decisions to support his case.
4. In response, Mr. Murali kumaran, learned Senior Standing Counsel would submit that several of the decisions relied on by the learned Senior Counsel arose out of the Income Tax Act, 1922 where the definition of income did not include "profits and gains" . The definition changed subsequently. The learned Senior Standing Counsel submitted that at no point of time did the assessee complain that he had been denied the opportunity for want of examination of all the foreign donors and it is raised for the first time here. He submitted that the so-called affidavits cannot be relied on since they are not properly notarised nor authenticated. He also submitted that there was no Valid Trust and it is futile to contend that it should be assessed in the hands of the Trust. The learned Senior Standing Counsel submitted that the burden of proof is on the assessee to prove the genuineness of the donations and in the absence of satisfactory proof the assessing officer rightly treated it as income and referred to various decisions. He also submitted that there was evidence to show that it is on account of the teachings of the assessee that those remittances were made. It was also submitted that the scheme of the Income Tax Act is that it categorizes the income and it charges the said income and then refers to deductions, exemptions and allowances and it is for the assessees to prove that the income or a part thereof is not taxable. It was also submitted that it is hardly relevant for the purpose of assessment, that what was received by the assessee had been spent for building orphanages. If he had spent on deductible expenditure then he could claim it. But that will not change the character of the receipts in his hand as income. He submitted that enough opportunity was given to assessee and he has no cause to complain. . He also submitted that there is absolutely no variation between the show cause notice and the assessment order. The questionnaire referred to certain sources like corpus, fund, cash and loan from bank etc. for which he was asked to furnish supporting evidence. When the evidence was not forthcoming or satisfactory, it was treated as income by the assessing officer but there was no variation. The learned Senior Standing counsel submitted that the writ petitions should be dismissed.
5. The story starts from the time the assessee came to India from Sri Lanka. He attracted some devotees. Definitely from 1984, there appears to have been an Ashram. According to the assessee , he was advised to found a Trust. In the Minutes of the Meeting of the Trustees alleged to be held on 08-07-2004 it is stated as follows:
VERNACULAR (TAMIL) PORTION DELETED
6. There are bald statements or recitals that the individuals had no right and that the properties belonged to the Trust. The trust deed is dated 08-07-1994 and registered on 20-07-1994. The author of the Trust is the assessee. He had given a sum of Rs.501/- for the creation of the Trust. He has named about eight persons including himself as the trustees of the Trust. Clause 32 of 1994 document reads thus:
"It is hereby declared that as on this date the Trust has no movable or immovable property excepting Rs.501/- mentioned in para.no.3 and that the Trustees have power to windup the Trust by merging or amalgamating with another Trust, charitable Society having similar objects and enjoying recognition by the commissioner of income-tax under section 80-G of the income-tax act, 1961 if they are of the decision that the object of this Trust would be better served by taking such a step. In such an event, no portion of the assets of the Trust remaining on that date shall be distributed amongst the Trustees."
7. Release deeds had been executed in 1994 by the petitioner. Only on 07-10-1994, forms were filed for registration under Section 12(A) of the Income Tax Act. From the FORM No.10G by the we get these details:
"9. Amount accumulated for the purposes mentioned in item 4 .........New Trust
13. Details of shares, security or other property purchased by or on behalf of the trust from any interested person as specified in sub-section (3) of section 13. " .......Nil Therefore, in 1994 when the Trust came into existence it owned no property. On 23-11-1994 and 29-11-1994, the assessee's premises called 'Premananda Ashram' was subjected to search. The documents showing substantial investment in bank deposits and immovable properties were seized in the search u/s.132 and they revealed that the assessee is liable to tax. So income tax assessment proceedings were initiated for all the ten assessment years by separate notices for each assessment year under Section 148 on 21-08-1995. In response to the notice, the assessee's Chartered Accountant sent a letter dated 28-09-1995 seeking time. Since the assessee failed to furnish his returns, two detailed letters were issued to the assessee on 11-10-1995 and 23-10-1995 wherein his explanations regarding the source of the properties and investments was called for. In response, he again sought for time, time was granted till 31-10-1995. Thereafter, there was no response. So an ex-parte assessment was completed under Section 144, on 29-12-1995, taking into account the various investments and outgoings. After the completion of the assessment ex-parte, he filed 'NIL' return for each of the assessment year. Then he preferred an appeal against the ex-parte assessments. Before the CIT(Appeals) he claimed that as he was in judicial custody; he was not given reasonable opportunity. He also claimed that the bank deposits and other investments did not belong to him, but they belonged to the Trust. The CIT(Appeals) called for a remand report. The CIT(Appeals) considered the remand report and after hearing the assessee's representative, concluded that the Assessing Officer had cursorily doubted the evidentiary value of the affidavits without making any effort to cross examine the deponents/depositors and therefore, he passed an order on 27-02-1998 wherein he gave the following directions:
"The Assessing officer is directed to reframe the assessment afresh after giving the appellant reasonable opportunity of being heard. While reframing the assessments the Assessing Officer is directed to examine the appellant Shri Premkumar alias Premananda Swamigal an oath in respect of unexplained investments in immovable properties/FDRs etc. He should also examine the various parties who filed affidavits in respect of the amounts credited to the NRE A/c of the assessee and Smt. Divyadevi. The Assessing Officer must also provide reasonable opportunity to the appellant regarding additional income which he failed to consider in the ex parte orders under section 144 for assessment years 85-86 to 95-96 mentioned in the annexure to the remand report. .."
Thereafter, a detailed questionnaire was issued to the assessee on 20-09-1999. A copy of the questionnaire was also sent to the Chartered Accountants. The various investments and deposits were treated as unexplained and they were shown as:
(1) Corpus Fund (2) Cash (3) Loan from Bank (4) Bank withdrawal (5) Bank interest In the above questionnaire, the assessee was required to explain with necessary evidence the receipts such as donations towards corpus fund, Bank loan, bank withdrawal, cash etc. The petitioner sought for a month's time and he also said that "on any day in November as fixed by the Assessing Officer," he would give the details. Time was granted till 04-11-1999. It is at this juncture that he filed W.P.No.17641 of 1999 praying that the Managing Trustee of the second respondent-Trust should be given an opportunity. Therefore, the copy of the questionnaire was also given to the Trust. Then time was granted till 07-01-2000. On 07-01-2000, the Chartered Accountant gave an explanation, which stated that all the bank deposits of the immovable properties did not belong to the assessee nor to the Managing Trustee but to the Trust and that by a Resolution passed on 20-07-1994 "it was declared that all the movable and immovable properties belong to the Trust only." Then the Trust was called upon to furnish the necessary documents to show that the bank deposits and immovable properties stood in the name of the assessee belonged to the Trust. The two documents mentioned above namely the minutes of the meeting of the Trustees and the alleged Trust deed were produced. Since the time for concluding the assessment was running out and since the assessee was in Prison, a Commission was taken out for recording his statement. The summary of all the statements given by the assessee is as follows:
"1. The Bank deposits and other assets both movable and immovables standing in the name of the assessee belong to Sri Premananda Trust and not to the assessee.
2. The Bank deposits and other movable and immovables standing in the name of the assessee and Divya Devi have been acquired out of donations received from foreign nationals who are the devotees of the assessee. The donations were given by the foreign devotees for being spent on specific purpose by the Ashram and the assessee received the funds only as a custodian.
3. In the meeting of the Board of Trustees of Sri Premananda Trust held on 20.07.94 a resolution was passed declaring all the movable and immovable properties and also the bank deposits standing in the name of the assessee and other trustees as belonging to Sri Premananda Trust.
4. The assessee has executed a Release Deed on 06.10.94 relinquishing his right over both movable and immovable assets and bank deposits held in his name and giving his consent for transferring all the assets and the bank deposits in his name to Sri Premananda Trust.
5. Divya Devi has executed a release deed on 08.08.94 transferring the movable and immovable properties and bank deposits standing in her name to Sri Premananda Trust.
6. Similar release deeds have been executed by Kamalananda and Mylvahanam on 06.10.94 transferring the assets and bank deposits standing in their name to Sri Premananda Trust.
7. Sri Premananda trust has filed property suit and money suit before the competent court seeking declaration that the assets and bank deposits standing in the name of the assessee and Divya Devi as belonging to the Trust and the suits.
8. Sri Premananda Trust has applied for registration u/s.12 A and the donations received from the foreign nationals are spent on charitable objects of the Trust and hence exempt.
9. The income tax proceedings initiated in the case of the assessee as individual have to be dropped and Sri Premananda Trust is to be assessed as the Ashram or the Trust is the real owner of the funds received by the assessee and the latter has acted only as the representative of the Ashram."
So, his case is that the income belonged to the Trust or the Ashram and that he had received the funds as the representative of the Ashram. In this statement, there is no request that his donors shall be examined. On a reading of the Trust Deed which showed that the only asset of the Trust on that date was the sum of Rs.501/- , the AO concluded that the properties in the name of the assessee belonged only to the assessee. The assessee had also executed a Will on 07-02-1986 bequeathing all these properties to one Swami Gunananda @ Gunala. Therefore, not only were these properties in assessee's name, he had also dealt with these properties as his own which he could bequeath on the person of his choice. It is true that a will comes into effect only after the death of the testator, but this gives us an insight into the mind of the petitioner and that he dealt with the properties as his own.
8. As regards the foreign remittances credited in his NRE account they were said to be donations received from foreign devotees for a specific purpose. The assessing officer found that the affidavits were more in the nature of confirmation letters, and that there was no authentication and the identities of the foreign devotees were not proved. The Assessing Officer has listed the following purposes as mentioned in the affidavits for which the donations were allegedly given :
"1. Food for children
2. Clothes for children
3. Orphanage
4. Forest trees maintenance
5. Office stationery
6. Stamp
7. Special Abishekam
8. Building materials/maintenance
9. Plants
10. Garden tools
11. Paatla Pooja
12. Postage
13. Cattle purchase/cow feed
14. Flower plants
15. Pooja Hall maintenance
16. Fertiliser
17. Vehicle maintenance
18. Agriculture
19. Books for library
20. Borewell maintenance"
The Assessing Officer held that, in view of the specific purposes mentioned in the affidavits , they cannot be treated as donations towards the corpus fund. The receipts were deposited in the assessee's Bank account. The Assessing Officer held that the donations were received by the assessee in his individual capacity and not as custodian of the Trust. It is also relevant to note that the Division Bench of this Court which heard the assessee's appeal against his conviction, directed that the interest accrued in the Bank deposits standing in his names should be paid to the victims. This fact has also been noted by the Assessing Officer. He considered the release deeds and found that they were not registered in accordance with law.
9. As regards the donors who are foreign nationals, the Assessing Officer held that it is not practicable to enquire them and that since the affidavits indicated the purpose for which the donations were made to the assessee, there is nothing more needed to be done in this regard. The Assessing Officer also referred to one letter which showed that the devotees were benefited by his teachings. So held that Krishna Menon's case would apply. So he assessed the income in the assessee's hands and passed the assessment orders.
10. The assessee filed a revision under Section 264. The revisional authority passed the impugned order. This shows that even before the revisional authority the assessee's case was that he had acted only as a custodian of the Trust and that sufficient opportunity was not given to establish his case. Even before the revisional authority, he did not complain of non-examination of the donors. The revisional authority rejected the revision.
11. We will examine the various issues argued before us and the judgments cited in support of them:
I. Judicial Indiscipline:
With regard to judicial indiscipline, several decisions were cited.
(i)In (2002) 292 ITR 22 [Nokia Corporation Vs. Director of Income-Tax (International Taxation) and Another] the Delhi High Court held that if the order of an appellate authority is the subject-matter of further appeal, that cannot furnish any ground for not following it, unless its operation has been suspended by a competent court. If this rule is not followed, the result will not only be undue harassment to assessees but also chaos in the administration of tax laws.
(ii) In 288 ITR 322 (SC) [CIT V. Ralson Industries Ltd.] the Supreme Court held that where an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline.
(iii) In 1990 (47) ELT 231 (Bom.) [Kamlakshi Finance Corporation Ltd. Vs. U.O.I.], the case arose with regard to what is the proper classification of the product produced at the assessee's factory. The Appellate Authority decided that it fell under Heading 8546. But on remand, the Assistant Collector failed to consider the claim of the assessee that the product is similar to that of their product produced in the Borivli factory which has been decided by the Appellate Collector and should be applied by the Assistant Collector. The Assistant Collector ignored the decision of the Appellate Authority. The Bombay High Court held that, "the Assistant Collector does not even explain why the decision in the other case could not be applied. This indicates how quasi-judicial powers are being misused by people who are not qualified to exercise the same. Their only purpose seems to be collect as much as possible or to harass the assessees to the maximum extent possible. The difficulty is what is to happen in future, because we are quite sure that if we pass an order of remand such incompetent and indisciplined officers will go on passing orders in this unsatisfactory manner. There seems to be no control of the depart ment over such officers."
The order of the Bombay High Court was confirmed by the Supreme Court wherein it was held that the strictures passed by the Bombay High Court against two Assistant Collectors for flouting the Appellate Collector's order on classification was in order and that the requirement of judicial discipline must be adhered to.
(iv) Similarly in [2007] 8 VST 131 (Mad) [Ragam Polymers Vs. Commercial Tax Officer], the learned Single Judge of this Court had held that when the appellate authority, whose order is binding on the assessing officer, has given certain directions to the assessing officer, while remanding the matter, the assessing officer cannot over-reach the appellate authority's order.
(v) In (1960) 40 ITR 618 [Bhopal Sugar Industries Ltd. Vs. Income Tax Officer] the income-tax officer had failed to carry out a legal duty imposed on him and such failure was destructive of a basic principle of justice, a writ of mandamus should issue ex debito justitiae to compel him to carry out the directions given by the Superior Authority. (vi) While there cannot be any gainsaying the position that the direction of a superior Tribunal/Court/Authority should be complied with by those lower in the hierarchy, in some cases, the facts and circumstances may make the directions practically not compliable.
(vii) In (1963) 48 I.T.R. 53 [Guru Estate vs. Commissioner of Income Tax], the assessees were a HUF who were Pandas at the Temple of Jagannath at Puri. The assessees collected from the pilgrims, amounts of money known as 'Annadan' on writings executed by the pilgrims. The words used are almost identical. It said that the pilgrims paid to "the name of the Panda for the Bhog of Sri Jagannathji" and that "the Panda will utilise this amount for the Bhog". The Income Tax Officer held that Annadan was not exempt from liability to tax since there was no valid trust in writing. The Appellate Assistant Commissioner confirmed the order stating that except for the bare assertion of the assessees, there is no evidence to show that the pilgrims understood either the character or the implication of the document they were signing. The Tribunal declined to accept case of the assessees on the ground that "no trust was intended to be created as alleged by the assessees and the assessees had not proved that they were under any obligation to donate the income to any particular use. The Supreme Court held that the Tribunal had recorded a finding that there was no trust intended or created by the pilgrims, and the assessees claim for exemption failed before the Supreme Court.
(viii) In the name of natural justice, the assessee in the above mentioned case could not have asked that all the pilgrims who have visited the Jagannath Temple at Puri be examined. No officer ought to issue such a direction. If he had, it cannot be complied with. It is impractical, nay impossible. The situation is similar to the case here and the Assessing Officer says that it is not practical. Sure, it is not .The law does not expect one to do the impossible. If the petitioner were to echo Shylock's words uttered in Portia's Court, and ask "Is that the law?" We have to say, "it is". The Assessing Officer rightly said it is impractical.
(2) In the present case, the CIT(Appeals) had very caustically remarked that the affidavits have been cursorily examined and had therefore, directed in his remand orders that these affidavits should be examined properly. On facts, we see that examination of the donors who allegedly have sent in money from amny countries e.g. Switzerland, Italy, U.K., Holland, Belgium, and France, etc; would have been as practical as examining all the Puri Temple Pilgrims, who were donors in Guru Estate case. The spirit of the remand order was to give a fair opportunity to the assessee and to really 'consider' the affidavits and not merely cursorily examine them. The time for completing the assessment order was coming to an end and there were numerous affidavits allegedly from foreign donors. Therefore, the assessment officer complied with the spirit of the directions which was to give an opportunity to the assessee and to examine the affidavits in detail which he had done. As earlier stated the so-called affidavits were neither stamped nor notarized. The Assessing Officer has accepted those affidavits at face value and then held it was 'income'. Even if the donors had been examined they could not have given any oral evidence contrary to what is stated in the affidavit. So there can be no prejudice on account of their non-examination. There are exceptional situations where compliance with the superior officer's order is almost impossible. This is one such. We therefore, reject this ground of judicial indiscipline.
II. High Court's interference:
(i) The learned Senior Standing counsel referred to (2001) 251 ITR 93 [Union of India and others Vs. Shatabadi Trading and Investment P. Ltd. and others) where the Supreme Court held that the supervisory power of the High court would not get enlarged; nor can the High Court exercise an appellate power while examining the correctness of the conclusion arrived at by the Authority. There is no quarrel with this position. But the High Court's power under Article 226 of the Constitution of India is always there to check illegality, arbitrariness, perversity etc. But we will not lightly or easily disturb concurrent factual findings.
III The Gifts & the Affidavits:
(a) In (1998) 176 ITR 78 [Father Epharam Vs. Commissioner of Income-tax] a priest in a monastery was receiving remittances from abroad for performing masses or to have the masses performed by other priests. The Kerala High Court held that, "the receipts were referable to the occupation or vocation of the assessee". The payments had their origin in such source. The Kerala High Court held that, "the scheme of section 2(24) of the Act, read with section 4 and 10 of the Act, seems to be that, given its ordinary and natural meaning, the word "income" will take in any monetary return "coming in". It will take in voluntary and gratuitous payments which are connected or linked with the office, vocation or occupation. Even treating the various remittances as casual receipts, we are of the view that the receipts are referable to the occupation or vocation of the assessee."
(b) In (1958) 34 ITR 93 [Maharaj Shri Govindlalji Ranchhodlalji Vs. Commissioner of Income-tax], the Bombay High Court dealt with the case of an assessee who was a direct descendant of the founder of Vallabha Sampradhayam faith. He received several gifts. The assessee claimed that he was not subject to tax. The Bombay High Court held that, "2. Now, every receipt that a man receives is either a revenue receipt or a capital receipt, and in this case there can be a little doubt that the receipts which have been subjected to tax are revenue and not capital receipts. The source of these receipts is the abiding faith that the disciples have in their Guru and the receipts come in with a fair regularity. But even if a receipt is a revenue receipt, it may not be subject to tax if the assessee establishes that the receipt is exempted from tax under one of the provisions of the Income-tax Act, and Mr. Thakkar, on behalf of the assessee, has strongly pressed upon us that these particular receipts are personal gifts made by the devotees to the assessee and, therefore, are exempted from payment of tax. Now it is perfectly true that a personal gifts is exempted from payment of tax on the ground that it is a casual and non-recurring. But the essence of such a gift is that it should be personal. It should be voluntary; the person making the present should have no obligation to make it and it should be made by the person our of personal considerations for the donee. Mr. Thakkar's contention is first that in this case there is no obligation upon the disciples to make these gifts. Now, it is true that in the sense of a legal obligation, there is none upon the disciples to make these gifts. The disciples could not be sued in a court of law if they failed to make these offerings to the assessee. But the Tribunal has taken judicial notice of the fact that it is customary on the part of the followers of a faith to make presents to the head of the faith. Therefore, that is the compelling motive, and in India, fortunately or unfortunately, nothing is more compelling than the dictates of a faith. It is that compelling motive that leads the devotees to make these presents to the assessee. It is not in that sense therefore a present purely voluntary dependent upon the him or caprice of the person making the present. It is a gift made by a member of the community practicing faith because he feels that as a member of that faith it is incumbent upon him to make a present to the head of his faith."
The assessee had performed some obligations as the head of this faith and he was looked upon by his devotees as Guru when he gives Mantras to his disciples. The Bombay High Court held that even practice of religion can be held to be a vocation more so when it brings in a steady income. The Court accepted the view taken by the Tribunal that the assessee practices a vocation and the case fell under Section 10, and that, but even otherwise the income would fall in any case under Section 12 of the Income Tax Act.
(c) (1998) 171 ITR 447 [Commissioner of Income-tax Vs. M. Balamuralikrishna] was cited on behalf of the appellant. This was a case of a musician who claimed that he was given a gift when he completed 30 years of service. This Court held that there is no direct nexus between this payment and his vocation, though it may not be denied that there is an indirect connection between the two. It was held that the receipt cannot be taxed.
(d) In (1963) 48 ITR 53 [Guru Estate Vs. Commissioner of Income-tax] , which has already been dealt with in detail in an earlier paragraph, the Supreme Court held that the donations given by the pilgrims to the assessee through the Annadan Patras were held to be taxable.
(e) The Bombay High Court in (1974) 94 I.T.R. 1 [Dilip Kumar Roy vs. C.I.T.], held that whenever an amount is paid as a personal gift for the personal qualities of the assessee and as a token of personal esteem and veneration, it cannot be subjected to tax as income arising out of business, profession or vocation under Section 10 of the Income Tax Act. In that case, there were two major gifts and they said that the gifts were purely out of personal regard, esteem and veneration for the Guru. In that case, the Division Bench of the Bombay High Court held that the affidavit did not show that the amount paid was by way of recompense for the teaching alleged to be received from the assessee and that it was a purely personal gift out of regard, personal esteem and veneration and expressly for the purpose of building a temple at Poona and therefore, the Bombay High Court held that these gifts cannot be taxed as income arising out of the business, profession or vocation within the meaning of Section 10 of the I.T. Act, strictly construing Krishna Menon's case as laying down the law that gifts would be treated as income only if the donors had obtained the benefit of teaching by the assessee. The Division Bench distinguished the ratio of Krishna Menon's case.
(f) Similarly, in (2007) 294 I.T.R 488 [Rajeev Tandon vs. Asst. C.I.T.], the Supreme Court rejected the case that there was a gift from abroad and the Court found it rather incredible that a complete stranger would gift huge amounts to a person in India.
(g) In (1959) 35 ITR 48 [P. Krishna Menon Vs. Commissioner of Income-tax] the assessee was a Superintendent of Police who spent time in studying Vedanta Philosophy. He received income and the quesiton was whether it can be treated as profits or gains of the vocation. The Supreme Court held that the teaching is a vocation, if not a profession and teaching Vedanta was just as much teaching as any other teaching, and therefore a vocation. Then, they relied on (1926) I K.B. 588 [Reed Vs. Seymour].
"But is it in the nature of a personal gift or is it a remuneration?... "If the latter, it is subject to the tax; if the former, it is not."
They also relied on [1902] 2 K.B. 631 [Herbert Vs. McQuade] and held thus:
"It is important to remember however that the point is not what the donor thought he was doing but why the donee received it. So Collins, M.R., in Herbert V. McQuade [1992] 2 K.B. 631 referring to In re Strong [1878] 1 Tax Cas. 207], said at page 649:
"Now that judgment, whether or not the particular facts justified it, is certainly an affirmation of a principle of law that a payment may be liable to income tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office; if it does it does not matter whether it was voluntary or whether it compulsory on the part of the person who paid it. That seems to me to be the test; ..liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it."
This further reinforces our conclusion under the Heading Judicial Indiscipline that the non-examination of the donors is not really fatal. What matters is why the assessee received it.
(h) In the present case, the assessee was running an Ashram and that is not denied. Even in the response to the questionnaire the assessee has said that he founded the Ashram in 1983 and the Ashram was engaged in activities essentially charitable and spiritual. He has also stated that the amounts were given to him as the representative of the Ashram. Therefore, these amounts were really given to him as Head (or representative) of the Ashram. From a letter given by one of the donors the Assessing Officer held that it was given to him in his individual capacity for his Vedanta teachings and it was received by him as remuneration in his vocation. The letter reads as follows:
(Emphasis supplied) "Internally there seems to be a lot of activity, a lot of rearranging and clearing away of inner content. What a bagful of Karma has been inside and on the back of this physical system. But now the sensing that it is almost over is grower stronger daily. Truly you were given the lock and key to the personal side of this Jiva."
The learned Senior Counsel submitted that only by an artificial and exaggerated construction can these words be construed to mean Vedantha teachings.
(i) The so-called donors' affidavit which is spelt as 'Affidafit' is a printed form in which people have signed. Only the donor's names , their vocation , addresses , and the purpose for which the amounts should be spent are filled in. Even the emotion which propelled each of the donor to make his/her gift is identically expressed. A "willing suspension of disbelief" is required if one must accept the "affidafits" as genuine. We reproduce the proforma :
AFFIDAFIT I, ..................................................., permanent resident of ................................................................, do hereby solemnly affirm and state as follows :
1. I am a devotee of H.H. Swami Premananda and I am impressed by His charitable activities.
2. I have donated a sum of ................... (..................... ..........................................).
3. The said contributions made by me shall be utilised for charitable activities carried on by Swamiji.
4. The Sri Premananda charity be hereby empowered to credit the sum contributed by me towards its corpus fund and the same be utilised for the developmental activities of the said Sri Premananda Swamiji.
5. The aforesaid sum being out of my legally owned wealth, I am competent to make the said contribution.
Signature Occupation : ..............................................
Office address : ..........................................
...........................................
Phone No. : .................................................
Fax : ..........................................................."
(j) Premananda Charity Trust did not come into existence till 1994. These donations have been coming in right from 1985. The amounts were sent to the assessee and the same were credited to his account. It is only in 1994 that the so called release deed is executed and it clearly says, "Some movable and immovable properties were purchase in my name although these properties are in my name I do not have any individual rights to the said properties because the said properties were purchased with the contribution of the devotees, specifically with the purpose to serve humanity".
It was explained before the assessing officer that the amount credited in the NRE account represents donations received from foreign devotees for a specific purpose and in support of this statement, those affidavits were filed. The assessing officer was of the opinion that the affidavits were more in the nature of confirmation letters and are not authenticated, and in the absence of any authentication, even the identity of the foreign devotees cannot be said to be proved. He correctly observed that the evidentiary value of the so called affidavits is open to question. We have already extracted the purposes mentioned in the affidavits. Opportunity was given to the persons who represented the assessee and the Trust to prove that the donations received were spent for the purpose for which they were donated. No such proof was forthcoming. These affidavits were also not seized or found during the search conducted under Section 132 of the Income Tax Act on 23.11.1994. They were produced later. The assessing Officer held that in the written submissions, it is said that the donations are received towards the corpus fund, whereas in the affidavits, various specific charitable purposes are mentioned and therefore, the assessing officer held that there is contradiction between the contents of the affidavit and the assessee's own statement. Notwithstanding all the doubts regarding the truth of those remittances, the Assessing Officer had treated the remittances as donations by foreign donors who were benefited by the assessee's spiritual teaching.
(k) There was no valid transfer by release or otherwise, of the properties from the hands of the asssessee to any other person, so the assessing offficer held that, "donations received from foreign devotees are held to be assessable as assessee's income from his vocation", following the decision of the Supreme Court in (1959) 35 I.T.R. 48 [P. Krishna Menon vs. C.I.T.].
(l) Let us look at the affidavit filed by the assessee himself in support of the writ petition. It says that when he came to India from Sri Lanka after the ethnic conflict erupted there, he started his spiritual and social activities and he states, "I purchased a land to carry on my social activities. The land was purchased in my name, but not in the individual capacity, but as a representative of an association of charitable minded persons and the ashram was engaged in activities essentially in charitable and spiritual work. There were regular prayer meetings and discourses conducted by me, which inspired more devotees, both local and foreign nationals... There are regular prayer meetings everyday and the devotees and inmates of the ashram took part in the daily chores pertaining to the smooth functioning of the ashram. Some of the foreign devotees also involved themselves in useful work such as doing research on spiritual and cultural matters... In view of the good work done by the ashram, it attracted the devotees in large numbers, as a result, donations started pouring in liberally from the devotees".
From this affidavit, two things are clear. He was carrying on activities as the Head of the Ashram and he had been conducting regular prayer meetings and discourses which inspired devotees, both local and foreign nationals. Even in reply to the questionnaire he had stated that he received the amounts as the representative of the Ashram. So on his own admission in the affidavit and in his reply to the questionnaire, his case is more similar to Father Epharam and Govindlalji Ranchhodlalji's cases and Krishna Menon's case. Therefore we think Dilip Kumar Roy's case does not apply .So it is only on account of his teaching that these foreign donors sent in the donations.The alleged artificiality of the devotee's letter will not affect this conclusion in view of his own admission. Whether we take the remittances as amounts received as Head of the Ashram or for his Vedanta teachings, the amounts would be "profits and gains" arising out of his vocation, business or profession.
(m) In (1989) 176 I.T.R. 78 [Father Epharam vs. C.I.T.], a priest of a Monastry received remittances from abroad. The Kerala High Court held that the receipts were referable to the occupation or vocation of the assessee. The fact that the priest was and that he should say the masses or have the masses said by others was the causa causans of the various payments and the remittances were made because the assessee was a priest. From the stand point of the person receiving the payments, it accrued to him by virtue of his office or position, though there was no legal obligation on the part of the persons remitting or paying the money to do so and therefore, the surplus which remained with the assessee out of the mass stipends received by him constituted his income. The Division Bench referred to (1985) 156 I.T.R. 412 [Dr. K. George Thomas vs. C.I.T.] where the Supreme Court held, "It has been established that the assessee was carrying on a vocation, the vocation of preaching of Christian Gospel and helping anti-theism was the vocation of his life. He was running a newspaper in aid of that. The donations received from America were to help him for the said purpose. They arose out of his carrying on and continued so long as he carried on this avocation or vocation. These receipts, therefore, arose out of his vocation. These were, therefore, his income...".
In that case, there cannot be any doubt that the receipts by the assessee arose out of the income of the assessee in propagating the Christian Gospel. In the present case, the assessee ran an ashram where he gave spiritual teaching and conducted discourses. The donations received from abroad were to help him in his activities. This is clear from the recitals in the affidavit of the writ petitioner. Even as per his own affidavit, we have no option but to hold that they were profits and gains arising out of his carrying on business, vocation or profession. Further, the burden of proof with regard to foreign gifts is on the assessee.
(n) The assessee claims that the properties belonged to the Trust and given as donations to the Trust. The Trust came into existence only in 1994. These remittances were made before that, the recitals show they were sent only to the assessee. The release deeds have been rejected as unworthy of any legal weight. We are not persuaded to hold otherwise. Until the date of the assessment orders, the properties stood in the assessee's name and he had dealt with them as his properties. These are factual findings.
(o) The learned Senior Standing counsel referred to several decisions as to how affidavits should be filed, the meaning of affidavits etc.
(p) In (1956) 30 ITR 181 [Mehta Parikh and Co. Vs. Commissioner of Income-tax], the question was whether the high denomination notes in the possession of the assessee could be assessed as undisclosed profits when the appellants produced affidavits from some persons that the assessee was paid in high denomination notes during the relevant period. The Supreme Court held that when the cash book of the appellants were accepted, and the entries therein were not challenged, and neither further accounts nor vouchers were called for, and the persons who gave the affidavits were not cross-examined, it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made in the affidavits. In fact, in that decision, the Supreme Court held that the court would be entitled to intervene if it appears that the fact-finding authority has acted without any evidence or upon a view of the facts, which could not reasonably be entertained or the facts found are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question. This was relied on by the learned Senior Counsel to support his case that the persons who gave the affidavits should be cross-examined. In that case, the finding was that it is impossible for the appellant to have had 61 high denomination notes in cash balance and by applying a thumb rule the authorities accepted 31 out of 61 notes as within the bounds of possibility. It is in those circumstances that the Supreme Court held that the conclusion was based on pure surmise and that the deponent of the affidavits ought to have been examined. In this case, the fact finding authority has arrived at the only reasonable conclusion.
(q) The learned Senior Standing Counsel also referred to AIR 1972 SC 330 [M/s. Bareilly Electricity Supply Co. Ltd. Vs. The Workmen and others], AIR 1997 SC 407 [Chhotan Prasad Singh Vs. Hari Dusadh] and AIR 1988 SC 1381 [Smt. Sudha Devi Vs. M.P. Narayanan and others] to show that the affidavits are not included in the definition of 'evidence' in Section 3 of the Evidence Act. These are not relevant to the case on hand.
(r) In the present case, the Income Tax Officer has accepted the remittances and had treated it as income. So the Mehta Parikh case will not apply. We have already seen why the donors could not have been examined. In Mehta Parikh's case the Department took a stand contrary to the recitals in the affidavit. But here the remittances were accepted as donations sent for the purposes mentioned in the affadavit. But they have been treated as Income for reasons recorded in the assessemnt orders and approved by us. So the question of cross-examining the deponents would also not arise. However, the learned Senior Counsel appearing for the assessee said that if it is accepted that the amounts were received for the Trust, then the non-application of the said funds for the purpose for which they were received may amount to breach of trust, but on account of the non-application, the Trust's income cannot be treated as the assessee's income. But the income is not the Trust's income. The order of the revisional authority also shows that the bank deposits created from the donations existed right from 1985 and they stood in the name of the assessee himself. The affidavits filed by the donors showed their intention to donate towards some specific purpose in view of the assessee's charitable activities. The Trust Deed also, did not mention about the foreign donations. In fact, the Trust Deed clearly stated that no property belongs to the Trust. Therefore, the revisional authority rejected the case that the remittances were made to the Trust. There is nothing to show that the remittances were received by the assessee as the custodian of the Trust. Merely his ipse dixit will not suffice. Firstly, the Trust came in to existence only in 1994 whereas the donations had been coming in from 1985; the assessee deposited them in his account and dealt with them as if they were his properties, the release deeds are neither duly stamped nor registered and hence there can be no valid transfer of immovable properties; there is evidence aliunde that the Trust had no money on the date on which it came into existence where these movable and immovable properties were available even before the said date. So the amounts that came in must be assessed as his income in the absence of satisfactory proof that it must be assessed in another's hands.
IV. Income:
Several authorities were referred to on behalf of Revenue, to show that the word "income" should be given its widest connotation.
(a) (1954) 26 ITR 758 [Navinchandra Mafatlal Vs. Commissioner of Income-tax]
(b) (1981) 316 ITR 315 [Bhagwan Dass Jain Vs. Union of India] "The expression"income" according to the dictionary, means "a thing that comes in".
(c) (1989) 178 ITR 140 [ELEL Hotels and Investments Ltd. And another Vs. Union of India] "The word income is of elastic import. In interpreting expressions in the legislative lists a very wide meaning should be given to the entries"
(d) (1962) 44 ITR 6 [Doors Tea Co. Ltd. Vs. Commissioner of Agricultural Income-tax] "the word income even as it is used in the Income Tax Act has often been characterised by judicial decisions as formidably wide and vague in its scope. It is a word of elastic import and its extent and sweep are not controlled or limited by the use of the words profits and gains in Sections 4 and 6 of that Act. ."
(e) In (1943) 11 ITR 513 [Raja Bahadur Kamakshya Narain Singh of Ramgarh Vs. Commissioner of Income-tax] the Privy Council held that, "Anything which can properly be described as income, is taxable under the Act unless expressly exempted."
(f) In (1993) 201 ITR 866 [Commissioner of Income tax Vs. G.R. Karthikeyan) ""Income"- Meaning of Should be the same as that of word occurring in legislative list Is of widest amplitude and must be given natural and grammatical meaning Income-tax Act, 1961, s.2(24) Constitution of India, Sch.VII, List 1, Entry 82."
(g) (1976) 102 ITR 40[Raja Ragavendra Singh Vs. State of Punjab] and (1993) 200 ITR 483 [Emil Webber Vs. Commissioner of Income-tax] were also relied on to show that income has thus to be a given a very wide meaning and the definition of "income" in section 2(24) is an inclusive definition.
(h) We have already referred to the various judgments which held that the word "income" should be given the widest meaning. In (1993) 201 I.T.R. 866 [C.I.T. vs. G.R. Karthikeyan], the individual who participated in a car rally received a prize and the Supreme Court held that "Even if a receipt does not fall within the ambit of any of the sub-clauses in Section 2(24), it may still be income if it partakes the nature of income... "
Therefore, we confirm the concurrent finding that the amounts received by the writ petitioner constituted income since it was profits and gains arising out of his vocation, profession or business. It is for the assessee to show that these receipts received by him are exempt from tax.
V. Onus of Proof:
(1) In (2007) 293 ITR 294 (Delhi) [Sandeep Kumar (HUF) Vs. Commissioner of Income-tax] the Delhi High Court held that, "A mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift. Since the claim of gift is made by the assessed, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift"
From this, it is clear that the burden of proving the source or the category under which the receipts should be classified is on the assessee, and any receipt will be treated as income unless the assessee shows that it comes under an exemption.
(3) In (2007) 291 I.T.R. 278 [C.I.T. vs. P. Mohanakala], the assessee received several foreign gifts from one common donor. The assessee's case was that the donor's father was a taxi driver and he was very poor and therefore, after he shifted to England and started a consultancy profession, he sent these gifts as an expression of his gratitude. The Supreme Court considered the true nature and scope of Section 68 of the Income Tax Act and held that a "bare reading of Section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression "the assessees offer no explanation' means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion". The Supreme Court also held that the expression 'the assessees offer no explanation' must be construed to mean where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees.
(4) The judgment in (1956) 30 I.T.R 181 [Mehta Parikh & Co. vs. C.I.T.] also does not help the assessee, since though in that case also, the Supreme Court held that the correctness of the cash book entries or the statements made in the affidavit cannot be challenged and when the persons who gave the affidavits were not cross-examined, the further accounts or vouchers were called for. In the present case, the Assessing Officer had proceeded on the basis of the recitals in the affidavit filed by the writ petitioner, though he held that the evidentiary value of the affidavits was very weak, but in that case, when explanation was given as to why high denomination notes were given to the assessee and the assessee was in possession of the same, rejecting some of those notes and accepting some of them as within the bounds of possibility was held to be pure surmise and had no basis in the evidence. This judgment also has no application to the facts of the present case as seen earlier.
In this case, the assessee fails the "satisfactory explanation " test too.
VI. Stock Variation On behalf of the petitioner, a Tabular Column was filed to show that every year amount was spent on charity. The amount was spent on charity is not a proof that the income was received by the Trust or that the income was received by the assessee as custodian of the Trust. It was also pointed out that there were discrepancies with regard to the income referred to in the show cause notice and the income referred to in the assessment order. We do not think so. We have compared what was shown and we found that the figures could be tallied. For instance,with regard to the assessment year 1985-86, the corpus fund for which source was sought for amounted to Rs.35,558/-. This is dealt with in the assessment order as bank deposit. Therefore, it is incorrect to state that the questionnaire did not refer to the amount. For the year 1986-87, the questionnaire called upon the assessee to given evidence to the source for the corpus fund of Rs.2,14,699/-. In the assessment order, this amount has been shown as donation from foreign devotees towards corpus fund. Therefore, it is only what was referred to in the questionnaire that has been dealt with in the assessment order. The statement given on behalf of the petitioner that no such income was referred to in the show cause notice is incorrect. For the year 1987-88, the corpus fund for which source was requested in the questionnaire is Rs.3,29,583/-. Supporting evidence was requested for that and this is dealt with in the assessment order as donations received from foreign devotees as income from vocation. The figure is the same. It is not necessary to deal with each assessment year we have verfied the same and found that the questionnaire tallies with assessment order. The 1990-91 assessment order, in addition to the alleged variation as referred for the earlier assessment years, it is stated in the chart given by the assessee that certain amount was spent for the construction of Ashram and that the show cause notice made no reference about this, whereas it is dealt with in the assessment order. But it is clearly stated in the questionnaire that for the construction of the Ashram, the assessee had admitted the cost of construction as Rs.15,00,000/- and he was asked to produce the evidence. Therefore, the submissions that there is variation is not correct. Therefore, this ground is rejected.
VII. Lack of Opportunity The next ground is that fair opportunity was not given to the petitioner. The Revisional Authority has held that for more than six months the assessee had been asked to submit his particulars. In fact, this is seen from the assessment orders that initially, time was granted, that is, before the remand order, time was repeatedly granted from 11-10-1995 and it is only thereafter, there was no reply that the assessment was completed. After remand, the assessee was given time as requested by him and the matter was adjourned from 04-11-1999 and again adjournment was sought for stating that the assessee has filed W.P.No.17641 of 1999 before the High Court and therefore, it was again adjourned and then on 07-01-2000 the assessee's Chartered Accountant filed a paper book and again it was adjourned. Similarly we see that whenever time was asked for it was given and only after giving sufficient opportunity to the petitioner that the orders were passed. Therefore, this ground is also rejected.
To sum up,
(i) We find that the directions given by the CIT(Appeals) to examine each and everyone of the foreign donors was impossible of compliance. The law does not expect anyone to do the impossible and the Assessing Officer had complied with the CIT(Appeals) directions fully in spirit.
(ii) The release deeds by which the right to immovable property was said to be released were not duly stamped nor registered in accordance with law and cannot be relied upon.
(iii) Next, the Trust deed is alleged to have been written some time in July 1994 and the recitals are that the Trust owed no property. Therefore, the income cannot be assessed in the hands of the Trust.
(iv) The foreign donors had sent it to the assesee allegedly impressed by his charitable activities with directions that he should spend it for a specific purpose. Therefore, they had sent it only to him and it was for the assessee to spend or not to spend in accordance with the directions. But in any way, the amounts have 'come in' to him and therefore, they were income in his hands.
(v) Even in the affidavit filed, by him the assessee has referred to his spiritual discourses, and that foreign devotees were attracted. Therefore, Krishna Menon's case squarely applies to this case.
(vi) On a careful verification of the questionnaire and the assessment orders it is clear that there is no variation; we also find that sufficient opportunity was given to the petitioner., and
(vii) The Assessing Officer was right in holding that the property was dealt with by the assessee as his own income.
13. For all these reasons, there are no merits in the writ petitions and the writ petitions are, therefore, dismissed. There shall be no order as to costs. Consequently, the connected W.P.M.P. are closed.
glp/ab/glp To
1. The Commissioner of Income Tax-I Office of the Commissioner of Income Tax I No.4, Williams Road, Cantonment Tiruchirapalli 620 001