2011 (7) TMI 441 - HC - Income Tax

Receipt of gifts of the India Development Bonds - immunity under sections 6 and 7 of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act 1991 - held that - it is crystal clear that no investigation can be allowed to be held pertaining to the India Development Bonds which were received from NRIs/overseas corporate bodies as gift. When it is so then we find no reason to interfere in the impugned order passed by the Tribunal. - Decided in favor of assessee.

Issues Involved:
1. Validity of the gifts of India Development Bonds received by the assessee and family members.
2. Entitlement to immunity under sections 6 and 7 of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991.
3. Applicability of the block assessment to the disclosure of India Development Bonds during the filing of the return of income for the assessment year 1997-98.

Detailed Analysis:

1. Validity of the Gifts of India Development Bonds:
The primary issue was whether the assessee and her family members genuinely received the India Development Bonds (IDBs) as gifts. The Department argued that the gifts were not genuine as the name of the alleged donor, Sita Ram Majitha, was not mentioned in the transferred documents, and there was no natural love and affection between the donor and the donee. However, the Tribunal upheld the assessee's claim, noting that the bonds were indeed received as gifts, and the Commissioner of Income-tax (Appeals) had rightly deleted the addition made by the Assessing Officer.

2. Entitlement to Immunity under Sections 6 and 7:
Sections 6 and 7 of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, provide immunity to bondholders from disclosing the nature and source of the investment. The court noted that these sections clearly state that no inquiry or investigation should be commenced against bondholders regarding the source of the bonds. The Central Board of Direct Taxes (CBDT) Circular No. 611 and a Press Note from the Ministry of Finance further clarified that recipients of IDBs are not required to disclose the identity of the non-resident Indian (NRI) or overseas corporate body (OCB) from whom the bonds were received. The court emphasized that the intention of the Legislature was to encourage the inflow of foreign exchange, and thus, the immunities provided are absolute.

3. Applicability of Block Assessment:
The third issue was whether the disclosure of the receipt of the IDBs during the filing of the return of income for the assessment year 1997-98 falls outside the purview of block assessment. The Tribunal held that since the assessee had disclosed the receipt of the IDBs during the regular filing of the return, the query regarding the possession of the bonds does not fall under the scope of block assessment. The court agreed with this interpretation, noting that the Assessing Officer was proceeding within the scope of regular assessment and not under the jurisdiction of Chapter XIV-B and section 158BA of the Income-tax Act, 1961.

Conclusion:
The court concluded that no investigation can be conducted regarding the IDBs received as gifts from NRIs or OCBs due to the absolute immunities provided under the relevant Act and supporting circulars. The appeal filed by the Department was dismissed, affirming the Tribunal's decision in favor of the assessee. The legal questions were answered affirmatively, supporting the assessee's entitlement to the immunities and exemptions provided by the Act.

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