2001 (11) TMI 223 - AT - Income Tax

Summary

Issues Involved:
1. Validity of Reassessment Proceedings
2. Applicability of Immunity under the Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991
3. Reliance on Third-Party Statements
4. Nature and Source of the Gift Received
5. Binding Nature of CBDT Circulars

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings:
The assessee argued that the reassessment was not valid as all details regarding the gifts were disclosed in the original return. The AO reopened the assessment based on information from FERA authorities and a statement from Mr. Sanjeev Goel, which was later retracted. The Tribunal held that the AO must have 'reasons to believe' that income had escaped assessment, not merely 'reasons to suspect.' The Tribunal found that the AO did not have sufficient material to reopen the assessment, especially after Mr. Sanjeev Goel retracted his statement. Thus, the reassessment proceedings were quashed as bad in law.

2. Applicability of Immunity under the Immunity Act:
The assessee claimed immunity under the Immunity Act for the gifts received in foreign exchange. The AO and CIT(A) contended that the gifts did not qualify for immunity as they were not genuine foreign exchange remittances but were converted from local currency. The Tribunal noted that the assessee had provided primary material showing the gift was received under the Immunity Act. The Tribunal emphasized that unless there was concrete evidence to prove otherwise, the immunity claimed by the assessee should be respected, especially given the binding nature of the CBDT circulars.

3. Reliance on Third-Party Statements:
The AO relied on the statement of Mr. Sanjeev Goel, who initially admitted to arranging NRE gifts by purchasing foreign currency locally but later retracted his statement. The Tribunal held that a retracted statement without corroborative evidence could not form the basis for reopening the assessment. The Tribunal also noted that the statement did not specifically implicate the assessee in any wrongdoing.

4. Nature and Source of the Gift Received:
The AO concluded that the gifts were not genuine and added the amount to the assessee's income as unexplained income. The Tribunal found that the assessee had disclosed the gifts in the original return and provided supporting documents from the bank. There was no evidence to suggest that the gifts were anything other than what was claimed. The Tribunal held that the AO's conclusions were based on suspicion rather than concrete evidence.

5. Binding Nature of CBDT Circulars:
The Tribunal emphasized that the CBDT circulars assured taxpayers that no inquiry would be made regarding remittances received under the Immunity Act. These circulars are binding on the tax authorities, and the Tribunal found that the AO's actions were contrary to these assurances. The Tribunal cited the Supreme Court's decision in UCO Bank vs. CIT, which held that CBDT circulars are binding on the Revenue authorities.

Judgment:
The Tribunal quashed the reassessment proceedings and set aside the order of the CIT(A), holding that the AO had no jurisdiction to reopen the assessment. The appeal filed by the assessee was allowed, and the Tribunal did not find it necessary to address other issues as they were rendered academic by the decision on the primary issues.