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TMI Blog1997 (1) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 including salary from Bharat Hotels Ltd. (Rs. 1,15,200) Miss Divya Suri28-8-1992Rs. 91,993 including income from other sources (Rs. 98,993) Miss Deeksha Suri28-8-1992Rs. 80,778 including income from other sources (Rs. 87,777) The assessments were framed in their cases on 28-3-1995 under section 143(3) of the Income-tax Act, 1961 in the case of Shri Lalit Suri at Rs. 78,39,640, including Rs. 77,33,952 added under section 68 of the Income-tax Act, in the case of Mrs. Jyotsna Suri at Rs. 52,64,530, including Rs. 51,55,968 added under section 68 of the Act ; in the case of Miss Deeksha Suri at Rs. 39,47,750 including Rs. 38,66,976 added under section 68 and in the case of Miss Divya Suri at Rs. 39,58,970 including Rs. 38,66,976 added under section 68 of the Act. The only dispute in these appeals (barring disputed addition of Rs. 67,000 in the case of Shri Lalit Suri) is against additions made under section 68 by the Assessing Officer, as sustained by the learned CIT(A), also keeping in view provisions of section 69A as discussed in paras 17-18 of his order. In their statement of income attached with the returns, the appellants by way of note indicated that the following amounts rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oever, the nature and source of the remittance made to him." 3.1 The Assessing Officer informed the assessee that as "the D.D. in question has not been processed in accordance with the notified Scheme of Reserve Bank of India, you are not eligible to the immunities provided under the Act". The Assessing Officer, therefore, required the assessee to file his written submissions about the basis on which the receipt claimed as coming under the purview of the Scheme and to show cause why enquiry and investigation should not be commenced against him. The Assessing Officer noted that after taking some adjournments the assessee filed letter dated14-2-1995but had not addressed to the query raised directly. The assessee requested for some more time to locate the declaration, the assessee having remembered to have filed the same. The assessee also informed the Assessing Officer that the remittances were received during the currency of the Scheme and necessary evidence of money having been received had already been filed. The assessee further informed the Assessing Officer that filing of the declaration was only a procedural matter, directory in nature and not mandatory. The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remittances are in the nature of gifts and as such any information in this regard filed after the assessment order constituted an additional evidence which could not be admitted under rule 46A on the facts and in the circumstances of the case when the assessee has been given ample opportunity to explain the source of remittance as also it was made very clear in terms of letter as early as on 21-2-1995 that assessee should discharge the burden of proof regarding the source of above remittances, failing which the receipt would be treated as unexplained cash credit under section 68 of the Income-tax Act. The assessee even thereafter filed certificates issued by Middle East Bank in August 1995 before the learned CIT (Appeals) in support of such gifts having been made by Shri Jayant Nanda, whose financial position was certified by the Bank in their certificates. The appellant, thus, made a request that these papers be taken as additional evidence by the learned CIT (Appeals). The learned CIT (Appeals), however, rejected the prayer of the appellant when he noted that the assessee has not made out any ground which could be specifically covered by rule 46A. The evidence now sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thus upheld the finding of the Assessing Officer. The assessee is in appeal before us. 5. The learned Authorised Representative for the assessee Shri R. Ganeshan submitted that claim of the appellant is two-fold : one, whether the learned CIT(A) erred in not admitting the evidence filed after the completion of assessment proceedings as also during the course of appellate proceedings, and (two) that the amount involved cannot be treated as assessee's income. He submitted that the appellant had claimed the amounts as not representing his income, being remittances under the Scheme. The learned Authorised Representative invited our attention to letter dated 27th January, 1995 of the Assessing Officer to the assessee, in particular paragraph 6 thereof, as also letter dated 21st February, 1995 of the Assessing Officer addressed to the assessee and assessee's reply dated 14-2-1995 at page 6 of the paper book, as also further letter dated 24-2-1995 at page 10 of the paper book, which is addressed to Exchange Control Department, Reserve Bank of India. He further referred to letter dated27th March, 1995from Reserve Bank ofIndiato the assessee and submitted that it has been the claim of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Hong Kong Bank that no such declaration was filed by the appellant when a copy of communication received from the Bank was also made available to the assessee and his attention invited to section 3(1)(a) of the relevant Scheme dealing with immunities. The Assessing Officer while informing the assessee that as he had not complied with the requirement as envisaged under the Scheme, he is not eligible for the immunity, as claimed, called upon the assessee to indicate "the basis on which the above receipt is being considered as coming under the purview of the Amnesty Scheme and show cause why enquiry or investigation should not be commenced by the undersigned." Shri Ganeshan submitted that the time of two months allowed by the Assessing Officer was not enough since the donor was foreign based and supporting material was to be collected from the bank in support of capacity of the donor. Shri Ganeshan submitted that some evidence was already on record in the form of photocopies of the drafts. He submitted that the learned CIT (Appeals) ought to have admitted the evidence in terms of rule 46A to render substantial justice to the appellant. Shri Ganeshan placed reliance on Electra (J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the two months time given by the Assessing Officer requiring the assessee to discharge the onus cast upon him was not adequate, since to establish capacity of the donor evidence was required which could be obtained only in August 1995 by way of certificate from Bankers (in Middle East) of Shri Jayant Nanda. It was, therefore, stressed that sufficient time was not allowed to the appellant and in the circumstances the evidence adduced before the learned Commissioner of Income-tax (Appeals) ought to have been admitted by him. 5.6 On merits, the learned Authorised Representative referred to section 68 of the Income-tax Act and submitted that the appellant has no books of accounts there being only a bank statement. Shri Ganeshan submitted that before the Assessing Officer could bring the amount to charge as assessee's income there should have been enough provocation for the Assessing Officer to treat the amount as not satisfactorily explained, when on the other hand, there is some evidence before the Assessing Officer himself in the form of photocopies of bank drafts issued by Middle East Bank, encashment of these drafts being the amount credited in assessee's bank account on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in written submissions dated28-7-1995as filed before the learned CIT (Appeals) there is no mention of rule 46A. Advancing his arguments Shri Syali submitted that the statute does not confer any right on the assessee for admission of additional evidence, rather it casts an obligation on the appellant to show sufficient cause before invoking the provisions of rule 46A. He pointed out that it is only on 25th October, 1995 when for the first time the appellant in his written submissions at page 19 of the paper book mentioned about Rule 46A and nowhere before. Shri Syali pointed out there is no application either on the part of the assessee for admission of such additional evidence. Shri Syali took us through the manner in which the learned CIT (Appeals) has dealt with this issue by referring to para 5, page 7 of the order of the learned CIT (Appeals) calling upon the appellant to explain as to why the documents could not be filed before the Assessing Officer and why the same should be admitted at the appellate stage keeping in view the provisions of rule 46A of the Income-tax Rules. Shri Syali pointed out that the assessee in turn submitted that the CIT(A) has wide powers for admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to file certificate from the Bank in the prescribed form under the Immunity Scheme of 1991. He submitted that thereafter a number of hearings took place, yet the assessee neither filed the required declaration nor any such evidence in support of the claim that the amount received represented gifts from abroad. He submitted that it is only on 21st of March, 1995 when the assessee while reiterating before the Assessing Officer that he had received remittances in foreign exchange through normal banking channel under Amnesty Scheme, 1991, the assessee had applied to the Reserve Bank of India for grant of appropriate certificate as per the Amnesty Scheme and such certificate would be received in two or three days mentioned that "the sum received outside India by the assessee were given by the remitter as personal gifts and were sent in India to us at our request for which the evidence confirming the same can be filed." Shri Syali submitted that there is admission on the part of the assessee that the sums were received by the assessee himself outsideIndiabut given by the remitter as personal gifts. He submitted that the identity of the remitter is not even mentioned in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee wanted the evidence to be admitted in support of his plea that the gifts were received from abroad from Shri Jayant Nanda, a blood relation, and, therefore, the same did not represent his income. Shri Syali pointed out that power to admit additional evidence is discretionary and it is only to be seen that the discretion is rightly exercised or not. He referred to various judgments of the Hon'ble Supreme Court governing the circumstances under which additional evidence could be admitted, including Delhi Service Forum others in 'Judgment Today' Vol. 2 SC 295 at page 304 and Tata Cellular v. Union of India AIR 1996 SC 11 at page 28, para 29. 6.1 Shri Syali submitted that the Tribunal has to address itself as to whether the learned CIT(A) has taken irrelevant considerations into account for not admitting the additional evidence or has ignored relevant consideration in doing so or his conclusion is such that it is shocking to the conscience. He submitted that the view taken by the learned CIT(A) is not militated by any of these aspects. He submitted that "sufficiant cause" has to come from the assessee and in this case the appellants had not even attempted to file the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here has been negligence, inaction and lack of bona fides on their part. He invited our attention in particular, to para 3, page 3 and again paras 7 and 8 at page 5 of the order of the learned CIT(A) demonstrating lack of bona fide on the part of the appellants while proper and sufficient opportunities were given by the Assessing Officer for satisfying the provisions of section 68 of the Income-tax Act and at no point of time the appellants even whispered that they were collecting evidence from abroad for satisfying conditions under section 68 much less praying for more time for this purpose. He also referred to page 6 onwards of order of the CIT(A) and submitted that the learned CIT(A) has made five points in his order, (i) no declaration was filed for claiming immunity under the Scheme while adjournments were sought only for the purpose of filing of declaration ; (ii) declarations were neither filed nor reasons given for not filing ; (iii) proper and sufficient opportunity was granted to the appellants for adducing the so-called additional evidence ; (iv) there is no rebuttal of applicability of the provisions of section 68 of the Income-tax Act, and (v) additional evidences are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to file the declaration. He also referred to Francis Bennion on Statutory Interpretation, 2nd edition at page 32 to the effect that "conferring of a right or benefit where legislation confers some right or benefit on a person which he would not have at common law, the conditions laid down as to the accrual of the right" or benefit, unless purely formal, are mandatory. If they are not complied with the right or benefit will not accrue." Shri Syali submitted that the filing of declaration under the Scheme is not a mere formality since the same has been specifically prescribed for the purpose of grant of immunity, as is evident from the very wording used in the declaration. According to Shri Syali, if filing of declaration was a mere formality and procedural, as is made out by the appellants, the Reserve Bank ofIndiawould not have refused the appellants. The Reserve Bank refused only because the filing of declaration is mandatory and they have no power to allow the appellants to file the same after expiry of time limit prescribed. He submitted that the money coming within the time prescribed under the Scheme as supported by declaration, only would be immune from enquiry. He also ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Scheme in the context of filing of the declaration it is not obligatory for filing of the declaration. He submitted that sufficient time was also not given by the Assessing Officer to enable the appellants to collect evidence from abroad and, therefore, there existed 'sufficient cause' for non-compliance on the part of the appellants as mentioned in para 8 of the written submission dated 25-10-1995 before the CIT(A). He submitted that the decision of the Tribunal -- D.C Rastogi (HUF)'s case as referred to by the revenue was rendered on its own facts and, therefore, inapplicable in these cases. He also reiterated that the appellants had sufficient reasons for not filing evidence before the Assessing Officer and the words 'sufficient cause' as used in rule 46A do not stand in the way of the appellant, the same being inter-changeable. In this connection, he referred to the provisions of sub-sections (3) and (4) of section 249 of the Act in support of his proposition. 8. We have heard the learned representatives of the parties at length and have perused the relevant record. We have also taken note of the judgments cited by the learned representatives. In essence the issues requiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimant duly authenticated with signature/date and seal intending to serve as a proof of applicability of the immunity as contemplated under the said Act/Scheme. Such a declaration is admittedly not filed by the appellants. Arguments have been advanced at length by the learned Authorised Representative for the appellants that filing of the declaration is not mandatory and, therefore, benefit of immunity under the Scheme is still available. Whereas the word 'shall' [Emphasis supplied] has been employed for the purpose of filing of declaration in sub-para (a) of paragraph 3 of the Scheme, yet this alone is not determinative of the issue as to whether filing of declaration is mandatory or declaratory. As observed by their Lordships of the Supreme Court in the case of State of U.P. v. Babu Ram Upadhya AIR 1961 SC 751 at page 765, "For ascertaining the real intention of the Legislature", points out Subbarao, J., "the Courts may consider, inter alia, the nature and design of the statute, and the consequences which would follow from construing it the one way or the other ; the impact of other provisions whereby the necessity of complying with the provisions in question is avoided ; the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. 8.3 In other words, right can be effected only by the formality prescribed and no other manner. Such right or benefit, thus, accrues only when the condition of filing of declaration is met. Filing of declaration in these circumstances is not a mere formality but is mandatory having direct relationship in effectuating the object of the Act/Scheme. This approach is also supported by various authorities cited by Shri Syali, the learned Senior Special Counsel of the revenue, including Sir Francis, Bennion, Craies, Maxwell. 8.4 The time prescribed for filing of the declaration is also indicative of the true intention of the Legislature. In case the filing of the declaration is declaratory, as is argued by the learned Authorised Representative for the appellants, the very purpose of the Act/Scheme would be defeated, there being no other mode available to avail of the immunity. The Legislature in its wisdom has not provided any power with the authorities under the Act/Scheme to extend the time for filing of the declaration. The relevant authority, i.e., the Reserve Bank of India has also been guided by the identical principles as is apparent from its reply dated 27-3-1995 to appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as coming under the purview of the Scheme and show cause why enquiry or investigation should not be commenced by him. However, this letter was not the initiation of enquiry, as rightly pointed out by Shri Syali for the revenue. The enquiry process had already commenced as early as on24th October, 1994in the case of Deeksha Suri and repeated on23-12-1994in the case of Deeksha and Divya Suri. Thus, it is not as if on27-1-1995the appellants for the first time became aware that declarations were required or in the absence thereof immunity claimed would not be available. On the other hand, in the computation sheets filed by the appellants along with their returns, they have claimed immunity from enquiry in respect of the remittances and, therefore, when the Assessing Officer picked up the case for scrutiny by issuing notice under section 143(2) at the end of November 1992, it became evident that the Assessing Officer is going to investigate the claim, thus, requiring the appellants to substantiate the same. No efforts were, however, made in this direction. While, therefore, it is admitted by the appellants that they became aware of need for declaration only vide letter dated 27-1-1995, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising of the assessment anything was placed on record in discharge of the onus placed on them. Vide letter dated 21-3-1995 it was mentioned that "the sums received outside India by the assessees were given by the remitter as personal gifts and were sent in India to us at our request, for which evidence confirming the same can be filed." In the same letter the assessee reiterated that it enjoyed immunity and had approached the Reserve Bank ofIndia. Having been appraised of the applicability of section 68, the same was not disputed by the appellants. Nor at any point of time the Assessing Officer was informed that the declarations have not been filed inadvertently and, thus, the matter should be examined on other lines. Despite having been confronted with the obligation to discharge their onus in January 1995, the appellants as late as on21-3-1995were as yet informing the Assessing Officer that the evidence can be filed. Nothing prevented the appellants from filing the evidence which they had in their possession, especially declaration of Jayant Nanda, which admittedly stood attested on5-2-1995. Even the name of Jayant Nanda was not made known to the Assessing Officer. In the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Attention is invited to rule 46A of the Income-tax Rules to emphasise that a duty is cast on the appellate authority to call for evidence for proper adjudication of the matter. Assertion that sufficient cause existed with the appellants is also there, i.e., the matter before the Assessing Officer was analysed only from the point of immunity under the Act/Scheme and since the matter now requires consideration from a different angle, additional [Emphasis supplied] evidence be admitted. 9.6 In the last submission attention again is invited to the Immunity Act/Scheme and it is submitted that the prescribed declaration is only a ministerial act. Thus, the only request made for admission of additional evidence is submission dated25th October, 1995, which has been effectively dealt with by the learned CIT (Appeals). No other application/reason have been placed on record in support of the submission of additional evidence under any of the clauses of rule 46A of the Income-tax Rules. This cause factually cannot be construed to be 'sufficient' since it was the appellant who led the Department to believe the particular situation. Being well aware that the appellants had not complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the appellants that prior to28-3-1995there was no need to file these evidences or the Gift Deed (actually confirmation attested on5-2-1995). In letter dated21-3-1995the appellants in passing have stated the remittances to be gifts. There was no need to do so if they were unaware of their ineligibility to immunity. Further, why make such hectic efforts to file letter dated29-3-1995and30-3-1995? If it were a remittance qualifying for immunity, as was the case of the appellant, then why a gift deed (i.e., declaration attested on5-2-1995), which again was not filed before the Assessing Officer. If immunity was not available then why not a contemporaneous gift deed of 1991 itself. Still further, not a single word is said by the appellants before the Assessing Officer in discharge of their onus under section 68 of the Income-tax Act, when a specific notice is given by the Assessing Officer or even as regards the applicability of that section in their subsequent correspondence. 9.9 In its letter dated24-2-1995addressed to the Reserve Bank ofIndia, the appellants have admitted that there was 'omission' on their part of not having filed the declaration. Yet the appellant di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer to Full Bench judgement of Hon'ble Delhi High Court in the case of Sophia Finance Ltd., wherein with reference to a prime facie capital receipt (share capital raised by a company immediately after its incorporation) their Lordships were pleased to hold that the Assessing Officer would not only be entitled to but would be duty bound to enquire whether the receipts were on capital account. Respectfully following the said judgment, in the absence of evidence pertaining to genuineness of gifts, identity of the donor (we have already observed at pages 18-19 above that the CIT (Appeals) has erroneously mentioned in para 15 of his order that identity of the donor was informed to the Assessing Officer), his financial capacity, the action of the lower authorities is upheld. The onus of proving the source is on the assessees and it is not for the revenue to disprove the assessee's version in case where section 68 or section 69A are attracted. The decision in Grindlays Bank, relied upon by the learned Authorised Representative for the appellants, Grindlays Bank Ltd's case does not come to their rescue because in that case their Lordships of the Supreme Court were only considering whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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