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TMI Blog2011 (3) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which made the said Bhavsar pay the said amount of Rs.4,78,80,000 to the Appellant and in any event was to be regarded as received by way of inheritance. 3. The CIT(Appeals) 27/16(1)/2 erred in holding that the Appellant" willingly offered to surrender the amount for taxation and also submitted as cheque of Rs.1,60,46,844/- dated 28/11/07 drawn HSBC Bank, Mumbai." 4. The CIT(Appeals) 27/16(1)/2 failed to appreciate that the amount of Rs.1,60,46,840/- was collected by Mr. Karun Kant Ojha, Deputy Director of Income Tax (Investigation), Unit-II(2) Room 437,Scindia House, N.M. Road, Ballard Pier, Mumbai - 400 038 and was recovered from the Appellant under duress, without any formal notice to the Appellant, without any jurisdiction over the Appellant, outside of and in breach of the Income Tax Act and the Law. 5. The CIT(Appeals) 27/16(1)/2 erred in directing the assessing officer to consider the addition of Rs.1.047 crores for the assessment year 2004-05. 6. The CIT(Appeals) 27/16(1)/2 erred in holding that the appellant is not the legal heir of the testatrix Mrs. Mani Cawas Bamji." 2. The assessee is an individual. The facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and testament dated 29/10/2001 appointing Mr. Rajesh K. Bhavsar as the sole executor and legatee. Mr.Rajesh K.Bhavsar got himself impeded as plaintiff in PIL Suit No. 27 of 2001 before Hon'ble Bombay High Court for granting of probate of the last will testament of Mrs. Mani Cawas Bamji in place of Dinshaw Jamsheji Mistry. 5. Mr. Rajesh K. Bhavsar and the assessee entered into a compromise whereby the assessee agreed to receive a sum of Rs.5,08,80,000/- in consideration for agreeing to the Court granting probate in respect of the last will of Mrs. Mani Cawas Bamji dated 2/5/1997. This agreement by which they agreed to comprise their disputes was dated 22/11/2002. There is no dispute that this sum of Rs.5,08,80,000/- later reduced by Rs.30,00,000/- and ultimately the assessee received a sum of Rs.4,78,80,000/- in the following manner. Date of payment Amount Mode of payment Drawn on bank 03/04/2003 17,47,000.00 Cheque HSBC 484087 10/4/2003 12,61,585.25 Cheque HSBC 484087 24/04/2003 4,19,777.60 Cheque HSBC 484087 28/04/2003 13,21,486.38 Cheque HSBC 484087 28/04/2003 1,33,411.54 Cheque HSBC 484087 12/05/2003 16,80,739.50 Cheque HSBC 484087 19/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement recorded during the search of Mr.RK Bhavsar, he narrated the sequence of events as described in the earlier paragraphs. The Deputy Director of Income Tax (Investigation) Mumbai in purported exercise of his powers u/s.131 of the Act, issued summons to the Assessee and recorded his statement on 24/11/2007. The Assessee also narrated the sequence of events as set out above. The Assessee also agreed to offer the sum so received to tax and also paid tax payable on such receipts. 8. In the return of income filed on 27/09/2007 for AY 06-07, the Assessee did not offer the aforesaid receipts to tax. In the order of assessment there is a reference to the opinion of Mr.Soli Dastur, Senior Advocate, given regarding non-taxability of the receipts in question. In this opinion there is a reference to a query by the AO regarding taxability of the receipts in question u/s.56(2)(v) of the Act. The opinion is to the effect that u/s.56(2)(v) any receipt to be treated as income should be receipt of monies without any consideration but in the case of the Assessee the receipts in question are in consideration for the Assessee withdrawing his caveat and giving up his right to challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier years when the agreement was reached and hence, should not be taxed in this year is also not correct. Since the money was received in this year, it has to be taxed in this year. Even if the agreement was made in the earlier year, it did not become full contract as no payment was made in the earlier year. Only when the payment is received, then the agreement comes into force." 12. The main issue to be decided in this appeal is as to whether the provisions of Sec.56(2)(v) are attracted. The said provisions read as follows: (As amended by the TL (Amend.) Act, 2006, w.ef. 1-4-2006.) 56. Income from other sources: (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources" if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income-tax under the head "Income from other sources", namely:- (v) where any sum of money exceeding twenty-five thousand rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Letters of Administration in respect of will of late Mani Cawasa Bamji. In this regard ld. Counsel for the assessee drew our attention to the provisions of section 2(d) of the Indian Contract Act, 1872 which defines consideration as follows: "(d) When, at the desire of the promisor, the promise or any other person had done or abstained from doing, or does or abstains from doing or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise." 15. In this regard ld. Counsel for the assessee drew our attention to the affidavit filed by the assessee in support of the caveat filed opposing the grant of Probate in respect of last will of Mrs. Mani Cawasa Bamji in favour of Mr. Dinshaw Jamshedji Mistry. He further dew our attention to the agreement dated 22/11/2002 whereby it was agreed that the assessee will receive a lumpsum consideration of Rs.5,08,80,000/- and in consideration of the said payment assessee will withdraw his caveat and request the Hon'ble Court to grant the Letters of Administration with will annexed of the deceased of Mrs. Mani Cawasa Bamji in favour of Mr. R.K.Bavasar. Our attention wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that when" the promise has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing something", the benefit of that act or abstinence must "directly" go to the promisor" ............ (ii) The provisions relating to "consideration" have been modified by the provisions of the Gift tax Act in two respects; first, in the Gift-tax Act an agreement to transfer property "otherwise than for adequate consideration"[see section 4(a)] gives rise to a gift to the extent of the inadequacy, while under the definition in the Contract Act that is not so. Under the Contract Act the adequacy or inadequacy of the consideration is immaterial. Under Explanation 2 of section 25 of the Contract Act, an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; it is still a valid agreement. But under section 4(a) of the Gift-tax Act, such an agreement or transfer would be partially bad, to the extent of the inadequacy. It would be a gift only to the extent to which the market value of the property at the date of the transfer exceeds the value of the consideration for the transfer. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half share in the asset of late Mrs. Mani Cawasa Bamji that a citation was issued to the assessee by Hon'ble Bombay High Court before granting the Probate in respect of the last will of late Mrs. Mani Cawasa Bamji to Mr. Dinshaw Jameshedji Mistry. The assessee promptly filed the caveat opposing the grant of Probate in favour of Mr. Dinshaw Jamshedji Mistry and consequently the proceedings became a testamentary suit. In such proceedings it was the duty of Mr. Dinshaw Jamshedji Mistry to establish that the will of late Mrs. Mani Cawasa Bamji was the last will and that was executed in accordance with law and that the testatatrix executed the will in a sound and disposing state of mind. The assessee also obtained an order of injunction restraining Mr. Dinshaw Jamshedji Mistry from dealing with estate of the deceased in any manner. After the death of Mr. Dinshaw Jamshedji Mistry Mr. R.K.Bavasa became the party to the testamentary suit in respect of Mr. Dinshaw Jamshedji Mistry and settled the issue with the assessee by a sum of Rs.5,08,80,000/-. It was thereafter that the Court accepted the terms of settlement and allowed Mr. R.K.Bavasa to deal with some of the properties of the estate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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