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TMI Blog2012 (10) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... not income being a capital receipt and not subject to income tax its disclosure or non disclosure is of no consequence for the purpose of the Act. It is only on account of search that documents were unearthed / found which showed that the gifts were not genuine, but only a method to convert the appellant's unaccounted money into regular income. Therefore, the non genuine gifts to the appellant was undisclosed income and covered by the definition provided in Section 158B(b). Consequent to the amendment in 2002 to Section 158BB documents and/or information available with the assessing officer and relatable to evidence found during the search is certainly evidence which can be used to compute the undisclosed income for the block period - In fact Parliament realizing the difficulty for the Revenue to prove its case to the hilt provided under Section 158BB(3) of the Act that the burden of proving to the satisfaction of the Assessing Officer that any income had already been disclosed is on the assessee. Further, sub section (2) of section 158BB in terms provided that section 68 relating to cash credits would apply to block assessment and in such cases also it is for the assessee to sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donors, confirmatory letters of the donors and the fact that the gifts were given by the donors from their respective Non Resident External accounts and thereafter the burden of proof had shifted to the Assessing Officer who has failed to discharge the same as the Assessing Officer neither summoned the donors nor issued any commission nor adduced any evidence to establish that the appellant had not received the gifts from the donors? iv) Whether the Appellate Tribunal was right in law in coming to the conclusion that the gifts received by the appellant are non genuine even though there is no evidence brought on record to derive a legal inference to the effect that the gifts were actually purchased by the appellant and therefore, they are nongenuine? v) Whether the Appellate Tribunal was right in law in coming to the conclusion that the case of the appellant is of a moneylaundering device because the copies of passports, personal letters, gift deeds, copies of pass book etc. were all obtained simultaneously with the cheques for gifts? vi) Whether the Appellate Tribunal was right in law in coming to the conclusion that the gifts received by the appellant are non genuine becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an amount of Rs.39.74 lacs as unexplained cash & offered the same for taxation. The Assessing Officer completed the assessment for the block period 01.04.1985 to 26.03.1996 by an order dated 27.03.1997 under Section 158BA of the Act, determining her total undisclosed income at Rs.2.11 crores. This was computed on the basis of unexplained cash credits, commission received on advertising, unexplained loans, undisclosed investments in properties, gifts from Resident Indians and Non Resident Indians etc. (e) Being aggrieved, the appellant preferred an appeal against the order dated 27.03.1997 to the Tribunal. The Tribunal by its order dated 25.02.1999 deleted all additions made to the income by the Assessing Officer save and except the following two additions: a) Gifts received from Non Resident Indians from their NRE accounts and cash premium paid thereon aggregating to Rs.4.06 lacs for the assessment year 1994-1995 and 1995-1996; and b) Commission received from M/s. Chintamani Advertiser aggregating to Rs.2.42 lacs for the assessment year 1993-94 up to 1996-1997. 4. The appellant is in appeal, on the aforesaid two additions, which has been sustained by the order dated 25.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er singly or together could lead to the conclusion that the gifts are fake. This conclusion by the authorities is based merely on suspicion. Suspicion howsoever strong, cannot take a place of proof. In view of the above, Mr. Jhaveri submits that the additions of amounts received as gifts to the appellant's income as unexplained credits and/or fake gifts is not sustainable. 7. As against the above, Mr. Suresh Kumar, the learned Counsel for the revenue-respondent submits as under: a) The disclosure made by the appellant while filing its return of income was not a subject matter of inquiry in the assessment year 1994-95 and 1995-96 as the same was not declared as her income. So far as, assessment year 1993-1994 is concerned, the Non Resident Indians gifts received from NRE account had not been brought to tax as undisclosed income in view of the fact that the same was the subject of inquiry in an order passed under Section 143(3) of the Act on 28.09.1995. Therefore, the reliance upon the aforesaid order by the appellant to establish that the gifts have been disclosed as income is not relevant for the present proceedings; b) It was only on search that the documents found establishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable articles, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act [,or any expense, deduction or allowance claimed under this Act which is found to be false]. Assessment of undisclosed income as a result of search 158BA(1)…. Computation of undisclosed income of the block period 158BB(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, [in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence], (a) ... (b) ... (c) ... (d) ... (e) ... (f) ... Explanation…… (2) In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, his submission that in case the Assessing Officer was of the view that the gifts were not genuine, then the same having been disclosed in the regular assessment could be a subject matter of proceedings for reopening of assessment etc. but to subject such disclosed income as a part block assessment is not available to the department/respondent. In support of aforesaid submission, he relies upon the decision of the Supreme Court in the matter of Asst. Commissioner of Income Tax v. Hotel Bluemoon reported in 321 ITR page 362. 12. There can be no quarrel with the above proposition. However, where the income has not been disclosed and the same has been reveled during the search proceedings then block assessment as provided under Chapter XIVB of the Act would certainly apply. The meaning of undisclosed income as spelt out under Section 158B(b) is that undisclosed income is that income which has not been or would not have been disclosed for the purpose of this Act. In the present case, the appellant had not disclosed its income but had incorrectly disclosed the same as gifts received. This is for the reason that gifts are not income, they are received on capital account and can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avits relating to the same were discovered. The Assessing Officer added the amount disclosed as gifts to the income on the ground that the gifts were bogus. The Commissioner of Income Tax (Appeals) and the Tribunal on consideration of the facts involved therein, came to the conclusion that no incriminating material was found during the course of search to indicate that the gifts were not genuine. This concurrent finding of fact led the Delhi High Court to refuse to interfere with the orders of authorities under the Act. In the present facts, the confirmatory letters addressed by the donors to the assessee were identically worded, typed on the same typewriter, the donors seemed were not related to the assessee, the aggregate gifts received by the family of the appellant was over Rs.35 lacs and all gifts were made allegedly out of love and affection for the appellant and/or her family members. Further, no circumstances have been indicated by the appellant before the authorities or during the hearing before us as to what was the occasion for apparent strangers to advance an amount aggregating Rs.35 lacs to the Gupta family as gifts. Therefore the decision of Delhi High Court in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan was genuine as the loan creditor was an assessee in whose assessment the loan advanced had been accepted by the Revenue. As against the above, in the present case no evidence has been led by the appellant to establish the genuineness of the gifts such as producing the donors before the authorities etc. Therefore in our view the present case is a clear case of the gifts being undisclosed income which is subject to Chapter XIVB of the said Act. 18. In CIT v. Vikram Doshi reported in 256 ITR page 129 (Bom) the Tribunal had as a matter of fact come to the conclusion that if the income concerned had been disclosed and was the subject matter of regular assessment then the same cannot be a part of block assessment. The aforesaid finding of the Tribunal being a finding of fact was not interfered with by this court. The facts in the present case are completely distinguishable as there are concurrent findings of fact by the Assessing Officer and the Tribunal that the so called gifts were in fact not gifts, but undisclosed income to which Section 68 of the Act would clearly apply. 19. We therefore find that none of the decisions which were relied upon by the appellant during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of evidence found, as a result of a search or other documents or materials available with the Assessing Officer and relatable to such evidence. In the present case, the evidence in the form of confirmatory letters, deed of gifts etc. were found during the course of search. The authorities on examination of the confirmatory letters and surrounding circumstances reached a prima facie view that the gifts were not genuine. A notice dated 27.06.1996 under Section 158BC of the Act was accordingly issued. Thereafter, before the assessment for the block period could be completed, the Assessing Officer came across the confessional statement made by the appellant's husband and son under FERA stating that the gifts were not genuine. Therefore, the statements made under the FERA and its retractions are relatable to the confirmatory letters given by the donors of the gifts found during the search of the appellant's premises. The confessional statement is certainly relatable to the evidence found during the course of the search. 22. Mr. Jhaveri in support of his submission that the block assessment has to be done only on the basis of the documents found during the course of the search, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon for the purpose of block assessment. In the aforesaid case, the fixed deposits in fictitious names were found not during the course of search, but during the course of investigation which followed the search. On the aforesaid facts, the Madras High Court held that since the information relating to fixed deposits in fictitious names was not found during the course of search, it could not be used to arrive at the undisclosed income for the block period. As pointed out above, in the present case, the gifts were found not to be genuine on the basis of the evidence found in the form of confirmatory letters during the course of the search. 25. In CIT v. Ravikant Jain, 250 ITR page 141 the Delhi High Court held that undisclosed income for the block period can only be determined on the basis of evidence found as a result of search. The court held that in case any evidence is found de hors the search, the same could be brought to tax in regular assessment and not as a part of the block assessment. In the aforesaid case, the Tribunal had come to a finding that the undisclosed income was not on the basis of any material found during the course of the search, but on the basis of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome is, thereafter, to be adjusted for the income or loss which has already been assessed or declared, to arrive at the undisclosed income of the block period. 61.3.1 Some appellate authorities have held that income which can be included in the block assessment is only such income which is directly evidenced by material found during the search and does not include income which has been discovered on the basis of postsearch inquiries made during the block assessment proceedings. This is contrary to the intention that nay undisclosed income discovered as a result of search is to be included in the block assessment as long as such income has been detected as a result of evidence gathered during the search. 61.3.2 The Finance Act, 2002, has amended section 158BB to clarify that the block assessment of undisclosed income is to be based on the evidence found in the search and material or information gathered in postsearch inquiries made on the basis of evidence found in the search." (emphasis supplied) 29. In this case the statement and the retraction thereof to the FERA authorities is certainly relatable to evidence found during the search and could be considered to compute the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also keeping fine. I have given cheque no.031029 dtd.131295, for Rs.1,00,000/- and cheque no. 031031 dtd. 02.02.96 for Rs.75,000/- Both cheques drawn on Hong Kong & Shanghai Banking Corporation Limited, Payable at Madras, issued out of my N.R.E. Account No.141 120023006. The same has been accepted by you as per our oral talk. I have made this gift of the amount of Rs. 1,75,000/- to your out of natural love and affection and the high esteem and regards that I have for you. Henceforward you are the sole owner of the proceeds of this gift and can enjoy the same as you may deem fit and proper. I have made this gift without any past, present or future consideration of any kind whatsoever and declare that I have not got any type of right, title, control or interest on the amount gifted to you as mentioned hereinabove. Please convey my regards to Bhabhiji. How is Arun, Renu & Aakansha. With best wishes, Yours lovingly, (A.T. DIANOLD) 32. Mr. Jhaveri submits that these letters were prepared by the appellant and her family for production before the Income Tax Authorities when called upon to substantiate the genuineness of gifts. Therefore, they were all typed on the same typewriter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion as under : "In our opinion, the majority opinion after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine." 34. In the present case the alleged gifts which appeared to be real are infact not real, particularly, if one takes into account the surrounding circumstances and applies the test of human probabilities. It is most unlikely in the normal course of human conduct for a family to receive gifts in excess of over Rs.35 lacs from persons who are not related in any manner to the assessee or her family. Similarly, while considering the order of the Tribunal, one is not required to examine the same through a microscope so as to discover a minor lapse here or there so as to use it as a peg on which one can raise a question of law. The Apex Court in the matter of Homi Jehangir Gheesta v. CIT, reported in 60 ITR page 135 observed that where the circumstances are such that the only proper inference one can draw is that receipt has to be treated as a income in the hands of the assessee such inferences are one of fact and not of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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