9911796707
TMI Blog2014 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax, Kanpur decided petitioner's objection dated 15.10.2004, and found them to be untenable. 3. The notice under Section 143 (2) preceded the order of the same date i.e., 11.2.2005, deciding and rejecting petitioner's objections dated 15.10.2004, to proceedings under Section 147, both on the ground that the action under Section 147 is barred by limitation, and that the gift deeds, claiming immunity, are bogus and are not genuine, routing the petitioner-assessees unaccounted money in the garb of gifts. 4. Shri S.K. Garg, learned counsel appearing for the petitioner has relied upon a judgment of this Court in Commissioner of Income Tax vs. Smt. Usha Omer (2011) 338 ITR 448 in Income Tax Appeal No. 3 of 2004 delivered on 26th July, 2011. In this judgment in a matter relating to the wife of the petitioner it was held by the Division Bench that the assessee was holding the India Development Bonds in US dollars, which were received by her as gift. The bonds were issued as per Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991. Sections 6 and 7 of the Act provide immunities to the bond holders which includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndra Kumar Gupta was recorded on 21.01.1998 by the Authorised Officer during the course of search on 21.01.1998. While replying to question No. 1, regarding the identity of the donors, he had confessed that he was not even aware of the names and addresses of such persons, from whom the gifts of India Development Bonds were claimed to have been received by him and other members of his family. The assessee could merely state that such gifts of IDBs were received from some Kirana Traders of Kanpur, who had since gone to Dubai and Singapore. While replying to Question No. 4, the assessee had stated that one Sita Ram Makhija of Jawahar Nagar, Kanpur, who was residing in Dubai and maintaining his office in Singapore had gifted the IDBs to the assessee and other members of his family. The documents pertaining to such IDBs are seized at Annexure LP-3 to the panchnama dated 22.01.1998 drawn at the residence at 15/232, Civil Lines, Kanpur. And, the name of Shri Sita Ram Makhija is mentioned in none of the transfer documents and, further, none of the India Development Bonds have been gifted by Shri Sita Ram Makija to the assessee as per such seized documents. The assessee's attention was draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he is not aware of the names and addresses of such persons and he is in no way related to such persons. Thus, there is no question of any love and affection possible in such persons for the assessee and other members of his family. The assessee has himself admitted that Shri Sita Ram makhija arranged the gifts of IDBs to the assessee and other members of his family and that too, in lieu of the financial assistance given to Shri Sita Ram Makhija by the assessee. However, the assessee has not been able to explain the source of such financial assistance and quantum thereof, given to Shri Sita Ram Makhija, in lieu of which, the gift of IDBs was claimed to be arranged by him. The assessee thus failed to establish that any gift of such huge magnitude, as big as Rs. 1.12 crores approximately, was received by him and his family members in the form of IDBs as referred to above. It is rather funny and unbelievable that strangers, being holders of IDBs, bequeathed such heavy amount in favour of the assessee and his family members, who even do not know their names and addresses. The assessee was required, during the course of assessment proceedings u/s 158BC of the Income tax Act, 1961, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, presumes that a genuine gift has taken place. If a person acquires IDBs other than by gift, he is not entitled to any immunity under Chapter III of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991. In the present case, as already discussed above, the assessee failed to establish that a gift of IDB bonds from NRIs has taken place. And so, the assessee is not entitled to any immunity under Chapter III of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991. The Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, while providing immunity from investigation into the source of such gift, presuppose that a gift has taken place. The intent of the said provisions was not to give blanket cover to the tax evaders, who attempt to defeat the provisions of the Scheme by "purchasing gifts" and introducing their unaccounted income in the books of account in the garb of gift and, when cornered, take shelter of such Scheme and claim "touch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 69A read with section 158BB (2) of the Income Tax Act, 1961. The interest on such IDBs, amounting to Rs. 14, 966, Rs. 89, 796 and Rs. 89, 796, shall be considered as the undisclosed income of the assessee, in the assessment years 1995-96, 1996-97 and 1997-98 respectively. 16.8. Consequently, the maturity value of the IDBs as referred in para 16.3, amounting to Rs. 34, 19, 308 is treated as assessee's undisclosed income. Given the rate of simple interest of 9.5% and following the principle of backward calculation of interest, the investment in acquision of the said IDBs works out to Rs. 28, 35, 640 in the assessment year 1995-96, 1996-97 and 1997-98. The investment of Rs. 28, 35, 640 made in acquisition of IDBs as referred to above, shall be treated as unexplained in the assessment year 1995-96 as per the provisions of section 69A read with section 158BB (2) of the Income Tax Act, 1961. The interest on such IDBs, amounting to Rs. 44, 897, Rs. 2, 69, 388 and Rs. 2, 69, 388, shall be considered as the undisclosed income of the assessee, in the assessment years 1995-96, 1996-97 and 1997-98 respectively. 16.9 Consequently, the maturity value of the IDBs as ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id gifts. It will be a case of money laundering in which the person arranges IDB's and purchases them from his undisclosed income. 8. Since the judgment in Commissioner of Income Tax v. Smt. Usha Omer (supra) was passed by a coordinate bench, it will be appropriate to refer the following questions to be decided by a larger bench:- "A. Whether the immunity provided to the bond holder of India Development Bond in US dollars, under Sections 6 and 7 of the Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 which includes that no enquiry to be made from bond holder, regarding the source, is also available to gifts, which are found to be bogus gifts, routing the unaccounted money of the bond holder, through such bonds, by purchasing the bonds for consideration in India? B. Whether the view taken in the judgment dated 26.7.2011 in Income Tax Appeal No. 3 of 2004; Commissioner of Income Tax vs. Smt. Usha Omer (2011) 338 ITR 448, that no investigation can be allowed to be held pertaining to the India Development Bonds which were received from NRI's/overseas, Corporate Bodies as gifts is a correct view, in law? 9. Let the papers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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