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TMI Blog2014 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... Agrawal,Ravi Kant,S. K. Garg For the Respondent : S.S.C.,A.N. Mahajan,Ashok Kumar,Bharatji Agrawal,D. Awasthi,G.Krishna,I. Chopra ORDER 1. We have heard Shri S.K. Garg, learned counsel appearing for the petitioner. Shri Dhananjay Awasthi appears for the Income Tax Department. 2. This writ petition arises out of proceedings of assessment under Section 147 of the Income Tax Act, 1961 (the Act) vide notice dated 11.2.2005 under Sections 142 (1) and 143 (2) of the Act served on the petitioner for the Assessment Year 1997-98, on the ground that he had received the foreign currency, which was found in a search operations and in respect of which he was also subjected to block assessment in connection with the return submitted by the petitioner on 28.11.1997. The department noticed that the alleged gifts were received on the strength of bogus gift deeds. The Assistant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the facts and circumstances of the case, it is crystal clear that no investigation can be allowed to be held pertaining to the Indian Development Bonds which were received from NRIs/overseas , corporate bodies as gift. When it is so , then we find no reason to interfere in the impugned order passed by the Tribunal. The answer to the legal questions is affirmative, in favour of the assesse and against the revenue. The appeal filed by the department is dismissed." 5. The present case also relates to same search, in which the petitioner (husband of Smt.Usha Omer), was subjected to proceedings for assessment of the block period. In the course of assessment, the petitioner gave his replies which are quoted in the orders under challenge as follows:- "16.5 To verify the genuineness of the claim made by the assessee regarding the receipt of gift of IDBs, statement of Shri Rajendra 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 Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explaining the reasons for Shri Sita Ram Makhija, arranging such gifts of IDBs to the assessee and other members of his family, the assessee disclosed that Shri Sita Ram Makhija, at one time, was actually a person of no means and the assessee had helped him and had given lot of money to Shri Sita Ram makhija, which were never returned by him to the assessee. And, it was only in lieu of such help and financial assistance given to Shri Sita Ram Makhija, that he arranged the gifts of IDBs to the assessee and other members of his family. The addresses of the transferers are generally not mentioned on the transfer documents of India Development Bonds, but only post box numbers are mentioned at the places meant for address. And so, it is not possible to ascertain from such documents the genuineness or existence of such persons. On the other hand, the assessee does not know these persons, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the procedure automatically collapses in view of his categorical statement u/s 132 (4) of the Income Tax Act, 1961 before the Authorised Officer, that he never knew the persons who were the holders of IDBs and that the gifts were received from Shri Sita Ram Makhija, once a kirana dealer of Kanpur, whose name does not find place as holder of any of the bonds. The assessee's contention that he cannot be required to disclose the identity of the donor as per the CBDT Circular dated 30.09.1991 also becomes irrelevant at this stage when the assessee has already confessed that the said gifts were arranged by Shri Sita Ram Makhija in lieu of the financial assistance of a lot of money, made by the assessee to him and such money was never returned by Shri Sita Ram Makhija to the assessee. The immunities provided to the donee under Chapter III of the Remittances of Foreign Exchange and Investment 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 (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income Tax Act, 1961. The interest on such IDBs, amounting to Rs. 74, 829, Rs. 4, 48, 980 and Rs. 4, 48, 980, shall be considered as the undisclosed income of the assessee, in the assessment years 1995-96, 1996-97 and 1997-98 respectively. 16.7. Consequently, the maturity value of the IDBs as referred in para 16.2, amounting to Rs. 11, 39, 769 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. 9, 45, 213 in the assessment year 1995-96 and the interest thereon works out to Rs. 14, 966, Rs. 89, 796 and Rs. 89, 796 in the assessment years 1995-96, 1996-97 and 1997-98. The investment of Rs. 9, 45, 213 made in acquision 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner's objections dated 15.10.2004 by the impugned order dated 11.2.2005. 7. We find it difficult to agree with the reasons given by the Lucknow Bench of this Court in Commissioner of Income Tax v. Smt. Usha Omer (supra). In our opinion, where the bonds have been received in India from a person, who had visited abroad, and were arranged through a person with whom the petitioner had no concern, the transactions cannot be treated to be by way of gift. There was no remittance of the foreign currency of Indian Development Bonds to be given immunity. A gift means valid gift and not a bogus gift arranged by a fraud played in which a person is allowed to purchase the bonds by paying his unaccounted money to the persons, who have travelled from India on their coming back along with the bonds. Prima facie we do not find that the India Development Bonds seized in the search operations carried out were valid 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 follo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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