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TMI Blog2016 (2) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the Inland Revenue Service, Great Britain and failed to follow the matter any further with respect to Shri Varinder Sharma and on the basis of suspicion, held that gifts are not genuine. Having already held that it was for the revenue to proceed to investigate the matter further, I find no error in the opinion recorded by the Tribunal, which has been reproduced in detail in preceding paragraphs or that in the facts and circumstances of the case, a different opinion could be recorded. Consequently, the substantial question of law is answered against the revenue. Also Tribunal has rightly opined that the gift could not be treated as a deemed income of the assessee. Consequently, the substantial questions of law are answered against the revenue - Income Tax Appeal No.49 of 1999, Income Tax Appeal No.48 of 1999, Income Tax Appeal No.169 of 1999, GTA No.10 of 2004 - - - Dated:- 29-1-2016 - MR. RAJIVE BHALLA, J. For The Appellant : Mr. Rajesh Katoch, Advocate For The Respondent : Mr. Sanjay Bansal, Senior Advocate with Mr. B.M.Monga, Advocate RAJIVE BHALLA, J. The revenue has filed Income Tax Appeal Nos.48, 49, 169 of 1999 and GTA 10 of 2004 challenging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the Hon'ble Judges comprising the Division Bench differed in their opinion, with one opinion, allowing the appeals and the other dismissing the appeals. The appeals were, therefore, placed before a third Hon'ble Judge. Before the third Hon'ble Judge, the revenue urged that as the Division Bench has not framed the questions of divergence, the matter should be returned unanswered. The respondents, however, urged to the contrary and prayed that the matter may be decided by ascertaining and answering the divergence of opinion. After examining the divergent opinion, it was held that though points of divergence have not been spelt out, this discrepancy is at best, a technical irregularity and after examining the divergent opinion, fresh questions of law can be framed and answered. A relevant extract from order dated 08.4.2002 reads as follows:- In my opinion, failure of the Bench of two or more Judges which is entrusted with the task of hearing the appeal in the first instance to state the point of law upon which they differ is by itself not sufficient to decline an answer on the points of law which arise for determination. This omission can, at the best, be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gifts are genuine and not a mere devise to evade tax, lay upon the assesssee. The assessee has failed to discharge this onus by producing any tangible evidence that would even remotely prove the genuineness of the gifts. The assessee has failed to prove that the donors had a close relationship, whether personal or professional with the assessee or his daughters. The donors are total strangers to the assessees not being related whether by relationship, business or friendship. The bank drafts bear consecutive numbers and were prepared on 22.3.1994, by Midland Bank, in the United Kingdom. The assessee has not been able to prove the financial capacity of the donors to gift such a large sum of money. The mere fact that Dr. O.S.Gill appeared before the Assessing Officer and his account in England was verified or he has an annual income of $120000 is not sufficient to discharge the onus or prove the genuineness of the gifts, particularly in the absence of any evidence of any relationship, or business dealings. The answers proferred by Mr. Gill to queries addressed by the Assessing Officer are vague and unclear and though Dr. O. S.Gill has proved that he was drawing an annual salary of $ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee. The assessee's simple denial of any relationship with Shri Varinder Sharma rightly led the Assessing Officer to raise an inference that the gifts represent the income of the assessee and, therefore, are his deemed income. Counsel for the assessees submits that the Commissioner of Income Tax (Appeals) has rightly accepted the genuineness of the gift made by Dr.O.S.Gill. The Tribunal has also affirmed this finding and dismissed the appeal filed by the revenue. The Tribunal has recorded detailed reasons after appraising the entire record and as the process of reasoning and the reasons assigned are legal, valid and plausible, the impugned orders do not call for interference. Counsel for the assessee submits that Section 260A of the Act, confines consideration to substantial questions of law. The questions framed, by the revenue, in the grounds of appeal or in order dated 8.4.2002 are mere questions of fact that are entirely dependent upon appreciation of evidence. The CIT (Appeals) and the Tribunal have recorded concurrent findings of fact that the assessee has discharged his onus and proved that the gift made by Mr. Gill is genuine. As these findings are neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has, therefore, rightly reversed the orders passed by the Assessing Officer and the CIT (Appeals) and has affirmed the genuineness of the gift. I have heard counsel for the parties, perused the impugned orders, the entire paper-book, the synopsis of facts filed by the revenue and faced, as I am, with two conflicting orders on the same set of facts and a third order, framing two new questions of law, proceed to answer, as urged by counsel for the parties, the questions framed vide order dated 8.4.2002 but before answering these questions, a brief narrative of the facts would be necessary. The Assistant Commissioner of Income Tax, Central Circle-V, Ludhiana, exercising the power of the Assessing Officer, called upon the assessee to prove the genuineness of gifts received for and on behalf of his daughters. The Assessing Officer addressed various queries to the assessee, collected evidence and one of the donors Dr. O.S.Gill appeared in evidence. The Assessing Officer rejected the explanation and evidence adduced by the assessee and by invoking Section 69-A of the Act, raised an inference that the amount received as gifts, reflects the deemed income of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant details, i.e., address, details of draft and the bank on which it was drawn. 5. Reconfirmation of the gift vide letter dated 24-5- 96 filed by the donor with the A.O. 6. Relevant extract from the Passport of the donor showing that he was a British citizen. 7. Copy of Special Power of Attorney given by Miss Ruchika Oswal authorising her father Sh.Jawahar Lal Oswal to receive the gift on her behalf in London and the confirmation of this by the donor Shri O.S.Gill. In addition, the Inland Revenue also investigated the matter and did not find anything adverse or incriminating. In fact, they were able to contact Shri O.S.Gill and in a communication dated 10-2-97 to Joint Secretary, Govt. of India (C.B.D.T.) wrote:- U.K. Stating the following;- 1 The gift was given to Miss Oswal on the occasion of her forthcoming marriage. The amount given was $ 200000. 2. The amount was given as a gift and was by means of a bank draft. 3. There is no agreement between D.R. Gill and Miss Oswal on repayment of any of the amounts given. 30.1 Further, Shri O.S.Gill on a visit to India was examined by the AO and his statement was also recorded. According to the AO the financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the Inland Revenue, U.K. Made enquiries about the two alleged donors and personally contacted Shri B.P.Bhardwaj. The addition in respect of his gift was made by the AO and sustained by the CIT(A) mainly on the basis of a letter dated 15-10-96 received by the Joint Secretary, Department of revenue, Ministry of Finance, Govt. of India, New Delhi from the Inland Revenue, U.K. Stating the following:- a gift of US Dollars 200000 was made to Miss Oswal' on the occasion of her forthcoming marriage on or around 22 March 1994. The funds were provided by Mr. Varinder Sharma of Flat 184, Building 9A, Raminki Moscow. Mr. Sharma arranged the draft and gave it to Mr. Bhardwaj. Mr. Bhardwaj handed it over to Miss Oswal s father who was at the time passing through London. 29. What has weighed with the AO and the CIT(A) is the reply allegedly given by Shri B.P.Bhardwaj that the funds were provided by Shri Varinder Sharma of Moscow. It must be appreciated that neither the AO nor the assessee participated in the enquiry and none of them had an opportunity to examine Shri Varinder Sharma or for that matter the donor Shri B.P.Bhardwaj, although we must mention that Shri Varinder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that he received these in U.K. being authorised to do so by his daughters who were the donees. The moneys were deposited in the bank accounts of the daughters who were majors and there was nothing on record to show that Sh.Jawahar Lal Oswal was the beneficiary in any way. The entire documentary evidence mentioned the names or the daughters and there was not an iota of evidence brought on record by the revenue to prove that Sh.Jawahar Lal Oswal was the owner of the funds and which it was required to do within the meaning of section 69A after the necessary evidence had been placed on record by the assessee. The entire addition has been based on suspicion and doubt which as already held should not find place in a deeming provision. The revenue did not carry any of its doubts to a logical conclusion by converting them into hard facts on the basis of evidence . By no stretch of imagination was the addition warranted in the case of Sh.Jawahar Lal Oswal. 44 The CIT(A) has drawn some distinction between the gifts of Sh. O.S. Gill and Sh. B.P.Bhardwaj but even if both of these are considered on the touchstone of section 69A, the entire addition stands to be deleted. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, partake the nature of a substantial question of law if the process of reasoning or the reasons assigned are perverse and/or arbitrary or relevant facts have been ignored or misconstrued. A set of facts may admit, as they often do, to two different and diametrically opposing views but interference under Section 260-A of the Act, would only be warranted, if findings are so incomprehensible as to be perverse and/or arbitrary. If, however, the findings admit to two views and the view adopted by the Tribunal is plausible, though debatable, a court exercising power under Section 260-A of the Act, must desist from substituting its own opinion for the opinion of the Tribunal. The quantum of tax or the alleged amount of evasion are irrelevant as what is relevant is the substantial question of law that arises for adjudication. The first substantial question of law, as framed, by order dated 8.4.2002 is, whether the assessee has discharged the onus of establishing that the gifts are genuine. Admittedly, the gifts were received by the assessee for and on behalf of his daughters, while he was in London. Alleging that the gifts were the deemed income of the assessee, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Service, Great Britain but the Assessing Officer drew an inference against the assessee as Dr. O.S.Gill could not disclose his account number, his answers were held to be vague and there does not appear to be any such relationship between the parties that would warrant such a large gift. As Dr.O.S.Gill appeared before the Assessing Officer, admitted that it was his money and admitted the gift, his accounts and income were verified, his failure to remember his account number, which was already known to the revenue, could not justify the raising of an inference against the assessee. A question may, however, legitimately arise that such a large amount could not be given as a gift on the marriage of the assessee's daughter but this question is speculative and cannot form the basis for raising an inference against an assessee. The Assessing Officer was apparently over-awed by the amount of the gift and, therefore, proceeded to base his opinion on his perception that no one would gift such a large amount. A deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue to pursue this lead and trace Shri Varinder Sharma but, unfortunately, no further enquiry was carried out but instead the assessee was asked to disclose the whereabouts and his connection with Sh. Varinder Sharma. The assessee denied any association, business or otherwise with Shri Varinder Sharma but admitted that Shri Varinder Sharma was known to him. The onus, therefore, shifted to the revenue to prove that Shri Varinder Sharma was an associate or an employee and only thereafter could the revenue raise an inference that the assessee had routed his funds through Shri Varinder Sharma, in the garb of a gift drawn in the name of his daughters. A perusal of the record reveals that the Assessing Officer did not pursue the matter any further and merely based his opinion on an assumed connection between the assessee and Shri Varinder Sharma and has failed to refer to any material, howsoever perfunctory, that would indicate that Shri Varinder Sharma was an employee or an associate of the assessee. The Assessing Officer, thus, drew an adverse inference against the assessee for his failure to disprove his relationship with Shri Varinder Sharma. An arrangement between a donor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial or evidence before him. The Assessing Officer would have been justified in raising such an inference if there was a shred of material to link B.P.Bhardwaj, Varinder Sharma to the assessee. The Tribunal has held that there is no evidence or material to link Varinder Sharma to the assessee and that findings have been recorded on mere suspicion, conjectures and surmises. The Tribunal has also held that the assessee, who accepted the gift for and on behalf of his daughters, was not privy to any information regarding the source of funds with Mr. B.P.Bhardwaj. One cannot be oblivious to the fact that such a large gift received from a foreign country is bound to raise suspicion but can not disregard the fact that suspicion and doubt cannot replace proof or translate into reasons, much less reasons for invoking a deeming provision to hold that gifts represent the income of the assessee, particularly in the absence of relevant facts. A further perusal of orders passed by the Assessing Officer reveals that he proceeded as if the entire onus lay upon the assessee, ignored the material received from the Central Board of Direct Taxes from the Inland Revenue Service, Great Britain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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