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TMI Blog2008 (12) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed on merit. So these writ petitions have been filed. 3. The learned senior counsel Thiru. V. Ramachandran, appearing for the assessee submitted that the assessment orders must be quashed. The assessee was not given a fair opportunity. Though the CIT(A) remanded the matter on 27th Feb., 1998, the AO issued the show-cause notice only on 19th Sept., 1999 after nearly 18 months. This gave the assessee very little time to present his case effectively. To make matters worse, he was in prison and this too prevented him from effective participation in the proceedings. Though it is claimed that adequate opportunity was given, it was more an illusion of an opportunity. In the show-cause notice, the assessee was asked to give his explanation regarding the source of his properties. There is a great variation in the items of properties listed in the show-cause notice and in the assessment orders. Therefore, even with regard to items for which no explanations were called for, the AO had on his own arrived at a conclusion and passed orders. This also amounted to violation of principles of natural justice. The learned senior counsel submitted that when the matter was remitted by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts cannot be relied on since they are not properly notarised nor authenticated. He also submitted that there was no valid trust and it is futile to contend that it should be assessed in the hands of the trust. The learned senior standing counsel submitted that the burden of proof is on the assessee to prove the genuineness of the donations and in the absence of satisfactory proof the AO rightly treated it as income and referred to various decisions. He also submitted that there was evidence to show that it is on account of the teachings of the assessee that those remittances were made. It was also submitted that the scheme of the IT Act is that it categorizes the income and it charges the said income and then refers to deductions, exemptions and allowances and it is for the assessees to prove that the income or a part thereof is not taxable. It was also submitted that it is hardly relevant for the purpose of assessment, that what was received by the assessee had been spent for building orphanages. If he had spent on deductible expenditure then he could claim it. But that will not change the character of the receipts in his hand as income. He submitted that enough opportunity was gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trust came into existence it owned no property. On 23rd Nov., 1994 and 29th Nov., 1994, the assessee's premises called 'Premananda Ashram' was subjected to search. The documents showing substantial investment in bank deposits and immovable properties were seized in the search under s. 132 and they revealed that the assessee is liable to tax. So income-tax assessment proceedings were initiated for all the ten assessment years by separate notices for each assessment year under s. 148 on 21st Aug., 1995. In response to the notice, the assessee's chartered accountant sent a letter dt. 28th Sept., 1995 seeking time. Since the assessee failed to furnish his returns, two detailed letters were issued to the assessee on 11th Oct., 1995 and 23rd Oct., 1995 wherein his explanations regarding the source of the properties and investments was called for. In response, he again sought for time, time was granted till 31st Oct., 1995. Thereafter, there was no response. So an ex parte assessment was completed under s. 144, on 29th Dec., 1995, taking into account the various investments and outgoings. After the completion of the assessment ex parte, he filed 'nil' return for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 2000, the chartered accountant gave an explanation, which stated that all the bank deposits of the immovable properties did not belong to the assessee nor to the managing trustee but to the trust and that by a resolution passed on 20th July, 1994 it was declared that all the movable and immovable properties belong to the trust only. Then the trust was called upon to furnish the necessary documents to show that the bank deposits and immovable properties stood in the name of the assessee belonged to the trust. The two documents mentioned above namely the minutes of the meeting of the trustees and the alleged trust deed were produced. Since the time for concluding the assessment was running out and since the assessee was in prison, a commission was taken out for recording his statement. The summary of all the statements given by the assessee is as follows : 1. The bank deposits and other assets both movable and immovables standing in the name of the assessee belong to Sri Premananda trust and not to the assessee. 2. The bank deposits and other movable and immovables standing in the name of the assessee and Divya Devi have been acquired out of donations received from foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Gunala. Therefore, not only were these properties in assessee's name, he had also dealt with these properties as his own which he could bequeath on the person of his choice. It is true that a will comes into effect only after the death of the testator, but this gives us an insight into the mind of the petitioner and that he dealt with the properties as his own. 8. As regards the foreign remittances credited in his NRE account they were said to be donations received from foreign devotees for a specific purpose. The AO found that the affidavits were more in the nature of confirmation letters, and that there was no authentication and the identities of the foreign devotees were not proved. The AO has listed the following purposes as mentioned in the affidavits for which the donations were allegedly given : 1. Food for children 2. Clothes for children 3. Orphanage 4. Forest trees maintenance 5. Office stationery 6. Stamp 7. Special abishekam 8. Building materials/maintenance 9. Plants 10. Garden tools 11. Paatla pooja 12. Postage 13. Cattle purchase/cow feed 14. Flower plants 15. Pooja hall maintenance 16. Fertiliser 17. Vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but also chaos in the administration of tax laws. (ii) In CIT vs. Ralson Industries Ltd. (2007) 207 CTR (SC) 201 : (2007) 288 ITR 322 (SC) the Supreme Court held that where an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline. (iii) In Kamlakshi Finance Corporation Ltd. vs. Union of India 1990 (47) ELT 231 (Bom), the case arose with regard to what is the proper classification of the product produced at the assessee's factory. The appellate authority decided that it fell under Heading 8546. But on remand, the Asstt. Collector failed to consider the claim of the assessee that the product is similar to that of their product produced in the borivli factory which has been decided by the appellate collector and should be applied by the Asstt. Collector. The Asstt. Collector ignored the decision of the appellate authority. The Bombay High Court held that : the Asstt. Collector does not even explain why the decision in the other case could not be applied. This indicates how quasi-judicial powers are being misused by people who are not qualified to exercise the same. Their only purpose seems to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the assessees on the ground that no trust was intended to be created as alleged by the assessees and the assessees had not proved that they were under any obligation to donate the income to any particular use. The Supreme Court held that the Tribunal had recorded a finding that there was no trust intended or created by the pilgrims, and the assessees claim for exemption failed before the Supreme Court. (viii) In the name of natural justice, the assessee in the above mentioned case could not have asked that all the pilgrims who have visited the Jagannath Temple at Puri be examined. No officer ought to issue such a direction. If he had, it cannot be complied with. It is impractical, nay impossible. The situation is similar to the case here and the AO says that it is not practical. Sure, it is not. The law does not expect one to do the impossible. If the petitioner were to echo Shylock's words uttered in Portia's Court, and ask Is that the law? We have to say, it is . The AO rightly said it is impractical. (2) In the present case, the CIT(A) had very caustically remarked that the affidavits have been cursorily examined and had therefore, directed in his remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee . The payments had their origin in such source. The Kerala High Court held that, the scheme of s. 2(24) of the Act, read with ss. 4 and 10 of the Act, seems to be that, given its ordinary and natural meaning, the word 'income' will take in any monetary return 'coming in'. It will take in voluntary and gratuitous payments which are connected or linked with the office, vocation or occupation. Even treating the various remittances as casual receipts, we are of the view that the receipts are referable to the occupation or vocation of the assessee. (b) In Maharaj Shri Govindlalji Ranchhodlalji vs. CIT (1958) 34 ITR 92 (Bom), the Bombay High Court dealt with the case of an assessee who was a direct descendant of the founder of Vallabha Sampradhayam faith. He received several gifts. The assessee claimed that he was not subject to tax. The Bombay High Court held that, 2. Now, every receipt that a man receives is either a revenue receipt or a capital receipt, and in this case there can be a little doubt that the receipts which have been subjected to tax are revenue and not capital receipts. The source of these receipts is the abiding faith that the disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alikrishna (1988) 69 CTR (MP) 18 : (1988) 171 ITR 447 (MP) was cited on behalf of the appellant. This was a case of a musician who claimed that he was given a gift when he completed 30 years of service. This Court held that there is no direct nexus between this payment and his vocation, though it may not be denied that there is an indirect connection between the two. It was held that the receipt cannot be taxed. (d) In Guru Estate vs. CIT (supra), which has already been dealt with in detail in an earlier paragraph, the Supreme Court held that the donations given by the pilgrims to the assessee through the Annadan Patras were held to be taxable. (e) The Bombay High Court in Dilip Kumar Roy vs. CIT (1974) 94 ITR 1 (Bom), held that whenever an amount is paid as a personal gift for the personal qualities of the assessee and as a token of personal esteem and veneration, it cannot be subjected to tax as income arising out of business, profession or vocation under s. 10 of the IT Act. In that case, there were two major gifts and they said that the gifts were purely out of personal regard, esteem and veneration for the Guru. In that case, the Division Bench of the Bombay High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r it compulsory on the part of the person who paid it. That seems to me to be the test; ..liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it'. This further reinforces our conclusion under the heading judicial indiscipline that the non-examination of the donors is not really fatal. What matters is why the assessee received it. (h) In the present case, the assessee was running an Ashram and that is not denied. Even in the response to the questionnaire the assessee has said that he founded the Ashram in 1983 and the Ashram was engaged in activities essentially charitable and spiritual. He has also stated that the amounts were given to him as the representative of the Ashram. Therefore, these amounts were really given to him as head (or representative) of the Ashram. From a letter given by one of the donors the AO held that it was given to him in his individual capacity for his Vedanta teachings and it was received by him as remuneration in his vocation. The letter reads as follows : Internally there seems to be a lot of activity, a lot of rearranging an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in my name I do not have any individual rights to the said properties because the said properties were purchased with the contribution of the devotees, specifically with the purpose to serve humanity . It was explained before the AO that the amount credited in the NRE account represents donations received from foreign devotees for a specific purpose and in support of this statement, those affidavits were filed. The AO was of the opinion that the affidavits were more in the nature of confirmation letters and are not authenticated, and in the absence of any authentication, even the identity of the foreign devotees cannot be said to be proved. He correctly observed that the evidentiary value of the so-called affidavits is open to question. We have already extracted the purposes mentioned in the affidavits. Opportunity was given to the persons who represented the assessee and the trust to prove that the donations received were spent for the purpose for which they were donated. No such proof was forthcoming. These affidavits were also not seized or found during the search conducted under s. 132 of the IT Act on 23rd Nov., 1994. They were produced later. The AO held that in the writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more similar to Father Epharam and Govindlalji Ranchhodlalji cases (supra) and Krishna Menon's case (supra). Therefore we think Dilip Kumar Roy's case (supra) does not apply .So it is only on account of his teaching that these foreign donors sent in the donations. The alleged artificiality of the devotee's letter will not affect this conclusion in view of his own admission. Whether we take the remittances as amounts received as head of the Ashram or for his Vedanta teachings, the amounts would be profits and gains arising out of his vocation, business or profession. (m) In Father Epharam (supra), a priest of a Monastry received remittances from abroad. The Kerala High Court held that the receipts were referable to the occupation or vocation of the assessee. The fact that the priest was and that he should say the masses or have the masses said by others was the causa causans of the various payments and the remittances were made because the assessee was a priest. From the stand point of the person receiving the payments, it accrued to him by virtue of his office or position, though there was no legal obligation on the part of the persons remitting or paying the mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court held that when the cash book of the appellants were accepted, and the entries therein were not challenged, and neither further accounts nor vouchers were called for, and the persons who gave the affidavits were not cross-examined, it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made in the affidavits. In fact, in that decision, the Supreme Court held that the Court would be entitled to intervene if it appears that the fact-finding authority has acted without any evidence or upon a view of the facts, which could not reasonably be entertained or the facts found are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question. This was relied on by the learned senior counsel to support his case that the persons who gave the affidavits should be cross-examined. In that case, the finding was that it is impossible for the appellant to have had 61 high denomination notes in cash balance and by applying a thumb rule the authorities accepted 31 out of 61 notes as within the bounds of possibility. It is in those circumstances that the Supreme Court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been coming in from 1985; the assessee deposited them in his account and dealt with them as if they were his properties, the release deeds are neither duly stamped nor registered and hence there can be no valid transfer of immovable properties; there is evidence aliunde that the trust had no money on the date on which it came into existence where these movable and immovable properties were available even before the said date. So the amounts that came in must be assessed as his income in the absence of satisfactory proof that it must be assessed in another's hands. IV. Income : Several authorities were referred to on behalf of Revenue, to show that the word income should be given its widest connotation. (a) Navinchandra Mafatlal vs. CIT (1954) 26 ITR 758 (SC) (b) Bhagwan Dass Jain vs. Union of India (1981) 21 CTR (SC) 339 : (1981) 128 ITR 315 (SC) The expression 'income' according to the dictionary, means 'a thing that comes in'. (c) Elel Hotels Investments Ltd. Anr. vs. Union of India (1989) 77 CTR (SC) 168 : (1989) 178 ITR 140 (SC). The word 'income' is of elastic import. In interpreting expressions in the legislative l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of gift is made by the assessed, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift. From this, it is clear that the burden of proving the source or the category under which the receipts should be classified is on the assessee, and any receipt will be treated as income unless the assessee shows that it comes under an exemption. (3) In CIT vs. P. Mohanakala Ors. (2007) 210 CTR (SC) 20 : (2007) 291 ITR 278 (SC), the assessee received several foreign gifts from one common donor. The assessee's case was that the donor's father was a taxi driver and he was very poor and therefore, after he shifted to England and started a consultancy profession, he sent these gifts as an expression of his gratitude. The Supreme Court considered the true nature and scope of s. 68 of the IT Act and held that a 'bare reading of s. 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust. It was also pointed out that there were discrepancies with regard to the income referred to in the show-cause notice and the income referred to in the assessment order. We do not think so. We have compared what was shown and we found that the figures could be tallied. For instance, with regard to the asst. yr. 1985-86, the corpus fund for which source was sought for amounted to ₹ 35,558. This is dealt with in the assessment order as bank deposit. Therefore, it is incorrect to state that the questionnaire did not refer to the amount. For the year 1986-87, the questionnaire called upon the assessee to given evidence to the source for the corpus fund of ₹ 2,14,699. In the assessment order, this amount has been shown as donation from foreign devotees towards corpus fund. Therefore, it is only what was referred to in the questionnaire that has been dealt with in the assessment order. The statement given on behalf of the petitioner that no such income was referred to in the show-cause notice is incorrect. For the year 1987-88, the corpus fund for which source was requested in the questionnaire is ₹ 3,29,583. Supporting evidence was requested for that and this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relied upon. (iii) Next, the trust deed is alleged to have been written some time in July 1994 and the recitals are that the trust owed no property. Therefore, the income cannot be assessed in the hands of the trust. (iv) The foreign donors had sent it to the assessee allegedly impressed by his charitable activities with directions that he should spend it for a specific purpose. Therefore, they had sent it only to him and it was for the assessee to spend or not to spend in accordance with the directions. But in any way, the amounts have 'come in' to him and therefore, they were income in his hands. (v) Even in the affidavit filed by him the assessee has referred to his spiritual discourses, and that foreign devotees were attracted. Therefore, Krishna Menon's case (supra) squarely applies to this case. (vi) On a careful verification of the questionnaire and the assessment orders it is clear that there is no variation; we also find that sufficient opportunity was given to the petitioner., and (vii) The AO was right in holding that the property was dealt with by the assessee as his own income. 13. For all these reasons, there are no merits in the writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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