9911796707
TMI Blog1983 (9) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bombay company was authorised to recover its loss to the extent of Rs. 6,61,421.97 out of the balance of Rs. 2,20,473.99, each standing to the credit of the three Singhania Brothers' HUFs aforesaid in the books of the Bombay company as on 31-12-1968. It came to the notice of the GTO in September 1970, in connection with another proceeding. This fact had not been disclosed by the assessee-HUF in its return filed on 30-6-1969. The case of the assessee was that the Bombay company was asked by the three Singhania HUFs to purchase a block of shares of New Kaiser-i-Hind Spinning and Weaving Mills Co. Ltd., Bombay (N.K.H. shares for short), in order to acquire its effective control and management and that for this purpose certain advances were made by the three Singhania brothers' HUFs to the Bombay company in 1947. According to the assessee, in 1965, the three Singhania brothers were compelled by adverse circumstances to give up the control and management of N.K.H. to Shri Nandlal Jalan and others. In order to effectuate this divesting of the management, the Bombay company is said to have been requested to dispose of the above shares which resulted in losses. The contention of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the learned Commissioner (Appeals). The learned Commissioner (Appeals) upheld the order of the GTO regarding the preliminary objection of the assessee that penalty could not be levied on the assessee since the original karta had died. On merits, it was submitted on behalf of the assessee that non-inclusion in the return, of the value of surrender of deposits with the Bombay company, was under the bona fide belief that the same was not liable to gift-tax. This contention was not accepted by the learned Commissioner (Appeals) on the ground that no disclosure regarding surrender of the deposit with the Bombay company was made before the GTO. He held, relying upon the order of the Appellate Tribunal, on the quantum side that the concealment of particulars of gift and furnishing of inaccurate particulars was deliberate. On behalf of the assessee, a chart was also submitted before the Commissioner (Appeals) to show that there was no net gain with respect to the wealth-tax liability of the assessee and that, in fact, the wealth-tax liability had increased. However, the learned Commissioner (Appeals) held that he had only to consider the impact of the surrender on the wealth-tax assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and management in the N.K.H., the Bombay company had to dispose of its entire holding at Rs. 10 per share causing a heavy loss and the aforesaid advance was allowed to be set off against the loss sustained by the company. Next, he referred to the letter dated 18-8-1979 of the Bombay company and the assessee's replies dated 26-9-1977, 16-12-1977, 10-6-1980 and 23-6-1980 in corroboration. He also relied upon the wealth-tax calculations and he argued on their basis that the net wealth-tax saving in the hands of the three HUFs, on account of the non-inclusion of Rs. 2,20,470, was only Rs. 9,407. He reiterated that the reimbursement of the loss was made in accordance with section 70 of the Indian Contract Act, 1872, which obliged the assessee to repay or reimburse the Bombay company for the benefit derived by it. Referring to the provisions of section 17(1)(c), he pointed out that since no Explanation was appended to it, onus of proving the concealment remained with the department and that the principles laid down by the Hon'ble Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696 applied. He submitted that the mere rejection of the explanation of the assessee could not attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject-matter of a gift and that the assessee had consciously concealed the particulars of the gift or had deliberately furnished inaccurate particulars thereof. In this case, therefore, the assessee is right in placing reliance on the observations of the Hon'ble Supreme Court in the case of Anwar Ali. Section 4(1)(c) is to the following effect : "where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment ;" It deals with a case where there is no transfer or assignment at all, but the owner of the right or interest passively allows his right or interest to be extinguished. The law then comes upon the scene and takes the property to its proper destination. The object is to rope in the so-called business transactions which are really gifts in a camouflaged form. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reason of the assessee's omission or failure to fill up Part IIIB, no presumption of concealment could be raised. If this were so, no claim could ever be raised by the assessee. Thus, the decision of the Supreme Court in the case of Smt. P.K. Kochammu Amma could not be availed by the department on facts. It is true that there was no written agreement fixing the liability for the losses on the HUFs and that the Bombay company had claimed the loss as its own, but then the case of the assessee was that the Bombay company was authorised to recover its loss out of the balances standing to the credit of the accounts of the Singhania brothers' HUFs. It was not its case that the said agreement had taken place before the loss occurred. A past consideration is also a good consideration. It is also true that the assessee-HUF was showing this debt as an asset in its wealth-tax return till 31-3-1968 but this would be understandable in the background of the fact that the letter was sent to the Bombay company only on 17-1-1969. The question of claiming the loss by the assessee-HUFs in its own return would have arisen only if the assessee's case was that from the very beginning it was agreed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if for the sake of argument, it was to be presumed that penalty under section 17(1)(c) could be attracted even in respect of a deemed gift, we are of the view that, on facts, no penalty for concealment could have been levied in the present case. Apart from the fact that the transaction was treated as a deemed gift under section 4(1)(c), there was no other material from which it could be inferred that it was a gift. A perusal of the quantum orders shows that the contention put forward on behalf of the assessee was held to be not proved or not established for want of a written agreement or assurance regarding reimbursement or recoupment of the loss in question. On facts, therefore, the non-inclusion in the return of the value of the surrender of deposits with the Bombay company could well be under the bona fide belief that the same was not liable to gift-tax. So far as the observation made by the GTO in the assessment order regarding advantage derived by the assessee in respect of its wealth-tax liability is concerned, the charts placed before us by the assessee show that there was no net gain and that, in fact, the wealth-tax liability had increased. The wealth-tax saving in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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