9911796707
Advanced Search 
TMI Blog2001 (11) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2,57,200 by cheque Nos. 734800 and 734797 respectively through Non-resident External Savings Bank Account of Mr. Vinod Goel/Ms. Cirila Goel. Copy of declaration (under the Immunity Act, 1991) dt. 2nd Jan., 1992, given to the Chief Manager, Indian Bank was also furnished before the AO. 3. In 1997, the AO received certain information from FERA authorities which highlights that one Shri Sanjeev Goyal, holding Power of Attorney to operate NRE account of Shri Vinod Goyal, was operatig the NRE account without following procedure prescribed under FERA. The preliminary investigation conducted by Enforcement Directorate revealed that foreign currency was purchased from local market by Mr. Sanjeev Goyal and exchanged at Thomas Cook and that was credited to NRE account of Mr. Vinod Goel, a Canadian citizen. Mr. Sanjeev Goel arranged for such NRE gifts to about 300 persons involving nearly Rs. 10 crores by collecting the value of NRE cheque amount plus premium at 30 to 35 per cent from the beneficiaries. The AO has received a letter from Dy. DIT (Inv.) Unit-III, Mumbai and also a letter addressed by Dy. Director, Foreign Exchange Regulation Department, alongwith annexures such as statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joy any immunity. Applying the ratio of the said decision, the AO observed that the circumstances show that the assessee has not received gift from Mr. Vinod Goel in foreign exchange and hence the assessee is not entitled to immunity under the Immunity Act, 1991. He thus, concluded that the alleged gifts received from Mr. Vinod Goel is not a gift covered by the Immunity Act. He also observed that the assessee had paid for the gift cheque and also paid premium of 30 to 35 per cent to Sanjeev Goel. Thus he added a sum of Rs. 6,93,900 (Rupees 5,14,000 (amount of gift) + Rs. 1,79,900 (premium paid) towards the income from undisclosed source. 6. Aggrieved by the additions made by the AO, the assessee contended that the reassessment is not valid and the additions made by the AO are liable to be deleted. In short, the contention of the assessee was that: (a) Assessee filed return of income by furnishing all the details with regard to the gifts received from Mr. Vinod Goel and thus the assessee has not concealed particulars of income. Therefore, reopening of assessment is not in accordance with law. (b) The statement of Mr. Sanjeev Goel was retracted later and in the absence of any furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidence to show that the transactions were routed through the banking channels of Mr. Vinod Goel/Sanjeev Goel and they had a capacity to give such large scale gifts to more than 300 persons involving nearly a sum of Rs. 10 crores, action of the AO in treating the amount of Rs. 5,14,000 as unexplained income was held to be in accordance with law. Similarly, the addition of Rs. 1,79,900 referable to the premium paid by the assessee to procure gifts was also sustained by the CIT(A). 8. Further aggrieved, the assessee is in appeal before us. The assessee filed grounds of appeal running into 9 pages. It was pointed out to the assessee's counsel that the grounds are not in accordance with r. 8 of the Tribunal Rules, 1963. It may be noted that the grounds of appeal filed before the Tribunal should be concise and it should not include arguments and it should not be narrative. The assessee filed revised grounds of appeal running into 5 pages which are "without prejudice to the original grounds of appeal". The learned counsel also filed written submissions captioned as proposition of law running into 11 pages in which detailed submissions were advanced. 9. The learned counsel submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 447 and also referred to the case of S.I. Corporation (P) Ltd. vs. Board of Revenue AIR 1964 SC 207 to highlight that the expression 'notwithstanding anything contained in any other law' implies that the provision in the Immunity Act will have overriding effect to any other contrary provision that may be found in any other enactment and thus the assessee is entitled to full immunity with regard to the gift received from NRE account. He also relied upon the decision of FERA Board in the case of Ramesh C. Mehta vs. Directorate of Enforcement (1999) 104 Taxman 421 (FERAB) wherein the issue regarding the immunity available to the 'recipient' and also Mr. Vinod Goel was considered in detail. The learned counsel has taken us through the reasons given by the CIT(A) to highlight that certain vital issues were not considered by the CIT(A) in coming to the conclusion that the assessee is not entitled to immunity. Adverting our attention to para 8 of the CIT(A)'s order, the learned counsel submitted that the learned CIT(A) has laid more stress on the observations of the Hon'ble Patna and Bombay High Courts though the CIT(A) admits that the observations therein have no direct application to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the CBDT having given assurance to the public, in its circular No. 611 dt. 30th Sept., 1991, it operates as a promissory estoppel and the Departmental authorities are not justified in initiating reassessment proceedings and to make rowing inquiries merely on the basis of suspicion and surmises, without having any authentic material on record to show that assessee has not, in fact, received a gift from Mr. Vinod Goel. He also relied upon the decision in the case of UCO Bank vs. CIT (1999) 154 CTR (SC) 88 : (1999) 237 ITR 889 (SC) in support of his contention that the circulars issued by CBDT are binding on the Revenue authorities. With regard to the observations made by the Hon'ble Patna High Court, the learned counsel submitted that the decision in that case was in connection with prosecution matter and there were several distinguishing features and thus it has no application to the case on hand. He further submitted that the observations of the Hon'ble Bombay High Court in Review Petition No. 22/95 are not applicable to the case on hand. He has taken us through the decision of the Hon'ble Bombay High Court and in particular following observations in para 5 of the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Engineering (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) at 320. He also referred to pp. 67 and 118 of the paper book No. I to highlight that the only question before the Hon'ble Bombay High Court was with regard to the justification of FERA authorities in keeping the remaining bank accounts frozen. Thus, the observations of the Hon'ble Court were not connected with the matter under review and thus it has no binding value. He has also referred to pp. 82 at 88 [Goodyear India Ltd. & Ors. vs. State of Haryana & Anr. & State of Maharashtra & Anr. (1991) 188 ITR 402 (SC)], pp. 89 at 90 (1975) 1 SCC 794] and pp. 91 @ 104 [CWT vs. Karan Singh & Ors. (1993) 110 CTR (SC) 221 : (1993) 200 ITR 614 (SC)] of the paper book-II in support of his contention that a stray sentence of a casual remark cannot be treated as a decision. He also submitted that even the learned CIT(A) was not sure as to whether the decisions of the Hon'ble Bombay High Court or Patna High Court have any direct application, because of the use of the expression "indirectly", in p. 23 of his order. He also submitted that the learned CIT(A) has not given any credence to the fact that the assessee's bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India vs. G.M. Kokil & Ors. (1994) Supp SCC 196. (c) S.I. Corporation (P) Ltd. vs. Board of Revenue followed in (a) above (2) Exactly identical facts (only beneficiary different) and it was held that all adjudicating authorities under all Acts are precluded from conducting any investigation/enquiry. Strong, heavy and extensive reliance on this decision (1999) 104 Taxman 421, 431 following its earlier decision in Ramnik H. Karia (Appeal No. 76-77 of 1995). Other decisions to same effect are: (a) dt. 30th June, 1987 (b) dt. 2nd Dec., 1987 following (a) above. (3) In similar vein is the Circular No. 611 dt. 30th Sept., 1991-Press Release dt. 1st Oct., 1991 issued by Min. of Fin. in this respect. These are binding on the Department. Reliance is placed in this connection on: (a) Navnitlal C. Javeri vs. K.K. Sen, AAC (1965) 56 ITR 198 (SC). (b) UCO Bank vs. CIT (c) Press Release being contemporaneous exposition is also relevant as per K.P. Varghese vs. ITO & Anr. (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC). (4) Object was to attract large inflow of foreign exchange to meet difficult balance of payments situation [Finance Minister's speech] and objects and reasons for intr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case: (b) In fact Ramesh Mehta's case has been approved by the Patna High Court wherein Ramnik Karia's decision dt. 30th June, 1997 which has been followed in 104 TM 421 has been specifically and categorically held to be correct in law by the Patna High Court. It held that in that particular fact situation (FERA Board's decision dt. 30th June, 1987 which is squarely applicable in the instant case), no other interpretation would have been possible. The appellant heavily and strongly relies on para 3 of the judgment to distinguish Patna's case. (c) In Patna's case facts were yet to be found, whereas in the appellant's case on investigation he has been exonerated: (d) Huge public money amounting to thousands of crores of rupees have been swindled from Animal Husbandry Department and part of the money has been suspected to have gone abroad. No such question in appellant's case. Patna's case concerned itself with prosecution under Indian Penal Code and Prevention of Corruption Act, 1988 which does not enjoy of immunity under s. 3 of Immunity Act, 1991. (f) No FERA proceedings against the instant appellant. (V) Mumbai High Court's decision in Review Petition No. 22 of 1995 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (1995) 216 ITR 811 (Bom) only recorded reasons can be looked into: (c) CIT vs. Sukhlal Ice Cold Storage Co. (1992) 96 ITR 562, 563 (All). VII. Reopening not valid for following reasons: (a) Third party's retracted statement under FERA cannot give reason to believe inasmuch as FERA and IT Act operate in different fields. That too a third party's confession which has been retracted [Coca Cola Export Corp. vs. ITO & Anr. (1998) 146 CTR (SC) 250 : (1998) 231 ITR 200 (SC)]. (b) Does not satisfy conditions precedent regarding reason to believe: (i) Words are "reason to believe" not "reason to suspect" [ITO & Ors. vs. Lakhamani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC)], Bhimraj Panna Lal vs. CIT (1957) 32 ITR 289 (Pat) affirmed in Bhimraj Pannalal vs. CIT (1961) 41 ITR 221 (SC). (ii) Postulates existence of reasons not a purely subjective satisfaction. The form of decision and belief to be formed as not the mind of AO. But there must be existence of reasons to found the belief. Belief must be held in good faith, and not a mere pretence [Calcutta Discount Co. Ltd. vs. CIT (1961) 41 ITR 191 (SC)]. Belief must be of an honest and reasonable person, but not based on goss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (f) Above all, the appellant relies on the written submission set out at pp. 112, 113, 114, 115, 122, 123, 124, 125, 126 and 127 in this connection. (IX) Phoolchand Bajrang Lal vs. ITO (1993) 113 CTR (SC) 436 : (1993) 203 ITR 456 (SC) distinguished as inapplicable: (a) Letter from creditor in that case confessing bogus nature of cash credit was specific, definite and reliable information. No such specific, definite and reliable information is available in appellant's case. The admission of Sanjiv Goel is too general and retracted within 10 days at the earliest opportunity. Information is vague, remote, indefinite and far streched and therefore decisions in Chhugamal Rajpal vs. S.P. Chaliha and Lakhamani Mewal Das are more applicable. (b) No immunity question was involved in (1993) 203 ITR 456 (SC); (c) Loan was raised in cash and repaid in cash in (1993) 203 ITR 456 (SC), whereas in appellant's case these are cheque transactions; (d) No retraction in (1993) 203 ITR 456 (SC) as in appellant's case (e) Loan transaction to be distinguished from remittance; (f) The Court itself construed the circumstances of (1993) 203 ITR 456 (SC) As "tell-tale' set out at p. 467 of 203 ITR. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the appellant relies on p. 84 of that report. XIII. Addition of premium of Rs. 1,79,900.00 (i) Without prejudice as per Sanjiv Goel's statement, the alleged premium charges is 10 per cent and not 30 to 35 per cent. (iii) Appellant relies upon submission made to CIT(A). XIV. Additions based on surmise, guess and conjecture, not sustainable: (a) Dhakeshwari Cotton Mills vs. CIT (1954) 26 ITR 775 (SC). (b) Lalchand Bhagat Ambicaram vs. CIT (1959) 37 ITR 288 (SC). XIV. All the above contentions are independent and without prejudice to one another. XV. The appellant craves leave to make further submissions, if necessary." 10. The learned Departmental Representative, on the other hand, submits that the AO had sufficient reasons to believe that the assessee has not received gift from a non-resident Indian. The fact that the assessee claimed to have received a sum of Rs. 5,14,000 as gift from a person whom he never knew or met, proves that the gift is not genuine. He has also submitted that the case law relied upon by the learned Authorised Representative with regard to the scope and ambit of s. 147 of the IT Act, in the matter of reopening of assessment proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before the CIT(A) wherein the assessee submitted that the premium cannot exceed 10 per cent. 12. Regarding immunity, the learned Departmental Representative contended that in order to enjoy immunity it has to be shown that the assessee received the gift in foreign exchange remitted by an NRI whereas, in the instant case, the facts show that assessee cannot be treated as a "recipient", within the meaning of the Immunity Act. Adverting our attention to p. 5 of the paper book, the learned Departmental Representative submits that the return of income filed by assessee shows that he has no business income and he has no financial status. It is difficult to believe that he received a gift of Rs. 5 lakhs from an unknown person. The surrounding circumstances and the material gathered by FERA authorities as well as the AO also highlighted that it was not a remittance of foreign exchange but the local cash was converted into foreign exchange and such amount was deposited in the NRE account and given to the assessee and it was a fraudulent transaction. When the assessee's case does not fall within the four corners of immunity scheme, the tax authorities would be justified in making further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and 73 of the paper book-I to highlight that the Court has considered the facts in detail in coming to the conclusion that the parties have chosen to suppress material facts and the material placed before the Court indicates that Mr. Vinod Goel has not remitted foreign exchange. In particular, he referred to the observations made in para 6 of the order of the Bombay High Court which are extracted herein for immediate reference: "The definition of 'recipient' refers to a person receiving any remittance under Chapter II of the said Immunities Act. However, 'remittance' as defined in s. 2(b) means remittance made in foreign exchange by any person resident outside India to a person resident in India, in the form of drafts, traveller's cheques, cheques drawn on banks situated outside India etc. The said definition, in our opinion does not cover a situation which is before us viz. that a foreign citizen entering the country with foreign currency, choosing not to declare the same and depositing the same in a NRE account. As far as the deposit of the said amount supposedly brought by the person is concerned. Dr. Chandrachud, took us through the provisions of the said manual. Rule 7D.5 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC). He also taken us through the detailed order of the CIT(A) and strongly relied upon the same. 14. Joining the issue, the learned Authorised Representative contended that the retraction by Mr. Sanjeev Goel was not a subsequent event. Before reopening of the assessment Mr. Sanjeev Goel retracted his statement and thus the Departmental Representative was not correct in contending that the AO has reasons to believe that the assessee has not disclosed the correct income, based on the original statement of Mr. Sanjeev Goel. He further submitted that the Court has power/discretion to go into the weight or sufficiency of reasons. Adverting our attention to p. 123 of the paper book No. 2, the learned counsel submits that the Hon'ble Supreme Court observed that though sufficiency of reasons cannot be gone into, existence of reasons should be verified by the Court. He further submitted that the circulars are binding on the Revenue authorities and the earlier decisions of the Hon'ble Supreme Court were overruled by the later decision and in this regard he referred to the case of UCO Bank vs. CIT. He also submitted that the decisions cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except the interest income. It is not the case of the Revenue that he has any income generating activity from which income was earned and the same has escaped assessment. In 1997, when the AO initiated the reassessment proceedings, Mr. Sanjeev Goel having retracted his earlier statement the AO could not have merely based on his first statement without any other supporting material to reopen the assessment. At the stage when the reasons were recorded for reopening the assessment the AO had no material to prima facie show that gift given to the assessee was also not genuine. Neither the first statement of Mr. Sanjeev Goel nor the letter of FERA authorities pinpoint that the gift received by assessee is not genuine. In the case of Coca Cola Export Corpn. vs. ITO the Hon'ble Supreme Court observed that the decision taken by different Departments exercising powers under different enactments cannot constitute information to the ITO for the purposes of reopening assessment to give him a reason to believe that income chargeable to tax had escaped assessment. In circular No. 611 dt. 30th Sept., 1991, the CBDT assured in paras 2, 5 and 7 of its said notification and also in reply to question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the non-resident Indian or the overseas corporate body owning the Bonds as well as the person resident in India to whom a gift of such Bond is made, will not be required to disclose the source of the investment in such Bonds. For the reason, and in view of the specific provision in s. 6(1)(b) of the Act barring any inquiry or investigation under the direct tax laws merely on the ground of owning such Bonds, the tax authorities cannot initiate any proceedings for levy of gift-tax on the non-resident owner of such Bonds." In the light of the decision of the Hon'ble Supreme Court in the case of UCO Bank, the circulars issued by the CBDT are binding on the Department and unless there is positive evidence to show that the assessee's case is not covered by the Immunity Act, reopening is not permissible under s. 148 of the Act. The order of the Hon'ble Bombay High Court in the review petition and other material which were considered by the tax authorities would only prima facie show that the remittance of gift was not in convertible foreign exchange but the Court has made it clear that the views expressed in the said order should not prejudice the proceedings pending in any forum, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
