The DCIT, Indore V. Shri Darpan Aanand, Indore

ITA 218/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2763 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 01-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH; P K MISHRA DRS
• Assessee Lawyers: M C MEHTA; HITESH CHIMNANI CAS
• Keywords: Gift

Judgement Text

PAGE 1 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ABHPA2452N I.T.A.NO. 218/IND/2009 A.Y. : 2004-05 DY. CIT, SHRI DARPAN ANAND, 1(1), VS 36, BADA SARAFA, INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.K. SINGH, AND SHRI P.K. MISHRA, DRS RESPONDENT BY : SHRI M. C. MEHTA AND SHRI HITESH CHIMNANI, CAS DATE OF HEARING : 28.6.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A)-I, INDORE, DATED 20.02.2009, FOR THE ASSESSM ENT YEAR 2004-05. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE DEC ISION OF THE CIT(A) IN DELETING THE ADDITION OF RS.65,14,276/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED GIFT OF RBI RESU RGENT BOND. GROUND PAGE 2 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. NOS. 2 TO 8 ARE IN THE NATURE OF ARGUMENTS, HENCE, WILL BE DEALT WHILE DISPOSING OF GROUND NO.1 AND NO SPECIFIC DECISION SHALL BE GIVEN THEREON. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE RECEIVED TWO GIFTS FROM ONE SHRI HARISH WADHWA, AN N.R.I. IN THE FORM OF RE SURGENT INDIA BOND WORTH US $ 50,000 EACH. THE ASSESSEE CLAIMED TO HAV E RECEIVED THE GIFTS OF THESE TWO BONDS ON 16.6.2003, WHICH WERE ORIGINA LLY PURCHASED BY SHRI WADHWA ON 31 ST OCTOBER, 1998. THE ASSESSEE ALSO GOT THESE BONDS ENCASHED PREMATURELY IN THE YEAR UNDER CONSIDERATIO N. THE AO, HOWEVER, MADE DETAILED ENQUIRIES TAKING DUE FROM MODUS OPERA NDI OF BUYING SUCH RESURGENT INDIA BONDS BY VARIOUS ASSESSEES BY INVES TING THEIR UNDISCLOSED INCOME AS REPORTED IN ECONOMIC TIMES. T HEREAFTER, THE AO ALSO TOOK NOTE OF VARIOUS JUDICIAL DECISIONS, PARTI CULARLY THE DECISION OF THE TRIBUNAL IN THE CASE OF SMT. RAJRANI GUPTA VS. DY. CIT, AS REPORTED IN 72 ITD 155 AND THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF JAWAHARLAL OSWAL AS REPORTED I N (2004) 190 CTR ( P & H) 56, TO HOLD THAT SUCH GIFTS WERE NOT GENUINE. THE AO ALSO TOOK NOTE OF THE PROVISIONS OF SECTION 56(2)(V), WHICH WERE B ROUGHT ON STATUTE TO CURB SUCH TYPE OF PRACTICES. THE AO FURTHER HELD TH AT FACTOR OF NATURAL LOVE AND AFFECTION WAS ALSO ABSENT BETWEEN THE ASSE SSEE AND THE DONOR. ACCORDINGLY, HE MADE THE IMPUGNED ADDITION. AGGRIEV ED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO, AFTER CONSIDERING PAGE 3 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. THE FACTS BROUGHT ON RECORD BY THE ASSESSEE AND REL YING ON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF KAN CHAN SINGH VS. CIT, (2009) 221 CTR ALLAHABAD (456), DELETED THE ADDITIO N. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER :- 4.3.1 I HAVE CONSIDERED THE FACTS OF THE CASE, THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSING OFFICER AND THE APPELLANT. I HAVE ALSO PERUSED THE VARIOUS DOCUMENT S SUCH AS COVERING LETTER ADDRESSED TO THE STATE BANK OF INDI A REGARDING TRANSFER OF THE SAID BONDS IN THE NAME OF THE ASSES SEE WITH THE INTENTION OF THE GIFT DULY SIGNED BY THE DONOR, CO PY OF PASSPORT OF THE DONOR, COPY OF RESURGENT INDIA BOND S CERTIFICATES DULY TRANSFERRED IN THE NAME OF THE AS SESSEE, COVERING LETTER OF STATE BANK OF INDIA RECEIVED BY THE ASSESSEE AFTER TRANSFER OF THESE BONDS IN THE NAME OF THE AP PELLANT. IN THE LAST DOCUMENT, WHICH WAS ISSUED BY STATE BANK O F INDIA, THE MODE OF TRANSFER OF THESE RESURGENT INDIA BONDS IS CATEGORICALLY STATED AS GIFT. I HAVE ALSO GONE TH ROUGH A RECENT DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF KANCHANSINGH VS. CIT, (2009) 221 CTR (ALL) 456 W HICH HAS BEEN RELIED UPON BY THE APPELLANT. THIS DECISI ON IS DIRECTLY ON THE ISSUE OF GIFT OF RESURGENT INDIA BO NDS. IN THAT PAGE 4 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. CASE ALSO FOUR RESURGENT INDIA BONDS OF 10000 US DO LLARS EACH WERE GIFTED BY ONE NRI SHRI KISHORE CHHAGANLAL KAPADIA TO A RESIDENT INDIAN SHRI KANCHAN SINGH WHO WAS NO LONGER HIS R ELATIVE. THE HON'BLE COURT TOOK THE VIEW THAT THE ASSESSING AUTHORITY WAS NOT JUSTIFIED IN TREATI NG THE AMOUNT AS AN INCOME OF THE ASSESSEE FROM OTHER SOUR CES. THE REASONS FOR ARRIVING THAT CONCLUSION WAS AS UNDER : - (I) FOUR RESURGENT INDIA BONDS OF 10,000 US DOLLARS EACH WERE PURCHASED ON 1ST OCT.,2003 ON THE APPLICATION OF SRI K.C. KAPADIA, WHICH IS ESTABLISHED FROM THE APPLICATION SENT BY THE CHIEF MANAGER, 581, NRI BRANCH, MUMBAI. (II) SUCH BONDS COULD BE PURCHASED ONLY BY NRI AGAINST THE FOREIGN CURRENCY. ADMITTEDLY, THE BONDS WERE PURCHASED AGAINST US DOLLARS. THUS, THE SOURCE OF THE MONEY FOR THE PURCHASE OF THE BOND, BEING US DOLLARS IS OUTSIDE INDIA. (III) THE BONDS REVEAL THAT THEY WERE TRANSFERABLE PAGE 5 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. AND, ACCORDINGLY, THEY WERE TRANSFERRED IN FAVOUR OF THE ASSESSEE BY SRI K.C. KAPADIA. (IV) AS A RESULT OF TRANSFERS OF SUCH BONDS IN FAVOUR OF THE ASSESSEE, THE ASSESSEE RECEIVED THE MATURITY AMOUNT FROM THE SBI AND CREDITED IN HER ACCOUNT. LETTER OF THE CHIEF MANAGER, SBI, NRI BRANCH, MUMBAI, DT. 28TH 'FEB., 2006, CONFIRMS THE TRANSFERS BY WAY OF GIFT TO THE ASSESSEE BY SRI K.C. KAPADIA . (V) UNDISPUTEDLY, IN PURCHASING THE FOUR BONDS THE INVESTMENTS WERE MADE ON 1ST OCT., 1998, AND NOT IN THE YEAR UNDER CONSIDERATION AND IN THE YEAR UNDER CONSIDERATION, NAMELY, IN THE ASSESSMENT YEAR 2004-05 ONLY THE MATURITY AMOUNTS OF THE BOND WERE RECEIVED. (VI) THUS, SO FAR AS THE YEAR UNDER CONSIDERATION IS CONCERNED, THE SOURCE AND NATURE OF DEPOSIT ARE FULLY ESTABLISHED AND THE QUERY WITH REGARD PAGE 6 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. TO THE INVESTMENT MADE IN PURCHASING THE BONDS COULD BE MADE ONLY IN THE FINANCIAL YEAR 1998-99 RELEVANT TO THE ASSESSMENT YEAR 1999-2000 AND NOT IN THE YEAR UNDER CONSIDERATION . (VII) AFTER THE AMENDMENT IN S. 5(IIIE) OF THE GT ACT BY THE FINANCE (NO. 2) ACT OF 1991, GIFT COULD BE MADE TO THE PERSON OTHER THAN RELATIVES ALSO. THE OMISSION OF THE WORD 'RELATIVE' IN THE SECTION SHOWS THAT THE AMENDMENT WAS MADE TO PROMOTE THE GIFT BY NRI TO THE PERSONS OTHER THAN RELATIVES TO ENCOURAGE INFLOW OF FOREIGN MONEY IN INDIA THROUGH GIFTS. (VIII) . SRI. K.C. KAPADIA, BY CONFIRMATORY LETTER DT. 8TH FEB., 2006 DULY NOTARIZED BY NOTARY PUBLIC OF NEW JERSEY, HAS CONFIRMED THE GIFT OF FOUR SUCH BONDS. THE LETTERS WRITTEN BY THE ASSESSING AUTHORITY WERE RETURNED UNSERVED WITH THE REMARK 'NOT DELIVERABLE AS ADDRESSED UNABLE PAGE 7 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. TO FORWARD' DOES NOT MEAN THAT SRI K.C. KAPADIA, WAS NOT TRACEABLE AND WAS NOT IN EXISTENCE. THERE MAY BE SO MANY REASONS THAT THE LETTER COULD NOT BE DELIVERED. MERELY BECAUSE THE ASSESSEE COULD NOT TELL ANY OTHER ADDRESS OF SRI K.C. KAPADLA, IT CANNOT BE INFERRED THAT SRI K.C. KAPADIA WAS/IS NOT IN EXISTENCE AND HIS IDENTITY IS DOUBTFUL. (IX) THE APPLICATION MOVED BY SRI K.C. KAPADIA FOR THE PURCHASE OF FOUR BONDS WITH THE S8I, THE ISSUE OF THE BONDS IN THE NAME OF SRI K.C. KAPADIA AGAINST US DOLLARS IS BY ITSELF AN EVIDENCE TO PROOF THE IDENTITY OF SRI K.C. KAPADIA. THE HON'BLE COURT TOOK THE VIEW THAT THERE WAS NO R EASON TO DOUBT THE GENUINENESS OF THE GIFT BY SHRI K. C. KAP ADIA TO THAT ASSESSEE. IN THE PRESENT APPEAL, THE FACTS ARE SIMI LAR. IN VIEW OF THE AVAILABLE PASSPORT AND THE FACT THAT STATE B ANK OF INDIA HAD ALLOTTED RESURGENT INDIA BONDS TO SHRI HARISH W ADHWA IN THE YEAR 1998 AGAINST THE FOREIGN CURRENCY, THE EXI STENCE AND THE CREDITWORTHINESS OF SHRI WADHWA CANNOT BE DOUBT ED. THE PAGE 8 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. LOVE AND AFFECTION FOR GIVING THE GIFT NEED NOT EMA NATE FORM THE FRIENDSHIP OR RELATIONSHIP ONLY. PRIOR TO AMEND MENT BY FINANCE ACT ( NO.2) OF 1991. NRI COULD MAKE GIFT OF BOND ONLY TO RELATIVES BUT BY THE FINANCE ACT (NO.2) OF 1991 , THIS RESTRICTION HAS BEEN TAKEN AWAY. THE OMISSION OF TH E WORD RELATIVE IN THE SECTION 5(IIE) OF THE G. T. ACT S HOWS THAT THE AMENDMENT WAS MADE TO PROMOTE THE GIFT BY NRI TO TH E PERSON OTHER THAN RELATIVES TO ENCOURAGE IN FLOW OF FOREIG N MONEY IN INDIA THROUGH GIFT. THUS, IT WAS NOT NECESSARY THAT NRI COULD MAKE GIFT OF BONDS TO THE RELATIVES ONLY. THERE IS NO EVIDENCE TO SUPPORT THE AOS VIEW THAT EQUIVALENT AMOUNT HAD PASSED ON ASSESSEE TO SHRI HARISH WADHWA. HAVING CONSIDERE D THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND FOLLOWI NG THE DIRECT DECISION AVAILABLE ON THE ISSUE I THE CASE O F KANCHAN SINGH VS. CIT (2009) 221 CTR (ALL) 456, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN TREATING THE MATURITY AMOUNT O F RS. 65,14,276/- OF THE TWO RESURGENT INDIA BONDS AS AN INCOME OF THE APPELLANT FROM OTHER SOURCES. ACCORDINGLY, THE ADDITION OF RS. 65,14,276/- ON THIS ISSUE IS DELETED. 5. THE LD. SENIOR D.R. NARRATED THE FACTS AND PLACED S TRONG RELIANCE ON THE ORDER OF THE AO, WHEREAS THE LD.COUNSEL FOR THE ASSESSEE BESIDES PAGE 9 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. REITERATING THE SUBMISSIONS MADE BEFORE THE LD.CIT( A), ALSO PLACED STRONG RELIANCE ON THE ORDER OF LD.CIT(A). IT WAS ALSO CO NTENDED THAT THE TRIBUNAL IN THE CASE OF SHRI PRANAV KUMAR JHAVAR & OTHERS IN I.T.A.NOS. 521, 522 & 528/IND/2007 FOLLOWED THIS DECISION OF T HE HON'BLE ALLAHABAD HIGH COURT AND DELETED THE ADDITION. 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 7. IT IS NOTED THAT THE ASSESSEE HAS RECEIVED GIFTS OF TWO RESURGENT INDIA BONDS FROM AN NRI AND SUCH BONDS ARE TRANSFER ABLE BY WAY OF GIFTS ONLY ONCE AND THAT TO A RESIDENT INDIAN AS PER THE SCHEME OF RESURGENT INDIA BONDS, THE IMMUNITY FROM TAXATION IN THE HAND S OF THE DONEE IS ALSO AVAILABLE. WE ALSO FIND THAT THE RELEVANT DOCUMENTA RY EVIDENCES HAVE BEEN FILED, SO AS TO ESTABLISH THE FACT OF GENUINEN ESS GIFT. WE ARE FURTHER OF THE VIEW THAT THE DECISION OF THE HON'BLE ALLAH ABAD HIGH COURT IN THE CASE OF KANCHAN SINGH VS. CIT (SUPRA) STRONGLY SUPP ORTS THE CASE OF THE ASSESSEE. IN THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT THERE IS NO MERIT IN ALL THE GROUNDS RAISED BY THE REVENUE. THEREFOR E, THE SAME ARE DISMISSED. PAGE 10 OF 10 -. I.T.A.NO. 218/IND/2009 SHRI DARPAN ANAND, INDORE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH JUNE, 2010. CPU* 28296