1999-VIL-104-ITAT-CHD

Equivalent Citation: ITD 071, 324, TTJ 071, 240,

Income Tax Appellate Tribunal CHANDIGARH

Date: 29.01.1999

JAWAHAR LAL OSWAL.

Vs

ASSISTANT COMMISSIONER OF INCOME-TAX.

BENCH

Member(s)  : R. M. MEHTA., B. S. SALUJA.

JUDGMENT

Mehta - All these appeals were heard together as they involved a common issue. They are being disposed of by means of a consolidated order for the sake of convenience.

2. Taking up the cross appeals of Shri Jawahar Lal Oswal, the issue pertains to the taxability of a sum of Rs. 1,24,24,864 being the equivalent of US $ 4,00,000 purported to have been received as gifts in the names of his daughters, namely, Monica Oswal and Ruchika Oswal (US $ 2,00,000 each).

3. The brief facts are that the alleged gifts were received in U. K. by the assessee on behalf of his two daughters; 2 lakh dollars each through a/c payee drafts from one Shri B. P. Bhardwaj and from one Shri O. S. Gill, both stated to be residents of U.K. and thereafter these drafts were credited in the bank accounts of the daughters in India. The AO asked the assessees to prove the financial capability of the alleged donors and on his own he conducted enquiries through the CBDT, New Delhi, who in turn approached the Inland Revenue, U.K. The AO also asked the assessee to produce the alleged donors and in compliance Shri O. S. Gill was produced and his statement was recorded by the AO whereas the other alleged donor, namely, Shri B. P. Bhardwaj, was not produced. According to the AO, the assessee could not prove the financial capability of the alleged donors since copies of their bank accounts and tax assessment orders were not filed. In coming to the same conclusion the AO also took into account the investigations conducted by the Inland Revenue, U.K. noting with specific reference to the case of Shri B. P. Bhardwaj that the funds were provided by one Mr. Varinder Sharma stated to be a resident of Moscow. This led the AO to conclude that Shri Bhardwaj was not the donor but he had been used as an 'instrument' for delivering the draft from Mr. Varinder Sharma to the assessee i.e., Shri Jawahar Lal Oswal. We may mention at this stage that the AO gave a specific opportunity to the assessee to prove the financial capability of Shri Varinder Sharma by furnishing necessary evidence and also informed him that both the demand drafts through which the alleged gifts were given had consecutive serial numbers and were issued by the same bank in U.K. and other 'facts and circumstances' were also identical. The AO, in fact, asked the assessee to show cause as to why the alleged gifts be not treated as 'unaccounted money' and taxed in assessee's hands as his 'concealed income'. In response, the assessee filed a written reply contending mainly:

1. It was not possible to comment on the financial capability of Shri Varinder Sharma or how the amount came to be received by Shri B. P. Bhardwaj, the donor, from Shri Varinder Sharma.

2. Shri Bhardwaj was doing all types of international trading in U.K.

3. The first contact with the 'donor' was in some party and after that there was an endeavour to come close for mutual business benefit.

4. The information received from the Inland Revenue of U.K through the CBDT was inadmissible as evidence and should therefore be ignored. On the basis of the aforesaid reply, the AO concluded that it was unbelievable that Shri Varinder Sharma would provide the funds of 2 lakh US $ to Shri Bhardwaj for giving a gift to the assessee's daughter when the financial capability of these two persons had not been proved and further the assessee did not give details about his 'first contact' with the donor and since a 'business benefit' had been stressed upon by the assessee the concept of 'natural love and affection' was missing and the gift therefore could not be genuine.

4. The AO also reproduced the statement of Shri O. S. Gill in the assessment order and analysing the same held that not a single document was produced to prove the creditworthiness and referring to the statement of the assessee he noted that he (the assessee) had never stayed with the alleged donor ie., Shri O. S. Gill when he visited U.K. and moreover Shri O. S. Gill never attended the marriage ceremony of assessee's daughter to whom he 'is purported to have gifted the sum of 2 lakh US dollars'. Reproducing the statement of the assessee in the assessment order and talking into consideration all the other facts and circumstances the AO in the ultimate analysis added the sum of Rs. 1,24,24,864 under section 69A observing as under :-

"The analysis of the statement recorded above reveals that the donor's financial capability in both the cases have not been proved by the assessee. He has not filed even a single documentary evidence like bank account. Income-tax assessment order to prove the creditworthiness of the donor. While the assessee has stated that the donor Shri B. P. Bhardwaj but Sh. Bhardwaj has stated before the inland service U.K. that the funds were provided by Mr. Varinder Sharma of Moscow. This is contradictory position. The assessee has failed to prove the financial capability. In the same way, it could not be proved that the draft of Rs. 2 lakh U.S. Dollar alleged to have been gifted by Shri O.S. Gill has been received by Shri J. L. Oswal from the donor or from somebody else because both the draft numbers were in consecutive serial numbers. In view of the above facts, it becomes clear that in both the cases, neither the donors are genuine nor the transactions of gifts are genuine. Even the friendship could not be proved because the assessee admitted that he has never given any gift to any of the donors and he has never stayed with them. It may be mentioned here that Sh. J. L. Oswal might be visiting U.K. every year. The entire facts lead to the conclusion that the assessee has failed to prove the financial capability of the donors and the transactions of the gifts. He has simply introduced his own concealed income under the garb of the alleged gifts in the name of the daughters so that the funds of the family may remain within the family itself without paying any taxes thereon. In view of the above, I hold that the alleged foreign gifts received by the assessee on behalf of his daughters amounting to Rs. 4 lakh U.S. Dollars - Rs. 1,24,24,864 was out of the money owned by the assessee and in the absence of any satisfactory explanation, the same is deemed to be the income of the assessee under section 69A of the Income-tax Act, 1961. An addition of Rs. 1,24,24,864 being the unexplained money will be made in the taxable income of the assessee."

5. Being aggrieved, the assessee moved the CIT(A) reiterating the following :-

1. The gifts were received by his daughters on their forthcoming marriages and he had merely received the drafts on their behalf and handed these to them on return to India.

2. There was no evidence on record to show that he was the owner of the two drafts.

3. There was no burden on the assessee to prove the nature and source of the gifts as these were to his two major daughters and in any case this had been discharged by the assessee by furnishing copies of the memorandum of gifts and affidavits of the two donors whose identity stood proved.

4. The enquiries from the Inland Revenue, U.K. substantiated the claim made by the assessee.

5. As regards the capacity of the donors to make the gifts, Shri O. S. Gill was examined on oath by the AO and he admitted the fact of making a gift of 2 lakh dollars to Ms. Ruchika Oswal withdrawing the amount from his bank account with the Midland Bank. Further, Shri Gill was in receipt of salary of 1,20,000 pounds from a company in which he was the Managing Director and enquiries made by the Inland Revenue, U.K. had proved the aforesaid facts.

6. Shri B. P. Bhardwaj had also accepted making the gift and no further onus lay on the assessee. On the basis of the above submissions it was contended that provisions of section 69A were not attracted as these could be invoked only on the basis of the unimpeachable evidence and not on the basis of suspicion alone. In support of the arguments advanced reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Commissioner of Income-tax vs Daulat Ram Rawat Mall [1973] 87 ITR 349, and that of the Hon'ble Patna High Court in the case of Sarogi Credit Corpn. vs Commissioner of Income-tax [1976] 103 ITR 344. Reliance was also placed on certain unreported decisions of the ITAT as also those of the CIT(A). The Assessing Officer also filed written submissions before the CIT(A) reiterating that the financial capacity of the donors was not proved, that Shri Bhardwaj was not produced for examination and the fact that both the drafts bore consecutive numbers proved that there was only one person behind the whole transaction. Further, the presence of the assessee at the time of preparation of drafts was relevant and that Shri Varinder Sharma who provided the funds for one of the gifts happened to be an employee of Shri J. L. Oswal who had been carrying on business in Moscow. In concluding, the Assessing Officer urged that the addition be sustained.

6. The CIT(A) considered the submissions as also the facts on record and at the outset he observed that the two gifts were required to be examined separately as circumstances were different. He, therefore, took up the case of Shri B. P. Bhardwaj first confirming the view of the Assessing Officer stressing that it was Shri Varinder Sharma who was the donor as he had passed on the money to Shri Bhardwaj and the identity of Shri Sharma was not proved. He relied on the decision of the Delhi Bench of he Tribunal in the case of D. C. Rastogi (HUF) vs Assistant Commissioner of Income-tax [1996] 57 ITD 295 to come to the conclusion that he did distinguishing the decisions relied upon by the assessee on the ground that in those cases the donors were identified. The CIT(A), however, accepted the gift in respect of Shri O. S. Gill on the following grounds :-

1. The donor had been identified as he had appeared before the Assessing Officer who examined him on oath.

2. The Inland Revenue, U.K., made enquiries from the donor ie. Shri O. S. Gill who admitted having made a gift of 2 lakh US $ to Miss Ruchika Oswal. Nothing adverse or incriminating was found in the report sent by the Inland Revenue authorities of U.K.

3. A perusal of the statement of Shri Gill revealed that he was earning annual salary of 1,20,000 £ which by any standard was in the "higher bracket". Such a person had the capacity to make a gift of 2 lakh $ which worked out to about one year's salary.

4. Shri Gill stated that he had made the gift out of his bank account with the Midland Bank of U.K. from where a draft had been issued.

5. There was evidence on record to show that the donor had shifted to a bigger house immediately after making the gift and this gave ample indication of his financial capacity. In deleting the addition vis-a-vis the gift made by Shri Gill, the CIT(A) placed reliance on the judgment of the Hon'ble Delhi High Court in the case of Commissioner of Income-tax vs Mrs. Sunita Vachani [1990] 184 ITR 121, and also referred to an unreported decision of the Amritsar Bench of the Tribunal as also an order of his predecessor in the case of one Shri Raghbir Singh. We may, however, mention that copies of these unreported judgments have not been filed before us by either party and we therefore decline to offer any comments. The CIT(A) further observed that the claim of gift made by Shri O.S. Gill had been rejected by the Assessing Officer on the basis of a 'lurking doubt' in his mind whereas the evidence available on record revealed nothing incriminating including the report of the Inland Revenue authorities of U.K. The CIT(A) while allowing relief as a matter of abundant caution observed that if at any stage any incriminating material / report was received by the Assessing Officer which proved that Shri Gill had not made the gift or the source of funds remained unproved, the Assessing Officer would be at liberty to reopen the assessment under section 148 and make an addition. None of the parties before us offered any opinion on these observations of the CIT(A).

7. The Id. counsel for the first mentioned appellant stated that he ie. Shri J. L. Oswal had nothing to do with the drafts as his two major daughters were the recipients and the occasion being their respective marriages. According to him there was no evidence to show that the assessee had earned any money outside India. It was the argument that the burden had been wrongly placed on Shri Oswal but in spite of that the gift from Shri O. S. Gill had been satisfactorily explained. It was also pointed out that in the cases of the daughters, provisions of section 68 had been invoked and additions made on protective basis and whereas the CIT(A) had upheld applicability of the said section, he had deleted the same in the light of his decision in the case of Shri Oswal. According to Id. counsel, both the Assessing Officer and the CIT(A) in Shri Oswal's case had stated that the ownership of the drafts vested in Shri Oswal whereas he and his daughters categorically stated that the ownership vested in the daughters.

8. Referring to section 69A Id. counsel contended that Assessing Officer was to give a finding that the assessee was the owner since the assessee was denying such ownership and attributing the same to his daughters and for doing so the onus was on the Assessing Officer and this was to be discharged by bringing on record necessary evidence. In seeking to come out of the deeming provisions of section 69A the Id. counsel highlighted the following :-

1. There was no evidence to link ownership of the drafts with Shri Oswal.

2. There was sufficient evidence to show that the daughters were the owners of the drafts.

3. Even if onus was assumed by Shri Oswal, then the same had been satisfactorily discharged.

4. In case onus was wrongly placed on a party, then the consequential finding of fact stood vitiated in law.

5. No decision had been given by the first appellate authority as to who was the owner of the drafts and in the absence of such a finding and also by placing onus wrongly on Shri Oswal the subsequent findings stood vitiated.

9. Adverting to the paper book filed, the Id. counsel stated that there was ample evidence to prove that no part of the money belonged to Shri Oswal and that the gifts were irrevocable and the donors could not take back the money. It was also pointed out that the gifts has been given on the impeding marriages of the two major daughters of Shri Oswal, the first taking place in the month following and the other within a few months. A reference was also made to the fact that the two donors resided in different towns in England. Referring to the gift given by Shri B. P. Bhardwaj and in specific the allegation of the department that the funds had been provided by one Shri Varinder Sharma "of Moscow" the Id. counsel contended that this was an "arrangement" between Bhardwaj and Sharma and there was no evidence to prove that Shri Oswal was party to it. The Id. counsel in fact went to the extent of arguing that whether the evidence was satisfactory or otherwise, it could not be held by any stretch of imagination that the funds belonged to Shri Oswal. At this stage, the Id. counsel referred to the statement of Shri Oswal recorded by the Assessing Officer contending that no question had been asked suggesting ownership by Shri Oswal of the funds in question. According to the Id. counsel, whenever a cheque / draft received from a foreign country had to be encashed in India, the source of funds was required to be given to the Reserve Bank of India. According to him, the non-proving of the financial capacity of a donor could not lead to the automatic conclusion that the amount in question belonged to the donee or any other person and which in this case was the assessee, ie. Shri Jawahar Lal Oswal. The further submission was to the effect that the addition was based entirely on surmises and conjectures and in doing so the department had rejected all types of evidence including good evidence. On the assumption that the onus lay on the assessee the Id. counsel argued that all relevant evidence to discharge such onus had been filed. The Id. counsel at this stage took us to another aspect of the matter contending that one had to examine the entire issue from a practical angle rather than apply the analogy of cash credits as understood in section 68 of the Income-tax Act, 1961. According to the Id. counsel, the following facts were required to he kept in mind and considered :-

1. Distance between a donor residing abroad and the donee residing in India.

2. The practical difficulty in examining the donor under section 131 on the part of the income-tax authorities once again keeping in mind the distance factor; and

3. The filing of relevant information/evidence by the donors who resided outside India. Adverting back to the facts of the present case, the Id. counsel argued that nothing adverse had been found by the Inland Revenue of U.K. who had got in touch with the two donors and "examined" them in respect of the purported gifts given to the two daughters of Shri Jawahar Lal Oswal. The Id. counsel, in fact, went to the extent of arguing that if the gifts were not genuine as alleged by the revenue, then the money received in India could not be treated as belonging either to Shri Jawahar Lal Oswal or to his two daughters but he reverted back to his original arguments contending that the gifts were in fact genuine. Once again going back to the examination on the part of the Inland Revenue of U.K., the Id. counsel stated that no question was put to the donors on their financial capacity and he went on to argue that creditworthiness could not be equated with financial capability. In concluding his arguments on the factual and legal aspects, the Id. counsel argued that if the assessment in the case of Shri Jawahar Lal Oswal was not held to be good vis-a-vis the addition in question, then the assessments in the cases of the two daughters would automatically fail. The Id. counsel further stated that the testimony of Mr. Varinder Sharma stated to be a resident of Moscow was irrelevant as identity of the said person remained undisclosed and Shri Jawahar Lal Oswal did not know him at all.

10. Some other arguments advanced by the Id. counsel were as follows :-

1. The burden was squarely on the department to prove that section 69A was applicable and further the said section was not a charging section but only constituted a rule of evidence.

2. Source of source was not required to be proved and each case was required to be decided on its own facts.

3. The department had not discharged the onus to prove that donors were bogus or not financially sound whereas the assessee, Shri Jawahar Lal Oswal, had proved so although no such onus lay on him to do so. In support of the various arguments advanced, the Id. counsel placed reliance on the followings :-

1. Parimisetti Seetharamma vs Commissioner of Income-tax [1965] 57 ITR 532 (SC),

2. Commissioner of Income-tax vs Daulat Ram Rawatmull's case (supra),

3. Sarogi Credit Corpn.'s case (supra),

4. Shankar Industries vs Commissioner of Income-tax [1978] 114 ITR 689 (Cal),

5. Commissioner of Income-tax vs Mrs. Sunita Vachani's case (supra),

6. Commissioner of Income-tax vs Ram Narain Goel [1997] 224 ITR 180 (Punj & Har); and

7. Income-tax Officer vs Suresh S. Kalmadi 1988 SOT (TM), Poona Bench.

11. The Id. D.R. in respect of the appeal filed by the assessee vis-a-vis the addition sustained in respect of the alleged gift of Shri B. P. Bhardwaj stated at the outset that large amounts were coming into the country through NRI gifts and on verification many of these had been found to be bogus. The other main arguments of the Id. D.R. were to the following effect :-

1. The documents pertaining to the gift had been purchased by the same person as would be apparent from the print of the documents.

2. The value of both the drafts was the same i.e. $ 2 lakh and not in pound sterling although the alleged gifts were sent from the U.K.

3. The serial order of the two drafts was in succession and this also showed that these had been prepared by the same person at the same time.

4. There was nothing to show whether the drafts were prepared by debit to a bank account or by tendering currency.

5. Mr. O. S. Gill, one of the alleged donors, does not mention anything about his bank account although his statement is recorded by the Assessing Officer.

6. In respect of the alleged gift sent by Shri B. P. Bhardwaj, the funds had been provided by Mr. Varinder Sharma of Moscow.

7. The statement made by the two alleged donors to the Inland Revenue, U.K., had not been provided to the Income-tax Department in India and the facts had to be interpreted in the best possible manner.

8. Mr. Varinder Sharma of Moscow arranged the funds for the draft allegedly given by Mr. B. P. Bhardwaj and he also did every other act leading to the preparation of the draft. Further, Mr. Varinder Sharma was physically present in United Kingdom when the draft was prepared.

9. The onus in case of gift was heavier than a cash credit since the former was not required to be returned whereas the position was contrary in respect of the latter.

10. Mr. B. P. Bhardwaj was not the owner of the funds and Mr. Varinder Sharma not established to be so and therefore before conversion of the currency to a draft, somebody had the money and this was the person who was the actual owner.

11. The gifts had benefited the donees i.e., the two daughters of Shri Jawahar Lal Oswal whose marriage expenses were the liability of Shri Oswal.

12. The evidence on record proved that he was the person who obtained the drafts who had a beneficial interest.

13. Shri Oswal had business interest abroad and it could not be said that he had not earned the money outside India.

14. Gifts are always for love and affection but both these elements were absent in the present case since the alleged donors did not even attend the marriages.

15. No other gifts had been made by the donors to any other person including their own relatives and moreover the gifts in the present case were from strangers.

16. No doubt, relevant documents in the form of affidavits, gift deeds etc. had been placed on record but that was not sufficient since the contents of each of these documents had to be proved.

17. The person earning, namely, Shri O. S. Gill, annual salary of £ 1,20,000 in U.K. did not produce his bank account and nor whether he was assessed to tax and this was quite strange.

18. No final report had been received from the Inland Revenue, U.K. regarding the two alleged donors.

19. The CIT(A) should not have drawn a distinction between the facts of the two cases, namely, the gift by Shri O. S. Gill and Shri B. P. Bhardwaj since they were on equal footing and further no evidence had been tendered with reference to the alleged gift by Shri O. S. Gill that he had the requisite money to prepare a draft. Further, he had not produced his bank account at any stage of the proceedings. In support of the agreements advanced vis-a-vis the assessee's appeal as also the revenue's appeal in the case of Shri J. L. Oswal, the Id. D.R. placed reliance on the following decisions:-

1. D. C. Rastogi's case (supra),

2. Commissioner of Income-tax vs Durga Prasad More [1971] 82 ITR 540 (SC); and

3. Lall Chand Kalra vs Commissioner of Income-tax 22 CTR (P&H) 135. As regards the decisions cited by the Id. counsel for the assessee, the submission of the Id. D.R. was to the effect that these were distinguishable on facts. Referring specifically to the judgment of the Delhi High Court in the case of Mrs. Sunita Vachani (supra), the Id. D.R. pointed out that there was nothing adverse against the assessee in that case whereas in the present appeals, substantial material had been brought on record for drawing adverse inference.

12. Continuing his arguments the Id. D.R. contended that this could also be treated as a case of colourable device in the light of the judgment of the Hon'ble Supreme Court in the case of McDowell & Co. Ltd. vs Commercial Tax Officer [1985] 154 ITR 148 / 22 Taxman 11. As regards the argument of the Id. counsel about applicability of section 69A, the argument of the Id. D.R. was to the effect that on the assumption that this was not applicable, then section 69 could be applied where ownership was not required to be proved. According to him, the mention of a wrong section did not vitiate the assessment proceedings. The Id. D.R. also sought to highlight the fact that the assessee could not prove how Shri Varinder Sharma who had provided the funds to Shri B. P. Bhardwaj had come in possession of the money. As regards the argument of the Id. counsel about the onus, the argument of the Id. D.R. was to the effect that the same stood shifted to the assessee on the receipt of the report of the Inland Revenue, U.K. As regards the judgments of the Hon'ble Calcutta High Court in the case of Shankar Industries (supra), and that of the Hon'ble Patna High Court in the case of Sarogi Credit Corpn. (supra) relied upon by the assessee's counsel, the Id. D.R. submitted that these pertained to cash credits and hence distinguishable. In support of his further arguments, the Id. D.R. relied upon the following decisions :-

1. L. Hazari Mal Kuthiala vs Income-tax Officer [1961] 41 ITR 12 (SC),

2. Hukumchand Mills Ltd. vs State of Madhya Pradesh [1964] 52 ITR 583 (SC),

3. Isha Beevi vs Tax Recovery Officer [1975] 101 ITR 449 (SC),

4. Thalibai F. Jain vs Income-tax Officer [1975] 101 ITR 1 (Kar)

5. Commissioner of Income-tax vs Madurai Knitting Co. [1976] 104 ITR 36 (Mad); and

6. Commissioner of Income-tax vs National Builders [1991] 192 ITR 250 / 59 Taxman 483 (Delhi).

13. We may mention at this stage that since both the parties were in appeal before the Tribunal in respect of the two alleged gifts - the assessee in respect of the addition sustained in respect of one gift and the revenue in appeal in respect of the relief allowed in respect of the other gift and the parties having advanced arguments on both the grounds at the same time, the present order may contain and in fact it does a combination of facts pertaining to both the gifts, the arguments of the parties before the Tribunal and which in turn would mean an adjudication on both the grounds in the respective appeals simultaneously and in continuity.

14. In reply to assessee's appeal as also the revenue's appeal, the Id. counsel made the following submissions :-

1. No evidence had been adduced by the department to show that the money pertaining to the gifts generated from Shri Jawahar Lal Oswal.

2. Whichever section of the Income-tax Act was taken into a account, the addition could not be made.

3. The money received as gifts had not been spent on the marriages and on the assumption that no marriage ultimately took place it would not mean that the amounts sent by the two drafts ceased to be gifts.

4. The assessee had not earned any income outside India and there was no iota of evidence available with the department to prove so.

5. The beneficiary of the gifts was not Shri Jawahar Lal Oswal.

6. The identical language of the declaration made by the donors in U.K. did not make any difference as such declaration may have been provided by the same person. To the same effect were the arguments in respect of the affidavits filed by the donors and further submission was that an affidavit was a sacrosanct document unless rebutted by the other side by cogent evidence.

7. Every remittance from abroad could not be viewed with suspicion and each case had to be decided on its own facts.

8. The Inland Revenue, U. K. had made enquiries on request by the CBDT and nothing adverse had been found and in any case the copies of the relevant correspondence between the CBDT and the Inland Revenue, U.K. had not been placed on record.

9. The assessee was not a party to the enquiries conducted by the CBDT from its counterpart in U.K. and the documents already placed on record nowhere stated that the funds pertaining to the two gifts emanated from Shri Jawahar Lal Oswal.

10. The gifts had been given in dollars since it was a more stable currency then pound sterling, the latter taking substantial time to get converted into Indian rupees and moreover there was more price fluctuation in the case of pound sterling rather than dollars.

11. No tax planning was involved and the judgment of the Hon'ble Supreme Court in the case of McDowell & Co. Ltd. (supra), would not apply. Moreover, the decision in the case of McDowell & Co. Ltd. (supra) had been substantially watered down in the light of the subsequent decision of the same Court in the case of Commissioner of Wealth-tax vs Arvind Narottam [1988] 173 ITR 479 / 39 Taxman 368.

12. Even on the assumption that provisions of section 68 were made applicable rather than section 69A, various conditions stood satisfied, namely, (i) identity was proved the same having been tested through Government and (ii) creditworthiness was proved by filing an affidavit, memorandum of gift and there being a further verification by the Inland Revenue, U.K. The U.K. authorities were satisfied about the financial capability as they did not mention anything adverse in their report.

13. Nothing incriminating was found till date when the appeals were being heard.

14. Bank account of any individual was a secret document and a donor residing abroad could not be asked to furnish copies of his bank account. Further, the CBDT in its requisition to the Inland Revenue, U.K. could have asked them to obtain particulars of the bank account of the two alleged donors but which it did not do.

15. The department could not discharge its onus by negating good evidence produced by the assessee.

16. The onus in the case of a gift was lighter and not heavier as was argued by the Id. D.R.

The Id. counsel also sought to distinguish the judgments relied upon by the Id. D.R., more so the one of Delhi Bench of the Tribunal in the case of D. C. Rastogi (HUF) (supra). According to him, the distinguishable features were that section 68 had been applied in that case and the assessee in question did not furnish any information or evidence whereas in the present case provisions of section 69A had been applied and necessary information and evidence had been placed on record. Referring to the same judgment, the Id. counsel stated that onus in the case of a gift had been held to be lighter by the Delhi Bench of the Tribunal and not heavier as argued by the Id. D.R.

15. In a short reply to the arguments of the assessee's counsel vis-a-vis the cross appeal of Shri Jawahar Lal Oswal, the Id. D.R. contended that by taking the gifts abroad the assessee had avoided gift-tax. We may mention at this stage that the appeals were kept part heard to be taken on a subsequent date and we asked the parties to file the following documents before us :-

1. The Id. D.R. to file copies of the correspondence exchanged between the CBDT and the Inland Revenue, U.K.

2. The assessee to file the copies of the powers of attorney given by the two daughters of Shri Jawahar Lal Oswal authorising him to receive the gifts on their behalf in U.K; and

3. Copy of the Circular No. 9 dated 14-2-1968 mentioned in the declaration furnished by the two donees in respect of the inward remittance of foreign funds (see page 6 of the paper-book filed in the case of Shri Jawahar Lal Oswal).

16. On the subsequent date of hearing to which the appeals had been adjourned, the Id. D.R. placed on record copies of the correspondence exchanged between the CBDT and the Inland Revenue of U.K. whereas the Id. counsel for Shri Jawahar Lal Oswal filed photocopies of the two powers of attorney purported to have been given by Miss Monica Oswal and Miss Ruckika Oswal to their father authorising him to accept the alleged gifts in United Kingdom. As regards the copy of the circular referred to earlier, the Id. counsel stated that this was not traceable being a very old circular and in lieu thereof he filed a certificate dated 28-5-98 issued by the Allahabad Bank wherein it had been confirmed that a declaration in the prescribed form had to be submitted by all the persons who received convertible foreign exchange and deposited the same in their account irrespective of the nature of receipt. With reference to the aforesaid document, the Id. counsel stated that the correspondence between the CBDT and the Inland Revenue, U.K. did not reveal any further facts over and above what had already been considered by the tax authorities and he further went on to state that there was nothing adverse to the case of the present assessees in the exchange of letters. On a query from the Bench the Id. counsel for the assessee stated that the original power of attorney where not available. At this stage there came forth a submission from the Id. D.R. to the effect that the power of attorney purported to have been given by the daughters of Shri Jawahar Lal Oswal were not valid and he in fact went to the extent of questioning their existence altogether. This was done on the ground that there was no mention about the said power of attorney in the gift deeds. Referring to the copies of the powers of attorney filed, the Id. D.R. stated that the copies of the reverse had not been filed. The ultimate submission on the part of the Id. D.R. was to the effect that the gifts themselves were invalid as there was no proper acceptance. In continuing his arguments further, the Id. D.R. contended that since the gifts were not valid, the moneys became that of Shri Jawahar Lal Oswal who had converted these into drafts and delivered the same to his daughters through the guise of gifts from Shri O.S. Gill and Shri B. P. Bhardwaj. As regards the certificate from the Allahabad Bank appended at page 9 of the further compilation filed by the assessee's counsel, the Id. D.R. did not advance any argument.

17. In reply to the arguments of the Id. D.R., the assessee's counsel stated that the powers of attorney had not been fabricated as alleged by the revenue and referring to the certificates filed at pages 5 and 6 once again of the fresh compilation these being issued by the donors, he stated that the original powers of attorney had been delivered to the donors as stated by them. The Id. counsel in fact took exception to the line of argument advanced by the Id. D.R. stating that the validity of the gifts had not been questioned by the tax authorities and the department could not build up a new case before the Tribunal. The further submission was to the effect that the question of gift tax was not being decided in the present appeals as all that was required to be adjudicated upon was whether the two drafts received by the daughters of Shri Jawahar Lal Oswal emanated from the two NRI donors ie. S/Shri O.S. Gill and B. P. Bhardwaj or these were the moneys of Shri Jawahar Lal Oswal kept abroad. He, however, advanced the following further arguments in response to the submissions made by the Id. D.R.:-

1. In case the gifts were invalid, then the right to the moneys still vested in the donors and they could claim the same but this was not the case of the department as it had already accepted the validity of the gifts.

2. Even if the gifts were invalid, the source was still linked to the donors there being nothing in the documents filed by the Id. D.R. (reference to the correspondence between the CBDT and the Inland Revenue, U.K.) which would show that Shri Jawahar Lal Oswal was the owner of the moneys.

18. At this stage, we would like to set out the arguments advanced by the parties with reference to the appeals of the revenue filed in the cases of Miss Monica Oswal and Miss Ruchika Oswal. In the case of Miss Monica Oswal she filed a return declaring income of Rs. 2,93,360 and which was processed under section l43(1)(a). The Assessing Officer noticed the credit of" Rs. 62,12,432 in her bank account and on being asked it was explained that this was received as a gift from Shri B. P. Bhardwaj, an NRI being resident of U.K. The assessee was asked to explain the financial capacity of the donor along with the genuineness of the transaction but as observed by the Assessing Officer, the donor was not produced in spite of "opportunities provided". Even the bank account of the donor from where the funds had been withdrawn was not filed or for that matter the copy of the income-tax assessment order of the said person.

19. In further proceedings before the Assessing Officer it was submitted that the demand draft was received vis-a-vis the gift by the assessee's father Shri Jawahar Lal Oswal in U.K On further enquiries conducted by the CBDT through the Inland Revenue, U.K. it transpired that the "funds were provided" by one Shri Varinder Sharma of Moscow to Shri B. P. Bhardwaj who handed over the draft to Shri Jawahar Lal Oswal. The further discussion in the assessment order pertains to the examination of Shri Jawahar Lal Oswal under section 131 but we need not detain ourselves further on reiterating the facts which we have already discussed at length in the earlier part of the present order while dealing with the appeals of Shri Jawahar Lal Oswal. Taking note of the fact that the alleged gift from Shri B. P. Bhardwaj had been considered as deemed income of Shri Jawahar Lal Oswal under section 69A of the Act on substantive basis, the Assessing Officer made addition on protective basis in the case of Miss Monica Oswal repeating a similar addition in the case of Miss Ruchika Oswal on absolutely identical lines.

20. On further appeals, the CIT(A) passed leading order in the case of Miss Ruchika Oswal. According to the CIT(A), the addition apparently had been made by the Assessing Officer by resort to the provisions of section 68 of the Income-tax Act, 1961. It was also noted by him as a fact that the bank draft of $ 2 lakh was received by Shri Jawahar Lal Oswal, father of Miss Ruchika Oswal, and who in turn had passed on the draft to the daughter which was then deposited by her in her bank account. It was also noted by the CIT(A) that the assessee explained the nature and source of the receipt but her explanation was not found to be satisfactory by the Assessing Officer. He, however, went on to observe that the explanation had been rejected without sufficient justification and in opining so and ultimately concluding that provisions of section 68 were not applicable, the CIT(A) recorded the following findings of fact and reasons :-

"As mentioned above, the draft in question was received in U.K. by Sh. J. H. Oswal. Therefore, Sh. J. H. Oswal was in possession of the draft before it was credited in the account of the appellant. It is not a case of the Assessing Officer that there is no source of acquisition of the draft. The source is Sh. J. L. Oswal. It is Sh. J. L. Oswal who has to explain the circumstances under which he had come in possession of the draft and further that the receipt of the draft was a genuine transaction between him and the other person, Sh. O. S. Gill in this case. If Sh. Oswal is able to explain the genuineness of the receipt of draft, no addition would be called for in any of the cases. However, if Sh. Oswal is not able to explain the genuineness of the transaction of receipt of draft, addition would be called for in his hands and not in the hands of the appellant. Whether the transaction of gift is correct or not, this would not have any impact on the taxability of the amount in the hands of the appellant. So far as the appellant is concerned, she has explained the source of acquisition of the draft and the source in her case is the father. The Assessing Officer admits that the draft was received by the father. This way the source of credit in the account of the appellant is proved. Whether Sh. J. L. Oswal had any valid explanation to explain the acquisition or possession of draft in his hands is to be seen in the case of Sh. J. L. Oswal. During the course of the hearing of the appeal the Assessing Officer was specifically required to justify the impugned addition in the hands of the appellant. He had merely pointed out that the addition has been made on protective basis on the ground that the amount was found credited in the account of the appellant. In my view the crediting of the amount in the account of the assessee alone is not sufficient to make any addition under section 68 unless it is established that the nature and source of credit have not been proved. In this case, the draft in question was received by the father of the appellant when he was in U. K. The acquisition or possession of the draft by Sh. Oswal has not been doubted. If that be so, then it is Shri Oswal who has to prove the genuineness of the transaction, as the gift was allegedly made by his (Mr. Oswal's) friend. So far the appellant is concerned, she had discharged the onus by proving that the impugned amount was received through her father. The Assessing Officer has not been able to bring any evidence to connect the acquisition and source of draft with the appellant. As mentioned above, the matter was referred to the Inland Revenue Service of U.K. The Inland Revenue Service has not furnished any information on the basis of which the genuineness of the transaction could be doubted, Accordingly, I hold that the provisions of section 68 are not applicable in this case and no addition is called for in the hands of the appellant. The addition made by the Assessing Officer is, therefore, deleted."

21. The addition in the case of Miss Monica Oswal was also deleted by the CIT(A) referring to the views expressed by him in the case of her sister Miss Ruchika Oswal. We may mention that no appreciable arguments had been advanced by the Assessing Officer who had appeared before the CIT(A) and all that he had stated was that the assessment had been completed on protective basis in the case of the daughters the substantive additions having been made in the case of the father Shri Jawahar Lal Oswal. It is noted by us on a reference to the order passed by the tax authorities that the Assessing Officer in the case of Shri Jawahar Lal Oswal, Miss Monica and Miss Ruchika Oswal is the same by name and this is also the position in the case of the CIT(A).

22. The case of the revenue before us in the appeals of Miss Monica Oswal and Miss Ruchika Oswal was to the effect that applicability of section 68 was to be decided and according to the Id. D.R. the said section was applicable as a credit had been located in the "books of the assessees" and the onus to explain the same lay on them. It was submitted that credits in the bank account tantamounted to a cash credit under section 68. The Id. D. R., however, hastened to add that these arguments were without prejudice to the case of the department in respect of Shri Jawahar Lal Oswal and he further went on to plead that in case the addition was to be deleted in the case of Shri Jawahar Lal Oswal, then the additions in the cases of the two ladies be restored by the Tribunal converting them into substantive additions as the credits in their respective bank accounts had not been proved. In support of the arguments advanced, the Id. D.R. placed reliance on the following decisions :-

1. A. Govindarajulu Mudaliar vs Commissioner of Income-tax [1958] 34 ITR 807 (SC),

2. Dr. Surmukh Singh Uppal vs Commissioner of Income-tax [1983] 144 ITR 200 (Punj & Har),

3. Commissioner of Income-tax vs United Commercial and Industrial Co. (P.) Ltd. [1991] 187 ITR 596 / 56 Taxman 304 (Cal),

4. Nizam Wool Agency vs Commissioner of Income-tax [1991] 59 Taxman 187 / 193 ITR 318 (All),

5. Commissioner of Income-tax vs Precision Finance (P.) Ltd. [1994] 208 ITR 465 (Cal),

6. Commissioner of Income-tax vs Baishab Charan Mohanty [1995] 212 ITR 199 / 78 Taxman 183 (Orissa),

7. Commissioner of Income-tax vs K. Mahim [1995] 81 Taxman 222 / 213 ITR 820 (Ker) and

8. D. C. Rastogi (HUF) case (supra).

23. In rebutting the arguments of the Id. D.R., the Id. counsel for the assessees pointed out that no ground had been raised by the revenue in its appeals contending that the CIT(A) should have converted the protective assessments into substantive ones. The Id. counsel in fact stated a legal proposition to the effect that a protective addition could not be made by invoking section 68 of the Income-tax Act, 1961. According to him, a relationship of debtor and creditor should exist whereas the assessees, i.e. Miss Monica Oswal and Miss Ruchika Oswal, categorically stated that the moneys belonged to them and it was only in a case where they denied the ownership of the money that section 68 would come into play. It was the submission of the Id. counsel that the relevant section could only be section 69A. As regards the entries in the bank account, the Id. counsel placed reliance on the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income-tax vs Bhaichand H. Gandhi [1983] 141 ITR 67 / 11 Taxman 59, contending that these could not be treated as entries in the books of account for purposes of invoking section 68. It was also the further argument that both these sections were not interchangeable and where one applied, the other could not come into play. The Id. counsel in fact went on to point out that the arguments which were being advanced by the department in the cases of the two respondents went against its own case which had been argued in the appeals of Shri Jawahar Lal Oswal. According to the Id. counsel, there could be no protective assessment in case of deemed incomes which could only be brought to tax on the basis of facts and evidence and not on the basis of surmises, conjectures and suspicion. He in fact pointed out in respect of the present cases that a substantive assessment had been made in the case of Shri Jawahar Lal Oswal who stated that the money was not his but protective in the cases of the two daughters who categorically owned up the money. Referring to the scheme of sections 68, 69, 69A onwards, the Id. counsel argued that these were not charging sections laying down any statutory provisions and he reiterated that these could not be interchanged at the sweet will of the department. As regards the arguments of the Id. D.R. to the effect that the additions be made substantive in the cases of the daughters in case the Tribunal was pleased to delete the addition in the case of Shri Jawahar Lal Oswal, the Id. counsel argued that this was not a relevant factor as section 68 had been applied in the cases of the two daughters and there could be no two opinions that the said provisions were not at all applicable and the additions had been rightly deleted by the CIT(A).

24. In a further reply the Id. D. R. contended that section 68 did not stipulate relationship of a debtor and creditor as argued by the Id. counsel for the assessees and the provisions of the said section came into play as soon as a credit was found in the assessees' accounts. On the question of protective assessment, he stated that this was nowhere provided in the Income-tax Act but according to him, the logic behind such an assessment was the protection of the legitimate revenues of the State. We may, however, mention that no reported decisions were cited by the Id. D.R. in support of the aforesaid proposition.

25. We have examined rival submissions and also perused the orders passed by the tax authorities. The decisions cited at the Bar have also been considered as also the material on record to which our attention was invited during the course of the hearing. At the out set we would like to set out as follows section 69A which has been applied by the revenue authorities in the case of Shri Jawahar Lal Oswal :-

"69A. - Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year."

It is to be noted that the conditions precedent to the application of the provisions of the said section are (1) the money, bullion, jewellery or other valuable articles in question are not recorded in the books of account, if any, maintained by the assessee and (2) the assessee either offers no explanation as to the nature and source of acquisition or the explanation offered is, in the opinion of the AO, not satisfactory. Another important aspect of the provision is the use of the words "is found to be the owner" in the section which shows that the finding of articles etc. at the time of search does not automatically lead to the invoking of the provisions and a person has to be established as an "owner". Depending on the item found there is prima facie presumption that one who is found in possession of an article or thing is the owner thereof unless such presumption is rebutted by cogent evidence. The next important question is one of onus arid it is well-settled that the onus of proving the source of money, bullion, jewellery, article etc. is on the person who is treated to be the owner thereof. He may either prove that the asset in question did not represent any income or if it did then it was exempt from tax. In case he fails to adduce necessary proof, then the department would be entitled to treat it as "deemed income" under section 69A but this onus shifts to the revenue after necessary evidence is furnished contending that he is not the "owner".

26. So much for the provisions of section 69A but before we deal with these vis-a-vis the facts of the case we proceed to examine an argument of the Id. counsel i. e. the type of proof and evidence that an assessee would have to render to prove the nature of the sums received from abroad in the form of gifts etc. The subsequent discussion would be relevant whether section 69A is applied or the relevant provision is section 68. It was the submission of the Id counsel that the three conditions of (i) identity (ii) financial capacity and (iii) genuineness of the transaction were required to be relaxed to some extent keeping in view the distance between the donor and the donee and the practical difficulty faced by the Assessing Officer in issuing summons under section 131 and examining the donor and necessary recourse to be taken to the enquiries on Govt. to Govt. level and the assessee being unable to say anything on such enquiries made as he would not be in a position to cross-examine the person who had responded to the enquiries by a Govt. agency outside India.

27. We have given due consideration to the submissions of the Id. counsel and would at the outset observe that we are with him not on the relaxation of the three conditions but on the degree of evidence and proof that has to be given by an assessee. The provisions of section 68 or 69A as facts warrant are applicable whether funds have come from abroad or they have emanated in India. We are very clear in our mind that all the three conditions have to be fulfilled but considering (1) that adverse inference under given circumstances may not be drawn in case the donor abroad does not appear before the Assessing Officer based in any part of India, (2) the material or evidence collected by a Government agency abroad and passed on to the tax department in India has to be confronted to the assessee fully well realising that the said Government agency had made enquiries as it deemed fit and these may not be on the lines which the tax authorities in India would make while confronting a donor or creditor located in India and (3) neither the Assessing Officer in India nor for that matter the assessee has any say in the enquiry made abroad, whether through the foreign Government or for that matter the Indian Embassy, High Commission, Consulate etc. In other words, both of them have to depend on the report sent from abroad and use it to their advantage or disadvantage of the other but on the same analogy an assessee cannot be heard saying that there should be a relaxation for him but strict rules be applied for the revenue. According to us both should have a level field.

28. In the present 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 Assessing Officer 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 2,00,000 was made to Miss Oswal 'on the occasion of her forthcoming marriage' on or around 22nd 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 Assessing Officer 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 Assessing Officer 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 Sharma was known to Shri Jawahar Lal Oswal as accepted by him in his deposition although the learned counsel contended otherwise but the allegation of the revenue is that he is an employee of Shri Jawahar Lal Oswal but no material to prove so was placed on record by them and Shri Jawahar Lal Oswal denied that Shri Varinder Sharma was his employee. The other allegation on the part of the revenue was that Shri Jawahar Lal Oswal was the Managing Director of certain companies which were carrying on business with Russia and these were the unaccounted funds of such business which were coming back in the form of gifts. This allegation according to us is entirely in the field of suspicion, surmises and conjectures for which there is no room while invoking a deeming provision which assumes a position different from what is obvious. No evidence was placed on record by the revenue. For all intents and purposes Shri B. P. Bhardwaj is treated as the donor as the gift has been given by him and this being an arrangement between him and Shri Varinder Sharma.

29.1 Another allegation on the part of the revenue was that Shri Varinder Sharma was physically present in the U.K. on the relevant date when the gift was received by Shri Jawahar Lal Oswal on the basis of the power of attorney but there is no evidence for this allegation, the assessee Shri Jawahar Lal Oswal denying and no such fact emerging from the enquiry made by Inland Revenue, U.K.

30. Coming to the two "gifts" in question, we will first take up the case of Shri O. S. Gill and see the nature of evidence placed on record which is as under :-

1. Memorandum of Gift dated 22-3-94 written in London confirming the gift of $ 2,00,000 to Miss Ruchika Oswal, daughter of Shri Jawahar Lal Oswal.

2. Copy of Bank A/c of Miss Ruchika Oswal with Allahabad Bank showing deposit of Rs. 62,10,442 equivalent of $ 2,00,000.

3. Copy of declaration of inward remittance sent to the Reserve Bank of India by Miss Ruchika Oswal.

4. Letter dated 14-3-96 sent by Shri O. S. Gill to the Assessing Officer along with affidavit sworn by him and duly notarised confirming the gift and giving all other relevant 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 Assessing Officer.

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 Shri 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 :

"1. The gift was given to Miss Oswal on the occasion of her forthcoming marriage. The amount given was $ 2,00,000.

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 Assessing Officer and his statement was also recorded. According to the Assessing Officer, the financial capability of Shri O. S. Gill was not proved as he did not file any evidence to prove his creditworthiness. The specific reference was to the copy of the bank account and income-tax assessment order. It must be appreciated that Shri O. S. Gill was on a visit to India and could not be carrying such documents with him expecting that he would be asked to file these with the Assessing Officers. On being asked he gave the following specific replies :-

"Q. : Please give name and address / designation of the officer with whom you are assessed to income-tax in U.K.

Ans : I do not have the name of the Assessing Officer. However my accountant knows the same.

Q. : Please let me know the bank account maintained in U.K.

Ans : I maintain account with Midland Bank, however, I don't remember the account number which is maintained by our account department.

Q. Have you brought with you the copy of your bank account out of which gift of 2 lac U.S. Dollars was made and can you produce any evidence in regard with to prove your creditworthiness.

Ans : No, I have not got copy of bank account since I was not asked to produce the copy and evidence in regard with creditworthiness."

30.2 In our opinion, the replies given by Shri O. S. Gill were those expected from a person placed in his position i.e. a NRI visiting India and deposing before the Assessing Officer about a gift made to an Indian citizen. The statement has to be read as a whole and conclusions drawn and in the present case these cannot be adverse as Shri O. S. Gill has stated all relevant facts on oath reaffirming the gift and also indicating amply his financial status ie. annual salary, shifting to a larger residence etc. No untruth or inconsistency has been pointed out by the Assessing Officer in the statement vis-a-vis the evidence placed on record.

30.3 Even in the case of Shri B. P. Bhardwaj, identical documents were filed the only distinguishing feature being the non-appearance of the said person before the Assessing Officer in India whereas Shri O. S. Gill the other "donor" deposed and his statement was recorded. As already stated by us the main fact which weighed in the case of Shri B. P. Bhardwaj was the role of Shri Varinder Sharma but we have already dealt with this aspect of the matter at length earlier in this order.

30.4 At this stage, we proceed to deal with some of the submissions of the Id. D.R. (see para 11 of this order) which in fact tantamount to casting doubts on the alleged gifts and these are:-

1. The documents pertaining to the gift had been purchased by the same person as would be apparent from the print of the documents.

2. The value of both the drafts was the same ie. $ 2, lakh and not in pound sterling although the alleged gifts were sent from the U.K.

3. The serial order of the two drafts was in succession and this also showed that these had been prepared by the same person at the same time.

4. There was nothing to show whether the drafts were prepared by debit to a bank account or by tendering currency.

5. Gifts are always for love and affection but both these elements were absent in the present case since the alleged donors did not even attend the marriages.

6. No other gifts had been made by the donors to any other person including their own relatives and moreover the gifts in the present case were from strangers."

30.5 As regards 1 and 3, there is no bar in law for a recipient of money, whether as a gift or as a cash credit, to suggest to the payer how the same should be sent to him and in fact assistance rendered or suggestions given by him in preparation of documents connected thereto "should not be viewed with doubt and suspicion as has been done in the present case. Basically, it is the person who receives the money who has to tender evidence and explanations to the tax authorities.

30.5-1 The preparation of the drafts from the same bank and having consecutive serial numbers is once again in the realm of doubt not leading to any adverse view on our part.

30.6 As regards item No. 2, the Id. counsel has already stated that dollar was a more stable currency and easily convertible than pound sterling and we do not find any basis to draw any adverse inference on this score.

30.7 As regards item No. 4, we have already dealt with this aspect of the matter while detailing the facts in respect of Shri O. S. Gill and in so far as Shri B. P. Bhardwaj is concerned, the enquiry was made by the Inland Revenue, U.K. and he apparently was not asked to give details of his bank account.

30.8 As regards item No. 14 the non-attending of the marriages by the alleged donors cannot once again be viewed adversely as even their attending would not have converted a non-genuine event, as held by the Assessing Officer, into a genuine one as this had to be tested on numerous other facts and considerations.

30.9 Referring to item No. 15, it is not necessary to show that a person has been making gifts in the past to prove the genuineness of the gift in question since on the facts of a case a single gift by a donor may be found genuine whereas a number of them by the same person may not satisfy the test of genuineness. Each gift has to be tested on its own facts.

31. The other points made by the Id. D.R. in para 11 of the present order have either been dealt with separately by us and those not adverted to are not relevant to the point at issue. We must, however, make one thing clear at this stage and that is the revenue cannot pick and choose a few facts to express an adverse opinion and it is necessary for them to appreciate all the facts together as also the evidence to arrive at a conclusion. In the present case it has been the former approach rather than the latter.

32. At this stage we would like to discuss the various authorities cited before us at the Bar by either side. These can be divided into three categories - the first pertaining to the provisions of section 68 which would become relevant in the cases of Miss Monica Oswal and Miss Ruchika Oswal as, admittedly, this is the provision of law which has been applied. The second category of decisions cited pertained to the question whether the invoking of a wrong section invalidates the addition itself since one of the arguments advanced before us on behalf of the department was that if in the case of Miss Monica Oswal and Miss Ruchika Oswal provisions of section 68 had been wrongly applied, then nothing prevented the Tribunal from confirming the addition by invoking the provisions of section 69A which was the section applied in the case of Shri Jawahar Lal Oswal or invoking section 69 in his case where ownership was not required to be proved. The third category of judgments referred to by the parties was with respect to onus and on whom it lay in a situation which was presently under consideration on the part of the Tribunal. We have thought it necessary to deal with only some of the judgments cited with a categorical observation that we have minutely pursued the other judgments also and there can be no quarrel with the propositions laid down by the Hon'ble High Courts and the Hon'ble Apex Court but we must add a word of caution and Le., these have been delivered on their own facts but while deciding the present appeals we propose to take into account the ratios laid down in the various judgments.

33. On the question of conversion of a wrong section invoked and canvassing that the addition be confirmed by reference to the correct section, it must be appreciated at the outset that we are dealing in the present appeals with two types of sections, namely a deeming section i.e., section 69A and one which is not so i.e., section 68. As already held by us earlier, the element of suspicion and doubt has to be ruled out while applying a deeming provision whereas in respect of section 68, the assessee has to satisfy three primary conditions, namely, identity, financial capacity and prove the genuineness of the transaction. In section 69A, the item found is deemed to be the income of the person in whose possession it is found and the onus is on him to tender all necessary evidence disclaiming ownership but subsequently he has to be proved as the owner of the asset found and the onus at this stage shifts to the revenue. We would now refer to the decisions cited dealing further with this matter afterwards.

34. On the question of conversion of a wrong section into the relevant one, the first decision relied upon by the Id. D.R. was that of the Hon'ble Supreme Court in the case of L. Hawri Mal Kuthiala (supra). This was a case concerning the jurisdiction of the Commissioner to direct a case to be assessed by a particular ITO and not the other one and, on the facts of the case, his order was held to be valid in law but this would not be applicable to the issue before us where the department is canvassing that an addition under section 68 be held to be good even for purposes of section 69A or the one made under section 69A be confirmed under section 69.

35. Another decision of the Hon'ble Supreme Court relied upon by the Id. D.R. was in the case of Hukumchand Mills Ltd. (supra). This judgment pertained to certain amendments in the law by issue of certain notifications without making mention of the particular section. The other issue under consideration was the repeal of a section by necessary implication although not specifically mentioned in the legislation in question. Their Lordships took the view that failure to mention the relevant section did not invalidate the notification and a vested right of appeal could be taken away either by express legislation or by legislation though it might not expressly repeal the vested right of appeal but which had the effect of such repeal by necessary implication.

36. The third judgment referred to was that of the Hon'ble Madras High Court in the case of Madurai Knitting Co. (supra). This was a case where the Tribunal took the view that in respect of an assessment order made prior to 1st April, 1962, the rectification order could be passed by the ITO only under section 35(1) of the Income-tax Act, 1922 whereas the ITO had passed the same under section 154 and the Tribunal accordingly cancelled the order. Their Lordships of the Hon'ble Madras High Court took the view that so long as the ITO had the jurisdiction to rectify the assessment order, he should be purported to have exercised his jurisdiction under the correct provision of law and the mere quoting of a wrong provision of law will not invalidate the order itself if it was otherwise within jurisdiction. Their Lordships accordingly decided the matter in favour of the revenue disagreeing with the Tribunal.

37. In the decision of the Hon'ble Delhi High Court in the case of National Builders (supra), the question was whether provisions of section 41(1) had been rightly invoked by the Assessing Officer. The Tribunal took the view that the said section was not applicable but the plea of the revenue contending that de hors section 41(1) the amount otherwise was taxable as revenue receipt was rejected. On these facts, their Lordships of the Delhi High Court were of the view that mentioning of a wrong provision did not mean that tax was not leviable where the income otherwise was assessable.

38. It may be seen that in all these judgments, the issues were entirely different and some of these pertained to rules, notifications and amendments in the Acts other than the Income-tax Act and quite unconnected with specific provisions relating to taxability of income under a particular head or from a definite source. Then again, none of these decisions deals with the applicability of a deeming provision which, as already expressed by us, has to be invoked on the basis of evidence and positive facts and not on surmises, conjectures, suspicion and doubt.

39. We now come to some of the decisions relied upon by the Id. counsel for the various assessees before the Tribunal. The first is that of the Hon'ble Supreme Court in the case of Parimisetti Seetharamamma (supra), and this deals with the question of burden and on whom it lies. The assessee in this case explained before the tax authorities that jewellery and cash received in the relevant years were in the nature of gifts made by the Maharani of Baroda. Relying on the admission of the assessee that she acted as the local agent of the Maharani for disbursing salaries to her servants and in a bill issued by a garage the assessee was described as private secretary of the Maharani and further observing that she had failed to place before the income-tax authorities all the evidence in support of her contention, the Tribunal held that what was given to the assessee by the Maharani was remuneration for services rendered or to be rendered. Their Lordships of the Hon'ble Supreme Court held that the burden of proof was wrongly placed by the Tribunal on the assessee and, on the facts and circumstances relied on by the Tribunal, did not establish that what but was given by the Maharani to the assessee was remuneration for services rendered or to be rendered and what the assessee received was not assessable to tax. We would like to mention that this was a judgment under the 1922 Act when there was no deeming provision corresponding to section 69A of the Income-tax Act, 1961, but we would still hold that the ratio would be applicable vis-a-vis our observations on the question of onus as set out in para 25 of the present order of the Tribunal.

40. The second judgment is once again of the Hon'ble Supreme Court in the case of Daulat Ram Rawatmull (supra) and in this case their Lordships held that the onus of proving that the apparent was not the real was on the party who claimed it to be so. We would once again refer to para 25 of our order duly taking into account the ratio of the judgment.

41. We now come to the decision of the Hon'ble Delhi High Court in the case of Mrs. Sunita Vachani (supra) which has also been referred to by the Delhi Bench of the Tribunal in the case of D.C. Rastogi (HUF), which was a decision strongly relied upon not only by the tax authorities but by the Id. counsel also during the course of hearing of the present appeals. No doubt this was on a reference i.e., Sunita Vachani's case but as held by the Delhi Bench of the Tribunal in the case of D. C. Rastogi (HUF) (supra) following the aforesaid judgment, there was no bar for strangers to make gifts to Indian citizens although here the two donors are not strangers. Decision of Lall Chand Kalra (supra), is not applicable. Shri O. S. Gill in reply to Q. No. 19 states that he knows Shri Jawahar Lal Oswal for the last' 15 years and the latter in his statement says in reply to Q. No. 4 that he knows both the donors for the last 10 to 12 years. Then again, both Shri O. S. Gill and Shri Jawahar Lal Oswal confirm the fact of the former staying with the latter when visiting India. Shri Jawahar Lal Oswal also confirms the stay of Shri B. P. Bhardwaj with him on visit to India. Shri O. S. Gill also confirms knowing Ruchika Oswal. In the case of D. C. Rastogi HUF (supra) section 68 of the Income-tax Act had been applied and the Delhi Bench of the Tribunal took the view that the said section was applicable to all transactions, whether in cash or by cheque or by draft, since one of the major issues raised before them was that amounts received by cheque or by draft were outside the purview of section 68. On the facts of the case, it was noted that the assessee had merely furnished confirmation letters from the alleged donors some of whom were NRIs but failed to furnish their present addresses or evidence regarding their financial capacity. As section 68 has been applied in the aforesaid judgment, it would be safe to presume that the amounts received as gifts were in the books of account of the assessee as it is not clear from the decision whereas in the cases of the two daughters of Shri Jawahar Lal Oswal, the amounts find place in their respective bank accounts as noted in the assessment orders.

42. Their Lordships of the Hon'ble Bombay High Court in the case of Bhaichand H. Gandhi (supra) have taken the view that entries in the bank pass-book of an assessee cannot be equated with entries in the books of account and, therefore, provisions of section 68 would not apply and the amount so credited would not be chargeable to tax as the income of the assessee. No decision to the contrary has been cited by the Id. D.R. Moreover, in the present cases, complete evidence has been filed in respect of the foreign gifts which include enquiries on the part of the Inland Revenue, U.K. and it is not the case of the department that the assessees have not co-operated in the enquiries made. In other words, the decision of the Delhi Bench of the Tribunal in the case of D.C. Rastogi (HUF) (supra) relied upon by the Id. D. R. would not be applicable. We also reject the arguments of the Id. D. R. about the applicability of the judgment of the Hon'ble Supreme Court in the case of McDowell & Co. Ltd. (supra) 154 ITR 148 as this is normally cited by the revenue as a last resort when no other decision comes to their aid. In the present case, it is definitely not applicable.

43. Coming back to the respective cases in the light of the earlier discussion in the case of Shri Jawahar Lal Oswal, the only connection which he had with the gifts 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 Shri Jawahar Lal Oswal was the beneficiary in any way. The entire documentary evidence mentioned the names of the daughters and there was not an iota of evidence brought on record by the revenue to prove that Shri 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 Shri Jawahar Lal Oswal.

44. The CIT(A) has drawn some distinction between the gifts of Shri O. S. Gill and Shri 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 the distinguishing features i.e., the role of Shri Varinder Sharma and the non-appearance of Shri B. P. Bhardwaj before the Assessing Officer in India, we have already dealt at length with the effect or appropriately stated the non-effect on the gift.

45. In the final analysis, we uphold the action of the CIT(A) in deleting the addition in respect of the gift of Shri O. S. Gill and further delete the addition in respect of the gift of Shri B. P. Bhardwaj.

46. Before we part with the cross appeals of Shri Jawahar Lal Oswal, we would categorically like to state that we have not found it necessary to deal with certain arguments of the parties and these are the validity of the POAs given by Miss Ruchika and Miss Monica Oswal to their father authorising him to receive the gifts in U.K. This was an issue raised before the Tribunal for the first time by the revenue although they expressed no doubt earlier. Arguments were also advanced about the onus having been wrongly placed on Shri Jawahar Lal Oswal under section 69A and the consequential decision therefore being vitiated in law. In the view that we have taken to delete the entire addition on the basis of section 69A itself and the evidence pursued, we do not feel that any separate discussion is necessary.

47. Taking up the appeals of Monica and Ruchika Oswal, provisions of section 68, in our opinion, do not get attracted to entries in the bank passbook in the light of the judgment of the Hon'ble Bombay High Court in the case of Bhaichand H. Gandhi (supra) no decision to the contrary cited by the revenue. Then again, the onus if assumed, stood fully discharged as identity of the donors stood proved, the movement of funds from them, the financial capacity of Shri O. S. Gill being subject to examination by the Assessing Officer himself and Shri B. P. Bhardwaj undergoing enquiry at the hands of the Inland Revenue, U.K. subject of course to the handicaps on both sides as already discussed earlier. As regards the third condition, i.e., the genuineness of the transactions, ample evidence was placed on record and as discussed at length not effectively contested by the revenue.

48. The CIT(A) has, however, deleted the additions in these cases primarily on the ground that the availability of monies with Shri Jawahar Lal Oswal pursuant to accepting the gifts was not in doubt and therefore conditions of section 68 were squarely satisfied as these very monies found their way into the bank accounts of Monica and Ruchika Oswal. He also took into account the view expressed by him in the appeals of Shri Jawahar Lal Oswal. In the light of the view taken in the appeals of Shri Jawahar Lal Oswal as also the reasons recorded in the preceding paragraph, i.e., 47, we do not propose to go into this aspect of the matter.

49. An argument was advanced before us by the Id. D.R. that section 68 addition be treated as one made under section 69A. We are unable to accept this argument since considerations in both the sections are different, the first not being a deeming section and the second being so. We have already discussed the decisions cited by the Id, D.R. in this respect and find that none of them advance revenue's case and, in any case, the Tribunal cannot fill up the gaps left by the revenue and be seen to be aiding it to make good its lapses. No direct judgment has been brought to our notice by the revenue which can arm us with such powers, but going on the assumption that we can change a section 68 addition into an addition under section 69A, the revenue must fail on exactly the same grounds and line of reasoning as held by us in the case of Shri Jawahar Lal Oswal where the Id. D.R. contended that section 69 be invoked instead of 69A but our view remains unchanged as according to us even two deeming provisions are not interchangeable. Section 69A speaks of an owner whereas section 69 does not and this means an entirely different effect and requirements.

50. Before we part with the appeals, we would like to observe that by making a protective addition under section 68 in the cases of Ruchika and Monica Oswal, the department weakened its case (as argued by Id. counsel) in respect of section 69A addition in the case of Shri Jawahar Lal Oswal, although we have recorded detailed and independent reasons for deleting it under the same section. The shifting stand and uncertainty in the mind of the revenue has jeopardised the additions both under section 69A and section 68 in the respective cases when they contend quite emphatically that addition under section 69A in the case of Shri Jawahar Lal Oswal be upheld under section 69 and in the cases of Monica and Ruchika they canvass conversion of section 68 addition into a 69A addition. In concluding, we uphold the relief given by the CIT(A) in the cases of Monica and Ruchika Oswal.

51. In the result, the appeal of the assessee i.e., Shri Jawahar Lal Oswal is allowed and the cross appeal of the revenue is dismissed along with the revenue's appeals in the cases of Monica and Ruchika Oswal.

 

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