1999-VIL-116-ITAT-CHD
Equivalent Citation: TTJ 066, 656,
Income Tax Appellate Tribunal CHANDIGARH
Date: 11.02.1999
RK. SYAL.
Vs
ASSISTANT COMMISSIONER OF INCOME-TAX.
BENCH
Member(s) : R. M. MEHTA., B. S. SALUJA.
JUDGMENT
B.S. SALUJA, J.M.:
The assessee has filed this appeal against order of the AO dt. 20th Sept., 1996, made under s. 158BC r/w s. 143(3) of the IT Act, on various grounds.
2. Grounds Nos. 1 to 4, which are general in nature, have not been pressed by learned counsel. The same are, therefore, rejected.
3. Grounds Nos. 5 to 7 relate to gifts of Rs. 26 lakhs given to the assessee by Shri H.S. Bhangu, of Rs. 5 lakhs by Shri Manmohan Singh Virdi and of Rs. 45 lakhs by Shri Navtej Singh Bains.
3.1. The AO observed from the books of account of the assessee relating to Savings Bank Account No. 9286 with State Bank of India, Sector 8, Panchkula, that there were deposits on 17th Aug., 1994, of Rs. 20 lakhs, on 23rd Nov., 1994, of Rs. 5 lakhs, on 12th Dec, 1994, of Rs. 6 lakhs and on 1st June, 1995, of Rs. 45 lakhs. In the statement recorded under s. 132(4) at the time of search, the assessee stated that all the deposits were gifts received from NRIs. AO referred to the statement of Shri Bhangu recorded on oath during search on 8th Sept., 1995. Shri Bhangu was asked as to whether he had given any gift, in foreign exchange to any of his relatives in India in the last five years or in his lifetime. He replied in negative, mentioning specifically not to relatives'. A further question was put to him as to whether he had given any gift to any other person. He replied that he had given gift of Rs. 25 lakhs to the assessee within last one year. On a further question with reference to the occasion on which the gift was given, Shri Bhangu replied that: "The work and development Shri R.K. Syal, Chairman of GFIL, doing all over India is very impressive to me and I thought in good faith and social development he is doing in the remote areas. I offered this gift. The gift was given from my NRI Account No. 218 with Punjab and Sind Bank, Sector 17, Chandigarh'. With reference to source of deposit in the NRI account 218, Shri Bhangu replied that money was repatriated in his account with State Bank of India, Los Angeles in Artisia. With reference to a further question about consideration for giving this gift, Shri Bhangu replied that he was offered a joint venture project share by Shri R.K. Syal and he was also assured of adequate compensation equivalent to the amount of gift and that was the consideration/attraction which allured him and he accepted the proposal and gifted the amount. AO concluded that the statement of Shri Bhangu was categorical in stating that whatever was paid to Shri Syal was not a gift without any consideration but compensatory payment as consideration for receiving an equivalent amount of gain in terms of money. He, therefore, held that there was no valid gift received by the assessee from Shri Bhangu. AO also observed that Shri Bhangu had been working as Vice Chairman, Overseas Marketing of GFIL and he was instrumental in negotiating NRI funds for various projects from USA. He also observed that Shri Bhangu was at Los Angeles for opening a branch of GFIL on 1st Jan., 1995. He also referred to a top secret preference fax message' sent by Shri Bhangu to the assessee and Smt. Pamila Syal informing about negotiations made in USA for mobilising NRI funds. He observed that it was a very important piece of circumstantial evidence, which corroborated the last part of the statement given by Shri Bhangu that he was offered a joint venture project share by the assessee and was assured of adequate compensation equivalent to the amount of gift. He, therefore, held that totality of circumstances proved invalidity of the gift given to the assessee, being a compensatory receipt for which equivalent amount was paid by the assessee to Shri Bhangu. He referred to the decision in the case of Lal Chand Kalra vs. CIT (1981) 22 CTR (P&H) 135, wherein it was held that the gift from a stranger under certain circumstances cannot be held to be genuine. AO observed that in the present case certain evidences have been brought on record to show that Shri Bhangu had not made any gift to any of his relatives in India, there was no occasion on which gift was made to the assessee and on top of it the amount was admitted to be compensatory in nature. He, therefore, held that the assessee had routed the unaccounted money through NRI a/c to Shri Bhangu by paying him adequate compensation for giving an entry which on the face of it appeared to be a genuine gift. He, therefore, added back the amount of Rs. 26 lakhs received by the assessee from Shri Bhangu as income for 1995-96 from undisclosed sources to be taxed at 60 per cent.
3.2. With reference to gift of Rs. 5 lakhs received from Shri Manmohan Singh on 23rd Nov., 1994, AO observed that it was received from NRI a/c of Shri Manmohan Singh. He referred to para. 4 of the assessment order relating to gift from Shri Bhangu and observed that the assessee had routed unaccounted money through NRI a/c of Shri Bhangu and it was a very strong piece of evidence which raised doubt regarding the genuineness of this gift also which had been received from Shri Manmohan Singh. He, therefore, added this amount of Rs. 5 lakhs also to the income of the assessee for asst. yr. 1995-96.
3.3. With reference to gift of Rs. 45 lakhs received by the assessee on 1st June 1995, from NRI a/c of Shri Navtej Singh Bains, AO again referred to para. 4 and observed that 'it is clear that Shri R.K. Syal had routed unaccounted money through NRI a/c of Shri Bhangu. There is a very strong piece of evidence which raise doubts regarding the genuineness of this gift also which has been received from Shri Navtej Singh Bains. As identity of donor and genuineness of payment is not verifiable and/nor established, therefore, Rs. 45 lakhs is added back to the income of the assessee for asst. yr. 1996-97 from undisclosed sources to be taxed at 60 per cent.
4. Learned counsel Shri P.C. Jain submitted that there was a search on 7th Sept., 1995, at the residence of Shri R.K. Syal, Chairman of Golden Forest India Ltd. He further submitted that three affidavits were found at his residence with reference to the aforesaid three gifts made by S/Shri H.S. Bhangu, Manmohan Singh and Navtej Singh Bains. He also submitted that these three persons are non-residents having NRE a/cs and that gifts were given out of their income earned abroad and out of running NRE a/cs. He submitted that the amounts of gifts received were deposited in the bank a/c of the assessee, which is a running account. He stressed that the said bank a/c was not opened by the assessee for a specific purpose of receiving the gifts. He referred to pp. 54-59 of the assessee's paper book, where a copy of bank pass book bearing account No. 9286 in the name of the assessee is placed. He pointed out that at p. 57, there is deposit of Rs. 20 lakhs on 17th Aug., 1994. Similarly, he pointed out that at p. 58 there is deposit of Rs. 5 lakhs on 23rd Nov., 1994, which is a gift received from Shri Manmohan Singh. He pointed out that at p. 59, there is deposit of Rs. 6 lakhs on 12th Dec, 1994 which is a part of gift of Rs. 26 lakhs received from Shri Bhangu. On the same page, there is another deposit of Rs. 45 lakhs on 1st June, 1995 which is gift received from Shri Navtej Singh Bains. He submitted that out of the said amounts of gifts, the assessee had given loans of Rs. 3 lakhs to Shri A.L. Syal, for which debit entry occurs at p. 58. Similarly, he submitted that loan of Rs. 9 lakhs was given to Smt. Pamila Syal wife of the assessee for which debit entry occurs at p. 59. He submitted that out of total amounts of gifts received by the assessee, except for utilisation of the amounts given on account of loans to these two persons, the balance amount plus interest amounting to Rs. 60,39,294 has been taken away by the Department from the said savings bank a/c. He submitted that the Department, in its anxiety to co-relate the amounts, should have sufficient evidence to establish that either there is money available with the assessee outside the books or the assessee had withdrawn so much amount from any other bank so as to manage the impugned gifts. He submitted that the amount has been genuinely received by the assessee from the three donors, who had given demand drafts/cheques which were deposited in the SB a/c of the assessee. He referred to the dichotomy of the Department in treating these gifts as income. He submitted that there were two facets of the issue as to whether the assessee is being taxed on receipt of the amounts or on the alleged compensatory payment, i.e. the alleged payments by the assessee to the three donors. He submitted that the Department had taxed the assessee on the basis that he has paid back the amount out of undisclosed sources available with him. He referred to the findings of AO as given in para. 4 onward. He pointed out that AO has concluded that the assessee has; routed his unaccounted money through NRI a/cs of three donors by paying them adequate compensation for giving an entry and at the same time has observed that the gifts appeared to be genuine-a concession by AO. He submitted that AO has proceeded on the assumption that identity/capacity of the donors had not been proved. Learned counsel referred to the statement of Shri Bhangu, as reproduced at p. 2 of assessment order and referred to question Nos. 4 to 6, in answer to which Shri Bhangu stated that the assessee was doing the work of social development and environmental development all over India which impressed him to offer the gift of Rs. 26 lakhs and which was given from his NRE a/c 216 with PSB. He referred to copy of statement of Shri Bhangu at pp. 25-38 of paper book. He submitted that at p. 36, Shri Bhangu categorically stated that he had given gift of Rs. 25 lakhs to Shri R.K. Syal within last one year. It is further mentioned that Shri Bhangu knew Shri Syal for about five years and came into contact with him in 1990, when Shri Bhangu was looking to buy some/place/property in Himachal. At p. 37, it is mentioned in answer to question relating to the occasion of making the gift that the work was being done by Shri R.K. Syal was very impressive and Shri Bhangu thought in good faith that social development Shri Syal was doing in remote area and, therefore, he offered the said gift. With reference to deposit in NRI a/c 218, Shri Bhangu specifically stated that the money was repatriated from his account with SBI in Los Angeles. Learned counsel further referred that the only one question was put with reference to the credits appearing in the bank a/c and sources of the said credits and that the assessee replied that the said deposit in his bank a/c were gifts received from NRIs. Learned counsel pointed out that no further question was put to the assessee with reference to these gifts and that there was no second statement recorded in the case on this issue. With reference to finding recorded by AO at p. 3 of assessment order that there was no valid gift made by Shri Bhangu and that the assessee routed his unaccounted money through NRI a/c of Shri Bhangu by paying him adequate compensation for giving an entry, learned counsel emphasised that there was no basis with AO for recording this finding. He submitted that AO had no incriminating document found during search on the basis of which he came to the conclusion that the money has gone back to Shri Bhangu or the other two donors. He stressed that the affidavits from the three donors found during search only show that the three donors had made gifts to the assessee through their NRE a/cs. Learned counsel mentioned that AO had "relied heavily on the fax message sent by Shri Bhangu, wherein he informed the assessee about certain negotiations being made in USA for mobilising NRI funds and coming to the conclusion that the assessee had assured of adequate compensation equivalent to the amount of gift to Shri Bhangu and, therefore, the gift was invalid. He referred to copy of fax placed in the assessee's paper book and submitted that Shri Bhangu informed the assessee that no bank entertained individual company unless it was approved by the World Bank or Government of that country. He referred to the portion of the fax message, wherein it is mentioned that no deposit could be invited from any foreign company/financial institution for the purpose of business, as GFI was an Indian company. Learned counsel submitted that the said fax message only shows close relations between the assessee and Shri Bhangu and that it cannot be treated as evidence for repayment of money by the assessee to Shri Bhangu. He stressed that the programme for future being discussed by the assessee and Shri Bhangu cannot be the basis for treating the gifts as income of the assessee. He submitted that AO did not put any question or confirmation from the assessee regarding repayment of money even after assessment. Learned counsel further referred to the affidavits dt. 13th Aug., 1994, and 8th Dec, 1994, by Shri Bhangu for gifting the amounts of Rs. 20 lakhs plus Rs. 6 lakhs out of his NRE a/c with PSB as also the bank certificates at pp. 1-6 assessee's paper book He also referred to copy of NRE a/c 216 placed at pp. 11-20 assessee's paper book and submitted that it is a running account from 1981 upto 1995. He pointed out that even after giving the aforesaid gifts of Rs. 26 lakhs, there was a balance of Rs. 9,82,068. He stressed that no money has been deposited in this account of Shri Bhangu on account of repayment by the assessee. He referred to p. 61 assessee's paper book, where a copy of letter dt. 18th April, 1996, written by AO to the assessee is placed. He submitted that in para 4 of the said letter, AO mentioned that during search bank account No. 9286 with SBI had been seized and on various dates in financial years, 1994 upto 1996 there were deposits of Rs. 76 lakhs. AO asked the assessee to explain the source and nature of these deposits. He further referred to p. 63 assessee's paper book, where copy of reply of the assessee is placed. The assessee submitted that each and every entry has been duly accounted for in the personal balance sheet for the block period which had already been filed with AO and which was self-explanatory and may be perused. Learned counsel referred to pp. 21-24 assessee's paper book, where a copy of 'note on foreign gifts' is placed. In the opening para of the said note, the assessee submitted that the donors were highly impressed by the project undertaken by the assessee in agro forestry as business of GFI. He pointed out that donors themselves were involved in agricultural activities and belonged to farmers families and were highly enthusiastic to promote agro forestry activities in their motherland and on getting in touch with the assessee, they found the right man for implementation of their cherished dream and, therefore, respective amounts of gifts were given. The assessee pointed out that all the three donors were men of means having declared sources of income in foreign land and had given the amounts out of their legally declared NRE a/cs, for which bank certificates were filed from the concerned banks. The assessee also pointed out that the affidavits in original were with the Department. The assessee also listed the requirements for a valid gift under the GT Act, namely, (i) there should be a transfer by one person to another of movable/immovable property situated either in India or outside India; (ii) it should be voluntary, i.e. without any duress, coersion or computation; and (iii) it should be without consideration in money or moneys worth, i.e. the donor should not have got anything in exchange which could be measured in money or money worth. The assessee relied on the decisions reported in K.L. Agarwal vs. CIT (1991) 190 ITR 303 (Del), Prakash Textiles Agency vs. CIT (1980) 121 ITR 890 (Cal) and Oriental wires Industries (P) Ltd vs. CIT (1991) 20 CTR (Cal) 264 : (1980) 131 ITR 688 (Cal). The assessee also relied on the decision of the Tribunal in the case of Smt. Purnima Mehta etc. wherein it was held that AO cannot make any roving enquiry about assets and liabilities of past years of the donor and AO should verify that the amounts really belong to the donor, that it was really gifted and it was available on the relevant day in credit in the bank a/c of the donor. The Tribunal also observed that AO is entitled to make investigation to rule out the possibility of deposit of own money of the assessee in the bank a/c of the donors and the money being returned to the assessee. The Tribunal held that AO was not justified in calling upon the assessee to produce the particulars of income assessed and declared by the donors in last five years and also copy of donor's account in the books of account of the concerns in which the donors have interest. The assessee further referred to the decision in the case of Smt Bhagwati Devi vs. ITO (1993) 47 ITD 58 (Cal), wherein the Tribunal observed that AO has to prove that the gift is collusive, facade, dubious device or a subterfuge to save tax. It also observed that AO has to prove that there was such income in the hands of the assessee so as to collude with foreign resident and adopt a device to evade payment of tax. The assessee pointed out that relations, occasion or past history or purpose etc. are only surrounding circumstances which have to be seen when the source is not at all explainable. It was stressed, that the case of Lal Chand Kalra was not applicable to the facts of those gifts where burden of the assessee had been discharged. The assessee referred to the decision in the case of CIT vs. Mrs. Sunita Vachani (1990) 84 CTR (Del) 18 : (1990) 184 ITR 121 (Del), wherein it has been observed that genuineness of a gift is a question of fact and even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers abroad, unless there is something more tangible than suspicion, it will be difficult to regard the moneys received in India from abroad as representing income of the assessee in India. In view of the foregoing, the assessee urged before AO that no addition could be made and in case any adverse decision was taken by AO, then a fresh opportunity be given and in case any other clarification/evidence was required the same would be supplied as and when required. The assessee pointed out that Shri Bhangu was available in India and he could be called for further clarification. With reference to other two donors, the assessee submitted that they were residing abroad and there present addresses were given in their affidavits and they may be summoned or any information required may be directly called for and the assessee is ready to cooperate in any way". The said note was filed on 5th Sept., 1996. Learned counsel further referred to letter dt. 16th Sept., 1996, by Shri Bhangu, wherein he mentioned that if required he was prepared to give his statement before AO. He also filed second affidavit, wherein it is mentioned that 'since the purpose for which the amounts were given has not been fulfilled by Shri R.K. Syal and the money stands seized by the IT Department, hence the said amount is refundable to me by him which he has assured to refund and is due from him as on date'. Learned counsel submitted that even in the second affidavit, there is a positive assertion regarding making of gifts by Shri Bhangu. Learned counsel submitted that he was relying on all the judgments as mentioned in the said note. Learned counsel further submitted that AO has not indicated the provisions of the IT Act under which the impugned additions have been made. With reference to the legal aspect of the issue involved in these gifts, learned counsel stressed that no defect has been found by AO, vis-a-vis direct evidence available with the Department in the form of original affidavits and NRE a/cs from which money has been given by the donors. He submitted that the explanation regarding genuineness of gifts and source thereof has been given inasmuch as money has been received, genuineness/identity of the persons has been established, there are business relations as is borne out from the fax message and that Shri Bhangu is not an employee of the assessee. Learned counsel submitted that AO had applied the decision in the case of Lal Chand Kalra but the said decision is not applicable to the gifts made to the assessee. Learned counsel referred to the decision of the Amritsar Bench of the Tribunal in the case of Shri S.N. Ben in ITA No. 838/1990 for asst. yr. 1987-88, wherein the aforesaid decision in the case of Lal Chand Kalra has been discussed. The Tribunal noted in para 8 of the order that in case of Lal Chand Kalra, AO found in the books of the company two deposits of Rs. 10,000 each entered on 16th March, 1970, and 28th March, 1970, in the account of the assessee and when asked to explain the nature/source of the said investment, the assessee explained that he had received the said amounts as gifts from S/Shri Sampuran Singh and Buta Ram through bank drafts dt. 12th March, 1970 and 25th March, 1979. The Tribunal further noted that the two donors were examined by AO and they stated that their source of income was agricultural lands owned by them which were 40 acres and 20 kilas respectively. The statements of the donors were not accepted by AO and the amount of Rs. 20,000 was added as income of the assessee from undisclosed sources. The order of AO was confirmed on appeal by the AAC and also by the Tribunal. The Tribunal observed that 'there is no satisfactory evidence on record to prove that they really own land measuring 40 acres and 20 killas or that their annual net income was in fact Rs. 30,000 or Rs. 18,000 as alleged by them. It is, therefore, difficult to accept that S/Shri Sampuran Singh and Buta Ram were men of means'. The Tribunal noted that the dispute ultimately travelled to High Court, which held that the Tribunal was justified in holding that there was no evidence to show the extent of annual income as stated by the donors and even though the two donors were proved to be owners of some land, the jamabandi did not furnish any proof regarding their annual income or that they were men of means. Accordingly, High Court upheld the finding of the Tribunal. The Tribunal held in para 9 that the aforesaid judgment in no way laid down that genuine gifts can be rejected merely on the ground that there was no occasion or relationship for making the gifts and that such circumstances can only be seen when the source of gifts or the financial standing of the donor is in doubt. The Tribunal observed that in the case of Lal Chand Kalra, the gifts had been made by strangers out of their alleged savings from agricultural income and the Tribunal recorded a finding of fact that the source of savings was doubtful, which finding was not disturbed by the High Court. The Tribunal held that in the present case, the donors clearly explained the source, i.e. their personal account and the gift were made by the account payee cheques out of savings bank a/c of the donors and that the donors have been assessed to income-tax. The Tribunal, therefore, held that there was nothing to doubt the genuineness of the gifts and the assessee had discharged his onus in all respects. Learned counsel also referred to an article on foreign remittances-Income-tax in the hands of donee- by Shri D.S. Walia in (1993) 113 CTR (Art) 51. He submitted that the said article also elaborately deals with the case of Lal Chand Kalra. It has been observed by the author at p. 53 that the High Court found itself unable to vitiate the finding of the Tribunal and agreed that both Shri Sampuran Singh and Shri Buta Ram were men of no means. The High Court, however, observed that even if they had come to the conclusion that Sampuram Singh and Buta Ram were men of means, the second question referred to it whether addition of Rs. 20,000 was sustainable or not had to be answered against the assessee on the basis of the 'finding of the Tribunal regarding nature of gifts (which) could be sustained on the other reasons given for disbelieving the genuineness of the alleged gifts'. The High Court further observed that: 'As found by the Tribunal, Sampuran Singh was totally a stranger to the assessee and there was no reason why he should make a gift of Rs. 10,000 to him. Buta Ram, though was brother of the wife of the assessee but he had four sisters and no reason was forthcoming as to why he gave a gift of Rs. 10,000 to the assessee alone particularly when there was no occasion to do so'. The author has observed that 'it is on this part of the judgment that the tax authorities rely to reject the claim of foreign remittances as genuine gifts. If there is no relationship or even if there is relationship between the donor and the donee, but there is no occasion for making the gift, the gift is rejected as ingenuine and is branded as an effort to launder black money'. The author has also observed that the High Court had agreed with the Tribunal that the donors were men of no means is lost sight of and it is also conveniently forgotten that the questions referred to it were not whether gifts can be given to persons not related to the donor, i.e. his friends and whether they can be given on specific occasions only. The author has referred to the decision in AIR 1971 SC 530, wherein it is observed that "it is not proper to regard a word, a clause or a sentence occurring in a judgment of Supreme Court devoid from its context as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment'. After referring to the two questions referred to the High Court in the case of Lal Chand Kalra, the author has observed that 'the High Court was not called upon to give its opinion on (a) whether a gift can be given without there being any occasion; (b) whether a gift can be given to a relative alone and not to friends and acquaintances?" He has also observed that the case of Lal Chand Kalra is also distinguishable inasmuch as one of the donors was a total stranger. Secondly, in the case of foreign remittance gifts are sent from foreign lands in foreign currency and there is also documentary evidence in the form of foreign drafts and/or certificates from the collecting bank to the effect that credit entry represents proceeds of a foreign draft. He has also observed that it is not feasible for a person to a sneak out of the country with foreign exchange, purchase a draft and send it to himself in India. It is against the law of the land and involves great risk and substantial expense. The gift cannot be held as ingenuine in the face of documentary evidence in the form of copy of bank draft and bank certificate. He has further observed that 'there is no justification for labelling the gift as compensatory payment. The rule of law is that he who alleges a thing has to prove it. As such, the onus is on AO to bring material on record to show that in lieu of the foreign remittance received, the recipient compensated the remitter in cash or kind. The onus for doing so squarely lies on the Department. Unless the onus is discharged, the Department is not, entitled to claim that these are compensatory payments. It remains a mere conjecture and surmise'. Learned counsel further referred to the decision of the Tribunal in the case of Atmaram J. Manghirmalani (HUF) vs. ITO (1998) 62 TTJ (Mumbai) 357 : (1998) 67 ITD 289 (Mumbai), wherein it was held that where cash gifts were given by account-payee cheques and donors filed affidavits confirming said gifts then in absence of any evidence in possession of Department to the contrary, gifted amounts could not be added as undisclosed income of the assessee. The Tribunal also observed that the statements made on oath cannot be brushed aside when there is no material to discredit the version of the person making the statement. In view of the foregoing, learned counsel urged that the Department has not brought any material on record to prove that the gifts are arranged gifts and money has gone back to the donors, as alleged by AO. He submitted that AO has not rebutted any evidence but had assumed that undisclosed money has been paid back by the assessee to the donors as compensation. He pointed out that no deposits in NRE a/cs are possible out of local funds of the assessee. He stressed that the Department has not discharged onus to show that the apparent state of affairs is not real. He referred to the decision in the case of CIT vs. Daulat Ram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC). Learned counsel submitted that the possibility of the assessee being in a position to earn income of Rs. 76 lakhs to be paid back to donors has to be examined and this has to be found/proved by evidence. He referred to the decision in the case of Roshan Di Hatti vs. CIT 1977 CTR (SC) 200 : (1977) 107 ITR 938 (SC), wherein it was observed that 'the utter improbability amounting almost to impossibility of the assessee having earned such a large amount of Rs. 2,33,414 as profit within a few months in the disturbed conditions which then prevailed in India was a circumstance which ought to have been taken into account by the Tribunal and the Tribunal had failed to do so'. It was held that 'in reaching the conclusion that out of the capital of Rs. 3,33,414 credited in the books of the assessee on 30th March, 1948, assets of the value of Rs. 3,33,414 represented undisclosed income of the assessee, the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially or properly instructed as to the relevant law could come to such a finding1. Learned counsel mentioned that sources of income of the assessee are from salary plus interest from FDRs out of gifts and agricultural income in the names of minors. He referred to pp. 65-66 of assessee's paper book, where copies of acknowledgments of returns filed by the assessee for asst. yrs. 1994-95 & 1995-96 are placed. He also referred to the statement of total income for asst. yr. 1995-96 at p. 69 assessee's paper book. He, therefore, concluded that the assessee could not have earned so much of income so as to pay back the amounts to the donors with reference to gifts received by him. He submitted that the assessee is not a beneficiary in relation to gifts received by him and that the real beneficiaries are Shri A.L. Syal and Smt. Pamila Syal, whom loans out of amounts of gifts have been given to the extent of Rs. 14 lakhs. 4.1. With reference to second gift of Rs. 5 lakhs received by the assessee from Shri Manmohan Singh, learned counsel submitted that AO has proceeded only on doubt and treated the gift as ingenuine. He referred to p. 41 assessee's paper book, where a copy of affidavit of Shri Manmohan Singh is placed, wherein the passport number issued by the Government of Muscat has been given and it is mentioned that he is working in Muscat for the last ten years and that he has gifted an amount of Rs. 5 lakhs to Shri R.K. Syal, vide cheque No. 0137903, dt. 12th Nov., 1994, from his NRE a/c 4943 maintained with Bank of India, Chandigarh. Learned counsel submitted that the affidavit was found during search and the family of the donor is situated in Chandigarh. He further submitted that the assessee offered the evidence and requested AO that donor, whose address is given in the affidavit may be summoned or any information required may be directly called for or the assessee may be directed to give information and that the assessee is ready to cooperate in any way required by AO. He submitted that the amount of Rs. 5 lakhs is given out of running NRE a/c of donor. On a query from the Bench, learned counsel filed copy of NRE a/c No. 4943. He submitted that balance in the said a/c as on 30th May, 1994, was Rs. 4,04,271 and balance reached Rs. 6,88,741 on 1st Sept., 1994, when an amount of Rs. 3,48,385 was credited by transfer. The amount of Rs. 5 lakhs was gifted to the assessee on 23rd Nov., 1994, and there was a balance of Rs. 20,196 in the said account. Learned counsel submitted that the family of the donor is living in Chandigarh and no question has been put by AO in relation to addition of Rs. 5 lakhs made on account of this gift.
4.2. With reference to third gift of Rs. 45 lakhs, learned counsel made similar submissions as in the case of gift received from Shri Manmohan Singh. He referred to affidavit of Shri Navtej Singh Bains at pp. 42-44 assessee's paper book, wherein donor has given his passport number given at Dar-Es-Eslaam valid till 13th July, 1996. It is mentioned that donor is living and working there for the last ten years and that he was making a gift of Rs. 45 lakhs to Shri R.K. Syal on account of love and affection and no other consideration. Learned counsel submitted that the address given is that of Chandigarh and that the gift has come out of NRE a/c, relevant extracts from a/c No. 588 have been filed on a query from the Bench. Learned counsel submitted that AO did not collect any information on his own in relation to these two gifts nor asked the assessee for any information. He stressed that no deposits are possible in NRE a/cs from local funds.
4.3. In view of the foregoing, learned counsel urged that addition of Rs. 76 lakhs as made by AO ought to be deleted.
5. Learned Departmental Representative, Shri P.S. Puniha, mentioned in brief facts of the case as found by the AO. He submitted that there are four affidavits with respect to the three gifts in question. He pointed out that two gifts were made by Shri H.S. Bhangu amounting to Rs. 20 lakhs and Rs. 6 lakhs. He submitted that these two gifts were made on 17th Aug., 1994 and 12th Dec, 1994. He further submitted that in between this period another gift of Rs. 5 lakhs was made by Shri Manmohan Singh Virdi and after another six months or so an other gift of Rs. 45 lakhs was made by Shri Navtej Singh Bains. He stressed that findings of AO are clear at p. 3 of assessment order, where he has concluded that Shri R.K. Syal had routed his unaccounted money through NRE a/c of Shri Bhangu by paying him adequate compensation for giving an entry which on the face of its appears to be genuine gift. Learned Departmental Representative referred to first affidavit of Shri Bhangu, wherein he has stated that a gift of Rs. 20 lakhs is being made out of love and affection and no other consideration. Learned Departmental Representative then referred to second affidavit of Shri Bhangu at p. 3 assessee's paper book, wherein it is stated that gift of Rs. 6 lakhs is being made out of love and affection and no other consideration. Learned Departmental Representative then referred to next affidavit of Shri Bhangu at p. 8 assessee's paper book, wherein he has stated that 'the said amount was paid for the promotion of social agro forestry work for maintaining rich environment and to improve the living conditions of poor people residing in under-developed and backward area in India'. Learned Departmental Representative, therefore, submitted that donor had suddenly changed the stance for making gifts. He referred to the statement of Shri Bhangu recorded on 8th Sept., 1995, at pp. 25-38 of assessee's paper book and pointed out that in answer to first question Shri Bhangu stated that he was working as Vice Chairman, Overseas Marketing with GFI since September, 1993. He further stated that he was residing in India but not ordinary resident as he had to go to foreign country as and when required. He also mentioned that he was an Indian citizen, holding Indian passport. Learned Departmental Representative pointed out that Shri Bhangu stated that he was not drawing any salary from GFI and in fact he was working on contract basis. He pointed out that Shri Bhangu was receiving 10 per cent of price of real estate in the shape of farm house, small orchards and membership of GFI tourist resorts. He referred to p. 28 assessee's paper book, where Shri Bhangu stated the nature of his payments. Learned Departmental Representative, therefore, urged that Shri Bhangu has been an important functionary of GFI. Learned Departmental Representative referred to p. 31 assessee's paper book, where Shri Bhangu stated that he sold his car for Rs. 17 lakhs and put the money into his bank a/c No. 41625 at Chandigarh and that the said money was invested in GFI deposit of Rs. 5 lakhs. Learned Departmental Representative pointed out that the said fact shows that Shri Bhangu did not have enough money to make the alleged gifts. Learned Departmental Representative referred to p. 36 assessee's paper book, where Shri Bhangu stated that he did not make any gift to his relatives Learned Departmental Representative, therefore, stressed that Shri Bhangu made gifts to stranger- Shri R.K. Syal. He further referred to p. 38 assessee's paper book, where Shri Bhangu stated that he was offered a joint venture project share by Shri R.K. Syal and he was also assured of adequate compensation equivalent to the amount of gift and that was the consideration/attraction which allured him and he accepted the proposal and gifted the amount. In view of the foregoing, learned Departmental Representative emphasised that there were contradictions in the stand taken by Shri Bhangu, as initially he mentioned that the gifts were on account of love and affection and subsequently he changed his stance and ultimately mentioned about joint venture project share. Learned Departmental Representative, therefore, urged that the gift was not without consideration, as is clear from the statement of Shri Bhangu, wherein he has been taken a flip, flop and flip stand. Learned Departmental Representative submitted is there any method in this madness of the donor-Shri Bhangu. He submitted that the affidavits of the donor are self-serving evidence. Learned Departmental Representative pointed out that Shri Bhangu was not an NRI on the date of making the gifts. He referred to the provisions of s. 5(1)(iid) of the GT Act and submitted that Shri Bhangu was not entitled to the exemption with reference to the gift made. Learned Departmental Representative, therefore, urged that Shri Bhangu is not a man of great means on the face of it and there is no likelihood of Shri Bhangu giving a gift of Rs. 26 lakhs even for religious purpose. He further submitted that relationship of Shri Bhangu with the assessee is that of an employee. Learned Departmental Representative, therefore, urged that in such cases, i.e. of gift by NRI, the test of human probabilities ought to be applied by the Tribunal. He urged that the Tribunal should look beyond direct evidence and that in such cases the test of human probabilities is most appropriate. He further submitted that if the arguments of learned counsel were to be accepted, then all gifts coming from NRE a/c into bank account of the assessee shall have to be treated as genuine gifts. He mentioned that if such gifts were to be received by one lakh donees like that of the assessee total external debt of the country would be wiped out. In support, learned Departmental Representative relied on the following decisions:
(a) ITO vs. Dr. Jagdish J. Kansagara (1998) 60 TTJ (Ahd) 288 : (1998) 66 ITD 381 (Ahd). In the said case, the assessees being doctors running an ultra modern surgical hospital with lucrative practice, claimed to have received gifts by cheques from stranger and illiterate agriculturists who were less wealthier in education and reputation-Donors confirmed having made gifts out of their agricultural income. The Tribunal held that by applying the test of human probabilities, gifts received by the assessees from donors could not be accepted as genuine ones merely on ground that gifts were received by cheques/drafts. The Tribunal also observed that where donors were rank outsiders/strangers and there was no occasion for making huge gifts to relatively well-to-do donees, genuineness of gifts could not be accepted.
(b) Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC). In the said case, the assessee carried on business as a dealer in art pieces, antiques and curios in Bangalore. Shri claimed that she received a total amount of Rs. 3,11,831 by way of race winnings in jackpots and treble events in races at turf clubs in Bangalore, Madras and Hyderabad. The said amount was shown in the capital account in the books. For asst. yr. 1972-73, she claimed receipts of Rs. 93,500 as race winnings in two jackpots at Bangalore and Madras and the said amount was credited in the capital account in the books. The ITO included these amounts as income from other sources and assessed as such. The AAC confirmed the order. The assessee referred the matter to the Settlement Commission, which held by a majority decision that the explanation of the assessee was not genuine, as the assessee's knowledge of racing was very meagre, a jackpot is a stake of five events in a single day and one can believe a regular and experienced punter clearing a jackpot occasionally but the claim of the assessee of having won a number of jackpots in three or four seasons not merely at one place but at three different centres appeared prima facie to be wild and contrary to statistical theories and experiences of frequencies and probabilities and the assessee's books did not show any drawings on race days or on the immediately preceding days for the purpose of jackpot combination tickets. On appeal, the apex Court held that the Settlement Commission after considering the surrounding circumstances and applying the test of human probabilities had rightly concluded that the assessee's claim about the amount being her winning from races was not genuine.
(c) CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1972) 82 ITR 540 (SC), wherein it was held that 'though an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self-serving recitals in documents, it was for that party to establish the truth of those recitals; the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. In view of the foregoing, learned Departmental Representative urged that it is the duty of the Tribunal to look beyond direct evidence and apply the aforesaid test of human probabilities. On a query from the Bench, learned Departmental Representative submitted that direct evidence need not be Ignored but it need to be appraised from angle of human probabilities. He referred to the two gifts made by Shri Bhangu within a span of few months and urged that the quantum of gifts, number of gifts, earning capacity of the donors, vis-a-vis gifts made, have to be examined. He referred to the decision in the case of Pradip Kumar Loyalka vs. ITO (1997) 59 TTJ (Pat) 655 (TM) : (1997) 63 ITD 87 (Pat)(TM), wherein it was observed at p. 106 that in the light of judgment in the case (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) 'the matter has to be considered in the light of human probabilities'. Learned Departmental Representative further referred to the decision in the case of Shyam Sunder Gupta vs. ITO (1995) 51 TTJ (JP) 436 : (1995) 82 Taxman 148 (JP). In the said case, the assessee claimed to have received gift of Rs. 25,000 from one J resident of London but failure to furnish his address in India and also his own relationship with J. AO rejected the assessee's contention that J had gifted the said amount out of love and affection resulting from a month long stay together at Kathmandu and made addition of Rs. 25,000. The Tribunal held that receipt of money by a person from others gratuitously or under an obligation to return/repay same casts a burden on recipient not only to provide identity and creditworthiness of giver but also genuineness in transaction. The Tribunal also held that bare assertion of an occasional stay of J with the assessee in Nepal turning intimacy into friendship of degree which prompted J to donate substantial amount at no auspicious occasion got no corroborative support even from assessee's own affidavit, circumstances attending on alleged transaction as also conduct and behaviour of parties were clearly such as went against genuineness in transaction. Learned Departmental Representative thus stressed that the gifts received from the other two donors, i.e. Shri Manmohan Singh and Shri Navtej Singh Bains were gratuitous in nature and these two persons have no connection with the assessee, as they are NRIs and never lived in India for more than 180 days and the chance of meeting with the assessee is extremely limited. Learned Departmental Representative referred to the decision in the case of Saraogi Credit Corporation vs. CIT 1975 CTR (Pat) 1 : (1976) 103 ITR 344 (Pat) for the proposition that there is difference m burden of proof when parties are close relations of assessee and other parties who are strangers. He referred to the gifts made by Shri Bhangu, who allegedly is an employee of the assessee and submitted that the onus is on the assessee to show that the transaction is at an arms length. He then referred to the decision m the case of CIT vs. Precision Finance (P) Ltd. (1994) 121 CTR (Cal) 20 : (1994) 208 ITR 465 (Cal), wherein it has been observed that it is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions and the fact that the transactions were through bank were not conclusive. He further referred to the facts of the case of Lal Chand Kalra as relied upon by AO and submitted that these three donors have also never given gifts to any relative of their own and, therefore, the gifts made to the assessee are rightly held as being not genuine.
5.1. On a query from the Bench as to under which section of the IT Act the additions have been made by AO, learned Departmental Representative submitted that non-mentioning of the section does not make the order invalid. On a further query that all the provisions of ss. 68 to 69B cannot be invoked for making/sustaining the additions, learned Departmental Representative submitted that the provisions of s. 69 should be applied. He hastened to add that capacity of the donors should be looked from the angle as to whether so much of money could be given by them gratis to the assessee.
5.2. With reference to plea of learned counsel that AO did not further question the assessee after issue of letter on 18th April, 1996, in relation to these gifts, learned Departmental Representative submitted that AO has accepted that money came from NRE a/cs and, therefore, there is no question of putting further question to the assessee and that AO has made enquiry in this regard. With reference to other plea of learned counsel that there is no direct incriminating document/evidence with the Department that the assessee had paid back the amount of Rs. 76 lakhs to the donors, learned Departmental Representative conceded that there is no direct evidence. However, he submitted that the scheme of the Act relating to block assessments is such that proceedings start on filing of the return and the Department has no occasion to sit on the assessee's head and, therefore, direct evidence is not likely to be found in such cases. On a query as to whether any evidence was found during search regarding repayment of money, learned Departmental Representative submitted that the assessee had done the home work and self-serving evidence in the form of affidavits had been credited. On a further query as to any question put to Shri Bhangu on the payment of money back to him by the assessee, learned Departmental Representative did not react though submitted that where gifts are received from close relatives degree of suspicion would be less. With reference to the letter written by the assessee to the AO to summon the donors, learned Departmental Representative submitted that the offer came too late as assessment was to be completed by 30th Sept., 1996, within the period of limitation. With reference to decision in the case of Roshan Di Hatti, as relied upon by learned counsel, learned Departmental Representative submitted that right perspective is whether donor had so much spare funds to make gifts and not the capacity of Shri R.K. Syal to repay the amounts. He submitted that it is not the duty of the Department to seek source of the assessee for repaying the amount and that onus is on the assessee to prove that receipts by way of gifts are not his income. With reference to the plea of learned counsel regarding utilisation of money and taxing the beneficiary owner learned Departmental Representative submitted that the money has gone into the bank a/c of the assessee and has come through gifts and that there is no concept of beneficial ownership and, therefore, there is no question of taxing Shri A.L. Syal and Smt. Pamila Syal.
5.3. Learned Departmental Representative then proceeded to deal with the cases relied upon by learned counsel. With reference to decision in (1990) 84 CTR (Del) 18 : (1990) 184 ITR 121 (Del), learned Departmental Representative submitted that it was a case of reference and the High Court held that the question involved was one of fact and not of law. With reference to decision in (1991) 190 ITR 303 (Del), learned Departmental Representative submitted that there was a question of summoning of the donors and that where the assessee undertakes to produce the donors, there was not liability on the part of the Department to summon them. Regarding decision in (1998) 62 TTJ (Mumbai) 357 : (1998) 67 ITD 289 (Mumbai), learned Departmental Representative submitted that AO did not make enquiry as directed by the AAC and there was violation of the direction. Regarding the decision in (1993) 47 ITD 58, learned Departmental Representative pointed out that the said case is distinguishable on farts as foreign gift was only of Rs. 1 lakh and it originated from 'Dharam Bhai' of the assessee, i.e. a close relative. With reference to decision in ITA No. 838/Asr/1990, learned Departmental Representative submitted that the case of Lal Chand Kalra, as discussed therein, was not relevant as in that case the gifts originated from close relations. Regarding Article by the Shri D.S. Walia in (1993) 113 CTR (Art.) 51, learned Departmental Representative submitted that there is no roving enquiry by AO and that the circumstances obtaining in the case ought to be seen. He, therefore, concluded that there is a collusive arrangement between the assessee and the three donors and it is a case of routing of unaccounted money of the assessee and the three donors and it is a case of routing of unaccounted money of the assessee through these gifts. He again urged that totality of circumstances should be examined as gifts of Rs. 26 lakhs from the employee of GFI and the other two gifts are from strangers. He again urged that the Tribunal should not limit itself to the direct evidence but also see the human probabilites.
6. Learned counsel, in reply, submitted at the outset that as learned Departmental Representative has accepted that s. 69 is applicable he was not advancing any arguments with reference to the provisions of s. 68 of the Act. He further submitted that the provisions of s. 69 are deeming provisions as against the provisions of s. 68. He also submitted that the deeming provisions of s. 69 have been elaborately examined by the Tribunal in the case of Smt. Neena Syal in ITA No. 1163/1996 dt. 21st Sept., 1998. He submitted that in the said case the Tribunal had considered the decisions in Asstt. CIT vs. Rajeshbhai Jagjivandas Thakkar (1996) 56 TTJ (Ahd) 288 : (1996) 58 ITD 283 (Ahd), Pushkar Narain Saraf vs. CIT (1990) 86 CTR (All) 110 : (1990) 183 ITR 388 (AH), and CIT vs. Shivakami Co. (P) Ltd. (1986) 50 CTR (SC) 10 : (1986) 159 ITR 71 (SC) and came to the conclusion that AO failed to comply with basic conditions stipulated in s. 69. The Tribunal also observed in para 5.1 of the order that onus of establishing a condition of taxability must be fulfilled by the Revenue, as held in (1986) 50 CTR (SC) 10 : (1986) 159 ITR 71. Learned counsel submitted that the case of Department is that the assessee had unaccounted money which was passed to the three donors and that there is a collusive arrangement and routing money of the assessee through the three donors. He further submitted that learned Departmental Representative has pleaded that direct evidence may be ignored and the case may be examined in the light of human probabilities, which means that learned Departmental Representative has conceded that there is no evidence with the Department with reference to the basic assumption that the assessee has made payments to the three donors with reference to gifts received. He again referred to the provisions of s. 69 and submitted that the Department cannot tax a person only on suspicion, as the Department has no evidence with reference to repayment of money as alleged, it has only suspicion/assumption for making the addition. Learned counsel submitted that in case of deeming provisions, burden is on the Department and here the Department has conceded that deeming provisions of s. 69 are applicable. With reference to nature of receipt, learned counsel submitted that balance in bank a/c of the assessee is investment, whether it has been received on account of gifts or otherwise and that source of investment is to be explained/proved by the assessee. He also submitted that the assessee is only required to explain from whom money has been received. He submitted that the provisions of s. 69 have a limited scope and once the assessee has given the source of receipt, he is not expected to prove source of source. He further submitted that in case of source, availability of funds with donors is the hallmark. He submitted that here sources are identified, capacity of the donors is there in the form of NRE a/cs from where moneys have come and that nothing more is required to be explained by the assessee. He, therefore, urged that the provisions of s. 69 do not require the application of test of human probabilities, as urged by learned Departmental Representative. He submitted that source of donors should be questioned by the Department by examining the three donors and, if necessary, they should be taxed. With reference to case law relied upon by learned Departmental Representative, learned counsel submitted that even in the case 1975 CTR (Pat) 1 : (1976) 103 ITR 344 (Pat), it has been observed that once the identity of the third party is established before the ITO and other evidences are prima facie placed before him pointing out to the fact that entry is not fictitious the initial burden lying on the assessee can be said to have been duly discharged and it will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make advance of the money as a loan to the assessee. It is also observed that once such identity is established and the creditors have pledged their oath that they have advanced the amount in question to the assessee the burden immediately shifts on the Department to show as to why the assessee's case should not be accepted. Learned counsel, therefore, urged that the assessee is not required to explain source of source. He therefore, referred to NRE bank a/cs of the donors and submitted that the gifts have come out of said a/cs and no money could flow in the said bank a/cs of the donors out of local funds. Learned counsel submitted that the provisions of s. 69 are also applicable with reference to other gifts of Rs. 5 lakhs and Rs. 45 lakhs as given by Shri Manmohan Singh and Shri Navtej Singh Bains and the same proposition of law applies to such gifts. He also submitted that Rs. 46 lakhs have been received by Shri Bains on account of rent for building in Tanzania and, therefore, even source of source is not discredited. He further submitted that no defect has been found by the Department with reference to the explanation of the assessee, contents of affidavits, identity of the person and the fact that money has been received by drafts/cheques. He referred to the decision in the case of CIT vs. Daya Chand Jain Vaidya (1975) 98 ITR 280 (All). In the said case, the assessee, his wife, two major and two minor sons were shareholders of a private company and the explanation given for the source of Rs. 40,500 paid for the allotment of additional shares to the wife and her two major sons was not accepted by the ITO who treated the amount as income from undisclosed source of the assessee. The Tribunal held that the addition to the assessee's income was unjustified. On a reference, it was held that the Revenue could succeed only in case they had brought on record material from which it could be concluded that the deposit made by the wife and two major sons were in fact made by the assessee and this had not been done and as such the amount could not be added. Learned counsel further submitted that no material is with the Department to hold as to why explanation of the assessee is not satisfactory. He submitted that nothing has been withdrawn by the assessee from the bank a/c except amounts for giving loans to Shri A.L. Syal and Smt. Pamila Syal and there is no receipt of money by the assessee from other sources. He again submitted that it has to be seen as to whether the assessee could earn the amount of Rs. 76 lakhs so as to pay back to the three donors, as alleged by the Department. He submitted that past and future sources of the assessee had to be seen before coming to the conclusion that the amount of Rs. 76 lakhs was available with the assessee for any such repayment. He pointed out that future assessments in the case of the assessee have been made under s. 143(3). He relied on the decision in the case of Roshan Di Hatti. Learned counsel, therefore, urged that there is no change of circumstances and there is no flip, flop and flip on the part of Shri Bhangu and right from the statement made on 8th Sept., 1995, he had stated that he was impressed with social forestry work being done by Shri R.K. Syal. He submitted that the same created affinity of Shri Bhangu with the assessee. He also submitted that love and affection could be spontaneous, as mentioned in first affidavit of Shri Bhangu. He submitted that there are no compensatory payments by the assessee as alleged by the Department and there is no evidence with it in this behalf. He referred to the definition of 'gift' as given in s. 2(xii) and submitted that the gift is without consideration, as mentioned in the said definition and the Department has only made the allegations without any proof/evidence that there is compensatory payment. He urged that even if the gifts are treated as ingenuine, the sources of receipt of money by the assessee are genuine for the purpose of s. 69 of the IT Act. With reference to plea of learned Departmental Representative that affidavits are self-serving evidence, learned counsel stressed that evidence has to be self-supporting and it is for the Department to prove that the submissions/averments made therein are wrong and the same are facade. He urged that the affidavits are good evidence and contain assertion of fact and the Department has no material to prove that the facts mentioned therein are wrong. With reference to plea of learned Departmental Representative that Shri Bhangu was not a non-resident, learned counsel submitted that status of donor has to be seen with reference to the period during which the gifts were made. He further submitted that the definition of non-resident as given in the Foreign Exchange Regulation Act would apply here and the provisions of the IT Act are not relevant for determining the status as NR. He submitted that NRE a/cs cannot be opened without approval of the RBI and that money into the said a/cs has to come in foreign exchange. He pointed out that Shri Bhangu had a joint account with his wife and the wife is still a NR. He submitted that the money in NRE a/cs of the three donors have come from them and the sources are evident from the said bank a/cs. He also urged that preponderance of human probabilities is a circumstantial evidence and if direct evidence is kept in one scale and the human probabilities in the other, then direct evidence with reference of the deeming provisions of s. 69 cannot be ignored. He further submitted that there cannot be presumption over presumption and the presumption cannot override the facts. He also submitted that the presumption has to be so strong that it could overcome facts or facts can be ignored. He referred to the decision in the case of Kairoos M. Bhaya vs. Dy CIT (1998) 100 Taxman 165 (Mum), wherein human probabilities have been considered. He submitted that human probabilities is nothing but human conduct and it is a relative term. Learned counsel then proceeded to discuss the case law as relied upon by learned Departmental Representative. He submitted that the decision in (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) in distinguishable on facts as innings in horse races in jackpots continuously was considered. With reference to decision in 1973 CTR (SC) 500 : (1972) 82 ITR 540 (SC), learned counsel submitted that validity of human probabilities was not the only factor/yardstick for making the addition and something more is required under the provisions of s. 69. With reference to the decision in (1995) 82 Taxman 148 (JP), learned counsel submitted that the gift was from a stranger while in this case three donors and their families are in Chandigarh and that each case has to be seen vis-a-vis its facts. With reference to decision in (1998) 60 TTJ (Ahd) 288 : (1998) 66 ITD 381 (Ahd), learned counsel submitted that the said case is under s. 68 and gifts were received from strangers and illiterate agriculturists who were less wealthier in education and reputation and the Tribunal considered the judgments including the case of Lal Chand Kalra. He submitted that the said case is distinguishable on facts. With reference to decision in (1997) 59 TTJ (Pat) 655 (TM) : (1997) 63 ITD 87 (Pat)(TM), learned counsel submitted that the said case was under s. 68 and creditworthiness of the donors could not be properly proved by the assessee and, therefore, the same is distinguishable on facts. With reference to the decision in (1994) 121 CTR (Cal) 20 : (1994) 208 ITR 465 (Cal), learned counsel submitted that the same is under s. 68 and relates to cash credit and is distinguishable on facts. Learned counsel thus concluded his reply by submitting that the identity of the donors, their sources and capacity are established and that there is no material with the Department to hold that the compensatory payments have been made by the assessee to the donors. He again referred to the decision in (1998) 62 TTJ (Mumbai) 357 : (1998) 67 ITD 289 (Mumbai), wherein it has been held that where gifts were given by the account payee cheques and donors file affidavits confirming the said gifts, in the absence of any evidence in possession of the Department to the contrary gifted amounts could not be added as undisclosed income of the assessee. He, therefore, urged that the addition of Rs. 76 lakhs ought to be deleted.
7. We have carefully considered the submissions made by both the parties and have perused the assessment order. We have also seen various documents placed in the paper book to which our attention was invited during the course of hearing. We have also considered the case law relied upon by both the parties. It is observed that the AO concluded on the basis of statement of Shri Bhangu that whatever was paid by him to the assessee is not a gift without consideration but compensatory payment as a consideration for receiving an equivalent amount of gain in terms of money. He, therefore, held that there was no valid gift made by Shri Bhangu. AO relied on the answer given by Shri Bhangu to question No. 6, when he stated that 'I was offered a joint venture project share by Shri R.K. Syal and I was also assured of an adequate compensation equivalent to the amount of gift and this was the consideration/attraction which allured me and I accepted the proposal and gifted the amount'. AO also referred to the fax message sent by Shri Bhangu to the assessee informing him about the negotiations made in the USA for mobilising NRI funds. He observed that it was a very important piece of circumstantial evidence which corroborated the last part of the statement given by Shri Bhangu that he was offered a joint venture project share by the assessee and was assured of adequate compensation equivalent to the amount of the gift. AO referred to the case of Lal Chand Kalra and observed that there was no occasion for Shri Bhangu to make the gift to the assessee and the amount was admitted to be compensatory in nature. He, therefore, concluded that the assessee had routed his unaccounted money through the NRE a/c of Shri Bhangu by paying him adequate compensation for giving an entry which on the face of it appears to be a genuine gift. With reference to gift of Rs. 5 lakhs made by Shri Manmohan Singh and of Rs. 45 lakhs by Shri Bains, AO applied the same assumptions and held that the gifts were ingenuine and the assessee had routed his unaccounted money through NRE a/cs of the donors. AO made addition of Rs. 76 lakhs on account of these three gifts without referring to the relevant section of the IT Act under which the additions have been made. Learned Departmental Representative accepted during hearing that s. 69 is applicable in relation to these additions. It is provided in s. 69 that where the assessee has made investments in the financial year which are 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 the investments or the explanation offered by him is not, in the opinion of the AO satisfactory, the value of the investment may be deemed to be the income of the assessee of such financial year. It is observed that during search, affidavits of three donors have been found wherein they have specifically stated that they have made the impugned gifts to the assessee. The reasons for making the gifts are stated to be love and affection, which is a common reason given by all the donors and the forestry and environmental work being done by the assessee and this reason has been given by Shri Bhangu in his affidavit dt. 14th Sept., 1996. It is also observed that no other incriminating document has been found during search which led to the conclusion that the assessee made any compensatory payment to the donors either before receiving the gifts or thereafter. AO has only relied on the statement of Shri Bhangu for coming to this conclusion regarding the compensatory payment and the relevant portion of the statement has already been mentioned in the foregoing part of this paragraph. There is nothing on record to show that the joint venture project did materialise or compensation equivalent to the amount of gift was given by the assessee to Shri Bhangu. Therefore, the consideration, if any, cannot be said to be in money/money's worth. Further, the statement of Shri Bhangu was recorded on 8th Sept., 1995, and in the affidavit made on 14th Sept., 1996 Shri Bhangu stated that he was still holding the status of NRI and his passport number was B-86564 issued in the USA. He reiterated that the amount of gift was Rs. 26 lakhs and not Rs. 25 lakhs mentioned inadvertently in the statement before the search party and that the said amount was paid for promotion of social agro forestry work for maintaining rich environment and to improve the living conditions of the poor people residing in under-developed and backward areas in India. He further stated that since the purpose for which the amounts were given to the assessee have not been fulfilled and the money stood seized by the IT Department, the said amount was refundable to him. In para 8 of the affidavit, Shri Bhangu has further stated that he made the statement without understanding the complexity/meaning of word 'gift' under the Indian Tax Laws and that he was correcting himself to state that it was a gift1 without any consideration and it was a payment towards a social cause which not having been achieved the amount was refundable to him. It may be mentioned here that the assessment was completed on 20th Sept., 1996. It is also observed from the copy of fax message that the same contains certain information about raising of funds outside India and obtaining franchise letter from big hotel chain for Chandigarh project. We feel that the said fax message is neither here nor there for the purpose of coming to the conclusion that the AO had arrived at regarding compensatory payment. It is also observed that the copy of NRE a/c of Shri Bhangu was filed before the AO and relevant extracts from NRE a/cs of Shri Manmohan Singh Virdhi and Shri Navtej Singh Bains have been filed before us, as enquired by the Bench during hearing. The said NRE a/cs have been perused by us and it is observed that these are running accounts and moneys have been deposited therein from time to time. It is not disputed that only deposits in the foreign exchange are permissible in such a/cs, It is thus clear that source of deposits in these NRE a/cs is in foreign exchange through the donors. There is no proof that the money of the assessee has been routed through donors into these accounts from where the gifts have been made to the assessee.
7.1. Now taking up the plea of learned Departmental Representative regarding application of principle of human probabilities, the plea looks attractive on the face of it. It really looks strange as to how any person can part with huge sums of money in favour of other person without cogent reasons. Such transactions thus create doubt/suspicion and one starts assuming that something is fishy about these transactions and probably the donors m such cases must have got the money equivalent to gifts or something equivalent or more in money's worth in return. The AO has proceeded on these assumptions and has presumed that the assessee has given compensatory payment in order to receive these gifts. However, we feel that the assumptions/presumptions/presumptions made by the AO have to be examined in the light of evidence on record and the explanation of the assessee particularly in view of the provisions of s. 69 relied upon by learned Departmental Representative. As already mentioned, there are affidavits by three donors stated on oath that gifts have been made to the assessee out of their NRE a/cs. We have perused copies of those accounts and have observed that these are running accounts in which moneys have been deposited by the donors from time to time. It is not the case of the Revenue that moneys have come into these accounts immediately before the gifts were made. Thus, we feel that in the face of evidence on record in the form of these affidavits made on oath by the donors testifying making of gifts, the said NRE a/cs showing source of gifts and the capacity of the donors possessing moneys deposited in those accounts from time to time, it is difficult to uphold the addition made by the AO on only assumption/human probabilities. We feel that the principles of human probabilities, though may be a relevant factor, cannot take the place of evidence on record and the explanation of the assessee unless such evidence cannot be relied upon or the explanation of the assessee is found unsatisfactory, as otherwise all foreign gifts may have to be treated as non-genuine. In this case, no material has been brought on record or placed before us to show any repayment of money to the donors by the assessee either before or after the receipts of the gifts. In so far as the offer of a share in the projected joint venture and assurance of adequate compensation as stated by Shri Bhangu is concerned, we feel that the said offer/assurance by itself cannot be called a consideration in money or money's worth as mentioned in the definition of 'gift' in s. 2(xii) of the GT Act. As we have already observed, the fax message mentioned by AO is not sufficient to come to the conclusion of there being consideration in money or money's worth. In view of the foregoing, we feel that the submissions made by learned counsel have force and are supported by the following case law relied upon by him.
(i) Atmaram J. Manghirmalam (HUF) vs. ITO which is a case under s. 69A. It has been held by the Hon'ble President of the Tribunal that where gifts have been given by account payee cheques and the donors filed affidavits confirming said gifts, in the absence of any evidence in possession of Department to the contrary, gifts amounts could not be added as undisclosed income of the assessee.
(ii) CIT vs. Mrs. Sunita Vachani. In the said case, the CIT had set aside an assessment order because he was of the view that the ITO had not gone into the sources of gifts of large sums of money received by the assessee from abroad. On appeal, the Tribunal examined the balance sheet of the donors and came to the conclusion on merits that the decision of the ITO to treat the moneys received as gifts was correct and that there was no error committed by the officer as there was nothing more which he could investigate than what he had already done. On reference, the High Court held that the finding of the Tribunal that the gifts were genuine was a pure question of fact. It observed that 'even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers from abroad, unless there is something more tangible than suspicion, it will be difficult to regard the moneys received in India from abroad as representing the income of the assessee in India."
(iii) Smt. Bhagwati Devi vs. ITO. In the said case, the assessee received a gift from a foreign resident out of natural love and affection. The amount was brought in by way of demand draft and credited to assessee's account directly with bank. A sworn declaration from donor was also filed by assessee. It was held that in the absence of any proof that the gift was collusive or a dubious device or a subterfuge to evade tax, amount of gift could not be assessed in assessee's hands. It was also held that since the amount of gift was not credited in the books maintained by the assessee, s. 68 was not applicable for assessment of such gift.
(iv) Roshan Di Hatti vs. CIT. In the said case, there was entry in the books of account of the assessee dt. 30th March, 1948, bringing in an aggregate capital of Rs. 3,33,414 including gold ornaments for Rs. 1,19,320, gold rawa for Rs. 1,69,020 and stones for Rs. 4,000 and bank and cash balances amounting to Rs. 38,074. When asked to explain the source of the capital brought into the business the assessee explained that the gold rawa, ornaments and cash were brought by R when he migrated from Lahore in the sealed trunk which was kept at Amritsar and later deposited in a locker with a bank at Delhi and that from June, 1947, till 30th March, 1948, neither the assessee nor R had any other business or means of income from which the assets of Rs. 3,33,414 could be earned. The AO rejected the assessee's explanation and treated the amount of s. 20,000 only as explained and brought to tax the balance amount of Rs. 3,13,414 as income from undisclosed sources. On appeal, the AAC treated a further sum of Rs. 80,000 as explained on the basis of documentary evidence. On further appeal, the Tribunal confirmed the order of the AAC On a reference, the High Court upheld the order of the Tribunal. The matter travelled before the apex Court and reversing the decision of the High Court, it was observed that the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially or properly instructed as to the relevant law could come to such a finding. It further observed that the business carried on by the assessee at Lahore was a reasonably large business though its extent could not be verified by any reliable material produced by the assessee; there was no material on which it could be said that the ornaments, jewellery and cash brought by the assessee and kept in the sealed truck were of the value of only Rs. 1 lakh and no more. It further observed that the utter improbability amounting almost to impossibility of the assessee having earned such a large amount of Rs. 2,33,414 as profit within a few months in the disturbed conditions which then prevailed in India was a circumstance which ought to have been taken into account by the Tribunal and the Tribunal had failed to do so.
(v) CIT vs. Daulat Ram Rawatmull. In the said case, it was observed at p. 360 that the approach of the Tribunal was manifestly erroneous because it is a common feature of commercial and other transactions that securities are offered by other persons to guarantee the payment of the amount which may be found due from the principal debtor The concept of security and ownership are different and it would be a wholly erroneous approach to hold that a thing offered in security by a third person to guarantee the payment of debt due from the principal debtor belongs not to the surety but to the principal debtor. It was further observed that the onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the Department which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the receipt had been issued in the name of Biswanath, the burden lay on the Department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of Biswanath.
(vi) Saraogi Credit Corporation vs. CIT. In the said case, with reference to credit entry in the books of the assessee, it was held that once the identity of the third party is established before the ITO and other such evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make an advance of the money as a loan to the assessee. In view of the above, we feel that the assessee has discharged the initial onus and has offered a satisfactory explanation before the AO with reference to the gifts received by him from the three donors. The affidavits of the three donors wherein they have testified making of gifts to the assessee were found during search, the assessee explained that the gifts have been made out of NRE a/cs of the three donors maintained in India and the said fact was also accepted by the AO. Learned Departmental Representative pleaded that once the AO accepted the fact that the money has come through NRE a/cs of the three donors, there was no occasion to further question the assessee. We have already observed that no material has been brought on record by the Department to show that any repayment of money to the donors by the assessee has taken place. Further, no material has been placed before us to show that the assessee could have earned the amount of Rs. 76 lakhs during block period so as to repay the said amount to the donors. We feel that the AO's finding that unaccounted money of the assessee has been routed to the donors in order to receive gifts is thus without basis.
7.2. We have also carefully seen the case law relied upon by learned Departmental Representative and we feel that the same is distinguishable on facts as under:
(a) Shyam Sunder Gupta. In the said case, the assessee received a gift of Rs. 25,000 from J resident of London. He failed to furnish address of the donor in India as also his relationship with the donor. AO rejected the assessee's contention that J had gifted the amount out of love and affection resulting from a month long stay together at Kathmandu. The assessee filed the affidavit and the Tribunal held that bare assertion of an occasional stay of J with the assessee in Nepal turning intimacy into friendship of degree which prompted J to donate substantial amount at no auspicious occasion got no corroborative support even from assessee's own affidavit. The Tribunal, therefore, took into account the circumstances attending on alleged transaction as also conduct and behaviour of parties and held that the transaction was not genuine. It is clear that the Tribunal went into other circumstances and conduct and behaviour of the parties in the absence of any other evidence (including affidavit of the donor confirming the gift).
(b) CIT vs. Precision Finance (P) Ltd. In the said case, there were credits in the names of various persons and it was held that the assessee must prove identity of the creditors and their creditworthiness and that mere furnishing of the particulars was not enough and mere payment by account payee cheque was not sacrosanct nor can it make a non-genuine transaction genuine. It is obvious that the facts in the said case were different and enquiries were conducted through inspector on different dates and it was found that either the file, did not exist as per details given by the assessee or the record did not tally with facts mentioned by the assessee. Apart from having enquiries made by the inspector several letters were also issued to the assessee bringing to its notice that the loans could not be verified and adequate proof was required and the assessee had not responded. High Court, therefore, held that the Tribunal was not justified in law in deleting the additions made on account of unexplained credit.
(c) Pradip Kumar Loyalka. In the said case, there were cash credits and an amount of Rs. 87,000 was found credited in the books of account. The assessee claimed gifts received from seven persons as close relatives. The assessee produced three relatives before the AO and filed a declaration made by other relatives. The three other alleged donors filed a written reply. The Tribunal observed that though the donors were income-tax assessees they could not explain the source of amount gifted by them and the occasion to make the gift. The Tribunal also observed that the evidence produced by the assessee was either scanty or negligible or did not inspire any confidence whatsoever or was against human probabilities It is obvious that the said case is distinguishable on facts being under s. 68 and further the donor could not explain the source of amounts gifted by them and the evidence adduced by the assessee was found to be scanty or negligible. The Tribunal, therefore, considered the case by also taking into account the human probabilities.
(d) It is next observed that the AO and learned Departmental Representative relied on the case of Lal Chand Kalra for the proposition that gifts have been given by strangers and there was no occasion-for making the gifts and further in case of Shri Bhangu he had admitted that the amount of gift was compensatory in nature. In this connection, it is observed that the Tribunal (Asr Bench) in its order dt. 31st March, 1992 has discussed the case of Lal Chand Kalra. After noting the facts in the said case and the decision of the Tribunal that there was no satisfactory evidence on record to prove that the donors owned land measuring 40 acres and 20 kanals or that their net income was in fact Rs. 30,000 or Rs. 18,000 as alleged by them and therefore, the donors were not men of means and that High Court held that the Tribunal was justified in holding that there was no evidence to show the extent of annual income as stated by the donors, Bench observed that the aforesaid judgment does not in anyway lay down that the genuine gifts can be rejected merely on the ground that there was no occasion or relationship for making the gifts. The Bench further observed that such circumstances could only be seen when source of gift or the financial standing of the donors was in doubt. These observations of the Tribunal are echoed in the article of Shri D.S. Walia in (1993) 113 CTR (Art) 51, wherein in para. 5 at p. 52 it is mentioned that there is no condition attached that the transferred property from the donors to the donee should be on some specific occasion and that the only condition for a gift is that the transfer of property should be voluntary and without consideration and that it should be accepted by or on behalf of the donee. It is also observed that the definition of gift in the GT Act is to the same effect and it has been only enlarged by including deeming gifts in its sweep. Commenting on the case of Lal Chand Kalra, the learned author has observed that the High Court found itself unable to vitiate the finding of the Tribunal that the donors Shri Sampuran Singh and Shri Buta Ram were men of no means. High Court observed with reference to second question referred to it as to whether addition of Rs. 20,000 was sustainable or not had to be answered against the assessee on the basis of the finding of the Tribunal regarding the nature of gift (which) could be sustained on other reasons given for disbelieving the genuineness of the alleged gift. The High Court observed that 'as found by the Tribunal, Sampuran Singh was totally a stranger to the assessee and there was no reason why he should make a gift of Rs. 10,000 to him. Buta Ram though was brother of the wife of the assessee but he had four sisters and no reason was forthcoming as to why he gave a gift of Rs. 10,000 to the assessee alone particularly when there was no occasion to do so'. The author has commented that on this part of the judgment IT authorities relied to reject the claim of foreign remittances as genuine gifts and if there is no relationship or even if there is relationship between the donor and the donee but there is no occasion for making the gift, the gift is rejected as ingenuine and is branded as an effort to launder black money. The author has stressed that the main thing was that the High Court had agreed with the Tribunal that the donors were men of no means and that is lost sight of. In view of the foregoing, we feel that the case law relied upon by learned Departmental Representative is clearly distinguishable on facts and is of no help to the Revenue. We tend to agree with the observations of the Amritsar Bench of the Tribunal made in order dt. 31st March, 1992, which are in line with the latter observations of learned author in the aforesaid article on foreign remittances that the gifts made cannot be rejected merely on the ground that there was no occasion or relationship for making the same. The element of close relationship or occasion for making the gift do not flow from the definition of gift as given in s. 2(xii) of the GT Act. The only conditions laid down in the definition are that there should be transfer by one person to another of any existing movable or immovable property, the transfer should be voluntary and it should be made without consideration of any money or money's worth. Thus, the elements of close relationship and occasion relate to the realm of human probabilities and are in the nature of circumstantial evidence which may have to be looked into if the direct evidence relating to making of gift is found wanting. Here, we may also mention that Government of India has been floating schemes from time to time for inviting remittances in foreign exchange from NRIs and granting immunity from the provisions of the GT Act including immunity from the provisions of IT Act, etc. During the period when such immunity schemes are in force, the question of dose relationship between the donor and the donee and occasion for making the gift are given a go-by. It may be argued that these elements are not considered because of immunity granted for specific purpose and in public interest. However, it cannot be ignored that these elements of close relationship and occasion are not legally necessary, though they lend credence to the gifts made by the donors. It may also be not out of place to mention that human nature is full of complexities. It is quite possible that a person may be at daggers drawn with his close relations and may not like to part with anything in their favour but at the same time a person may develop fancy for a friend or a neighbour for the reasons which appeal to him, however, redundant such reasons may appear to others. Looked at from this angle, a person may develop love and affection spontaneously for any person or for any cause and may like to part with bulk of his sources in the form of money and make a gift. In such circumstances, the person making the gift cannot be found fault with and the gift cannot be treated as ingenuine only on the basis that the donor is not related to the donee and there is no occasion for making the gift.
7.3. Now if we examine the gifts given by Shri Bhangu to the assessee in the above context, it would be clear from the sequence of this first two affidavits, the statement made by Shri Bhangu and the affidavit dt. 14th Sept., 1996 (which was filed before passing of assessment order on 20th Sept., 1996) that Shri Bhangu consistently claimed that he made gifts of Rs. 26 lakhs to the assessee. The AO has conveniently ignored the last affidavit wherein the donor reiterated that the gifts had been made without consideration and for a social cause. The AO laid much emphasis on the answer of Shri Bhangu to question No. 6 and the fax message, which we have already analysed and have observed that the same is not a sound basis for coming to the conclusion that the amounts of gifts made by Shri Bhangu were compensatory in nature. With reference to other two gifts, the AO simply relied on the assumption made by him in case of gifts by Shri Bhangu and had no material at all for coming to the conclusion that the assessee had routed his unaccounted money through NRE a/cs of Shri Manmohan Singh or of Shri Navtej Singh Bains or that the amounts gifted were compensatory in nature. In view of the foregoing, we feel that there is no basis for making the impugned addition of Rs. 76 lakhs, which is hereby deleted.
8. Ground No. 8(a) to (g) relates to addition of Rs. 19,15,920 on account of purchase of land.
8.1. AO observed that p. 5 of item A-20 seized on 7th Sept., 1995 at the residence of Smt. Pamila Syal and Shri A.L. Syal related to purchase of land by various family members at Mirpura in the month of August, 1995. He also observed that in the case of the assessee there were three lands purchased, i.e. plots of 16.07 bighas registered on 31st Aug., 1995 for an amount of Rs. 4,08,750; 1.05 bighas registered on 24th Aug., 1995, for Rs. 3,81,250; and 16 bighas registered on 24th Aug., 1995, for Rs. 4 lakhs. He also observed that total consideration paid for the said plots was Rs. 10,66,858; Rs. 9,95,062; Rs. 10.44 lakhs: aggregating to Rs. 31,05,920. He referred to balance sheet of the assessee as on 7th Sept., 1995, and observed that it showed only one land having registration value of Rs. 4,08,750 was reflected in balance sheet of Smt. Bimla Syal on 7th Sept., 1995 instead of Shri R.K. Syal. Similarly, he observed that the land having registration value of Rs. 4 lakhs was shown in balance sheet of Smt. Pamila Syal, sister of Shri R.K. Syal. He, therefore, considered all the three plots of land at Mirpura, whose registration had been done in the name of the assessee, in the hands of the assessee on substantive basis. He also concluded that certain payments were made to sellers over and above value of their property. He noted that the assessee had denied payment of any premium. He also observed that the seller of land, Shri Rachpal Singh, was summoned under s. 131 and he denied receipt of any payment over and above the registered deed and also furnished affidavit to that effect. He noted the contention of the assessee that there were two proposals one by the individuals of the family and the other by the company and that individuals bought land on cash down payment but the company was offering them FDRs for higher amounts. He also noted the plea that the amount mentioned in the seized document was actually maturity value to be paid at the end of the plan. AO, however, did not accept the plea of the assessee on the ground that p. 14 of A-8 seized from the residence of Shri Vinod Viyogi confirmed that the said payments were made to sellers as premium over and above the registered value of land. AO, therefore, made an addition of Rs. 19,15,920 (Rs. 31,05,920 minus Rs. 11,90,000) in the income of the assessee from undisclosed sources in asst. yr. 1986-87 upto the date of search and levied tax @ 60 per cent.
8.2. Learned counsel, at the outset, objected to the admissibility of pp. 12 14 of the Departmental paper book and raised the same objections as were raised by him in the case of Smt. Neena Syal refer para 4.3 of order dt. 21st Sept., 1998 in ITA No. 1163/1996, i.e. the said papers may not be taken on record as the same were found from the residence of Shri Vinod Viyogi and not from the assessee and that the said evidence was never confronted to him. He pointed out that the land at Sr. No. 3 of para. 7 of assessment order registered for Rs. 4 lakhs has actually been registered in the name of the assessee. He submitted that AO has committed a mistake and that it is a matter of record that the said land is not registered in the name of the assessee. With reference to land at Sr. No. 1 of para. 7 registered for an amount of Rs. 4,08,750 learned counsel submitted that though the land is registered in the name of the assessee the funds have been paid by Smt. Bimla Syal and that she is the real beneficiary. He referred to balance sheet as on 7th Sept., 1995 in the case of Smt. Bimla Syal at pp. 76-77 of assessee's paper book, wherein it has been mentioned that land at Mirpura has been purchased in the name of Shri R.K. Syal on 31st Aug., 1995. In cash flow statement placed at p. 77 of assessee's paper book, the amount of Rs. 4.35 lakhs is shown with reference to (w.r.t.) land at Mirpura in the name of Shri R.K. Syal. He further referred to assessment order in the case of Smt. Bimla Syal at p. 78-79 and submitted that the addition w.r.t. the said land has been made in the case of Smt. Bimla Syal on protective basis, as she provided the funds. He further submitted that the sellers of the land, Shri Rachpal Singh and Shri Chanan Singh were summoned under s. 131 and they denied receipt of any on-money w.r.t. sale of the said land. He referred to letter dt. 18th April, 1986, written to the assessee at p. 61 of assessee's paper book, wherein AO mentioned in para. 3 that as per documents seized during search land in Mirpura had been acquired and where registration has been done in August, 1995, total consideration for three pieces of land was Rs. 10,66,858; Rs. 9,95,060; and Rs. 10.44 lakhs respectively and that the assessee may explain the above transactions and nature and source of investment in the said lands at Mirpura. Learned counsel further referred to reply at p. 63 assessee's paper book, wherein the assessee stated that there was only one land which belonged to him while other pieces of land had been declared in the names of family members in their block assessment. The assessee appended a note on Mirpura property for perusal of AO. The said note is placed at pp. 64-66 of assessee's paper book. In the said note, the assessee has clarified that he had purchased only one land on 24th Aug., 1995, for Rs. 3,81,250 and further amount of Rs. 22,900 plus Rs. 1,850 was spent on stamp-paper and total amount of Rs. 4.06 lakhs is duly declared in the balance sheet of the assessee. The assessee also clarified that another piece of land has been declared in the hands of Smt. Bimla Syal who had made investment and the same was verifiable from balance sheet and her income-tax return. With reference to third piece of land, the assessee stated that the same is actually registered in the name of Ms Madhulika Syal who had declared three pieces of land in her hands and the same are reflected in balance sheet of Smt. Pamila Syal and Ms Madhulika Syal. The assessee denied payment of any on money w.r.t. purchase of land at Mirpura. Learned counsel submitted that the arguments advanced in case of Smt Neena Syal in para. 4.1, 4.2 and 4.4 may be taken to have been advanced in this case also.
8.3. Learned Departmental Representative submitted that the sellers of the land in question are relatives and that the proposal is given for the family as a whole and there is no fresh proposal for each member or for each piece of land. He referred to p. 42 of Departmental paper book, where a copy of document A-20 is placed and submitted that actual amount of consideration is at (2) and that the said amounts do not reflect the maturity value of FDRs. He further submitted that the additions have been rightly made in the name of the assessee as the plot land is registered in his name, though funds may have been provided by Smt. Bimla Syal. With reference to pieces of land registered in the name of Smt. Pamila Syal/Ms Madhulika Syal, learned Departmental Representative submitted that this fact may be allowed to be verified by AO. Learned Departmental Representative submitted that this fact may be allowed to be verified by AO. Learned Departmental Representative submitted that all the arguments advanced in the case of Smt. Pamila Syal including written submissions may be taken as his arguments advanced in this case also.
9. We have carefully considered the rival submissions and have perused order of AO and various papers placed in the assessee's paper book as also the Departmental paper book to which our attention was invited during the course of hearing. We have also seen the case law relied upon by both the parties. It is observed that AO while making impugned addition of Rs. 19,15,920 has mainly relied on document A-8 p. 14 seized from the residence of Shri Vinod Viyogi. He has also referred to document A-20 p 5 seized from the residence of Smt Pamila Syal and Shri A.L. Syal. AO asked the assessee to explain the source of investment in the impugned lands at Mirpura and the assessee filed a detailed reply placed at pp. 64-65 of assessee's paper book. The assessee clarified that the alleged amounts of consideration in relation to three plots had nowhere been mentioned either in the seized documents or in the registration deeds. From assessment order, it is clear that AO has observed that seller of land Shri Rachhpal Singh was summoned under s. 131 and he denied receipt of any payment over and above registered deed and he furnished affidavit to that effect. AO also referred to the contention of the assessee that there were two proposals- one by individual of family and the other by the company and that individuals bought land on cash down payment, while the company was offering them FDRs for higher amounts. He has also observed that the amount mentioned in seized document A-20 was actually maturity value to be paid at the end of the plan. AO rejected the plea of the assessee by referring to p. 14, item A-8 seized from the resident of Shri Vinod Viyogi and concluded that the aggregate amount of Rs. 19,15,920 was paid over and above the cost mentioned in the registration deed. It is clear that the explanation given by the assessee in his reply has not been controverted by AO and that he did not make any further enquiry from the assessee in this respect. It is also observed from the statement of Shri R.K. Syal recorded on 3th Sept., 1995 at pp. 45-53 of assessee's paper book that no question was put to the assessee w.r.t. any premium paid by him for purchase of plots at Mirpura from the sellers. AO came to the conclusion that premium had been paid by the assessee to the sellers of plots only on the basis of document A-8, p. 14, which was seized from the residence of Shri Vinod Viyogi and which was not confronted to the assessee. We may also here make a reference to order sheet entry dt. 20th Aug., 1996, whereby AO asked the counsel to file explanation w.r.t. unaccounted money paid in Mirpura property. The said order sheet entry is silent about the confrontation to the assessee of document A-8, p. 14 seized from the residence of Shri Vinod Viyogi. We may also refer to order sheet entry dt. 16th Sept., 1996, wherein it is specifically mentioned that counsel is confronted with the statement of Shri H.S. Bhangu and is asked to file written submissions. Thus, AO made the impugned addition by referring to document A-8, p. 14 and concluded that the amount of Rs. 19,15,920 is undisclosed income of the assessee He has not discussed in assessment order as to whether the assessee furnished the provisions of s. 69. AO has not given any reason for either not accepting the explanation or for finding the explanation as unsatisfactory. It is also observed that even the affidavit filed by the seller has not been confronted to the assessee. Thus, we feel that on the facts and circumstances of the case AO did not comply with the conditions stipulated in s. 69, which are mandatory in nature and are relevant for assessment made under s. 143(3)/158BC of the Act. It may be mentioned that under s. 158BB(2), the provisions of ss. 68, 69, 69A, 69B and 69C have been made applicable for the purpose of computing undisclosed income of the block period. It is also observed from the decision of the Tribunal in Asstt. CIT vs. Rajesh Bhai Jogjivandass Thakkar that 'the fiction enacted under s. 132(5) for the limited purpose cannot be extended while completing the assessment under s. 143(3) and, therefore, the burden of proving that the assessee was the owner of the gold ornaments in question in the face of his spontaneous statements and statements of the family members lies on the taxing authority'. We may also refer to the decision in (1990) 86 CTR (All) 110 : (1990) 183 ITR 388 (All), wherein it was held in the context of s. 132(4A) that the books of account, other documents, money, bullion, jewellery or other valuable articles seized from the possession of the assessee shall be presumed to belong to the assessee if they are found in the possession or control of the assessee in the course of search. This presumption cannot, however, have the effect of excluding s. 68 when regular assessment is made in regard to the income of the person from whose possession those books of account were seized under s. 132. We may mention that in the present case even the seized documents on the basis of which the impugned addition of Rs. 19,15,920 has been made, have not been found at the residence of the assessee and, as already mentioned, the same have not been specifically confronted to the assessee before making the impugned addition. Thus, having regard to the foregoing facts, we feel that addition of Rs. 19,15,920 is not sustainable in the hands of the assessee when AO had failed to comply with the basic conditions stipulated under s. 69. We may mention here that the plea of learned counsel that in case of one plot the funds have been provided by Smt. Bimla Syal has no force as the land is admittedly registered in the name of the assessee. However, w.r.t. land at Sr. No. 3 of para 7 of assessment order measuring 16 bighas and purchased for Rs. 4 lakhs, AO may verify the contention of the assessee that the said land is registered in the name of Smt. Pamila Syal/Ms Madhulika Syal. The case law relied upon by learned Departmental Representative is clearly distinguishable on facts and is of no help to the Revenue. We have already held in the case of Smt. Neena Syal that even if it is assumed that document A-8 p. 14 and other relevant pages were impliedly confronted to learned counsel, Shri Mukhi, AO had not followed up the matter to the logical end, as assessment order is silent about any explanation specifically sought by AO from the assessee w.r.t. such document and source of Rs. 19,15,920 and as to whether any explanation was furnished by the assessee and, if furnished, how it was unsatisfactory. We have also observed that the aforesaid documents are open to more than one possibility of interpretation and do not prove conclusively that any premium was given by the assessee or received by the sellers. We had also referred to the decision in (1986) 50 CTR (SC) 10 : (1986) 159 ITR 71 (SC), wherein it was held that 'unless there is evidence that more than what was stated was received, no higher price can be taken to be the, basis for computation of capital gains'. It was also observed that though the legislation in question, i.e. s. 12B(2), proviso (i) of, Indian IT Act, 1922, was to remedy a social evil and should be read broadly and should be so read that the object is fulfilled; yet the onus of establishing a condition of taxability must be fulfilled by the Revenue.
9.1. We have also considered the written submissions filed by learned Departmental Representative in the case of Smt. Pamila Syal in ITA No. 1168/1996. It is observed that learned Departmental Representative has submitted that the issue of payments for purchase of immovable property by the assessee in the name of Ms Madhulika Syal over and above the registered amount was duly confronted to the assessee as per question No. 4 of the questionnaire dt. 18th April, 1996, issued by AO and placed at p. 6 of the paper book. In the said written submissions, it has been further stated that presuming that the documents mentioned in items A-5 and A-8 of the Panchnama drawn at the residence of Shri Vinod Viyogi were not confronted, it is prayed that the case may be referred back to the file of AO for fresh adjudication. In this connection, the Department has relied on the decisions in the cases of Kapurchand Shrimal vs. CIT (1981) 24 CTR (SC) 345 (1981) 131 ITR 451 (SC) and CIT vs. Saligram Premnath (1984) 148 ITR 302 (P&H) and CIT vs. Salig Ram (1989) 179 ITR 239 (P&H). A reference has also been made to the decision in the State of Kerala vs. K.T. Shaduli AIR 1977 SC 1627. It has further been stated that under the provisions of new Chapter XIV-B the order made by AO is directly appealable to the Tribunal and, therefore, the CIT(A) has no power to hear the appeal and the Tribunal has become first and final fact-finding appellate authority. It is stressed that under the new scheme, the Department has no remedy under s. 148 or 263 or 251(1)(a). The ultimate emphasis is on restoration of the case to the AO. In that case, an elaborate rejoinder to the written submissions was filed by learned counsel, wherein it has been mentioned that AO himself is not relying on any document other than A-8, p. 14 for making the addition and that the Department is now attempting that the said document may form part of appreciation of evidence and drawing inference against the assessee. Learned counsel has further mentioned that in para 4 of the letter of AO placed at p. 6 of Departmental paper book, certain mention has been made to documents A-5, A-8 and A-20 seized from the residence. It has been mentioned that the attempt is to read between the lines that A-20 comprising of p. 5 is from Smt. Pamila Syal and A-5 and A-8 which Eire from the residence of Shri Vinod Viyogi have been produced to the assessee. It has further been pleaded that assuming that learned Departmental Representative is correct, he has not mentioned anything w.r.t. non-reply of the assessee or non-advancement of any argument by the assessee w.r.t. the said documents. Learned counsel has also referred to the case of Smt. Neena Syal, where statement at bar was made by counsel, the assessee's father-in-law in response to the certificate issued by the then AO through an affidavit that the said documents were not confronted to the assessee. It has been mentioned that the issue had been adjudicated upon by the Tribunal in the said order. Learned counsel also relied on the decisions in CIT vs. Shamlal (1980) 18 CTR (P&H) 89 : (1980) 127 ITR 816 (P&H); 41 ITR 206 (sic); Wiseman & Anr. & Boneman & Anr. (1970) 75 ITR 652 (HL); AIR 1978 SC 597 for the proposition that rules of natural justice are for guidance of the authorities to discharge the judicial functions, and to avoid abuse of the exercise of powers and it is not available to the assessing authority so that it may improve upon its finding and come to a conclusion after rectifying his lapse and after rectifying legal and mandatory directions to be followed by him. It is observed that these issues have already been considered by the Tribunal in the case of Smt. Neena Syal. The Tribunal elaborately discussed the issue of restoring the matter to the file of AO in para. 5.2 in the light of the provisions of new Chapter XIV-B. It analysed the said provisions and observed at p. 32 that it will be seen that the new provisions are more stringent inasmuch as the assessee is liable to pay tax at 60 per cent in relation to undisclosed income, assessment order is to be made by an officer not below the rank of Asstt. CIT and with the previous approval of the CIT. We, therefore, feel that the provisions of the new Chapter have placed a greater-burden on the Departmental authorities to comply with the essential provisions of law and that these provisions have to be construed strictly. Thus, in a situation where AO has failed to comply with the basic provisions of s. 69/69B, whereunder the impugned addition has overtly been made, it is difficult to accept the plea of learned Departmental Representative that the matter may be restored to the file of AO so that the requisite material can be confronted to the assessee and then the addition made. We feel that it is not the function of the Tribunal to further allow opportunity to the AO so as to cover up legal lapses made by him while making addition, by restoring the matter back to his file. Moreover, the Department is only respondent in this case'. Thus, we feel that the issue already stands covered and, therefore, the said written submissions are rejected.
9.2. Thus, we feel that AO had simply jumped to the conclusion that the amount of Rs. 19,15,920 is undisclosed investment, without following due course of law. The impugned addition of Rs. 19,15,920 is, therefore, deleted.
10. Ground No. 9 relates to addition of Rs. 25,938 in financial year ending 31st March, 1995, on account of details of school fees in the case of Master Nikhil Syal.
10.1. Brief facts are that AO perused p. 41 of item A-4 seized from the residence of the assessee on 7th Sept., 1995, and noted details of schools fee paid in the case of Nikhil to the extent of Rs. 25,938 for financial year ending 31st March, 1995. He observed that in the said financial year, household expenses were shown at Rs. 42,000 only. He, therefore, added the amount of Rs. 25,938 as undisclosed income to be taxed at 60 per cent.
10.2. Learned counsel referred to p. 41 of Departmental paper book, where a copy of seized document relating to details of fee of Nikhil is placed. He further referred to reply of the assessee w.r.t. household expenses at p. 85 of assessee's paper book. It has been mentioned therein that members of Syal family were regular income-tax assesses and were drawing consultancy charges, agricultural income, business income, salary and income from other sources and had been withdrawing sufficient funds for their household expenses, which are duly depicted in their personal balance sheets for the block period. Learned counsel urged that expenses on fee had been met out of household expenses shown in balance sheet of members of Syal family. He further submitted that certain questions arise, for example, authenticity of the seized papers, no enquiry has been conducted by AO as to how the expenses have been met, the period for which fees have been paid is not mentioned and it is not clear as to whether fees have been actually paid and for what period. He further submitted that though AO has drawn inference but he has not proved that the amount mentioned in the seized paper is undisclosed income of the assessee. He submitted that AO has not examined withdrawals of the past years as also withdrawals made by the wife of the assessee. He also submitted that AO has not proved that withdrawals of the assessee and his wife were insufficient to meet these expenses. He urged that some material should have been brought on record to show that the expenses have actually been incurred. He, therefore, urged that the document in question was not conclusive and it was not proved to the logical end. He relied on the decision in the case of Raj Kumar Jain vs. Asstt. CIT (1944) 49 TTJ (All) 558 (TM). (1994) 50 ITD 1 (TM)(All).
10.3. Learned Departmental Representative relied on order of AC. He further submitted that the paper has been found from the residence of the assessee and it is not necessary that it should have been signed by anybody He referred to the provisions of s. 132(4) and submitted that there is a presumption that the paper belongs to the assessee. He further submitted that it has never been disputed that the contents are not true. He submitted that sufficient details of expenses have been given in the said paper. He also submitted that the life style/living standard of the assessee has to be taken into account and the household withdrawals shown at Rs. 42,000 are not sufficient to cover the expenses of Rs. 25,938 incurred by way of school fee, etc. of Nikhil. He, therefore, urged that AO has rightly drawn the inference. On an observation of the Bench that normally documents seized ought to be confronted to the assessee, learned Departmental Representative submitted that though AO has not made any specific query but the inference drawn is clear. He further submitted that the facts in the case in (1996) 56 TTJ (Bang) 217 : (1996) 59 ITD 1 (Bang) are distinguishable. He therefore, urged that the preponderance of probabilities is in favour of the addition. In support, learned Departmental Representative relied on the decisions in the cases of Vidya Sagar Oswal vs. CIT 1977 CTR (P&H) 8 : (1977) 108 ITR 861 (P&H) and Yashwant Singh vs. CIT (1995) 128 CTR (Raj) 12 : (1995) 212 ITR 207 (Raj).
10.4. Learned counsel, in reply, submitted that in the cases relied upon by learned Departmental Representative onus was not discharged by the assessee. However, in this case AO has not put any question to the assessee about the impugned addition. He further submitted that even withdrawals of the wife of the assessee are there. He also submitted that the proceedings taken in search are in the nature of criminal proceedings as the provisions of the Cr. PC. 1973, have been made applicable vide s. 132(13). He, therefore, submitted that the principles of the Evidence Act, though not strictly applicable, do apply. He referred to the decision in the case of Chuharmal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250 (SC), wherein it is observed that 'what was meant by saying that the Evidence Act did not apply to proceedings under the IT Act, 1961, was that the rigour of the rules of evidence contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so'.
11. We have carefully considered the rival submissions and have perused order of AO as also various documents placed in the paper books to which our attention was invited. It is not disputed before us that the document in question was found from the residence of the assessee. In view of the provisions of s. 132(4A), it is presumed that the said document belonged to the assessee. Details of various expenses have been given in the said document under caption 'Fee details of Nikhil Syal-Cl. IX'. The details consist of admission fee, caution money, building fund, annual charges, fee, computer fee, books and stationery, extra coaching and pocket money aggregating to Rs. 20,488 (actually Rs. 20,788). Though it is admitted by learned Departmental Representative that AO did not put any specific query to the assessee and proceeded to draw the inference that the amount of Rs. 25,938, as mentioned in the said document, is undisclosed income of the assessee, yet at the same time the submissions made by learned counsel are general in nature and do not explain the entries made in the seized document. We, therefore, feel that the onus placed on the assessee to explain the said entries is not discharged and the addition has to be sustained.
12. In the result, the appeal is allowed in part.
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