Case Law Details
Brief of the Case
Punjab & Haryana High Court held In the case of CIT vs. Shri Jawahar Lal Oswal & others that suspicion and doubt may be the starting point of an investigation but cannot, at the final stage of assessment, take the place of relevant facts, particularly where a deeming provision is sought to be invoked. The principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer.
Facts of the Case
The dispute in hand, briefly put, relates to the genuineness of two monetary gifts received by the assessee for and on behalf of his daughters on the occasion of their marriage. The gifts, as admitted, were received from Dr. O.S.Gill and Shri B.P.Bhardwaj, by demand drafts, while the assessee was in London. The Assessing Officer, served a notice under Section 143, addressed queries to the assessee, obtained information through the Central Board of Direct Taxes, from the Inland Revenue, Great Britain, examined Dr. O.S.Gill but as he was not satisfied with the explanation proffered by the assessee, on the basis of material on record, held that the assessee has not been able to prove the genuineness of the gifts. The Assessing Officer, therefore, raised an inference, under Section 69 and held that the gifts represent the income of the assessee and added these amounts to the income of the assessee. A protective assessment was made in the hands of Ms Monica and Ruchica Oswal.
Contention of the Assessee
The ld counsel of the assessee submitted that CIT (A) has rightly accepted the genuineness of the gift made by Dr.O.S.Gill. The Tribunal has also affirmed this finding and dismissed the appeal filed by the revenue. The Tribunal has recorded detailed reasons after appraising the entire record and as the process of reasoning and the reasons assigned are legal, valid and plausible, the impugned orders do not call for interference. Counsel for the assessee submits that Section 260A, confines consideration to substantial questions of law. The questions framed, by the revenue, in the grounds of appeal or in order dated 8.4.2002 are mere questions of fact that are entirely dependent upon appreciation of evidence. The CIT (Appeals) and the Tribunal have recorded concurrent findings of fact that the assessee has discharged his onus and proved that the gift made by Mr. Gill is genuine. As these findings are neither perverse nor arbitrary, they cannot be set aside by reappreciating evidence. An appeal under Section 260A confines consideration to appraisal of impugned orders to ascertain whether the process of reasoning and the reasons assigned are perverse, arbitrary, contrary to law and give rise to a substantial question of law.
He further submitted that Section 69-A is a deeming provision that places the initial onus on the revenue and then if sufficient material is available shifts the onus to the assessee but if the assessee adduces evidence and proves relevant facts within his knowledge, the onus reverts to the revenue to prove that facts disclosed by the assessee are incorrect or that the material on record is sufficient to raise an inference that the gifts reflect the income of the assessee. The Assessing Officer based his opinion primarily on the quantum, his ill conceived perceptions and drew an inference without referring to concrete facts. The Assessing Officer held that as B.P.Bhardwaj has stated that the amount was given to him by Shri Varinder Sharma and as Varinder Sharma is an associate of the assessee, the failure of the assessee to disclose the whereabouts of Varinder Sharma or disclose his address is sufficient to raise an inference that the gifts are the deemed income of the assessee. The Assessing Officer has failed to refer to any material that would even primafacie establish a link between the assessee and Shri Varinder Sharma. The onus to probe and prove a link between the assessee and Shri Varinder Sharma lay upon the Assessing Officer and in the discharge of this onus was required to ascertain the address and whereabouts of Shri Varinder Sharma and only if Shri Varinder Sharma was proved to be an employee or an associate of Shri Jawahar Lal Oswal, could the Assessing Officer raise an inference that the gifted amount is the deemed income of the assessee. The Assessing Officer could not call upon the assessee to prove the source of the money with Shri B.P.Bhardwaj. The learned Tribunal has, therefore, rightly reversed the orders passed by the Assessing Officer and the CIT (Appeals) and has affirmed the genuineness of the gift.
Contention of the Revenue
The ld counsels of the revenue submitted that the assessee, admittedly, received two gifts, valued at $200,000, each for and on behalf of his daughters Ms. Monica Oswal and Ruchika Oswal, from Dr. O.S.Gill and Shri B.P.Bhardwaj, respectively, in London. The onus to prove that the gifts are genuine and not a mere devise to evade tax, lay upon the assesssee. The assessee has failed to discharge this onus by producing any tangible evidence that would even remotely prove the genuineness of the gifts. The assessee has failed to prove that the donors had a close relationship, whether personal or professional with the assessee or his daughters. The donors are total strangers to the assessees not being related whether by relationship, business or friendship. The bank drafts bear consecutive numbers and were prepared on 22.3.1994, by Midland Bank, in the United Kingdom. The assessee has not been able to prove the financial capacity of the donors to gift such a large sum of money. The mere fact that Dr. O.S.Gill appeared before the Assessing Officer and his account in England was verified or he has an annual income of $120000 is not sufficient to discharge the onus or prove the genuineness of the gifts, particularly in the absence of any evidence of any relationship, or business dealings. The findings recorded by the CIT (Appeals) and the Tribunal that the gift made by Dr.O.S.Gill is genuine, are perverse and arbitrary. The onus lay upon the assessee to prove the genuineness of the gift but the CIT (Appeals) and the ITAT have shifted the onus to the revenue.
As regards Mr. B.P Bhardwaj, the other donor, counsel for the revenue submits that the fact that he did not appear before the Assessing Officer, is by itself sufficient to answer the first question against the assessee. The fact that his account was verified by the Inland Revenue Great Britain or that money was received by a demand draft, is not sufficient to raise an inference regarding his financial capacity or the source of these funds or the bona fides of the gift, particularly as he stated that money was given to him by one Shri Varinder Sharma, who is an associate of the assessee. A further perusal of the statement made by the assessee reveals that there is no reference to any exchange of letters or gifts between the assessee and the donors. Both the Assessing Officer and the CIT (Appeals), therefore, rightly recorded that the assessee has failed to discharge his onus to prove the genuineness of the gift made by Mr. B.P.Bhardwaj but the Tribunal has reversed this finding by assigning perverse and arbitrary reasons namely:- verification from the Inland Revenue Services of Great Britain, which neither proves the genuineness of the gifts nor the capacity of the donor to make such a gift or a relationship between the parties.
Held by CIT (A)
CIT (A) partly allowed the appeal of the assessee by accepting the gift made by Dr. O.S.Gill but rejecting the gift made by Shri B.P.Bhardwaj.
Held by ITAT
ITAT accepted the appeal of the assessee and his daughters but rejected the appeals filed by the revenue by holding that the assessee has proved the genuineness of the gifts. The Tribunal has held that the revenue has not brought forth any credible material that would raise an inference under the deeming provision of Section 69 that the gifts represent the income of the assessee.
Held by High Court
High Court held that suspicion and doubt may be the starting point of an investigation but cannot, at the final stage of assessment, take the place of relevant facts, particularly where a deeming provision is sought to be invoked. The principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved. Any ambiguity or any ifs and buts in the material collected by the Assessing Officer must necessarily be read in favour of the assessee, particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer.
Further a deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed income under section 69-A. As already held, If the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the revenue to adduce evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions. The findings of fact recorded by the CIT (A) and the Tribunal regarding the gift made by Dr. O.S.Gill are plausible, though debatable, do not call for interference. The first question of law is, thus, answered against the revenue as regards the gift made by Dr. O.S.Gill.
As regards the gift made by B.P.Bhardwaj, a perusal of orders passed by the Assessing Officer and the CIT (Appeals) reveal that the reasons assigned by them for rejecting the gift are, firstly, failure to produce Shri B.P.Bhardwaj, secondly that B.P.Bhardwaj stated that the money was given to him by Shri Varinder Sharma and other reasons that are similar to the reasons assigned in the case of Dr. O.S.Gill. The Assessing Officer and the CIT (Appeals) ignored the fact that the drafts were prepared from the account of Shri B.P.Bhardwaj and if the Assessing Officer was to rely upon the statement made by Shri B.P.Bhardwaj that he had received the money from Shri Varinder Sharma of Moscow, the onus lay upon the revenue to pursue this lead and trace Shri Varinder Sharma but, unfortunately, no further enquiry was carried out but instead the assessee was asked to disclose the whereabouts and his connection with Sh. Varinder Sharma. The assessee denied any association, business or otherwise with Shri Varinder Sharma but admitted that Shri Varinder Sharma was known to him. The onus, therefore, shifted to the revenue to prove that Shri Varinder Sharma was an associate or an employee and only thereafter could the revenue raise an inference that the assessee had routed his funds through Shri Varinder Sharma, in the garb of a gift drawn in the name of his daughters. A perusal of the record reveals that the Assessing Officer did not pursue the matter any further and merely based his opinion on an assumed connection between the assessee and Shri Varinder Sharma and has failed to refer to any material, howsoever perfunctory, that would indicate that Shri Varinder Sharma was an employee or an associate of the assessee. The Assessing Officer, thus, drew an adverse inference against the assessee for his failure to “disprove” his relationship with Shri Varinder Sharma.
An arrangement between a donor and another is an arrangement between the donor and his source of money. The onus to probe and prove this aspect lies upon the revenue and not upon the assessee, particularly where the income is being dealt with under a deeming provision. A person who receives a gift, is not required to prove the source of the money of his donor. Further ITAT has held that there is no evidence or material to link Varinder Sharma to the assessee and that finding have been recorded on mere suspicion, conjectures and surmises. The Tribunal has also held that the assessee, who accepted the gift for and on behalf of his daughters, was not privy to any information regarding the source of funds with Mr. B.P.Bhardwaj. One cannot be oblivious to the fact that such a large gift received from a foreign country is bound to raise suspicion but cannot disregard the fact that suspicion and doubt cannot replace proof or translate into reasons, much less reasons for invoking a deeming provision to hold that gifts represent the income of the assessee, particularly in the absence of relevant facts. Having already held that it was for the revenue to proceed to investigate the matter further, I find no error in the opinion recorded by the Tribunal. Consequently, the substantial question of law is answered against the revenue.
Accordingly appeals of the revenue dismissed.
