KANCHAN SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY means of the present petition, petitioner has challenged the order of the CIT -I, Lucknow dt. 12th June, 2007 passed under Section 264 of the IT Act, 1961 (hereinafter referred to as 'Act'), by which the assessment order passed by the ITO, Lucknow dt. 12th June, 2007 for the asst. yr. 2004 -05 has been confirmed and the revision petition of the petitioner has been rejected.

(2.) BRIEF facts giving rise to the present petition are that the petitioner filed the return for the asst. yr. 2004 -05 showing the short -term capital loss of Rs. 1,76,957.63p. Along with the return petitioner has filed computation of income and four copies of Resurgent India Bonds (hereinafter referred to as 'bonds'). In the computation of the income, the petitioner had shown the receipt of Rs. 26,78,504 received as a gift in the form of bonds of 40,000 US dollars. The gift was claimed to have been received from Shri Kishore Chhagan Lal Kapadia, an NRI who was living in New Jersy, USA. A sum of Rs. 26,78,504 was found deposited in the said bonds was transferable and were transferred in favour of the petitioner by Shri Kishore Chhagan Lal Kapadia, on 10th July, 1999 by making necessary declarations in this regard on the back of the each bond itself. Petitioner has filed the confirmatory letter dt. 8th Feb., 2006 of Shri Kishore Chhagan Lal Kapadia, duly notarized by Notary Public of New Jersey confirming the gift of 4 such bonds. In the month of Oct, 2003, when the said bonds were matured, a sum of Rs. 26,78,504 was paid, which was equal to 58.829.44 US dollars to the petitioner in view of the declaration of the bonds being transferred and the said amount was deposited in account No. 0119017878 of SBI, Main Branch, Lucknow. The said amount was claimed to be gifted by Shri Kishore Chhagan Lal Kapadia, to the petitioner. During the course of the assessment proceeding, the assessing authority had recorded the statements of the petitioner on 31st Jan., 2006 and on 9th Oct., 2006. It also appears from the perusal of the assessment order that two letters dt. 19th Sep 2006 and 10th Oct., 2006 were sent on the address of Shri Kishore Chhagan Lal Kapadia, given in the confirmatory letter as 83, Fairview Awe, New Jersy, NJ 07306, USA. As per the assessment order, the said letters were returned unserved with the remark 'Not deliverable as addressed -unable to forward'. It appears that ITO wrote a letter dt. 15th Feb., 2006 to the Chief Manager, SBI, NRI Branch, Mumbai, with the request to provide the copy of letter/document through which the said bonds had been gifted to the petitioner or any other document/letter available on this transfer. Chief Manager, SBI, NRI Branch, Mumbai through his letter dt. 28th Feb., 2006 informed that 'The RBI certificate Nos. C041622 to C041625 were transferred by way of gift to Kanchan Singh, by Shri Kishore Chhagan Lal Kapadia, As the above certificates and relative transfer documents were spoiled and destroyed due to flooding of one godown due to heavy rains on 26th July, 2005, we are unable to produce copies thereof. ITO further wrote a letter dt. 18th Sep., 2006 to Chief Manager, SBI, NRI Branch, Mumbai, asking him to procure the related transfer documents from RBI and also furnish copy of return/bank statement so that creditworthiness of Shri Kapadia may be ascertained. Chief Manager, SBI, NRI Branch, Mumbai through his letter dt. 26th Sep., 2006 replied and sent the copy of original application form submitted by Shri Kishore Chhagan Lal Kapadia, and further stated that except this form they do not have any information of Shri Kishore Chhagan Lal Kapadia. It appears that the matter has been referred to the Addl. CIT under Section 144A of the Act, who has expressed his opinion vide letter dt. 8th Dec, 2006. In view of the aforesaid letter of Addl. CIT, ITO held that the gift of Rs. 26,78,504 from alleged donor, Shri Kishore Chhagan Lal Kapadia, whose identity and creditworthiness, assessee failed to establish is nothing else but assessee's owned money routed through some fictitious person and the same was added in the income of the assessee as income from other sources. In revision, the aforesaid order has been confirmed by the CIT.

(3.) LEARNED Counsel for the petitioner submitted that the Resurgent India Bond could only be purchased by NRI against foreign currency. The bonds were issued on the application of Shri Kishore Chhagan Lal Kapadia, which is clear from the application sent by the Chief Manager, SBI, NRI Branch, Mumbai, in reply to the letter issued by the ITO. The copies of bonds, which are annexure -I to the writ petition also reveal that the bonds had been issued in the name of Shri Kishore Chhagan Lal Kapadia. It was issued against the payment of 40,000 US dollars. The back side of the bonds reveals that it was transferable and was transferred in favour of the petitioner by Shri Kishore Chhagan Lal Kapadia on 10th July, 1999, which has also been confirmed by the Chief Manager, SBI, NRI Branch, Mumbai, in his earlier letter. Therefore, there is no manner of doubt that the bonds were purchased by Shri Kishore Chhagan Lal Kapadia in the year 1998 against the US dollars. He submitted that it is not in dispute that amount of Rs. 26,78,504 was the maturity amount of the four bonds, which were purchased by Shri Kishore Chhagan Lal Kapadia in the year 1998 and were subsequently, transferred in favour of the petitioner. He submitted that after the amendment in the GT Act by the Finance Act (No. 2) of 1991 it was not necessary that NRI could make gift of bonds to the relatives only. He submitted that the petitioner had established beyond doubt, the source of the amount of Rs. 26,78,504. He submitted that though the identity of Shri Kishore Chhagan Lal Kapadia had been fully established beyond doubt, inasmuch as the bonds were issued on his application being NRI he submitted that the letters, which are alleged to have been issued at the given address to Shri Kishore Chhagan Lal Kapadia have not been returned back with the remark that, 'he was not traceable' but with the remark 'not deliverable as addressed -unable to forward', which does not mean that Shri Kishore Chhagan Lal Kapadia was not traceable and was not residing at the given address. He submitted that after the return of the letters, ITO had not confronted the said fact to the petitioner and even in the statement, no such query was made. He submitted that in the statement, no query relating to the existence of Shri Kishore Chhagan Lal Kapadia was made and his existence has not been doubted. Thus, doubting the identity of Shri Kishore Chhagan Lal Kapadia, is without any material and baseless. He further submitted that the source of the money was fully established, namely, that the deposit was the maturity amount of the bonds, which were purchased in the year 1998 against US dollars. Therefore, so far as the petitioner is concerned, the burden has been fully discharged and, therefore, burden has been shifted to the Revenue to prove that the said amount has not been received by the petitioner from Shri Kishore Chhagan Lal Kapadia and it was her unexplained and undisclosed owned money, which the Revenue has failed to discharge. He further submitted that in any view of the matter the amount of Rs. 26,78,504 cannot be treated as income from other sources in the year under consideration.