| SooperKanoon Citation | sooperkanoon.com/64602 |
| Court | Income Tax Appellate Tribunal ITAT Ahmedabad |
| Decided On | Apr-18-1991 |
| Judge | R Sangani, B Kothari |
| Reported in | (1991)38ITD5(Ahd.) |
| Appellant | Sunil Siddharthbhai |
| Respondent | Gift-tax Officer |
The Gift Tax Office from the very nature of the peculiar facts should have enquired regarding all the surrounding cirumstances. He should have made enquiry in order to determine whether it was a genuine gift or a device to evade taxes. The very facts necessitated such an enquiry. Such enquiry was not made by the Gift Tax Office and he granted exemption without enquiry into the surrounding circumstances.
On these facts the Commissioner was justifled in setting aside the assessment granting exemption and directing the Gift Tax Officer to make further enquiry and complete the assessment after giving reasonable opportunity of being heard to the assessee. There is no illegality in the order of the Commissioner.
1. This appeal by the assessee is directed against order dated 28-3-1988 passed by the Commissioner of Gift-tax, Gujarat-I, Ahmedabad in exercise of powers under Section 24(2) of the Gift-tax Act, 1958.
2. For assessment year 1984-85, the assessee had for the purpose of Income-tax Act, 1961 the status of resident but not ordinarily resident. The assessee filed return showing taxable gift at Rs. 750. In the return the assessee had mentioned that the assessee had made gifts aggregating to Rs. 32 lakhs in Jammu & Kashmir and that the said gifts were exempt under Section 5(1)(ii)(a) of the Gift-tax Act, 1958.
According to the assessee, gift of movable property situated in Jammu & Kashmir was exempt under said provision if the gift was made by a person who was citizen of India and was not ordinarily resident in India. The Gift-tax Officer observed that the assessee had filed copies of various pay-in-slips and counterfoils of cheques in support of the statement that the gifts were made by drawing cheques on Bank of India, Srinagar Branch and was deposited by the donees in Srinagar in Bank of India and that these documents supported the contention that the gifts were made in Jammu & Kashmir to which gift-tax was not applicable. He recorded a finding that the assessee was not chargeable to gift-tax in respect of gifts made by him on 24-5-1983 to various trusts aggregating to Rs. 32 lakhs as shown in Annexure-C forming part of the return.
3. The Commissioner of Gift-tax, Gujarat-I, Ahmedabad issued notice dated 14-7-1987 under Section 24(2) of the Gift-tax Act, 1958 in which it was mentioned that the exemption granted under Section 5(1)(ii)(a) by the GTO was irregular and had resulted in loss of revenue and that the said order was prejudicial to the interests of revenue. He called upon the assessee to show cause by 5-8-1987 as to why that order should not be revised. He directed the assessee to furnish following information by the abovementioned date viz.: (ii) Intention which prompted the assessee to make gift by borrowing money.
(iii) Details of dates and amounts of all gifts in excess of Rs. 5,000 made by assessee in the past years.
(iv) Names of all the trustees who received the gifts from assessee at Srinagar.
(v) The manner in which the assessee repaid loan of Rs. 32 lakhs to M/s. Lalbhai Dalpatbhai.
4. The assessee filed reply dated 23-7-1987 to the show-cause notice in which it was mentioned that the presumption in said notice that the gift had been made by borrowing taken from M/s. Lalbhai Dalpatbhai was wrong. It was submitted that the gift had been made by the assessee from his own money. The assessee filed copy of the assessee's account with M/s. Lalbhai Dalpatbhai which indicated that the assessee had sufficient credit balance. It was submitted that since gift had been made in Jammu and Kashmir it was exempt under Section 5(1)(ii)(a) of the Act. The assessee supplied information about value of assets as on 24-5-1983 just prior to the date of gift. According to the assessee, the value of assets as on that date was Rs. 59,03,800. The trustees who had received the gifts were, according to the assessee, Vimla Siddharthbhai Lalbhai and Tarla Siddharthbhai Lalbhai.
5. On receipt of this information, the learned Commissioner addressed letter dated 20-8-1987 to Vimla Siddharthbhai Lalbhai and to Tarla Siddharthbhai Lalbhai who were the trustees of several trusts receiving the gifts from assessee seeking certain information. Both the trustees replied that the assessee had informed them that assessee would like to make gifts of certain movable properties to the trusts of which they were the trustees provided the gifts were accepted by the trustees of the trust at Srinagar and as such both of them accompanied the assessee to Srinagar on 23-5-1983 and stayed at a hotel at Srinagar and that gifts were accepted at Srinagar.
6. The information collected by the learned Commissioner prima facie indicated to him that an amount of Rs. 32 lakhs was remitted from Ahmedabad by purchasing five bank drafts of Rs. 6 lakhs each on 20-5-1983 and one draft of Rs. 2 lakhs on 21-5-1983 from Bank of India by debit to the account of Chinubhai Chimanbhai and two others and that application for such drafts had been made by Shri Shrenik Lalbhai and that since there was no adequate balance in the bank account of Chinubhai Chimanbhai and two others, amounts of Rs. 27,61,000 and Rs. 27,90,000 were respectively transferred to this bank account from the account of Kasturbhai Lalbhai and thirty others on 19-5-1983 and 20-5-1983 respectively. The above drafts were deposited in the Srinagar Branch of Bank of India on 23-5-1983 in the account of the assessee which was opened on or about the same day. The introduction to the Manager of the Srinagar Branch was given by the Manager of Ahmedabad Branch. On the basis of cheque books issued by Srinagar Branch the assessee issued 22 cheques favouring ABC Trust No. 201 to ABC Trust No.222 and those cheques were all deposited by transfer from the assessee's accounts to the accounts opened in the names of those trusts on 24-5-1983 itself and demand drafts were drawn by the Srinagar Branch of the Bank of equivalent amounts payable at Ahmedabad Branch. The learned Commissioner found that the bank accounts of those trusts were opened on 23-5-1983 by deposit of cash of only Rs. 500 each and except the deposit of cheque in question and issue of bank drafts against the same and bank charges there were no other transactions in the accounts of those 22 trusts in Srinagar Branch and that those accounts were opened on the basis of forms apparently filled in Ahmedabad. According to the learned Commissioner, the transactins prima facie appeared to be collusive. He further received information to the effect that the drafts in question in favour of abovementioned trusts were deposited with M/s. Lalbhai Dalpatbhai through whom the original amount of Rs. 32 lakhs had been drawn. He also came to know that those trusts were created on 19th and 20th May, 1983 and that 44 private limited companies were floated during the same period on or after 17th May, 1983 and those companies were shown as beneficiaries of those trusts, two companies being beneficiaries for each trust and those companies were owned by the family members of the assessee. According to the learned Commissioner, all those events had happened within a short period of 8 to 10 days and that they indicated a device to evade gift-tax, wealth-tax and income-tax and as such principles of Supreme Court decision in the case of McDowell and Co. Ltd. 154 ITR 148 applied.
7. In the notice issued by the learned Commissioner dated 11-3-1988 all these facts were mentioned and the assessee was called upon to show cause why the original assessment order should not be revised.
8. The assessee filed reply dated 19-3-1988 in which it was admitted that the drafts were purchased on 19-5-1983 and 20-5-1983 at Ahmedabad and were deposited in Bank of India Srinagar Branch on 23-5-1983 on which day the account was opened. The assessee denied that there was a device to evade gift-tax, wealth-tax and income-tax. According to the assessee when the law provided that gift made by a citizen who was resident but not ordinarily resident in India in Jammu & Kashmir was exempt, the assessee was entitled to bring the amount in Jammu & Kashmir and make a gift thereof in order to claim exemption. The assessee further submitted that the section under Section 24(2) was not valid because the learned Commissioner has taken into account result of further enquiry made by him and that what all he could take into account was the record before the Gift-tax Officer. The learned Commissioner rejected the submissions of the assessee and directed the GTO to make fresh assessment in accordance with law after making necessary enquiries and giving an opportunity of being heard to the assessee. Against the said order, present appeal has been filed by the assessee.
9. It was submitted on behalf of the assessee that notice to show cause for taking action under Section 24(2) of the Act issued on 11 -3-1988 was invalid because in that notice facts which were gathered by the learned Commissioner by issue of earlier notice dated 14-7-1987 to the assessee and notices dated 20-8-1987 to Vimla Siddharthbhai and Tarla Siddharthbhai were taken into account. It was submitted that the Commissioner can look into the record of the Gift-tax Officer only and what was not on the record of GTO cannot be looked into by the Commissioner for initiation of action under Section 24(2) of the Act.
Reliance was placed on the decision of the Single Member of the Tribunal in Hari Om Aggarwal v. ITO [1990] 34 ITD 420 (Delhi). His further submission was that the learned Commissioner was wrong in observing that the situs of the amount was at Ahmedabad and that facts indicated a device to evade tax. It was submitted that the assessee was resident but not ordinarily resident for the purpose of Income-tax Act during the relevant accounting year and as such he was entitled to claim exemption under Section 5(1)(ii)(a) of the Gift-tax Act, 1958 in respect of any amount if he made a gift of that amount in the State of Jammu & Kashmir, when the law allowed exemption for such gifts the action of the assessee in transferring the amount from Amedabad to Srinagar and then making a gift in Srinagar could not be said to be a device to evade tax. It was submitted that the fact that the donees were discretionary trusts of which beneficiaries were companies in which the assessee and members of the family held shares would not make any difference. Regarding the decision in the case of McDowell and Co.
Ltd. v. CTO [1985] 154 ITR 148 (SC) to which reference was made by the learned Commissioner, the learned counsel referred to certain observations of the Supreme Court in CWT v. Arvind Narottam [1988] 173 ITR 479.
10. The submission on behalf of the Department was that the learned Commissioner was entitled to make enquiries and that the facts considered by the learned Commissioner are all relevant facts and that on the basis of those facts the learned Commissioner was entitled to direct the GTO to make further enquiry. It was submitted that the GTO has not paid attention to several surrounding circumstances while completing the gift-tax assessment. On the facts of the present case, he ought to have enquired into those circumstances before accepting the claim of the assessee for exemption under Section 5(1)(ii)(a) of the Gift-tax Act, 1958. Reliance was placed on several decisions in support of the plea that the learned Commissioner has jurisdiction to order further enquiry on the facts of the present case. It was also submitted that Section 5(1)(ii)(a) of the Gift-tax Act under which exemption is claimed was not available to the assessee because that provision contemplates that the property should be situated in Jammu & Kashmir.
The word 'situate' indicates that there should be some continuity or permanence and that on the facts of the present case it cannot be said that amount of Rs. 32 lakhs which was subject matter of gift was situate in the State of Jammu & Kashmir. It was further submitted that the expression "ordinarily resident in the said territories" in Section 5(1)(ii)(a) has not been defined in the Gift-tax Act, 1958 and that there is nothing to show that a person who is "resident but not ordinarily resident" under the provisions of the Income-tax Act, 1961 would necessarily be considered as a person who is not ordinarily resident in said territories within the meaning of Section 5(1)(ii)(a) of the Gift-tax Act, 1958.
11. In reply, the learned counsel for the assessee reiterated that powers under Section 24(2) of the Act could not have been exercised on the facts of the present case. He submitted that the plea of the Department that the provisions of Section 5(1)(ii)(a) were not at all attracted cannot be entertained because that was not the ground on which the learned Commissioner has revised the assessment order.
Reliance was placed on the decision of Punjab and Haryana High Court in CIT v. Jagadhri Electric Supply and Industrial Co. [1983] 140 ITR 490 in which it was held that the Tribunal cannot substitute grounds which did not form part of the order of the Commissioner.
12. We have considered the rival submissions and facts on record. The undisputed facts are that the amount of Rs. 32 lakhs which is subject matter of gift was lying at Ahmedabad on 19-5-1983. Drafts in respect of this amount were purchased on 19-5-1983 and 20-5-1983 on Bank of India, Srinagar Branch and those drafts were deposited by the assessee in the Bank of India, Srinagar Branch on 23-5-1983. Immediately thereafter, cheques were issued in favour of donees who had opened bank accounts at Srinagar on that day. These cheques were deposited in the accounts of donees and subsequently donees transferred the amounts to Ahmedabad. Thus, the amount which was at Ahmedabad on 19-5-1983 came back to Ahmedabad a week thereafter. The donees were 22 discretionary trusts of which the trustees were Smt. Vimla Siddharthbhai and Tarla Siddharthbhai who were near relatives of assessee and the beneficiaries of the trusts are 44 private limited companies. The shares are owned by the assessee and members of his family. The question is whether on these admitted facts was it not the duty of the Gift-tax Officer to make further enquiries in order to decide whether provisions of Section 5(1)(ii)(a) were applicable. The order of the Gift-tax Officer indicates that he called upon the assessee to show that he was not ordinarily resident in Assessment year 1984-85 under the provisions of Income-tax Act, 1961. He satisfied himself on that point. The GTO was shown the pay-in-slips and counterfoils of cheques in support of the statement that the gifts were made by drawing cheques on Bank of India, Srinagar Branch and the amounts were deposited in the accounts of the donees in Srinagar Branch of Bank of India. From these the GTO came to the conclusion that gifts were made in Jammu & Kashmir to which Gift-tax Act was not applicable and granted exemption under Section 5(1)(ii)(a). The GTO from the very nature of the peculiar facts should have enquired regarding all the surrounding circumstances. He should have made enquiry in order to determine whether it was a genuine gift or a device to evade taxes. The very facts necessitated such an enquiry. Such enquiry was not made by the GTO and he granted exemption without enquiry into the surrounding circumstances. On these facts the learned Commissioner was justified in setting aside the assessment granting exemption and directing the GTO to make further enquiry and complete the assessment after giving reasonable opportunity of being heard to the assessee. There is no illegality in the order of the learned Commissioner.
13. It is true that the learned Commissioner before issue of notice dated 11-3-1988 had made enquiries from assessee and from the two trustees of the donee trusts. The submission on behalf of the assessee is that the material gathered in such enquiry could not be taken into account by the learned Commissioner. We are unable to accept this submission. It is true that the record which the learned Commissioner has to see is the record of the GTO. However, in order to satisfy himself whether the order of the GTO was erroneous or prejudicial to the interest of revenue he was entitled to make necessary enquiries.
Section 24(2) of the G.T. Act itself makes a provision for making an enquiry. In fact it is difficult to see as to how the learned Commissioner could come to the conclusion that the order was erroneous or prejudicial to the interest of the revenue unless some enquiry is made by him. Enquiry of this nature is not prohibited by the provisions of Section 24(2) of the Act. It is implicit in the very exercise of powers under said provision. The principle laid down in the decision of the Tribunal to which the learned counsel for the assessee has drawn attention would not be applicable to the facts of the present case.
14. In this connection, we may refer to the decision of the Gujarat High Court in Addl. CIT v. Mukur Corporation [1978] 111 ITR 312. It is observed that Section 263 of the Income-tax Act, 1961 (which is in pari materia with Section 24(2) of the Gift-tax Act, 1958) requires such enquiry to be made as the Commissioner deems necessary. Consequently, such enquiry on the facts of the case as is deemed necessary is required to be made by the Commissioner. If enquiry is made with a view to satisfy himself that the order of the GTO was erronous or prejudicial to the interest of revenue it could not be said that the Commissioner has acted without jurisdiction.
15. Reliance was placed by the learned counsel for the assessee on the decision of the Tribunal in Dipak A. Sheth v. GTO [1986] 19 ITD 820 (Ahd.) where it was held that gift by a person who was resident but not ordinarily resident in India in respect of an amount which was lying in deposit in bank at Srinagar would attract exemption under Section 5(1)(ii) of the Act. In that case the facts as are narrated in the order are not similar to the facts of the present case. The surrounding circumstances of the present case are entirely different and it is because of those surrounding circumstances that a further probe by GTO was necessary and that probe was not made by him and as such the learned Commissioner was justified in directing the GTO to make fresh assessment after further enquiry and after giving reasonable opportunity of being heard to the assessee.
16. Since we have come to the conclusion that order of the learned Commissioner directing the GTO to make further enquiry was not illegal, it is not necessary for us to record decision on the question raised by the Department to the effect whether the words "ordinarily resident in the said territories" have any direct nexus with the expression "resident but not ordinarily resident" under the Income-tax Act, 1961.
17. For reasons given above we confirm the order of the learned Commissioner setting aside the assessment on the point in controversy and directing the Gift-tax Officer to make fresh assessment in accordance with law after making necessary enquiries and giving an opportunity of being heard to the assessee.