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The Tax Publishers2018 TaxPub(DT) 2537 (Del-HC) : (2018) 406 ITR 0609 : (2018) 303 CTR 0560 CIT v. M.S. Aggarwal INCOME TAX ACT, 1961 --Search and seizure--Assessment under section 153AComputation of undisclosed gift income----During the course of search, several incriminating documents and material were found and seized. Assessee in his statement recorded on oath under section 132(4) admitted having procured, in the current year, gifts of Rs. 50,00,000 and Rs. 10,00,000. Assessee also admitted that he did not know donor(s) and why gift was given to me (assessee). Assessee in his subsequent satement recorded under section 131 had again accepted and admitted that the gifts were bogus and had offered the same to be taxed. . During the course of the block assessment proceedings, assessee vide letter retracted his admission on bogus gifts, asserting that the gift of Rs. 50,00,000 given to him by Mr. R and not procured. The gifts were given by way of two cheques of Rs. 25,00,000 each. AO rejected he contention that the confession was extorted under coercion, pressure and duress observing that the retraction and explanation justifying the gift was given for the first in March 2002. Thus, in January, 2000, 40 days postt the search, the assessee had again confessed and acceped ha the gifts were bogus and should be considered as undisclosed income.AO then made addition for the so called gift which was confirmed by CIT(A). However, the Tribunal deleted the addition.Held:when there are cross-transactions in form of payment of cash for issue of cheque, in the absence of explanation, there would be consideration and the transaction/transfer would not be a genuine gift but a sham and camouflage. Genuine gifts received during the current year were un-taxable, but sham and bogus gifts would fall foul and attract correction and taxation under section 68, It is in this context that the statements on oath made by the respondent- assessee on two occasions, i.e., 25-11-1999 and 6-1-2000 become relevant and significant. In the present case, assessee had stated that he had paid cash to convert his unaccounted money to procure the gift. This admission and confession was made in two statements after a time gap of nearly forty days. It would be difficult, if not impossible, to get direct evidence to ascertain and vouch for the truth or falsity of this inculpatory admission. The answer would largely depend on inference founded on surrounding circumstances, antecedent and subsequent. In the facts of the present case, the surrounding circumstances compellingly affirm that the gift was procured and not a genuine one. . Oral statement was and should not be read in isolation, as assessee at the first and initial stage had accepted that the gift of Rs. 50,00,000 was not genuine, and was a subterfuge. Oral evidence and documentary material was collected during the course of search regarding the undisclosed income. It is relevant that the assessee in his block return had declared undisclosed income, i.e., unaccounted income, to the tune of Rs. 86.82 lacs. Given the aforesaid position, and in view of the aforesaid conflict and divergence, having recorded our prima facie reservation on the view expressed on 'books of accounts' and more particularly on 'oral statement ' not being evidence found, one is inclined to refer the question of interpretation of the term 'undisclosed income' for the purpose of block assessment to a larger bench to resolve and iron out differences and bestow and bring clarity. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2018 TaxPub(DT) 2537 (Del-HC) : (2018) 406 ITR 0609 : (2018) 303 CTR 0560

CIT v. M.S. Aggarwal

INCOME TAX ACT, 1961

--Search and seizure--Assessment under section 153AComputation of undisclosed gift income----During the course of search, several incriminating documents and material were found and seized. Assessee in his statement recorded on oath under section 132(4) admitted having procured, in the current year, gifts of Rs. 50,00,000 and Rs. 10,00,000. Assessee also admitted that he did not know donor(s) and why gift was given to me (assessee). Assessee in his subsequent satement recorded under section 131 had again accepted and admitted that the gifts were bogus and had offered the same to be taxed. . During the course of the block assessment proceedings, assessee vide letter retracted his admission on bogus gifts, asserting that the gift of Rs. 50,00,000 given to him by Mr. R and not procured. The gifts were given by way of two cheques of Rs. 25,00,000 each. AO rejected he contention that the confession was extorted under coercion, pressure and duress observing that the retraction and explanation justifying the gift was given for the first in March 2002. Thus, in January, 2000, 40 days postt the search, the assessee had again confessed and acceped ha the gifts were bogus and should be considered as undisclosed income.AO then made addition for the so called gift which was confirmed by CIT(A). However, the Tribunal deleted the addition.Held:when there are cross-transactions in form of payment of cash for issue of cheque, in the absence of explanation, there would be consideration and the transaction/transfer would not be a genuine gift but a sham and camouflage. Genuine gifts received during the current year were un-taxable, but sham and bogus gifts would fall foul and attract correction and taxation under section 68, It is in this context that the statements on oath made by the respondent- assessee on two occasions, i.e., 25-11-1999 and 6-1-2000 become relevant and significant. In the present case, assessee had stated that he had paid cash to convert his unaccounted money to procure the gift. This admission and confession was made in two statements after a time gap of nearly forty days. It would be difficult, if not impossible, to get direct evidence to ascertain and vouch for the truth or falsity of this inculpatory admission. The answer would largely depend on inference founded on surrounding circumstances, antecedent and subsequent. In the facts of the present case, the surrounding circumstances compellingly affirm that the gift was procured and not a genuine one. . Oral statement was and should not be read in isolation, as assessee at the first and initial stage had accepted that the gift of Rs. 50,00,000 was not genuine, and was a subterfuge. Oral evidence and documentary material was collected during the course of search regarding the undisclosed income. It is relevant that the assessee in his block return had declared undisclosed income, i.e., unaccounted income, to the tune of Rs. 86.82 lacs. Given the aforesaid position, and in view of the aforesaid conflict and divergence, having recorded our prima facie reservation on the view expressed on 'books of accounts' and more particularly on 'oral statement ' not being evidence found, one is inclined to refer the question of interpretation of the term 'undisclosed income' for the purpose of block assessment to a larger bench to resolve and iron out differences and bestow and bring clarity.