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IN THE HIGH COURT OF DELHI AT NEW DELHI
S. RAVINDRA BHAT, NAJMI WAZIRI, JJ.
Commissioner of Income Tax Delhi - Appellant
Versus
Late Sh. K.M. Bijli Thru LR’S - Respondent
ITA No. 613 of 2004
Decided On : 15-12-2016
Interest Income - Taxation - [Indo-UK Double Taxation Avoidance Agreement] - [Article XXV] - [Section 271(1)(c)] - The court analyzed the nature of the correspondence between the Indian tax authorities and UK revenue authorities, and concluded that the evidence pointed to interest income to the tune of UK £64,500/- and further amount of UK £55,000/- in the account of one Sh. Chhabra. The court found that the lack of probe and almost exclusive reliance upon the UK revenue information was not sufficient to conclude that the amount attributed to the deceased assessee in fact belonged to him. The court held that the tax authorities did not do what they could have and had not done what they should have when they received information in September 1989 and woke up far too late.
Fact of the Case:
The original assessee died before the proceedings commenced. The case involved the reassessment of completed assessment for AY 1982-83 based on information received from the UK tax authority. The reassessment notice was opposed by the legal representatives of the deceased assessee.
Finding of the Court:
The court found that the lack of probe and almost exclusive reliance upon the UK revenue information was not sufficient to conclude that the amount attributed to the deceased assessee in fact belonged to him. The court dismissed the appeal in favor of the assessee.
Issues: The issues involved the reassessment of completed assessment for AY 1982-83 based on information received from the UK tax authority, the nature of the correspondence between the Indian tax authorities and UK revenue authorities, and the probative value of the statements made by the deceased assessee.
Ratio Decidendi: The court held that the lack of probe and almost exclusive reliance upon the UK revenue information was not sufficient to conclude that the amount attributed to the deceased assessee in fact belonged to him. The court emphasized that the tax authorities did not do what they could have and had not done what they should have when they received information in September 1989 and woke up far too late.
Final Decision: The court dismissed the appeal in favor of the assessee, holding that the question of law framed should be answered against the revenue and in favor of the assessee.
S. Ravindra Bhat, J.
1. The question of law framed in this case is as follows:-
“Whether the order of the Tribunal deleting additions made by the Assessing Officer and confirmed by the CIT(A) relating to interest on bank accounts in UK and loan given by the assessee to Mr. N. Chhabra in UK is perverse, contradictory and based upon surmises and conjectures?”
2. The original assessee died even before the proceedings commenced.
3. The brief facts are that the assessee, Late Sh. K.M. Bijli [hereafter “Sh. Bijli”] was a tax payer. On the basis of an information received from the UK tax authority through letter dated 12.05.1989, in terms of the Indo-UK Double Taxation Avoidance Agreement [hereafter “DTAA”], the appellant/Revenue reopened the completed assessment for AY 1982-83 by reassessment notice dated 08.12.1992. Sh. Bijli died on 11.01.1992. The basis for the reopening of the completed assessment was a statement made by Bijli on 06.06.1983 to the UK revenue officials, who had suspected evasion of income on the part of one Sh. K.L. Kumar [hereafter “Sh. Kumar”] – Sh. Bijli’s brother-in-law. The communication received from the UK revenue authorities was that in the interview conducted in Sh. Kumar’s counsel’s office (since Sh. Kumar was facing investigation for concealment of income), Sh. Bijli made some statements that the amounts received by Sh. Kumar was in reality his. In the course of the interview, Sh. Bijli appears to have indicated that during his numerous visits (numbering 25) spanning several years, he consistently made deposits in Kumar’s account which aggregated to UK £2 million (the exchange value of which in 1992 was about Rs.2.4 crores).
4. The reassessment notice was opposed by the legal representatives of Sh. Bijli but without success. In these circumstances, the assessment was completed and the Assessing Officer (AO) brought to tax the sum of Rs.2.4 crores. In doing so, the relevant discussion in the AO’s order is as follows:-
“In an interview at the offices of Rothburn Burton & Partners Manchester, on 6th June, 1983 to the assessee replies to some of the following questions as under:-
Q. No.12 - What are or have been, over the last 10 years, your business interests?
Ans. by assessee- Transport business 125 branches, 200 agencies all over India. Picture Hall, Finance Company property Income, in India; and in U.K., I have no business in United Kingdom.”
Q.No.13- Have you even had any business interests in the United Kingdom?
Ans. -Only money deposits in Banks.
Q. No.14 - How of ten have you been to the U.K. in the last ten years.
Ans. -Probably 25 in ten years – 1981 – 2 or 3 times, book at passport.
A reading to the above answers makes clear that the assessee is having transport business in India, and money deposits in Banks in U.K. He visited U.K. frequently, about 2-3 times in a year.
It was gathered from the investigation by the U.K. Tax Authority in the case of Kumar Bros., under their company name of Rajan Trading Co. Ltd. and during the interrogation, the deceased assessee deposed before the U.K. Tax Authority that he had bank deposits to the tune of £ 2 Million in U.K. The U.K. Revenue authority stated that Mr. Bijli, the assessee, came to the U.K. in June, 83 in an attempt to explain the presence of that money and when interviewed, claimed that the monies contained within the accounts belong to the assessee.
The assessee was asked to explain that in view of above facts, and his statement before the U.K. Tax Authority, why the amount of Rs.2,40,00,000/- equivalent to £2 million lying in U.K. Banks, be not treated his income. The assessee merely stated that the above accounts/allegations, are wholly baseless that there is no material to allege that the assessee had various accounts. The above material placed on record is sufficient to prove that the above accounts pertain to the assessee either in his name or in the names of his close associates in Muslim Commercial Bank, U.K.
Hence, the amount of Rs.2,40,00,000
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