Case: PURSHOTTAM KHATRI Vs. COMMISSIONER OF INCOME TAX, BHOPAL

1. The present appeal is by the Assessee on account of the fact that the High Court has, by the impugned judgment dated 25.01.2006, set aside the reasoned order of the Appellate Tribunal, in which the Appellate Tribunal, after looking at the exchange vouchers and other evidence produced by the Assessee, held that the entire sum of $7,55,534 is explained, as a result of which, the sum of $3,14,534 equivalent to Rs. 1,03,49,720 could not be held to be unexplained deposits. The Appellate Tribunal in so far as this aspect of the matter is concerned held as follows:       13. With regard to that foreign currency, shown to have been brought in India by the Assessee, for which no declaration Forms were available, we have perused the foreign currency exchange vouchers and find that these exchange vouchers were issued few days prior to the date of arrival of the Assessee in India. Since the date of exchange vouchers co-relates with the date of arrival of the Assessee, the contention of the Assessee that the foreign currency shown in the currency exchange vouchers was in fact brought to India by the Assessee during his visit, also appears us to be plausible but the AO while working out the unexplained deposits of dollars, has totally ignored the fact of availability of the foreign currency exchange vouchers and has not allowed the credit of this much of foreign currency brought to India. He has simply allowed the credit of 10,000$ per visit till June, 1995 and thereafter 2500$ without bringing anything oil record that the Assessee did not bring the foreign currency shown in the exchange vouchers to India at the time of his visit whereas a visitor to India is required to surrender the declaration Form before the customs authorities at the time of his departure from India if he wishes to carry any unutilised foreign currency with himself. In these circumstances, the possibility that the Assessee might have brought some foreign currency alongwith himself while leaving India and for which he had surrendered the declaration forms to the customs authorities, is not ruled out. A common man will not anticipate that in the years to come he would be searched by the income tax authorities and he would be required to produce all the evidence through which he has brought the foreign currency which is not chargeable to tax in India. Since the Assessee has earned the foreign currency outside India, which is not chargeable to tax in India, the same should not be viewed with an evil eye whenever it is being brought to India through lawful means. The learned Counsel for the Assessee has prepared complete details of the foreign currency which was brought to India on different occasions in the forms of cash and travellers cheques appearing at page Nos. 308 and 309. The details given in the chart are not objected to by the revenue. It is obvious from the details given at pages 294, 308, 309 and 310 that 7,55,534$ were deposited in the banks and invested in FDRs. While working out the unexplained deposits, the AO has only given a credit of 4,41,000$ and treated $3,14,534 which are equivalent to Rs. 1,03,49,720/- as unexplained deposits. The learned Counsel for the Assessee has submitted that if the, availability of 2,21,800$ brought to India for which the declaration Forms were available between 25.10.1982 to 2.12.1987with the Assessee is accepted, a credit of $2,21,800/- is required to be given from the unexplained deposit of 3,14,534$. Our attention was also invited to the fact that if the foreign currency shown in the foreign exchange vouchers is considered to have been brought in India, a credit of 2,36,000$ should also be given against the so called deposited dollars. If the credits of the aforesaid foreign currency is given, there would be excess balance of $1,43,266 with the Assessee which was utilised and brought back by him at the time of departure from India and for these reasons the declarations Form of certain dollars were not available with the Assessee as the same were required to be produced before the customs authorities at the time of departure. Besides, our attention was also invited to the fact that the pounds brought to India by the Assessee were either retained by the Assessee or utilised by him and none else.        14. We have carefully examined the details furnished by the Assessee in the light of his submissions and find that since the revenue has not brought anything on record to demolish the stand of the Assessee and to prove that the dollars brought between 25.1.1982 to 2.12.1987 were not available with the Assessee for the deposit in bank nor did he bring that much of foreign currency which was shown in the exchange vouchers but was not supported by the declaration Forms, the stand of the Assessee is acceptable to us. More so, when there is no iota of evidence with regard to the utilisation of dollars brought by the Assessee between 25.10.1982 to 2.12.1982 due credit of ($2,21,800 + $2,36,000 = $4,57,800) should have been given while determining the unexplained deposits of dollars.        15. Keeping in view the totality of the facts and circumstances of the case we are of the considered opinion that the Assessee has brought $9,08,800 besides pounds out of which he has deposited $7,55,534 in his NRE accounts. Out of this deposit, Assessee invested $40,575 in FDRs. The balance $ 1,43,266 was either utilised in India for different purposes or taken back by the Assessee while leaving India. Since the Assessee has duly explained the source of deposits of dollars in FDRs and NRE accounts, he should not be penalised for minor discrepancies pointed out by the revenue though these discrepancies were clarified by the Assessee in its chart appearing at pages 308 to 310 of the compilation of the Assessee. We also agree with the alternative argument of the Assessee that for violation of FERA, Assessee may be penalised in that act but the fact that Assessee brought the foreign currency in India and retained it for a longer period cannot be ignored while determining the unexplained deposit of dollars.        We, thereafter, delete the addition made on account of unexplained deposit of dollars.

Court's reasoning:
2. The impugned judgment has added as unexplained income a sum of Rs. 1.03 crores, as aforesaid, basically on the ground that the Assessee has been unable to present declaration Forms that had been filled in by him at the time of his visits to India from abroad. Keeping in mind the fact that these declaration forms were asked for long after such expenditure had, in fact, been incurred, it cannot possibly be said that the Appellate Tribunals judgment and findings therein are perverse, which is the only entry on facts for the High Court exercising its appellate jurisdiction Under Section 260A of the Income-tax Act, 1961.3. Having heard learned Counsel for both the parties, we are clearly of the view that the High Court ought not to have interfered with the Appellate Tribunals judgment as no substantial question of law arose therefrom.