2011-VIL-913-P&H-DT

PUNJAB AND HARYANA HIGH COURT

ITA No. 498 of 2005

Date: 07.02.2011

COMMISSIONER OF INCOME-TAX, KARNAL

Vs

SH. PUNEET CHUGH

Mr. Yogesh Putney, Advocate for the appellant.  
Mr. Akshay Bhan, Advocate for the respondent.  

BENCH

MR. JUSTICE ADARSH KUMAR GOEL, MR. JUSTICE AJAY KUMAR MITTAL, JJ.

JUDGMENT

ii) Whether the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in confirming the order of the CIT(A) in deleting the addition of Rs.2,00,000/- made by the assessing officer on account of commission paid by the assessee for arranging the bogus NRI gifts of Rs.10,00,000/-?”  

2. The facts necessary for adjudication as mentioned in the appeal are that the assessee is engaged in the business of manufacturing of velvet cloth. The assessee filed his return on 31.10.1995 for the assessment year 1995-96 declaring an income of Rs.56,000/- and his case was processed on 9.3.1998 at the returned income. The survey was conducted on 2.2.1995 under Section 133A of the Income Tax Act, 1961 (in short “the Act”) when inventory of stock was prepared on physical verification. It was selected for compulsory scrutiny being a survey case. A sum of Rs.10,00,000/- was credited in the account of the assessee as foreign gift from one Sukhchain Ram Sallan of Dubai. The donor made the gift vide DD dated 26.7.1994 out of the Non-resident External Account No. 40614017 with Bank of America, New Delhi. The brother of the assessee also received a gift of Rs.10,00,000/- from the same donor i.e. Sukhchain Ram Sallan. As the assessee failed to prove the genuineness of the gifts, the Assessing Officer made an addition of Rs.10,00,000/- treating the same as income of the assessee from undisclosed sources under Section 68 of the Act. Besides that, an addition of Rs.2,00,000/- was also made on account of estimated Hawala premium paid for obtaining the said gift of Rs.10,00,000/-. Feeling aggrieved, the assessee took the matter in appeal and the Commissioner of Income Tax (Appeals) [hereinafter referred to as “the CIT(A)”] vide order dated 22.10.1998 deleted the addition made by the Assessing Officer. Against the order of the CIT (A), the revenue approached the Income Tax Appellate Tribunal (in short “the Tribunal”) who vide order dated 23.8.2004, upheld the order of the CIT(A) and dismissed the appeal. Hence, the present appeal by the revenue.  

3. We have heard learned counsel for the parties.

4. The point for consideration in this appeal is whether the alleged gift received by the respondent-assessee from Non-resident Indian with whom the assessee had no relationship was a genuine gift or not?  

5. The aforesaid issue is no longer res integra. This Court in a recent judgment passed in ITA No. 392 of 2005 (The Commissioner of Income Tax, Faridabad v. Sh. Kamal Gupta) decided on 20.1.2011, had laid down as under:-  

“The assessee failed to produce the donor as also his bank statement to prove that gift was actually given by the assessee. Financial capacity of the donor was also not established. The assessee, thus, failed to discharge onus which was on him. Reliance has been placed on judgment of this Court dated 15.9.2006 in ITA No. 256 of 2006 Shri Jaspal Singh v. CIT, wherein in similar circumstances, NRI gift from a stranger was held to be bogus relying upon earlier judgment of this Court in Lal Chand Kalra v. CIT (22 CTR 135) and judgment of Delhi High Court in Sajan Dass and Sons v. CIT (2003) 264 ITR 435. We are of the view that the Assessing Officer and the CIT (A) were justified in holding that the gift in question was bogus and the Tribunal committed patent error in accepting the gift as genuine. Admittedly, the donor had no relationship with the assessee. He had no occasion to give the gift. He was not produced. His financial capacity was not established. His bank statement was not produced. The Tribunal failed to appreciate these facts. It, thus, committed patent error of law in holding that the assessee discharged onus on him to prove the genuineness of the gift. Its order is, thus, perverse. In identical situation, this Court held that NRI gift could not be accepted as genuine unless the assessee was able to prove natural love and affection and financial capacity of the donor.  

Observations of this Court in Jaspal Singh are:-  

“It is well settled that mere identification of donor and showing the movement of gift amount through banking channel is not enough to prove genuineness of the gift. The assessee was required to establish that the donor had the means and the gift was genuine, for natural love and affection. Reference in this regard may be made to the judgment of this Court in Lal Chand Kalra v. CIT, 22 CTR 135, judgment of Delhi High Court in Sajan Dass and Sons v. CIT, (2003) 264 ITR 435, CIT, West Bengal II v. Durga Prasad More, (1971) 82 ITR 540 and Sumanti Dayal v. CIT, (1995) 214 ITR 801.”  

6. Applying the aforesaid para meters to this case, learned counsel for the assessee was unable to show that there was either any occasion or any relationship or there existed any natural love and affection with the donor to have gifted the amount as claimed by the assessee. Further, the assessee was also required to substantiate that the donor had the means and the gift was genuine which he had failed to establish.  

7. In view of the above, the finding recorded by the Tribunal stands vitiated and cannot be sustained. Accordingly, the questions of law are answered in favour of the revenue and against the assessee.  

The appeal stands allowed.  

 

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