Commissioner Of Income-Tax, Karnal v. Sh. Puneet Chugh

ITA No. 498 of 2005 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income-Tax, Karnal Versus Sh. Puneet Chugh ITA No. 498 of 2005 Date of Decision: 7.2.2011 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Mr. Akshay Bhan, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.The appeal was admitted by this Court on 30.10.2006 fordetermination of the following substantial questions of law:- “i)Whether on the facts and in the circumstances of thecase the Hon'ble ITAT was right in law in confirmingthe order of the CIT(Appeals) in deleting the additionof Rs.10,00,000/- made by the assessing officerunder section 68 of the Income Tax Act, 1961, onaccount of alleged NRI gifts shown by the assesseefrom Sh. Sukhchain Ram Sallan and Neeraj KumarGupta as the alleged donors were completestrangers whose financial capacity was not provedcase the Hon'ble ITAT was right in law in confirmingthe order of the CIT(Appeals) in deleting the additionof Rs.10,00,000/- made by the assessing officerunder section 68 of the Income Tax Act, 1961, onaccount of alleged NRI gifts shown by the assesseefrom Sh. Sukhchain Ram Sallan and Neeraj KumarGupta as the alleged donors were completestrangers whose financial capacity was not proved and the assessee even failed to demonstrate anyoccasion for the alleged donor to make such hugegift to the assessee? ii) Whether the facts and in the circumstances of thecase, the Hon'ble ITAT was right in law in confirmingthe order of the CIT(A) in deleting the addition ofRs.2,00,000/- made by the assessing officer onaccount of commission paid by the assessee forarranging the bogus NRI gifts of Rs.10,00,000/-?” 2.The facts necessary for adjudication as mentioned in theappeal are that the assessee is engaged in the business ofmanufacturing of velvet cloth. The assessee filed his return on31.10.1995 for the assessment year 1995-96 declaring an income ofRs.56,000/- and his case was processed on 9.3.1998 at the returnedincome. The survey was conducted on 2.2.1995 under Section 133A ofthe Income Tax Act, 1961 (in short “the Act”) when inventory of stockwas prepared on physical verification. It was selected for compulsoryscrutiny being a survey case. A sum of Rs.10,00,000/- was credited inthe account of the assessee as foreign gift from one Sukhchain RamSallan of Dubai. The donor made the gift vide DD dated 26.7.1994 outof the Non-resident External Account No. 40614017 with Bank ofAmerica, New Delhi. The brother of the assessee also received a gift ofRs.10,00,000/- from the same donor i.e. Sukhchain Ram Sallan. As theassessee failed to prove the genuineness of the gifts, the AssessingOfficer made an addition of Rs.10,00,000/- treating the same as incomeof 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 ofestimated Hawala premium paid for obtaining the said gift ofRs.10,00,000/-. Feeling aggrieved, the assessee took the matter inappeal and the Commissioner of Income Tax (Appeals) [hereinafterreferred to as “the CIT(A)”] vide order dated 22.10.1998 deleted theaddition made by the Assessing Officer. Against the order of the CIT(A), the revenue approached the Income Tax Appellate Tribunal (inshort “the Tribunal”) who vide order dated 23.8.2004, upheld the orderof the CIT(A) and dismissed the appeal. Hence, the present appeal bythe revenue. 3.We have heard learned counsel for the parties. 4.The point for consideration in this appeal is whether thealleged gift received by the respondent-assessee from Non-residentIndian with whom the assessee had no relationship was a genuine giftor not? 3.We have heard learned counsel for the parties. 4.The point for consideration in this appeal is whether thealleged gift received by the respondent-assessee from Non-residentIndian with whom the assessee had no relationship was a genuine giftor not? 5.The aforesaid issue is no longer res integra. This Court ina recent judgment passed in ITA No. 392 of 2005 (The Commissionerof Income Tax, Faridabad v. Sh. Kamal Gupta) decided on20.1.2011, had laid down as under:- “The assessee failed to produce the donor as alsohis bank statement to prove that gift was actuallygiven by the assessee. Financial capacity of thedonor was also not established. The assessee, thus,failed to discharge onus which was on him. Reliancehas been placed on judgment of this Court dated15.9.2006 in ITA No. 256 of 2006 Shri Jaspal Singh v. CIT, wherein in similar circumstances, NRI giftfrom a stranger was held to be bogus relying uponearlier judgment of this Court in Lal Chand Kalra v.CIT (22 CTR 135) and judgment of Delhi High Courtin Sajan Dass and Sons v. CIT (2003) 264 ITR 435. We are of the view that the Assessing Officerand the CIT (A) were justified in holding that the giftin question was bogus and the Tribunal committedpatent error in accepting the gift as genuine.Admittedly, the donor had no relationship with theassessee. He had no occasion to give the gift. Hewas not produced. His financial capacity was notestablished. His bank statement was not produced.The Tribunal failed to appreciate these facts. It, thus,committed patent error of law in holding that theassessee discharged onus on him to prove thegenuineness of the gift. Its order is, thus, perverse.In identical situation, this Court held that NRI giftcould not be accepted as genuine unless theassessee was able to prove natural love andaffection and financial capacity of the donor.Observations of this Court in Jaspal Singh are:- “It is well settled that mere identification ofdonor and showing the movement of giftamount through banking channel is not enoughto prove genuineness of the gift. The assessee was required to establish that thedonor had the means and the gift was genuine,for natural love and affection. Reference in thisregard may be made to the judgment of thisCourt in Lal Chand Kalra v. CIT, 22 CTR 135,judgment of Delhi High Court in Sajan Dassand 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, learnedcounsel for the assessee was unable to show that there was either anyoccasion or any relationship or there existed any natural love andaffection with the donor to have gifted the amount as claimed by theassessee. Further, the assessee was also required to substantiate thatthe donor had the means and the gift was genuine which he had failedto establish. 7.In view of the above, the finding recorded by the Tribunalstands vitiated and cannot be sustained. Accordingly, the questions oflaw are answered in favour of the revenue and against the assessee.The appeal stands allowed. (AJAY KUMAR MITTAL) JUDGE February 7, 2011gbs (ADARSH KUMAR GOEL)JUDGE