Commissioner Of Income Tax, Karnal v. Sh. Subhash Mittal

ITA No. 356 of 2006 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income Tax, Karnal Versus Sh. Subhash Mittal ITA No. 356 of 2006 Date of Decision: 15.2.2011 ....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. Pankaj Jain, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been filed by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 22.9.2005 passed by the Income Tax Appellate Tribunal, DelhiBench 'SMC', New Delhi (hereinafter referred to as “the Tribunal”) in ITANo. 601/Del/2004, for the assessment year 1994-95, claiming followingsubstantial questions of law:- “i)Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT was right in law in deletingthe addition of Rs.2,20,000/- made by the AssessingOfficer on account of bogus NRE gift of Rs.2,00,000/-shown by the assessee along with the amount ofcase, the Hon'ble ITAT was right in law in deletingthe addition of Rs.2,20,000/- made by the AssessingOfficer on account of bogus NRE gift of Rs.2,00,000/-shown by the assessee along with the amount of premium paid @ 10% for arranging the said bogusgift as the alleged donor Sh. Sanjeev Gupta hadhimself informed the Enforcement Officer vide hisletter dated 11.3.96 that NRE account in his namehad been opened fraudulently by Sh. Rakesh Batra,C.A. which was misused for distributing bogus NRIgifts to various beneficiaries including the assessee?That the assessee failed to prove the genuineness ofthe alleged gift as per judgment of the Hon'blePunjab & Haryana High Court in the case of Sh. LalChand Kalra Vs. CIT (22 CTR 135)? ii) iii) That since there is nothing brought on record by theassessee to prove the capacity of the donor Sh.Sanjeev Gupta who was a student during therelevant period and had admittedly no sources todole out gifts of Rs.3.15 crores between 29.1.93 and30.6.94 inter alia including the gift of Rs.2,00,000/- toSh. Subhash Mittal, can alleged gift be accepted asgenuine?” 2.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that in pursuance of notice under Section 148of the Act, the assessee filed his return on 20.9.2001 for theassessment year 1994-95 declaring an income of Rs.45,534/- with anote that during the financial year 1993-94, he had received a gift ofRs.2,00,000/- from NRE Account of Shri Sanjeev Gupta vide DDNo.190733 dated 28.10.1993. The gift of Rs.2,00,000/- was proved to be bogus as admitted by the donor Shri Sanjeev Gupta. The AssessingOfficer made an addition of Rs.2,00,000/- treating it as undisclosedincome of the assessee under Section 68 of the Act. Further, additionof Rs.20,000/- at the rate of 10% of bogus gift representing thepremium paid for arranging such bogus gift was also made.Accordingly, total addition of Rs.2,20,000/- was made as undisclosedincome. Feeling aggrieved, the assessee took the matter in appealand the Commissioner of Income Tax (Appeals) [hereinafter referred toas “the CIT(A)”] vide order dated 18.11.2003 affirmed the addition madeby the Assessing Officer. On further appeal by the assessee, theTribunal vide order dated 22.9.2005 allowed the appeal and deleted theaforesaid addition. 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 thealleged gift received by the respondent-assessee from a 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 Commissioner of Income Tax, Faridabad v. Sh. Kamal Gupta) decided on20.1.2011, had laid down as under:- 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 a 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 Commissioner of 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. Reliance has been placed on judgment of this Court dated15.9.2006 in ITA No. 256 of 2006 Shri Jaspal Singhv. 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 gift amount through banking channel is not enough to prove genuineness of the gift. Theassessee was required to establish that thedonor had the means and the gift was genuinefor 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 for the donor who has gifted the amount asclaimed by the assessee. Further, the capacity of the donor or therebeing any natural love and affection between the donor and theassessee also had not been established. 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 (ADARSH KUMAR GOEL) JUDGE