Commissioner Of Income Tax v. Bhullan Mal Gupta

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.58 of 2008 Date of decision: 10.3.2011 Commissioner of Income Tax Vs. Bhullan Mal Gupta. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Ms. Urvashi Dhugga, Sr. Standing Counselfor the appellant. Mr. Pankaj Jain, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 (for short, “the Act”)against the order of the Income Tax Appellate Tribunal, NewDelhi dated 23.3.2007 in ITA No.2790/DEL/2004 for theassessment year 1994-95 raising following substantial question oflaw:- “Whether on facts and circumstances of the case, theHon’ble ITAT has erred in law in allowing the appealof the assessee by ignoring the Jurisdictional HighCourt decision in the case of Sh. Lal Chand Kalra, 22- CTR-135 and Apex Court decision in the case ofMcDowell & Co., 154-ITR-148?” 2.The return of the assessee for the assessment year inquestion was initially processed under Section 143(1) of the Actbut, thereafter, the Assessing Officer on formation of opinion thatthere was escapement of income, served notice upon theassessee under Section 148 for reassessment, after obtainingdue approval. The assessee responded to the said notice andstated that the return already filed may be treated to have beenfiled in response to the said notice. After due consideration, theAssessing Officer made addition to the declared income of theassessee, treating the amount claimed to have been received byway of foreign gift to be undisclosed income. The assessee wasunable to show that the gift was genuine. The donor had norelationship with the assessee. The assessee had manipulatedthe gift by paying commission and by giving cash amount. TheCIT(A) upheld the addition as follows:- 9.8. In this case, the onus on the assessee wasmuch more as donor was non-resident and, therefore,the department does not have the means to examinethe books of account of the non-residents donors. Itwas for the assessee to prove beyond doubt byproducing the donor before the Assessing Officer andalso his complete bank statement/bank account (andnot merely the bank certificate) to prove that gift wasactually given to the assessee. 9.9.In this case the Assessing Officer had stated inthe order that the donor had denied having given thegift. The relevant extract of the assessment order isreproduced here:- “However, Sh. Subhash Sethi alleged donor inhis letter dated 25.07.1995 addressed to Sh.N.K. Katyal Enforcement Officer New Delhi haddenied of having executed any gift deed infavour of any persons at any state or paratedany money through his NRE account, simplybecause he had no money in the account andfurther he did not remit any money fromEngland.” 9.10. Therefore, even the identity of the donor is notthere. The donor had also categorically stated that hehad no money to gift to anyone. Therefore, even hisfinancial capacity is not proved. The Assessing Officerhas also mentioned in the assessment order that Sh.Subhash Sethi, apart from giving gift to the assesseeHUF, had also given gift to other members of thefamily, the question, therefore, which remainsunanswered is what is the financial capacity of thedonor to make such gifts? What are his knownsources of income? None of these have beenanswered or proved before the Assessing Officer bythe assessee.” The Tribunal deleted the addition as follows:- “21.We find that similar to the facts of the abovecase, in the instant case also, donor Subhash Sethiwas not examined by the AO and the donor neverdenied the fact of his making the gift to the assessee.The assessee in support of the genuineness of the The Tribunal deleted the addition as follows:- “21.We find that similar to the facts of the abovecase, in the instant case also, donor Subhash Sethiwas not examined by the AO and the donor neverdenied the fact of his making the gift to the assessee.The assessee in support of the genuineness of the gifts has filed declaration duly signed by the donor. Inaddition to this affidavit of the donor, bank account ofthe donor, bank certificate etc. were also placed bythe assessee before the A.O. The A.O. apart from thestatements of Shri Umesh Mahndiratta, which wasgiven before the FERA authorities, could not bring anymaterial on record to show that the assessee paidcommission only to receive the said gift. Further, theRevenue could not give any reason as to why nocredence should be placed on the statement of ShriMehndiratta, which was obtained at the back of theassessee by FERA authorities and no opportunity ofcross examination was provided to the assessee andmore so when the FERA authorities itself hasabsolved all concerned Shri Umesh Mehndiratta in hisstatement before the FERA authorities has not deniedthe fact of gift of Rs.4.00 lacs made by Shri SubhashSethi, N.R.I. to the assessee H.U.F. Thus, wefollowing the above-cited decision in the case of ShriKamal Gupta (Supra) are of the view that the additionof Rs.4,60,000/- made by the lower authorities in theabove facts and circumstances of the case cannot besustained. Accordingly, we set aside the order of theA.O. and the CIT(A) and delete the addition ofRs.4,60,000/-. The ground of appeal of the assesseeis allowed.” 3. We have heard learned counsel for the parties. 4. Learned counsel for the revenue submitted that theTribunal erred in deleting the addition ignoring the finding that theimpugned gift was merely a manipulation. Only reason given bythe Tribunal for accepting the gift to be genuine is that there was no reason not to rely upon the statement of Umesh Mehndirattawho was representative of the donor. This observation isperverse, as Umesh Mehndiratta instead of supporting the caseof the assessee has supported the stand of the revenue thatthere was no genuine gift. The observation quoted above is alsocontradictory as the Tribunal itself has stated that the statementof Umesh Mehndiratta was not enough to hold that the gift wasnot genuine. 5. Learned counsel for the assessee has not been ableto justify the finding of the Tribunal. 6. We find merit in the contention raised on behalf of therevenue. The finding of the Tribunal is patently perverse. TheTribunal faulted to deal with the reasons given by the CIT(A).Accordingly, we answer the question in favour of the revenue 7. Learned counsel for the assessee points out that hehas filed Cross Objections to the effect that proceedings forreassessment were beyond limitation and there was no dueservice of notice. 8. We have considered the submissions. The impugnedproceedings were initiated on 25.5.2001 in respect of theassessment year 1994-95. It is not disputed that initiation ofproceedings was within the time prescribed under Section 149 ofthe Act at the relevant time. Thus, the Cross Objections arewithout any merit. 9. As regards service of notice, the Assessing Officer aswell as the CIT(A) have categorically held that there was duecompliance of requirement of issuing notice and the assesseeresponded to the said notice. In absence of any error beingpointed out in the said finding, the contention that the notice hadnot been duly served is without any basis. 10. Accordingly, the appeal is allowed and CrossObjections are dismissed. (ADARSH KUMAR GOEL) JUDGE March 10, 2011ashwani ( AJAY KUMAR MITTAL ) JUDGE