Commissioner Of Income Tax,Karnal v. Vinod Chugh

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 953 of 2008Date of decision: 4.2.2011 Commissioner of Income Tax,Karnal --- Appellant Versus Vinod Chugh --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Yogesh Putney, Senior Standing Counselfor the appellant-Revenue. None for the respondent-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act,1961 (for short “the Act”) has been filed by the Revenue against theorder dated 21.7.2006, passed by the Income Tax Appellate TribunalDelhi Bench ‘B’, New Delhi (in short “the Tribunal”) in ITA No.3802/Del/2001, relating to the assessment year 1994-95. The following substantial questions of law have beenclaimed by the Revenue for determination by this Court: 1- Whether on the facts and circumstances of the case, the learned ITAT was right in law in deleting the addition of Rs. 7,50,000/- made by the assessing officer onaccount of alleged NRE gifts when neither the financialcapacity of the alleged donor nor relationship with theassessee nor the event for making the alleged gifts areproved on record?account of alleged NRE gifts when neither the financialcapacity of the alleged donor nor relationship with theassessee nor the event for making the alleged gifts areproved on record? 2- Whether on the facts and circumstances of the case,the learned ITAT was right in law in deleting theaddition of Rs. 1,50,000/- made by the assessing officeron account of commission paid by the assessee forarranging the bogus NRE gifts of Rs.1.50 lacs?the learned ITAT was right in law in deleting theaddition of Rs. 1,50,000/- made by the assessing officeron account of commission paid by the assessee forarranging the bogus NRE gifts of Rs.1.50 lacs? 3- Whether on the facts and circumstances of the case,the learned ITAT was right in law in deleting the additionof Rs.9,00,000/- made by the assessing officer towardsincome of the assessee as undisclosed u/s 68 of theIncome Tax Act, 1961?”the learned ITAT was right in law in deleting the additionof Rs.9,00,000/- made by the assessing officer towardsincome of the assessee as undisclosed u/s 68 of theIncome Tax Act, 1961?” The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee, who is engaged inthe business of manufacturing of velvet cloth, filed its return of incomefor the assessment year 1994-95, declaring income of Rs. 62,770/-.The return was processed under Section 143(1)(a) of the Act andduring the proceedings that were followed by a survey carried outunder Section 133A of the Act on the business premises of theassessee, on 2.2.1995, it transpired that the assessee had revealedfresh capital of an amount of Rs. 7,80,000/- out of which Rs.7,50,000/-were shown as foreign gift. We have heard learned counsel for the Revenue and haveperused the record. In this appeal, the point for consideration is, whether thegift received from NRE by the respondent-assessee was genuine andexempt from being treated as undisclosed income of the assessee.The Tribunal after appreciating the evidence held thereceiving of gift from the NRE to be genuine. However, a similarquestion came up for consideration of this Court in Income Tax AppealNo. 392 of 2005 (The Commissioner of Income Tax, Faridabad v.Kamal Gupta), decided on 20.1.2011 wherein it was held that in orderto prove that the gift received in the above manner was genuine, theassessee was required to establish that the gift was for natural loveand affection and the donor had the means to give the gift. It was heldas under:- We have heard learned counsel for the Revenue and haveperused the record. In this appeal, the point for consideration is, whether thegift received from NRE by the respondent-assessee was genuine andexempt from being treated as undisclosed income of the assessee.The Tribunal after appreciating the evidence held thereceiving of gift from the NRE to be genuine. However, a similarquestion came up for consideration of this Court in Income Tax AppealNo. 392 of 2005 (The Commissioner of Income Tax, Faridabad v.Kamal Gupta), decided on 20.1.2011 wherein it was held that in orderto prove that the gift received in the above manner was genuine, theassessee was required to establish that the gift was for natural loveand affection and the donor had the means to give the gift. It was heldas under:- “The Assessing officer received information of a scandalbeing carried out by some Chartered Accountants bygiving cheque or draft in lieu of cash received. Theassessee failed to produce the donor as also his bankstatement to prove that gift was actually given by theassessee. Financial capacity of the donor was also notestablished. The assessee, thus, failed to discharge onuswhich was on him. Reliance has been placed on judgmentof this Court dated 15.9.2006 in ITA No.256 of 2006 ShriJaspal Singh v. CIT, wherein in similar circumstances,NRI gift from 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 Court in SajanDass and Sons v. CIT, (2003) 264 ITR 435. 7. We are of the view that the Assessing Officer and theCIT(A) were justified in holding that the gift in questionwas bogus and the Tribunal committed patent error inaccepting the gift as genuine. Admittedly the donor had norelationship with the assessee. He had no occasion to givethe gift. He was not produced. His financial capacity wasnot 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 assesseedischarged onus on him to prove the genuineness of thegift. Its order is, thus, perverse. In identical situation, thisCourt held that NRI gift could not be accepted as genuineunless the assessee was able to prove natural love andaffection and financial capacity of the donor. Observationsof this Court in Jaspal Singh are:- “It is well settled that mere identification of donor andshowing the movement of gift amount throughbanking channel is not enough to prove genuinenessof the gift. The assessee was required to establishthat the donor had the means and the gift wasgenuine, for natural love and affection. Reference inthis regard may be made to the judgment of thisCourt 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 andSumanti Dayal v. CIT, (1995) 214 ITR 801.” The conditions enumerated in the aforesaid judgment didnot stand fulfilled in the present case. The donors were strangers andthere was no element of love and affection and there was no occasionfor the donors to give the gift. Therefore, it cannot be said that theTribunal was right in deleting the addition of Rs. 7,50,000/- made bythe assessing officer on account of gifts received by the assesseefrom NRE. The substantial questions of law are, thus, answered infavour of the Revenue and against the assessee. The appeal is accordingly allowed. (AJAY KUMAR MITTAL) JUDGE February 4, 2011*rkmalik* (ADARSH KUMAR GOEL) JUDGE