COMMISSIONER OF INCOME TAX V. KIRAN BALA

ITA/602/2006

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax, Chandigarh-II against the decision of the Income Tax Appellate Tribunal, which had accepted the foreign gifts received by the assessee, Kiran Bala, as genuine. The gifts, amounting to `2.60 lakhs, were allegedly received from non-resident Indians, Mr. Malti Pal and Mr. N.P. Bhandari. The Assessing Officer had initially added these amounts to the assessee's income, suspecting them to be undisclosed income, due to lack of evidence regarding the donors' financial capacity, their relationship with the assessee, and the occasion for the gifts. The CIT(A) upheld this addition, but the Tribunal reversed it, leading to the present appeal by the revenue.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 733776 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 03-04-2014
• Assessment Year: misc
• Other Referred Cases: The Commissioner of Income Tax, Jalandhar vs. M/s Udham Singh & sons, Goraya, Lal Chand Kalra Versus CIT, Jaspal Singh Versus CIT, Sajan Dass and Sons Versus CIT, Commissioner of Income Tax, Karnal Versus Puneet Singh, Shri Hanuman Dass Versus The Commissioner of Income Tax, Jalandhar, The Commissioner of Income Tax- Jalandhar-II, Jalandhar vs. Sh. Subhash Chander
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: RAVISHANKAR
• Assessee Lawyers: RAJESH KATOCH; URVASHI DUGGA
• Keywords: Financial capacity of donor; Foreign gifts; Genuineness of gift; NRI gift; Unexplained gifts
• Section: 271(1)(c); 260-A

Judgement Text

"IN THE HIGH COURT OF PUNJAB & HARYANA, CHANDIGARH Income Tax Appeal No.602 of 2006 Date of Decision: April 03, 2014 Commissioner of Income Tax, Chandigarh-II ..... APPELLANT VERSUS Kiran Bala ..... RESPONDENT . . . CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH . . . PRESENT: - Mr. Rajesh Katoch Advocate, for Ms. Urvashi Dugga, Advocate, for the appellant – revenue. Mr. Ravi Shankar, Advocate, for the respondent. . . . Jaspal Singh, J 1. This is an appeal preferred under Section 260-A of the Income Tax Act, 1961 (for short, 'the Act') by the revenue feeling dissatisfied against order dated June 23, 2006 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench (B) (for brevity, 'the Tribunal') in ITA No.655/Chandi/2001 in respect of assessment year 1995-96. 2. The following question of law would emanate from the order of the Tribunal for determination by this Court:- Kumar Avin 2014.05.20 10:36 I attest to the accuracy and integrity of this document High Court of Punjab & Haryana at Chandigarh ITA No.602 of 2006 [2] “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was right in holding the foreign gifts of ` 2.60 lakhs received by the assessee as genuine, though the financial capability of the donors, their identity, relations with the assessee and occasion to gift have not been proved at any stage, either at the assessment stage or at the appellate stage?” 3. Shortly put, the facts of the case are that for the assessment year 1995-96, the assessee filed the return. His income from certain sources were doubted by the Assessing Officer and he was asked to reply with regard to cash entry of ` 2,60,000/- on account of unexplained gifts and another amount of ` 37,600/- on account of unexplained silver jewellery. Though there were some other posers but those are not relevant for the purpose of this appeal and are not being referred to. As per assessee, he got the aforesaid amounts as foreign gifts from Mr. Malti Pal (gift of ` 1,40,000/-) and Mr. N.P. Bhandari (gift of ` 1,20,000/-) respectively, who were living abroad. The Assessing Officer was not satisfied with the explanation of the assessee and vide order dated March 27, 1998 directed that the said amounts be added to be income of the assessee on account of his income from undisclosed sources. The Assessing Officer also initiated penalty proceedings as prescribed under Section 271(1)(c) of the Act. 4. The assessee thereafter preferred an appeal before the Commissioner of Income Tax (Appeals), Chandigarh [to be referred as, 'the CIT(A)]. The CIT(A), while holding the addition made by the Assessing Officer to be justified, rejected the assessee’s appeal qua Gift of ` 2,60,000/-. However, the appeal against Kumar Avin 2014.05.20 10:36 I attest to the accuracy and integrity of this document High Court of Punjab & Haryana at Chandigarh ITA No.602 of 2006 [3] addition of ` 37,600/- on account of unexplained silver jewellery was succeeded vide order dated March 2, 2001. The assessee Kiran Bala challenged the order of CIT(A) by filing the appeal (ITA No.655/Chandi/2001) which was allowed vide impugned order. 5. Being aggrieved with the same, the revenue preferred the instant appeal. 6. We have heard the learned counsel for the appellant – revenue as well as for the respondent and have perused the paper- book carefully. 7. The Assessing Officer while ordering addition took note of the fact that the donors were not related to the donee and there was no occasion for them to make the gift. The Assessing Officer observed that the financial capacity of the donors was not established and there existed no plausible reasons to part with the hard earned money. Consequently, it held that the gift was not genuine. It has come on record that both of them were having no blood relations. It was a NRI gift from a person other than a relation and it could not be said to be genuine or valid nor out of love and affection. Not only this, what raises suspicion about the veracity of the said transactions is that the donor had parted with a substantial portion of his income in favour of the assessee earlier also. 8. The issue raised here is no longer res integra. 9. In ITA No.12 of 2000 titled “The Commissioner of Income Tax, Jalandhar vs. M/s Udham Singh & sons, Goraya”, Kumar Avin 2014.05.20 10:36 I attest to the accuracy and integrity of this document High Court of Punjab & Haryana at Chandigarh ITA No.602 of 2006 [4] decided on December 20, 2013, this Court while dealing with a situation where a gift was received by the assessee from a non- resident Indian with whom the assessee had no relationship, while relying upon various decisions rendered on the issue, held as under:- “9. The matter of receipt of foreign gifts even earlier had engaged attention of the courts. This Court in Lal Chand Kalra Versus CIT (1981) 22 CTR 135 had held that NRI gift from a stranger was neither genuine nor valid. This judgment was followed in Jaspal Singh Versus CIT (ITA No.256 of 2006) decided on 15.9.2006 by this Court as also judgment in Sajan Dass and Sons Versus CIT (2003) 264 ITR 435 by Hon'ble Delhi High Court. Recently, this Court in ITA No.498 of 2005 decided on 7.2.2011 titled Commissioner of Income Tax, Karnal Versus Puneet Singh had taken the same view holding as under: “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.” 10. Even this Bench in ITA No.72 of 1999 titled Shri Hanuman Dass Versus The Commissioner of Income Tax, Jalandhar and another decided on 22.11.2013 held as under: Kumar Avin 2014.05.20 10:36 I attest to the accuracy and integrity of this document High Court of Punjab & Haryana at Chandigarh ITA No.602 of 2006 [5] “Taking up the case in hand, even when the donor had the means to make the gifts, there being neither any relationship nor there being any circumstance to show natural love and affection of the donor for the donee nor there being any occasion to make such gifts to the assessee and the authority of jurisdictional High Court being against the assessee, the authority cited by the assessee as Commissioner of Income Tax v. R.S. Sibal, (2004) 269 ITR 429 does not support the case of the appellant. Thus, there is no perversity or impropriety in the impugned order and sequelly the same is upheld.” 10. Similar view has been reiterated by this Court, also, in ITA No.203 of 2006 titled “The Commissioner of Income Tax- Jalandhar-II, Jalandhar vs. Sh. Subhash Chander”, decided on January 29, 2014 while placing reliance on the case of M/s Udham Singh & sons (supra). 11. Attracting the observations made in the above referred decisions, it is fully established that the assesse was unable to show that there was any occasion or relationship to make the gift. 12. In the light of what has been discussed above, we answer the substantial question of law in favour of the revenue. The appeal is allowed. (Jaspal Singh) Judge (Ajay Kumar Mittal) April 03, 2014 Judge avin Kumar Avin 2014.05.20 10:36 I attest to the accuracy and integrity of this document High Court of Punjab & Haryana at Chandigarh "