Sh. Mohinder Paul, Jalandhar V. The Income Tax Officer, Jalandhar

ITA 56/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5794 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-06-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 27-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDHIR K SEHGAL
• Keywords: Gift; Reassessment proceedings
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. I.T.A. NO.56(ASR)/2010. (ASSESSMENT YEAR: 2000-01) SHRI MOHINDER PAUL, THE INCOME TAX OFFICER, JALANDHAR. III(4), JALANDHAR. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI SUDHIR K. SEHGAL, ADV. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), JALANDHAR DATED 12-11-2009, RELATING TO THE ASSESSMENT YEAR 2000-01. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS:- 1. THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN REOPENING THE CASE U/S.147 OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT(A), JALANDHAR HAS ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN NOT ACCEPTING TH E GENUINENESS OF GIFTS OF RS.2 LACS RECEIVED BY THE ASSESSEE FROM HIS COUSIN BROTHER WHO IS A NRI AND SETTLED IN GERMANY AND LIV ING THERE FO THE LAST ABOUT 20 YEARS. 3. THAT THE LD. CIT(A) HAS ERRED IN REJECTING THE GIFTS OF RS.2 LACS RECEIVED BY THE ASSESSEE BY NOT CONSIDERING THE FAC TS LAID DOWN IN THE CASE OF SAURABH GUPTA VS. ITO 153 TAXMAN 52 (DEL) AS QUOTED BY HIM DURING THE ASSESSMENT PROCEEDINGS. 2 3. FIRST WE WILL DECIDE GROUND NO.2 RAISED BY THE A SSESSEE ON MERITS:- 3.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT AN INFORMATION WAS RECEIVED BY THE A.O. THAT THE ASSESSEE HAD CLAIMED TO HAVE RECEIVED GIFTS AMOUNTING TO RS.2 LACS (RS.1 LAC EACH ON 16-8-1999 AND 16-9-1999) FROM ONE SHRI DARBARA SINGH S/O SHRI TEJA SINGH, RESIDEN T OF THISMAN RODER, BERG WEG, 12-60385, FRANKFURT, GERMANY. THE A.O. I SSUED NOTICE U/S.148 ASKING THE ASSESSEE TO FILE HIS RETURN OF INCOME. DURING THE COURSE OF REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE I NCOME TAX ACT, 1961 (IN SHORT, THE ACT), THE ASSESSEE STATED THAT THE GIF TS HAD BEEN RECEIVED FROM THE ASSESSEES COUSIN (FATHERS SISTERS SON), WHO WAS AN NRI AND HAD SETTLED IN GERMANY FOR THE LAST 20 YEARS. A DECLARATION OF GI FT AND COPIES OF THE DRAFTS WERE FILED. AS REGARDS THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LAL CHAND KALRA, 22 CTR (PB. & HAR.) 135, IT WAS STATED BY THE ASSESSEE THAT SAME IS NOT APPLICABLE AS IN THAT CASE GIFTS WERE RECEIVED WITHIN INDIA AND WERE NOT NRI GIFTS. HOWE VER, THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF SAURABH GUPTA VS. ITO, 153 TAXMAN 52 (DEL) IN WHICH CASE TH E FILING OF COPY OF DECLARATION ISSUED BY THE DONOR WAS CONSIDERED AS S UFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF THE GIFTS BY THE DELHI HIG H COURT. THE A.O. DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE. THE A.O . HELD THAT THE DECISION RELIED UPON BY THE ASSESSEE WAS NOT APPLICABLE TO T HE FACTS OF THE PRESENT CASE. THE A.O. POINTED OUT THAT THE DECLARATION GI VEN BY SHRI DARBARA SINGH REGARDING THE GIFT DID NOT DEPICT THE PROOF OF HIS INCOME NOR HAD THE DONOR MENTIONED IN HIS BANK ACCOUNT NUMBER FROM WHERE HE HAD MADE SUCH GIFTS. THE A.O. ASKED THE ASSESSEE TO PRODUCE A COPY OF BA NK STATEMENT OF SHRI DARBARA SINGH FROM WHERE THE GIFT HAD BEEN MADE. H OWEVER, THE SAME WAS NOT PRODUCED. THE A.O. TOOK THE VIEW THAT THE ASSE SSEE FAILED TO PROVE THE 3 CREDITWORTHINESS OF THE DONOR. THE A.O. ALSO TOOK THE VIEW THAT THERE WAS NO CLOSE RELATIONSHIP BETWEEN THE ASSESSEE AND THE DON OR AND THERE WAS NO OCCASION TO MAKE THE GIFT. THE A.O., THEREFORE, HE LD THAT THE GIFTS COULD NOT BE TREATED AS GENUINE IN THE LIGHT OF THE RATIO LAI D DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF LAL CHAND KALRA (SUPRA). 4. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION OF RS.2 LACS FOR THE REASONS STATED IN PARA 4 OF THE IMPUGNED ORDER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE US, SHRI SUDHI R SEHGAL, ADVOCATE, THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT TH E ASSESSEE HAS FILED CONFIRMATION/DECLARATION OF SHRI DARBARA SINGH (DON OR) BEFORE THE A.O., WHICH READS AS UNDER:- DECLARATION I, DARBARA SINGH SON OF SHRI TEJA SINGH RESIDENT OF THISMAN RODER, BERG WEG, 121-60385 FRANKFURT, GERMANY HEREBY DECL ARE AS UNDER: THAT I AM PERMANENT RESIDENT OF FRANKFURT GERMANY F OR THE LAST 20 YEARS. THAT I AM RUNNING A DEPARTMENTAL STORE IN GERMANY A ND MY ANNUAL INCOME IS ABOUT RS.6.00 LACS. THAT I AM RELATED TO SHRI MOHINDER PAUL AS COUSIN B ROTHER. THAT I HAVE GIFTED THE AMOUNT OF RS.2,90,000/- TO M Y BROTHER SHRI MOHINDER PAUL VIDE DRAFTS AS FOLLOWS:- DRAFT NO.180967 DATED 16-8-1999 FOR RS.1,00,000/- DRAFT NO.188548 DATED 2-5-2000 FOR RS.90,000/- CHEQUE NO.831342 DATED 16-9-1999 FOR RS.1,00,000/- THAT THE GIFT OF RS.2,90,000/- WAS MADE OUT OF MY L OVE AND AFFECTION FOR HIM AND FOR HIS BUSINESS PURPOSE. 4 THAT I AM FULLY CAPABLE OF MAKING THE GIFT. SD/- (DARBARA SINGH) THE ASSESSEE HAS ALSO FILED A PHOTOCOPY OF ACCOUNT PAYEE DRAFT ISSUED FROM STATE BANK OF INDIA, MAINZER LANDSTRABE 61, POSTBOX 111 753, D-60052 FRANKFURT/MAIN, GERMANY. SHRI SUDHIR SEHGAL, THE L EARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE ALSO RECEIVED RS.90,000/- FROM SAME DONOR ISSUED IN THE SHAPE OF DEMAND DRAFT SBI, FRAN KFURT, GERMANY DATED 2- 5-2000, I.E. FALLING IN THE ASSESSMENT YEAR 2001-02 , FOR WHICH NO ADVERSE VIEW HAS BEEN TAKEN AND NO ADDITION HAVE BEEN MADE AND THE MATTER HAD ATTAINED FINALITY. SHRI SUDHIR SEHGAL, THE LEARNED COUNSEL FOR THE ASSESSEE, FURTHER SUBMITTED THAT SINCE THERE IS NO OTHER MATE RIAL JUSTIFYING THE DEPARTMENT FROM THE EXISTENCE OF THE GIFT MADE IN T HE SUBSEQUENT YEAR, THE ADDITION ON THE BASIS OF VAGUE AND IRRELEVANT CONS IDERATION DESERVES TO BE REJECTED. 5.1 SHRI SUDHIR SEHGAL, THE LEARNED COUNSEL FOR THE ASS ESSEE, ALSO SUBMITTED THAT THERE WAS NO REQUIREMENT BY THE A.O. TO PRODUCE THE PERSON AND THEN TO SAY THAT THE CREDITWORTHINESS HAS NOT B EEN ESTABLISHED, CANNOT BE SAID BY THE A.O. AS REGARDS THE COPY OF BANK ACCOU NT NOT HAVING BEEN FURNISHED, SHRI SUDHIR SEHGAL, THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT IT IS AN ACCEPTED FACT THAT THE ACCO UNT PAYEE DRAFT HAS BEEN MADE FROM DONORS ACCOUNT AT GERMANY, WHICH WAS PAY ABLE AT STATE BANK OF INDIA, JALANDHAR. SHRI SUDHIR SEHGAL, THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE IDENTITY OF THE PERSON STAN DS ESTABLISHED AND THE AMOUNT HAS COME FROM THE RELATIVE AND, AS SUCH, THE JUDGMENT OF LAL CHAND KALRA (SUPRA) IS NOT APPLICABLE SINCE HERE THE GIFT IS FROM CLOSE RELATIVE AND 5 HE IS NOT A STRANGER AND THERE IS A CAPACITY TO GIF T THE AMOUNT IN QUESTION BECAUSE THE DONOR IS RUNNING A DEPARTMENTAL STORE I N GERMANY AND HIS INCOME IS ABOVE RS.6 LACS PER ANNUAM. SHRI SUDHIR SEHGAL, THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT SHRI DARBA RA SINGH (DONOR) IS PERMANENT RESIDENT OF FRANKFURT, GERMANY FOR THE LA ST 20 YEARS. HE IS RUNNING A DEPARTMENTAL STORE IN GERMANY AND HIS ANN UAL INCOME IS ABOUT RS.6 LACS. IN OUR VIEW, THERE IS SUBSTANTIAL FORCE IN THE ABOVE SUBMISSIONS OF SHRI SUDHIR SEHGAL, THE LEARNED COUNSEL FOR THE ASS ESSEE. IN THE CASE OF A. RAJENDRAN & ORS. VS. ASSTT. C.I.T. (2006) 204 CTR ( MAD) 9, WHEREIN IT HAS BEEN HELD THAT THE GIFTS RECEIVED BY THE ASSESSEE F ROM AN NRI INDUSTRIALIST THROUGH PROPER BANKING CHANNELS COULD NOT BE TREATE D AS NON-GENUINE WHERE THE IDENTITY AS ALSO SOLVENCY OF THE DONOR STOOD ES TABLISHED. SIMILARLY, IN THE CASE OF ASSTT. C.I.T. VS. RADHEY SHYAM BANSAL (2000 ) 68 TTJ (RAJKOT) 136, WHEREIN IT HAS BEEN HELD THAT THE GIFTS RECEIVED BY THE ASSESSEE FROM A FOREIGN PARTY OUT OF LOVE AND AFFECTION COULD NOT B E TREATED AS INCOME OF THE ASSESSEE WHEN THE GENUINENESS OF GIFT COULD NOT BE DOUBTED, IDENTITY OF DONOR WAS ESTABLISHED AND HIS CAPACITY TO MAKE THE GIFT IS NOT QUESTIONABLE. AT THIS STAGE, WE MAY ALSO REFER A DECISION OF THE I.T.A.T., CALCUTTA A BENCH IN THE CASE OF SMT. BHAGWATI DEVI VS. I.T.O., (1993) 47 ITD 58 (CAL), WHEREIN THE CONTROVERSY WAS THAT WHETHER A S UM OF RS.1 LAC RECEIVED BY THE ASSESSEE AS GIFT THROUGH BANKING CHANNEL FR OM A RESIDENT OF NEPAL IS TO BE CONSIDERED AS INCOME OF THE ASSESSEE FROM UND ISCLOSED SOURCES OR NOT. THE CALCUTTA A BENCH HELD THAT THERE WAS NO EVIDE NCE TO SHOW THAT GIFT WAS A COLLUSIVE OR A DEVICE TO EVADE TAX AND, THERE FORE, THE AMOUNT DIRECTLY CREDITED IN THE BANK ACCOUNT OF THE DONEE CANNOT BE TREATED AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. IN THE INSTANT C ASE ALSO, IT IS NOT THE CASE OF THE A.O. THAT THE GIFT WAS COLLUSIVE OR A DEVICE TO EVADE TAX. IT IS APPARENT 6 FROM THE RECORD THAT THE AMOUNT IN QUESTION CAME TO THE ASSESSEE THROUGH BANKING CHANNEL FROM A RESIDENT OF FRANKFURT, GERMA NY. 5.2 IN THE CASE OF NARINDER KUMAR SEKHRI VS. A.C.I.T. (2003) 81 TTJ (ASR.) 1036, THE TRIBUNAL CONCLUDED THAT FOREIGN GI FT HAVING BEEN RECEIVED THROUGH BANKING CHANNELS AND THERE BEING NO MATERIA L TO SHOW THAT IT WAS HAWALA TRANSACTION, NO ADDITION UNDER SECTION 68 OF THE ACT WAS CALLED FOR. IN THE SAID CASE, THE GIFT WAS RECEIVED BY THE ASSE SSEE THROUGH BANKING CHANNELS AND MONEY REMITTED FROM U.K. THE TRIBUNAL ALSO HELD THAT IT WAS NO THE CASE OF THE DEPARTMENT THAT THE ASSESSEE HAD SENT THE MONEY TO U.K. AND CONVERTED THE SAME INTO POUNDS AND THEN SOMEBOD Y ON BEHALF OF THE ASSESSEE SENT THE MONEY AGAIN TO THE ASSESSEE IN IN DIA. 5.3 WE ALSO FIND SUBSTANCE IN THE SUBMISSIONS OF THE LE ARNED COUNSEL FOR THE ASSESSEE THAT THE DECISION RELIED UPON BY THE A .O. OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LAL CHAND KALRA (SUPRA) I S NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THAT CASE, THE RECEI PT FROM THE FOREIGN COUNTRY THROUGH BANKING CHANNELS WAS NOT INVOLVED. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE IS CLOSELY RELATED TO THE DONOR, SHRI DARBARA SINGH. CONSIDERING THE ENTIRE FACTS AN THE CIRCUMSTANCES O F THE PRESENT CASE, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) IS NOT SUSTAINABLE AND HENCE WE DELETE THE SAME. 6. SINCE WE HAVE DELETED THE ADDITION ON MERITS, TH EREFORE, WE DO NOT THINK IT NECESSARY TO DECIDE THE GROUND NO.1 OF THE APPEAL, WHICH IS OF ACADEMIC IN NATURE. 7 7. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERM S INDICATED ABOVE, THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 10 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO:- (1) THE APPELLANT: (2) THE ITO (3) THE CIT (4) THE CIT(A) (5) THE SR. D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.