THE COMMR. OF INCOME TAX V. SUBHASH CHANDER

ITA/203/2006

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax, Jalandhar-II against the decision of the Income Tax Appellate Tribunal, which had deleted the addition of certain amounts to the income of the assessee, Sh. Subhash Chander. These amounts were claimed to be foreign gifts received from non-resident Indians. The Assessing Officer had initially added these amounts to the assessee's income, suspecting them to be undisclosed income. The CIT(A) reversed this decision, which was upheld by the Tribunal. However, the High Court, after examining the facts and precedents, concluded that the gifts were not genuine as there was no evidence of relationship or natural affection between the donor and the donee, nor was the financial capacity of the donors established.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 675090 (HC-PUNJAB HARYANA)
• Appeal Type: Others
• Pronouncement Date: 29-01-2014
• 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
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: RAJIV SHARMA
• Assessee Lawyers: VIVEK SETHI
• Keywords: Income from undisclosed sources; Foreign gifts; NRI gift; Genuine gift; Financial capacity of the donor
• Section: 271(1)(c); 260-A

Judgement Text

" ITA No. 203 of 2006 1 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No. 203 of 2006 (O&M) Date of Decision: 29.01.2014 The Commissioner of Income Tax-Jalandhar-II, Jalandhar. ... Appellant vs. Sh. Subhash Chander ... Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MRS. JUSTICE ANITA CHAUDHRY Present:- Mr. Vivek Sethi Advocate for the appellant. Mr. Rajiv Sharma, Advocate for Mr. S.K. Mukhi, Advocate for the respondent. --- ANITA CHAUDHRY, J. 1. The revenue has approached this Court by filing the appeal under Section 260-A of the Income Tax Act, 1961 (for short, 'the Act') laying challenge to the order dated 05.09.2005 (Annexure P-3) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, 'the Tribunal') in ITA No. 137(ASR)/ 1999 in respect of assessment year 1995-96. 2. In our considered view, the following question of law would emerge from the order of the Tribunal for determination by this Court:- “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the addition of `3,37,410/-( `75859/- + `2,61,551/-) allegedly received by the assessee as foreign gifts? 3. The facts of the case, in nutshell, are that for the Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 203 of 2006 2 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 `75859/- (`75325+`534) in his saving bank account and another amount of `46,800/- and `2,14,751/-. 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 Piara Singh Johal and N.C. Handa respectively, who were living abroad. The Assessing Officer was not satisfied with the explanation of the assessee and vide order dated 16.03.1998 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 gave directions for initiating penalty proceedings as prescribed under Section 271(1)(c) of the Income Tax Act. 4. The assessee thereafter preferred an appeal before the Commissioner of Income Tax (Appeals), Jalandhar (to be referred as, 'the CIT(A)) and succeeded there. The CIT(A),while relying upon its earlier order passed in respect of assessment year 1994-95 between same donor and donee, ordered deletion of the aforesaid amounts from the income of the assessee. The revenue challenged the order of CIT(A) by filing the appeal, but failed to get any relief and the appeal was dismissed vide impugned order. 5. Dis-satisfied with the same, the revenue has filed the instant appeal. 6. We have heard the learned counsel for the appellant- revenue as well as for the respondent and have perused the Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 203 of 2006 3 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 stranger 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, decided on 20.12.2013, 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 Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 203 of 2006 4 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 Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 203 of 2006 5 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: “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. Applying the aforesaid parameters to this case, it is found that the assesse was unable to show that there was any occasion or relationship to make the gift. 11. In view of the discussion made hereinabove, we answer the substantial question of law in favour of the revenue. The appeal is allowed. (AJAY KUMAR MITTAL) (ANITA CHAUDHRY) JUDGE JUDGE 29.01.2014 Jiten Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh "