COMMR. OF INCOME TAX KARNAL vs. SUBHASH MITTAL

This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 22.9.2005 passed by the Income Tax Appellate Tribunal, Delhi Bench 'SMC', New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 601/Del/2004, for the assessment year 1994-95, claiming following substantial questions of law:- “i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in deleting the addition of Rs.2,20,000/- made by the Assessing Officer on account of bogus NRE gift of Rs.2,00,000/- shown by the assessee along with the amount of -2- premium paid @ 10% for arranging the said bogus gift as the alleged donor Sh. Sanjeev Gupta had himself informed the Enforcement Officer vide his letter dated 11.3.96 that NRE account in his name had been opened fraudulently by Sh. Rakesh Batra, C.A. which was misused for distributing bogus NRI gifts to various beneficiaries including the assessee? ii) That the assessee failed to prove the genuineness of the alleged gift as per judgment of the Hon'ble Punjab & Haryana High Court in the case of Sh. Lal Chand Kalra Vs. CIT (22 CTR 135)? iii) That since there is nothing brought on record by the assessee to prove the capacity of the donor Sh. Sanjeev Gupta who was a student during the relevant period and had admittedly no sources to dole out gifts of Rs.3.15 crores between 29.1.93 and 30.6.94 inter alia including the gift of Rs.2,00,000/- to Sh. Subhash Mittal, can alleged gift be accepted as genuine?”

Briefly stated, the facts necessary for adjudication as narrated in the appeal are that in pursuance of notice under Section 148 of the Act, the assessee filed his return on 20.9.2001 for the assessment year 1994-95 declaring an income of Rs.45,534/- with a note that during the financial year 1993-94, he had received a gift of Rs.2,00,000/- from NRE Account of Shri Sanjeev Gupta vide DD No.190733 dated 28.10.1993. The gift of Rs.2,00,000/- was proved to -3- be bogus as admitted by the donor Shri Sanjeev Gupta. The Assessing Officer made an addition of Rs.2,00,000/- treating it as undisclosed income of the assessee under Section 68 of the Act. Further, addition of Rs.20,000/- at the rate of 10% of bogus gift representing the premium paid for arranging such bogus gift was also made. Accordingly, total addition of Rs.2,20,000/- was made as undisclosed income. Feeling aggrieved, the assessee took the matter in appeal and the Commissioner of Income Tax (Appeals) [hereinafter referred to as “the CIT(A)”] vide order dated 18.11.2003 affirmed the addition made by the Assessing Officer. On further appeal by the assessee, the Tribunal vide order dated 22.9.2005 allowed the appeal and deleted the aforesaid addition. Hence, the present appeal by the revenue.

We have heard learned counsel for the parties.

The point for consideration in this appeal is whether the alleged gift received by the respondent-assessee from a Non-resident Indian with whom the assessee had no relationship, was a genuine gift or not?

The aforesaid issue is no longer res integra. This Court in a recent judgment passed in ITA No. 392 of 2005 (The Commissioner of Income Tax, Faridabad v. Sh. Kamal Gupta) decided on 20.1.2011, had laid down as under:- “The assessee failed to produce the donor as also his bank statement to prove that gift was actually given by the assessee. Financial capacity of the donor was also not established. The assessee, thus, failed to discharge onus which was on him. Reliance -4- has been placed on judgment of this Court dated 15.9.2006 in ITA No. 256 of 2006 Shri Jaspal Singh v. CIT, wherein in similar circumstances, NRI gift from a stranger was held to be bogus relying upon earlier judgment of this Court in Lal Chand Kalra v. CIT (22 CTR 135) and judgment of Delhi High Court in Sajan Dass and Sons v. CIT (2003) 264 ITR 435. 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 -5- 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.”

Applying the aforesaid para meters to this case, learned counsel for the assessee was unable to show that there was either any occasion or any relationship for the donor who has gifted the amount as claimed by the assessee. Further, the capacity of the donor or there being any natural love and affection between the donor and the assessee also had not been established.

In view of the above, the finding recorded by the Tribunal stands vitiated and cannot be sustained. Accordingly, the questions of law are answered in favour of the revenue and against the assessee.