COMMISSIONER OF INCOME TAX vs. MANOJ KUMAR SEKHRI

Facts

The revenue appealed against the Income Tax Appellate Tribunal's (Tribunal) order for assessment year 1994-95. The assessee had declared an income of ₹1,20,280. The Assessing Officer (AO) questioned cash entries of ₹1,85,000 and ₹61,788. The assessee claimed these were foreign gifts from Mohinder Singh Handa (uncle) and Piara Singh Johal, providing cashier's cheques and fax letters. The AO added these amounts to the assessee's income as undisclosed sources, deeming them bogus gifts re-routed as foreign remittances, and initiated penalty proceedings. The Commissioner of Income Tax (Appeals) deleted both additions, finding the identity and capacity of Mohinder Handa proven and the second amount not pertaining to the accounting period. The Tribunal upheld the deletion for both amounts.

Held

The High Court held that the gift of ₹1,85,000 from Mohinder Handa could not be considered bogus, following the principle of consistency as laid down by the Apex Court in Berger Paints India Ltd. Vs. CIT. The Court noted that a previous decision involving the same assessee and donor had upheld the genuineness of a foreign gift from Mohinder Handa. Therefore, there was no ground to interfere with this part of the Tribunal's order. However, regarding the gift of ₹61,788 from Piara Singh Johal, the Court held that a gift from a stranger, a Non-Resident Indian (NRI) with whom the assessee had no relationship, cannot be considered genuine or valid. The Court cited several precedents, including Lal Chand Kalra Versus CIT and Sajan Dass and Sons Versus CIT, which held that mere identification of the donor and banking channel transactions are insufficient to prove the genuineness of a gift. The assessee must establish the donor's means and the gift's genuineness for natural love and affection. The Court found no occasion for the gift and that the donor had not gifted to his family in India. Consequently, the deletion of ₹61,788 was not sustainable, and the AO's order was restored for this amount. The appeal was partly allowed.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the addition of ₹1,85,000 allegedly received by the assessee as a foreign gift from Mohinder Singh Handa? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the addition of ₹61,788 allegedly received by the assessee as a foreign gift from Piara Singh Johal? Assessee's Contentions: The assessee contended that the foreign gifts were genuine, supported by documentary evidence like cashier's cheques and fax letters, and that the remittances were through banking channels. The assessee also relied on the findings of the CIT(A) and the Tribunal which accepted the genuineness of the gifts. Revenue's Contentions: The revenue contended that the AO correctly added the amounts as income from undisclosed sources, as the assessee failed to establish the source and capacity of the donors. The revenue argued that Mohinder Handa was a distant relation and Piara Singh Johal was unrelated, and that the assessee's parents residing abroad had not made gifts, suggesting no occasion for these alleged gifts. The revenue further argued that a gift from a stranger (Piara Singh Johal) cannot be considered genuine or valid.