THE COMMISSIONER OF IT vs. KAILASH KUMAR

ITA No. 640 of 2005 1 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH

ITA No. 640 of 2005 (O&M) Date of Decision: 29.01.2014 The Commissioner of Income Tax-Jalandhar-II, Jalandhar. ... Appellant vs. Sh. Kailash Kumar

... 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.

ITA No. 640 of 2005 2 3. The facts leading to the filing of instant appeal are being noticed. For the assessment year 1989-90, respondent- assessee filed the return on 15.11.1989 showing his income to be `21,330/-. However, the Assessing Officer called upon the assessee to render explanation in respect of 12000 pounds shown by the assessee as foreign gift and about the investment of ` 20,000/- made by him in M/s Mohan Lal & Co. During the course of assessment proceedings, the assessee replied to the questionnaire and furnished explanation that he had received the said amount equivalent to `3,16,570/- from Y.P. Wadhera who is residing in U.K.. The Assessing Officer doubted the explanation put forth by the assessee. The Assessing Officer took notice of the fact that the donor and donee had no relationship with each other. The Assessing Officer vide order dated 7.11.1990 directed that the said amount be added to be income of the assessee on account of his income from undisclosed sources, as it was bogus gift re-routed as a foreign remittance. The Assessing Officer also gave directions for initiating penalty proceedings as prescribed under Section 271(1)(c) of the Income Tax Act. It is relevant to mention here that earlier the matter was taken to Commissioner of Income Tax (Appeals), Jalandhar (to be referred as, 'the CIT(A)) by the assessee, which vide order dated 19.2.1991 deleted the addition of `3,16,570/-, but confirmed the addition of `20,000/-. Thereafter, the revenue as well as the assessee went in appeal before the Tribunal where appeal of revenue was allowed and that of assessee was dismissed vide order dated 20.2.1998 and the amount of `3,16,570/- and `20,000/- was ordered to be added to the Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No. 640 of 2005 3 income of the assessee. However, on an application filed by the assessee before the Tribunal, the order dated 20.2.1998 was recalled and the matter was remanded back to the Assessing Officer for decision afresh in the light of some documents which the assessee produced before the appellate authorities. Consequently, the matter was re-heard. The Assessing Officer vide order dated 8.2.2002 again ordered the addition of aforesaid amounts, besides some other additions, in the income of the assessee. The appeal preferred by the assessee before the CIT(A) also came to be dismissed vide order dated 2.6.2004. However, on an appeal preferred by the assessee before the Tribunal, the addition of `3,16,570/- was ordered to be deleted vide order dated 6.7.2005, but the addition of an amount of ` 20,000/- was maintained. 4. Dis-satisfied with the same, the revenue has filed the instant appeal. 5. The Tribunal with regard to gift of 12,000 pounds equivalent to ` 3,16,570/- received from Y.P. Wadhera, held that it was through proper banking channel and Assessing Officer had made the addition without rebutting the assessee's explanation and evidence produced on record. Hence, it was concluded that the assessee had not only proved the identity of the donor, but also its capacity to make the gift. Consequently, it was held that the gift was genuine. 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. In the instant case, cash entries by way of two Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No. 640 of 2005 4 different foreign cheques amounting to `3,16,570/- made by one Y.P. Wadhera in favour of the assessee is in dispute. The veracity of the said entry was doubted by the Assessing Officer on the ground that there was no relationship between donor and the donee. It has come on record that both of them were having no blood relations between them. It is a NRI gift from a stranger and it cannot be said to be genuine or valid nor out of love and affection. 8. The issue raised here is no longer res integra. In ITA No. 12 of 2000, titled as 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 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 Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No. 640 of 2005 5 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: “Taking up the case in hand, even when the donor had the means to make the gifts, there Sharma Jiten 2014.03.14 17:16 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No. 640 of 2005 6 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.” 9. Adverting to the facts of present case, here a person residing abroad had sent a gift to a stranger. It has come on record that the donor made contradictory versions about his relationship with the donee. But the sum and substance of his version leads to the fact that there existed no blood relationship between them. It has also been admitted by the donor that he had not gifted any amount to any other person. In this scenario, there was no occasion for him to make the gift and this amount could not have been deleted. 10. In view of the discussion made above, the findings of the Tribunal deleting an amount of `3,16,570/- are not sustainable. We accordingly answer the question in favour of 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