IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.58 of 2008 Date of decision: 10.3.2011 Commissioner of Income Tax -----Appellant. Vs. Bhullan Mal Gupta. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Ms. Urvashi Dhugga, Sr. Standing Counsel for the appellant. Mr. Pankaj Jain, Advocate for the respondent. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, New Delhi dated 23.3.2007 in ITA No.2790/DEL/2004 for the assessment year 1994-95 raising following substantial question of law:- “Whether on facts and circumstances of the case, the Hon’ble ITAT has erred in law in allowing the appeal of the assessee by ignoring the Jurisdictional High Court decision in the case of Sh. Lal Chand Kalra, 22- I.T.A. No.58 of 2008 CTR-135 and Apex Court decision in the case of McDowell & Co., 154-ITR-148?” 2. The return of the assessee for the assessment year in question was initially processed under Section 143(1) of the Act but, thereafter, the Assessing Officer on formation of opinion that there was escapement of income, served notice upon the assessee under Section 148 for reassessment, after obtaining due approval. The assessee responded to the said notice and stated that the return already filed may be treated to have been filed in response to the said notice. After due consideration, the Assessing Officer made addition to the declared income of the assessee, treating the amount claimed to have been received by way of foreign gift to be undisclosed income. The assessee was unable to show that the gift was genuine. The donor had no relationship with the assessee. The assessee had manipulated the gift by paying commission and by giving cash amount. The CIT(A) upheld the addition as follows:- 9.8. In this case, the onus on the assessee was much more as donor was non-resident and, therefore, the department does not have the means to examine the books of account of the non-residents donors. It was for the assessee to prove beyond doubt by producing the donor before the Assessing Officer and also his complete bank statement/bank account (and not merely the bank certificate) to prove that gift was actually given to the assessee. 2 I.T.A. No.58 of 2008 9.9. In this case the Assessing Officer had stated in the order that the donor had denied having given the gift. The relevant extract of the assessment order is reproduced here:- “However, Sh. Subhash Sethi alleged donor in his letter dated 25.07.1995 addressed to Sh. N.K. Katyal Enforcement Officer New Delhi had denied of having executed any gift deed in favour of any persons at any state or parated any money through his NRE account, simply because he had no money in the account and further he did not remit any money from England.” 9.10. Therefore, even the identity of the donor is not there. The donor had also categorically stated that he had no money to gift to anyone. Therefore, even his financial capacity is not proved. The Assessing Officer has also mentioned in the assessment order that Sh. Subhash Sethi, apart from giving gift to the assessee HUF, had also given gift to other members of the family, the question, therefore, which remains unanswered is what is the financial capacity of the donor to make such gifts? What are his known sources of income? None of these have been answered or proved before the Assessing Officer by the assessee.” The Tribunal deleted the addition as follows:- “21. We find that similar to the facts of the above case, in the instant case also, donor Subhash Sethi was not examined by the AO and the donor never denied the fact of his making the gift to the assessee. The assessee in support of the genuineness of the 3 I.T.A. No.58 of 2008 gifts has filed declaration duly signed by the donor. In addition to this affidavit of the donor, bank account of the donor, bank certificate etc. were also placed by the assessee before the A.O. The A.O. apart from the statements of Shri Umesh Mahndiratta, which was given before the FERA authorities, could not bring any material on record to show that the assessee paid commission only to receive the said gift. Further, the Revenue could not give any reason as to why no credence should be placed on the statement of Shri Mehndiratta, which was obtained at the back of the assessee by FERA authorities and no opportunity of cross examination was provided to the assessee and more so when the FERA authorities itself has absolved all concerned Shri Umesh Mehndiratta in his statement before the FERA authorities has not denied the fact of gift of Rs.4.00 lacs made by Shri Subhash Sethi, N.R.I. to the assessee H.U.F. Thus, we following the above-cited decision in the case of Shri Kamal Gupta (Supra) are of the view that the addition of Rs.4,60,000/- made by the lower authorities in the above facts and circumstances of the case cannot be sustained. Accordingly, we set aside the order of the A.O. and the CIT(A) and delete the addition of Rs.4,60,000/-. The ground of appeal of the assessee is allowed.” 3. We have heard learned counsel for the parties. 4. Learned counsel for the revenue submitted that the Tribunal erred in deleting the addition ignoring the finding that the impugned gift was merely a manipulation. Only reason given by the Tribunal for accepting the gift to be genuine is that there was 4 I.T.A. No.58 of 2008 no reason not to rely upon the statement of Umesh Mehndiratta who was representative of the donor. This observation is perverse, as Umesh Mehndiratta instead of supporting the case of the assessee has supported the stand of the revenue that there was no genuine gift. The observation quoted above is also contradictory as the Tribunal itself has stated that the statement of Umesh Mehndiratta was not enough to hold that the gift was not genuine. 5. Learned counsel for the assessee has not been able to justify the finding of the Tribunal. 6. We find merit in the contention raised on behalf of the revenue. The finding of the Tribunal is patently perverse. The Tribunal faulted to deal with the reasons given by the CIT(A). Accordingly, we answer the question in favour of the revenue 7. Learned counsel for the assessee points out that he has filed Cross Objections to the effect that proceedings for reassessment were beyond limitation and there was no due service of notice. 8. We have considered the submissions. The impugned proceedings were initiated on 25.5.2001 in respect of the assessment year 1994-95. It is not disputed that initiation of proceedings was within the time prescribed under Section 149 of the Act at the relevant time. Thus, the Cross Objections are without any merit. 5 I.T.A. No.58 of 2008 9. As regards service of notice, the Assessing Officer as well as the CIT(A) have categorically held that there was due compliance of requirement of issuing notice and the assessee responded to the said notice. In absence of any error being pointed out in the said finding, the contention that the notice had not been duly served is without any basis. 10. Accordingly, the appeal is allowed and Cross Objections are dismissed. (ADARSH KUMAR GOEL) JUDGE March 10, 2011 ( AJAY KUMAR MITTAL ) ashwani JUDGE 6