Income Tax Appeal No. 953 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 953 of 2008 Date of decision: 4.2.2011 Commissioner of Income Tax, Karnal --- Appellant Versus Vinod Chugh --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Yogesh Putney, Senior Standing Counsel for the appellant-Revenue. None for the respondent-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated 21.7.2006, passed by the Income Tax Appellate Tribunal Delhi Bench ‘B’, New Delhi (in short “the Tribunal”) in ITA No. 3802/Del/2001, relating to the assessment year 1994-95. The following substantial questions of law have been claimed by the Revenue for determination by this Court: 1- Whether on the facts and circumstances of the case, the learned ITAT was right in law in deleting the addition Income Tax Appeal No. 953 of 2008 -2- of Rs. 7,50,000/- made by the assessing officer on account of alleged NRE gifts when neither the financial capacity of the alleged donor nor relationship with the assessee nor the event for making the alleged gifts are proved on record? 2- Whether on the facts and circumstances of the case, the learned ITAT was right in law in deleting the addition of Rs. 1,50,000/- made by the assessing officer on account of commission paid by the assessee for arranging the bogus NRE gifts of Rs.1.50 lacs? 3- Whether on the facts and circumstances of the case, the learned ITAT was right in law in deleting the addition of Rs.9,00,000/- made by the assessing officer towards income of the assessee as undisclosed u/s 68 of the Income Tax Act, 1961?” The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee, who is engaged in the business of manufacturing of velvet cloth, filed its return of income for the assessment year 1994-95, declaring income of Rs. 62,770/-. The return was processed under Section 143(1)(a) of the Act and during the proceedings that were followed by a survey carried out under Section 133A of the Act on the business premises of the assessee, on 2.2.1995, it transpired that the assessee had revealed fresh capital of an amount of Rs. 7,80,000/- out of which Rs.7,50,000/- were shown as foreign gift. Income Tax Appeal No. 953 of 2008 -3- We have heard learned counsel for the Revenue and have perused the record. In this appeal, the point for consideration is, whether the gift received from NRE by the respondent-assessee was genuine and exempt from being treated as undisclosed income of the assessee. The Tribunal after appreciating the evidence held the receiving of gift from the NRE to be genuine. However, a similar question came up for consideration of this Court in Income Tax Appeal No. 392 of 2005 (The Commissioner of Income Tax, Faridabad v. Kamal Gupta), decided on 20.1.2011 wherein it was held that in order to prove that the gift received in the above manner was genuine, the assessee was required to establish that the gift was for natural love and affection and the donor had the means to give the gift. It was held as under:- “The Assessing officer received information of a scandal being carried out by some Chartered Accountants by giving cheque or draft in lieu of cash received. 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 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 Income Tax Appeal No. 953 of 2008 -4- (22 CTR 135) and judgment of Delhi High Court in Sajan Dass and Sons v. CIT, (2003) 264 ITR 435. 7. 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, Income Tax Appeal No. 953 of 2008 -5- 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.” The conditions enumerated in the aforesaid judgment did not stand fulfilled in the present case. The donors were strangers and there was no element of love and affection and there was no occasion for the donors to give the gift. Therefore, it cannot be said that the Tribunal was right in deleting the addition of Rs. 7,50,000/- made by the assessing officer on account of gifts received by the assessee from NRE. The substantial questions of law are, thus, answered in favour of the Revenue and against the assessee. The appeal is accordingly allowed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) February 4, 2011 JUDGE *rkmalik*