Punjab-Haryana High Court
The Commissioner Of Income ... vs Sh. Narinder Kumar Sekhri on 29 January, 2014
Author: Anita Chaudhry
Bench: Ajay Kumar Mittal, Anita Chaudhry
ITA No. 99 of 2006 1
IN THE HIGH COURT OF PUNJAB & HARYANA
AT CHANDIGARH
ITA No. 99 of 2006(O&M)
Date of Decision: 29.01.2014
The Commissioner of Income Tax-Jalandhar-II, Jalandhar.
... Appellant
vs.
Sh. Narinder Kumar Sekhri
... Respondent
ITA No. 158 of 2006(O&M)
The Commissioner of Income Tax-Jalandhar-II, Jalandhar.
... Appellant
vs.
Sh. Chaman Lal Sekhri
... Respondent
ITA No. 202 of 2006(O&M)
The Commissioner of Income Tax-Jalandhar-II, Jalandhar.
... Appellant
vs.
Sh. Subhash Chander
... Respondent
CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL
HON'BLE MRS. JUSTICE ANITA CHAUDHRY
Present:- Mr. Vivek Sethi Advocate
for the appellant in all the cases.
Mr. Rajiv Sharma, Advocate for
Mr. S.K. Mukhi, Advocate
for the respondents in all the cases.
---
ANITA CHAUDHRY, J.
1. We propose to dispose of all the above-referred appeals filed by the revenue as common question of law has been Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 2 raised therein. Also the assessees are related to each other and the transactions which are in dispute pertain to the same assessment year 1996-97.
2. In our considered view, the following question of law would emerge from the impugned orders of the Tribunal for determination by this Court:-
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the additions of `1,38,437/- and `5,30,000/- (In ITA No. 99 of 2006), `2,65,000/-(In ITA No. 158 of 2006) and `4,97,400/-(in ITA No. 202 of 2006) allegedly received by the assessees as foreign gifts?
3. Let us first advert to the facts of the case.
4. In ITA No. 99 of 2006 a sum of `1,38,437/- and `5,30,000/- respectively, received by the assessee Narinder Kumar Sekhri from S.P. Amar and Mohinder Handa, claimed to be foreign gifts are in dispute. Though, the Assessing Officer and Commissioner of Income Tax (Appeals), Jalandhar (to be referred as, 'the CIT(A)) doubted the veracity of these entries and directed to add the same in the income of the assessee, but the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, 'the Tribunal'), found the same as genuine and ordered its deletion.
5. In ITA No. 158 of 2006, the assessee Chaman Lal Sekhri filed the return for the assessment year 1996-97 Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 3 showing the income of `602540/-. Explanation in respect of certain entries and its source, including an entry of 10,000 Canadian Dollars (equivalent to `2,65,000/-) , in dispute in the present case, was sought from the assessee. The assessee replied and averred that he received the said amount from Mohinder Handa, his son-in-law, who was residing and working abroad. The plea did not find favour with the Assessing Officer. Vide order dated 28.12.1998, apart from certain other additions, the amount of `2,65,000/- was ordered to be added in the income of the assessee. The appeal preferred by the assessee before the CIT(A)was dismissed vide order dated 12.11.1999. The assessee filed appeal before the Tribunal which was partly allowed on 5.9.2005, while relying upon its order dated 4.8.2005 rendered in the case of Narinder Sekhri Vs. Dy. CIT, CC-II, Jalandhar pertaining to the assessment year 1996-97. Consequently, the impugned addition of `2,65,000/- was ordered to be deleted.
6. In ITA No. 202 of 2006, the Assessing Officer questioned the credit entry of `2,65,000/- and `2,32,400/- shown in the returns filed for assessment year 1996-97 by the assessee Subhash Sekhri, which he claimed to have received by way of foreign gifts in the shape of 10000 Canadian Dollars and 7000 US$ respectively, from Mohinder Handa residing in Canada. Accordingly, finding the same as bogus gift re-routed as a foreign remittance, the Assessing Officer vide order dated 16.11.1998 directed for addition in the income of the assessee. The view of the Assessing Officer was upheld by the CIT(A), which dismissed the appeal filed by the assessee vide order dated 30.08.2000. Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 4 However, the Tribunal vide order dated 5.9.2005, allowed the appeal of the assessee in the light of its earlier order rendered in the case of Narinder Kumar Sekhi and the impugned addition was ordered to be deleted.
7. We have heard the learned counsel for the appellant- revenue as well as for the respondent and have perused the paper-book carefully.
8. The Assessing Officer and CIT(A) made some observations while making the impugned additions in ITA No. 158 of 2006:
"4. A perusal of SB A/c No. 46 with UBI, Nurmahal shows a credit of Rs.265000/- on 9.2.96 and 16.2.96 (260500+4500) respectively. The assessee was required to explain the source of the same. The assessee, vide letter dated 20.8.98 filed in the office submitted the same was a gift of 10000 US Dollars from Sh. Mohinder Handa, the son in law of the assessee.
The assessee filed confirmation of the donor which is on record. However, a perusal of the group record shows that the donor has been working with General Motors since 1976 and his yearly salary in January 1997 was 57524 Canadian Dollars. Further perusal of the record of the assessee and his family members reveals some very important facts which cannot be overlooked at this stage:
Sh. Mohinder Handa has sent not only 10,000 Canadian dollars to the assessee but has also Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 5 allegedly remitted the following amounts to the other family members also Narinder Sekhri 20,000 Canadian Dollars (son of assessee) Subhash Sekhri 10,000 Canadian $ (son of assessee) 7,000 US$ Chaman Lal 10,000 Canadian $ (assessee) Manoj Sekhri 5000 US$ (grandson of assessee) Thus in the year under consideration the family as a whole has claimed that it has received gifts of 40,000 Canadian Dollars and 12000 US dollars. In rupee terms the total gifts are over Rs. 15,00,000.
The yearly salary of Sh. Mohinder Handa after working for 20 long years with a company is only 57524 dollars. Obviously the person has gone abroad to earn money and not squander it away by gifting it to one and all without any occasion. The normal human behaviours is to gift on occasions and that too a token amount of the yearly salary.
Also it is not as if this is the first year and only occasion when this donor has allegedly gifted money to this family. A perusal of record shows a similar trend in the preceding years also. It is difficult to accept that a person would gift away his hard earned money. It is also not as if the family is need of drastic funds.
This is nothing but a part of the Hawala racket Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 6 going on in this Doaba region wherein compensatory money is paid to get these foreign remittances. Also income tax proceedings being of the nature of civil proceedings, evidence has to be judged by preponderance of probablity. It is highly improbable to accept the submissions of the assessee.
Accordingly, this gift is treated as a bogus gift re-
routed as a foreign remittances. Accordingly, the source of the same is unexplained and is added back to the income of the assessee. Penalty proceedings u/s 271(1)(c) have been initiated separately."
9. The CIT(A) upheld the order of the Assessing Officer and held:
"2.1 During the appellate proceedings, the Ld. Counsel gave similar arguments as in the case of Sh. Narinder Sekhri (supra). It was also stated that in addition to the income of Sh. Mohinder Handa, his wife and son were also earning 40,000/- and 45,000/- dollars respectively per annum.
However, no evidence to this effect was filed before the A.O. Nor any such arguments were taken before the A.O. No evidence regarding the earning of wife and son of Sh. Mohinder Handa were produced even during the appellate proceedings.
Further, it is difficult to accept that a hindu person belonging to old generation would accept a Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 7 genuine gift out of the income of his daughter, son- in-law and his grand-son. In these circumstances and following the order in the case of Sh. Narinder Sekhri (supra), the addition of Rs. 2,65,000/- made by the AO is upheld."
10. Similar observations were made by the Assessing Officer and CIT(A) while ordering additions in respect of amounts involved in ITA No. 99 and 202 of 2006.
11. The Assessing Officer as well as CIT(A) doubted the frequent transfer of money by the donors as substantial portion of the income was being passed on to the assessees, without any occasion. These findings were brushed aside by the Tribunal and it relied on the decision rendered in the case of Narinder Kumar Sekhri, which is subject matter of ITA No. 99 of 2006. In that case, what impressed the Tribunal was that on account of the search and seizure conducted upon the assessees, an occasion arose for the relatives residing abroad and since they had the capacity, they had extended the financial help to save them from the financial crunch. The Tribunal found the explanation valid. Further the Tribunal took notice of the fact that the Assessing Officer had not adversely commented upon the evidence and material filed by the assessee proving the genuineness of the gift and paying capacity of the donor. It was held that the foreign gifts received by the assessee were genuine.
12. In the case of Narinder Kumar Sekhri, he had received foreign gifts from one S.P. Amar with whom he had no relation while the other donor Mohinder Handa was his brother's Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 8 brother-in-law. Likewise donee Chaman Lal Sekhri received foreign remittance from Mohinder Handa who is his son-in-law while Subhash Chander Sekhri (donee in ITA No. 202 of 2006) is brother-in-law of Mohinder Handa. The donors had parted away with substantial amount of their income in favour of these persons without there being any occasion. No doubt, it is a matter of record that search and seizure operation was conducted on the firms of the assessees, but at the same time the Assessing Officer took into account the fact that the assessee still kept on investing in land year after year. A perusal of order passed by the CIT(A) in the case of Subhash Chander Sekhri, the plea of the assessee of financial crunch was found to be misleading. It had been noticed that the assessee and his family members made voluntary disclosure of income under the Income Tax Scheme 1997 and more than Rs. 50,00,000/- out of which Rs.48,00,000/- was made in cash in December 1998. In view of the totality of facts and circumstances that this family had adopted a modus operandi of creation of capital by NRI gifts without there being any occasion, the alleged gifts cannot be held to be genuine transaction. In the light of these facts the findings of the Tribunal that the distant relatives had come to his aid at the time of need, was not sustainable. Not only this, these are not small gifts, particularly keeping in view the contemporaneous times when these were given in the year 1996.
13. 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 Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 9 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 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:-Sharma Jiten 2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 10
"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 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."Sharma Jiten
2014.03.18 17:07 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No. 99 of 2006 11
14. In view of the discussion made above, the findings of the Tribunal as well as CIT(A) making the aforesaid deletion are not sustainable. We accordingly answer the question in favour of the revenue. The appeals are allowed.
(AJAY KUMAR MITTAL) (ANITA CHAUDHRY)
JUDGE JUDGE
29.01.2014
Jiten
Sharma Jiten
2014.03.18 17:07
I attest to the accuracy and
integrity of this document
High Court Chandigarh