Income Tax Appellate Tribunal - Amritsar
Income Tax Officer vs Dr. A.K. Sharma on 3 December, 1998
Equivalent citations: (1999)63TTJ(ASR)380
ORDER
PHOOL SINGH, J.M.:
The following is the effective ground agitated in this appeal of the Revenue "On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 2,36,838 made by the AO on account of alleged foreign gifts when there was no occasion for such huge gifts and the case is fully covered by the decision of the Hon'ble Punjab & Haryana High Court in the case of Lal Chand Kalra vs. CIT (1981) 22 CTR (PM) 135".
2. The facts giving rise to this appeal are that the assessee is a doctor by profession and deriving income from that profession. During the assessment proceedings, it was noted by the AO (hereinafter referred as the AO) that the assessee had received two foreign gifts of Rs. 19,661 and Rs. 1,50,200 totalling to Rs. 1,69,861 and received another amount of Rs. 23,000 from Smt. Krishna Parmar by way of transfer from NRE A/c No. 103 with Indian Bank, Phagwara, thereby total foreign gifts were Rs. 1,92,861. The assessee was examined by the AO to verify the genuineness of the foreign gifts in which he stated that Rs. 1,50,200 was sent to him by his religious brother Para Lal residing in Canada for the last 25 years. The other amount of Rs. 19,661 was given to him from Smt. Veena Birla, who was class fellow of his wife and sister-in-law of her sister. Rs. 23,000 were received from Smt. Krishna Parmar, a family friend. The AO further noted that assessee's wife Smt. Mukta Sharma had also received foreign remittances of Rs. 14,044 from Smt. Veena Birla and Rs. 29,933 from Smt. Krishna Parmar family friend and these are two amounts which were credited in her account and later on transferred in the account of her husband. Smt. Mukta Sharma was also examined. The contention of the assessee and his wife was that their son was going to seek admission in Dayanand Medical College, Ludhiana for which he needs foreign gifts that is why both of them asked for foreign gifts from their friends and relatives. The AO considered all these facts and observed that the very purpose for obtaining foreign gifts was not substantiated as the amount was not spent for donation to seek admission of assessee's son in medical college but the assessee had deposited Rs. 3 lakhs with Kiran Metal Works (Regd.), Jalandhar and Rs. 50,000 with Vespa Valves & Steel Industries, Jalandhar on 27th Aug., 1988, and 5th Sept., 1988 respectively and charged interest of Rs. 20,050 and Rs. 3,950 respectively. He further noted that the persons from whom the alleged gifts were received by the assessee were not having direct relationship nor friends will be sending huge amounts without any adequate consideration. The story put forward by the assessee that the aforesaid amounts of foreign gifts were received for admission of his son remained to be proved and the amount was actually the for Income of the assessee who got it by making arrangement. He treated these gifts as non-genuine following the decision of the Hon'ble Punjab & Haryana High Court in the case of Lal Chand Kalra vs. CIT (1981) 22 CTR (P&H) 135 and made addition in the hands of the assessee to the extent of Rs. 2,36,838. The assessee came in appeal and contended that none of the relatives of the donors were living in India. The capacity of the donors to give the gifts was established by the assessee and his wife and there was no rebuttal by the ITO. It was further contended before the CIT(A) that there was occasion to make the gifts as assessee's son was going to seek admission in D.M.C., Ludhiana, under donation category because he could not come in merit list that is why the assessee sought the gifts in dollars and donors in the case in hand were not the strangers. Reliance was also placed on the decision of the Delhi High Court in the case of CIT vs. Mrs. Sunita Vachani (1990) 84 CTR (Del) 18 : (1990) 184 ITR 121 (Del), in which it was held that foreign gifts cannot be treated as income particularly when the capacity of the donors, the occasion of the gift and the genuineness of the transaction stands proved. The counsel further pleaded that ITO's observations that the gifts were introduced in lieu of assessee's own earned money in India from the profession was not correct as the AO himself has accepted the book results and under the Foreign Exchange Regulation Act no Indian rupee can go out of India without banking channel. Apart from it, it was specifically mentioned that the AO deputed his inspector to find out the truth about the relation of donor viz. Para Lal. and said inspector confirmed the submissions of the assessee. Further Para Lal in his letters addressed to the assessee confirmed giving of the amount and thus there was no basis for making the addition. After considering the submissions of the assessee, the learned CIT(A) deleted the amount after observing as under:
"6. It seems that there is no disputed amount the receipt of money. The amounts have been received between August to November, 1988 presumably before his son appeared in CET test in 1989. Since the amount was required in 1989, it was deposited with Kiran Metal Works, Jalandhar on the understanding that it will be returned back at once when required. The correspondence with three persons and the deposition of the appellant and his wife showed their closeness with the done.
7. The earlier discussion shows that the amounts received were not voluntary as the gifts were made on the request of the appellant donee or his wife. However, even if these were considered to be the gifts, their genuineness is proved in the appellant's deposition and the fact that all the near relations of the donors are in USA. In view of the earlier discussion, there is no justification for addition of the two sets of amounts in the hands of the appellant as their sources have been explained. The additions are deleted."
The Revenue is in appeal against this order of the learned CIT(A) and the learned Departmental Representative has placed reliance on the order of the AO and on the decision of the Hon'ble jurisdictional High Court in the case of Lal Chand Kalra (supra) in which their Lordships have confirmed the findings of the Tribunal that the donors were not the men of means and gifts from strangers cannot be treated as genuine. On this, the learned Departmental Representative wants us to reverse the findings of the CIT(A).
3. As against it, the learned counsel for the assessee has taken the same pleas as were before the authorities below and particularly he took us to the facts and the clarification submitted by the assessee before the CIT(A), copy of which is appearing at pp. 1 to 9 and which gives details of each and every point leading towards the genuineness of the transaction of the gifts, capacity of the donors and the occasion for giving such loans. It was also pointed out that all the amounts of gift were received through bank channels. Copies of the bank drafts given by the donors are appearing in the paper-book and these are paper Nos. 14, 17, 18, 19, 26, 29 and 30. There are confirmations given by Smt. Veena Bimal, Smt. Krishna Parmar, Piara Lal and given by Smt. Veena Birla, which are paper Nos. 16, 20A, 28 and 31 respectively. The learned counsel also pointed out that necessary entries in the pass-book of the assessee and his wife were also made and copy of relevant pass-book is also appearing in the paper book. Further, the learned counsel submitted that statements of assessee and his wife were recorded and copies thereof are appearing at pp. 36, 37 and 21 to 23 respectively in which both of them confirmed the theory of receiving gifts from their friends and relatives and no infirmity whatsoever has been found. The learned counsel for the assessee has also referred to the evidence showing that assessee's son was seeking admission in D.M.C., Ludhiana under category 2(e) in which foreign donation was must as apparent from copy of catalogue at pp. 42 and 43 of the paper-book and this was the occasion which prompted the assessee to seek foreign currency. It otherwise also proves the genuineness of the transaction. In the end, the learned counsel for the assessee pointed out that the Tribunal, Amritsar Bench vide its order dt. 1st Jan., 1993 in ITA No. 67EAsW1992 in the case of ITO vs. Smt. Shanti Devi, Jalandhar has followed the decision of the Delhi High Court in the case of Smt. Sunita Vachani-(supra) and thus the same view should be followed in the present case and there was no basis for addition.
4. We have considered the rival submissions and perused the relevant material to which our attention was drawn during the course of hearing by the learned counsel for the assessee. First of all, we have to see whether there was an occasion for making gifts in favour of the assessee by his alleged friends and relatives as the learned counsel had vehemently argued that there had been an occasion for making the gifts by assessee's friends and relatives. The alleged occasion is that assessee's son was seeking admission in MBBS course in DMC, Ludhiana. He appeared in an entrance examination but could not come in the merit list. The assessee has filed copy of result card of his son in the entrance test of CET, 1989, in which the position of Arvind Sharma was 1818. He further pointed out that in PMT examination conducted in June, 1990, the assessee's son obtained 119 marks out of 300 marks as evident from the result card, a copy of which is appearing at p. 49. Out of this, the learned counsel pointed out that the assessee's son did not qualify for admission through merit list and he was seeking his admission under category 2(e) and fee for that was 30,000 US Dollars as evident from the copy of prospectus appearing at p. 43 of the paper-book. Version is that this necessitated the assessee to seek foreign gifts. If we examine the contention of the assessee then it does not appear to be believable version. First of all, the dates of getting the gifts are relevant. The amount of Rs. 1,50,200 was received on 3rd Aug., 1988, from Para Lal and Rs. 19,661 from Smt. Veena Birla on 26th Aug., 1988, and remaining amount of Rs. 23,000 were received by the assessee from Smt. Krishna Parmar on 21st Sept., 1988. The foreign gifts allegedly received by the assessee through his wife were also on 27th Aug., 1988 and 10th Nov., 1988. From these dates, one thing is clear that most of the amounts were received in the months of August, and September, 1988. It becomes relevant as the assessee did not point out that his son appeared in entrance examination of MBBS in 1988. As pointed out, he first appeared in 1989 and he did not qualify in the merit list. The contention of the assessee is that his son was seeking admission under category 2(e), which requires 30,000 US Dollars that is why he asked for the amount. If this point is examined further then it is apparent that in 1988 when foreign gifts were received by the assessee, he was not in need of foreign gifts as assessee's son never appeared for entrance examination nor moved application to the principal for admission under category 2(e) on payment of 30,000 US Dollars. If the assessee's son was actually interested in seeking admission through donation then he should have moved a necessary application to the principal of DMC, Ludhiana for admission on payment of 30,000 US Dollars. No such application has been moved till today by the assessee's son and particularly in 1988 to 1990. We have also minutely perused the prospectus of DMC, Ludhiana, a copy of which is appearing at pp. 41 to 43 of the paper-book and particularly the relevant clause of category 2(e), which provides that any candidate, who is qualified from the foreign universities/Boards can seek admission on payment of 30,000 US Dollars. The assessee had placed wrong reliance on this clause. The assessee's son had not qualified from any foreign university/Board and thus he cannot be admitted even on payment of 30,000 US Dollars. So this theory fails. Secondly, the assessee for seeking US Dollars should have asked donors to send the amount of gift in US Dollars but as apparent from copy of bank draft of Rs. 1,50,200 appearing at p. 26 issued on behalf of Piara Lal in favour of the assessee, we note that the amount of draft was to be paid in Indian rupee and not in Dollars. The same thing is in respect of others except one gift. Smt. Veena Birla has sent gift of 1,000 US Dollars to the wife of the assessee and rest of the amount of gift by the other donors are to be paid in Indian rupee. So this limb of the argument of the assessee that foreign currency was required for admission of the assessee's son also goes away as most of the gifts were received in Indian rupee and not in US Dollars. Lastly, the assessee was to show the amount so received through the gifts were received for the very purpose it was asked for. As noted by the AO the assessee did not utilise the amount of gifts in 1988 when he received it but gave it to different firms on interest. Rupees 3 lakhs were given to Kiran Metal Works (Regd.), Jalandhar and Rs. 50,000 to Vespa Valves & Steel Industries, Jalandhar on interest. Nothing has come from the assessee to show that this amount of gift which was so deposited with different firms was utilised for admission of assessee's son. So theory of assessee that there was occasion for getting gifts from different relatives and friends does not fit in the evidence produced by the assessee. Further the amount cannot be treated as gift because the same were not voluntary as the same were given after request from the assessee.
5. Now comes the theory as to whether the donors were friend or relatives of the assessee. In this connection, the AO has already discussed at length. Para Lal was not any relative of the assessee but he was said to be class fellow as he read along with the assessee in school in 1959. After that both were separated and after 1965 said Piara Lal was not residing in India. In such circumstances, when Piara Lal virtually settled in Canada more than 25 years ago how he will be giving huge amount of gift to the assessee in respect of other donors. The same thing is? None of the donors is close relative of the assessee or his wife, and we failed to understand as to why these persons who are neither relatives nor friends will be coming forward to oblige the assessee in parting with so huge amount and without any reciprocal obligation from the side of the assessee as assessee had not said a word that he has also made any gift to any of the donors or any particular occasion or festivals, etc., or there may be any other circumstance for such gifts, etc.
6. We have considered the decision of the Hon'ble Delhi High Court in the case of Mrs. Sunita Vachani (supra) but facts of that case are different. In that case, balance sheet of the donor was filed before the Tribunal to show that the amount of gift came out of his income. In the case in hand, the assessee failed to prove anything except a mere confirmation of donors on record, to show that all the donors have parted with the money from their incomes/savings. Further, their Lordships in that case were not discussing the question on merits and whatever they have observed was in respect of that case but facts of the present case cannot be equated with that case and no reliance can be placed for deciding the present case. However, the observations of the Hon'ble Punjab & Haryana High Court in the case of Lal Chand Kalra (supra) are relevant. One has to see as to whether the donors were men of means and whether gifts can be from strangers. In the case in hand, the capacity of the persons who gave the gifts had not been proved as nothing came on record that the amount of gifts came from the savings/income of the donors. Secondly, the donors were not relatives nor can be treated as friends. No reason to give such gifts as occasion for which alleged gifts were sought by the assessee proved to be baseless and thus all the transactions of gifts were rightly treated as bogus.
7. The other plea was that some of the amounts of gifts were received by the assessee's wife and that cannot be treated in the hands of the assessee. This argument is again without any force. As all the amounts of gifts stood in the books of assessee and he was supposed to prove the source. The amount of gifts allegedly received by the wife of the assessee which otherwise stood transferred in the account of the assessee were supposed to explain as genuine transaction and they have already concluded that those transactions were bogus and thus the entry in the account books relevant to gifts were rightly treated as unexplained investment as income of the assessee from unexplained sources and rightly treated in the hands of the assessee.
8. The result of the above discussion is that the appeal of the Revenue is allowed.