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The Commissioner Of Income Tax v. Sh. Sandeep Goyal
Factual and Procedural Background
Revenue appealed against the order dated 30.07.2003 of the Income Tax Appellate Tribunal (Amritsar Bench) in ITA Nos. 112(ASR)/2002 and 193(ASR)/2002 relating to assessment year 1998-99. The revenue's challenge raised two substantial questions of law concerning foreign gifts aggregating Rs. 5,00,000 and Rs. 9,58,759.
The question relating to the Rs. 5,00,000 gift (from Pritam Singh) was remanded by the Tribunal to the Assessing Officer and remained pending before the Commissioner of Income Tax (Appeals) (CIT(A)), thus not surviving for adjudication in the present appeal. The High Court admitted the appeal on 12.05.2006 only to consider the second question of law: whether the ITAT was justified in accepting the genuineness of gifts of Rs. 9,58,759, particularly when there was alleged to be no occasion to receive large gifts from unrelated persons.
On the facts, the assessee declared income of Rs. 3,04,990. The Assessing Officer queried several foreign remittances received by the assessee. The assessee claimed the donors were family friends who helped him to set up an MRI scan unit to be run by M/s Apollo Imaging & Diagnostics Centre Pvt. Ltd. The Assessing Officer disbelieved this explanation and treated the amounts as the assessee's income. The assessee appealed to the CIT(A), produced additional material under Rule 46-A of the Income Tax Rules, 1962, and obtained Assessing Officer reports on the donors' capacity and the transactions.
The CIT(A) deleted four gifts totaling Rs. 9,58,759 (Rs. 1,82,835 from Jagdish Vijh; Rs. 1,91,000 each from Gurpreet Kaur and Manpreet K. Sahdev; and Rs. 3,93,924 from Parmod Tandon) based on Assessing Officer reports, bank channels, affidavits and other material, but confirmed the addition of Rs. 5,00,000 from Pritam Singh. Both the revenue and the assessee appealed to the Tribunal. The Tribunal dismissed the revenue's appeal as regards the Rs. 9,58,759 and remanded the Rs. 5,00,000 matter back to the Assessing Officer. The present appeal by the revenue challenges the Tribunal's confirmation of deletion of Rs. 9,58,759.
Legal Issues Presented
- Whether the question relating to the Rs. 5,00,000 transaction (from Pritam Singh) remained part of the present appeal — this issue was remanded to the Assessing Officer and was not being adjudicated in this appeal.
- Whether, on the facts and in the circumstances of the case, the Hon'ble ITAT was justified in law in accepting the genuineness of gifts amounting to Rs. 9,58,759 — especially when there was assertedly no occasion to receive such large gifts from unrelated persons.
Arguments of the Parties
Appellant (Revenue)
- The Tribunal erred in accepting the genuineness of the foreign gifts of Rs. 9,58,759 where the donors had no blood relationship with the assessee and there was no apparent occasion for such large gifts.
- The nature of the donors (non-relatives), the absence of established financial capacity in some cases, the improbability of numerous unrelated persons giving large cash gifts, and the lack of circumstances showing natural love and affection supported treating the receipts as the assessee's income.
Respondent (Assessee)
- The assessee's case was that the donors were family friends who contributed to help set up an MRI scan centre to be run under M/s Apollo Imaging & Diagnostics Centre Pvt. Ltd.
- The assessee relied on additional material produced under Rule 46-A (affidavits, bank statements and Assessing Officer reports) to show the genuineness of the amounts received from the donors.
- Respondent's counsel observed that a cited precedent (referred to as Puneet Chugh's case) had been impugned before the Apex Court by way of SLP; however, the court noted that this fact alone was not sufficient to decide the issue in respondent's favor.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner of Income Tax, Jalandhar v. M/s Udham Singh & Sons, Goraya (ITA No.12 of 2000) decided 20.12.2013 | Relied upon earlier decisions to hold that gifts from non-resident persons with whom the assessee had no relationship cannot be accepted as genuine without adequate proof. | The Court relied on this decision as part of a line of authority that treats NRI/foreign gifts from unrelated persons with suspicion and requires proof of relationship, occasion, and donor's capacity. |
| Lal Chand Kalra v. CIT (1981) 22 CTR 135 | Held that an NRI gift from a stranger was neither genuine nor valid. | Quoted as foundational authority for the proposition that gifts from strangers ordinarily cannot be accepted as genuine. |
| Jaspal Singh v. CIT (ITA No.256 of 2006) decided 15.9.2006 | Followed the principle in Lal Chand Kalra that gifts from non-relatives (strangers) are not to be accepted as genuine without proof. | Used to reinforce the position that identification and banking trail alone are insufficient to establish genuineness of gifts. |
| Sajan Dass and Sons v. CIT (2003) 264 ITR 435 (Delhi High Court) | Supports the principle that gifts from strangers are subject to close scrutiny and may be held not genuine. | Cited as persuasive precedent in the line of cases disallowing acceptance of such gifts as genuine. |
| Commissioner of Income Tax, Karnal v. Puneet Singh (ITA No.498 of 2005) decided 07.02.2011 | Held that where donor had no relationship with the assessee, no occasion to give the gift, donor not produced, donor's financial capacity not established and bank records not produced, the gift was bogus. | The Court quoted this decision to demonstrate that Tribunal erred in accepting such gifts as genuine; the decision was applied to conclude the assessee had not discharged the onus to prove genuineness. |
| CIT, West Bengal II v. Durga Prasad More (1971) 82 ITR 540 | Referenced among authorities establishing the standard for proving genuineness of gifts. | Cited as part of the body of precedent requiring proof of natural love and affection and donor's capacity for gifts to be accepted. |
| Sumanti Dayal v. CIT (1995) 214 ITR 801 | Referenced as part of the authorities regarding proof required for gifts to be accepted. | Used to support the proposition that mere bank movement and identification are insufficient. |
| Shri Hanuman Dass v. Commissioner of Income Tax, Jalandhar (ITA No.72 of 1999) decided 22.11.2013 | Held that even where a donor had means, absence of relationship, absence of circumstances showing natural love and affection, and absence of occasion to make such gifts warrant rejection of genuineness. | Applied to show that the authorities supporting acceptance of such gifts were not persuasive and to uphold conclusions disallowing acceptance of gifts where essential circumstances were missing. |
| Commissioner of Income Tax v. R.S. Sibal (2004) 269 ITR 429 | Cited by parties but noted by the Court as not supportive of the assessee's case in the circumstances. | The Court noted that this authority does not assist the assessee and therefore does not change the outcome. |
| Puneet Chugh's case (referred to in the opinion; impugned before the Apex Court by way of SLP) | Mentioned in relation to a contention that a relied-upon authority had been impugned by SLP. | The Court observed that the pendency of an SLP against a decision relied upon does not, by itself, provide a ground to decide the present issue in favour of the respondent. |
Court's Reasoning and Analysis
The Court reviewed the sequence of factual findings and the treatment of the contested receipts at each stage:
- The Assessing Officer disbelieved the assessee's initial explanation that the amounts were gifts from family friends to help set up an MRI unit, and considered the receipts as the assessee's own income because the donors had no apparent occasion or relationship to make such large gifts.
- Before the CIT(A), the assessee produced additional material under Rule 46-A and the Assessing Officer furnished reports addressing donors' capacity and other aspects. The CIT(A) accepted Assessing Officer reports and other material (banking channel, affidavits, bank statements) in respect of four donors and deleted the amounts aggregating Rs. 9,58,759.
- The Tribunal confirmed the CIT(A)'s deletions for the Rs. 9,58,759 but remanded the Rs. 5,00,000 matter. The present appeal by the revenue therefore concerned only the deletion of Rs. 9,58,759.
- The Court emphasized that the assessee had no blood relations with any of the donors and that the claimed status as "family friends" and the asserted occasion (setting up an MRI unit) were not persuasive in the face of the overall facts. The Court observed instances which it found implausible (for example, admission by Dr. Jagjit Singh that he had received a cash gift from his daughters, and the improbability that a large number of unrelated persons would give substantial cash gifts running into lacs).
- The Court placed the matter in the context of a settled line of precedent holding that where gifts are received from persons who are not related to the assessee and where there is no occasion or circumstances showing natural love and affection, mere identification of the donor and showing movement of amounts through banking channels is insufficient to establish genuineness.
- Applying that principle and the authorities cited (including Lal Chand Kalra; Jaspal Singh; Sajan Dass and Sons; Puneet Singh; and others), the Court concluded that the alleged foreign gifts were not genuine in the present factual matrix. The Court also addressed the respondent's submission about an SLP against a relied-upon authority and held that pendency of an SLP does not, by itself, justify deciding the issue in the respondent's favor.
Holding and Implications
Holding: The Court answered the framed question in favour of the revenue and against the assessee and ALLOWED the appeal.
Implications:
- The Court held that the alleged foreign gifts amounting to Rs. 9,58,759 received from Gurpreet Kaur, Manpreet K. Sahdev, Parmod Tandon and Jagdish Vijh were not genuine. This reverses the Tribunal's deletion of those amounts and supports the revenue's position that such receipts should not have been excluded from the assessee's income.
- The Court did not purport to lay down a new rule of law but applied existing lines of authority. The decision's immediate effect is the restoration of the revenue's challenge to the deletions; there is no indication in the opinion that a new precedent was articulated beyond application of established principles.
1. Revenue is in appeal impugning the order dated 30.07.2003 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, 'the Tribunal') in ITA No. 112(ASR)/2002 and 193(ASR)/2002 relating to assessment year 1998-99.
2. The revenue had raised two substantial questions of law, pertaining to the order of the Tribunal regarding foreign gifts of `5,00,000/- and `9,58,759/-. It has been pointed that the question regarding the transaction of `5,00,000/- made by Pritam Singh in favour of the assessee was remanded by the Tribunal to the Assessing Officer and is pending before the CIT(A) and it does not survive in the present appeal.
3. On 12.5.2006 the instant appeal was admitted only to Sharma Jiten 2014.03.26 12:35 I attest to the accuracy and integrity of this document High Court Chandigarh consider the second question of law, which reads as under:-
"Whether on the facts and in the circumstances of case, the Hon'ble ITAT was justified in law in accepting the genuineness of gifts at Rs. 9,58,759/-
especially when there was no occasion to receive huge gifts from unrelated persons?"
4. In order to appreciate the controversy in its right perspective, the facts of the case are noticed.
5. Respondent-assessee, filed a return declaring an income of `304990/-. The assessee was called upon to explain about the following foreign remittances:
6. The stand of the assessee was that all the donors were family friends and had come forward to help him to put a MRI Scan unit in India proposed to be run under the name and style of M/s Apollo Imaging & Diagnostics Centre Private Limited. The explanation rendered by the assessee was not accepted by the Assessing Officer. The Assessing Officer found that there was no occasion for the donors, who had no relations with the assessee, to part with such a hefty amount. Consequently, it was held that it was the money of the assessee and ordered it to be added to Sharma Jiten 2014.03.26 12:35 I attest to the accuracy and integrity of this document High Court Chandigarh the income of the assessee.
6. The assessee filed an appeal before the Commissioner of Income Tax (Appeals), Jalandhar (to be referred hereinafter as, 'the CITA(A)'). Certain additional facts, as provided under Rule 46-A of the Income Tax Rules, 1962(for short, 'the Rules') were pleaded before the CIT(A) by the assessee to show the genuineness of the amounts received from the donors, on which the comments of the Assessing Officer were called.
7. Relating to the sum of `1,82,835/- received from Jagdish Vijh, the Assessing Officer gave its report dated 13.03.2002 that the donor did have good family relations with the donee and he was financially well and the amount was not big for the donor and the gift was through the banking channel. Consequently, the CIT(A), relying upon the report of Assessing Officer held this amount as genuine and ordered its deletion from the income of the assessee.
8. Likewise, in respect of gift of `1,91,000/- and `1,91,000/- received from Gurpreet Kaur and Manpreet K. Sahdev, the Assessing Officer in its report submitted that the factum of gift by both the donors stood proved, but doubted their capacity to gift. However, the CIT(A) taking into account that the amounts were received through proper banking channel coupled with the affidavits of the donors, it relied upon the bank statements and held these gifts as genuine and ordered its deletion from the income of the assessee.
9. Similarly, qua the gift received from Parmod Tandon of `3,93,924/-, the Assessing Officer in its report found the financial capacity of the donor, but noted that there was no Sharma Jiten 2014.03.26 12:35 I attest to the accuracy and integrity of this document High Court Chandigarh relationship between the donor and the donee. The CIT(A) taking into account the fact that Parmod Tandon was a friend of Jagdish Vijh and on the asking of the later had gifted the amount to the assessee, it held that this gift was also genuine and the amount was ordered to be deleted.
10. Relating to the gift made by Pritam Singh, it was held that he was leading a retired life in India and had no close relationship with the assessee and the assessee himself was not aware about the antecedents of Pritam Singh. Consequently, the addition made by the Assessing Officer of `5,00,000/- received by the assessee was confirmed by the CIT(A) vide order dated 28.03.2002.
11. Dis-satisfied with the affirmation of the addition of `5,00,000/- and deletion of `9,58,759/- (1,91,00/- + `1,91,000/- + `3,93,924/- + 1,82,835/-), the assessee and revenue filed separate appeals before the Tribunal. The Tribunal dismissed the appeal of the revenue and confirmed the deletion of the amount of `9,58,759/- while partly allowing the appeal of the assessee and remanded the matter to the Assessing Officer to decide afresh about the capacity and credit worthiness of transaction of `5,00,000/- made by Pritam Singh in favour of the assessee. The Tribunal also directed the assessee to produce Pritam Singh before the Assessing Officer. This appeal is by the revenue.
12. As noticed above, the issue regarding genuineness of transaction of `5,00,000/- is pending before CIT(A), therefore, the same is not being taken here for adjudication.
13. The only dispute remains is with regard to deletion of Sharma Jiten 2014.03.26 12:35 I attest to the accuracy and integrity of this document High Court Chandigarh `9,58,759/- (1,91,00/- + `1,91,000/- + `3,93,924/- + 1,82,835/-) received by the assessee from Gurpreet Kaur, Manpreet K. Sahdev, Parmod Tandon and Jagdish Vijh respectively.
14. Undisputedly, from the record, it is clearly evident that the assessee was not having blood relations with any of the donors. The plea taken by the assessee was that they were his family friends and had come forward to help him to set up a MRI Scan Centre. It was found that there was no occasion to make the gifts either by close relations or strangers. Dr. Jagjit Singh, father of donors Gurpreet Kaur and Manpreet K. Sahdev admitted that he had received cash gift from his daughters. It was found unbelievable that instead of giving any gift or monetary help to some charitable organization, a large number of strangers had chosen the assessee to make alleged cash gift running in lacs of rupees. Though, in the report of Assessing Officer submitted on the basis of additional facts and evidence produced by the assessee, the transactions in dispute were not doubted, but the fact remains that the donee was not having blood relations with the donors.
15. The issue regarding the receipt of amount by the assessee purported to be foreign gift from a person residing abroad where there is no relationship had invited the attention of this Court on numerous occasions and this issue is no longer res integra.
16. 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 Sharma Jiten 2014.03.26 12:35 I attest to the accuracy and integrity of this document High Court Chandigarh where a gift was received by the assessee from a non-resident Indian with whom the assessee had no relationship had relied upon various decisions rendered on the issue and had 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 Sharma Jiten 2014.03.26 12:35 I attest to the accuracy and integrity of this document High Court Chandigarh 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 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 Sharma Jiten 2014.03.26 12:35 I attest to the accuracy and integrity of this document High Court Chandigarh appellant. Thus, there is no perversity or impropriety in the impugned order and sequelly the same is upheld."
17. It has been contended by the learned counsel for the respondent that the judgment rendered in the case of Puneet Chugh's case (supra), relying upon which Udham Singh's case (supra), has been decided, has been impugned before the Hon'ble Apex Court by way of SLP and notice of motion has been issued, but that by itself is no ground on the basis of which issue can be decided in his favour.
17. In view of the discussion above, we find that the alleged foreign gifts in favour of the assessee by persons are not genuine. We, therefore, answer the question in favour of the revenue and against the assessee. The appeal is accordingly allowed.
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