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Bhupinder Kumar Chug Versus ITO

2015 (6) TMI 425 - ITAT DELHI

Addition on account of gift received - reopening of assessment - Held that:- As regarding sufficiency of reasons recorded, we find that at the time of issue of notice, the detailed reasoning is not required as detailed reasoning can only be given after hearing the assessee. The A.O. had definite information through Investigation Wing of the Department that assessee along with his brother had taken bogus gifts therefore, this reason itself is sufficient to ascertain the correct facts. At the time .....

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a sufficient compliance for making alternative arrangement of serving the notice.

As notice was issued before sanction, is also devoid of merit as receipt of sanction by A.O. on 01.06.2001 by post does not mean that A.O. was not conveyed sanction telephonically or otherwise. Thus notice u/s 148 has been rightly served upon the assessee - Decided against assessee.

It has been established that NRE account of donor Shri Subhash Sethi was being used for the purpose of making .....

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rakash Chug, similar addition has been made and was confirmed by Ld. CIT(A) vide his order dated 01.08.2003. As per the statement of Ld. A.R., he was not aware of the status of any appeal filed by Shri Ved Prakash Chug before the Tribunal wherein Ld. D.R. categorically stated that the issue had attained finality in that case as no appeal was preferred by Shri Ved Prakash Chug before the Tribunal. The appellant also could not establish as to what was the relationship between donor and appellant, .....

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PER T.S. KAPOOR, AM: This is an appeal filed by assessee against the order of Ld. CIT(A) dated 27.08.2004. The appeal in I.T.A. No. 4659/Del/2004 was earlier dismissed in limine vide Tribunal order dated 02.03.2009 but the same was restored vide tribunal order dated 19.06.2009 for hearing on merits. 2. In I.T.A. No. 4659/Del/2004, the assessee has taken various ground of appeal by which he had challenged the addition sustained by Ld. CIT(A) both on the basis of violation of legal principles as w .....

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ssessment order, the notice u/s 148 was served on 21.05.2001 but assessee did not comply with the same. The notice u/s 142(1) was served on 24.09.2001 and again there was no compliance. Then notice u/s 143(2) was issued on 07.11.2001 fixing the case for 19.11.2001. On 19.11.2001, the assessee filed a reply and challenged the validity of notice u/s 143(2) and submitted that notice was served beyond a period of 12 months from the end of month in which return was filed. Return of income in this cas .....

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1994-95. You are requested to produce Sh: Subhash Chander along with documentary evident regarding the capacity to make the gift as claimed by you. Please also intimate what relations you have with Sh: Subhash Chander and also inform the occasion on which the same was received by you. 2. You are a/so requested to give copies of your account from the different firms in which you have deposited the amount/you are having interest in those firms relevant to the A. Y. 1994-95. 3. Prove the reasonable .....

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for 20.11.2002. On that date, Shri Rajat Aggarwal, C.A. attended but did not file any reply. Then on change of jurisdiction notices u/s 142(1) and 143(2) were served upon the assessee on 02.01.2003 and case was fixed for 10.01.2003 but nobody attended on 10.01.2003 and case was fixed for 13.02.2003. The authorized representative then filed a reply vide letter dated 20.11.2002. Vide this reply, the assessee reiterated that return was filed within time allowed u/s 139(1) but could not give the ex .....

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ng assessment proceedings submitted that the donor was a distant relative of father of assessee. It was claimed that gift received by him was genuine on the basis of following submissions: i) Existence of Subhash Sethi proved by mentioning the reference of Subhash Sethi in order o Enforcement Directorate. ii) Capacity of donor is established by credits in NRE a/c emanating from foreign sources, iii) Genuineness of transaction through gift deed execution, iv) No evidence for compensatory payment .....

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onerated the notice Bhupinder Kumar Chugh to all the changes leveled in memorandum and the order is stated to be appended. But as per order No. AD/61/JC/02/SPS elated 27-6-2002 and file No. T- 4173/JIJ200213086, no favour has been made for assessee as alleged. The assessee could not produce the donor for examination. Moreover, could not establish that the gift had been shown in the return of income. There is no force in the version that the set of documents being given now was appended with retu .....

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to float a bond of relationship between donor and himself (although without any basis or stretch of imagination) and on the other hand state that relationship and occasion of gift is not required for having and receiving any gift The gift has been claimed to be genuine on reasons :- (i) Existence of Subhash Sethi proved by mentioning the reference of Subhash Sethi in order to Enforcement Directorate. (ii) Capacity of donor is established by credits in NRE ale emanattng from foreign sources. (ii .....

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e reply, it was mentioned at S. No. 4 on page 12 that Bank Pass Books are produced for reference but no such pass books have, ever been produced before the AG. The contention of the assessee is not correct as for a valid gift, the assessee will have to establish besides the identity and capacity of donor and genuineness of transaction of gift, the element of relationship between donor and donee and the occasion of the gift in view of Lal Chand Kalra's case. Now, the assessee says that Dr. Su .....

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egistered hence, in the absence of registration of these documents, do not have any evidentiary value. The reasons stated to establish gift as genuine have not force as the assessee could not prove the identity and capacity of donor as could not produce him for examination and could not file his return of income tiled in UK or India. The genuineness of transaction as not established as pointed out Directorate of FERA, and Investigations of Income tax Department. The occasion of gift was not prov .....

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opy of return stated to have been filed earlier along with its annexures, books of accounts and bank pass books relevant to F.Y. 1993-94 and to justify household withdrawals. Incompliance to it, the assessee filed reply dated 10-3-2003 vide which nothing was added to the reply filed earlier and almost reiterated the reply filed on 13-2-2003. When the assessee could not produce the donor for examination he was asked to give his address of India. The address was given Subhash Sethi s/o Sh. Tara Ch .....

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tment and Enforcement Directorate, 'it has been uncovered that the beneficiaries had approached through CA's/agents to get such bogus gifts out of such NRE account on payment of 10 to 15% premium on the purchased gifts. The assessee even has not been bothered to furnish basic minimum information about extent and sources of income of the alleged donor during the relevant period. Rather he tried to shift the burden of proof upon this office which is of no help to the assessee as is a bogus .....

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(P) Ltd. Panipat. Therefore, the amount of Rs, 11 lacs representing the bogus gift shown by the assessee alongwith premium paid is taken as undisclosed income of the assessee for the asstt, Year 1994-95. As the assessee could neither give any evidence of filing of return of income [or the asstt. Year 1994-95, nor any bank pass book, copy of account in books of other concerns, interest/dividend income, income and expenditure account. Hence, in absence of filing of any information regarding income .....

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f income of Rs, 1 Lakh) on the income of ₹ 11 lakhs discussed above. 6. Aggrieved, the assessee filed appeal before Ld. CIT(A) and filed various submissions. However Ld. CIT(A) also did not accept the contention of assessee and upheld the addition and rather increased the amount of addition by an amount of ₹ 75,140/- by holding as under: The matter has been considered. It is seen that the AO allowed more than sufficient opportunity to the appellant to prove the genuineness of the all .....

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nd, has pointed out that under similar facts and circumstances and for the same asstt. year an addition of Rs. 11,50,000/- comprising of bogus gift of ₹ 10 lacs and premium of ₹ 1,50,0001- made by the ITO, Ward 25(3), New Delhi in the case of Sh. Ved Prakash Chugh, brother of the appellant, has been confirmed by the CIT(A), X.XIV, New Delhi vide his order dated 01.08.2003. The CIT(A) is stated to have observed as under :- "On going through the Enforcement Directorate's order .....

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quot;, The order of the ED also throws light on the fact that the NRE account No. 320169733 of Sh. Subash Sethi with American Express bank, New Delhi was actually being operated by one Sh. Umesh Mahndiralta. The A O on perusal of the said bank account found that there was regular cash deposits made in the said NRE account of Sh. Subash Sethi and the amounts were utilized for issuing MCS and DDs. On such DD No. 78428 dated 9.7.93 of ₹ 10 lacs was made in the name of appellant. From the abov .....

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the AO made the asstt. at ₹ 11 lakhs and taxed it at the maximum rate of 40% because the appellant could not file any evidence of the original return of income. The Id.AR, however, in the submissions made during the appellate proceedings, has stated that the AO in his comments has stated that the returned income of ₹ 75,140/- is required to be added back to the income of ₹ 11 lacs as assessed by the AO. Therefore, assessed income is required to be enhanced by ₹ 75,140/-. .....

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8. Ld. A.R. at the outset invited our attention to synopsis filed by him and also submitted that he will be making reference to the paper book filed by revenue. Ld. A.R. further submitted that grounds no.1, 2 & 6 relate to legal issue of which is agitated by appellant on various counts. He submitted that service of notice u/s 148 was not according to law contained in order V Rule 20 of CPC and in this respect, he invited our attention to paper book page 20 of Revenue s paper book where a co .....

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under Rule 20 of CPC was placed. He submitted that before taking action under rule 20 of order V the Court have held that certain conditions must be met which include that the court should reasonably be satisfied that assessee was remaining out of house for the purpose of avoiding service of notice and further it should be satisfied that summons cannot be issued in ordinary course and there must be basis on record on the basis of which action can be taken. He submitted that satisfaction of court .....

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er visited, it was informed that the assessee had gone out. He argued that for the purpose of serving notice, the notice server should have gone like a creditor and he should have effectively served the notice. He submitted that on 29.05.2001 itself, the said order under rule V was passed which itself indicates that notice server never visited the assessee and all paper work was done in the office itself to prove that notice server had made various attempts and this fact is further proved from t .....

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y course. In view of above, it was argued that order directing substitutes service was not in accordance with law and reliance was placed on the following judgements:- i) Satish Construction Co. Vs Allahabad Bank AIR 1999 MP 21, 23. ii) Kunj Behari Vs ITO 139 ITR 73 10. Coming to another legal aspect, Ld. A.R. submitted that reopening itself was bad in law as the action u/s 148 was approved on 29.05.2001 and was alleged to have been served by A.O. on 31.05.2001, whereas the A.O. received the san .....

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that there was escapement of appellant s income. He submitted that reasons recorded are quite vague and cannot be the basis for reopening of assessment. He submitted that the reasons recorded indicate that there was no application of mind as the same were based on the basis of report received from ADIT and there is no application of mind by A.O. Ld. A.R. submitted that Hon'ble Supreme Court in the case of M/s. Ganga Saran & Sons (P) Ltd. Vs ITO reported at 130 ITR 01 had said that the w .....

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ided by Hon ble Delhi High Court. Inviting our attention to a further defect in the affixture of notice, Ld. A.R. submitted that there is no witness evidencing the so called affixture and nothing is mentioned regarding time of affixture and exact location of affixture. He further argued that affixture was done on 31.05.2001 whereas the order was passed on 29.05.2001 and in between this period, it is not known whether any efforts were made to locate the assessee and serve the notice. 11. Ld. A.R. .....

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her issued notice in pursuance of directions from higher authorities and in this respect he invited our attention to paper book page 14 wherein a copy of letter addressed to A.O. written by ADIT Rohtak was placed. He submitted that senior officers directed the A.O. and therefore, the whole action of recording the reasons issued and notice u/s 148 framing reopening order making an addition on account of gift which has been done in pursuance of will of higher authorities and, therefore the same wa .....

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donor. In view of above documents, Ld. A.R. Submitted that the assessee had furnished all the documents demonstrating the gift was a genuine gift and was received through banking channel from a NRE account of a donor who happened to be a relative. Ld. A.R. took us to paper book pages 36-40, 57-63 wherein copy of detailed submissions made before A.O. and Ld. CIT(A) were placed. Therefore he argued that on merits also, the assessee has a strong case and the gift is liable to be accepted. 13. Ld. D .....

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t and then decided the issue after recording extensive findings. He further submitted that under the provisions of Section 148, the requirement is that notice needs to be issued within prescribed time, whereas as per requirements of Section 143(2), it is mandatory to serve notice within prescribed period. In this respect, he invited our attention to page 4 of Ld. CIT(A) order and invited our attention to back page of notice where notice server had mentioned that on 29.05.2001, he had visited the .....

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D.R. submitted that higher authorities while giving permission/ sanction to issue notice generally guide, direct and there is nothing wrong in it. Only on the basis of some wording, it cannot be said that A.O. had initiated on the basis of directions by higher authorities. Regarding argument regarding multiplicity of assessees as mentioned in the notice u/s 148 Ld. D.R. submitted that the second name is the name of brother of assessee and these two had received gifts and mentioning of two names .....

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the proceedings in the case of his brother Shri Ved Prakash Chug. He further submitted that in the case of Shri Ved Prakash Chug, the proceedings attained finality as the assessee had not made any appeal. He submitted that the facts in both the cases are exactly similar. Therefore also, he submitted that addition on merits needs to be sustained. On a question by bench to Ld. A.R. regarding the status of proceedings in the case of Shri Ved Prakash Chug Ld. A.R. stated that he was not aware regard .....

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exhaustive order. The relevant findings of Ld . CIT(A) are reproduced below: Regarding the service of notice, it has been claimed that n notice was served jupon the appellant on 31st of May 2001. It has been argued that it was the duty of the revenue to establish that the service of a notice was made on the appellant itself or on someone duly authorized by him in that behalf. The Ld. A.R. further argued that the impugned notice u/s 148 was issued on the last date of limitation, which could not h .....

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e u/s 148 should be quashed. Copy of these submissions was forwarded to the AO for his comments. In his comments, it has been stated by 'the AO that notice u/s 148 was issued with the prior- approval of the Addl. Commissioner of I. Tax, Rohtak Range, Rohtak granted vide his letter dated 29.5.2001. The service of notice was made by regd. A.D. post which was received back with the following remarks of the postal authorities :- ''Addressee not attended after delivery of notice hence ret .....

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ant properly. The AO also pointed out that the appellant has not furnished any evidence of having furnished the original return, either during the asstt. proceedings or during the Appellate proceedings. Regarding the legality of notice issued u/s 148, the AO has stated that the notice was served after receiving definite information from various authorities and after recording the reasons in writing and after obtaining necessary approval from the AddI.CIT. Therefore, it was argued that the notice .....

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ice, (Sonipat on 20.5.2001. iii) On the basis of the direction the AO has allegedly sent the reasons for reopening the proceedings u/s 148 strongly on 25.5.2004 itself. iv) These reasons were approved by the Addl. Commissioner of I. Tax, Rohtak Range, Rohtak vide his office letter No. 672 dt. 29.5.2001 which is received by the AO allegedly on 31.5.2001. v) Sir, one more important fact which need your kind consideration that the stamp of the receiving office was of dt. 1.6.2001. vi) The AO has re .....

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The AO i.e. the DCIT, lnv. Circle, Panipat passed the order under Rule 20 of order V of the CPC, 1908 to serve the notice by affixture on 29.5.2001 itself. ix) The then A.O. had sent the notice by regd. Post on 31.5.2001 to be served within time limitation of evening of 31.5.2001. x) The fixture was restored by the then AO had sent the notice by regd. post either to be served or come back without servers. xi) The notice sent by Regd. Post was received unserved on 01.06.2001. On the basis of thes .....

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rom Sh. Subash Sethi (NRI) and many documents including the statement of the appellant recorded on 04.05.1998 was enclosed along with this letter. This letter was received in the office of the AO on 2 .5.2001. The AO recorded the reasons for reopening the case on 25.5.2001 and a proforma for obtaining approval of the Add!. Commissioner was sent to the Addl.CIT on 25.01.2001 itself. Approval of the Addl.CIT has been granted on 29.5.2001 and the AO issued notice u/s 148 on that very date i.e. 29.5 .....

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ounds of appeal No,1, 2, 3,4 and 8 are rejected. 17. We find that Ld. CIT(A) has passed a speaking and well reasoned order. 18. As regards the arguments of Ld. A.R. regarding sufficiency of reasons recorded, we find that at the time of issue of notice, the detailed reasoning is not required as detailed reasoning can only be given after hearing the assessee. The A.O. had definite information through Investigation Wing of the Department that assessee along with his brother had taken bogus gifts th .....

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te down time and date of visit on every visit. If he submits a report regarding non service of notice, it is a sufficient compliance for making alternative arrangement of serving the notice. 18.2. The other argument of Ld. A.R. that notice was issued before sanction, is also devoid of merit as receipt of sanction by A.O. on 01.06.2001 by post does not mean that A.O. was not conveyed sanction telephonically or otherwise. 18.3 In view of the above we are of the considered view that notice u/s 148 .....

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