2015 (6) TMI 425 - AT - Income Tax

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 of issuance of notice, the A.O. only needs a prima facie view that some income had escaped assessment. As regards the Revenue had not made necessary efforts to serve notice in the ordinary course before taking resort to notice by affixture, we find that notice server has clearly submitted a report that notice could not be served despite various visits. It is not required to note 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. 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 bogus gifts as the alleged donor has himself stated before Enforcement Directorate that he had not made any gift to any person in India out of his said NRE account as he has not remitted any money from abroad into this account. As noted by Ld. CIT(A) a letter dated 07.08.1995 written by alleged donor Shri Subhash Sethi denying any gift to any person in India finds mention in the order of Enforcement Directorate dated 27.06.2002. We further find that in the case of brother of assessee, Shri Ved Prakash 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, and what was the occasion on which gift was alleged to have been given. In view of above facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A) as regards merits of the case. Therefore, addition sustained by Ld. CIT(A) is confirmed - Decided against assessee.

Issues Involved:
1. Confirmation of addition on account of gift received by the assessee.
2. Validity of reopening the case under section 148 of the Income Tax Act.
3. Validity of the service of notice under section 148.
4. Merits of the case regarding the genuineness of the gift.
5. Charging of interest under section 234B and initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Confirmation of Addition on Account of Gift Received by the Assessee:
The primary issue in this case is the confirmation of the addition made by the Assessing Officer (AO) on account of a gift of Rs. 10 lakhs received by the assessee from an NRE account held by Shri Subhash Sethi. The AO reopened the case based on information from the Investigation Wing of the Income Tax Department, which indicated that the gift was bogus. The AO issued various notices to the assessee, who failed to comply. The AO concluded that the assessee could not establish the genuineness of the gift, the identity and capacity of the donor, and the relationship between the donor and the assessee. The AO added Rs. 11 lakhs (Rs. 10 lakhs as the bogus gift and Rs. 1 lakh as the premium allegedly paid for arranging the gift) to the assessee's income.

2. Validity of Reopening the Case Under Section 148 of the Income Tax Act:
The assessee challenged the reopening of the case under section 148, arguing that the notice was not served according to the law and that the reasons recorded for reopening were vague and lacked material to show a nexus with the belief that some income had escaped assessment. The AO recorded the reasons for reopening on 25.05.2001 and issued the notice on 29.05.2001 after obtaining approval from the Additional Commissioner. The Tribunal found that the AO had definite information from the Investigation Wing and that the reasons recorded were sufficient for reopening the case. The Tribunal upheld the reopening of the case, stating that detailed reasoning is not required at the time of issuing the notice.

3. Validity of the Service of Notice Under Section 148:
The assessee argued that the notice under section 148 was not served properly and that the service by affixture was not justified. The Tribunal found that the AO had made several attempts to serve the notice personally, and when these attempts failed, the notice was served by affixture, which was in accordance with the law. The Tribunal also noted that the AO might have received verbal approval for issuing the notice before the formal approval was received. The Tribunal concluded that the notice under section 148 was properly served.

4. Merits of the Case Regarding the Genuineness of the Gift:
The Tribunal examined the merits of the case and found that the alleged donor, Shri Subhash Sethi, had denied making any gift to any person in India from his NRE account. The Tribunal also noted that similar additions were made in the case of the assessee's brother, Shri Ved Prakash Chug, which were upheld by the CIT(A) and had attained finality. The assessee could not establish the relationship with the donor or the occasion for the gift. The Tribunal upheld the addition made by the AO and confirmed by the CIT(A), finding no infirmity in the order regarding the merits of the case.

5. Charging of Interest Under Section 234B and Initiation of Penalty Proceedings Under Section 271(1)(c) of the Income Tax Act:
The assessee also challenged the charging of interest under section 234B and the initiation of penalty proceedings under section 271(1)(c). The Tribunal found these issues to be premature and did not require any adjudication at this stage.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the reopening of the case under section 148, the service of notice, the addition on account of the bogus gift, and the charging of interest and initiation of penalty proceedings. The Tribunal's order was pronounced in the open court on 02nd June 2015.

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