TaxTMI 
TaxTMI 
2015 (6) TMI 425
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.... on the basis of information received from Investigation wing of Income tax Department that assessee had received a bogus gift of Rs. 10 lacs on 30.07.1993 from an NRE account held by Shri Subhash Sethi in American Express Bank, New Delhi. As per assessment 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 case was claimed to have been filed way back in 1995. After giving various notices as mentioned above to which assessee had not responded, finally assessee was served summons u/s 131 of the Act and in response to which assessee was represented by one Shri Ashok Kumar and assessee was required to furnish the following information:- "1. On perusal of recor....
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....e 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 by assessee, v) No proceedings pending with Directorate of FERA. 5. The A.O. however, did not agree with the contention of assessee and made additions as under:- "The assessee failed to establish that any return of income for A Y 1994-95 was ever filed although stated in presumption manner that it was filed within prescribed time i.e. Before August. 1994. Coming to the point of gift, it is submitted by the assessee vide para 3 of page 8 that the Asstt. Direction, Enforcement Directorate, FEMA, exonerated the notice Bhupinder Kumar Chugh to all the changes leveled in memorandum and the order is stated to be appe....
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....onor 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. Subhash Sethi is a relative of my father and in the statement given on 4-5-1998, the assessee stated that Sh. Subhash Sethi is friend of his father -in-law's brother. The donee is not familiar with donor's family background. Hence, it is unbelievable that a stranger would give such a large amount us gift without any motive. Although, the deed is stated to be executed on 30-7-93 and confirmation through affidavit is stated to be executed on 30-7-1993 but as none of the above documents are registered 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 Dire....
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....y clear from the facts and circumstances of the case that the assessee purchased a bogus gift of Rs. 10 lacs on 30.07.1993 on payment of an equal amount in cash along with premium for arranging such gift which is taken @ 10% of the amount of gift arranged, The amount of bogus gift so arranged was utilized by the assessee for making investment in shares of MIs Golden Home Furnishing (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 on the part of the assessee, it was confronted to the assessee on 16-3-2003, if not proof of income is given, the maximum of income tax i.e. 40% will be applied on the income assessed as per information available....
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....t as he had not remitted any money from abroad into this account", 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 Rs. 10 lacs was made in the name of appellant. From the above, it is obvious that Sh. Subash Sethi has not given any Gifts to any person in India. Thus, the gift of Rs. 10 lacs claimed to have been received by the appellant from Sh. Sethi is obviously bogus. It is also common knowledge that the appellant must have paid some premium for arranging this bogus gift. Thus, the addition of Rs. 11 lacs ( Rs. 10 lakhs bogus gift + 1 lakh premium) is upheld and grounds of appeal No.5, 6 and 7 are hereby rejected. As discussed in preceding paragraphs, the AO made the asstt. at Rs. 11 lakhs and taxed it at....
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....ng 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 for making order V under Rule 20 contemplates objective satisfaction and relevant material must exist to justify the conclusion. He submitted that mere fact that notice could not be served, would not lead to conclusion that assessee was keeping away for the purpose of avoiding service and that for any other reason, the summon could not be served. He argued that between 29.05.2001 and 31.05.2001the notice server is stated to have visited the house of assessee several times. Every time, when server 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....
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....ry or irrational and it must be reasonable and be based on reason with relevant material on record. Inviting our attention to notice u/s 148, Ld. A.R. submitted that multiplicity of assessee mentioned in the notice itself shows that A.O. has mechanically followed for issuing notice u/s 148 and has not applied his mind. Reliance in this respect was placed on the case law of Sarthak Securities (P) Ltd. decided 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. further argued that notice u/s 148 is further invalid on the ground that reasons was not provided u/s 148 within stipulated period and rather the copy of reason was obtained by assessee by filing a l....
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....f notice, Ld. CIT(A) had remanded back this issue to A.O. and had obtained remand report 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 assessee many times but the assessee was not available. He submitted that notice server is not required to note down time of every visit and it is sufficient compliance when he made report that he could not find assessee for service of notice and, therefore A.O. held that notice could not be served in an ordinary way and that is why he made an order under Rule V for serving the notice by affixture. 14. As regards the argument of Ld. A.R. that higher authorities had directed to issue notice, Ld. D.R. submitte....
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....t 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 have, in any case, been served on the appellant 011 the same very day. Accordingly, it was argued that the service beyond the limitation period shall not save the same from bar of limitation. Coming to the service by affixture, it was submitted that the service by affixture could only be resorted to if none of the other modes of service were practical. It was claimed that service by affixture could not be resorted to in the first place. On the basis of these submissions, it was pleaded that notice 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 ....
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....vi) The AO has received the prior approval on 31.5.2001 or on 1.6.2001 whereas notice u/s 148 was issued on 29.5.2001. vii) The notice server has reported on 29.5.2001 itself that assessee was not available at his residence after repeated visits by tile notice server. Sir, your Honour will agree that there is no law in India, which requires the assessee to be present at his known address all time to facilitate the service of notice by the I. T Department on any date convenient to the department officials. viii) 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 these submissions, it was argued by the Ld.A.R. that the ....
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....d 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. 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 has been rightly served upon the assessee and, therefore, grounds No.1, 2 and 7 are dismissed. 19. As regards merits of the case, we find that 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 th....