Arulmigu Birma Trust, Kumbakonam V. ACIT, Trichy

CO 23/CHNY/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9663 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-05-2014
• Assessment Year: misc
• Appeal Filed On: 10-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Charitable institution; Block assessment
• Section: 12A; 12AA; 132; 139

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CH ENNAI. . , . !' !' !' !' , # # # # $ $ $ $ BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER I.T(SS).A. NO.01/MDS/2011 BLOCK ASSESSMENT PERIOD :1991-92 TO 2001-02 & C.O. NO.23/MDS/2011 [IN I.T.(SS)A.NO. 01/MDS/2011] THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, TIRUCHIRAPALLI. VS. ARULMIGU BIRMA TRUST, 40, J.P. KOIL WEST STREET, KUMBAKONAM - 612 001. [PAN : AAATA2907H] (APPELLANT ) (RESPONDENT/CROSS OBJECTOR ) DEPARTMENT BY : SHRI SHAJI P. JACOB, ADDL. CIT ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE % & / DATE OF HEARING : 28.05.2014 '( % & /DATE OF PRONOUNCEMENT : 10.07.2014 ) ) ) ) / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALLI, DATED 05.10.2010 REL EVANT TO THE BLOCK ASSESSMENT PERIOD 1991-92 TO 2001-02. I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S PUBLIC CHARITABLE TRUST CREATED BY A DOCUMENT DATED 17.01.1994. THE OBJECTS OF THE TRUST ARE AS UNDER: (A) TO TRAIN IN HANDICRAFTS, MUSIC AND DANCE AND T O CONDUCT CONFERENCE AND CULTURAL PROGRAMMES RELATED TO THESE THINGS; (B) TO PROMOTE HISTORIC CULTURAL ARTS AND RENOVATE AND MAINTAIN POPULAR TEMPLES; (C) TO TRAIN IN AAGAMA SASTRAS; (D) TO PROVIDE EDUCATION, FOOD AND CLOTHES TO HANDI CAPPED; AND (E) TO GIVE DONATION TO OTHER CHARITABLE INSTITUTIO NS HAVING SIMILAR OBJECTS. 3. A SEARCH UNDER SECTION 132 OF THE INCOME TAX AC T WAS CONDUCTED IN THE RESIDENCE AND BUSINESS PREMISES OF SRI RAYA R. GOVINDARAJAN, MANAGING TRUSTEE OF THIS TRUST ON 08.02.2001. DURIN G THE COURSE OF SEARCH, CERTAIN INCRIMINATING MATERIALS REGARDING SUPPRESSI ON OF INCOME BY THE TRUST HAVE BEEN FOUND AND SEIZED. INCRIMINATING DOCUMENTS CONTAINING DETAILS REGARDING DONATIONS RECEIVED BY THE TRUST BETWEEN F INANCIAL YEAR 1994-95 AND 2000-01 AND ALSO CERTAIN EXPENDITURE INCURRED B Y THE TRUSTEES HAVE BEEN FOUND. THE TRUST HAS ALSO NOT SUBMITTED ITS RE TURN OF INCOME FOR ANY OF THE ASSESSMENT YEARS COMING UNDER THE BLOCK WITHIN THE TIME LIMIT STIPULATED UNDER SECTION 139 OF THE ACT. 4. THEREAFTER, A NOTICE UNDER SECTION 158BD OF THE ACT WAS SERVED ON THE ASSESSEE AND AFTER FOLLOWING DUE PROCESS AND AFTER CONSIDERING THE REPLY I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 3 FILED BY THE ASSESSEE, THE ASSESSING OFFICER HAS OB SERVED THAT THE TRUST HAS NOT OBTAINED REGISTRATION UNDER SECTION 12A OF THE ACT. THE ASSESSEE HAS FILED AN APPLICATION BELATEDLY ON 22.01.2003, I.E. AFTER SEARCH FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT. THIS APP LICATION FILED BY THE ASSESSEE WAS CONSIDERED BY THE COMMISSIONER OF INCO ME TAX(CENTRAL), CHENNAI II, CHENNAI AND REGISTRATION WAS GRANTED W. E.F. 01.04.2002 VIDE ORDER DATED 30.07.2003. IN OTHER WORDS, THE ASSESSE E IS NOT REGISTERED A REGISTERED TRUST UNDER SECTION 12A OF THE ACT DURIN G THE BLOCK PERIOD. THEREFORE, THE STATUS OF THE TRUST WILL BE AOP FOR THE BLOCK PERIOD. THE ASSESSING OFFICER HAS CALCULATED THE INCOME OF THE ASSESSEE ON THE DONATIONS RECEIVED IN THE BLOCK ASSESSMENT PERIOD 1 991-92 TO 2001-02 [AT PAGE 3 OF THE ASSESSMENT ORDER] AND HAS OBSERVED TH AT THE DONATIONS RECEIVED BY THE ASSESSEE IS TAXABLE FOR THE REASON THAT: 1. THE TRUST HAS NOT OBTAINED REGISTRATION UNDER S ECTION 12A OF THE INCOME TAX ACT, 1961 FOR THE BLOCK PERIOD; 2. THE TRUST HAS NOT APPLIED FOR ACCUMULATING THE FUNDS; 3. THE TRUST FUNDS WERE NOT DEPOSITED IN SPECIFIC SECURITIES AND VIOLATED SECTION 11(5) OF THE ACT; 4. THE FUNDS HAVE BEEN LENT AND BUSINESS DONE BY T HE TRUST FOR EARNING INTEREST; AND 5. THE TRUST FUNDS WERE LENT TO INTERESTED PERSONS , WHICH IS AMOUNTING TO VIOLATION OF SECTION 13(3) OF THE ACT. THE ASSESSING OFFICER AGAIN ISSUED A LETTER ON 01.0 1.2003 CALLING FOR EXPLANATION FROM THE ASSESSEE AS TO WHY THE DONATIO N OF . 42,76,014/- AND INTEREST INCOME OF . 10.02.293/- SHOULD NOT BE TAXED AS UNDISCLOSED IN COME OF THE BLOCK PERIOD. THE ASSESSEE HAS FILED A REPLY DATED 20.01.2003 IN I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 4 WHICH HE HAS SUBMITTED THAT THE DONATIONS WERE RECE IVED WITH A SPECIFIC DIRECTION FROM THE DONORS THAT THE DONATION SHOULD BE ONLY TOWARDS THE CORPUS OF THE TRUST. BUT NO SUCH PROOF WAS SUBMITTE D IN SUPPORT OF THE SAME. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE AS SESSING OFFICER HAS OBSERVED THAT THE TRUST HAS NOT UTILIZED THE DONATI ONS RECEIVED FOR THE PURPOSE OF THE TRUST, BUT LENT ON INTEREST THAT TOO MOSTLY TO THE INSTITUTIONS IN WHICH THE MANAGING TRUSTEE AND OTHER TRUSTEES WERE INTERESTED. HE FURTHER OBSERVED THAT THE TRUST WAS NOT REGISTERED FOR THE PURPOSE OF CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT FOR THE ASSES SMENT YEARS 1994-95 TO 2001-02 AND EVEN OTHERWISE, THE TRUST HAS VIOLATED THE PROVISIONS OF SECTION 13 BY INVESTING ITS FUNDS IN FIRMS IN WHICH THE TRU STEES ARE INTERESTED. THE TRUST HAS ALSO NOT SOUGHT PERMISSION FOR ACCUMULATI ON OF INCOME, WHICH IS ALSO A PRE-REQUISITE FOR THE ASSESSEE TO CLAIM EXEM PTION UNDER SECTION11 OF THE ACT. SO FAR AS INTEREST INCOME IS CONCERNED, TH E ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS PARTLY SPENT THE DON ATIONS AND ACCUMULATED THE BALANCE AND LENT IT TO THE INSTITUTIONS IN WHIC H THE MANAGING TRUSTEE AND TRUSTEES ARE INTERESTED AND ACCORDINGLY, THE ASSESS ING OFFICER HAS COMPLETED THE ASSESSMENT BY TAXING .41,69,546/-. 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE LD. CIT(APPEALS) AND THE LD. CIT(APPEALS) HAS ALLOWED T HE APPEAL OF THE ASSESSEE AND THE RELEVANT PORTION OF THE ORDER IS E XTRACTED AS UNDER: I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 5 10. I HAVE GONE THROUGH THE WRITTEN SUBMISSIONS, THE ASSESSMENT ORDER FOR THE BLOCK PERIOD AND THE RECORDS OF THE A PPELLANT. 11. AS THE REGISTRATION U/S. 12AA HAS BEEN GRANTED RETROSPECTIVELY WITH EFFECT FROM THE DATE OF CREATION OF THE TRUST, THE DONATIONS RECEIVED TOWARDS CORPUS OF THE TRUST ARE EXEMPT U/S. 11 AND HENCE THE ADDITIONS ARE DELETED. 12. AS REGARDS THE INTEREST ON THE MONIES LENT, TH E ARGUMENTS OF THE REPRESENTATIVE THAT IDLE FUNDS WERE LENT TO AUGMENT THE RESOURCES FOR CARRYING OUT THE OBJECTS OF THE TRUST AND HENCE IS COVERED BY THE APEX COURTS DECISION IN THE CASE OF THANTHI TRUST SUPRA IS FOUND TO BE CORRECT AND HENCE IT IS HELD THAT THERE IS NO VIOLA TION OF SECTION 13(3) OF THE ACT AND HENCE THE ADDITIONS ARE DELETED. 13. AS IT HAS BEEN HELD THAT THE INCOME IS EXEMPT, THERE IS NO QUESTION OF ANY UNDISCLOSED INCOME WITHIN THE MEANI NG OF SECTION 158B(B) OF THE ACT AND HENCE THE QUESTION OF ASSESS ING ANY UNDISCLOSED INCOME DOES NOT ARISE. I DIRECT ACCORDINGLY. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY S UPPORTED THE ORDER PASSED BY THE LD. CIT(APPEALS). 7. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ORDER PASSED BY THE LD. CIT(APPEALS) IS CRYPTIC BECAUSE THE REGISTR ATION UNDER SECTION 12AA OF THE ACT WAS GRANTED RETROSPECTIVELY AND DURING T HE COURSE OF SEARCH, THE TRUST WAS NOT A REGISTERED TRUST AND ALSO SUBMITTED THAT WHEN THE ASSESSING OFFICER HAS SPECIFICALLY POINTED OUT THAT THE DONAT ION RECEIVED BY THE ASSESSEE WAS NOT UTILIZED FOR ANY CHARITABLE PURPOS E. AGAINST THE SUBMISSIONS OF THE ASSESSEE WITH REGARD TO THE DONA TION RECEIVED BY THE ASSESSEE WAS ONLY TOWARDS CORPUS OF THE TRUST, THE ASSESSEE HAS NOT FURNISHED ANY PROOF IN SUPPORT OF THE SAME. I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 6 8. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS EE IS A PUBLIC CHARITABLE TRUST CREATED BY DOCUMENT DATED 17.01.1994. THE ASS ESSEE WAS NOT APPLIED FOR REGISTRATION UNDER SECTION 12A OF THE ACT IN 19 94. THERE WAS A SEARCH UNDER SECTION 132 OF THE ACT CONDUCTED IN RESIDENCE AND BUSINESS PREMISES OF THE MANAGING TRUSTEE SHRI RAYA R. GOVINDARAJAN O N 08.02.2001. DURING THE COURSE OF SEARCH, CERTAIN INCRIMINATING MATERIA LS REGARDING SUPPRESSION OF INCOME WERE FOUND AND SEIZED RELATING TO FINANCI AL YEAR 1994-95 TO 2000- 01. THE TRUST HAS NOT FILED RETURN OF INCOME. THE A SSESSING OFFICER ISSUED NOTICE UNDER SECTION 158BD OF THE ACT AND AFTER FOL LOWING DUE PROCESS, THE ASSESSING OFFICER HAS TREATED THE ASSESSEE AS AOP M AINLY ON THE GROUND THAT WHEN THE SEARCH WAS CONDUCTED, THE ASSESSEE WA S NOT A REGISTERED TRUST UNDER SECTION 12A OF THE ACT. THE ASSESSEE HA S ONLY APPLIED FOR REGISTRATION UNDER SECTION 12A OF THE ACT ON 22.01. 2003 I.E. AFTER NINE YEARS OF ITS CREATION. THE REASON FOR BELATEDLY APPLYING FOR REGISTRATION OF THE TRUST, AFTER NINE YEARS OF ITS CREATION THAT TOO AFTER CON DUCTING SEARCH OPERATION BY THE DEPARTMENT, IS BEST KNOWN TO THE ASSESSEE. THE APPLICATION FILED BY THE ASSESSEE FOR REGISTRATION UNDER SECTION 12A OF THE ACT WAS CONSIDERED BY THE LD. CIT AND GRANTED REGISTRATION WITH EFFECT FROM 0 1.04.2002. THUS, IT IS CLEAR THAT THE ASSESSEE IS NOT A REGISTERED TRUST UNDER S ECTION 12A OF THE ACT DURING THE BLOCK PERIOD I.E. 1994-05 TO 2001-02, BE CAUSE THE REGISTRATION WAS ONLY GRANTED WITH EFFECT FROM 01.04.2002. IN TH E ASSESSMENT ORDER, THE I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 7 ASSESSING OFFICER HAS OBSERVED THAT THE TRUST HAS N OT APPLIED FOR ACCUMULATING THE FUNDS AND THE TRUST FUNDS WERE NOT DEPOSITED IN SPECIFIC SECURITIES AND VIOLATED SECTION 11(3) OF THE ACT. T HE FUNDS WERE LET ON INTEREST, THAT TOO, MOSTLY TO THE INSTITUTIONS IN W HICH THE MANAGING TRUSTEE AND OTHER TRUSTEES ARE INTERESTED. ACCORDINGLY, THE ASS ESSING OFFICER HAS COMPLETED THE ASSESSMENT BY TREATING THE ASSESSEE A S AOP. BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTED BY THE ASSESSEE THAT AGAINST THE ORDER OF THE LD. CIT(APPEALS) WITH REGARD TO 12A REGISTRATION OF THE ASSESSEE DATED 17.07.2003, THE ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE TRIBUNAL AND THE TRIBUNAL HAS DIRECTED THE LD. CIT TO CONSID ER THE ISSUE AFRESH AND ACCORDINGLY, 12A REGISTRATION WAS GRANTED FROM THE DATE ON WHICH THE TRUST WAS CREATED VIDE ORDER DATED 07.07.2004. THE COPY O F THE ORDER OF THE TRIBUNAL, WHICH IS A CRUCIAL DOCUMENT TO DECIDE THI S APPEAL, WAS NOT FILED BEFORE THE TRIBUNAL. APART FROM THAT THE DONATION R ECEIVED BY THE ASSESSEE, WHEN IT WAS POINTED OUT TO THE ASSESSEE, IT HAS SUB MITTED THAT IT IS ONLY A CORPUS DONATION RECEIVED AND NO PROOF WAS FILED BEF ORE THE ASSESSING OFFICER. THE SAME SUBMISSIONS WAS MADE BEFORE THE L D. CIT(APPEALS) AND THE LD. CIT(APPEALS) ACCEPTED THE SAME. THERE IS NO THING AVAILABLE ON RECORD AS TO WHAT IS THE BASIS FOR THE LD. CIT(APPE ALS) TO COME TO A CONCLUSION AND ALSO ACCEPTED ASSESSEES SUBMISSIONS AND DECIDED THAT THE DONATION RECEIVED BY THE ASSESSEE WAS ONLY CORPUS O F THE TRUST. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS SPECIFI CALLY MENTIONED THAT THE I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 8 DONATION RECEIVED BY THE ASSESSEE WAS NOT UTILIZED BY THE ASSESSEE FOR CHARITABLE PURPOSE OF THE TRUST AND ONLY LET IT TO THE INTERESTED PARTIES PARTICULARLY THE MANAGING TRUSTEE AND OTHER TRUSTEE S. THEREFORE, IT IS A VIOLATION OF SECTION 11(5) OF THE ACT. THE LD. CIT( APPEALS), WITHOUT CONSIDERING THE OBJECTION RAISED BY THE ASSESSING O FFICER, HAS SIMPLY BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF THANTHI TRUST [274 ITR 785], DELETED THE ADDITIONS. WE FIND THAT THE ORDER PASSED BY THE LD. CIT(APPEALS) IS CRYPTIC AND NO REASON WAS R ECORDED IN THE ORDER. MOREOVER, NEITHER THE COUNSEL FOR THE ASSESSEE NOR THE LD. DR HAS FILED COPY OF THE ORDER DATED 09.01.2004 PASSED BY THE ITAT RE MITTING THE MATTER TO LD. CIT TO CONSIDER THE ISSUE AFRESH AND ALSO SUBSEQUEN T ORDER PASSED BY THE LD. CIT VIDE ORDER DATED 07.07.2004. THESE ARE MATE RIAL DOCUMENT TO DECIDE THIS APPEAL. WE, THEREFORE, SET ASIDE THE ORDER PAS SED BY LD. CIT(APPEALS) AND REMIT THE MATTER BACK TO THE LD. CIT(APPEALS) W ITH A DIRECTION TO CONSIDER THE ISSUE AFRESH AFTER CONSIDERING THE SPECIFIC OBJ ECTIONS RAISED BY THE ASSESSING OFFICER WITH REGARD TO DONATION RECEIVED BY THE ASSESSEE, I.E. WHETHER THE DONATIONS ARE RECEIVED ONLY FOR CORPUS OF THE TRUST AND LETTING THE FUNDS TO INTEREST PURPOSE AND PASS ORDER IN ACC ORDANCE WITH LAW. 9. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ON LY TO SUPPORT THE ORDER PASSED BY THE LD. CIT(APPEALS). SINCE WE HAVE SET A SIDE THE ORDER PASSED BY THE LD. CIT(APPEALS), THE CROSS OBJECTION FILED BY THE ASSESSEE BECOME I.T I.TI.T I.T(SS) (SS) (SS) (SS).A. .A..A. .A. NO. NO. NO. NO.01 0101 01/M/ /M/ /M/ /M/11 & 11 & 11 & 11 & C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/ C.O.NO. 23/M/11 1111 11 9 INFRUCTUOUS AND ACCORDINGLY THE SAME IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE AND THE CO FILED BY THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED ON THURSDAY, THE 10 TH OF JULY, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 10.07.2014 VM/- ) % *#&+, -,(& /COPY TO: 1. ./ / APPELLANT, 2. *0./ / RESPONDENT, 3. 1 ( ) /CIT(A), 4. 1 /CIT, 5. ,2! *#&# /DR & 6. !3' 4 /GF.