M/s. Prahar Foundation, CHENNAI V. ITO, Coimbatore

ITA 1695/CHNY/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9172 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 14-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-09-2012
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: S SRIDHAR
• Keywords: Unexplained cash credit
• Section: 143(3); 80G; 12A; 12AA; 131; 68; 11

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1 6 9 5/MDS/2012 / ASSESSMENT YEAR :200 9 - 1 0 M/S. PRAHAR FOUNDATION, NO. 11/4, RVP COMPLEX, 4 TH CROSS, BHARATHI PARK ROAD, COIMBATORE 641 011. [PAN: A A BTP4191M ] VS. THE INCOME TAX OFFICER , COMPANY WARD I, COIMBATORE . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI A.B. KOLI , J CIT / DATE OF HEARING : 1 6 . 0 3 .201 6 / DATE OF P RONOUNCEMENT : 15 . 0 6 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I , C OIMBATORE , DATED 22 . 06 .20 1 2 R ELEVANT TO THE ASSESSMENT YEAR 200 9 - 1 0 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 ON 11.05.2009 ADMITTING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION I.T.A. NO . 1 695 /M/ 12 2 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS ISSUED ON 19.03.2010. IN RESPONSE THERETO, THE ASSESSEE HAS FILED ALL DETAILS AND RELEVANT RECORD. FROM THE RECORDS, THE ASSESSING OFFICER HAS OBSERVED THAT THERE WAS A SEARCH IN THE CASE OF THE HUSBAND OF THE MANAGING TRUSTEE, WHO WAS THE VICE CHANCELLOR, ANNA UNIVERSITY, COIMBATORE BY THE DIRECTORATE OF VIGILANCE AND ANTICORRUPTION WING OF TAMIL NADU GOVERNMENT. THE TRUST HAS APPLIED FOR REGISTRATION UNDER SECTION 12A OF THE ACT ON 08.05.200 8 BEFORE THE COMMISSIONER OF INCOME TAX - I, COIMBATORE. THE APPLICATION FOR REGISTRATION WAS REJECTED VIDE ORDER DATED 10.11.2008 BY THE LD. CIT HOLDING THAT THE TRUST HAS NO SUBSTANTIAL CHARITABLE ACTIVITY. SIMILARLY APPLICATION FOR GRANT OF APPROVAL UNDER SECTION 80G OF THE ACT FILED ON 08.05.2008 WAS ALSO REJECTED VIDE ORDER DATED 10.11.2008. THE ASSESSEE TRUST HAS AGAIN APPLIED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT VIDE APPLICATION DATED 19.05.2009, WHICH WAS ALSO REJECTED BY THE LD. CIT BY ORDE R DATED 23.11.2009. AS THE TRUST HAS NOT BEEN REGISTERED UNDER SECTION 12A OF THE ACT, AS PER THE DETAILS GIVEN ABOVE, THE TRUST CANNOT CLAIM ANY EXEMPTION UNDER SECTION 11 OF THE ACT. THEREFORE, THE ASSESSING OFFICER OPINED THAT THE INCOME RECEIVED DURING THE YEAR BY THE TRUST IS ASSESSABLE IN THE STATUS OF AOP. 2.1 . THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE ASSESSEE TRUST HAS RECEIVED .18,19,000/ - DURING THE YEAR AS CORPUS FUND FROM 8 DIFFERENT I.T.A. NO . 1 695 /M/ 12 3 INDIVIDUALS APART FROM THE MANAGING TRUSTEE S C ONTRIBUTION OF .40,000/ - . THE ASSESSING OFFICER HAS BRIEFLY EXAMINED ALL THE DONORS AS WELL AS THE LOAN CREDITORS AND ALSO ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER THE VARIOUS FINDINGS DURING THE COURSE OF STATEMENT RECORDED FROM THEM. THE AMOUNT REC EIVED FROM THE DONORS COULD NOT BE PROVED TO THE SATISFACTION OF THE ASSESSING OFFICER. THE ASSESSING OFFICER FOUND THAT MANY OF THE DONORS COULD NOT EXPLAIN THEIR SOURCES TO SUPPORT THE PAYMENT OF SUCH DONATIONS. THE ASSESSEE COULD NOT PRODUCE ANY PROOF T O THE EFFECT THAT THE AMOUNTS WERE RECEIVED TOWARDS CORPUS FUNDS. AFTER DISCUSSING THE FACTS IN DETAIL IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CONCLUDED THAT THE INCOME OF THE TRUST COULD NOT BE EXEMPT UNLESS IT HAS OBTAINED REGISTRATION 12A OF THE ACT. UNLESS AND UNTIL THE INSTITUTION IS REGISTERED UNDER SECTION 12A OF THE ACT, IT CANNOT CLAIM THE BENEFIT OF SECTION 11(1)(A) OF THE ACT. THAT BEING THE SITUATION, THE ASSESSEE CANNOT TAKE SHELTER OF SECTION 12 OF THE ACT TO CLAIM THAT WHAT HAS BEE N RECEIVED WAS CORPUS DONATION AND SUBJECT THE SAME TO CLAIM OF EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. 2.2 MOREOVER, THE ASSESSING OFFICER HAS EXAMINED ABOUT THE LOANS RECEIVED FROM MR. BHAVESH KUMAR JAIN AND MR. VASANT KUMAR JAIN, SHRI S. BALAMU RUGAN AND M/S. POINT RED TELECOM P LTD. FROM THE DETAILS, ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE CREDITS APPEARING IN THEIR BOOKS AMOUNT TO .70 LAKHS IN I.T.A. NO . 1 695 /M/ 12 4 THE NAME OF THE ABOVE FOUR PARTIES. ACCORDINGLY, THE ASSESSING OFFICER MADE ADDITIONS ON DONATION TO THE EXTENT OF .18,90,000/ - AND ALSO ADDITION UNDER SECTION 68 OF THE ACT ON THE UNPROVED LOAN CREDITS OF .70,00,000/ - . 2.3. IN ADDITION TO THE ABOVE, THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10(23 C )(IIIAD) OF THE ACT SINCE THE ASSESSEE HAS UTILISED THE ENTIRE FUNDS FOR CREATION OF INFRASTRUCTURE FOR PRAHAR COLLEGE OF ARCHITECTURE, AN EDUCATION INSTITUTION OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER HAS OBSERVED THAT SINCE NO INSTITUTION HAS EVE R COME INTO EXISTENCE, THE ASSESSEE CANNOT CLAIM EXEMPTION UNDER SECTION 10(23 C ) OF THE ACT AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 03.11.2011. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CONSIDERING THE FACTS OF THE CASE, THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH REGARD TO SUSTAINING THE ADDITION OF .18.90 LAKHS, UNPRO VED DONATION OF .70 .00 LAKHS UNPROVED LOAN CREDITS AND ALTERNATIVELY, THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10(23 C ) OF THE ACT. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, IT IS AN ADMITTED FACT I.T.A. NO . 1 695 /M/ 12 5 THAT THE TRUST HAS NOT BEEN REGISTERED UNDER SECTION 12A OF THE ACT AND THEREFORE, THE ASSESSEE CANNOT CLAIM ANY EXEMPTION UNDER SECTION 11 OF THE ACT. THUS, THE INCOME RECEIVED DURING THE YEAR BY THE ASSESSEE WAS ASSES SED IN THE STATUS OF AOP. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED COPIES OF LEDGER ACCOUNTS OF THEIR BANK ACCOUNT FROM BANK OF INDIA AND KARUR VYSYA BANK. THEY ALSO FURNISHED DETAILS OF CORPUS FUND RECEIVED DURING THE YEAR A ND THE DETAILS OF UNSECURED LOAN RECEIVED BY THE ASSESSEE. IT WAS STATED THAT THERE WAS NO ACTIVITY OF ANY KIND IN THE TRUST. THE LOANS AND CORPUS DONATIONS RECEIVED WERE STATED TO HAVE BEEN FULLY UTILISED TOWARDS PURCHASE OF LAND FOR THE TRUST. AS PER THE DETAILS FILED, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS RECEIVED .18,90,000/ - DURING THE YEAR AS CORPUS FUND FROM EIGHT DIFFERENT INDIVIDUALS APART FROM THE MANAGING TRUSTEE S CONTRIBUTION OF .40,000/ - . ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE, SUMMONS WAS ISSUE TO VARIOUS DONORS AS WELL AS THE LOAN CREDI TORS WHO APPEARED BEFORE THE ASSESSING OFFICER AND STATEMENTS WERE RECORDED FROM THEM. THE BRIEF DEPOSITION MADE BY THE DONORS IS AS UNDER: 1. D. JAYAKUMAR RS. 2,00,000 - HE HAS CONFIRMED THAT HE HAS GIVEN THIS DONATION FROM HIS SALARY SAVINGS THROUGH HIS BANK ACCOUNT AND FURNISHED DETAILS. 2. S KAMALAM RS 5,00,000 - SHE IS THE MOTHER OF THE MANAGING TRUSTEE AND ALSO A TRUSTEE HERSELF. IT WAS CLAIMED THAT SHE IS VERY OLD AND CAN NOT APPEAR IN OFFICE IN RESPONSE TO SUMMONS. A CONFIRMATION LETTER IS FILED . HOWEVER, NO EVIDENCE FOR SOURCE OF INCOME IS PRODUCED. CONSIDERING HER AGE AND IN THE ABSENCE OF I.T.A. NO . 1 695 /M/ 12 6 INDEPENDENT SOURCE OF INCOME, THIS DONATION WAS NOT SATISFACTORILY PROVED. 3. R NIRMALA DEVI RS. 50,000 - SHE IS THE SISTER OF MANAGING TRUSTEE'S MOTHER. CLAIMS TO HAVE GIVEN RS. 50,000 AS DONATION TO THE TRUST, OUT OF SAVINGS FROM AGRICULTURAL INCOME HER HUSBAND. 4. S RAGHAVAN RS. 3,00,000 - 5. VENKATAPRAKASH S (RAILWAY EMPLOYEE) RS. 2,50,000 - 6. S RAVICHANDRAN RS. 3,00,000 - THESE THREE ARE THE BR OTHERS OF THE MANAGING TRUSTEE AND STATED TO BE DOING AGRICULTURE IN OWN LANDS WITH AN ANNUAL INCOME OF ABOUT RS. 4 TO 6 LAKHS. THEY CONFIRMED THAT THEY HAVE GIVEN THE DONATION AS MENTIONED ABOVE BUT COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCES. 7. SHANM UGAM RS. 50,000 - HE HAS CONFIRMED THAT HE HAS GIVEN THIS DONATION FROM HIS SALARY SAVINGS THROUGH HIS BANK ACCOUNT AND FURNISHED DETAILS. 8. SUNDARAM VN RS.2,00,000 CONFIRMS TO HAVE GIVEN TWO LAKHS BY TWO CHEQUES FROM HIS SALARY SAVINGS AND PRODUCED BANK ACCOUNT COPY AS PROOF. 5.1 FROM THE ABOVE, AT SL. NO. 1, 7 AND 8, I.E, D. J AYAKUMAR HAS CONFIRMED THAT HE HAS GIVEN . 2,00,000 / - FROM HIS SALARY SAVINGS THROUGH HIS BANK ACCOUNT AND FURNISHED DETAILS BEFORE THE ASSESSING OFFICER ; S IMILARLY, SHANMUG AM AND SUNDARAM VN HAVE ALSO CONFIRMED HAVING GIVEN THE DONATIONS OF .50,000/ - AND .2,00,000/ - FROM THEIR SALARY SAVINGS THROUGH BANKING CHANNEL AND THEREFORE, THE ABOVE THREE AMOUNTS CANNOT BE BROUGHT UNDER SECTION 68 OF THE ACT AS UNEXPLAINED CREDITS. WITH REGARD TO OTHER DONORS, THE DONORS ARE EITHER RELATED TO THE ASSESSEE OR CLOSELY KNOWN TO THEM. CONCRETE PROOF FOR GIVING THESE DONATIONS WAS NOT GIVEN BY FIVE DONORS AND THE SOURCES EXPLAINED BY THEM ARE INADEQUATE TO SUPPORT THE PAYMENT I.T.A. NO . 1 695 /M/ 12 7 OF SUCH DONA TIONS. THE INCOME OF A TRUST WOULD NOT BE EXEMPT UNLESS IT HAS OBTAINED REGISTRATION UNDER SECTION 12A OF THE ACT . A CONJOINT READING OF SECTIONS 11, 12 AND 12A OF THE ACT MAKES IT CLEAR THAT REGISTRATION UNDER SECTION 12A IS A CONDITION PRECEDENT FOR AVAI LING BENEFITS UNDER SECTIONS 11 AND 12 OF THE ACT. UNLESS AND UNTIL AN INSTITUTION IS REGISTERED UNDER SECTION 12A OF THE ACT , IT CANNOT CLAIM THE BENEFIT OF SECTION 11(1)(A) OF THE ACT. THIS BEING THE SITUATION, THE ASSESSEE CANNOT TAKE SHELTER OF S ECTION 12 TO CLAIM THAT WHAT HAS BEEN RECEIVED IS CORPUS DONATION AND SUBJECT THE SAME TO CLAIM OF EXEMPTION UNDER SECTIONS 11 & 12 OF THE ACT. THEREFORE IT IS HELD THE CREDITS APPEARING IN THE NAMES OF ABOVE FIVE PERSONS HAVE NOT BEEN SATISFACTORILY EXPLAINED A S PER THE PROVISIONS OF SECTION 68 OF THE ACT . ACCORDINGLY, THE DONATIONS STATED TO HAVE BEEN RECEIVED FROM THE FIVE PARTIES AMOUNTING TO RS. 1 4 , 4 0,000/ - WAS RIGHTLY TREATED AS INCOME AND TAXED IN THE STATUS OF AOP. IN VIEW OF THE ABOVE, THE AMOUNT OF DONAT IONS RECEIVED FROM THREE PARTIES AS STATED ABOVE IN SL.NO. 1, 7 & 8 IN PARA 5 , WHICH CANNOT BE BROUGHT UNDER SECTION 68 OF THE ACT. 5.2 WITH REGARD TO THE LOANS RECEIVED, THE DETAILS ARE AS UNDER : - LOANS RECEIVED FROM SHRI. VASANTH KUMAR JAIN AND BHAV ESH KUMAR JAIN: SHRI. VASANTHA KUMAR JAIN AND HIS SON SHRI. BHAVESH KUMAR JAIN HAVE ADVANCED THE LOANS TO THE TUNE OF RS.30 LAKHS AS PER THE DETAILS BELOW: - BOTH SHRI. VASANTHA KUMAR JAIN AND HIS SON SHRI. BHAVESH KUMAR JAIN, IN THEIR RESPECTIVE SWORN S TATEMENT RECORDED AT THE TIME OF THEIR APPEARANCE IN RESPONSE TO SUMMONS ISSUED UNDER SECTION 131 OF THE IT ACT, HAVE I.T.A. NO . 1 695 /M/ 12 8 CATEGORICALLY STATED THAT THE ENTIRE AMOUNT WAS DEPOSITED IN THEIR BANK ACCOUNTS, BOTH IN INDIVIDUAL AND HUF STATUS BY THE TRUST BY USING THEIR OWN FUNDS. HE HAS CLEARLY STATED THAT ONLY THE BANK ACCOUNTS IN THE NAME OF HIS SON AND HIMSELF BOTH IN INDIVIDUAL AND HUF STATUS WERE ALLOWED TO BE USED FOR THE PURPOSE OF ACCOMMODATING THE LOANS. HE ALSO CLAIMED THAT EACH OF THEM WERE ASSURED OF RS .50,000 AS CHARGES FOR THIS ACCOMMODATION. HE IS ALSO FILED COPIES OF BALANCE SHEETS WHEREIN THE AMOUNTS EQUAL TO THE LOANS ARE ALSO SHOWN ON THE LIABILITY SIDE IN THE NAME OF THE ASSESSEE M/S. PRAHAR FOUNDATION ONLY. BOTH THESE CREDITORS HAVE GIVEN EXTENS IVE DETAILS OF THE TRANSACTIONS IN THEIR DIFFERENT SWORN STATEMENTS RECORDED IN THIS REGARD AND HAVE CATEGORICALLY DENIED THE EXISTENCE OF ANY LOANS AS CLAIMED BY THE ASSESSEE TRUST. THE SWORN STATEMENTS RECORDED FROM BOTH THE CREDITORS WERE SHOWN TO THE M ANAGING TRUSTEE SMT. AMIRTHA SANJEEVI AND THE AR OF THE ASSESSEE SHRI M RAMAKRISHNAN CA DURING THE HEARING ON 28.06.2011. IN DEFENSE, THEY HAVE REITERATED THAT THE LOANS ARE ACTUALLY OUTSTANDING AND CLAIMED THAT THE STAND TAKEN BY THE LOAN PARTIES ARE INCO RRECT. THEY STATED THAT BOTH THE CREDITORS HAVE SENT A LEGAL NOTICE IN ORDER TO RECOVER THE LOANS, WHICH IS PROOF ENOUGH FOR THE EXISTENCE OF THE LOANS AND FILED THE DETAILS IN THIS REGARD. THEY ALSO HAVE REQUESTED FOR CROSS EXAMINATION OF THE CREDITORS. W HICH WAS PERMITTED AND THE CREDITORS WERE SUMMONED FOR THIS PURPOSE. THE MANAGING TRUSTEE AND BOTH THE LOAN CREDITORS HAVE APPEARED ON 25.08.2011 AND AGAIN ON 13.09.2011. OPPORTUNITY OR CROSS - EXAMINATION AS SOUGHT WAS RANTED DURING WHICH SHRI. VASANTH KUMA R JAIN APPEARING FOR HIM SEL AND ALSO ON BEHALF OF HIS SON SHRI BHAVESH KUMAR JAIN. (AS AGREED BY THE MANAGING TRUSTEE)STATED THAT THE LEGAL NOTICE WAS SENT ONLY TO PRESS FOR RECOVERY OF THE COMMISSION AMOUNT PROMISED BUT NOT GIVEN TO THEM BY THE TRUST. HE CATEGORICALLY STATED THAT NEITHER HIMSELF NOR HIS SON HAVE GIVEN ANY LOAN TO THE TRUST. AT THIS POINT THE AR STATED THAT SINCE THE PARTIES ARE NOW DENYING THE LOANS GIVEN, THOUGH THE SAME WERE GENUINE, THE LETTER FILED BY THE MANAGING TRUSTEE ON 25 AUGUST 2011 EXPLAINING THEIR POSITION MAY BE TAKEN AS THEIR EXPLANATION ON THE SUBJECT MATTER. THE RELEVANT PORTIONS OF THE LETTER ARE REPRODUCED AS UNDER: - UNDER THESE CIRCUMSTANCES. WE WOULD LIKE TO INFORM YOU THAT, WE HAVE NOT MET IN THE PERSONS AND THE LO ANS WILL ARRANGE TWO PERSONS KNOWN TO THEM. THEY HAVE I SSUED A LEGAL NOTICE OF THE TRUST THROUGH THEIR ADVOCATE, SHRI PK RAJENDRAN, MSC BL ON 17. 07. 2010 DEMANDING THE PRINCIPAL AND INTEREST DUE. THIS CLEARLY SHOWS THAT THE MONEY WAS LENT TO US BY THEM. W E HAD EXPLAINED TO THEM IN REPLY THAT OUR BANK ACCOUNT WAS FROZEN BY THE DVAC AND WILL BE PAYING THE MOURNS THE CASE BEFORE DVAC IS OVER. FURTHER TO THE BOTH HAVE CLAIMED THAT THE MONEY GIVEN TO PRAHAR FOUNDATION IS SHOWN AS ASSETS AND THEY HAVE SHOWN TH E MONEY PAID BY PRAHAR FOUNDATION IS LIABILITY. TO THE CONTRARY IN THEIR BALANCE SHEET FOR THE YEAR ENDED THE 31.03. 2009, THEY HAVE SHOWN THE I.T.A. NO . 1 695 /M/ 12 9 MONEY LENT TO PRAHAR FOUNDATION AS ASSET AND THERE IS NO MENTION OF PRAHAR FOUNDATION ON THE LIABILITY SIDE. THEI R BALANCE SHEET CERTIFIED BY THE CHARTERED ACCOUNTANT IS ENCLOSED IT WITH FOR YOUR RECORDS. IN FACT IT IS REPRESENTED BY CAPITOL FUND AND UNSECURED LOAN FROM OTHERS. WE REQUEST YOU TO TAKE THE LEGAL NOTICE AS WELL AS THE BALANCE SHEET ON RECORD AND DO THE NEEDFUL. HOWEVER, THE DEPOSITIONS MADE BY THE CREDITORS ARE CONTRARY TO THE CLAIM OF THE ASSESSEE. THEY HAVE STATED THAT THE BALANCE SHEETS ETC FILED BY THE TRUST WERE NOT CORRECT. THEY ALSO CATEGORICALLY STATED THAT THEY HAVE SENT A LEGAL NOTICE ONLY I N ORDER TO CLAIM THE COMMISSION AMOUNT PROMISED BY THE TRUST. THE CREDITORS HAVE LEFT NO AMBIGUITY IN THEIR STATEMENTS WHILE DENYING THE SAID LOANS. THE ASSESSEE WAS GIVEN ADEQUATE OPPORTUNITY TO CROSS EXAMINE THE CREDITORS AS SOUGHT, WHICH ACT ALSO DID NO T COME TO THEIR RESCUE. THE LOAN CREDITS OF RS 30 LAKHS AS PER DETAILS ABOVE APPEARING IN THE ASSESSEE'S BOOKS IN THE NAMES OF SHRI BHAVESH KUMAR JAIN AND VASANTH KUMAR JAIN HAVE NOT BEEN SATISFACTORILY EXPLAINED. LOAN GIVEN BY SHRI. S BALAMURUGAN AS P ER THE DETAILS FILED BY THE ASSESSEE TRUST A TOTAL LOAN AMOUNT OF RS.15 LAKHS IS OUTSTANDING IN THE NAME OF THE ABOVE CREDITOR. A SWORN STATEMENT WAS RECORDED ON 11 JULY 2011FROM THE SAID CREDITOR SHRI S BALA MURUGAN, WHEN HE APPEARED IN RESPONSE TO THE SU MMONS ISSUED UNDER SECTION 131. EXPLAINING THE TRANSACTIONS, HE STATED THAT THE AMOUNT OF RS.15 LAKHS WAS GIVEN TO HIM IN CASH BY SHRI RADHAKRISHNAN, VICE CHANCELLOR OF ANNA UNIVERSITY AND HUSBAND OF THE MANAGING TRUSTEE OF M/S PRAHAR FOUNDATION SMT. AMIRT HA SANJEEVI IN TWO INSTALMENTS. THIS HE STATED, WAS DEPOSITED IN HIS BANK ACCOUNT AS REQUESTED BY THEM. NARRATING THE SEQUENCE OF EVENTS, HE CLAIMED THAT HE HAS GIVEN 10 SIGNED CHEQUE LEAVES PERTAINING TO HIS BANK ACCOUNT WITH CENTRAL COOPERATIVE BANK TO M R RADHAKRISHNAN, WHICH WAS UTILISED LATTER BY HIM, FOR CONVERTING THE AMOUNT OF CASH DEPOSITED BY HIM IN HIS ACCOUNT, AS LOANS TO PRAHAR FOUNDATION. HE FURTHER STATED THAT SINCE THE MANAGING TRUSTEE SMT. AMIRTHA SANJEEVI FORCED HIM THROUGH TELEPHONE CALL, TO GIVE IN WRITING THAT HE HAS GIVEN RS.15 LAKHS TO PRAHAR FOUNDATION AS LOAN, HE HAS PREFERRED A COMPLAINT IN THIS REGARD WITH THE CHANCELLOR OF ANNA UNIVERSITY, DIRECTOR, INSPECTOR GENERAL, SUPT. OF THE POLICE, VIGILANCE AND ANTICORRUPTION. HE ALSO CLAIM ED TO HAVE FILED AN AFFIDAVIT WITH ALL THE DETAILS BEFORE THE HONOURABLE HIGH COURT, CHENNAI AND FILED COPIES OF THESE DOCUMENTS AS EVIDENCE. THESE DOCUMENTS, ESPECIALLY THE AFFIDAVIT FILED BEFORE THE HONOURABLE HIGH COURT, COMPREHENSIVELY EXPLAIN AS TO HO W THE CREDITS HAVE COME INTO BEING. THE SWORN STATEMENT RECORDED FROM THE ABOVE CREDITOR WAS ALSO SHOWN TO THE MANAGING TRUSTEE FOR WHICH NO EXPLANATION WAS GIVEN. AS THE CREDITOR HAS CATEGORICALLY DENIED THE LOAN AND ALSO EXPLAINED UNDER WHAT CIRCUMSTANCE S THESE LOANS HAVE COME INTO EXISTENCE, IT IS CLEAR THAT THE LOANS SHOWN AGAINST THE NAME OF SHRI S BALA MURUGAN, ARE NOT GENUINE. AS I.T.A. NO . 1 695 /M/ 12 10 NO EXPLANATION WAS OFFERED BY THE ASSESSEE TRUST WITH REGARD TO THE DENIAL OF THE CREDITS BY THE CREDITOR HIMSELF, THE LOA N CREDIT OF RS. 15 LAKHS APPEARING IN THE ASSESSEE'S BOOKS ARE ALSO NOT SATISFACTORILY EXPLAINED. LOAN FROM M/S. POINT RED TELECOM P LTD : AN AMOUNT OF RS.25 LAKHS, IS SHOWN AS LOAN AVAILED FROM THE ABOVE CREDITOR, AS PER THE DETAILS FILED BY THE ASSES SEE TRUST. SUMMONS UNDER SECTION 131 WERE ISSUED TO THE PRINCIPAL OFFICER OF THE COMPANY, TO VERIFY THE CORRECTNESS OF THE LOAN CREDIT. IN RESPONSE, MR K RADHAKRISHNAN, CLAIMING TO BE AN EMPLOYEE OF THE PARENT COMPANY OF THE CREDITOR APPEARED ON I JULY 201 1AND SOUGHT TIME TILL THIRD WEEK OF JULY FOR SHRI R VIJAYAKUMAR, MANAGING DIRECTOR OF THE COMPANY TO APPEAR AND FURNISH DETAILS. LATER SHRI G SRIDHAR, MANAGE: - OPERATIONS OF THE COMPANY APPEARED IN PERSON TO EXPLAIN THE TRANSACTION WITH PRAHAR FOUNDATIONS AND FILED A COPY OF BANK LEDGER ACCOUNT, WHEREIN THE TRANSACTION TOWARDS THE LOAN IS SHOWN. HOWEVER, IT WAS NOTICED THAT CASH OF RS.25 LAKHS WAS REMITTED IN THEIR BANK ACCOUNT IN ORDER TO FACILITATE THE LOANS. AS HE WAS UNABLE TO EXPLAIN THE TRANSACTION FU LLY, HE SOUGHT FURTHER TIME TO ENABLE THE MANAGING DIRECTOR TO EXPLAIN THE LOANS AND THE SOURCES OF FUNDS FOR THE SAME. IN SPITE OF REMINDERS, NO FURTHER DETAILS WERE FURNISHED TO SATISFY THE EXISTENCE OF LOANS AND SOURCES FOR THE SAME. THE ASSESSEE WAS IN FORMED TO PRODUCE THE CREDITORS, TO PROVE THE GENUINENESS OF THE LOANS. APPEARING ON 20.10.2011, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS STATED THAT THE CREDITORS ARE NOT RESPONDING TO THEIR REQUESTS AND THAT THEY ARE UNABLE TO PRODUCE THEM FOR E XAMINATION. EVEN AFTER SEVERAL REMINDERS AND REASONABLE OPPORTUNITIES TO THE ASSESSEE, NO CREDIBLE EVIDENCE WITH REGARD TO THE LOAN AMOUNT WAS MADE AVAILABLE. THOUGH AS PER THE BALANCE SHEET OF THE CREDITOR THE LOAN AMOUNT EXISTS, THE SOURCES FOR FUNDS FOR MAKING THE DEPOSIT IN CASH IN THE BANK ACCOUNT, SPECIFICALLY, AS IT APPEARS, TO HONOUR THE CHEQUE ISSUED TOWARDS THE SO CALLED LOAN AMOUNT, WAS NOT SATISFACTORILY EXPLAINED. IN VIEW OF THIS THE LOAN AMOUNT OF RS.25 LAKHS SHOWN AGAINST THE NAME OF M/S. POI NT RED TELECOM PRIVATE LIMITED, IS ALSO AS NOT GENUINE. 5.3 IN VIEW OF THE ABOVE THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE CREDITS APPEARING IN THEIR BOOKS AMOUNTING TO . 70,00,000/ - , IN THE NAMES OF ABOVE FOUR PARTIES. MOREOVER, WE HAVE ALSO NOTICED THAT THE ASSESSEE HAS INDULGED INTO FRAUDULENCE ACTIVITY WITH THE CREDITOR, SHRI S. BALAMURUGAN, WHICH IS IN THE NATURE OF CRIMINAL OFFENSE AND SUBJECTED TO JUDICIAL PROCEEDINGS. HAVING CREDITED THE AMOUNTS IN THE BOOKS, THE ONUS OF I.T.A. NO . 1 695 /M/ 12 11 PROVING THE GEN UINENESS OF THE CREDITS IS ON THE ASSESSEE. THE ASSESSING OFFICER HAS GIVEN SUFFICIENT OPPORTUNITIES TO THE ASSESSEE TO PROVE THE SAME. INSPITE OF THIS, THE ASSESSEE WAS UNABLE TO ADDUCE ANY EVIDENCE TO SUBSTANTIATE THE CLAIM OF EXISTENCE OF THE LOANS. 5 .4 THE EXPLANATION OFFERED FOR THE NATURE OF THE SOURCES FOR THESE CREDITS ARE MOSTLY FABRICATED AND NOT TO THE SATISFACT ION OF THE ASSESSING OFFICER , WITHIN THE MEANING OF SECTION 68 OF THE ACT. MOREOVER, IN THIS CASE, TH E ENQUIRIES MADE WITH ALL THE CRED ITORS REVEAL ED THAT THE ASSESSEE TRUST/TRUSTEES HAVE USED THEIR MONEY AND CREATED THE LOANS BY USING THE NAMES/ BANK ACCOUNTS OF THE CREDITORS. THEREFORE THE TOTAL UNPROVED LOAN CREDITS IN THE ABOVE FOUR NAMES AMOUNTING TO . 70,00,000/ - WA S THE INCOME OF THE TRUST AN D ASSESSED UNDER SECTION 68 OF THE ACT BY THE ASSESSING OFFICER WAS FOUND TO BE RIGHTLY CONFIRMED BY THE LD. CIT(A). 5.5 WITH REGARD TO THE CLAIM OF EXEMPTION UNDER SECTION 10(23) OF THE INCOME TAX ACT, THE RE LEVANT PORTIONS OF THE LETTER FILED BY THE ASSESSEE IS REPRODUCED BELOW IN VERBATIM : - WITH REFERENCE TO THE ABOVE SUBJECT, I WOULD LIKE TO SUBMIT THE FOLLOWING FACTS. THE INSTITUTION DURING THE YEAR 2008 - 09 HAS CARRIED ON NO OTHER OPERATIONS OTHER THA N BUYING LAND (OR THE COLLEGE WHICH WAS APPROVED BY THE AICET AND THE COURSE OF ARCHITECTURE WAS STARTED DURING ACADEMIC YEAR 2009 - 10. THE LANDS ORE PURCHASED TO PUT OF BUILDINGS FOR THE COLLEGE AS PER AICET NORMS. HENCE THE TRUST HAS CARRIED ON ACTIVITIES ONLY TO RUN THE COLLEGE (I.E.) THE ACTIVITIES OF THE TRUST WAS PURELY FOR EDUCATIONAL PURPOSES. HENCE, WE WOULD LIKE TO CLAIM EXEMPTION UNDER SECTION 10 (23C) (III AD) FOR THE ANY INCOME I.T.A. NO . 1 695 /M/ 12 12 THAT IS TO BE ARRIVED BY YOU BY DISALLOWANCE OF CORPUS COLLECTIONS A ND ALSO TREATING CERTAIN UNSECURED LOANS OF THE TRUST HAS THE INCOME OF THE TRUST . THE ASSESSEE HAS RESORTED TO CLAIM EXEMPTION UNDER SECTION 10(23), AS AN ALTERNATIVE SOURCE TO CLAIM EXEMPTION, WHEN THE ASSESSEE HAS LEFT WITH NO OPTION. HAVING BECOME AWARE THAT MANY OF THE LOAN CREDITORS INTRODUCED BY THE ASSESSEE HAVE TURNED HOSTILE AND DENIED HAVING LENT MONEY AND THESE CREDITS ARE LIKELY TO BE TREATED AS INCOME, THE ASSESSEE HAS MADE ATTEMPT TO TAKE SHELTER UNDER SECTION 10(23C)(III AD) OF THE ACT. THE ASSESSEE'S INTENTIONS ARE CLEAR THAT, IN THE LIKELIHOOD OF DENIAL OF EXEMPTION, THEY EXPLORED THE POSSIBILITIES OF GETTING EXEMPTIONS ELSEWHERE. IN THIS BACKDROP, THE ASSESSEE'S PLEA WITH REFERENCE TO THE EXEMPTION UNDER SECTION 10 (23C) (IIIAD) OF THE ACT, HAS TO BE SEEN. 5.6 THE ASSESSEE TRUST HAS BECOME INELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 11 OF THE ACT, AS THE REGISTRATION SOUGHT UNDER SECTION 12A OF THE ACT HAS BEEN REJECTED BY THE COMMISSIONER OF INCOME TAX. ON PERUSAL OF THE ASSESSMEN T ORDER, IT IS AMPLY CLEAR THAT WHILE FILING THE RETURN OF INCOME THE ASSESSEE TRUST HAS NOT MADE ANY CLAIM OF DEDUCTION UNDER SECTION 10(23C) (IIIAD) OF THE ACT. AS CAN BE SEEN FROM THE TEXT OF THE LETTER DATED 20.10.2011 AS REPRODUCED HEREINABOVE FILED B Y THE AR OF THE ASSESSEE BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS BEEN CLAIMING TO BE EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT OPERATING FOR PROFITS. AS CAN BE SEEN, ANY UNIVERSITY OR EDUCATIONAL INSTITUTION WHICH IS SOLELY EXISTING FOR THE P URPOSE OF I.T.A. NO . 1 695 /M/ 12 13 EDUCATION AND NOT FOR THE PURPOSE OF PROFIT, IS ELIGIBLE TO CLAIM EXEMPTION UNDER THIS SECTION, IF THE TRUST'S RECEIPTS DURING THE YEAR IS LESS THAN RUPEES ONE CRORE. THE CLAIM MADE AS AN AFTERTHOUGHT IN ANTICIPATION OF DISALLOWANCES CANNOT BE AC CEPTED FOR THE REASONS AS STIPULATED IN THE ASSESSMENT ORDER THAT I T IS UNAMBIGUOUSLY PROVIDED IN SECTION 10(23C) (IIIAD) THAT THE EXEMPTION IS AVAILABLE TO 'ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT F OR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED'. FROM THE DETAILS FILED IT CAN BE SEEN THAT THE ASSESSEE TRUST HAS UTILISED THE FUNDS BRO UGHT IN AS DISCUSSED ABOVE ONLY FOR PROCUREMENT OF LANDS AS ADMITTED BY THE ASSESSEE IN ITS LETTER DATED 20.10.2011. EVIDENTLY NO OTHER ACTIVITIES WERE FOUND TO HAVE BEEN SEEN OR ESTABLISHED. THEY ALSO HAVE STATED THAT THE TRUST HAS NOT COMMENCED ANY ACTIV ITIES. THE ASSESSEE TRUST HAS ALSO FILED A COPY OF THE TRUST DEED BEFORE THE ASSESSING OFFICER AND ON SCRUTINY OF THE TRUST DEED, AS PER CLAUSE 6 OF THE TRUST DEED THERE ARE 42 ITEMS LISTED AS OBJECTS OF THE TRUST AND ACCORDING TO THE ASSESSING OFFICER IT IS OBVIOUS THAT THE TRUST IS CERTAINLY NOT EXISTING SOLELY FOR THE PURPOSE OF EDUCATION, THEREBY DISQUALIFYING ITSELF FOR THE POSSIBLE CLAIM OF EXEMPTION UNDER SECTION 10(23C) OF THE ACT. I.T.A. NO . 1 695 /M/ 12 14 6. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE UNABLE TO AGRE E THAT THE ASSESSEE CAN BE TERMED AS AN INSTITUTION EXISTING SOLELY FOR THE PURPOSE OF EDUCATION. THUS, WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A) WITH REGARD TO EXEMPTION UNDER SECTION 10(23C) OF THE ACT AND SUSTAIN THE ADDITION TO THE EXTENT OF .14,40,000/ - AS DISCUSSED AT PARA 5.1 HEREINABOVE. THE OTHER ADDITION OF .70.00 LAKHS TOWARDS UNPROVED LOAN CREDITS ALSO HEREBY SUSTAINED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED ON THE 15 TH JUNE , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 15 . 0 6 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.