DCIT CC-5(2) CENTRAL RANGE-5, MUMBAI V. JAYANAND RELIGIOUS TRUST, MUMBAI

ITA 1727/MUM/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9524 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Appeal Filed On: 30-06-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SOMAIYA
• Assessee Lawyers: SANJAY KAPADIA
• Keywords: Charitable institution; Maximum Marginal Rate; Reassessment proceedings
• Section: 147; 131; 68; 148; 12; 133A; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI RAHUL CHAUDHARY, JM ITA No. 1727/MUM/2022 (Assessment Year 2017-18) DCIT C c-5 (2) Centra l Ran ge-5, Room No. 1908, A i r India B ld g, Nar im an Point, Mu m bai-400 021 Vs. Jayananad Religious Trust Shop No. 1, 148, Rasik Kunj, Jain Society, Sion (W), Mumbai-400 022 (Appellant) (Respondent) PAN No. AAATJ8901F Assessee by : Sh. Sanjay Kapadia, AR Revenue by : Sh. Nishant Somaiya, DR Date of hearing: 22.09.2022 Date of pronouncement : 30.09.2022 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by The Deputy Commissioner Of Income Tax – Central Circle 5 (2), Mumbai (The learned Assessing Officer) against the appellate order passed by the Commissioner Of Income Tax, (Appeals) – 53, Mumbai [The learned CIT (A)] for A.Y. 17-18 passed on 22 nd April, 2022, by which the appeal filed by the assessee against the assessment order passed under Section 143 (3) read with Section 147 of The Income Tax Act, 1961 ( the Act) dated 17 th March, 2022 by the learned Assessing Officer wherein addition of ₹22,925,500/– was made Under Section 68 of The Act as unexplained, unverifiable and unsubstantiated receipt, was deleted. Page | 2 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 02. Learned Assessing Officer has raised following grounds of appeal: - “i. Whether on facts and circumstances of the case and in law, the learned CIT (A) erred in deleting the additions u/s 68 of the IT act of Rs 2,29,25,500/– holding that the assessee has explained the source of cash and also relying on the provisions of Section 115BBC (2) by ignoring the circumstantial evidences and without appreciating the fact that assessee had not satisfactorily explained the source of cash. ii. Whether on the facts and in the circumstances in law, the learned CIT (A) erred in law in admitting the revised grounds of appeal during the appellate proceedings without granting the opportunity to the AO thereby contravening the provisions of rule 46A the IT rules. iii. On facts and in circumstances of the case and in law, the learned CIT (A) erred in deleting the addition of ₹ 2,29,25,500/– u/s 68 of The Income Tax Act on account of cash deposited in bank as on 11/11/2016 and 19/11/2016 during the period as against a negligible cash deposits in the similar period In the past without considering the ratio laid down in the decision of the honourable Supreme Court in case of Sumati Dayal versus CIT (1995) 80 taxmann 89 (SC) and Durga Prasad More versus CIT (1971) 82 ITR 540 (SC) that apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look Page | 3 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities.” 03. As per facts available, assessee is a religious trust established wholly for religious purposes registered under Section 12 AA of the Act by The Director of Income Tax (Exemption) Mumbai as per certificate dated 12 th September, 2007. 04. It has the object to erect, build, construct, reconstruct, repair, maintained and renovate, takeover and maintain Derasars , Upasharays , Paushad Shala , lecture halls, palkhis, Ardhana Bhavans , meant for stay of sadhus and Sadhvis of Swetambar Murtipujak Jain sangh along with other religious purposes. 05. Assessee filed its return of income on 18 th October, 2017 declaring total income of ₹2,23,790/–. This return was processed under Section 143 (1) 27 th March, 2019. 06. Subsequently, survey under Section 133A of The Act was conducted on assessee’s premises on 29 th March, 2017 by the Income Tax Officer (Exemption) – 1 (4), Mumbai. It was found that during the period assessee has deposited cash of ₹2,90,58,000/- in its bank accounts. During survey, the assessee neither established identity of the donors nor nature and source of cash deposited in the bank account. During the survey, assessee surrendered ₹6,132,500/- offering it under PMGKY. Page | 4 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 07. Subsequently, action under Section 147 of The Act, was taken and notice under Section 148 of the Act, was issued on 31 st March, 2021. The reason for the issue of the notice was that as per AIMS module of ITBA assessee has deposited cash amounting to ₹290,58,000/– during the period in its bank account and has merely declared ₹6,132,500/- as unexplained cash under PMGKY. It was also noted that in A.Y. 2015–16 the total receipts are shown by assessee at ₹2,54,150/- as income from other sources and for A.Y. 2016–17 total receipts are shown as ₹221,734/–, however voluntary contribution received was ₹ nil. Further, in F.Y. 2013–14 to F.Y. 2015 –16 no cash is deposited in the bank account. Therefore, deposit of voluntary contribution of ₹2.90 crores in cash in this period is not explained. Further, online response shows that assessee has received above sum in donation box. A statement under Section 131 of the Act, was recorded on 29 th March, 2017 of the trustee wherein, he submitted that a sum of ₹ 148,58,000/– was deposited in Mumbai and ₹142 lakhs was deposited in Ahmadabad. Out of this, it was submitted that donation receipts of ₹2,29,25,550/- were issued and ₹61,32,500/- was received in donation box. However, on online submission assessee submitted entire cash of ₹2,90,58,000/– was received from identifiable persons, which is not backed by any supporting evidences. Therefore, because of these contradictory statements the cash deposit was not explained. Thus, case was reopened. Page | 5 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 08. In response to notice under Section 148 of the Act, assessee did not file any objections but complied with the statutory notices and therefore, reassessment proceedings were initiated. 09. When the assessee was questioned about the above deposit, assessee submitted a reply stating that cash is deposited in HDFC bank account in the month of November, 2016 as on 11 th November, 2016 a sum of ₹148,58,000/- and on 19 th November, 2016 a sum of ₹142 lakhs was deposited in the bank account. It was submitted that the above cash is received mainly for the construction of Jain temple at Lonavala. The trust received above voluntary contribution from followers of the religious head. Accordingly, above voluntary contributions are shown as income under Section 12 of The Act, as being income received from the property held under trust wholly for religious purposes. The learned Assessing Officer considered the submission of the assessee and held that assessee did not maintain any record of the identity indicating the name and address of the persons making above donations and further, the assessee has not provided details of the person depositing the above sum in the bank account. The learned AO considered the statement of the trustee recorded during the survey and held that cash donation received of ₹290,58,000/- received from unexplained sources and unidentifiable persons. Out of which assessee has already declared a sum of ₹6,132,500/- as undisclosed income and the balance sum of ₹2,29,25,500/- which is unexplained, Page | 6 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 unverifiable and unsubstantiated is liable to be added under Section 68 of the Act. Accordingly, the assessment order under Section 147 of the Act, was passed on 17 th March, 2022 determining total income of the assessee at ₹2,31,49,290/– . 010. Aggrieved with the assessment order, assessee preferred appeal before the learned CIT (A). The learned CIT (A) deleted the above addition holding that as per the provisions of clause (2) of Section 115 BBC of the Act anonymous donation received by the charitable trust having object of religious trust are exempt from taxation. He following the decision of the honourable Delhi High Court in CIT (Exemption) versus other one Shri Lakshmi Narayan Dham trust 62 taxman.com 358 (Delhi) deleted the above addition. 011. The learned Assessing Officer aggrieved with the appellate order has preferred this appeal. The learned Departmental Representative vehemently supported assessment order. He referred to the provisions of Section 68 and 115BBC of the Act with respect to anonymous donations and submitted that same are required to be taxed at the maximum marginal rate and therefore, the learned CIT (A) is not correct in deleting the above addition. 012. The learned Authorized Representative submitted that taxation of anonymous donations received by wholly charitable trust or institution is introduced with effect from A.Y. 2007–08. He submitted that in anonymous donations made to a wholly charitable and religious trust or Page | 7 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 institution having a mixed purpose shall be taxed only if it is for any university or other educational Institute or any hospital or any other medical institution run by them. Anonymous donations to wholly religious trust or institution will not be taxed. He referred to paragraph number 25.1 of circular number 14/2006 dated 28 th December, 2006 for the above proposition. He therefore submitted that there is no error in the order of the learned CIT (A) in deleting the above addition. 013. We have carefully considered the rival contentions. Facts show that assessee is religious trust. In the case of the assessee trust, the addition was made under Section 68 of the Act of the sum, which is already disclosed as income by the assessee trust in the nature of donation. In this case, the survey was conducted by the income tax department. The donation received by the assessee religious trust from various donors is reflected in the donation receipts, which were impounded during survey proceedings. The amount of donation received is treated as receipts in the Income and Expenditure account as voluntary contribution. Hon'ble Delhi High Court in DIT Vs. Keshav Social and Charitable Foundation 278 ITR 152 has held that “11. Section 68 of The Act has no application to the facts of the case because the assessee had in fact disclosed the donations of Rs. 18,24,200 as its income and it cannot be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, Page | 8 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 full disclosure of income by the assessee and also application of the donations for charitable purposes. It is not in dispute that the objects and activities of the assessee were charitable in nature, since it was duly registered under the provisions of section 12A of the Act.” 014. According to the provisions of Section 68 of the Act, if any sum is found credited in the books of accounts of the assessee including the trust, the nature and source of such credit is required to be explained to the satisfaction of the learned assessing officer. Otherwise, it may be added under Section 68 of the Act. There is no dispute on this aspect. It applies to all assesses without any exception. Therefore, even in the case of a charitable trust, which has offered income in its income and expenditure account in the form of voluntary donation, if such trust fails to explain the source of such voluntary contributions, section 68 of the Act may apply. Earlier decision holding that section 68 does not apply to voluntary contribution were rendered where there was no tax disparity in income taxed as normal income and income as unexplained cash credit under Section 68 of the Act. In the impugned cash where the receipts were impounded by survey team, income offered as voluntary contributions and purpose of such donation is explained, it cannot be added under Section 68 of the Act. 015. However, provisions of Section 115BBC of the Act were enacted to tax such donations in hands of certain charitable trust and institutions at the rate of 30%. Page | 9 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 However, subsection 2 (b) of the Act excludes the trust established woolly for religious and charitable purpose from rigors of that Section. This is also explained in paragraph number 25 of circular number 14/2006 dated 28 th December, 2006. In the above aspect and following the decision of the Hon'ble Delhi High Court in 62 taxmann.com 358, the learned CIT (A) has deleted the addition. We do not find any infirmity in the order of the learned CIT (A) deleting the above addition of ₹22,925,500/–. Accordingly, ground no. 1 of the appeal is dismissed. 016. Ground no. 2 is with respect to the entertainment of the revised grounds of appeal filed by assessee during the appellate proceedings without granting the opportunity to the AO and thereby provisions of rule 46A are contravened, the learned departmental representative did not advance any argument on the same, therefore, it is dismissed. 017. Ground no. 3 of the appeal is with respect to the same addition of ₹ 22,925,500/– under Section 68 of the Act. The learned Assessing Officer in grounds of appeal has referred to the decisions of the Hon'ble Supreme Court, however, on careful consideration of both these decisions of the Hon'ble Supreme Court, we find that those are not applicable to the facts of this case because, the decisions of the Hon'ble Supreme Court are respect to the assessee individuals whereas it is a case of a trust before asked which has already offered the above sum as income as Page | 10 ITA No.1727/Mum/2022 Jayanand Religious Trust; A.Y. 17-18 voluntary contribution and respective receipts were also impounded by the learned Assessing Officer during the course of survey. Assessee has explained the nature of the receipt as voluntary contribution and the source of such voluntary contributions are already mentioned in the receipts impounded. Accordingly, ground number 3 is dismissed. 018. In the result, appeal filed by the assessing officer is dismissed Order pronounced in the open court on 30.09.2022. Sd/- Sd/- (Rahul Chaudhary) (PRASHANT MAHARISHI) (Judicial Member) (ACCOUNTANT MEMBER) Mumbai, Dated:30. 09.2022 Sudip Sarkar, Sr.PS/Dragon Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai