Subhadra Mahtab Seva Sadan, Bhubaneswar V. ITO(Exemptions), Bhubaneswar

ITA 257/CTK/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3594 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 05-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: A K PADHY
• Keywords: Income from undisclosed sources; Charitable institution; Principle of natural justice; Source of fund
• Section: 143(3); 142(1); 12A; 12AA; 131; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PA V AN KUMAR GADALE, JM . / ITA NO. 2 57 /CTK/201 6 ( [ [ / ASSESSMENT YEAR : 20 08 - 20 09 ) SUBHADRA MAHTAB SEVA S ADAN KOLTHIA, AIGANIA, BHUBANESWAR ORISSA VS. ITO(EXEMPTION), BHUBANESWAR ./ ./ PAN/GIR NO. : A A ETS 9311 A ( / APPELLANT ) .. ( / RESPONDENT ) [ /AS SESSEE BY : SHRI A.K.PADHY, AR /REVENUE BY : SHRI D.K.PRADHAN, DR / DATE OF HEARING : 0 2 / 0 8 /201 8 / DATE OF PRONOUNCEMENT 20 / 0 8 /201 8 / O R D E R PER SHRI PA V AN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 3 , BHUBANESWAR , DATED 28.04.2016 PASSED IN I.T.APPEAL NO. 0047 / 2013 - 14 FOR THE ASSESSMENT YEAR 2010 - 11 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THAT THE LEARNED CIT(APPEALS) UPHELD THE ADDITIONS ON ACCOUNT OF UNSECURED LOA N OF RS. 11,42,000/ - OUT OF RS.34,22,000/ - OBTAINED DURING THE YEAR FROM I) SMT. SMURTI REKHA MOHANTY OF RS. 1,60,000/ - , II) DR. AJ IT KUMAR ROUT OF RS. 2,00,000/ - , III) SRI PURNA CHANDRA SWAIN OF RS. 2,48,500/ - , IV) SMT. NIRMALA PANI OF RS. 1,45,000/ - , V) SRI AMERSH KOANR OF RS. 1,30,000/ - , VI) SRI SUBASH CH SAHOO OF RS. 1,35,000/ - AND VII) SRI RANJAN KUMAR SAHOO OF RS. 1,23,500/ - AS ALLEGED SUM U/S 68 IS ARBITRARY, PURELY SURMISE AND UNJUSTIFIED IN LAW TO THE PARTICULAR FACTS AND CIRCUMSTANCE OF THE CASE. 2. THAT THE ADDITIONS ON ACCOUNT OF UNSECURED LOAN RS. 11,42,000/ - BY THE CIT (APPEALS) OUT OF TOTAL ADDITIONS OF UNSECURED LOAN OF RS.60,58,018/ - TO THE APPELLANT CASE SINCE THE APPELLANT IS REGISTERED UNDER SECTION 12A OF THE INCOME TAX ACT, 1961 AND OBTAINING APPROVAL OF EXEMPTION UNDER SECTION 10(23C)(V) & (VI) OF THE INCOME TAX ACT, 1961 IS ITA NO. 2 57 /CTK/201 6 2 ILLEGAL, UN JUSTIFIED IN THE EYES OF LAW AND PREJUDICIAL TO THE PRINCIPLES OF NATURAL JUSTICE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND S OF APPEAL AND PUT - FORTH EVIDENCES AND ARGUE OTHER GROUND DURING THE COURSE OF HEARING. 4. PRAYER: - THAT THE APPELLANT PRAYS THAT THE ADDITIONS ON ACCOUNT OF UN - SECURED LOAN OF RS.L 1,42,000/ - MAY KINDLY BE DELETED AND LEVY OF INTEREST MAY KINDLY BE DEL ETED IN THE INTEREST OF JUSTICE FOR WHICH THE APPELLANT SHALL AS IN DUTY BOUND EVER PRAY. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A SOCIETY REGISTERED UNDER SOCIETY ACT, 1860. THE ASSESSEE HAS REGISTERED U/S 12AA OF THE INCOME TAX ACT, 1961 AND TH E CHIEF COMMISSIONER OF INCOME TAX, ORISSA HAS APPROVED EXEMPTION ON ACTIVITIES IN THE PROVISIONS OF SECTION 10(23C) OF THE INCOME TAX ACT, 1961. BESIDES, THE ASSESSEE HAS RECEIVED APPROVAL U/S 80G(5)(VI) OF THE INCOME TAX ACT, 1961. THE ASSESSEE TRUST FIL ED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 2011 ON 23.09.2010 DISCLOSING TOTAL INCOME AT RS.NIL. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AS PER CBDTS GUIDELINES AND NOTICES U/S.143(2) & 142(1) OF THE ACT WERE ISSUED TO THE ASSESSEE. IN COMPLIANCE, LD. AR OF THE ASSESSEE APPEARED AND FILED THE REQUIRED/RELEVANT DETAILS/DOCUMENTS AND THE CASE WAS DISCUSSED. THEREAFTER THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT MAKING ADDITION AND PASSED ORDER DATED 21.03.2013 4. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS, LD. AR OF THE ASSESSEE REITERATED THE SUBMISSIONS AS WAS MADE BEFORE THE AO AND THE CIT(A) CONSIDERING ITA NO. 2 57 /CTK/201 6 3 THE SUBMISSION OF THE ASSESSEE AND FINDINGS OF AO, HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. LD. AR BEFORE US SUBMITTED WRITTEN SUBMISSIONS AND STATED AS UNDER : - 3.1 AS REGARDS TO LOAN CREDITORS THAT THERE ARE ABOUT 31 PARTIES AS UNSECURED LOAN CREDITORS AND THERE IS AN OPENING BALANCE OF RS.26,36,018/ - AS ON 31 - 03 - 2009 AND DURING THE YEAR THE SOCIETY HAS AVAILED LOANS OF RS.34,22,000/ - AND PAID RELATING TO THE PREVIOUS OUTSTANDING BEFORE 01 - 04 - 2009 AT RS. 12,36,400/ - AND AN AMO UNT OF RS.21,85,600/ - THE LOAN AMOUNT WAS PAID RELATING TO THE PREVIOUS YEAR 2009 - 10 RELATING TO THE ASSESSMENT YEAR 2010 - 11. THE DETAILED STATEMENT OF THESE PARTIES ALONG - WITH THE OUTSTANDING BALANCE AS ON 31 - 03 - 2010 IS AT RS.45,66,668/ - HAS ALREADY BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDING AND APPELLATE PROCEEDING THE SAID STATEMENT IS HEREWITH SUBMITTED IN PAPER BOOK PAGE - 37 TO 40 FOR YOUR PERUSAL. 3.2 SIMILARLY, THERE ARE 14 CASES REPLY HAVE BEEN RECEIVED BY THE A.O THAT THEY HAVE ADVANCED LOAN O UT OF THE INCOME EARNED FROM AGRICULTURAL ACTIVITIES. ONE PERSON HAS REFUSED THAT HE HAS NOT ADVANCED ANY LOAN TO THE ASSESSEE, THE DETAILS ARE SUBMITTED IN THE PAPER BOOK NUMBER 41 TO 44. 3.3 OUT OF 14 CASES SUMMON WAS ISSUED TO THE AFORESAID PARTIES OU T OF WHICH 10 PARTIES ARE APPEARED BEFORE THE A.O. THE DETAILS OF CHART HAVE BEEN PREPARED SHOWING THE DETAILS OF CASES AFFIDAVIT IS SUBMITTED, THE REPLIES WERE SUBMITTED DURING THE ASSESSMENT PROCEEDING AND APPEARED BEFORE IN RESPONSE TO SUMMON IN SEPARAT E SHEET ENCLOSED IN PAPER BOOK AT PAGE 41 TO 44. 3.4 A.O STATED IN HIS ORDER THAT OUT OF 31 UNSECURED LOAN CREDITORS, SOME CASES THE LETTER WERE WRITTEN BACK AS UN - SERVED AND SOME CASES NO REPLY HAS BEEN RECEIVED. FROM THE ABOVE OBSERVATION IT IS SUBMITTE D THAT MOST OF THE CASES THEY HAVE CHANGED THEIR ADDRESS AND SOME CASES OUT FEAR FROM INCOME TAX DEPARTMENT THEY HAVE NOT RECEIVED THE LETTERS, BUT AS FAR AS POSSIBLE ON THE PART OF THE ASSESSEE WE HEREWITH SUBMIT THE AFFIDAVIT FROM THE PERSONS AS PER DETA IL SUBMITTED IN THE SEPARATE STATEMENT ENCLOSED IN THE PAPER BOOK PAGE NO 41 TO 44 AND AFFIDAVITS ARE ALSO HEREWITH SUBMITTED IN THE PAPER BOOK AT PAGE 45 TO 68 FOR YOUR PERUSAL CONSIDERATION TO PROVE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF TRANSACTI ON. 3.5 THAT IT IS SUBMITTED THAT THE AMOUNT OF LOANS TAKEN HAS BEEN UTILIZED TOWARDS THE ACTIVITIES OF THE TRUST AND THE OPERATION OF THE ACTIVITIES OF 12 UNITS IN DIFFERENT PLACES AND ITS UTILIZATION HAVE ALREADY BEEN SUBMITTED DURING THE ASSESSMENT PRO CEEDING. WHEN THERE IS UTILIZATION THERE MUST BE A FUND AND SOURCES OF FUNDS HAS BEEN SHOWN IN THE AUDITED STATEMENT OF ACCOUNTS. BUT AS REGARDS TO ITA NO. 2 57 /CTK/201 6 4 THE PERSONS EXAMINED U/S 131 OF THE INCOME TAX ACT, 1961 THAT HAVE ADVANCE LOAN TO THE SOCIETY HAS ALREADY B EEN EXPLAINED IN THE ABOVE PARAGRAPHS. HENCE, THE UNSECURED LOAN SHOULD NOT BE CONSIDERED AS INCOME FROM UNDISCLOSED SOURCES IN THE INTEREST OF JUSTICE. 3.6 THE COPY OF REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961 IS HEREWITH SUBMITTED IN THE PAPER BO OK AT PAGE - LL OF PAPER BOOK AND APPROVAL OF EXEMPTION U/S 10(23C) OF THE INCOME TAX ACT, 1961 IS HEREWITH SUBMITTED AT PAGE 12 TO 13 OF PAPER BOOK FOR YOUR PERUSAL. BESIDES THE COPY OF APPROVAL U/S 80G(5)(VI) OF THE INCOME - TAX ACT, 1961 IS HEREWITH FURNIS HED AT PAGE - 14 OF PAPER BOOK. 3.7 THERE IS NO DOUBT THAT THERE ARE LOAN CREDITORS WHICH MOST OF THEM HAVE CONFIRMED THAT THEY HAD GIVEN LOAN BUT THE SOURCES THE LOAN HAVE NOT BEEN PROPERLY EXPLAINED BY THE CREDITORS EVEN THOUGH THEY HAVE THE SOURCES OUT OF THE FEAR OF INCOME TAX DEPARTMENT. IN MOST OF THE CASES WHEN PERSONAL DEPOSITS MADE ARE NOT PROPERLY EXPLAINED THE SOURCES DUE TO TIME LAPSE OF THREE YEARS FROM THE DATES OF EXTENDING THE LOANS, THEY COULD NOT DISCLOSE THEIR REAL SOURCES OF INCOME OTHER THAN AGRICULTURAL INCOME DUE TO FEAR OF INCOME TAX DEPT. AND ALSO BECAUSE DUE TO THEIR TOTAL RELIANCE ON THE INTEGRITY OF THE SOCIETY, THEY NEVER MAINTAINED ANY RECORD OF THE TRANSACTIONS OF LOAN MADE BY THEM WITH THE SOCIETY. THE ANSWERS GIVEN BY THEM DU RING THE COURSE OF RECORDING THE STATEMENT U/S 131 OF THE INCOME - TAX, 1961 WHEN THEY WERE IN A STATE OF FEAR PSYCHOSIS AND TENSION AND NATURALLY THEY WERE FLABBERGASTED WHICH MAY BE TAKEN INTO CONSIDERATION. ONE FACT THAT ALL THE PARTIES AFFIRMED THE FACT OF EXTENDING THE LOAN, ARE MATERIAL WHICH MAY KINDLY BE CONSIDERED FOR THE SAKE OF NATURAL JUSTICE. 3.8 THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT FOR THE FINANCIAL YEAR 2009 - 10 AND ACCOUNTS ARE AUDITED BY THE INDEPENDENT CHARTERED ACCOUNTANT ON PR OGRAMME WISE, THE AUDIT REPORT ARE SUBMITTED IN THE PAPER BOOK AT PAGE - 15 TO 36. 3.9 THE DETAILS OF UNSECURED LOAN HAVE BEEN ANALYSED FROM THE CHART ENCLOSED IN THE PAPER BOOK PAGE 37 TO 40. FROM THE CHART IT REVEALED THAT SL. NO UNSECURED LOAN AMOUNT IN RS. 1 OPENING BALANCE 2636018 2 LOAN TAKEN DURING THE YEAR 3422000 3 LOAN REPAID DURING THE YEAR RELATING RECEIVED DURING THE YEAR 1236400 4. BALANCE OF LOAN TAKEN DURING THE YEAR 2185600 5. LOAN REPAYMENT RELATING TO OPEN ING BALANCE 254950 6. CLOSING BALANCE 4566668 3.10 BUT THE A.O. HAS ADDED AN AMOUNT OF RS. 11,42,000/ - INCLUDING THE REPAYMENT MADE DURING THE YEAR RELATING TO THIS ITA NO. 2 57 /CTK/201 6 5 ASSESSMENT YEAR FOR AN AMOUNT OF RS. 2,84.500/ - WHICH IS NOT SUSTAINABLE IN TH E EYES OF LAW. THEREFORE, THIS ADDITION IS ALSO NOT SUSTAINABLE IN THE EYES OF LAW. HENCE IT SHOULD BE DELETED. 3.11 AS REGARDS TO UNSECURED LOAN ACCOUNT OF THE CURRENT YEAR AFTER REPAYMENT IT IS SUBMITTED THAT THE BALANCE AMOUNT WAS REPAID IN SUBSEQUENT YEARS. SECONDLY IT IS SUPPORTED BY AN AFFIDAVIT THAT THE LOANS WERE PAID BY THE RESPECTIVE LOAN CREDITORS NAMELY SMT SMURTI REKHA MOHANTY, DR. AJ IT KUMAR ROUT AND SRI AMRESH KOANR AND OTHERS THE DETAILS ARE AS FOLLOWS: - SL.NO NAME OF THE LOAN CREDITORS A MOUNT BORROWED DURING THE YEAR 2009 - 10 (RS.) REPAYMENT MADE DURING THE YEAR 2009 - 10 (RS) AFFIDAVIT ATTACHED IN PAPER BOOK AT PAGE 1 SMT. SMURTI REKHA MOAHANTY 160000 57000 55 2 DR. AJIT KUMAR ROUT 200000 77000 57 5 SRI PURNA CHANDRA SWAIN 248 500 73500 4 SMT. NIRMALA PANI 145000 39000 5 SRI AMERSH KOANR 130000 38000 68 6 SRI SUBASH CH SAHOO 135000 0 7 SRI RANJAN KUMAR SAHOO 123500 0 TOTAL 1142000 284500 4. DURING THE FINANCIAL YEAR 2010 - 11 RELATING TO THE ASSESSMENT YEAR 2011 - 12 THE APPELLANT HAS SUBMITTED EXISTING LOAN CREDITOR REPAYMENT AND FRESH LOAN AVAILED DURING THE ASSESSMENT PROCEEDING FOR THE A.Y 2011 - 12 WHICH HAS BEEN ACCEPTED BY THE A.O ON THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT. 1961. THE DETAILS OF STATEMENT O F UNSECURED LOAN AND ASSESSMENT ORDER U/S 143(3) FOR THE A. Y 2011 - 12 ARE HEREWITH SUBMITTED FOR YOUR PERUSAL. HENCE IT SHOULD BE DELETED. 5. PRESUMING BUT NOT ADMITTEDLY, IF AT LOAN CREDITOR ADDED, IT SHALL BE ADDED TO TOTAL INCOME AND ENTIRE INCOME IS EXEMPTED BECAUSE THE AMOUNT WAS BROUGHT FOR THE EXPENSES INCURRED WHICH WERE APPLIED FOR CHARITABLE PURPOSES. THESE ENTIRE ADDITIONS ARE ADDED IN THE PROVISIONS OF INCOME TAX ACT, 1961. THE ASSESSEE HAS PROVED THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF ALL LOAN CREDITORS AND SUNDRY CREDITORS BY PRODUCING THE BOOKS OF ACCOUNT AND AFFIDAVIT FROM MAJOR LOAN CREDITOR. EVEN IF CREDITWORTHINESS OF LOAN CREDITORS HAS NOT BEEN PROVED ALSO, SINCE THE ACTIVITIES OF THE SOCIETY ARE PROVED AS GEN UINE AND THE SOCIETY HAS CARRIED OUT THE ACTIVITIES IN ACCORDANCE WITH THE OBJECT OF THE SOCIETY AND REGISTRATION GRANTED U/S 12A HAS NOT BEEN WITHDRAWN, THE EXEMPTION CANNOT BE DENIED. ITA NO. 2 57 /CTK/201 6 6 6. THAT AS REGARDS TO APPLICATION OF SECTION 115BBC OF THE INCOME TA X ACT, 1961 BY THE LEARNED CIT(A) IT IS STATED THAT IN THIS CASE THE IDENTITY IS PROVED IN THE PROVISIONS OF SECTION 115BBC (3), HENCE THE SAID SECTION IS NOT APPLICABLE TO THE APPELLANT CASE. 7. FURTHER IT IS A FINDING THAT ADMITTEDLY MORE THAN 75% OF THE AMOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF LOAN AVAILED FROM CREDITORS AND THE SAID AMOUNT WERE UTILISED AND APPLIED FOR CHARITABLE PURPOSES. IT IS A FACT THAT SECTION 68 IS NOT APPLICABLE TO THE APPELLANT CONSIDERING THE FACTS OF THE CASE AND ITS UTILIZATION TOWARDS CHARITABLE ACTIVITIES. IT WAS NOT DISPUTED THAT ALL THE EXPENDITURE DURING THE YEAR AND EARLIER YEARS ON FUND RAISED THROUGH UNSECURED LOAN AND PURCHASES WERE MADE ON CREDIT WAS DECLARED IN THE INCOME AND EXPENDITURE ACCOU NT AS AN EXPENSES IN THE HANDS OF THE APPELLANT. THERE WAS FULL DISCLOSURE OF THE INCOME AND EXPENDITURE BY THE ASSESSEE AND IT IS ALSO NOT IN DISPUTE THAT THE OBJECT AND ACTIVITIES OF THE ASSESSEE ARE CHARITABLE. 8. THE ASSESSEE HAS RELIED THE FOLLOWIN G DECISIONS OF SUPREME COURT AND HIGH COURTS TO SUPPORT THE APPELLANT'S CASE AS DETAILED BELOW: - A) SRI S.RM.M.CT.M. TRIRUPPANI TRUST VS. CIT 230 ITR 636 (SC.)(1998), ENCLOSED IN THE PAPER BOOK AT PAGE - 78 TO 80. B) CIT VS. UTTARANCHAL WELFARE SOCIETY 364 ITR 398 (ALL.)(2014) ENCLOSED, IN THE PAPER BOOK AT PAGE - 81 TO 84. C) DIT (EXEMPTION) VS. KESHAV SOCIAL & CHARITABLE FOUNDATION 278 ITR 152 (DELHI) (2005) ENCLOSED IN THE PAPER BOOK AT PAGE - 85 TO 88. D) DY.CIT VS. AGARWAL CHARITABLE TRUST VIDE ITAT APPEAL NO 236 & 237/IND/2011, ENCLOSED IN THE PAPER BOOK AT PAGE - 89 TO 112 9. THE HONOURABLE SC COURT HELD THAT U/S 11(1) EVERY CHARITABLE OR RELIGIOUS TRUST IS ENTITLED TO DEDUCTION OF CERTAIN INCOME FROM ITS TOTAL INCOME OF THE PREVIOUS YEAR. TH E INCOME SO EXEMPT IS THE INCOME WHICH IS APPLIED BY THE CHARITABLE OR RELIGIOUS TRUST TO ITS CHARITABLE OR RELIGIOUS PURPOSES IN INDIA. THIS IS OF COURSE, SUBJECT TO ACCUMULATION UP TO A SPECIFIED MAXIMUM WHICH WAS 25 %. IN THAT CASE IT WAS FOUND AS IN TH E PRESENT CASE THAT THE ASSESSEE HAD APPLIED MORE THAN 75% OF THE LOAN AMOUNT RECEIVED DURING THE YEAR AND SUNDRY CREDITORS ON ACCOUNT OF EXPENSES INCURRED FOR CHARITABLE PURPOSES AS PER ITS OBJECT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE , THE ASSESSEE PRAY ED TO DELETE THE ADDITION MADE BY THE A.O IN R ESPECT OF UNSECURED LOAN OF RS. 11,42,000/ - IN THE INTEREST OF JUSTICE FOR WHICH THE ASSESSEE SHALL AS IN DUTY BOUND EVER PRAY. ITA NO. 2 57 /CTK/201 6 7 7. LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 8. WE HAV E HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE , ON PERUSAL OF THE ASSESSMENT ORDER WE FOUND THAT THE ASSESSING OFFICER DETERMINED TOTAL INCOME AT RS.70,58,180/ - . BEING AGGRIEVED TO THIS ORDER, THE APPEAL HAS BEEN FILED BEFORE CIT (A) . THE LEARNED CIT(A) HAS ALLOWED IN PARTIALLY AND DELETED AN AMOUNT OF RS.59,14,180/ - IN RESPECT OF UNSECURED LOAN AND SUNDRY CREDITORS AND UPHELD UNSECURED LOAN OF RS. 11,42,000/ - . LD. ARS CONTENTION IS THAT THE AMOUNT OF LOANS TAKEN HAS BEEN UTILIZED TOWARDS THE ACTIVITIES OF THE TRUST AND THE OPERATION OF THE ACTIVITIES OF 12 UNITS IN DIFFERENT PLACES AND ITS UTILIZATION HAVE ALREADY BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDING. WHEN THERE IS UTILIZATION THERE MUST BE A FUND AND SOURCES OF FUNDS H AS BEEN SHOWN IN THE AUDITED STATEMENT OF ACCOUNTS. WE FIND THAT BOTH THE LOWER AUTHORITIES HAVE NOT DOUBTED THE UTILIZATION OF FUNDS, HOWEVER, THE FACT REMAINS THAT THERE ARE 31 LOAN CREDITORS OUT OF WHICH, LD. AR BEFORE US HAS FILED AFFIDAVITS OF THREE CREDITORS CONFIRMING THE LOAN AMOUNT GIVEN TO THE SOCIETY, COPIES OF WHICH HAVE BEEN FILED IN THE PAPER BOOK AT PAGES 55, 57 & 68, RESPECTIVELY. LD. AR BEFORE US SUBMITTED THAT FOR THE ASSESSMENT YEAR 2011 - 2012 SUBSEQUENT TO THE RELEVANT ASSESSMENT YEAR UN DER CONSIDERATION THE ASSESSEE SUBMITTED DETAILS OF REPAYMENTS MADE TO EXISTING LOAN CREDITORS AND FRESH LOAN AVAILED DURING THE ASSESSMENT PROCEEDINGS, WHICH WAS ACCEPTED BY THE ASSESSING OFFICER. SIMILARLY THE TRADE CREDITORS WHICH HAVE BEEN DISALLOWED BY THE AO DURING THE ASSESSMENT YEAR 2010 - 2011 THE SAME TRADE CREDITORS ITA NO. 2 57 /CTK/201 6 8 HAVE ALSO BEEN REPAID DURING THE ASSESSMENT YEAR 2011 - 2012 AND THE AO HAS ACCEPTED THE SAME IN THE ASSESSMENT FRAMED U/S.143(3) OF THE ACT FOR A.Y.2011 - 2012. WE FIND AS REGARDS TO UNS ECURED LOAN ACCOUNT OF THE CURRENT YEAR AFTER REPAYMENT THE ASSESSEE SUBMITTED THAT THE BALANCE AMOUNT WAS REPAID IN SUBSEQUENT YEARS. L D. AR DREW OUR ATTENTION TO THE CHART PROVIDED IN THE WRITTEN SUBMISSION AT PAGE 4 , WHERE NAME OF SEVEN LOAN CREDITORS H AVE BEEN MENTIONED, HOWEVER, AFFIDAVITS WITH REGARD TO LOAN CREDITED TO THE SOCIETY ONLY THREE CREDITORS HAVE CONFIRMED, I.E. I) SMT. SMRUTI REKHA MOHANTY OF RS.1,60,000/ - , II) DR. AJ IT KUMAR ROUT OF RS.2,00,000/ - AND III) SRI AMRESH KOANR OF RS.1,30,000/ - , AGGREGATING TO RS.4,90,000/ - . IT WAS NOT DISPUTED THAT THE EXPENDITURE INCURRED DURING THE RELEVANT ASSESSMENT YEAR AND EARLIER YEARS IS ON FUND RAISED THROUGH UNSECURED LOAN AND PURCHASES WERE MADE ON CREDIT WAS DECLARED IN THE INCOME AND EXPENDITURE A CCOUNT AS EXPENSES IN THE HANDS OF ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE OBJECT AND ACTIVITIES OF THE ASSESSEE ARE CHARITABLE. LD. AR FURTHER SUBMITTED THAT THE CIT(A) HAS CONFIRMED ADDITION TO THE EXTENT OF 7 LOAN CREDITORS AND THESE LOAN CREDITORS ARE EXISTING FROM EARLIER ASSESSMENT YEARS AND ALSO IN SUBSEQUENT ASSESSMENT YEARS LOANS HAVE BEEN OBTAINED AND REPAID AND IN ASSESSMENT YEAR 2011 - 2012 THESE FACTS WERE ALSO FILED WITH THE INCOME TAX DEPARTMENT. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF LOWER AUTHORITIES AND THE CHARITABLE ACTIVITIES OF THE ASSESSEE SOCIETY, WE FIND THAT THE LD. AR OF THE ASSESSEE HAS DEMONSTRATED BEFORE US WITH THE AFFIDAVITS IN RESPECT OF THREE CREDITORS NAMELY, NAMELY, SMT. ITA NO. 2 57 /CTK/201 6 9 SMRUTI REKHA MOHANTY, DR. AJ IT KUMAR ROUT AND SRI AMRESH KOANR, AND FURTHER DREW OUR ATTENTION TO THE CONTENTS OF THE AFFIDAVIT REFERRED AT PAGE 55, 57 & 68 OF THE PAPER BOOK THAT THE REPAYMENT HAS BEEN MADE IN THE SUBSEQUENT YEARS. THEREFORE, CONSIDERING THE OVERALL ASPECTS AND ALSO THE FACT THAT THE REVENUE HAS BEEN ACCEPTING THE LOAN CREDITORS IN THE EARLIER YEARS AND ALSO IN THE SUBSEQUENT YEARS AS ENVISAGED BY THE LD AR, WE ARE OF THE OPINION THAT THE LOAN CREDITORS HAVE SUBSTANTIATED THEIR SOURCES IN AFFIDAVITS WHICH WAS NOT DIS PUTED AND WAS ACCEPTED BY THE LOWER AUTHORITIES. WE PLACE RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF GUNVANTRAI SETH IN ITA NO.517/CTK/2017, ORDER DATED 06.08.2018 , WHEREIN THE TRIBUNAL OBSERVED THAT WHEN THE CREDITWORTHINESS OF THE LOAN CREDITOR WAS ACCEPTED BY THE DEPARTMENT IN SUBSEQUENT YEARS, THEREFORE, THERE IS NO BASIS TO REFUSE THE SAME IN THE ASSESSMENT YEAR UNDER CONSIDERATION : - 15. FURTHER, THE ASSESSEE ALSO POINTED OUT THAT A FURTHER LOAN OF RS.2,62,00,000/ - IN THE A SSESSMENT YEAR 2013 - 14 AND RS.1,20,00,000/ - IN THE ASSESSMENT YEAR 2014 - 15 WAS RECEIVED BY THE ASSESSEES SUCCESSOR FIRM IN THE HAN DS OF THE SAID SUCCESSOR FIRM. THESE SUBSEQUENT LOANS WERE DULY ACCEPTED BY THE ASSESSING OFFICER IN AN ASSESSMENT MADE U/S.1 43(3) OF THE ACT. 16. IT WAS ALSO POINTED OUT THAT THE ENTIRE LOAN ALONGWITH INTEREST THEREON WAS DULY REPAID BY THE ASSESSEES SUCCESSOR FIRM IN THE ASSESSMENT YEAR 2016 - 17. THUS, AS THE IDENTITY AND CREDITWORTHINESS OF THE SAID LOAN CREDITOR WAS ACCEPTE D BY THE DEPARTMENT IN SUBSEQUENT YEARS, THERE REMAINS NO BASIS TO REFUSE THE SAME IN THE ASSESSMENT YEAR UNDER APPEAL. 17. LD D.R. COULD NOT CONTROVERT THE ABOVE FACTS. 18. WE FIND THAT NO DEFECT IN THE VARIOUS DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE TO DISCHARGE HIS INITIAL ONUS COULD BE POINTED OUT BY THE REVENUE. THE SERVICE OF NOTICE U/S.133(6) OF THE ACT ON THE LOAN CREDITOR PROVES THE EXISTENCE ITA NO. 2 57 /CTK/201 6 10 OF THE SAID LOAN CREDITOR AND MERELY BECAUSE OF NOT RECEIVING OF RESPONSE FROM THE SAID LOAN CREDITOR CANNOT BE TAKEN AS AN EVIDENCE AGAINST THE ASSESSEE. 19. FURTHER IN THE STATEMENT OF SAID SHRI RAJ KUMAR THARAD, NEITHER THE NAME OF THE SAID LOAN CREDITOR NOR THE NAME OF THE ASSESSEE IS APPEARING. THUS, THE SAID STATEMENT CANNOT BE A BASIS TO DRAW AN AD VERSE INFERENCE AGAINST THE ASSESSEE. THUS, WE FIND THAT IN THE INSTANT CASE, THE INITIAL ONUS WHICH WAS ON THE ASSESSEE WAS DULY DISCHARGED BY THE ASSESSEE AND, THEREAFTER THE DEPARTMENT COULD NOT BRING ANY COGENT MATERIAL ON THE BASIS OF WHICH, THE ADDI TION OR DISALLOWANCE MADE COULD BE SUSTAINED. WE, THEREFORE, DELETE THE ADDITION OF RS.1,82,00,000/ - MADE U/S.68 OF THE ACT AND CONSEQUENTLY, WE ALSO DELETE THE DISALLOWANCE OF INTEREST OF RS.3,70,000/ - . THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. WE RESPECTFULLY FOLLOW THE JUDICIAL PRECEDENT AND C ONSIDERING THE ACTIVITIES OF THE SOCIETY, OBJECTS AND THE UTILIZATION OF THE FUNDS OF THE SOCIETY, WE ARE OF THE SUBSTANTIVE OPINION THAT THE ADDITION IN RESPECT OF THREE LOAN CREDITORS NAMELY, S MT. SMRUTI REKHA MOHANTY, DR. AJ IT KUMAR ROUT AND SRI AMRESH KOANR, AGGREGATING TO RS.4,90,000/ - CANNOT BE SUSTAINED. ACCORDINGLY, WE DELETE THE ADDITION TO THE EXTENT OF RS.4,90,000/ - AND BALANCE ADDITION OF RS. 6,52,000/ - IS CONFIRMED. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 20 / 0 8 / 201 8 . SD/ - ( N.S.SAINI ) SD/ - ( PAVAN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 20 / 0 8 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY ITA NO. 2 57 /CTK/201 6 11 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - SUBHADRA MAHTAB SEVA SADAN KOLTHIA, AIGANIA, BHUBANESWAR ORISSA 2. / THE RESPONDENT - ITO(EXEMPTION), BHUBANESWAR 3. ( ) / THE CIT(A) 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. [ / GUARD FILE. //TRUE COPY//