THE DY. COMMISSIONER OF INCOME TAX. CENTRAL CIRCLE-5(3) , MUMBAI V. SITADEVI KHATOD FOUNDATION, MUMBAI

ITA 2784/MUM/2022

AI Insights

The case revolves around an appeal by the Deputy Commissioner of Income Tax, Central Circle-5(3), Mumbai against the Sitadevi Khatod Foundation concerning the assessment year 2020-2021. The primary issue was the addition of Rs. 2,75,00,000 as unexplained expenditure under section 69C of the Income Tax Act, 1961, which the Assessing Officer (AO) had added after a survey. The foundation had offered this amount as income from donations, which was accepted by the AO but later treated as unexplained expenditure. The Commissioner of Income Tax (Appeals) reversed the AO's decision, leading to the Revenue's appeal to the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302428 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 02-01-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 30-10-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 131; 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘G‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.2784/Mum/2022 (Asse ssment Year :2020-2021) The Dy. Commissioner of Income Tax, Central Circle-5(3) Mumbai Room No.1906, 19 th Floor Air India Building Nariman Point Mumbai – 400 021 Vs. Sitadevi Khatod Foundation 3 rd Floor, Empire House 214, D.N.Road Fort, Mumbai – 400 001 PAN/GIR No.AAATS1880Q (Appellant) .. (Respondent) Assessee by Shri Prateek Jain Revenue by Shri Rajnish Yadav Date of Hearing 03/01/2023 Date of Pronouncement 06/01/2023 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.2784/Mum/2022 for A.Y.2020-21 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in Appeal No.CIT(A)-53,Mumbai/10345/2019-20 dated 18/08/2022 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 06/03/2022 by the ld. Dy. Commissioner of Income Tax, Central Circle -5(3), Mumbai (hereinafter referred to as ld. AO). ITA No.2784/Mum/2022 M/s. Sitadevi Khatod Foundation 2 2. The Revenue has raised the following grounds of appeal:- 1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is right in deleting the addition made by the AO of Rs. 2,75,00,000/- being the amount of expenditure as unexplained u/s 69C of the Act even though Shri Srikant S. Somani, trustee, offered the same as undisclosed income of the assessee u/s 131 of the Income Tax Act, 1961. 2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in deleting the disallowance made by the AO, relying upon those judicial pronouncements, the facts of which are not similar from the instant case. ?" 3. The appellant craves to leave, to add, to amend and/or to alter any of the ground of appeal if need be." 3. We have heard rival submissions and perused the materials available on record. The assessee is a Public Charitable Trust duly registered u/s.12A of the Act vide Registration No.TR/28841 dated 14/01/1992 and with Charity Commissioner, Mumbai vide Registration No.E-13822(Bom). The assessee trust is engaged in the charitable activities in the field of education and accordingly, eligible for exemption u/s.11 of the Act. 3.1. A survey action u/s.133A of the Act was conducted in the premises of the assessee trust on 04/06/2019. During the survey proceedings, the survey team found that the assessee trust had made certain interior and furniture work in its premises at S-1, 4 th Floor, Mittal Grandeur, Cuff Parade, Mumbai. It was found that no corresponding accounting was made in the books of accounts for the same by the assessee. This aspect was confronted by the survey team to the Managing Trustee of the assessee trust Shri Shrikant S Somani, who during the course of statement recorded during survey proceedings explained that all the ITA No.2784/Mum/2022 M/s. Sitadevi Khatod Foundation 3 expenses related to fixture and furniture were recorded in the books of accounts of the trust and that certain working bills which were yet to be finalized were not accounted in the books of trust. He also stated that the said expenses were out of various donations received by the trust. However, in order to cover up any discrepancy, he offered an amount of Rs.2,75,00,000/- for the year under consideration. The assessee trust filed its regular return of income on 13/3/2021 declaring total income at Rs.1,40,42,140/- which admittedly includes a sum of Rs.2,75,00,000/- duly credited in the ‘Income and Expenditure Account’ of the assessee as ‘income from other sources’ in consonance with the statement recorded during survey proceedings. The assessee explained that the source for meeting the investments towards interiors, fixture and furniture have been duly met out of the donations which had been duly offered to tax by the assessee in the return of income. The ld. AO however, disregarded the said contention of the assessee and proceeded to treat the income already offered by the assessee as ‘income from other sources’ as unexplained expenditure u/s.69C of the Act and again added the very same sum of Rs. 2,75,00,000/- in the assessment. The ld. CIT(A) observed that nature and source of receipt being donation was accepted by the ld. AO and accordingly, the entire cost of investments made in the interiors, fixture and furniture fittings had been duly explained by the assessee and that there cannot be any question of unexplained expenditure u/s.69C of the Act thereon. Accordingly, he deleted the addition made by the ld. AO. Aggrieved, the Revenue is in appeal before us. 3.2. At the outset, we find that assessee had duly offered a sum of Rs.2,75,00,000/- as ‘income from other sources’ by crediting the same in the Income and Expenditure Account filed along with return of income. ITA No.2784/Mum/2022 M/s. Sitadevi Khatod Foundation 4 After considering that receipt of Rs.2,75,00,000/-, the assessee had earned surplus of Rs.1,40,42,141/- during the year. The nature of said receipt of Rs.2,75,00,000/- has been stated by the assessee to be donations received by the Trust. This fact of receipt of donation has been accepted by the ld. AO in the instant case. It is not the case of the ld. AO that these donations represent anonymous donations to be taxed under specific provisions of Section 115BBC of the Act. Once the nature of receipt being donations has been accepted by the Revenue, the entire cost of meeting investments in interiors and furniture & fittings remains properly explained. In either case, the assessee has to prove the availability of cash flow with it to meet the investments made in interiors and furniture fittings. This has been duly proved by the assessee by offering the sum of Rs.2,75,00,000/- in the return of income. Once it is done, the entire cost of investments in interiors and furniture & fittings becomes properly explained. Hence, there cannot be any addition u/s.69C of the Act. The ld. CIT(A) had duly appreciated this fact and had granted relief to the assessee. Hence, we do not find any infirmity in the order of the ld. CIT(A) in this regard. Accordingly, the grounds raised by the Revenue are dismissed. 4. In the result, appeal of the Revenue is dismissed. Order pronounced on 06/01/2023 by way of proper mentioning in the notice board. Sd/- (AMIT SHUKLA) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 06/ 01/2023 KARUNA, sr.ps ITA No.2784/Mum/2022 M/s. Sitadevi Khatod Foundation 5 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//