M/s. Jhunjhunu Darmada Trust, Bangalore V. DDIT (Exemptions), Bangalore

ITA 323/BANG/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8768 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-08-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: ASHOK KULKARNI
• Keywords: Capital asset; Maximum Marginal Rate; Cost of acquisition; Reason to believe
• Section: 143(3); 142(1); 147; 148; 12; 144; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS. 323 & 324/BANG/2009 ASSESSMENT YEARS : 2004-05 & 2005-06 M/S. JHUNJHUNU DARMADA TRUST, C/O. M/S. K.R. PRASAD, ADVOCATE & TAX CONSULTANT, 9/3, OLD MADRAS ROAD, BANGALORE 560 001. : APPELLANT VS. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1), BANGALORE. : RESPONDENT APPELLANT BY : SHRI ASHOK KULKARNI, ADVOCATE RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL.CI T(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THESE TWO APPEALS OF THE ASSESSEE-TRUST ARE DIRECTE D AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A)-V, BANGALORE, IN ITA NOS: 30 & 33/TRUST/CIT(A)-V/07-08 DATED: 30.1.2009 FOR THE ASSESSMENT YEARS 2004- 05 AND 05-06. 2. THE ASSESSEE TRUST (THE ASSESSEE IN SHORT) HAD ORIGINALLY RAISED SEVEN AND SIX GROUNDS FOR THE AYS UNDER DISPUTE RES PECTIVELY. ITA NO.323 & 324/BANG/09 PAGE 2 OF 15 SUBSEQUENTLY, IT CAME UP WITH CONSOLIDATED GROUNDS WHICH ARE LISTED OUT AS UNDER: AY 2004-05 : ON A SCRUTINY, GROUND NOS: 1 AND 9 BEING GENERAL IN NATURE WITH NO SPECIFIC ISSUES INVOLVED, THEY HAVE BECOME NON-CONSEQUENTIAL . IN THE REMAINING GROUNDS, THE ESSENCES OF THE ISSUES ARE, FOR THE SA KE OF CLARITY, REFORMULATED AS BELOW: (I) THE CIT(A) OUGHT TO HAVE HELD THAT THE INITIATION O F PROCEEDINGS U/S 148 OF ACT WAS BAD IN LAW AND WITHOUT JURISDICT ION; - THE CIT(A) OUGHT TO HAVE HELD THAT THE EX-PARTE ORD ER U/S 144 OF THE ACT WAS BAD IN LAW AND WITHOUT JURISDICTION; (II) THE CIT (A) ERRED IN NOT ALLOWING DEDUCTIONS AS CLA IMED WITH REGARD TO THE DONATIONS MADE; (III) THE CIT (A) ERRED IN NOT APPRECIATING THAT THE COMP UTATION OF INCOME BY THE AO WAS ERRONEOUS AND THE COMPUTATION OF TAX AT MAXIMUM MARGINAL RATE WAS NOT IN ACCORDANCE WITH TH E PROVISIONS OF THE ACT. AY 2005-06 : SIMILARLY FOR THIS AY TOO, GROUND NOS: 1 AND 9 BEIN G GENERAL IN NATURE WITH NO SPECIFIC ISSUES INVOLVED, THEY HAVE BECOME NON-C ONSEQUENTIAL. IN THE REMAINING GROUNDS, THE SUBSTANCES OF THE ISSUES ARE REFORMULATED N CONCISE MANNER AS UNDER: (I) THE CIT(A) OUGHT TO HAVE HELD THAT THE EX-PARTE ORD ER WAS BAD IN LAW AS THE A R REPRESENTED BEFORE THE AO ON VARIOUS DAYS OF HEARING; (II) THE CIT(A) ERRED: - IN NOT ALLOWING DEDUCTIONS AS CLAIMED WITH REGARD T O THE DONATIONS MADE; ITA NO.323 & 324/BANG/09 PAGE 3 OF 15 - IN NOT APPRECIATING THAT THE COMPUTATION OF TAX AT MAXIMUM MARGINAL RATE WAS NOT IN ACCORDANCE WITH THE PROVIS IONS OF THE ACT; - THE INCOME COMPUTED BY THE AO WAS ERRONEOUS AND NOT IN ACCORDANCE WITH LAW - THE COMPUTATION OF TAX AND THE RATE OF TAX APPLIED BY THE AO WAS ERRONEOUS AND NOT IN ACCORDANCE WITH LAW (III) THE AO ERRED IN INCLUDING INCOME FROM TRANSFER OF L ONG TERM CAPITAL ASSET BEING EQUITY SHARES IN COMPUTING THE TOTAL INCOME. 3. DURING THE COURSE OF HEARING, THE ASSESSEE CAME UP WITH A PLEA FOR ADMISSION OF IDENTICAL ADDITIONAL GROUNDS OF APPEAL FOR BOTH THE AYS UNDER DISPUTE. AFTER HEARING THE RIVAL PARTIES, THE PRAYER FOR ADMISSION OF ADDITIONAL GROUNDS WERE ADMITTED AND THE REGISTRY W AS DIRECTED TO PLACE THE APPLICATIONS FOR ADDITIONAL GROUNDS ON RECORDS. 4. AS THE ISSUES RAISED IN THESE APPEALS ARE SIMILA R AND RATHER INTER- LINKED, FOR THE SAKE OF CONVENIENCE AND CLARITY, TH EY WERE HEARD, CONSIDERED AND DISPOSED OFF IN THIS COMMON ORDER. 5. BRIEFLY STATED, THE ASSESSEE FURNISHED ITS RETU RN OF INCOME FURNISHED ITS RETURN OF INCOME FOR THE AY 2004-05, DECLARING EXCESS EXPENDITURE OVER INCOME AT RS.23.22 LAKHS WHICH WAS PROCESSED U/S 14 3(1) OF THE ACT. ON BEING NOTICED BY THE AO THAT THE ASSESSEE HAD INVES TED RS.1.8 CRORES IN SHARES OF VARIOUS COMPANIES WHICH, ACCORDING TO THE AO, DO NOT FORM THE MODE OF ASSETS SPECIFIED IN S.11(5) OF THE ACT. A S THE ASSESSMENT WAS NOT CONCLUDED U/S 143(3) OF THE ACT, THE AO TOOK REFUGE IN CLAUSE (B) TO EXPLANATION 2 TO S. 147 OF THE ACT TO EXAMINE WHET HER THERE WAS ANY INCOME ESCAPED FROM ASSESSMENT AND, ACCORDINGLY, IS SUED A NOTICE U/S 148 OF THE ACT, CALLING UPON THE ASSESSEE TO FURNIS H ITS RETURN OF INCOME. ITA NO.323 & 324/BANG/09 PAGE 4 OF 15 AS THERE WAS NO COMPLIANCE TO THE NOTICE U/S 148 OF THE ACT, A NOTICE U/S 142(1) WAS ISSUED POSTING THE CASE FOR HEARING ON 1 4.11.2007. ACCORDING TO THE AO, THOUGH THE ASSESSEES REPRESENTATIVE APP EARED ON 26.11.07 WITHOUT A PROPER AUTHORIZATION TO REPRESENT THE CA SE, HE WAS APPRIZED OF THE FACT THAT SINCE THE ASSESSEE HAD NOT COMPLIED W ITH THE ISSUANCE OF NOTICE U/S 148 OF THE ACT, THE ASSESSMENT WOULD BE CONCLUDED ON THE MATERIALS AVAILABLE ON RECORD U/S 144 OF THE ACT, T HAT THE TRUST HAD INVESTED IN THE SHARES OF COMPANY AND, THUS, IT WAS NOT ENTI TLED FOR EXEMPTION U/S 11 OF THE ACT AND THAT THE DONATION OF RS.16,08,060/- WAS NOT ELIGIBLE FOR EXEMPTION AS IT HAD NOT SPENT TO EARN INCOME ETC. IT WAS, ALSO, FURTHER NOTICED BY THE AO THAT THE TRUST HAD LENT RS.33.42 LAKHS TO ITS MEMBERS WITHOUT ANY INTEREST WHICH WAS VIOLATION OF S.13(1) (C)(II) OF THE ACT, THE ASSESSEE WAS DENIED EXEMPTION U/S 11 OF THE ACT AND THE ENTIRE INCOME WAS TAXED AT MAXIMUM MARGINAL RATE AS PER PROVISO T O S.164(2) OF THE ACT. 5.1. SIMILARLY, THE FOR THE AY 2005-06, THE ASSESSE E IN ITS RETURN OF INCOME DECLARED EXCESS OF EXPENDITURE OVER INCOME A T RS.34.81 LAKHS WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQU ENTLY, THIS CASE WAS TAKEN UP FOR SCRUTINY. THERE WAS NO COMPLIANCE TO THE HEARING NOTICES ISSUED ON A COUPLE OF OCCASIONS AND ON A FINAL HEAR ING, THE ASSESSEES REPRESENTATIVE [WITHOUT DUE AUTHORIZATION] PRESENTE D HIMSELF AND SOUGHT FOR AN ADJOURNMENT WHICH WAS SUMMARILY REJECTED. HOWEV ER, ACCORDING TO THE AO, THE REPRESENTATIVE WAS APPRIZED THAT THE TRUST FUNDS WERE INVESTED IN THE MODES NOT SPECIFIED IN S.11 (5) OF THE ACT, THE TRUST WAS NOT ENTITLED FOR EXEMPTION U/S 11(5) OF THE ACT. IN SPITE OF REASON ABLE OPPORTUNITY HAVING OFFERED FOR WHICH THERE WAS NO PROPER REPRESENTATIO N, THE AO RESORTED TO ITA NO.323 & 324/BANG/09 PAGE 5 OF 15 CONCLUDE THE ASSESSMENT U/S 144 OF THE ACT ON THE B ASIS OF MATERIALS AVAILABLE ON RECORD. WHILE DOING SO, HE HAD NOTICE D THAT THE ASSESSEE HAD INVESTED RS.1,54,80,165/- IN SHARES ON VARIOUS COMP ANIES WHICH WAS VIOLATION OF MODE OF INVESTMENTS SPECIFIED IN S.11( 5) OF THE ACT AND AS PER S.13(1)(D)(II) OF THE ACT, THE ASSESSEE WAS NOT ENT ITLED FOR EXEMPTION U/S 11(5) OF THE ACT. AS IN LAST YEAR, THE ASSESSEE HA D ADVANCED RS.77.05 LAKHS TO ITS TRUSTEES WITHOUT ANY INTEREST WHICH AT TRACTED S.13(2)(A) OF THE ACT. AS PER S.13 (1)(C)(II) OF THE ACT, THE TRUST WAS RENDERED DISENTITLED FOR EXEMPTION U/S 11 OF THE ACT. ACCORDINGLY, THE FUND S OF THE TRUST INVESTED WERE VIOLATIVE OF S.13 (1)(D)(I) OF THE ACT , THE A O CONCLUDED THE ASSESSMENT U/S 144 OF THE ACT BY BRINGING TO TAX AT MAXIMUM MARGINAL RATE. 6. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES WITH THE CIT(A) FOR REDRESSAL. (I) WITH REGARD TO THE ASSESSEES OBJECTIONS FOR HA VING CONCLUDED THE ASSESSMENTS FOR BOTH THE AYS UNDER DISPUTE, THE CIT (A) WAS OF THE VIEW THAT SINCE THE AO HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AS THE ASSESSEE INVESTED RS.1.80 CRORES IN SHARES OF VARIOUS COMPANIES WHICH DID NOT FORM THE MODE OF ASSETS SPE CIFIED IN S.11(5) OF THE ACT AND THAT THE ASSESSMENT WAS NOT CONCLUDED U/S 1 43(3) OF THE ACT, THE AO HAD REVOKED THE PROVISIONS OF CLAUSE (B) TO EXPL ANATION 2 TO S.147 OF THE ACT AND, ACCORDINGLY, ISSUED NOTICE U/S 148 OF THE ACT. THERE WAS NO COMPLIANCE EITHER TO NOTICES 148, 142(1) OR 143(2) OF THE ACT. FURTHERMORE, THE ASSESSEES REPRESENTATIVE [EVEN THOUGH THE CASE S WERE REPRESENTED ITA NO.323 & 324/BANG/09 PAGE 6 OF 15 WITHOUT PROPER AUTHORIZATION ETC.] WAS APPRIZED OF THE AOS PROPOSAL TO CONCLUDE THE ASSESSMENT U/S 147 OF THE ACT. TAKING INTO THE ABOVE SCENARIO, THE CIT(A) CONFIRMED THE INITIATION OF PROCEEDINGS U/S 147, CONCLUSION OF THE ASSESSMENTS U/S 144 AND ALSO ISSU ANCE OF NOTICE U/S 143(2) OF THE ACT BY THE AO FOR BOTH THE AYS UNDER DISPUTE. (II) IN RESPECT OF THE INVESTMENTS OF RS.1.80 CRO RES AND RS.1.54 CORES IN VARIOUS COMPANIES AND EARNING OF INCOME OF RS.1.08 LAKHS OTHERWISE THAN WHAT WAS SPECIFIED IN S.11 (5) OF THE ACT, THE VERY FACT HAS NOT BEEN DISPUTED BY THE ASSESSEE EITHER. ACCORDINGLY, AS PE R S.13(1)(C)(II) OF THE ACT, THE ASSESSEE WAS NOT ENTITLED FOR EXEMPTION U/ S 11 OF THE ACT. HOWEVER, THE CIT (A) FOUND SOME FORCE IN THE ARGUME NT OF THE ASSESSEE THAT OUT OF THE INVESTMENTS MADE, THE ASSESSEE EARNED IN COME OF RS.1.08 LAKHS ONLY OTHERWISE THAN WHAT WAS SPECIFIED IN S.1 1(5) OF THE ACT. TAKING INTO THIS ASPECT INTO CONSIDERATION, THE CIT(A) [EV EN THOUGH THE POWER OF THE CIT(A) U/S 251(1) OF THE ACT TO SET ASIDE THE ASSESSMENT OR REMITTING BACK AN ISSUE WITH A DIRECTION TO THE AO HAS BEEN DISPENSED WITH BY THE FINANCE ACT, 200 W.E.F. 1.6.2001] HAD DIRECTED THE AO TO FIND OUT THE EXACT AMOUNT OF INVESTMENTS AND INCOME EARNED OUT OF SUCH INVESTMENTS WHICH VIOLATED S.11(5) AND ADOPT MAXIMUM MARGINAL RATE TO THAT PART OF INCOME WHICH HAD FORFEITED THE EXEMPTION U/S 11(5) OF THE ACT. (III) WITH REGARD TO THE DONATIONS MADE BY THE TR UST AMOUNTING TO RS.6,08,060/- (SIC) RS.16,08,060/- AND RS.33,74,509 /- FOR THE AYS 04-05 AND 05-06 RESPECTIVELY, THE OBSERVATION OF THE CIT (A) WAS THAT I HAVE EXAMINED THE DETAILS OF THE DONATIONS AND SEE THAT THESE ARE FOR VILLAGE ITA NO.323 & 324/BANG/09 PAGE 7 OF 15 DEVELOPMENTS, MEDICAL TREATMENT FOR POOR PEOPLE, ED UCATION FEES, DISTRIBUTION OF CLOTHES TO THE POOR PEOPLE BEDS IN SLUM AREAS, CATTLE PURCHASE AND DONATED TO JHIMMY DEVI GOENKA TRUST. IN THIS CO NNECTION, IT IS A FACT WHICH IS NOT DISPUTED BY THE APPELLANT THAT THE APP ELLANT TRUST HAD LENT RS.33,42,375/- FOR THE ASSESSMENT YEAR 2004-05 AND ADVANCED RS.77,05,004/- TO TRUSTEES WITHOUT CHARGING ANY INT EREST FROM THEM WHICH VIOLATED S.13(1)(C)(II) OF THE ACT. AFTER CONSIDER ING THE FACTS OF THE CASE, I AM OF THE OPINION THAT THE DISALLOWANCES MADE BY TH E AO HAVE TO BE UPHELD AND SUSTAINED. 7. AGITATED , THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS. 7.1. BEFORE VENTURE TO DEAL WITH THE CONSOLIDATED G ROUNDS RAISED FOR BOTH THE AYS UNDER DISPUTE, WE SHALL NOW TAKE UP THE ADD ITIONAL GROUNDS RAISED DURING THE COURSE OF HEARING AS DISCUSSED SUPRA. (I) THE FIRST GROUND BEING GENERAL, IT DOESNT SURV IVE FOR ADJUDICATION. (II) THE SECOND GROUND THAT THE ASSESSING OFFICER OUGHT TO HAVE TAKEN INDEXED COST OF ACQUISITION FOR THE PURPOSE OF COMP UTING LONG-TERM CAPITAL GAINS WAS NOT PRESSED BY THE LD. A R DURING THE COURSE O F HEARING AND, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. (III) THE THIRD GROUND WAS THAT THE COMPUTATION OF TAX BY THE ASSESSING OFFICER IS ERRONEOUS AND NOT IN ACCORDANCE WITH LAW . HOWEVER, NO PROPER PROOF OR ANY DETAIL REASON WAS ADDUCED AS TO HOW TH E AO WAS ERRONEOUS AND IN NOT IN ACCORDANCE WITH LAW. THIS GRIEVANCE OF THE ASSESSEE IS, ITA NO.323 & 324/BANG/09 PAGE 8 OF 15 HOWEVER, BEING TAKEN CARE OF WHILE DECIDING THE REG ULAR GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE FOLLOWING PARAGRAPHS. 8. LET US NOW CONSIDER THE GRIEVANCES OF THE ASSESS EE IN A CHRONOLOGICAL MANNER AS UNDER: AY 2004-05 : 8.1. DURING THE COURSE OF HEARING, THE SUBMISSION O F THE LD. A R WAS REVOLVED AROUND THE FACT THAT THE CIT (A) HAD GROSS LY ERRED IN CONFIRMING THE INITIATION OF THE PROCEEDINGS U/S 148 OF THE AC T AS THE CONDITIONS PRECEDENT FOR REOPENING BEING ABSENT, THE ASSESSING OFFICER SHOULD NOT HAVE RESORTED TO REOPEN THE ASSESSMENT AS HE DID. IT WAS, FURTHER, SUBMITTED THAT THE ORDER PASSED U/S 144 OF THE ACT WAS BAD IN LAW AND WITHOUT ANY JURISDICTION WHICH REQUIRES TO BE ANNUL LED. 8.2. THE LD. D.R PRESENT WAS HEARD. WE HAVE CAREFU LLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO DILIGENTLY PERUSED THE R ELEVANT RECORDS. 8.3. THE ASSESSEES RETURN OF INCOME FOR THE AY UND ER DISPUTE WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, IT CAME TO THE NOTICE OF THE AO THAT THE ASSESSEE HAD INVESTED RS.1.8 CRORES IN SHARES OF VARIOUS COMPANIES. TO EXAMINE THE VERACITY OF THE STATE OF AFFAIRS AND THE ASSESSMENT IN QUESTION WAS NOT SUBJECTED TO U/S 143 (3) OF THE ACT, THE AO WAS OF THE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND ALSO ARMED WITH SUB-CLAUSE (B) TO EX PLANATION 2 TO S.147, HE HAD INITIATED ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT BY ISSUANCE OF NOTICE U/S 148 OF THE ACT. ITA NO.323 & 324/BANG/09 PAGE 9 OF 15 8.3.1. THE MOOT QUESTION BEFORE US IS WHETHER THE AO WAS WITHIN HIS REALM TO ISSUE A NOTICE U/S 148 OF THE ACT CALLING UPON THE ASSESSEE TO FURNISH ITS RETURN OF INCOME? LET US HAVE A GLANCE OF THE RELEVANT PROVISIONS OF THE ACT. S.147 .. EXPLANATION 2- FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT, NAMELY- (A) (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAI MED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; 8.3.2. THUS, WE ARE OF THE FIRM VIEW THAT THE AO WA S WITHIN HIS DOMAIN AND BY ASSUMING PROPER JURISDICTION TO ISSUE A NOTICE U /S 148 OF THE ACT. AS THERE WAS NO COMPLIANCE TO THE SAID NOTICE, THE ASS ESSEES CASE WAS TAKEN UP FOR EXAMINATION BY ISSUANCE OF NOTICE U/S 142(1) OF THE ACT AND, FINALLY, WHEN THE ASSESSEES REPRESENTATIVE APPEARED, ACCO RDING TO THE AO, WITHOUT A PROPER AUTHORIZATION, IT WAS IMPLICITLY B ROUGHT TO HIS NOTICE ON 26.11.2007 BY THE AO THAT THE ASSESSEE HAS NOT COMPLIED TO THE NOTICE U/S 148 OF THE ACT, THE ASSESSMENT WILL BE COMPLETED U/ S 148 OF THE ACT.. HOWEVER, IT WAS NOTICED THAT NO ATTEMPT WAS EVER MA DE BY THE ASSESSEE TO PRESENT ITS CASE BEFORE THE AO AND, CONSEQUENTLY, I T APPEARS THAT, THE AO WAS LEFT WITH NO OPTION, BUT, TO CONCLUDE THE ASSES SMENT FINALLY ON 30.11.2007 (BEING A TIME-BARRING ASSESSMENT). THIS BEING A GROUND REALITY, THE ASSESSEE WAS NOT JUSTIFIED IN RAISING A CLAIM T HAT THE ASSESSMENT ITA NO.323 & 324/BANG/09 PAGE 10 OF 15 CONCLUDED U/S 144 OF THE ACT WAS BAD IN LAW AND WIT HOUT JURISDICTION AND SO ON SO FORTH. 8.3.3. CONSIDERING THE FACTS OF THE ISSUE AS DISC USSED SUPRA, THE AO WAS JUSTIFIED IN REOPENING THE ASSESSMENT BY ISSUANCE O F NOTICE U/S 148 OF THE ACT AND CONCLUDING THE ASSESSMENT U/S 144 OF THE AC T ON THE BASIS OF MATERIALS AVAILABLE ON RECORD AT THAT RELEVANT TIME . IT IS ORDERED ACCORDINGLY. 8.4. THE NEXT GROUND IS WITH REGARD TO THE ALLOWANC E OF DEDUCTIONS IN RELATION TO THE DONATIONS MADE BY THE ASSESSEE TRUS T. THE ASSESSEE APPEARS TO HAVE CLAIMED DONATIONS OF RS.16,08,060/- . 8.4.1. THE BRIEF CONTENTION OF THE ASSESSEE WAS THA T THE CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION IN RELATION TO THE DONATIONS MADE BY THE ASSESSEE. 8.4.2. THE AO HAD ADDED THE DONATION CLAIMED BY THE ASSESSEE TO THE TOTAL INCOME, ACCORDING TO HIM, THE EXPENDITURE DEBITED I N INCOME & EXPENDITURE ACCOUNT WHICH WAS NOT FOR THE PURPOSE OF EARNING TH E INCOME. THE CIT(A) IN HIS IMPUGNED ORDER STATED THAT THE DONATION ALLE GED TO HAVE BEEN MADE FOR PURCHASE OF CLOTHES FOR DISTRIBUTION TO SLUM D WELLERS, TREATMENT TO SICK PEOPLE, EDUCATION FEES FOR POOR CHILDREN ETC., 8.4.3. WE HAVE DULY PERUSED THE I & E ACCOUNT WHE REIN DONATION OF RS.16,08,060/- HAS BEEN CLAIMED. HOWEVER, NO DETAI LS OF THE ALLEGED DONATIONS MADE HAVE BEEN FURNISHED. NO DOCUMENTARY EVIDENCES HAVE BEEN FORTH-COMING EITHER FOR THE PURCHASE OF CLOTH ES OR ALLEGED DISTRIBUTION TO THE SLUM DWELLERS. LIKEWISE, NO PROOF OF ADMIN ISTRATING TREATMENT TO ITA NO.323 & 324/BANG/09 PAGE 11 OF 15 NEEDY ETC. WAS ADDUCED TO SUBSTANTIATE ITS CLAIM. MERE CLAIM IN I & E ACCOUNT OF SUBSTANTIAL DONATIONS ALLEGED TO HAVE BE EN DOLED OUT TO THE NEEDY WOULD NOT SUFFICE. IN VIEW OF THE ABOVE, WE ARE INCLINED TO AGREE WITH THE AO ON THIS POINT. 8.5. THE OTHER GRIEVANCE OF THE ASSESSEE WAS THAT T HE TREATMENT METED OUT TO COMPUTATION OF INCOME AS WELL AS THE LEVY OF MAXIMUM MARGINAL RATE ETC., 8.5.1. IT WAS THE CASE OF THE AO THAT THE ASSESSEE HAD ADVANCED RS.33.42 LAKHS TO ITS MEMBERS WITHOUT ANY INTEREST WHICH WAS VIOLATION OF S.13(1)(C) (II) OF THE ACT AND THAT THE ASSESSEE HA D INVESTED ITS FUNDS IN SHARES OF VARIOUS COMPANIES WHICH WAS ALSO IN VIOLA TION OF S.13(1)(D)(I) OF THE ACT AND, THUS, THE ENTIRE INCOME OF THE ASSESSE E TRUST WAS BROUGHT TO TAX AT MAXIMUM MARGINAL RATE AS PER PROVISO TO S.16 4(2) OF THE ACT. 8.5.2 THE CONTENTION OF THE ASSESSEE THAT THE TRU ST HAD EARNED INCOME OF RS.1,08,549/- OTHERWISE THAN WHAT WAS SPE CIFIED IN S.11(5) OF THE ACT WAS EXAMINED AND OBSERVED BY THE CIT(A) IN HIS IMPUGNED ORDER CITED SUPRA. TO ILLUSTRATE FURTHER, WE SHALL HAVE A GLANCE OF S .164(2) OF THE ACT. S.164 .. (2) IN THE CASE OF RELEVANT INCOME WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURP OSES, OR WHICH IS OF THE NATURE REFERRED TO IN SUB-CLAUSE (IIA) OF CLAUSE (2 4) OF S.2 OR WHICH IS OF THE NATURE REFERRED TO IN SUB-SECTION (4A) OF SECTION 1 1, TAX SHALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12, AS IF THE RELEVANT INCOME NOT SO EXEMPT WERE THE INCOME OF AN ASSOCIATION OF PERSONS: PROVIDED THAT IN A CASE WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12 BY VIRTUE OF THE ITA NO.323 & 324/BANG/09 PAGE 12 OF 15 PROVISIONS CONTAINED IN CLAUSE OR CLAUSE (D) OF S UB-SECTION (1) OF SECTION 13, TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE 8.5.3. IN VIEW OF THE FACTS OF THE CASE, WE HEREBY DIRECT THE LD. AO TO LOOK INTO THE CONTENTION OF THE ASSESSEE AND WORK O UT THE EXACT AMOUNT OF INVESTMENTS AND INCOME EARNED OUT OF SUCH INVESTMEN TS WHICH VIOLATED S. 11(5) OF THE ACT AND, ACCORDINGLY, ADOPT THE MAXIM UM MARGINAL RATE TO THAT EXTENT OF INCOME WHICH HAD FORFEITED THE EXEMPTION U/S 11(5) OF THE ACT. FOR THIS LIMITED PURPOSE, THIS ISSUE IS REMITTED BA CK ON THE FILE OF THE AO TO CARRY OUT THE ABOVE MENTIONED DIRECTIONS. IT IS OR DERED ACCORDINGLY. A.Y 2005-06: 9. IN THE FIRST GROUND THE ASSESSEE, AS IN LAST ASS ESSMENT YEAR, HAD OBJECTED TO FOR HAVING CONCLUDED THE ASSESSMENT EX- PARTE U/S 144 OF THE ACT. 9.1. AT THE OUT-SET, WE WOULD LIKE TO POINT OUT TH AT AN IDENTICAL ISSUE HAD CROPPED UP IN THE IMMEDIATELY PRECEDING A Y AND FOR THE REASONS RECORDED THEREIN, WE HAVE DECIDED THE ISSUE AGAINST THE ASSESSEE AND, THUS, JUSTIFIED THE STAND OF THE AO ON THIS POINT. AS THE ISSUE RAISED IS SIMILAR TO THAT OF THE PREVIOUS AY, OUR FINDINGS ON THE ISSUE HOLDS GOOD FOR THIS AY TOO. IT IS ORDERED ACCORDINGLY. 10. THE NEXT GROUNDS RELATES TO DONATIONS, WE FIND THAT THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.33,74,509 /- BEING DONATIONS WHICH WAS DEBITED IN THE I & E ACCOUNT. AS IN LAST YEAR, THE AO HAD ADDED BACK THE ENTIRE AMOUNT ON THE GROUND THAT THIS WAS NOT AN EXPENDITURE ITA NO.323 & 324/BANG/09 PAGE 13 OF 15 INCURRED FOR EARNING THE INCOME. WHEN THIS WAS OBJ ECTED TO BEFORE THE CIT (A) WHO, AS IN LAST AY, HAD MENTIONED THAT HE HAD E XAMINED THE DETAILS OF DONATIONS FURNISHED ETC., HOWEVER, NO CONCLUSIVE FI NDING WAS GIVEN ON THE ADMISSIBILITY OR OTHERWISE OF THE CLAIM. 10.1. THE BRIEF SUBMISSION BEFORE US WAS THAT THE CIT(A) OUGHT TO HAVE ALLOWED DEDUCTION AS CLAIMED IN RELATION TO TH E DONATIONS MADE BY THE ASSESSEE TRUST. 10.1.1. WE HAVE A GLANCE OF THE LIST CONTAINING DO NATION PAID DURING THE YEAR 2004-05 (A.Y 2005-06) WHEREIN IT HAS BEEN MENTIONED THAT (I) DONATED FOR VILLAGE DEVELOPMENT GURU NAIK RS.10,000 /-; (II) DONATED MENTAL TREATMENT HUSBAND OF KIRAN RS.90,000/-; (III) DISTR IBUTE CLOTHES TO POOR PEOPLE OF VARIOUS PLACES RS.11,70,983/-; (IV)SWEATE RS AND BLANKETS DISTRIBUTED TO POOR OF RS.90,000/- AND RS.88,494/- RESPECTIVELY; (V) PURNI DEVI SDME TRUST RS.5,26,800/-; (VI) AK PRANI DAYA S ANG RS.3,30,000/- ETC. IRONICALLY, NOT EVEN A RECEIPT WORTH THE NAME WAS EVIDENCED WHEN THE ASSESSEE TRUST CLAIMED A SUBSTANTIAL AMOUNT ALLEGED TO HAVE BEEN DONATED. IN THE ABSENCE OF ANY PROOF, WE ARE OBLIGED TO AGRE E WITH THE REASONING OF THE AO ON THIS POINT AND, ACCORDINGLY, DECIDE THE I SSUE AGAINST THE ASSESSEE. 11. THE ASSESSEES OTHER GRIEVANCE BEING - (A) THAT THE COMPUTATION OF TAX AT MAXIMUM MARGINA L RATE WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT; (B) THE INCOME COMPUTED BY THE AO WAS ERRONEOUS AND NOT IN ACCORDANCE WITH LAW; & (C) THE COMPUTATION OF TAX AND THE RATE OF TAX APP LIED BY THE AO WAS ERRONEOUS AND NOT IN ACCORDANCE WITH LAW ITA NO.323 & 324/BANG/09 PAGE 14 OF 15 11.1. HOWEVER, THE ASSESSEE HAD NOT SPELT OUT EXPL ICITLY CLEAR AS TO HOW THE AO HAD ERRONEOUSLY COMPUTED ITS INCOME ETC. , 11.1.1 THIS GRIEVANCE OF THE ASSESSEE HAS, HOWEVER, BEEN DULY ADDRESSED TO IN THE FORE-GOING PARAGRAPHS AND TO CLEAR THE CO NFUSION, WE WOULD LIKE TO MAKE IT IMPLICITLY CLEAR THAT THE AO SHALL LOOK INT O THESE ASPECTS AND TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISION S OF THE ACT. IN THE MEANWHILE, THE ASSESSEE TRUST IS ADVISED, THROUGH I TS AR, TO FURNISH ALL THE RELEVANT PARTICULARS AT ITS POSSESSION WHICH WOULD FACILITATE THE AO TO CARRY OUT THIS BENCHS DIRECTIONS CITED SUPRA EXPEDITIOUS LY. 12. THE OTHER GROUND OF THE ASSESSEE WAS THAT THE AO ERRED IN INCLUDING INCOME FROM TRANSFER OF LONG TERM CAPITAL ASSET BEING EQUITY SHARES IN COMPUTING THE TOTAL INCOME. 12.1. HOWEVER, ON A CRITICAL EXAMINATION OF THE IMPUGNED ORDER OF THE AO, WE FIND THAT THE AO HAD ADDED RS.9.58,841/- CL AIMED AS EXPENDITURE AS PER I & E ACCOUNT BY THE ASSESSEE AS INCOME AND ALSO RS.33,74,509/- BEING DONATIONS CLAIMED AS INCOME BASED OF THE MATE RIAL AVAILABLE ON RECORD AT THE TIME OF CONCLUSION OF THE ASSESSMENT PROCEEDINGS. 12.1.2. ON A PERUSAL OF THE GROUNDS RAISED BEFORE T HE CIT(A) AGAINST THE IMPUGNED ORDER OF THE AO, THIS ISSUE HAD NOT BE EN AGITATED. HOWEVER, TAKING COGNIZANCE OF THE ASSESSEES CONTENTION RAIS ED BEFORE US, THE AO IS DIRECTED TO LOOK INTO THE GRIEVANCE OF THE ASSESSEE AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE AC T, OF COURSE, AFTER AFFORDING AN OPPORTUNITY TO THE ASSESSEE OF BEING H EARD. IT IS ORDERED ACCORDINGLY. ITA NO.323 & 324/BANG/09 PAGE 15 OF 15 13. IN THE RESULT : THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 200 4-05 AND 2005-06 ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPTEMBER, 2010. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 29 TH SEPTEMBER, 2010. DS/- COPY TO: BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE. 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE