DDIT (E), New Delhi V. Pran Nath Educational Medical Society, New Delhi

ITA 3846/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4084 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-05-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 10-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H K LAL
• Keywords: Search and seizure; Charitable institution; Question of law; Validity of assessment
• Section: 143(3); 12A; 143(1); 147; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO. 3846/D/2009 ASSESSMENT YEAR : 2000-01 DY. D.I.T.(E), VS. PRAN NATH EDUCATIONAL INV. CIR.-II, MEDICAL SOCIETY, A-1/4, NEW DELHI SHAKTI NAGAR EXTN., NEW DELHI (APPELLANT) (RESPONDENT) PAN NO.AAATP 2644M CROSS OBJECTION NO.359/D/09 ( IN I.T.A. NO.3846/D/09) ASSESSMENT YEAR : 2000-01 PRAN NATH EDUCATIONAL MEDICAL VS. DY. DIT(E) SOCIETY, A-1/4, SHAKTI NAGAR EXT., INV. CIR.-II, NEW DELHI NEW DELHI ( APPELLANT ) ( RESPONDENT) ASSESSEE BY : SHRI AMOL SINHA, ADVOCATE RESPONDENT BY : SHRI H.K. LAL, SR. DR ORDER PER K.G. BANSAL: AM: THIS APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A)-XXI, N EW DELHI, PASSED ON 01-06-2009 IN APPEAL NO.204/07-08, PERTAINING TO ASSESSMENT YEAR 2000-01. THE ASSESSMENT ORDER WAS PASSED BY THE A SSTT. DIRECTOR OF 2 INCOME-TAX (EXEMPTION), TRUST CIRCLE-IV, NEW DELHI, ON 31.12.2007 UNDER THE PROVISIONS OF SECTION 143(3) READ WITH SE CTION 147 OF THE ACT. TWO GROUNDS HAVE BEEN TAKEN IN THE APPEAL THA T ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A ) ERRED IN DELETING THE ADDITION OF RS.1,50,226/- REPRESENTING NON-GENU INE DONATION BY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTION) VS. KESHAV SOCIA L CHARITABLE FOUNDATION (2005) 278 ITR 152. IN THIS CONNECTION IT IS MENTIONED IN THE GROUNDS THAT THE SUM OF RS.1,50,226/- WAS MEREL Y AN ACCOMMODATION ENTRY OBTAINED BY PAYING EQUIVALENT A MOUNT IN CASH TO THE ENTRY PROVIDER. IT IS FURTHER MENTIONED THAT THE EXEMPTION WAS GRANTED U/S 11 BY NOT CONSIDERING THE ADVERSE INFER ENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER, LEADING TO REDUCTI ON IN INCOME BY AN AMOUNT OF RS.9,42,706/- 2. THE FACTS OF THE CASE ARE THAT NIL RETURN WAS FILED ON 24.08.2001 WHICH WAS PROCESSED U/S 143(1) ON 22.01.2001. SUBSEQUENT LY INFORMATION WAS RECEIVED THAT THE ASSESSEE RECEIVED ACCOMMODATI ON ENTRY OF RS.1,50,226/- BY WAY OF DONATION ON 08.12.1999 FOR WHICH EQUIVALENT AMOUNT WAS PAID IN CASH TO THE ENTRY PROVIDER. ACT ING ON THIS INFORMATION, THE ASSESSMENT PROCEEDINGS WERE INITIA TED U/S 147. AFTER 3 CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE INTIMATION OF ACCUMULATION OF INCOME U/S 11(2) OF AN AMOUNT OF RS .9,27,042/-, IT WAS HELD THAT (I) NO EVIDENCE WAS FILED REGARDING APPLICATION OF INCOME FOR CHARITABLE PURPOSES; (II) THE ENTRY TAKE N FROM SHRI BRIJESH KUMAR AND RAM BAHADUR, AGGREGATING TO RS.1,50,226/- , REPRESENTED THE INCOME LIABLE TO BE TAXED U/S 68 OF THE ACT. AGGRIEVED BY THIS ORDER, THE APPEAL WAS FILED BEFOR E THE CIT(A)-XXI, NEW DELHI, WHO DISPOSED IT OFF ON 01.06.2009. THE LEARNED CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSEE HAS PROVED THE IDE NTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION STANDS PROVED. THE DONORS WERE ASSESSED TO TAX AND HAD GIVEN DIRECTION THAT THE SAME MAY BE TR EATED AS CORPUS DONATION. RELYING ON THE DECISION OF KESHAV SOCIAL CHARITABLE FOUNDATION (SUPRA), IT WAS HELD THAT SECTION 68 HAD NO APPLICATION ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. HE ALSO ALLOWED THE BEN EFIT OF ACCUMULATION OF INCOME U/S 11(2) AS FORM NO.10 HAD BEEN FILED IN TI ME. AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US. THE LIMITED CASE OF THE LEARNED DR BEFORE US IS THA T THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KESHAV SOCI AL CHARITABLE FOUNDATION (SUPRA) HAS NOT BEEN ACCEPTED BY THE DEP ARTMENT AND ITS SLP IS PENDING BEFORE THE HONBLE SUPREME COURT IN THE MAT TER. IN REPLY, THE CASE 4 OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE DECISION HAS BEEN RENDERED BY THE JURISDICTIONAL HIGH COURT, WHICH IS BINDING ON THE TRIBUNAL AS WELL AS ON THE LOWER AUTHORITIES. THE OPERATION OF THIS JU DGMENT HAS NOT BEEN STAYED IN ANY MANNER BY ANY COURT AND THUS MERE PENDENCY O F THE SLP CANNOT BAR THE APPLICATION OF THE RATIO OF THE CASE. COMING T O THE FACTS OUR ATTENTION WAS DRAWN TO PAGES 6 TO 8, BEING THE INCOME AND EXPENDI TURE ACCOUNT, BALANCE SHEET, AND .THE RESOLUTION PASSED IN MEETING OF THE EXECUTIVE COMMITTEE HELD ON 16.03.2000 REGARDING ACCUMULATION OF INCOME U/S 11(2). THIS RESOLUTION AND FORM NO.10 ARE STATED TO HAVE BEEN FILED ALONGW ITH THE RETURN OF INCOME. THE PROFIT AND LOSS ACCOUNT SHOWS RECEIPT OF DONATION AMOUNTING TO RS.8,91,000/-. IT WAS ARGUED THAT SINCE THIS AMOUN T HAS BEEN SHOWN AS INCOME FROM PROPERTY HELD UNDER TRUST, THERE WAS NO OCCASION TO CONSIDER THE SAME AMOUNT AGAIN UNDER THE PROVISIONS OF SECTION 6 8. IN REGARD TO THE EXPENSES, IT IS SUBMITTED THAT THERE ARE ROUTINE EX PENSES ON SALARY, PRINTING AND STATIONERY, CONVEYANCE AND ENTERTAINMENT BESIDE S APPLICATION OF INCOME OF RS.6,245/- AS RELIEF TO POOR. IN THESE CIRCUMST ANCES, IT IS ARGUED THAT THE ORDER OF THE LEARNED CIT(A) IS REQUIRED TO BE UPHEL D. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMIS SIONS MADE BEFORE US. THE AMOUNT OF RS.8,91,000/- IS SHOWN BY THE AS SESSEE AS INCOME FROM PROPERTY HELD UNDER TRUST, BEING THE DONATIONS RECE IVED. THE WHOLE OF THE 5 AMOUNT HAS BEEN CONSIDERED AS INCOME AND THUS, WE A RE OF THE VIEW THAT EVEN IF IDENTITY ETC. OF THE DONORS IS NOT PROVED, THE SAME DOES NOT MAKE ANY DIFFERENCE TO THE INCOME OF THE ASSESSEE. THE ASSE SSEE HAS DULY FILED FORM NO.10 BEFORE THE ASSESSING OFFICER. SINCE THE ASSE SSEE IS A REGISTERED SOCIETY U/S 12A OF THE ACT, THE BENEFIT CANNOT BE D ENIED TO IT. IN THE LIGHT OF THE ORDER OF THE ASSESSING OFFICER THAT THE BOOKS E TC. WERE NOT PRODUCED BEFORE HIM, THE ONLY ADVERSE CONCLUSION WHICH CAN B E DRAWN IS THAT APPLICATION OF INCOME OF RS.6,245/- IS NOT PROVED A ND, THEREFORE, IT CANNOT BE DEDUCTED FROM THE TOTAL INCOME U/S 11(1). HAVING C OME TO THIS CONCLUSION WE MAY STILL REFER TO THE DECISION IN THE CASE OF K ESHAV SOCIAL CHARITABLE FOUNDATION (SUPRA), IN WHICH THE HONBLE COURT DISP ROVED THE APPROACH OF THE ASSESSING OFFICER AND HELD THAT THE PROVISIONS OF SECTION 68 HAVE NO APPLICATION TO THE FACTS OF THE CASE WHEN DONATIONS WERE SHOWN AS INCOME. FOR THE SAKE OF READY REFERENCE THE RELEVANT PORTIO N OF THE JUDGMENT IS REPRODUCED BELOW:- WE ARE AFRAID THAT IT IS NOT POSSIBLE FOR US TO AG REE WITH THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE AND W E ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. IN S.RM. M. CT. M. TIRUPPANI TRUST VS. CIT (1998) 2 30 ITR 636 (SUPREME COURT), IT HAS BEEN HELD THAT U/S 11(1 ) OF THE ACT, EVERY CHARITABLE OR RELIGIOUS TRUST IS ENTITLED TO DEDUCTION OF CERTAIN INCOME FROM ITS TOTAL INCOME OF THE PREVIOU S YEAR. THE INCOME SO EXEMPT IS THE INCOME WHICH IS APPLIED BY THE 6 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, IN THE PRESENT CAS E, WAS 25 PER CENT. IN THE APPEAL THAT WE ARE CONCERNED WITH , IT HAS BEEN FOUND AS A MATTER OF FACT THAT THE ASSESSMENT HAD A PPLIED MORE THAN 75 PER CENT OF THE DONATIONS FOR CHARITABLE PU RPOSES AS PER ITS OBJECTS. TO OBTAIN THE BENEFIT OF THE EXEMPTION U/S 11 OF TH E ACT, THE ASSESSEE IS REQUIRED TO SHOW THAT .THE DONATIONS WE RE VOLUNTARY. IN THE PRESENT CASE, THE ASSESSEE HAD NOT ONLY DISC LOSED ITS DONATIONS, BUT HAD ALSO DISCLOSED ITS DONATIONS, BU T HAD ALSO SUBMITTED A LIST OF DONORS. THE FACT THAT THE COMP LETE LIST OF DONORS WAS NOT FILED OR THAT THE DONORS WERE NOT PR ODUCED, DOES NOT NECESSARILY LEAD TO THE INFERENCE THAT THE ASSE SSEE WAS TRYING TO INTRODUCE UNACCOUNTED MONEY BY WAY OF DONATION R ECEIPTS. THIS IS MORE PARTICULARLY SO IN THE FACTS OF THE CA SE WHERE ADMITTEDLY MORE THAN 75 PER CENT OF THE DONATIONS W ERE APPLIED FOR CHARITABLE PURPOSES. SECTION 68 OF THE ACT HAS NO APPLICATION TO THE FAC TS OF THE CASE BECAUSE THE ASSESSEE HAD IN FACT DISCLOSED THE DONA TIONS OF RS.18,24,200/- AS ITS INCOME AND IF CANNOT BE DISPU TED THAT ALL RECEIPTS, OTHER THAN CORPUS DONATIONS, WOULD BE INC OME IN THE HANDS OF THE ASSESSEE. THERE WAS, THEREFORE, 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 NATUR E, SINCE IT WAS DULY REGISTERED UNDER THE PROVISIONS OF SECTION 12A OF THE ACT. FOR THESE REASONS, WE DO NOT FIND ANY MERIT IN THE APPEAL. NO SUBSTANTIAL QUESTION OF LAW ARISES. DISMISSED. 3. THE LEARNED COUNSEL DID NOT PRESS THE CROSS OBJECTI ON IN WHICH VALIDITY OF ASSESSMENT PROCEEDINGS U/S 147 WAS CHALLENGED. 7 4. THE RESULT OF AFORESAID DISCUSSION IS THAT THE ASSE SSEE IS ENTITLED TO DEDUCTION U/S 11(1) OF ALL EXPENSES EXCEPT THE APPL ICATION OF INCOME SHOWN AT RS.6,245/-. 5. IN RESULT, THE APPEAL IS PARTLY ALLOWED AND THE CRO SS OBJECTION IS DISMISSED AS INFRUCTUOUS. THIS ORDER WAS ORDER PRONOUNCED IN OPEN COURT ON 12 .05.2010 SOON AFTER THE CONCLUSION OF THE HEARING. SD/- SD/- ( C.L. SETHI ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 12.05.2010. NS COPY FORWARDED TO:- 1. DY. DIRECTOR OF INCOME TAX (E), INV. CIRCLE-II, NEW DELHI. 2. PRAN NATH EDUCATIONAL MEDICAL SOCIETY, A-1/4, SH AKTI NAGAR EXTN., NEW DELHI. 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).