Ch. Lekh Raj Educational & Charitable Trust, Yamunanagar V. DCIT, Yamunanagar

ITA 436/CHANDI/2015

• Counselvise Citation: 43621514 RSA 2015
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Revenue expenditure; Capital expenditure
• Section: 12AA; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.436 /CHD/2015 (ASSESSMENT YEAR : 2010-11) CH.LEKH RAJ EDUCATIONAL & VS. THE D.C.I.T., CHARITABLE TRUST, CIRCLE 111, SANTPURA ROAD, YAMUNANAGAR. YAMUNANAGAR PAN: AAATC9657M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GOYAL RESPONDENT BY : SHRI MANOJ MISHRA, DR DATE OF HEARING : 12.10.2015 DATE OF PRONOUNCEMENT : .12.2015 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INC OME TAX (APPEALS), PANCHKULA DATED 20.2.2015 FOR ASSESSMENT YEAR 2010-11. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN EDUCATIONAL TRUST REGISTERED UNDER S ECTION 12AA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). DURING THE YEAR UNDER CONSIDERATION, IT FILED ITS R ETURN OF INCOME ON 15.10.2010 DECLARING NIL INCOME CLAIMING ITS 2 ENTIRE INCOME AS EXEMPT UNDER SECTION 11 OF THE ACT . THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDING S, NOTED THAT AN AMOUNT OF RS.3,52,45,500/- WAS SHOWN BY THE ASSESSEE AS CORPUS FUND RECEIVED DURING THE YEA R. A LIST OF 78 PERSONS INVOLVING DONATION OF RS.2,00,00 ,000/- WAS FURNISHED BY THE ASSESSEE CONTAINING NAMES, ADDRESSES, DATE OF DONATION AND AMOUNT OF DONATION RECEIVED. THE ASSESSING OFFICER PICKED UP SEVEN PE RSONS RANDOMLY OUT OF 78 PERSONS AND AFTER CALLING THEM RECORDED THEIR STATEMENTS IN ORDER TO ASCERTAIN THE IR IDENTITY AND CREDITWORTHINESS AND GENUINENESS OF TH E DONATION. THE ASSESSING OFFICER IN HIS ORDER NOTED THAT ALL THESE SEVEN PERSONS DENIED HAVING GIVEN ANY DON ATION TO THE ASSESSEE. THE ASSESSEE MADE A REPLY AND OBJ ECTED TO THE ADDITION PROPOSED UNDER SECTION 68 OF THE AC T. THE CONTENTION OF THE ASSESSEE WAS THAT SUCH AN ADDITIO N ON THE BASIS OF ONLY SEVEN PERSON OUT OF 78 PERSONS IN VOLVED IS DEVOID OF ANY MERITS. FURTHER, NO OPPORTUNITY T O CROSS EXAMINE THE SAID SEVEN PERSONS WAS GIVEN TO THE ASS ESSEE. THE ASSESSING OFFICER AGAIN ASKED THE ASSESSEE TO P RODUCE 14 PERSONS OUT OF WHICH FOUR WERE AMONGST THE EARLI ER LIST FOR CROSS EXAMINATION. THE PERSONS WHO HAD EARLIER CAME TO THE ASSESSING OFFICER, PREFERRED NOT TO APPEAR A GAIN BEFORE HIM. EIGHT OTHER PERSONS ACCEPTED TO THE FA CT THAT THEY HAD GIVEN DONATIONS TO THE ASSESSEE TRUST, WHI LE TWO OTHERS DENIED DOING SO. THE SUM AND SUBSTANCE OF T HESE INVESTIGATIONS WERE THAT OUT OF TOTAL 18 PERSONS CA LLED FOR, 9 DENIED HAVING GIVEN ANY DONATION TO THE ASSESSEE. ON 3 THE BASIS OF THIS, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT IT SEEMS THAT 50% OF THE DONATIONS RECEIVED BY THE ASSESSEE ARE OUT OF ITS OWN MONEY A ND MADE THE ADDITION OF 50% OF RS.2,00,00,000/-, I.E. RS.1,00,00,000/- UNDER SECTION 68 OF THE ACT. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE MADE MANIFOLD SUBMISSIONS. IT WAS STATED THAT THER E WERE CERTAIN DISCREPANCIES IN THE INTERPRETATION ARRIVED AT BY THE ASSESSING OFFICER FROM THE STATEMENTS OF A FEW PERSONS RECORDED BY HIM. FURTHER, IT WAS SUBMITTED THAT TH E AMOUNT ADDED BY THE ASSESSING OFFICER ESTIMATING @ 50% ONLY ON THE BASIS OF TOTAL 18 PERSONS OUT OF TOTAL 78 PERSONS FROM WHOM THE DONATIONS HAVE BEEN RECEIVED, IS NOT AS PER LAW. FURTHER, IT WAS STATED THAT THE AM OUNT ADDED UNDER SECTION 68 OF THE ACT WAS A PART OF COR PUS DONATION AND THE SAME CANNOT BE TREATED AS INCOME O F THE PREVIOUS YEAR BY ANY STRETCH OF IMAGINATION AS THE CORPUS FUND IS NEVER AN INCOME, HENCE CANNOT BE TREATED AS INCOME AT THE WHIMS AND FANCIES OF THE ASSESSING OF FICER. WITHOUT PREJUDICE, IT WAS SUBMITTED THAT EVEN IF FO R THE SAKE OF ARGUMENTS, THE CORPUS FUND IS TREATED AS TH E INCOME OF THE ASSESSEE, THE BETTER COURSE WOULD HAV E BEEN TO INDUCT IT AS DONATIONS AS THE EXPENDITURE WAS MU CH MORE THAN THE PRESCRIBED LIMIT OF 85% AS THE ASSESS ING OFFICER HAD NOT BEEN ABLE TO POINT OUT ANY DEFECT I N THE BOOKS RELATED TO EXPENDITURE OF THE TRUST. AFTER A NALYZING THE SUBMISSION OF THE ASSESSEE AND RELYING ON CERTA IN 4 JUDICIAL PRONOUNCEMENTS, THE LEARNED CIT (APPEALS) FOUND THAT THE ASSESSEE HAS NOT PROVED SATISFACTORILY THE CREDITWORTHINESS OF THE DONORS AND THE GENUINENESS OF THE TRANSACTION. IN THIS MANNER, HE UPHELD THE ORDER O F THE ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THIS ORDER, THE ASSESSEE HAS COME U P IN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.1,00,00,000/- RECEIVED UNDER CORPUS FUND DONATION U/S 68 OF INCOME TAX ACT. (PARA OF ASSESSMENT ORDER) (PARA 2 PAGE 3-8 OF CIT(A) ORDER) 2. THAT AUTHORITIES BELOW HAVE ERRED IN LAW AND FAC TS IN NOT INCLUDING THE UNEXPLAINED CORPUS FUND DONATIONS ADDED U/S 68 AMOUNTING RS.1,00,00,000/- AS GROSS RECEIPTS OF THE TRUST AND THERE BY NOT ADJUST ING EXPENDITURE AGAINST THIS ADDITION U/S 68. (PARA 7 PAGE 7 OF ASSESSMENT ORDER) 2(A) THAT APPELLANT CRAVES LEAVE TO ADD, ALTER, AME ND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFOR E OR AT THE TIME OF HEARING OF CASE. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE ARGUING BEFORE US REITIERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HIS ARGUMENT WAS THAT THE A DDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF T HE ACT IS NOT AS PER LAW, BECAUSE THE ASSESSING OFFICER CA NNOT TAKE ADVERSE INFERENCE WITH REGARD TO THE WHOLE AMO UNT OF 5 THE CORPUS DONATION ONLY ON THE BASIS OF STATEMENTS OF 9 PERSONS, GIVING THE FACT THAT THE DONATION WAS RECE IVED FROM AS MANY AS 78 PERSONS. FURTHER, HIS MAIN ARGU MENT WAS THAT EVEN IF FOR THE SAKE OF ARGUMENT, THE CORP US DONATION AMOUNTING TO RS.1,00,00,000/- IS CONSIDERE D TO BE THE INCOME OF THE ASSESSEE, THE APPLICATION OF I NCOME BEING MORE THAN 85%, EXEMPTION UNDER SECTION 11 OF THE ACT IS AVAILABLE TO IT. BY DRAWING ATTENTION TO VA RIOUS PAGES OF THE PAPER BOOK, IT WAS SUBMITTED THAT THE GROSS REVENUE RECEIPTS OF THE ASSESSEE WERE 716.19 LACS, WHEREAS THE REVENUE EXPENDITURE IT SELF IS 726.05 L ACS. ADDITIONALLY, THE CAPITAL EXPENDITURE WAS RS.1425.1 2 LACS. THE REPAYMENT OF TERM LOAN WAS IN ADDITION TO THIS. HENCE, THE ASSESSEE HAD SPENT 304% OF REVENUE RECEI PTS FOR THE PURPOSE OF THE TRUST AGAINST THE PRESCRIBED 85%. THE TOTAL DONATION RECEIVED DURING THE YEAR WAS 352 .46 LACS. EVEN IF THAT IS CONSIDERED TO BE PART OF TOT AL RECEIPTS, EVEN THEN THE EXPENDITURE INCURRED WAS MO RE THAN 200% OF GROSS RECEIPTS. IN THIS VIEW, A PRAYE R WAS MADE TO DELETE THE ADDITION MADE BY THE ASSESSING O FFICER. 7. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THAT OF THE LEARNED CI T (APPEALS). 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT A LIST CO NTAINING 6 NAME, ADDRESS AND AMOUNT OF 78 PERSONS CLAIMED TO H AVE GIVEN CORPUS DONATION WAS PROVIDED BY THE ASSESSEE TO THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER CHOSE TO CALL ONLY 18 PERSONS OUT OF THESE 78 PERSONS. O N THE BASIS OF INTERPRETATION OF STATEMENTS OF THESE PERS ONS, THE ASSESSING OFFICER HAS DRAWN INFERENCE AGAINST ALL T HE 78 PERSONS AND MADE ADDITION UNDER SECTION 68 OF THE A CT, WHICH GOT CONFIRMED BY THE LEARNED CIT (APPEALS). WITHOUT GETTING INTO THE MERITS OF THE INTERPRETATI ON OF STATEMENTS OF THESE PERSONS, FIRST OF ALL, WE DO NO T APPRECIATE THE WAY ASSESSING OFFICER HAS MADE ADDIT ION OF THE WHOLE AMOUNT OF CORPUS DONATION RECEIVED BY THE ASSESSEE. AS PER SECTION 68 OF THE ACT, THE ADDITI ON CAN BE MADE BY THE ASSESSING OFFICER IF HE IS NOT SATIS FIED AS TO THE IDENTITY AND CREDITWORTHINESS OF THE PERSON GIVING MONEY AS WELL AS THE GENUINENESS OF THE TRANSACTION , WITH REGARD TO ANY AMOUNT CREDITED IN THE BOOKS OF THE ASSESSEE. HOWEVER, THIS SECTION DOES NOT GIVEN POW ER TO THE ASSESSING OFFICER TO MAKE ADDITION BASED ON HIS INFERENCE DRAWN ON A SAMPLE TRANSACTIONS. OUT OF 7 8 PERSONS, THE ASSESSING OFFICER PREFERRED TO CALL ON LY 18 PERSONS, OUT OF THESE 18 PERSONS, 9 PERSONS HAVE AC CEPTED THE FACT OF GIVING DONATION. HOW CAN A CONCLUSION BE DRAWN THAT SINCE 9 PERSONS OUT OF 18 PERSONS HAVE D ENIED GIVING DONATION. EVEN OUT OF REMAINING 60 PERSONS, 30 PERSONS WOULD HAVE DENIED IF THEY WERE CALLED. THI S IS STRETCHING THE POWER OF INVESTIGATION GIVEN TO THE ASSESSING OFFICER, TOO FAR. THE ASSESSING OFFICER CANNOT 7 MAKE ADDITION UNDER SECTION 68 OF THE ACT IN SUCH A CASUAL MANNER. IT HAS BEEN HELD IN THE CASE OF CIT VS P.K.NOORJAHAN 237 ITR 570(SC) THAT THE ADDITION CA NNOT BE MADE BY THE ASSESSING OFFICER JUST FOR THE SAKE OF MAKING ADDITION. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DONATION RECEIVED FR OM THE PERSONS WHO WERE NOT CALLED AND THE PERSONS WHO WER E CALLED AND ACCEPTED THE FACT OF GIVING DONATION, CA NNOT BE SAID TO BE NOT GENUINE. AS REGARDS THE PERSONS WHO HAD COME AND DENIED BEFORE THE ASSESSING OFFICER THE FA CT OF GIVING DONATION, WE OBSERVE THAT CERTAIN FALLACIES WERE POINTED OUT BY THE ASSESSEE BEFORE THE LOWER AUTHOR ITIES, WHICH HAVE NOT BEEN DEALT WITH BY EITHER THE ASSESS ING OFFICER OR THE LEARNED CIT (APPEALS). FURTHER, CRO SS EXAMINATION OF THESE PERSONS WAS SPECIFICALLY ASKED BY THE ASSESSEE, WHICH WAS NOT PROVIDED TO IT. IN THIS V IEW, THE ADDITION EVEN ON THESE ACCOUNTS CANNOT BE MADE. 9. EVEN OTHERWISE, THERE IS A MORE BASIC AND GERMAN ISSUE ON THE BASIS OF WHICH THE ASSESSEE GET S THE RELIEF. THE ADDITION ON ACCOUNT OF CORPUS DONATION IN THE PRESENT CASE, EVEN IF SUSTAINED, WOULD GO TO INCREA SE THE INCOME OF THE ASSESSEE. BEFORE US, IT HAS BEEN DEMONSTRATED WITH THE HELP OF INCOME AND EXPENDITUR E ACCOUNT ANNEXED TO THE PAPER BOOK THAT THE REVENUE RECEIPTS OF THE ASSESSEE DURING THE YEAR ARE 7,16,1 8,794/-, WHILE THE REVENUE EXPENSES, (BEING APPLICATION OF I NCOME FOR CHARITABLE PURPOSES) ARE RS.7,26,05,864.72. IT IS NOT THE 8 CASE OF THE ASSESSING OFFICER THAT THIS APPLICATION OF INCOME IS NOT FOR CHARITABLE PURPOSES. HE HAS NOT DENIED ASSESSEE THE EXEMPTION UNDER SECTION 11 OF THE ACT AND NOWHERE HE HAS CAST ANY DOUBTS ON THE NATURE OF APPLICATION OF FUNDS. FURTHER, AN AMOUNT OF RS.14,25,12,457/- HAS BEEN INCURRED FOR ADDITION OF FIXED ASSETS. THIS IS CLEAR FROM THE PERUSAL OF FORM 10 ANNEXED TO THE PAPER BOOK. THE TOTAL APPLICATION, IN THIS WAY, COMES TO RS.21,51,18,322/-. EVEN IF THE CORPUS DON ATION, WHICH IS HELD TO BE BOGUS, AMOUNTING TO RS.1 CRORE, WILL, AT BEST GO TO INCREASE THE INCOME OF THE ASSESSEE. THE RECEIPTS WILL BECOME RS.8,16,18,794/- AND THE APPLI CATION BEING RS.21,51,18,322/-, IS IN ANY CASE MORE THAN 8 5% OF THE RECEIPTS. THEREFORE, THE ASSESSEE WILL GET THE EXEMPTION UNDER SECTION 11 OF THE ACT EVEN ON THIS COUNT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF DECEMBER, 2015. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9