Satluj Shiksha Samiti, Berli Kalan, Rewari V. Commissioner of Income Tax, Rohtak

ITA/471/2018

AI Insights

Satluj Shiksha Samiti, a charitable society focused on promoting education for minority and underprivileged communities, appealed against the order of the Income Tax Appellate Tribunal, which had confirmed the additions made by the Assessing Officer and upheld by the CIT(A). The additions included `67,75,000 as unexplained cash loans and `7,89,745 as excess income over expenditure, both of which contributed to the society's gross receipts exceeding `1 crore, thereby disqualifying it from claiming exemption under Section 10(23C)(iiiad) of the Income Tax Act without the necessary approval. The High Court found no substantial question of law arising from the Tribunal's decision and dismissed the appeal.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 820528 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 02-04-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: PANKAJ JAIN; SACHIN BHARDWAJ; DIVYA SURI
• Keywords: Charitable society; Exemption denial; Gross receipts; Income Tax; Unsecured loan
• Section: 143(1); 139(1); 68; 131; 260A; 10(23C)(iiiad); 2BC

Judgement Text

"ITA-471-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-471-2018 (O&M) Date of Decision: 2.4.2019 Satluj Shiksha Samiti, Berli Kalan, Rewari ....Appellant. Versus Commissioner of Income Tax, Rohtak ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Pankaj Jain, Senior Advocate with Mr. Sachin Bhardwaj, Advocate and Mr. Divya Suri, Advocate for the appellant. *** AJAY KUMAR MITTAL, J. 1. Delay of 47 days in refiling the appeal is condoned. 2. This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 29.9.2017 (Annexure A-10) passed by the Income Tax Appellate Tribunal, Delhi Bench 'G', New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 777/DEL/2016, for the assessment year 2011-12, claiming the following substantial questions of law:- I. Whether on examining Schedule 7 List III Entry 25, 28 of Constitution of India, can the deeming fiction of law be utilized to the detriment of the applicant charitable society fulfilling the 'test of predominant object', by treating the explained GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -2- transactions as cash credit u/s 68 to increase the limit specified (1 cr), for denial of exemption u/s 10(23C)(iiiad) r.w. Rule 2BC of the Income Tax Act, 1961, Income Tax Rules 1962? II. Whether the Tribunal order is unreasonable while concurring with the findings of CIT(A) that the issue in dispute 'is not clear' & not assigning reasoning to clarify the dispute hence in such circumstances the case should have been remanded for resolving the controversy in accordance with the procedure of law? 3. A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee has been incorporated with the object to promote child education specially for minority community and under privileged sections of the society and is registered as is clear from the certificate of registration along with memorandum of association (Annexure A-1). The assessee for the assessment year 2011-12 filed its return on 15.10.2011 at 'nil' income. The said return was processed under Section 143(1) of the Act. Since the date of incorporation on 1.9.1989, till the assessment year 2011-12, the assessee had been filing the returns of income regularly as required under Section 139(1) of the Act. During the pendency of the assessment proceedings, the assessee filed written pleadings dated 18.2.2014, 27.2.2014 1.3.2014 and 26.3.2014 (Annexure A-2 Colly). The Assessing Officer vide order dated 28.3.2014 (Annexure A-3) framed the assessment at ` 75,64,750/- as unsecured cash loan of ` 67,75,000/- remained unexplained and, thus, added under Section 68 of the Act. After GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -3- adding this amount of ` 67,75,000/- to the gross receipts from fees and interest at ` 72,28,382/-, the gross annual receipts came to ` 1,40,03,382/- which exceeded ` 1 crore. Accordingly, the assessee was not entitled to claim exemption under Section 10(23C)(iiiad) of the Act. Feeling aggrieved by the order, Annexure A-3, the assessee filed an appeal on 30.4.2014 (Annexure A-4) before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. The assessee also furnished written pleadings dated 15.5.2015 and 25.6.2015 (Annexure A-5 Colly) before the CIT(A). Pursuant thereto, the CIT(A) sought remand report from the Assessing Officer who issued notice dated 6.8.2015 (Annexure A-6), wherein the Assessing Officer had called 6 of the unsecured loanees to record their statements to verify the genuineness of the cash transactions. It was recorded in the remand report that in response to summons to these persons, the assessee produced only five persons and their statements were recorded under Section 131 of the Act. All these persons had neither produced copy of any income tax return filed by them nor furnished/produced any documentary evidence in respect of source of cash deposits made in their bank accounts. It was noticed in the remand report that the assessee had not added or produced anything new in respect of the sources of cash deposits made and against which loans have been advanced to the assessee. The CIT (A) vide order dated 27.1.2016 (Annexure A-8) dismissed the appeal of the assessee. Still dissatisfied, the assessee filed an appeal before the Tribunal on 12.2.2016 (Annexure A-9). The Tribunal vide order dated 29.9.2017 (Annexure A-10) dismissed the appeal of the assessee. Hence, the present appeal. 4. After hearing learned counsel for the assessee, we do not find GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -4- any merit in the appeal. 5. The assessee had received unsecured loan in cash amounting to ` 67,75,000/- from various persons. The assessee had failed to discharge its onus in respect of the unsecured loan of ` 67,75,000/- and, therefore, the Assessing Officer had rightly treated the said income as unexplained income and added to the returned income of the assessee under Section 68 of the Act. Further, during the year under consideration, the assessee had gross receipts from fees and interest at ` 72,28,382/-. Since the assessee had failed to discharge its onus qua unsecured loan, thus, on adding the same with its receipts from fees and interest, the gross annual receipts amounted to ` 1,40,03,382/- (` 67,75,000/- + ` 72,28,382/-) which exceeded ` 1 crore. Consequently, a notice dated 24.3.2014 was issued to the assessee to show cause as to why the exemption claimed under Section 10(23C)(iiiad) of the Act be not disallowed and excess of income over expenditure be taxed, as the gross receipts of the assessee were exceeding ` 1 crore and the assessee had not taken prior approval from the Chief Commissioner of Income Tax, Panchkula under Section 10(23C)(iiiad) of the Act. The said exemption was disallowed to the assessee and the excess of income over expenditure of ` 7,89,745/- along with the unexplained unsecured loan of ` 67,75,000/- was added to the returned income of the assessee. Accordingly, the Assessing Officer framed the assessment at ` 75,64,750/-. The CIT(A) vide order dated 27.1.2016 (Annexure A-8) affirmed the aforesaid additions made by the Assessing Officer in the following terms:- “I have examined the facts and circumstances of the case. A sum of ` 67,75,000/- has been added on account of unsecured loans received. As stated in the assessment GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -5- order, as well as in the remand report dated 27.11.2015, it is apparent that the lenders of funds have not, at any stage discharged their onus in furnishing documentary evidence in respect of cash deposits made in their accounts and against which loans were advanced to the appellant. It is absolutely clear that the creditworthiness of the lenders and the genuineness of the transaction is not clear. Moreover, the lenders who were summoned have not submitted their ITRs. In view of the facts laid out above, I confirm the addition of ` 67,75,000/-. Also an addition of ` 7,89,745/- was made on a/c of the amount confirmed as excess of income over expenditure after withdrawal of exemption u/s 10(23C)(iiiad) as the receipts in view of the addition of ` 67,75,000/- exceeded ` One Crore. Since, the appellant had not submitted the correct position of its gross annual receipts, the finding by the AO which pags the turnover at above ` One Crore automatically necessitates the requirement of an approval of the Ld. Pr. CCIT, Panchkula. Since this approval has not been sought, the AO was correct in not allowing the claim of expenditure. The addition of ` 7,89,745/- is confirmed.” 6. The Tribunal while confirming the addition of ` 67,75,000/- made on account of unsecured loan received, had noticed that the lenders of funds have not, at any stage, discharged their onus in furnishing documentary evidence in respect of cash deposits made in their accounts GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -6- and against which loans were advanced to the assessee. The creditworthiness of the lenders and the genuineness of the transaction was not clear and even the lenders summoned by the Assessing Officer had not submitted their income tax returns. Therefore, the addition made by the Assessing Officer under Section 68 of the Act was rightly confirmed by the CIT(A) and did not call for any interference by the Tribunal. The Tribunal had observed that the assessee had shown gross receipts from fees and interest of ` 72,28,382/- and after debiting the expenses under various heads including depreciation of ` 64,38,637/-, the excess of income over expenditure had been shown at ` 7,89,745/- which was claimed as exempt under Section 10(23C)(iiiad) of the Act. Since the assessee had failed to discharge its onus in respect of unsecured loan, therefore, on adding the same with its receipts from fees and interest, the gross receipts amounted to ` 1,40,03,382/- (` 67,75,000/- + ` 72,28,382/-) which exceeded ` one crore. Since, the gross annual receipts of the assessee exceeded ` one crore and the assessee having not taken prior approval from the Chief Commissioner of Income Tax, Panchkula, thus, the assessee was not eligible for exemption under Section 10(23C)(iiiad) of the Act. Therefore, the said exemption was rightly disallowed and as a consequence the excess of income over expenditure shown at ` 7,89,745/- was also rightly added to the unsubstantiated unsecured loan and the taxable income of the assessee determined. The findings recorded by the Tribunal read thus:- “6. We have heard both the parties and perused the records and gone through the orders of the authorities below, especially the contention raised in the grounds of appeal and the contentions raised in the Synopsis and GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -7- case laws cited therein as well as the contentions raised in the written submissions filed by the Ld. DR and the case laws cited therein. We find that a sum of ` 67,65,000/- has been added on account of unsecured loan received. We further find that after perusing the assessment records, appellate order and the Remand Report, it is apparent that the lenders of funds have not, at any stage, discharged their onus in furnishing documentary evidence in respect of cash deposits made in their accounts and against which loans were advanced to the assessee. We further note that in this case the creditworthiness of the lenders and the genuineness of the transaction is not clear. Moreover, the lenders who were summoned by the AO have not submitted their Income Tax Returns. In view of the above facts and circumstances, in our considered opinion, Ld. CIT(A) has rightly confirmed the addition in dispute made by the AO u/s. 68 of the Act, which does not need any interference on our part, hence, we upheld the order of the Ld. CIT(A) on the issue in dispute and reject the ground no.2 raised by the assessee. 6.1. With regard to ground no.3 relating to upholding the action of the AO in denying exemption u/s 10(23C) (iiiad) to the assessee amounting to ` 7,89,745/- claimed by the assessee despite the assessee being eligible for the same is concerned, we note that the society has shown GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -8- gross receipts from fees and interest of ` 72,28,382/-. After debiting the expense under the various heads including depreciation of ` 64,38,637/-, the excess of income over expenditure has been shown at ` 7,89,745/- and the same has been claimed as exempt u/s 10(23C) (iiiad) of the Income Tax Act, 1961. In view of above, the society has failed to discharge its onus in respect of so called unsecured loan, therefore, on adding the same with its receipts from fees and interest, the gross annual receipts comes at ` 1,40,03,382/- (67,75,000 + 72,28,382) which exceeds ` One crore. Keeping in view the above, a notice dated 24.03.2014 was issued and assessee society was asked to show cause as to why the exemption claimed u/s 10(23C)(iiiad) should not be withdrawn and excess of income over expenditure should not be taxed as per the provisions of Income Tax Act as the gross receipts of the society are exceeding ` One crore and the society has not taken prior approval from the Ld. CCIT, Panchkula u/s 10(23C)(vi) of the Income Tax Act, 1961 which is mandatory for claiming exemption. In response, the society filed its written reply stating therein that receipt of our school should be kept at ` 72,28,382/- which is prescribed limit explained in Section 10(23C)(iiiad) of the Income Tax Act, 1961. This contention of the assessee is not genuine because, the gross annual receipts of the society exceeding ` One GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document ITA-471-2018 -9- crore and society has not taken prior approval from the Ld. CCIT, Panchkula. Therefore, the society is not eligible for exemption u/s 10(23C)(iiiad) of the Act, hence, the same exemption was withdrawn and the excess of income over expenditure shown at ` 7,89,745/- was added to the returned income of the assessee and the same was rightly confirmed by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute.” 7. An effort was made by learned counsel for the appellant to demonstrate that the conclusions and the concurrent findings of fact recorded by the Assessing Officer, the CIT(A) and the Tribunal was erroneous and perverse. The aforesaid findings of fact recorded by the authorities cannot be held to be perverse based on non-appreciation of material or based on the misreading of any evidence on record which may warrant interference by this Court. No question of law, much less, substantial question of law arises in the appeal. 8. Accordingly, finding no merit in the present appeal, the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE April 2, 2019 (MANJARI NEHRU KAUL) gbs JUDGE Whether Speaking/Reasoned Yes Whether Reportable Yes GURBACHAN SINGH 2019.05.01 17:03 I attest to the accuracy and integrity of this document "