Case Law Details
Asst. CIT Vs. Gurudatta Shikshan Sanstha (ITAT Pune)
Ground raised by the Revenue revolves around the correctness in granting exemption under section 10(23C) of the Act in respect of the additions made under section 68 of the Act.
Held by ITAT
I find from the records that no action has been initiated by the assessing officer to recommend withdrawal of exemption given to the appellant under section 10(23C)(v) or cancellation its registration under section 12A of the Act in the light of additions under section 68 of the Income Tax Act, 1961. The appellant trust enjoys the benefit of exemption under section 10(23C)(v) for assessment years under appeal is an undisputed fact. The assessing officer has not brought on record any material suggesting that the appellant trust was not meeting the conditions given in section 10(23C)(v) of the Income Tax Act, 1961. In the assessment order for sub-sequent assessment year i.e., 2012-13 assessing officer has not denied exemption under section 10(23C)(v) where facts are identical. Further, section 10(23C) starts with ‘any income’. The case laws relied upon by appellant suggest that ‘any income’ also includes deemed income added under section 68 or 69 of the Income Tax Act, 1961. As long as the appellant trust enjoys exemption under section 10(23C)(v), I am of the opinion that any addition made by the assessing officer on account of unexplained cash credits under section 68 of the Act would also be eligible for exemption under section 10(23C)(v) of the Income Tax Act, 1961. Further, it is also clear that the appellant trust has used the unsecured loans towards the objects of the trust. It has also been evident from the financial statements of the appellant trust the income even after addition results in deficit. As the assessing officer’s assessment orders dated 25-3-2013 and 25-3-2014 clearly mention that there was no dispute to the fact that the trust was notified under the provision of section 10(23C)(v) of the Act, I am of the considered opinion that the above referred judicial pronouncements including Director of IT(Exemption) v. Raunaq Education Foundation (supra) support the appellant’s case.
In view of the above facts and discussion and respectfully following the ratio laid down by the above referred decisions, I hold that the appellant is entitled to exemption under section 10(23C) in respect of additions of Rs. 1,09,79,321 for assessment year 2010-11 and Rs. 1,71,00,000 for assessment year 2011-12 made under section 68 of the Income Tax Act, 1961.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
These are the two main appeals filed by the Revenue against the order of Commissioner (Appeals)-3, Nashik dated 30-4-2015 for the different assessment years 2010-11 & 2011-12. Assessee filed two Cross Objections for the said assessment years too. We shall take up the appeal filed by the Revenue and the Cross Objection filed by the assessee for the assessment year 2010-11.
ITA No. 843/PUN/2015–by Revenue
C.O.No. 34/PUN/2017 by the Assessee
2. ITA No. 843/PUN/2015 is filed by Revenue in the assessment year 2010-11. Assessee filed Cross Objection vide C.O.No. 34/PUN/2017.
In the appeal, Revenue raised solitary issue ground on the same reads as under :–
“1. Whether in the facts and in the circumstances of the case and in law the learned Commissioner (Appeals) was right in holding that the additions made under section 68 of the Income Tax Act, 1961 would be entitled to exemption under section 10(23c) without appreciating the fact that unexplained deemed income cannot form part of exempt income?”
3. Briefly stated relevant facts are that the assessee filed the return of income declaring total income nil. Assessee is a Trust and engaged in educational activities. In respect of its income, assessee claimed exemption under section 10(23C) read with section 12A of the Act. At the end of the assessment proceedings assessing officer made various additions and determined the assessed income at Rs. 1,09,79,320. During the first appellate proceedings, after considering the assessee’s submissions, the Commissioner (Appeals) held that the additions made by the assessing officer under section 68 in both the years are sustainable. The contents of para 11 are relevant in this regard. However, on finding that the assessee is entitled to the deduction/ exemption under section 10(23C)(v) of the Act and also on finding assessing officer denied such a deduction to the assessee in both the years, the Commissioner (Appeals) granted such benefit of deduction/exemption under section 10(23C)(v) of the Act in respect of such additions under section 68 of the Act. The Commissioner (Appeals) relied heavily on various judicial pronouncements while granting the exemption in respect of the entire enhanced income which includes additions made under section 68 of the Act. The Madras High Court judgment in the case of Sri Krishna Educational & Social Trust v. ITO (2013) 351 ITR 178 (Mag.) Madras, the Delhi High Court judgment in the case of DIT (Exemption v. Raunaq Education Foundation (2007) 294 ITR 76/164 Taxman 266 (Delhi), the Cochin Bench of the Tribunal in the case of Asst. CIT v. Muslim Education Society (2010) 1 ITR (Trib.) 527 were cited by the Commissioner (Appeals) in para 12.4 of his order. Eventually, the Commissioner (Appeals) held that the assessee is entitled to deduction under section 10(23C)(v) in respect of income added under section 68 of the Act.
4. Further, the Commissioner (Appeals) made other dis allowance too out of the donations invoking the provision of section 115 BBC of the Act. This issue shall be discussed when dealing with the Cross Objection by the assessee.
5. Aggrieved with the said relief given to the assessee, the Revenue filed the main appeal. Further, aggrieved with the invoking of the provisions of section 115BBC of the Act, the assessee filed the Cross Objection before us.
6. In connection with the issue raised in the main appeal, learned Departmental Representative for the Revenue relied on the order of the assessing officer and requested for reversing the finding of the Commissioner (Appeals) on the issue of providing exemption/deduction under section 10(23C)(v) of the Act in respect of the additions made under section 68 of the Act. In the process, he relied on the decision of Hyderabad Bench of the Tribunal and fairly mentioned that it is a case of granting exemption/ deduction in respect of the additions made under section 69C of the Act. However, learned Counsel for the assessee relied heavily on the discussion given by the Commissioner (Appeals) in para 11, 12.4, 12.5 & 12.6 of the order of the Commissioner (Appeals).
7. On hearing both the parties, we perused the orders of the assessing officer and Commissioner (Appeals) and the decision cited by the Commissioner (Appeals) while granting relief to the assessee under section 10(23C)(v) of the Act. We find the ground raised by the Revenue revolves around the correctness in granting exemption under section 10(23C) of the Act in respect of the additions made under section 68 of the Act. In our view, the said issue is elaborately discussed by the Commissioner (Appeals) in his speaking order in the above referred paragraphs. For the sake of completeness, we proceed to extract the said paragraphs 12.4 to 12.6 and the same read as under:
‘12.4 I have carefully considered the facts of the case and rival contentions. On perusal of the same it has been noticed that the appellant trust is registered under section 12A, under section80G and is also notified by Honorable Chief Commissioner, Nashik under section 10(23C)(v) of the Act vide order dated 3-12-2007. The said notification granting exemption under section 10(23C)(v) of the Act is in force till date and has not been cancelled by Honorable Chief Commissioner, Nashik. A perusal of the assessment order dated 20-2-2015 for assessment year 2012-13 reveals that the assessing officer has not initiated any action for revocation or cancellation of exemption granted to the appellant under section 10(23C)(v) of the Act in the light of huge additions under section 68 of the Act. In fact, he has certified that the trust has complied with the relevant provisions of section 10(23C)(v) of the Act. The provisions of section 10(23C)(v) of the Act are to be followed for deciding the issue under appeal and hence the same are reproduced below:
“10. In computing the total income of a previous year of any person, any income falling within any of the follows clauses shall not be included.
(23C)-Any income received by any person on behalf of–
(v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, (which may be approved by the prescribed authority), having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof;”
The words used in the section is “any income” received by any trust is exempt. Therefore, the income of the appellant trust assessed by the assessing officer by making addition under section 68 shall also qualify for exemption. This proposition of law is supported by following decisions.
(i) Sri Krishna Educational and Social Trust v. ITO (2013) 351 ITR 178 (Mad)
In this case it has been laid down that addition under section 68 is not possible when the assessee’s income was exempt under section 10(22) of the Act, unless the Commissioner granting the exemption has withdrawn the same.
(ii) DIT v. Raunaq Education Foundation (2007) 294 ITR 76 (Del)
The Honorable High Court has concluded that the word “income as occurring in section 10(22) cannot be given restrictive meaning and must be given its natural meaning or the meaning ascribed to it in section 2(24) and therefore, the use of the word ‘income’ in sub-section (22) of section 10 is wide enough to include deemed income under section 68 of the Act. The Honorable Court has held as under:-
6. We find that the words ‘derived from’ (or some other similar words) do not occur in section 10(22) of the Act and, therefore, the word ‘income’ as occurring in section 10(22) cannot be given restrictive meaning and must be given its natural meaning or the meaning ascribed to it in section 2(24) of the Act.
7. It is well-settled that exemption provision must be strictly construed but when it is found that an exemption is available then it must be given its full play. This has recently been held by the Supreme Court in P.R. Prabhakar v. CIT(2006) 204 (SC) 27 : (2006) 284 ITR 548 (SC) in the following words:
“It is now a well-settled principle of law that although the exemption provisions are to be construed strictly as regards the applicability thereof to the case of assessee, once it is found that the same is applicable, the same are required to be interpreted liberally. (See Tata Iron & Steel. Co. Ltd. v. State of Jharkhand (2005) 4 RC 641; (2005) 4 SCC 272; 5 RC 379; (2005) 7 SCC 396 and CCE v. Hira Cement (2006) 6 RC 219; (2006) 2 JT 369 (SC)).
It is also trite law that an exemption is to be granted unless it is expressly taken away. (See Adityapur Industrial Area Development Authority v. Union of India (2006) 5 Scale 321)”
8. In view of the above, we do not find any infirmity in the decision of the Tribunal. No substantial question of law arises for consideration”.
(iii) Asst. CIT v. Muslim Education Society (2010) 1 ITR (Trib.) 527 (Cochin)
In this case the assessee’s income was subject to exemption under section 10(23C)(v) being educational institution. The assessing officer has made additions under section 68 on account of unexplained cash credits. The Honorable ITAT has followed the decision of Honorable Delhi High Court in the case of DIT v. Raunaq Education Foundation (2007) 294 ITR 76 and has held that what is entitled for exemption under section 10(23C) is “any income”; the word ‘income cannot be given restrictive meaning but its natural meaning, therefore the assessee is entitled to benefit under section 10(23C) even in respect of income covered under section 68 of the Act.
12.5 I find from the records that no action has been initiated by the assessing officer to recommend withdrawal of exemption given to the appellant under section 10(23C)(v) or cancellation its registration under section 12A of the Act in the light of additions under section 68 of the Income Tax Act, 1961. The appellant trust enjoys the benefit of exemption under section 10(23C)(v) for assessment years under appeal is an undisputed fact. The assessing officer has not brought on record any material suggesting that the appellant trust was not meeting the conditions given in section 10(23C)(v) of the Income Tax Act, 1961. In the assessment order for sub-sequent assessment year i.e., 2012-13 assessing officer has not denied exemption under section 10(23C)(v) where facts are identical. Further, section 10(23C) starts with ‘any income’. The case laws relied upon by appellant suggest that ‘any income’ also includes deemed income added under section 68 or 69 of the Income Tax Act, 1961. As long as the appellant trust enjoys exemption under section 10(23C)(v), I am of the opinion that any addition made by the assessing officer on account of unexplained cash credits under section 68 of the Act would also be eligible for exemption under section 10(23C)(v) of the Income Tax Act, 1961. Further, it is also clear that the appellant trust has used the unsecured loans towards the objects of the trust. It has also been evident from the financial statements of the appellant trust the income even after addition results in deficit. As the assessing officer’s assessment orders dated 25-3-2013 and 25-3-2014 clearly mention that there was no dispute to the fact that the trust was notified under the provision of section 10(23C)(v) of the Act, I am of the considered opinion that the above referred judicial pronouncements including Director of IT(Exemption) v. Raunaq Education Foundation (supra) support the appellant’s case.
12.6 In view of the above facts and discussion and respectfully following the ratio laid down by the above referred decisions, I hold that the appellant is entitled to exemption under section 10(23C) in respect of additions of Rs. 1,09,79,321 for assessment year 2010-11 and Rs. 1,71,00,000 for assessment year 2011-12 made under section 68 of the Income Tax Act, 1961. The assessing officer is directed accordingly. Ground No. 2 is allowed.’
8. Considering the above, we are of the view that the decision cited by the learned Departmental Representative for the Revenue is distinctly on different facts and also on the different provisions of the Act. Therefore, the same are not applicable to the facts of the present case. The facts are not homologues of the facts in the present case. Therefore, we are of the opinion the order of Commissioner (Appeals) is fair and reasonable and it does not call for any interference. In the result, the solitary ground raised by the Revenue in the appeals are dismissed.
9. In the result, Revenue appeal is dismissed.
C.O.No. 34/PUN/2017 for assessment year 2010-11 by the Assessee.
10. This Cross Objection is filed by the assessee before the Tribunal in connection with the appeal in ITA No. 843/PUN/2015. The said Cross Objection is filed with the delay of 25 days. Assessee filed the affidavit explaining the reasons for delay and narrated the sufficient cause. For the sake of completeness, the para 4 being relevant is extracted as under:
“4. That the appeal memos of the Tribunal admittedly were received on 23-4-2017 and during that period our school was closed for summer vacation. The staff working in the office were also given leave because of summer vacation. During the summer vacation institute carries on the necessary repairs and maintenance of school building, mess building, administrative office etc and mostly these are looked after by the peons and security staff. The Staff working in the administration and accounts departments are also given vacation for 2-3 weeks so that repair works can be carried out without any obstruction.
The envelopes containing the appeal memos were collected by the security guard/peon and remained with him for around 25 days. Thereafter the trustees on receiving the appeal memos from security guard took some more time in knowing the nature of these appeal memos and by the time they handed over these appeal memos to our Chartered Accountant Mr. Yogesh Punde, this delay of 26 days has been occurred in filing these cross objections”
11. On considering the above reasons given by the assessee in the affidavit filed by the Chairman of Trust dated 17-6-2017, we are of the opinion the Cross Objection is required to be admitted. Consequently the same is taken for adjudication.
12. The Cross Objection raised by the assessee reads as under:
“1. On the facts and in the circumstances of the case learned Commissioner (Appeals) has erred in directing the assessing officer to consider 10% of the donations as anonymous and tax the same under section 115BBC as such direction is not within the powers of the learned Commissioner (Appeals) because it amounts to assessing new source of income.”
13. The background facts relating to the above said Cross Objection includes that the assessee received donations from various donors. The assessing officer investigated into the identity of the said donors. Assessing officer invoked various provisions of the Act for investigating the same. Eventually, in the process, few donors denied having given any donations to the Trust. However, in the assessment, for unknown reasons, assessing officer did not make any dis allowance in this regard. The contents of para 14 of the order of Commissioner (Appeals) are relevant. Taking a clue from assessing officer’s investigation into the donations, the Commissioner (Appeals) noted that assessee received donations of Rs. 1,03,59,525 from 565 persons in the assessment year 2010-11. The individual donations are below Rs. 20,000 each. Similarly, assessee received donation of Rs. 64,68,820 from 367 persons in the assessment year 2011-12 against which all are below Rs. 20,000 each. Commissioner (Appeals) issued a notice of enhancement of the assessment before investigating into this issue further.
14. On perusal of the assessment record and on finding the assessing officer did not take this investigation into the logical conclusion, the Commissioner (Appeals) issued letters to 26 persons randomly for the assessment year 2010-11 and also to another set of 25 persons for assessment year 2011-12. This exercise resulted in the following remarks i.e., some donors confirmed, no response from some others, some people wanted further time etc., Further, Shri Raghunath Jadhav flatly denied having given any donation to the Trust. Considering the discrepancies and anomalies, the Commissioner (Appeals) issued a notice of enhancement of assessment as required under section251 of the Act and on adhoc basis, the Commissioner (Appeals) proposed to make dis allowance of 10% of the donations received in both the assessment years. He proposed to treat the same as “Anonymous Donations” as defined in section 115 BBC of the Act. Further, Commissioner (Appeals) interpreted the said provisions and obtained the reply from the assessee vide assessee’s letter dated 28-4-2015. He proceeded to disallow 10% of the such donations and applied the provisions of section 115 BBC of the Act. The contents of para 14 at page No. 37 to 42 of the order of the Commissioner (Appeals) are relevant. Commissioner (Appeals) is of the view that, the unverifiable of the donors antecedents constitutes “Anonymous Donations”. Thus, the donations reflected in the books of accounts made by such unverifiable donors constitutes the “Anonymous Donations” as defined in sub-section (3) of 115 BBC of the Act. The exhaustive definition given to “Anonymous Donations” means any voluntary contribution as specified therein in the said sub-section (3) where a person receiving such contribution does not maintain the record of the identity, indicating the name and address of a person, such person as prescribed. In the instant case, though the names and addresses are mentioned, the same are unverifiable when the inquiry was conducted by the Commissioner (Appeals). Accordingly, the Commissioner (Appeals) invoked the provisions of section 115 BBC of the Act and taxed 10% of the donations in both years applying the tax rate of 30%.
15. Aggrieved with the above order of Commissioner (Appeals), assessee filed Cross Objection with the ground extracted above.
16. Before us, learned Counsel for the assessee Shri Piyush Bafna submitted that, in taxing 10% of the donations as anonymous donation, the Commissioner (Appeals) exceeded his jurisdiction by creating new source of income for the assessee and same is not permissible under the provisions relating to the enhancement of the assessment. Relying on various Supreme Court judgments, learned Counsel submitted that the Commissioner (Appeals) is prevented from assuming such a jurisdiction. Referring to the provisions of section 115 BBC of the Act, learned Counsel submitted that the definition given to the “Anonymous Donations” does not apply to the donations under consideration as assessee dutifully maintained the record of the identity indicating the name and addresses and such other particulars. For this, the facts of conducting inquiries by the Commissioner (Appeals) using such names and addresses was relied upon by the learned Authorized Representatives before us. Further, learned Authorized Representatives mentioned that certain donations which were confirmed by donors were also considered while estimating 10% of the entire donations for both the years.
17. Per contra, learned Departmental Representative for the Revenue relied heavily on the order of Commissioner (Appeals) argued vehemently stating that mere mentioning of the names and addresses of the donors is not adequate. The said details should stand test of scrutiny by the authorities. In the instant case, the assessee did not bother to file confirmation letters of all donors or to produce donors or the revised addresses. In such circumstances, the donations made by such donors constitute the anonymous ones. Therefore, they will fall within the ambit the “Anonymous Donations” as defined in sub-section (3) of section 115 BBC of the Act.
18. We heard both the parties on this issue and perused the order of the Revenue and the paper book filed before us. We have also perused the decisions cited by the both parties. To start with we extract the provisions of section 115 BBC and the definition given to Anonymous Donation in sub-section (3). The same read as under :
‘(3) For the purposes of this section, “anonymous donation” means any voluntary contribution referred to in sub-clause (iia) of clause (24) of section 2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed.)’
19. We find the above section is brought into statute with Finance Act 2002 with effect from 1-4-2003 and the same apply to the assessment year 2011-12 under consideration. According to the said provisions, the “Anonymous Donation” is defined in sub-section (3). According to the sub-section (1), 30% of the aggregate of the Anonymous Donation received in excess of the higher of the specified amounts, constitutes tax in certain cases. The meaning given to the Anonymous Donations is exhaustive. The maintenance of record regarding the identity of the donors assumes significance in the definition. When the provision specify directing the assessee to maintain the record regarding the identity of such donation, it implies that record of that identity of the donor should stand the test of scrutiny by assessing authorities. Merely writing some names and their addresses, in our opinion, falls short of the legal requirement. Therefore, in our view, the names and addresses taken for verification on test check basis, goes to cast of doubt about the genuineness of the such records, name of donors, donations etc., From that point of view, considering the assessee’s failure to maintain the fool-proof records on the identity of the donors, we are of the opinion that the principle of adhocism adopted by Commissioner (Appeals) is the only method available in this case for taxing donations as “Anonymous Donations”. As such, the Commissioner (Appeals) fairly restricted such charge of taxation only to 10% of the entire donations in both the years. All the verifiable identity of the donors, if any will fall in the balance 90% of the entire donors in both the years. From this point of view, we are of the opinion, order of the Commissioner (Appeals) is fair and reasonable and it does not call for any interference.
20. Regarding the argument of the counsel for the assessee that revolves around the creation of a ‘new source of income’ by the Commissioner (Appeals) for the first time, we are of the opinion learned Counsel for the assessee ignored the fact that assessing officer scrutinized the issue of donors and donations during the assessment proceedings. The same is evident from the contents of para 14. The relevant portions from the said para of 38 vouches for the same. The relevant lines are extracted as under :
‘14. Donations:-It is seen that the appellant has received donations of Rs. 1,03,59,525 all below Rs. 20,000 each from 565 persons in assessment year 2010-11 and Rs. 64,68,820 again all below Rs. 20,000 each from 367 persons in assessment year 2011-12. A perusal of assessment folders revealed that an inquiry was made in this regard by the assessing officer concerned. It was also found that while some of the letters sent to the alleged donors were returned unserved, Shri Balu Shivaji Pawar vide letter 26-12-2012 has clearly denied having given any donation to Gurudatta Shikshan Sanstha. His reply is reproduced as under:–
In connection with above referred subject I would like to state and declare as under:–
“That I do not concerned with the above Sanstha. Besides I have not given any donation either by cheque or by bank cheque/DD or any other kind.
I am surprised to know that why this sanstha has informed you that I have given donation to them.
I therefore again state and declare that I have not given any donation to Gurudatta Shikshan Sanstha either in kind or in cash/DD and availed deduction under section 80G.
Please take the note of my confirmation on your records and do the needful.
I have enclosed herewith the copies of my Returns and Computations for last three years for your perusal.”‘
21. From the above, it is evident that the assessing officer initiated the enquiry into the said donations. He also gathered the adverse evidence against the assessee from a donor named Shri Balu Shivaji Pawar vide letter dated 26-12-2012. Therefore, the counsel’s argument before us regarding the creation of new source by the Commissioner (Appeals) for the first time in his order of enhancement of the assessment, is not sustainable. Accordingly, the only ground raised by the assessee in both the C.O’s are dismissed.
22. In the result, the appeal of revenue and the Cross Objection of the assessee are dismissed.
ITA No. 844/PUN/2015 & C.O. No. 35/PUN/2017
23. At the outset, both the counsels for the assessee as well as Revenue submitted the grounds raised by the Revenue as well as the objection raised by the assessee amount involved in the additions, arguments, counter arguments on the said grounds/objections are similar to the once already advanced in connection with the appeal in ITA No. 843/PUN/2015 & C.O.No. 34/PUN/2017.
24. Considering the commonness of the grounds/objections arguments and counter arguments etc,. we find the facts are identical. Therefore, the decision given by us in connection with appeal of the Revenue and cross objection of the assessee for the assessment year 2010-11 applies equally to the appeal/ cross objection under consideration i.e., assessment year 2011-12. Accordingly, the Revenue’s appeal is dismissed and the Cross Objection by the assessee is also dismissed.
25. To sum up, both the appeals of the Revenue are dismissed and both the cross objections of the assessee are also dismissed.
