2012 (6) TMI 542 - HC - Income Tax

Addition of income from undisclosed sources - assessee claimed to have received corpus donation of ₹ 39,27,845 - Revenue appeal as against ITAT who deleted addition - Held that - The judgment in the case of DIT (Exemption) v. Keshav Social & Charitable Foundation 2005 (2) TMI 84 (HC) is only one aspect which the Tribunal has to keep in mind. Several other aspects, which have been referred to by the AO,that Bank statement obtained from Andhra Bank depicts that the total amount credited from the opening till 31.3.2003 was ₹ 61,52,545/- including ₹ 4,00,000/-deposited in cash and the credit amount of ₹ 61,52,545/- did not explain the corpus donation of ₹ 88,32,845/- and also did not explain the source of payment for the purchase of land and the expenses incurred towards professional payment AND considering the bank statement of M/s CGS Mani Charitable Trust depicts that they did not have sufficient funds and an amount of ₹ 49,39,926/- was received by way of pay order dated 2.7.2002 and an amount of ₹ 49,00,000/- was allegedly paid as donation to the assessee on the same date - Findings recorded by the Tribunal in the impugned order are partly factually incorrect and cannot be sustained - the order of the tribunal is bereft of reasoning, consideration and is cryptic - in favour of the appellant-Revenue

Summary

Issues:
- Appeal under Section 260A of the Income Tax Act, 1961 regarding addition of Rs. 88,32,845/- made by the Assessing Officer.
- Whether the Income Tax Appellate Tribunal was right in deleting the addition and holding that Section 68 is not applicable.

Analysis:
1. The appeal pertains to the assessment year 2003-04 of a charitable society. The Assessing Officer added Rs. 88,32,845/- under Section 68 of the Act based on alleged donations received. The Tribunal deleted this addition, citing that the amount was already included in the income of the assessee under Section 2(24)(iia). The Tribunal found that the corpus donation was offered as income and assessed to tax, making the addition as income from undisclosed sources unjustified. The Tribunal referred to a previous judgment supporting the disclosure of donations for charitable purposes to obtain exemption under Section 11. The Tribunal concluded that Section 68 was not applicable, and the addition should be deleted.

2. The Assessing Officer's findings revealed discrepancies in the corpus fund claimed by the assessee. The bank statement did not support the claimed donations, and the source of payment for property acquisition was unverified. Despite multiple requests for details and evidence, the assessee failed to provide satisfactory explanations. The Tribunal noted that the entire sum of Rs. 88,32,845 was accounted for in the income and expenditure account of the trust, emphasizing that the corpus donation had been disclosed as income under Section 2(24)(iia). The Tribunal highlighted the charitable nature of the organization and the full disclosure of donations, supporting its decision to delete the addition.

3. However, the High Court found the Tribunal's order lacking in reasoning and consideration, deeming it factually incorrect and unsustainable. The court allowed the appeal in favor of the Revenue, directing a fresh decision by the Tribunal. The court emphasized that it had not expressed any view on the merits of the case and granted parties the opportunity to submit additional documents. A date for a new hearing was set, with no costs imposed on either party. The court's decision aimed to ensure a more reasoned and well-founded judgment by the Tribunal, emphasizing the importance of substantiated reasoning in tax matters.