2012 (7) TMI 398 - AT - Income Tax

Addition on account of unexplained cash found at the time of search Held that - Trustee, has stated that part of the money was belonging to the assessee trust - cash was from the available balance in the books of the account of the assessee - allegation of the manipulation in the cash book could not be established - Simply stating that there may be possibility of manipulation in the cash books cannot be made sole basis for making the addition addition deleted In favor of assessee Deletion made on the basis of Annexure A-47 alleged that amount appearing in Annexure A-47 are not appearing in the books of account of the assessee Held that - Documents seized as Annexure A- 47 is a daybook - daybooks show cash entries of four institutions run by Trust and in fact these are division of assessee s Trust itself - AR was able to demonstrate and to show us the various entries found in the Annexure A-47 are also reflected in the cash book of various institutions run by the assessee - CIT (A) has rightly deleted the addition In favor of assessee Addition made on account of corporate donation received - AO disallowed exemption u/s 11(2) of the Act on the ground that registration of the society u/s 12AA of the Act has been cancelled Held that - Addition was based on the cancellation of the assessee trust u/s 12AA and denying the exemption u/s 11 of the Act - appeal of the assessee for granting the registration allowed, therefore, addition deleted - assessee is allowed. Cancellation of registration granted to the assessee trust for the purpose of exemption u/s 12AA - alleged that activities of the trust are not genuine and charitable unaccounted cash found and seized from the residence of trustees of assessee Held that - Revenue s appeal dismissed by confirming the relief granted to assessee - unexplained cash transfer entry has been also decided in favour of the assessee - all the issues on which registration was cancelled did not survive - CIT has found the trust and its activities as genuine and the objectives have been found charitable - assessee has been granted registration again Denial of approval of exemption u/s 80G - on the basis of the cancellation of registration of the assessee trust u/s 12AA Held that - Assessee s appeal against the cancellation of registration allowed, therefore - CIT directed to grant the exemption u/s 80G

Issues Involved:
1. Deletion of addition of Rs.9,30,850/- made on account of unexplained cash/money.
2. Deletion of addition of Rs.13,38,600/- made on account of unexplained cash entries.
3. Allowing registration u/s 12AA despite non-application of 85% of additional income towards charity.
4. Treatment of Rs.7,89,96,478/- received as corpus donations as income of the assessee.
5. Cancellation of registration granted to the assessee trust u/s 12AA.
6. Denial of approval of exemption u/s 80G.

Detailed Analysis:

1. Deletion of Addition of Rs.9,30,850/- (Unexplained Cash/Money):
The Assessing Officer made a protective addition of Rs.9,30,850/- in the hands of the assessee trust, treating the cash found at the residence of the trustees as unexplained money. The CIT (A) deleted this addition, stating that the money belonged to Manav Rachna Educational Society and M/s. Techplast India Pvt. Ltd., and was reflected in the cash books. The Tribunal upheld the CIT (A)'s decision, noting that the revenue failed to establish any specific defects or manipulation in the books of account. The cash was kept at the trustees' residence due to security reasons, and the addition was made on a protective basis without concrete evidence. Thus, the Tribunal found no merit in the revenue's ground and dismissed it.

2. Deletion of Addition of Rs.13,38,600/- (Unexplained Cash Entries):
The addition of Rs.13,38,600/- was based on entries in Annexure A-47, a daybook maintained for the period 02.07.2005 to 02.08.2005. The CIT (A) deleted the addition, finding that the entries in Annexure A-47 were part of the books of account of various institutions run by the assessee. The Tribunal confirmed this, noting that the entries were reflected in the respective cash books of the institutions. Therefore, the Tribunal found no merit in the revenue's appeal and upheld the CIT (A)'s decision.

3. Allowing Registration u/s 12AA:
The revenue contended that the assessee did not apply 85% of the additional income of Rs.13,38,600/- towards charity or religious purposes. However, since the Tribunal dismissed the revenue's appeal on the additions made, no additional income remained in the hands of the assessee for consideration. Thus, this ground became infructuous and was dismissed.

4. Treatment of Rs.7,89,96,478/- as Income:
The CIT (A) confirmed the addition of Rs.7,89,96,478/-, treating it as income and denying exemption u/s 11 on the ground that the assessee's registration u/s 12AA was cancelled. The Tribunal noted that the registration was cancelled based on additions made during assessment proceedings, which were deleted by the CIT (A). Since the registration was subsequently granted again, the Tribunal set aside the orders of the authorities below and allowed the assessee's appeal.

5. Cancellation of Registration u/s 12AA:
The registration granted to the assessee trust was cancelled based on three additions made to the income for Assessment Years 2005-06 and 2006-07. The Tribunal found that all the issues on which the registration was cancelled did not survive, as the additions were deleted in the quantum appeal. The Tribunal noted that the trust was granted registration again and found to be genuine with charitable objectives. Therefore, the Tribunal allowed the assessee's appeal and restored the registration.

6. Denial of Approval of Exemption u/s 80G:
The CIT, Central, Ludhiana denied the approval of exemption u/s 80G based on the cancellation of the trust's registration u/s 12AA. Since the Tribunal allowed the appeal against the cancellation of registration, it also set aside the order of the CIT and directed to grant the exemption u/s 80G.

Conclusion:
The Tribunal dismissed the revenue's appeal (ITA No.1148/Del/2010) and allowed the assessee's appeals (ITA Nos.1841/Del/2011, 793/Del/2011, and 972/Del/2011), restoring the registration u/s 12AA and granting exemption u/s 80G. The Tribunal upheld the CIT (A)'s decisions on the deletion of additions and found no merit in the revenue's grounds. The order was pronounced in open court on May 25, 2012.

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