2015 (8) TMI 1145 - AT - Income Tax

Unexplained investment/deposit found in the bank deposits - addition under section 69 - CIT(A) delted the addition - Held that - The bank account standing in the name of the assessee does not belong to the assessee in his individual capacity and he was holding the account in his fiduciary capacity as metropolitan/bishop of the church. Therefore, all the monies credited in the bank account, which stands in the name of the assessee, belong to the church. If the money credited in the bank account of the assessee is not accounted in the books of account of the church or diocese addition could be made only in the hands of the church or diocese and not in the hands of the individual, who is the metropolitan/bishop of the church. By executing an oath of affirmation under the constitution of Marthoma Syrian Church of Malabar, the assessee renounced his all movable and immovable properties, assets, bank deposits held by him and he does not own anything except his patrimony. Therefore, the property/ money which stands in the name of the assessee has to be considered only in the hands of the church, if at all an addition has to be made. There cannot be any addition in the hands of the present assessee. This Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly deleted the addition. - Decided in favour of assessee.

Issues Involved:
1. Addition made by the Assessing Officer under section 69 of the Income-tax Act concerning investment/deposit found in the bank deposits.
2. Ownership and fiduciary capacity of the assessee regarding the bank deposits and properties.
3. Validity of reopening the assessment under section 147 of the Income-tax Act.
4. Compliance with the Central Board of Direct Taxes circular regarding the tax effect threshold for filing appeals.

Issue-wise Detailed Analysis:

1. Addition Made by the Assessing Officer Under Section 69:
The primary issue in these appeals is the addition made by the Assessing Officer (AO) under section 69 of the Income-tax Act concerning the deposits found in the bank accounts of the assessee for the assessment years 2004-05 to 2007-08. The AO discovered substantial deposits in the bank accounts maintained in the name of the assessee, who is the bishop/metropolitan of Marthoma Syrian Church of Malabar. The AO contended that these deposits were not accounted for in the books of the church or the diocese and thus treated them as the assessee's income. However, the Commissioner of Income-tax (Appeals) found that the assessee, by virtue of his position and the church's constitution, could not own any property or money except patrimony, and thus the deposits in the bank account should not be treated as the assessee's income.

2. Ownership and Fiduciary Capacity of the Assessee:
The assessee argued that the bank accounts and properties in question were held in a fiduciary capacity as the bishop of the church. The constitution of Marthoma Syrian Church of Malabar mandates that any property or money held by the bishop automatically belongs to the church. The Tribunal agreed with this position, emphasizing that the oath of affirmation executed by the assessee binds him under the Indian Contract Act. Therefore, any property, assets, or bank deposits in the name of the assessee belong to the church, not the individual.

3. Validity of Reopening the Assessment Under Section 147:
The assessee's representative argued that the reopening of the assessment under section 147 was unjustified. The Tribunal noted that the funds in the bank account were received from church members for specific purposes, such as constructing a hermitage for old-age people. The bank account was opened for this purpose, and the funds were incorporated into the church's accounts. The Tribunal referenced the Supreme Court's judgment in Radhasoami Satsang v. CIT, which supports the view that the funds received by the bishop in his fiduciary capacity should be treated as the church's income.

4. Compliance with Central Board of Direct Taxes Circular:
The assessee's representative pointed out that the tax effect for the assessment years 2004-05 and 2006-07 was less than Rs. 4 lakhs, and thus, according to the Central Board of Direct Taxes circular, the Department should not have filed appeals for these years. The Tribunal did not specifically address this point in the final judgment but focused on the substantive issue of ownership and fiduciary capacity.

Conclusion:
The Tribunal concluded that the bank accounts and properties in the name of the assessee were held in a fiduciary capacity for the church. Therefore, any deposits in these accounts should be considered as the church's income, not the assessee's. The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision to delete the additions made by the AO. Consequently, all the appeals of the Revenue were dismissed.

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