2019 (2) TMI 627 - AT - Income Tax

Charitable activity - exemption u/s 11 denied - Held that - The assessee is not eligible for claim under section 11 of the Act for the activities carried by the assessee. We also find that the income received by the assessee is not inconsonance with the objects of the society and therefore, there is a clear violation of section 11 of the Act. Therefore, the assessee is not entitled for exemption under section 11 of the Act. - Decided against assessee.

Issues Involved:
1. Erroneous order by the Commissioner of Income-Tax (Appeals) on facts and law.
2. Lack of proper opportunity provided to the appellant by the Commissioner of Income-Tax (Appeals).
3. Incorrect treatment of amounts received from donors as income of the appellant.
4. Confirmation of action by the Assessing Officer without considering payments made against such amounts.
5. Levy of interest under section 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Erroneous Order by the Commissioner of Income-Tax (Appeals) on Facts and Law:
The appellant contended that the order passed by the Commissioner of Income-Tax (Appeals) was erroneous both on facts and in law. The Tribunal, after reviewing the material on record, found that the Commissioner of Income-Tax (Appeals) had thoroughly examined the factual matrix and confirmed the order of the Assessing Officer. The Tribunal agreed with the Commissioner that the appellant was not eligible for exemption under section 11 of the Income Tax Act due to the nature of the activities carried out by the appellant, which were not in consonance with the objects of the society.

2. Lack of Proper Opportunity Provided to the Appellant by the Commissioner of Income-Tax (Appeals):
The appellant argued that the Commissioner of Income-Tax (Appeals) erred in deciding the appeal without providing a proper opportunity to the appellant. The Tribunal noted that the appellant had been given multiple opportunities to present their case, but had failed to appear or provide the necessary information. The Commissioner had posted the case on various dates (e.g., 9-6-2016, 5-7-2016, 17-8-2016, 7-9-2016) and had clearly stated that the final opportunity would be on 7-9-2016, which the appellant did not avail. The Tribunal concluded that the appellant was not interested in pursuing the appeal and upheld the Commissioner’s decision to proceed with the order.

3. Incorrect Treatment of Amounts Received from Donors as Income of the Appellant:
The appellant claimed that the amounts received from donors, totaling ?3,30,09,249/-, were not donations but were meant to be passed on to third parties as per the instructions of the donors. The Assessing Officer found that the society had received donations arranged by Mr. Ashok Kumar Roy, which were subsequently transferred back to the donors after deducting a 1% commission. The Tribunal agreed with the Assessing Officer's finding that these transactions violated section 11 of the Income Tax Act and were conducted for personal gains. Consequently, the amounts were correctly treated as the income of the appellant.

4. Confirmation of Action by the Assessing Officer Without Considering Payments Made Against Such Amounts:
The appellant argued that the Commissioner of Income-Tax (Appeals) erred in confirming the Assessing Officer’s action without considering the payments made against the amounts received. The Tribunal noted that the appellant had failed to provide any details or evidence of the payments made. The Assessing Officer had determined that no books of account or donation receipt books were maintained by the society, and the president of the society admitted that no such records were kept. Therefore, the Tribunal upheld the Assessing Officer’s decision to treat the entire amount as income.

5. Levy of Interest Under Section 234B of the Income Tax Act:
The appellant contested the confirmation of the levy of interest under section 234B of the Income Tax Act. The Tribunal found that, given the appellant's failure to maintain proper records and the fraudulent nature of the transactions, the levy of interest was justified. The Tribunal upheld the Commissioner of Income-Tax (Appeals)’s decision to confirm the levy of interest under section 234B.

Conclusion:
The Tribunal found no reason to interfere with the order passed by the Commissioner of Income-Tax (Appeals) and dismissed the appeal filed by the appellant. The Tribunal concluded that the appellant was not entitled to exemption under section 11 of the Income Tax Act and that the entire amount received was rightly treated as income. The appellant’s grounds of appeal were dismissed, and the order was pronounced in open court on 6th February 2019.

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