2019 (5) TMI 698 - HC - Income Tax

Addition of explained cash credit u/s 68 - exemption u/s 10(23C)(iiiad) - assessee had received unsecured loan in cash from various persons - genuineness creditworthiness of the lenders - HELD THAT - The Tribunal while confirming the addition made on account of unsecured loan received, had noticed that the lenders of funds have not, at any stage, discharged their onus in furnishing documentary evidence in respect of cash deposits made in their accounts and against which loans were advanced to the assessee. The creditworthiness of the lenders and the genuineness of the transaction was not clear and even the lenders summoned by the Assessing Officer had not submitted their income tax returns. Therefore, the addition made by the Assessing Officer u/s 68 was rightly confirmed by the CIT(A) and did not call for any interference by the Tribunal. Since the assessee had failed to discharge its onus in respect of unsecured loan, therefore, on adding the same with its receipts from fees and interest, the gross receipts amounted to ₹ 1,40,03,382/- (₹ 67,75,000/- ₹ 72,28,382/-) which exceeded Rs. one crore. Since, the gross annual receipts of the assessee exceeded Rs. one crore and the assessee having not taken prior approval from the Chief Commissioner of Income Tax, Panchkula, thus, the assessee was not eligible for exemption u/s 10(23C)(iiiad). Therefore, the said exemption was rightly disallowed and as a consequence the excess of income over expenditure shown at ₹ 7,89,745/- was also rightly added to the unsubstantiated unsecured loan and the taxable income of the assessee determined. The aforesaid findings of fact recorded by the authorities cannot be held to be perverse based on non-appreciation of material or based on the misreading of any evidence on record which may warrant interference by this Court. No question of law, much less, substantial question of law arises in the appeal - appeal is dismissed

Summary

Issues:
Delay in refiling the appeal, interpretation of constitutional provisions affecting charitable society, reasonableness of Tribunal order.

Delay in Refiling the Appeal:
The appeal was filed under Section 260A of the Income Tax Act, 1961, against an order passed by the Income Tax Appellate Tribunal. The delay of 47 days in refiling the appeal was condoned by the High Court.

Interpretation of Constitutional Provisions Affecting Charitable Society:
The case involved the interpretation of Schedule 7 List III Entry 25, 28 of the Constitution of India in relation to a charitable society's eligibility for exemption under Section 10(23C)(iiiad) of the Income Tax Act. The issue was whether the deeming fiction of law could be used to treat certain transactions as cash credit under Section 68, thereby affecting the society's exemption claim.

Reasonableness of Tribunal Order:
The Tribunal's order was challenged on the grounds of unreasonableness, as it concurred with the findings of the CIT(A) that the issue in dispute was not clear. The appellant argued that the case should have been remanded for further clarification. However, the High Court found no merit in the appeal after considering the facts and legal arguments presented.

The High Court detailed the facts of the case, where the assessee, a charitable society, received an unsecured cash loan that remained unexplained. The Assessing Officer added this amount under Section 68 of the Act, leading to the denial of exemption under Section 10(23C)(iiiad) due to gross annual receipts exceeding the specified limit. The CIT(A) and Tribunal affirmed these additions based on the lack of evidence regarding the source of cash deposits and the genuineness of transactions.

The Tribunal upheld the addition of the unsecured loan and the denial of exemption, emphasizing the failure of the society to discharge its onus regarding the loan and gross receipts. The society's claim for exemption under Section 10(23C)(iiiad) was rejected due to exceeding the prescribed limit without prior approval. The High Court agreed with the lower authorities' findings, dismissing the appeal for lack of merit and absence of substantial legal questions.

In conclusion, the High Court dismissed the appeal, affirming the decisions of the lower authorities regarding the unexplained unsecured loan, denial of exemption, and the society's failure to meet the prescribed conditions under the Income Tax Act.