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2015 (8) TMI 765 - AT - Income TaxUndisclosed cash credits under section 68 - CIT(A) deleted part addition - Held that - When the donors have given their permanent account numbers and their receipts would prove that the assessee has been able to prove the identity of the donors as well as proved that the donors have given donations towards corpus of the assessee-society and the donations have been utilised for the purpose of construction of the educational building. Therefore, the authorities below should not have made addition against the assessee. Therefore, we set aside the orders of the authorities below and delete the entire addition. - Decided in favour of assessee. Addition on account of alleged commission - unexplained expenditure under section 69C - Held that - If the assessee has made any actual payment on account of commission to any person, the commission is stated to be given to some persons who have arranged the donations. Most of the donors have already confirmed giving of donations to the assessee and none of the donors have confirmed the version of the Assessing Officer if they have given donations to the assessee through commission agent, against commission payment. Therefore, the theory of commission agent arranging the donations is not proved through any reliable or cogent evidence. No material was also found during the course of search to support the findings of the authorities below if any commission is paid actually to the commission agent for arranging the donations. The assessee is a charitable society. Therefore, there was no need to make any payment by way of commission and even if any commission is paid, this would have been allowable deduction under section 37 of the Act. Therefore, in the absence of any specific material available on record, it is difficult to believe that any commission was paid by the assessee. No enquiries have been made from any recipient of the amount. The assessee was engaged only in construction of the building in the year under consideration. Therefore, there was no other source of income from where it could be stated that the assessee has earned undisclosed income or paid any commission. We have already decided major issue of unexplained donations above and have deleted the entire addition. Therefore, considering the totality of the facts and circumstances, we do not find any justification even to sustain part of the addition on account of alleged commission payment - Decided in favour of assessee. Taxing of the income of the assessee - income of the assessee society was exempt under section 10(23C)(vi) and section 12AA - Held that - Learned counsel for the assessee stated that registration under section 12AA of the Act has already been cancelled, against which the assessee is in appeal. Therefore, this ground will not survive in favour of the assessee. On consideration of the above facts it is clear that once registration is cancelled under section 12AA(3) of the Act, the assessee would not get benefit of the same. Violation of aims and objects of the assessee-society - The assessee was at the stage of formation, i.e., construction of educational building and all corpus funds applied towards the construction of the college building and no specific findings of fact have been recorded against the assessee in this assessment year and whatever additions have been made by the Assessing Officer on account of donors donation or commission payment, we have already deleted the addition and allowed the appeal of the assessee. Therefore, it is not the case of violation of any provisions of sections 11, 12 and 13 of the Act in this year. Therefore, the learned Commissioner of Income- tax (Appeals) was justified in allowing the appeal of the assessee on this issue. - Decided in favour of assessee. Addition on account of capitation fees from the students and addition being cash found in the residential premises of the chairman of the society - Held that - No specific, reliable or cogent evidence was found during the course of search to prove that the assessee-society received any capitation fee or any cash belonged to the assessee-society. Therefore, both additions of ₹ 1.60 crores and ₹ 3,99,950 in the hands of the assessee- society are wholly unwarranted and are liable to be deleted. Since the Assessing Officer has failed to prove his case against the assessee on account of both additions, therefore, there is no question of violation of sections 11(3) and 13(3) of the Act in the case of the assessee. Considering the above discussion, we set aside the orders of the authorities below and delete the addition of ₹ 3,99,950 and ₹ 1.60 crores in the hands of the assessee. We also held that there is no violation of sections 11(3) and 13(3) of the Act in the case of the assessee. - Decided in favour of assessee. Cancel the registration under section 12AA - Held that - There is no material available against the assessee-society at this stage to show that the assessee s activities are not genuine or have not been carried out in accordance with the objects of the trust. We may also note here that in the remaining assessment years 2005-06, 2006-07, 2007-08 and 2008-09, the Revenue Department did not find any adverse material against the assessee to prove that its activities are not genuine. There is no violation of sections 11, 12 and 13 of the Act. There is also no violation of conditions under section 80G of the Act. Therefore, considering the totality of the facts and circumstances, it is clear that the assessee-society has solely carried out the genuine educational activities and as such, there is no reason to cancel the registration under section 12AA of the Act or withdrawing the approval under section 80G of the Act.- Decided in favour of assessee.
Issues Involved:
1. Addition of corpus fund as undisclosed income under Section 68 of the Income-tax Act, 1961. 2. Addition of corpus fund from two private limited companies as undisclosed income. 3. Treatment of donations as unexplained income. 4. Addition of commission as unexplained expenditure under Section 69C of the Income-tax Act, 1961. 5. Taxing of income of the assessee society under Sections 10(23C)(vi) and 12AA of the Income-tax Act, 1961. 6. Cancellation of registration under Section 12AA and withdrawal of approval under Section 80G of the Income-tax Act, 1961. 7. Addition of capitation fees and cash found during search as income of the assessee society. 8. Protective assessment of cash found in the hands of Shri Sukhdev Kumar Singla. Detailed Analysis: 1. Addition of Corpus Fund as Undisclosed Income under Section 68: The assessee claimed that the corpus fund collected from various individuals was supported by proper receipts mentioning the name, address, and permanent account number of the donors. However, the Assessing Officer treated these donations as unexplained income under Section 68. The Commissioner of Income-tax (Appeals) (CIT(A)) partly deleted the addition, but the Tribunal found that the donations were genuine as they were accounted for in the books and used for constructing educational infrastructure. The Tribunal directed the Assessing Officer to work out the amount involved for the 39 persons whose donations were disallowed. 2. Addition of Corpus Fund from Two Private Limited Companies: The Assessing Officer added Rs. 20 lakhs received from two companies as unexplained income, citing that the companies did not exist at the given addresses. The CIT(A) upheld the addition, but the Tribunal admitted additional evidence (bank statements) proving the donations were made through banking channels. The Tribunal deleted the addition, finding the assessee had proved the identity and creditworthiness of the donor companies. 3. Treatment of Donations as Unexplained Income: The Tribunal found that the donations were accounted for in the regular books, and the receipts contained all necessary details. The Assessing Officer's reliance on vague notices under Section 133(6) was not sufficient to disprove the genuineness of the donations. The Tribunal deleted the entire addition, holding that the donations were genuine and used for the construction of educational buildings. 4. Addition of Commission as Unexplained Expenditure under Section 69C: The Assessing Officer added Rs. 3,27,099 as unexplained expenditure based on seized documents mentioning "commission." The CIT(A) partly upheld the addition, but the Tribunal found no evidence of actual payment of commission. The Tribunal deleted the entire addition, noting that no material was found during the search to support the payment of commission. 5. Taxing of Income of the Assessee Society under Sections 10(23C)(vi) and 12AA: The Assessing Officer concluded that the activities of the trust were not genuine and taxed the income of the assessee society. The CIT(A) found no violation of the aims and objects of the society and allowed the appeal of the assessee. The Tribunal upheld this finding, noting that the assessee was involved in constructing educational infrastructure and had not violated any provisions of the Income-tax Act. 6. Cancellation of Registration under Section 12AA and Withdrawal of Approval under Section 80G: The CIT cancelled the registration and approval based on the additions made by the Assessing Officer. The Tribunal found that all the additions were deleted, and there was no material to show that the assessee's activities were not genuine. The Tribunal restored the registration under Section 12AA and approval under Section 80G. 7. Addition of Capitation Fees and Cash Found during Search as Income of the Assessee Society: The Assessing Officer added Rs. 3,99,950 as capitation fees and Rs. 1.60 crores as cash found during the search. The Tribunal found no evidence of capitation fees and noted that the cash was owned by Shri Sukhdev Kumar Singla, who had already surrendered it in his return of income. The Tribunal deleted both additions and held that there was no violation of Sections 11(3) and 13(3). 8. Protective Assessment of Cash Found in the Hands of Shri Sukhdev Kumar Singla: The Assessing Officer made a protective assessment of Rs. 1.60 crores in the hands of Shri Sukhdev Kumar Singla. The Tribunal, having deleted the addition in the hands of the assessee society, directed that the amount be added on a substantive basis in the hands of Shri Sukhdev Kumar Singla, as it was part of his return of income. Conclusion: The Tribunal allowed the appeals of the assessee and deleted the additions made by the Assessing Officer, finding that the donations were genuine, the assessee's activities were in line with its objects, and there was no evidence of capitation fees or unexplained expenditure. The Tribunal also restored the registration under Section 12AA and approval under Section 80G.
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