2015 (9) TMI 319 - AT - Income Tax

Addition made u/s 68 - assessee trust has violated the conditions for grant of exemption u/s 12A - CIT(A) deleted the addition - Held that - . On a consideration thereof on facts, we are of the view that the impugned order cannot stand in the eyes of the law. The CIT(A) has failed to address the speaking findings on record made by the AO namely that the assessee had collected funds through illegal means. The so called donations through entry operators who admittedly did no business whatsoever and only provided accommodation entries cannot be termed as donations let alone voluntary donations in the eyes of law. It is a matter of record that at the relevant point of time the assessee was in need of funds for making payments to DDA and the urgency in the need of funds as per record was addressed by arranging the funds through illegal means in contravention of law. These facts on record have not been addressed by the CIT(A). The impugned order in both the years is contrary to the facts on record and also the judicial precedent cited by the Ld. Sr. DR who has placed reliance on the judgement of the Delhi High Court in the case of CIT vs Sh. Vishwa Vigyan Telugu Linguistic Minority Education Society (2012 (6) TMI 542 - DELHI HIGH COURT ). Accordingly in view of the detailed reasons given hereinabove, we find that the departmental appeal deserves to be allowed. The impugned order having failed to address the relevant crucial facts considering the judicial precedent is set aside. The issue is restored back to the file to the CIT(A) with the direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of revenue for statistical purposes.

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act.
2. Violation of conditions for grant of exemption under Section 12A of the Income Tax Act.
3. Legitimacy and genuineness of donations received by the assessee trust.
4. Compliance with Section 11 and 12 of the Income Tax Act.

Detailed Analysis:

1. Deletion of Addition Made Under Section 68 of the Income Tax Act:
The Revenue challenged the CIT(A)'s decision to delete the addition made under Section 68, arguing that the assessee trust violated conditions for exemption under Section 12A. The AO initially denied exemptions under Sections 11 and 12, suspecting that donations were unaccounted money introduced as income. The ITAT remanded the issue back to the AO for a detailed examination, directing the AO to pass a speaking order. In reassessment, the AO found that the donations totaling Rs. 24,93,000/- were received from 24 persons within a short span and were largely unverified, leading to the conclusion that funds were collected through illegal means, thus violating Section 12A conditions.

2. Violation of Conditions for Grant of Exemption Under Section 12A of the Income Tax Act:
The AO held that the assessee violated Section 12A conditions by collecting funds through illegal means, specifically through entry operators who provided bogus accommodation entries. The CIT(A) disagreed, stating that the AO failed to specify which conditions under Sections 11 and 12 were not complied with, and relied on judicial precedents like DIT Vs. Keshav Social Charitable Foundation. However, the Tribunal found that the CIT(A) did not address the AO's findings adequately and that the so-called donations were not voluntary but facilitated through entry operators, thus violating the law.

3. Legitimacy and Genuineness of Donations Received by the Assessee Trust:
The AO's investigation revealed that the donations were facilitated by entry operators like Sh. Mukesh Gupta, who admitted that no real business was conducted and only accommodation entries were provided. The AO concluded that these transactions were not genuine donations but were arranged to meet the urgent financial needs of the assessee for payments to DDA. The Tribunal noted that the CIT(A) failed to address these findings and the urgency in the need for funds, which were arranged through illegal means, thus contravening the law.

4. Compliance with Section 11 and 12 of the Income Tax Act:
The AO argued that the assessee did not maintain regular books of accounts and failed to comply with the requirements of Sections 11 and 12. The Tribunal found that the CIT(A) did not adequately address the AO's findings regarding the non-maintenance of books and the unverified nature of donations. The Tribunal emphasized that the donations through entry operators could not be considered voluntary and genuine, thus failing to comply with the conditions for exemption under Sections 11 and 12.

Conclusion:
The Tribunal set aside the CIT(A)'s orders for both assessment years, directing the CIT(A) to pass a speaking order after giving the assessee a reasonable opportunity to be heard. The Tribunal found that the CIT(A) failed to address the AO's findings adequately and that the donations facilitated through entry operators were not genuine, thus violating the conditions for exemption under Section 12A. The appeals were allowed for statistical purposes, and the matter was remanded back to the CIT(A) for a detailed examination in accordance with the law.

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