9911796707
TMI Blog2010 (8) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... see society was also granted registration under section 12AA of the Act on 15.10.2001 and approval under section 80G on 18th March, 2002. It was pointed out that the assessee received donations from various persons amounting to ₹ 1,86,83,248/- whereas the assessee applied ₹ 1,94,42,849/- during the financial year 2001-02. A survey under section 133A of the Act was carried out at the premises of the assessee on 3.9.2002 wherein the books of accounts, ledger, cash book, vouchers of expenses along with tax audit report were impounded. The learned counsel for the assessee pointed out that the assessee duly maintained the books of accounts on the computer for the financial years 2001-02 and 2002-03. The receipts/receipt books containing carbon copies of the donations received by the assessee were also found during survey. Our specific attention was invited to the order of the learned first appellate authority wherein it was opined that "it appears that assessee has not received any donation and expenses are bogus" [page 12 of the order of the CIT(A)]. It was strongly pointed out that the donations were received by the assessee in cash and the factum of donation was duly prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. It was strongly pleaded that various Sarpanchs confirmed free distribution of clothes, medicines, etc. Our attention was invited to pages 1155 to 1174 (volume III of the paper book ). It was contended that even the Assessing Officer did not consider it necessary to examine the statements which were favorable to the assessee and the bills of medicines, clothes, kirana items were duly found during survey (pages 1652 to 2412 paper book vol. IV). A strong plea was raised that the learned Commissioner of Income tax (Appeals) obtained the statements of 19 Sarpanchs on the typed proforma containing 5 questions each wherein also out of 19 Sarpanchs only 2,namely, Shri Dinanath Tiwari and Raghvendra Singh Sengar confirmed the activities of the trust (statements refer to page 1172 of volume III) and for the remaining persons either the statements do not contain the answers posed by the revenue or the questions were left blank and only signatures were put at the end of the typed statements by further pointing out that these statements are attached with the order of the learned Commissioner of Income tax (Appeals). The learned counsel strongly pleaded that these persons were neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and entries are duly reflected in the books of accounts of the suppliers. The learned counsel for the assessee relied upon certain decisions which will be discussed while concluding the issue. 4. We have considered the rival submissions and perused the material available on record. Brief facts are that the assessee NGO/society is a voluntary organisation/Samiti registered under the M.P. Societies Registration Act, 1973. The assessee is also getting grants from State Government of Madhya Pradesh for smooth running of certain programmes for the upliftment of women and children. The activities of the assessee are monitored by the programme Officers working with the office of the District Collector. The activities of the assessee also include training to Anganwadi workers and various other activities for the upliftment of women welfare. There is no dispute to the fact that the assessee society/Samiti is regularly filing its returns since assessment year 2000-01. After being satisfied with the activities of the assessee it was granted registration vide order dated 15.10.2001 under section 12A of the Act (F.No.CIT-II/JBP/Tech/4/01-02). The assessee was also granted approval vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years. 6. During the course of survey conducted under section 133A, at the office premises of the assessee on 3.9.2002, the books of accounts like cash book, ledger, expenditure vouchers, etc. along with copy of tax audit report for the financial year 2000-01 were found and impounded along with the books of accounts maintained in computer for the financial years 2001-02 and 2002-03 and also receipt books containing carbon copies of receipts so issued for getting donations. It is pertinent to mention here that the case of the assessee for the assessment year 2002-03 was selected for scrutiny and in the meantime on the basis of some inquiries made by the department, the registration granted under section 12A and approval/recognition under section 80G of the Act was withdrawn vide order dated 12.8.2003 which was restored by the Tribunal vide order dated 27.2.2004 under section 12A of the Act (order in ITA No. 198/Jab/03). The whole issue revolves around suspicion by the learned Commissioner of Income Tax (Appeals) in disbelieving the receipts of donations on the reasons stated in the assessment order which are as under : - (i) the donations were received in cash and the same were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as under :- "Voluntary contributions to religious or charitable trusts are deemed to be its income. Department is not required to disprove the same even if circumstances surrounding the receipt of donations appear extremely suspicious. Law requires that only expenditure to the extent the trust has incurred for the charitable purposes is to be allowed." In view of the above findings, the learned Commissioner of Income Tax (Appeals), enhanced the returned income to ₹ 1,86,83,48/-. 8. If the totality of the facts, arguments advanced by the learned respective counsels and the material available on record are kept in juxta-position and analysed, following facts are oozing out. (i) From the certificates/statements issued/tendered by the Sarpanchs of different villages it is seen that some of them have confirmed that the assessee Samiti distributed free food, clothes and medicines (volume III paper book pages 1155 to 1174) (ii) The learned CIT(A) either did not think it appropriate to further examine the correctness of the aforesaid material evidence or deliberately avoided to mention the same simply to disbelieve the claim of the assessee. (iii) The stereo-type proforma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d after completion of survey. Even otherwise, impounding of such receipts during survey has not been controverted by the revenue at any stage right from the assessment, first appellate stage and even before the Tribunal. The expenditure was disallowed and enhanced to ₹ 1,86,26,203/- by the learned Commissioner of Income Tax (Appeals) by observing that the claimed expenditure was bogus. The ld. Counsel for the assessee claimed that the expenses were in fact incurred and the income was applied for charitable purposes, for which our attention was invited to the following pages of the paper book :- S. No. Details of expenditure Page numbers (i) Medicines purchases 1652 - 1766 (ii) Bills for purchase of stationary, furniture and expenditure for courier service 1767 - 1843 (iii) Payments to visitors 1844 - 1856 (iv) Medical bills for purchase of medicines 1857 - 1864 (v) Audit fee receipts 1865 - 1866 (vi) Payment to sweepers, dry cleaners, stipend to workers and salary to staff 1867 - 1887 (vii) Bills for purchase of kirana 1888 - 2092 (viii) Vouchers for payment of stipend, salary, boarding and lodging and other expenses 2093 - 2177 (ix) Travelling an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same payments made to suppliers are being suspected in the case of the assessee, which were duly supported by bills/proper vouchers. Consequently, on the same analogy, the department is not permitted to take a contrary stand in the case of the assessee to falsify its stand. Even otherwise, if this issue is analysed with the doctrine of consistency, the assessee is fortified by the ratio laid down in the following cases :- 1. Union of India v. Satish Panalal Shah; 249 ITR 221 (SC) 2. Union of India v. Kaumudini Narayan Dalal; 249 ITR 219 (SC) 3. CIT v. A.R.J. Security Printers; 264 ITR 276 (Del) 4. CIT v. Neo Poly Pack(P) Ltd.; 245 ITR 492 (Del) 5. CIT v. Roxy Indl. Corporation; 289 ITR 318 (P&H) 6. Berger Paints India Ltd.; 266 ITR 99 (SC) 7. DCIT v. United Vanaspati Ltd.; 275 ITR 124 (AT) (Chd) 8. CIT v. Narendra Doshi; 254 ITR 606 (SC) para 11 9. CIT v. Shivsagar Estate; 257 ITR 59 (SC) 10.Pradip Ramanlal Sheth v. Union of India; 204 ITR 866 (Guj.) 11.Radhasoami Satsang v. CIT; 193 ITR 321 (SC) The crux of the aforesaid cases is that where the department has accepted the correctness in one case then it is not permitted to take a different stand on identical facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them ought to have been supplied to the assessee. It was the bounden duty of the revenue to provide opportunity to rebut the same before the material is used against the assessee. The assessee is further supported by the following decisions :- 1. Guduthur Bros. v. ITO; 40 ITR 298 (SC) 2. Kapurchand Shrimal v. CIT; 131 ITR 451 (SC) 3. CIT v. United Towers(I)(P)Ltd.; 172 Taxman 267 4. ITA Nos. 458 to 468/Jd/04 Even otherwise, it is the bounden duty of the other party to provide opportunity to cross examine the evidence/material/witnesses against whom such material/statement is used. Our view is supported by the decision of the Delhi Bench of the Tribunal in the case of Rose International (2004) 88 ITD 95 (Del). 13. The whole case of the revenue is based on suspicion that either the donations are fictitious or the purchases are bogus. We are of the view that once the list of donors was furnished by the assessee, the purchases are supported by relevant bills, the suppliers of the goods/material have duly confirmed the same in their statements recorded by the revenue and also by filing respective affidavits and the carbon copies of receipts of donations impounded during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts in question to the assessee, the burden immediately shifts on to the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source." Hon'ble Bombay High court in the case of CIT VS. United Tyres India Private Limited (2008) 172 Taxman 267 held that principles of natural justice require that before any material is used against a party, it should be put to the party and thus the learned Commissioner(A) was under a statutory obligation to put any additional material/evidence taken on record by him to the other party. Our view further finds support from the decision in the case of Tejraj Chopada v. ITO; (2006) 100 TTJ (Jd) 922. Hon'ble High Court of Kerala in P.S. Abdul Majeed vs. Agricultural Incometax and Salestax Officer; 209 ITR 821 held that reliability of entries evident against the assessee can only be proved after examination of author of those books. Identical ratio was laid down in 102 ITR 366 (Ker). In the present appeal, donations are duly confirmed by the receipts. Therefore, on pre-pondera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from various persons who supplied the goods/material to the assessee needs to be analysed. One such person is Shri Anuj Pratap Singh, owner of tent house who supplied tents to the assessee for conducting various programmes. The said statement is available at pages 84 to 87 of the paper book. The relevant portion of the statement recorded by the revenue on 4.1.2007 is reproduced hereunder :- "Q. 22. Account of Namra Mahila Evam Bal Kalyan Samiti show that they paid you ₹ 22,15,126/- in FY 2001-02. Did you get the entire amount of ₹ 22,15,126/- in one instalment or were you receiving the payments periodically ? A- Amount was received in multiple instalments, but towards the end of the year. Q. 23 - Did you receive any amount prior to December, 2001 ? A. I received nominal amounts to compensat for transportation expenses and labour payment. But final accounting was done towards the end of the year. Q.24 Did you receive any amount in the month of April, 2002 also ? A. Yes I have received payment even in April, 2002 Q. 25 How much payment did you received till December, 2001 ? A. At this moment, I do not recall. I have to look into my records. Q. 26. Did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d aforesaid return has been accompanied with audited statement of account. A.O. has also noted that Sarpanch of various villages have given evidence with regard to activities of trust. The A.O. however, in respect to such legal evidence has observed that such statements do not establish that funds are received and distributed within short span of time. A.O. has further observed that funds are not actually received and thus could not be corresponding expenditure either. A perusal of assessment order indicates that there was evidence on record in terms of statement of Shri Ritesh Singh admitting that amount received by him towards supply of cloth and also statement of Sarpanch with regard to distribution of same towards object of trust . The aforesaid evidence has not been found to be false or has been shown to be incorrect by adducing any other legal evidence on record. It is settled proposition of law that evidence cannot be brushed aside on the basis of mere suspicion and surmises. The tone and tenor of A.O. clearly reflects that expenditure on objects of trust is sought to be not accepted as according to him there was no receipt of amount of donation by trust. The A.O. has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we are of the view that the expenditure in the hands of assessee trust cannot be disputed. Considering the above facts and evidence on record, we are of the opinion that assessee has satisfactorily discharged the onus of explaining application of income to the extent of ₹ 37.71 lacs . 19. In the case of Shri Mathura Pd. Gupta payment made are ₹ 31.37 lacs. His statement was recorded on 18/9/2002 in which it is stated that he has supplied goods worth ₹ 31 to 33 lacs. A.O. has observed that he has filed return of income on 31/10/2002. He also appeared before the CIT(A) on 4/1/2007 and again affirmed that he has sold goods to assessee trust for ₹ 31 to 33 lacs. The A.O. has made similar observation as in the case of Shri Ritesh Singh. Such rejection of the evidence and confirmation by the supplier is clearly based on presumption and probabilities. The evidence placed on record cannot rejected on suspicion and surmises. In A.O. at page 6 para 5 of the assessment order has noted the filing of return of income by Shri Mathura Pd. Gupta on 31/10/2002. On identical query from Bench regarding the filing of return by Shri Mathura Prasad Gupta, the learned represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons have been recorded pursuance to survey proceedings at the premises of assessee u/s 133A on 03/09/2002. 21. Various documents placed in paper book at volume 1 comprising of 810 pages clearly demonstrate that assessee trust has carried out various activities of charitable nature. The assessee trust is registered with Registrar of Socieities and also Directorate of Women & Child Development of Madhya Pradesh. The assessee trust has maintained regular books of account which are duly audited by Chartered accountant from time to time. The assessee has placed on record certificates and communications issued by various State Government's agencies with regard to charitable activities of the trust. A.O. has not recorded any adverse observation in respect of various activities of trust except for transaction of receipt of donation of ₹ 186 lacs and its application thereof. CIT(A) has not disputed the genuineness of trust except for application of income out of donation shown to have been received by assessee trust at ₹ 186 lacs during the previous year under consideration. It is also seen that assessment for the assessment year 2001-02 has been completed after invoking 147 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dministrative Officer at the relevant time was called by the office of the learned Commissioner (A) where he has duly confirmed that during the relevant time he was posted in Rewa and from July, 1995 to September, 2001 he attended various functions of the assessee and confirmed the photographs shown to him of special occasions like Independence Day/republic day. 23. The learned CIT(A) in para 7 of the impugned order has observed as under :- "7. It is quite clear from the discussion Above that the AO passing the assessment order of the appellant knows nothing about the provisions of the incometax act relating to assessment of trust. This is because section 2(24) of the I.T. Act, 1961 which defines income being within its fold "voluntary contributions received by the trust created wholly or partly for charitable or religious purposes". If this be so, then question of addition any amount received as donation to the trust as deemed income under the provisions of section 68 does not arise. Also the AO does not appear to be comfortable with accounts because cash shortage can never be added as income in anyone's hand. Therefore, even though the grounds on which the appellant filed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the office of the Programme Officer, Mahila Avum Bal Vikas, District Rewa (M.P.) dated 19.2.2001 is analysed, in view of the facts stated above, certain facts are oozing out that the assessee was maintaining six rooms like office, kitchen, store room, Anganwadi workers residential accommodation, training hall, three lavatories, etc. On the upper floor of the building the assessee is also maintaining legal advice centre in two rooms. Ultimately, there is a specific mention that on verification the assessee society was found to have been discharging its responsibilities fully. 24. In view of the above facts, it can be said that the activities of the assessee are genuine and if the activities are genuine, then incurring of expenses is obviously cannot be denied. The Samiti claimed to have received donations from about 1400 persons out of which only 723 persons were suspected by the department. On questioning from the Bench as to how 1150 receipts were issued to 723 persons, it was explained by the learned counsel for the assessee that in some cases some persons did not donate the whole amount at one go but at different intervals, so the receipts were issued as and when such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppliers. Therefore, from this angle also, no addition is justified. 25. All the donors, in question, were examined by the authority of the department and their statements were recorded. Such statements/affidavits are available in Volume III pages 1259 to 1374. Their assessments were completed after issuing notice u/s 148/143(2) of the Act wherever applicable, and these donors were allowed exemption u/s 80-G either in assessment so completed or in revision proceedings u/s 264 of the Act. In view of these facts, it can be said that the assessee actually received donation. Therefore, there is no question of assumption that the donations are bogus. The list of persons summoned by the authorities is available at page 1561 to 1564 of Volume III. As far as the expenditure is concerned, the books of the suppliers were impounded by the learned Commissioner of Income Tax (Appeals) wherein the payments were found to be recorded as their receipts. Therefore, these books cannot be said to be either bogus or unreliable. Before us and also before the authorities below, the list of workers was filed by the assessee who distributed medicines, clothes, etc. (pages 1500 to 1506) of Volume III. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT. Another fact pertinent to mention here is that after approval of recognition u/s 80G(v) of the Act, the assessee received donation from 723 persons aggregating to ₹ 1,86,83,248/- against which the assessee claimed to have applied an amount of ₹ 1,94,42,849/- during the financial year 2001-02 (A.Y. 2002-03). 27. Now the question arises as to whether the income/donations were applied for charitable purposes ? This is the moot question to be examined by us. If the totality of facts is analysed, broadly it can be said that if the department itself is suspecting the accumulation/receipt of donation, then there is no question of expenditure or in other words, addition because if there is no income, there is no question of addition. However, if the statements of the suppliers of goods like tent, kirana goods, medicines, are analysed, in the light of the facts stated above, then the payments made to them cannot be suspected especially when they have confirmed that they have supplied the goods. From a perusal of photographs it is clear that the tents were used for Anganwadi workers, other charity functions, etc. At page 12 of the impugned order the learned Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of income from donation was spent within 10 days at the close of the year which is not possible. We are of the view that firstly it depends on the availability of funds and secondly there is no bar u/s 11(1)(a) for incurring the expenditure that it has to be incurred throughout the year. Even if there is reimbursement of expenditure of earlier year out of the income of the current year, still it is application of income as was held in CIT v. Shri plot Swatambar Moorti Pujak Jain; 119 CTR (Guj) 144 and CIT v. Maharana of Mewar Charitable Foundation; 164 ITR 439 (Raj.). Even the repayment of borrowals is also covered as was held in CIT v. Janma Bhoomi Press Trust; 242 ITR 245 (Karn.). In the present appeal, with documentary evidence like some vouchers, statements of the suppliers of the goods, other persons, it has been proved by the assessee that the income was applied for charitable purposes and the department is not satisfied with the claim of the assessee then the onus shifts on the revenue to prove otherwise which the revenue has failed to do. Even the department is broadly not saying that money was not expended but is suspecting that this amount cannot be spent within a per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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