2023 (3) TMI 722 - AT - Income Tax

Assessee's Appeal Dismissed, Income Addition Upheld.

The appeal filed by the assessee was dismissed as the addition of corpus donation as income was confirmed by the Commissioner of Income Tax (Appeals), ... Corpus donation - exemption under section 11(1)(d) of the Income Tax Act - genuineness of donations and source of funds - bogus companies and siphoning of funds - admission of additional evidence under rule 46A - remand for fresh consideration and remand complianceCorpus donation - exemption under section 11(1)(d) of the Income Tax Act - genuineness of donations and source of funds - Whether the corpus donation of Rs.2,94,00,000 claimed by the assessee is exempt under section 11(1)(d) or is taxable as income. - HELD THAT: - The Tribunal recorded that on remand the Assessing Officer afforded the assessee an opportunity to be heard but no fresh material or evidence was produced. The AO in his remand report rehearsed the earlier findings that the donors' claims were not substantiated by identification papers or books of account, that receipt by cheque alone did not establish genuineness, and that post-search investigations had identified the donor companies in the list of entities floated by the Usha group for siphoning funds. The CIT(A) after considering the AO's remand report and the absence of new material reiterated the earlier conclusion that the receipts were not proved to be genuine corpus donations. The Tribunal, noting absence of any new evidence before the AO, CIT(A) or itself, found no infirmity in the concurrent findings of the lower authorities and upheld the addition treating the amount as taxable income. [Paras 7, 8]Addition of Rs.2,94,00,000 as taxable income upheld; claim of exemption under section 11(1)(d) rejected.Admission of additional evidence under rule 46A - affidavits filed during appellate proceedings - Whether affidavits and statements filed on behalf of donor representatives constituted admissible additional evidence. - HELD THAT: - The CIT(A) and the AO noted that affidavits filed during appellate proceedings contained statements inconsistent with earlier depositions recorded under summons u/s 131 and that the persons who appeared at earlier proceedings had not produced identification or books of account. The appellate authority applied the tests for admission of additional evidence and found that none of the conditions for admitting such evidence (including compliance with rule 46A) were satisfied; accordingly the affidavits were not admitted and could not bolster the assessee's claim. The Tribunal accepted that no fresh material complying with admissibility conditions was produced on remand. [Paras 7, 8]Affidavits/additional evidence not admitted; cannot be relied upon to establish the genuineness of the donations.Bogus companies and siphoning of funds - remand for fresh consideration and remand compliance - Whether the remand to the Assessing Officer was complied with and whether findings regarding the donors being bogus entities could sustain the addition. - HELD THAT: - The Tribunal noted that the matter had earlier been remanded by the ITAT to the AO for fresh examination. On remand the AO submitted a report after hearing the assessee and reiterated findings from investigations that linked the donor companies to the Usha group and to entities identified as bogus for purposes of siphoning funds. The CIT(A) considered the remand report and the rejoinder, found no new evidence from the assessee, and upheld the AO's view. The Tribunal recorded that the remand directions had been complied with, that the AO and CIT(A) had considered the material on record, and that in absence of fresh admissible evidence there was no reason to interfere with the conclusion drawn on the basis of the investigation and remand report. [Paras 4, 7, 8]Remand complied with; findings regarding linkage of donor companies to bogus entities sustained and relied upon to uphold the addition.Final Conclusion: The Tribunal, after hearing the Revenue and noting absence of any fresh admissible evidence from the assessee on remand, upheld the addition of Rs.2,94,00,000 as taxable income; the claim of exemption under section 11(1)(d) and the affidavits filed as additional evidence were rejected, and the appeal is dismissed. Issues Involved:1. Addition of corpus donation as income.2. Non-consideration of confirmation letters/statements u/s 131.3. Non-admission of affidavits as additional evidence.4. Allegation of donor companies being bogus.5. Relevance of search and seizure operations.6. Non-compliance with ITAT directions.7. Dismissal of affidavits and material produced.8. Assessment based on suspicion and surmises.9. Examination of facts by CIT(A).10. Adherence to ITAT directions.Summary:1. Addition of Corpus Donation as Income:The Commissioner of Income Tax (Appeals) confirmed the action of the Assessing Officer in making an addition of corpus donation of Rs. 2,94,00,000/- received by the appellant, holding it to be in the nature of income without invoking any provision of the Income Tax Act, 1961.2. Non-consideration of Confirmation Letters/Statements u/s 131:The CIT(A) upheld the AO's decision to not take cognizance of the confirmation letters/statements recorded in response to summons u/s 131, which included identification papers and other documents confirming the corpus donation.3. Non-admission of Affidavits as Additional Evidence:The CIT(A) did not admit the affidavits of the directors/accountants of the donor companies as additional evidence, noting that none of the conditions of rule 46A were satisfied for their admission.4. Allegation of Donor Companies Being Bogus:The CIT(A) relied on the AO's observations that the donor companies were bogus entities floated to transfer funds and evade tax, without any material evidence to the contrary.5. Relevance of Search and Seizure Operations:The CIT(A) considered the search and seizure operations carried out on the Usha Group, which established the floating of bogus companies, including the donor companies in question, even though the operations were for an earlier assessment year.6. Non-compliance with ITAT Directions:The CIT(A) was found to have not followed the ITAT's directions to examine the circumstances establishing the receipt of donations or the money having gone back to the donors.7. Dismissal of Affidavits and Material Produced:The CIT(A) dismissed the affidavits and material produced by the appellant, reiterating the findings of the original assessment that the donations were not genuine.8. Assessment Based on Suspicion and Surmises:The CIT(A) upheld the AO's assessment based on suspicion and surmises, noting that the complete identity of the donors was made available but did not establish the genuineness of the donations.9. Examination of Facts by CIT(A):The CIT(A) was criticized for confirming the AO's observations without properly examining the facts of the case or the material produced by the appellant.10. Adherence to ITAT Directions:The CIT(A) was found to have not adhered to the ITAT's directions in their order dated 10th July, 2009, regarding the examination of the material produced by the appellant.Conclusion:The appeal filed by the assessee was dismissed due to the lack of new evidence or material produced before the AO, CIT(A), or the Tribunal. The addition of Rs. 2,94,00,000/- as taxable income was confirmed, and no error was found in the findings of the lower authorities. The order was pronounced on 16/03/2023.