2024 (7) TMI 578 - AT - Income Tax

Trustees' personal payment for land purchase cannot be taxed as trust's undisclosed income

Vivekanand Shiksha Samiti, Gargi Global Academy Sansthan, Sikar Versus DCIT, Central Circle-02, Jaipur

Vivekanand Shiksha Samiti, Gargi Global Academy Sansthan, Sikar Versus DCIT, Central Circle-02, Jaipur - TMI Issues Involved:1. Unexplained investment in the purchase of land.2. Applicability of the amended tax rate under Section 115BBE.3. Examination of the applicability of sections 271D/271E.Detailed Analysis:1. Unexplained Investment in the Purchase of Land:The assessee, a charitable society, was involved in a search and seizure operation by the Income Tax Department. During the search, documents and a sale deed were found indicating the purchase of land for Rs. 15,00,000, whereas the actual consideration was Rs. 1,92,17,000, leading to a discrepancy of Rs. 1,77,67,000. The assessee claimed that this difference was paid by its trustees, Jogendra Singh Sunda and Piyush Sunda, out of their undisclosed income, which they had offered for tax before the Settlement Commission. The Assessing Officer (AO) rejected this explanation, adding the amount as unexplained investment under Section 69 of the Income Tax Act, stating that the society, being a non-profit entity, could not have received such an investment from individuals.The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the society did not provide sufficient evidence to prove the source of the investment. The CIT(A) also noted that the order of the Interim Board of Settlement (IBS), which accepted the trustees' disclosure of additional income, did not apply to the society.Upon appeal, the tribunal noted that the trustees had indeed disclosed the additional income used for the land purchase before the IBS, which had accepted this disclosure. The tribunal found that the society had no other source of income to make such a payment and that the investment was indeed made by the trustees. Consequently, the tribunal allowed the appeal, deleting the addition made under Section 69.2. Applicability of the Amended Tax Rate under Section 115BBE:The assessee contested the application of the amended tax rate of 60% under Section 115BBE, arguing that the amendment, which received presidential assent on 15.12.2016, should not apply to the assessment year 2017-18. The CIT(A) rejected this argument, citing judicial precedents that upheld the applicability of the amended rate from 01.04.2017.The tribunal, however, referred to a decision by the ITAT Jabalpur Bench, which interpreted the amendment as applicable from 15.12.2016, thereby affecting transactions made after this date. Since the disputed amount was paid on 30.06.2016, prior to the amendment, the tribunal concluded that the tax rate of 30%, as applicable before the amendment, should apply. However, as the primary issue was resolved in favor of the assessee, this ground became moot.3. Examination of the Applicability of Sections 271D/271E:The CIT(A) directed the AO to examine the applicability of sections 271D/271E, which pertain to penalties for accepting or repaying loans or deposits in cash exceeding the prescribed limit. This direction was based on the acknowledgment that the trustees had paid the amount on behalf of the society. The tribunal, while allowing the primary appeal, did not specifically address this issue, as it was ancillary to the main contention regarding the unexplained investment.Conclusion:The tribunal allowed the appeal, deleting the addition of Rs. 1,77,67,000 made under Section 69, recognizing the trustees' disclosure of additional income before the Settlement Commission. The issue of the amended tax rate under Section 115BBE was rendered moot, and the direction to examine sections 271D/271E was noted but not specifically adjudicated. The decision in the lead case was applied mutatis mutandis to the related appeal, resulting in both appeals being partly allowed.