TaxTMI 
TaxTMI 
TaxTMI 
1992 (9) TMI 128
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....o as the Act) of a sum of Rs. 7,50,000 purportedly on account of donations made in favour of HACP Rural Development Association, Hyderabad, an institution approved by the prescribed authority for the purposes of s. 35CCA of the Act. The return of income was, however, revised on8th Nov., 1983in which the claim under s. 35CCA was omitted and the income declared was Rs. 25,75,430. Tax due on the basis of the revised return was also paid. Assessment proceedings had been taken up by the ITO at Jaipur by the issue of notice under s. 143(2) on25th Nov., 1983. However, after some hearing had taken place at Jaipur, jurisdiction of this case was transferred to the ITO, Central Circle VIII,New Delhiby an order under s. 127. TheITO Central Circlecompleted the assessment under s. 143(3) vide order dt.25th March, 1986on a total income of Rs. 36,69,650. In computing the total income certain additions/disallowances had been made by the Assessing Officer. Assessee appealed to CIT(A), who vide order dt.11th Nov., 1987almost confirmed all the additions made by the Assessing Officer. Assessee appealed to the Tribunal. Vide order dt.31st July, 1991in ITA No. 447/Del/88 asst. yr. 1983-84 the appeal of t....
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....onated to HACP Rural Development Association,Hyderabad. Assessee according to the learned counsel had the receipts for these donations alongwith copy of the approval granted to the institution which had been attached to the return of income. The payment had been made by means of crossed cheques and the receipts numbering 204 to 208 for Rs. 1 lakh each and No. 209 for Rs. 2.5 lakhs dt.29th June, 1982indicated the cheque numbers alongwith the dates. According to the learned counsel on 4th Sept., 1983 a public notice had appeared on behalf of Hasti Mal Sancheti Memorial Trust, Pune, alleging that certain persons were posing themselves as authorised to collect the donations from the trust whereas they were not so authorised. According to Shri Ganeshan Inalsa P. Ltd. had made a donation to Hasti Mal Sancheti Memorial Trust during the financial year ended on June, 1983 through a person purportedly representing the trust. Efforts were made to find out as to whether the donations had reached the trust. On14th Sept., 1983the officers of the Intelligence Wing of Income-tax, Mayur Bhavan conducted a survey at the business premises of the Inalsa P. Ltd. On16th Sept., 1983Shri Deepak Singh, acc....
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....rned counsel Shri Kalra wrote to Shri Prem Prakash that Shri Vipin Mehra and Shri P.P. Verma having been introduced by him to Shri Kalra, he would be responsible to ensure satisfactory settlement of the whole affairs failing which legal action could be taken. Letter dt.28th Oct., 1983in this regard was referred to by the learned counsel. On 31st Oct., 1983, Shri Prem Prakash according to the learned counsel replied by regretting the strange stand taken by Shri Vipin Mehra and Shri P.P. Verma and that they are prepared to refund the money and give affidavits outlining their modus operandi provided no legal proceedings were lodged against them. Shri Prem Prakash thereafter obtained sworn affidavits from Shri Vipin Mehra and Shri P.P. Verma regarding their role in the matter. In these affidavits it has been categorically affirmed by these persons that the money had been received by them which had been kept by Mrs. Mehra partly in one of his lockers and partly in the investment bonds. In these affidavits there was unqualified undertaking to refund the moneys to the assessee firm. According to the learned counsel, the moneys more or less were returned to the assessee as promised. On the....
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....he conclusion that assessee had made a wrong claim under s. 35CCA in the original return of income. Shri Gupta pointed out that assessee had issued six cheques on account of the donation purportedly to HACP Rural Development Association,Hyderabad. Four cheques had been drawn on State Bank ofIndia, Jaipur South out of which three were dt.28th June, 1982and the fourth one was dt.29th June, 1982. These four cheques were marked 'crossed cheques'. Two cheques of Rs. 1 lakh each dt.29th June, 1982had been issued on P&SB,New Delhi. These cheques had been initially marked 'payees' account' but it is established on record that the endorsement 'account payee' had been deleted under the signatures of the drawer. It is the claim of the assessee that these cheques had been handed over to one Shri Prem Prakash. Shri Prem Prakash, according to the learned Departmental Representative is a close business associate of the assessee and was director of Meghdoot Enterprises P. Ltd., a holding company of Inalsa P. Ltd. of the DCM Group. According to Shri Gupta, it has been established by the Assessing Officer that these cheques had been deposited in the bank account of Parvati Charitable Foundation of w....
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....ther contended that the DCM Group had its own charitable institutions. According to him, why did the assessee chose to donate huge sums to other institutions is a pondering question which has remained unanswered. Shri Gupta referred to the assessment order where specific instances have been made by the Assessing Officer about assessee having made donations in the past of very small amounts by means of account payee cheques. Shri Gupta pointed out that such donations not even exceeding Rs. 1,000 had been made by account payee cheques. Assessee not having issued cheques marked 'account payee' would be sufficient to establish that assessee had no intentions of making the donations to the trust, it is claimed by the Departmental Representative. 8. Shri Gupta contended that certain papers such as a note on the newspaper and letter regarding Ram Krishan Mission were not available before the Assessing Officer. Shri Gupta contended that the evidence on record establishes the fact that assessee did not file revised return voluntarily. Department had enough evidence to prove the guilt of the assessee. In this connection Shri Gupta contended that Intelligence Wing of the department is part o....
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.... amounting to Rs. 48,543 we find that in the preceding year, i.e., for asst. yr. 1982-83 addition of Rs. 63,163 had been made on account of under valuation of closing stock. During the year under appeal, the addition of Rs. 48,543 was made by the Assessing Officer. The CIT(A) has directed to readjust the opening stock by giving credit for a sum of Rs. 63,163 being the addition made in the preceding year on account of closing stock for that year. As a result of the appellate order, there would be reduction of income as against addition made by the Assessing Officer on account of valuation of closing stock. Considering the facts and circumstances of this case, we are of the view that penalty under s. 271(1)(c) in regard to sum of Rs. 48,543 is not warranted. 12. We are thus left with the issue relating to levy of penalty in respect of sum of Rs. 7,50,000. As is clear from the facts stated elsewhere assessee had made a claim in the original return of income filed on 14th June, 1983 under s. 35CCA in respect of sum of Rs. 7,50,000 which was claimed to have been donated to HACP Rural Development Association, Hyderabad. On8th Nov., 1983assessee filed a revised return in which the aforem....
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.... account of donation paid to HACP Rural Development Association,Hyderabadare as under: .Cheque No. Date Amount (Rs.) Drawn on 899101 28th June, 1982 1,00,000 SBI, Jaipur, South 899102 28th June, 1982 1,00,000 SBI, Jaipur, South 899103 28th June, 1982 1,00,000 SBI,, Jaipur, South 199123 29th June, 1982 2,50,000 SBI, Jaipur, South 335433 29th June, 1982 1,00,000 P&SB,New Delhi 335434 29th June, 1982 1,00,000 P&SB,,New Delhi As is seen from details given above, four cheques have been drawn on the same bank, namely, State Bank ofIndia, Jaipur South. Three cheques are dt.28th June, 1982for Rs. 1 lakh each whereas the fourth cheque is dt.29th June, 1982for a sum of Rs. 2,50,000. These four cheques admittedly had not been marked as 'account payee'. The other two cheques for Rs. 1 lakh each have been drawn on P&SB,New Delhi. These cheques were also dt.29th June, 1982and had initially been marked as 'account payee' but altered as crossed. Certain important questions do arise here for which the answers are to be searched from the material on record. Why did the assessee issue four cheques instead of only one on the same bank when these cheques had been issued on ....
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....timal Sancheti Memorial Trust. The statement of Shri P.P. Verma (Prem Prakash Verma) had also been recorded on13th Sept., 1983. In response to a question as to whether he was connected with Hastimal Sancheti Memorial Trust, or Shri Vipin Mehra or Poona Medical Foundation. Shri Verma had stated as under: "During the last two years Shri Prem Prakash Executive Director, Sri Ram Associates of the DCM Group had approached me regarding donations to such trusts who were willing to return back a substantial percentage of the donation in cash back to the donors. This percentage was negotiated between the donor and trustee between 50 to 70%. The donor contacts a broker who arranges for the transaction with the trustees. The broker is paid 1% on total transaction each from the donor and the trustee. It is the responsibility of the broker to open the bank account, exchange the drafts and pay both the trusts and the donors the agreed amounts." On 14th Sept., 1983 search and seizure operations carried out at M/s Inalsa P. Ltd. Certain documents relating to donations of Rs. 30 lakhs in the name of Hastimal Sancheti Memorial Trust had been seized. Shri S.C. Gupta, Dy. Manager (Acctts.) had state....
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....eeting, Mr. Mehra had himself been introduced to me only during the beginning of this year. He has appeared to be an honest man and whatever investigations I had made did not lead me to doubt any of his intentions. I had also checked up the affairs of the Hastimal Trust and I had found that the Trust was doing good work. I had, therefore, recommended to you that you may donate any sums to them in case you so desire. The cheques which you had sent to me as a donation to the Hastimal Trust were handed over by me to Mr. Vipin Mehra for onward transmission to the trust authorities. The receipts given by Mr. Mehra were subsequently sent back to you for your records. It appears that there has indeed been some confusion between Mr. Mehra and the trust authorities and that Mr. Mehra has not actually deposited the money with the trust authorities. I am glad to inform you that I have been able to persuade Mr. Mehra to return your donation and I am enclosing herewith a letter dt.20th Sept., 1983from him wherein he has mentioned that he is returning the money. A draft for Rs. 10 lacs given to me by Mr. Mehra in full and final settlement of this matter is also enclosed." On 26th Sept., 1983 st....
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....ersation it is clear that the donation has not reached the right source." At page 39-40 is a letter written by Chief Executive of Varun Enterprises (assessee) to Shri P.P. Verma. In this letter Shri P.P. Verma was informed about the handing over of the donation cheques in the name of HACP Rural Development Association and the receipts having been issued to Shri Prem Prakash. Shri Verma was informed about the IT authorities making enquiries about these donations and that Shri Prem Prakash had informed the assessee about non receipt of donations by HACP Rural Development Association. By this letter Shri Verma was asked to clarify within 48 hours as to what had actually happened lest legal action was threatened to be taken. In response to this letter Shri P.P. Verma has replied by means of a registered letter, which is at page 51 of the paper book. Similar letter has been written by Shri Vipin Mehra which is at page 50 of the paper book. The contents of this letter are reproduced hereunder: "This has reference to your various letters addressed to me by your various companies and also my telegramme dt.24th Oct., 1983contents of which read as follows: "Contents of the letters dt.20th....
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....d in principle to refund the balance amount due to you. I am constantly following up with them and I hope that within the next few days I shall be able to get the necessary action. I would, therefore, suggest that you do not proceed with any legal complaint for the next few days. You would kindly appreciate that it would be more advisable to obtain refund from Mr. Vipin Mehra and Mr. P.P. Verma rather than entering into litigation." At page 55/56 is another letter from Shri Prem Prakash addressed to Shri Deepak Singh informing the latter that Shri Vipin Mehra has furnished affidavits admitting total responsibility for encashment of all cheques and drafts and that he was aggreable to repay the amount. Eight affidavits sworn by Shri Vipin Mehra were also enclosed. These related to the donations made by the Group, the details of which as contained in this letter are as under: .--Inalsa Rs. 30 lacs to Sancheti Trust; amount already refunded by him. . Rs. 3 lacs to Morarji Trust. --Varun Rs. 10 lacs to Sancheti Trust; amount already refunded by him in full. . Rs. 7.5 lacs to HACP Association. --Karna Inds. Rs. 25,000 to HACP Association. --Karna Commercial Rs. 25,000 to Mor....
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....ompany are being attended by them while sitting at either of the places. In such circumstances, we are of the opinion that the expenditure of Rs. 6,000 cannot be considered as for business consideration. The ground of appeal is, therefore, rejected. We are in agreement with the detailed reasons given by the CIT(A)." The purpose of reproducing the relevant para from the order of the Tribunal is to demonstrate that the two of the partners of this firm were performing the duties as partners while sitting in the office premises of Inalsa, the premises of which was raided on 14th Sept., 1983. Another fact, i.e., to be borne in mind is that Shri Prem Prakash is a close business associate of the assessee. He is director of the Meghdoot P. Ltd., a holding company of Inalsa P. Ltd. This is stated by the assessee in para 8 of letter by the assessee to the ITO (PB 99/100) dt.21st June, 1986. Between 12th Oct., 1983 to 19th Oct., 1983 the statement of Governors of Parvati Charitable Foundation have been recorded by the Assessing Officer. A perusal of these statements indicate that Shri Prem Prakash was in fact running the affairs of Parvati Charitable Foundation. Assessing Officer in his asse....
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....hri Vipin Mehra and Shri P.P. Verma, we must mention had filed affidavits in support of assessee's version. Later on these persons have reiterated their earlier stands and withdrawn the statements made by way of affidavits. The question before us is not as to whether the statements of Shri Vipin Mehra and Shri P.P. Verma are to be accepted as correct as this is not the only evidence on the basis of which rival contentions revolve around. When assessee had made a claim in the original return which undisputedly was wrong it is for them to establish that the claim made was a bona fide claim. What is the evidence in favour of the assessee. The statement of Shri Prem Prakash, who had stated that Shri Vipin Mehra and Shri Prem Prakash Verma has been introduced by him to the assessee. It is enough to exonerate the assessee from the responsibilities of discharging the onus to prove that the claim was a bona fide claim. As mentioned earlier Shri Prem Prakash is the close business associate of the assessee and continues to be so even now. We are searching answers to various questions from the material on record and in fact we had asked the learned counsel for the assessee to enlighten us in ....
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....Another fact worthy to note is that but for the donations of Rs. 57,20,200 no substantial donation has been made for public or charitable purposes. We asked the learned counsel for the assessee that after recovery of the amount from the alleged culprits did the assessee think of making any donations for public or charitable purposes. The learned counsel stated that he is not in a position to confirm any donations having been made by the assessee of substantial amounts out of the recovery made. 30. The factors that we have indicated above have important bearing upon the issue in hand. 31. In this materialistic world one cannot rule out the possibility of being cheated but we fail to understand as to why a person who claims to have been cheated does not bother to lodge a complaint against the culprit. 32. In the matter of penalty under s. 271(1)(c) one has to consider the preponderance of probabilities in order to arrive at a fair conclusion. One has to see whether the explanation furnished by the assessee was plausible. Does the evidence on record create a belief in favour of the assessee is very crucial for determination of the issue. If it is found that the evidence produced cr....