TaxTMI 
TaxTMI 
2019 (10) TMI 306
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....did not carry any activity except acquiring land or investment in capital assets through corpus fund received from the member of the society. 3. The Ld. CIT (A) has erred in law and on facts by ignoring that the concerned members confirmed the giving of membership fee towards corpus funds and after insertion of section 115BC of the Income tax Act, 1961 w.e.f. 01.04.2007 provisions of section 68 of the Income Tax Act, 1961, are not applicable in the case of the society. 4. The Ld. CIT (A) has erred in law and on the facts by ignoring that in some cases contribution allowed by Ld. AO, was disallowed and added us 68 of the Income tax Act. 5. Any other ground may be taken during the appellate proceedings if arose out of order u/s 250 of Income Tax Act, 1961dated 24/11/2011." 3. The assessee is a society registered under the UP Society registration Act w.e.f. 23/08/2007. The Assessee is also registered u/s section 12AA of the Income Tax Act, effective from 23/08/2007 i.e. from the date of its incorporation as per the certificate of registration granted by the Ld. Commissioner of Income tax Ghaziabad. This is the first year of the assessment of the assessee ....
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....s been given to explain this case. 2. Smt. Neelam Singh 1,50,000 No bank a/c; no ITR filed-thus, only identity proved but neither creditworthiness, nor any prima-facie source of fund explained-no worthwhile evidence on record. 3. Smt. Sudha Sharma 2,45,000 Only identity on record; no worthwhile evidence of creditworthiness; source of cash deposit used for donation not explained. The AO has added only Rs. 90,000/-; but once creditworthiness is unproved; the entire amount of this donation of Rs. 2,45,000/- is to be added-this amounts to enhancement for this particular donation, but not over all enhancement-in any case specific opportunity to the counsel has been given to explain this case. 4. Sushila Verma 1,00,000 Only election card submitted; no detail or evidence; at all, regarding creditworthiness. 5. Sh. Ajay Kumar 1,00,000 No detail and evidence 6. Sh. A.P. Singh 95,000 No detail and evidence 7. Sh. Kiran Pal Singh 1,00,000 No evidence of his work experience and income thereof-contradictory statement (assessee says donor is agriculturist while donor's affidavit says something else) 8. Sh. Mahesh Si....
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....ny of the members donating for the society are agriculturist by profession; managing their affairs in cash as they are receiving sale proceeds of their agricultural crops in cash only. Thus, the failure to furnish the cash flow may not be considered a valid reason to hold that no cash could be available with the concerned member (s) for paying the membership fee. It may further kindly be noted that if the contention of the Ld. Assessing officer is accepted and it is assumed that he was right in holding that the members were not having sufficient funds for contributing to the corpus fund, even then it is for the member(s) to prove the source of transaction and the society cannot be taxed for the income of the members, if the Ld. A.O. for any reason was not satisfied with the explanation of the members. The member(s) appeared/produced; in their statement recorded before the Ld A. O have confirmed that the amount has been paid by them. This fact has been accepted by the Ld. Assessing Officer in the assessment order. The society to its level best during course of assessment proceedings has furnished all the documents as required by the Ld. AO., to satisfy him about the genuine....
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....between a public company and a private company is not very material for this purpose." In the case of CIT v. Shree Barkha Synthetics Ltd. [2004] 270 1TR 477 (Raj.) it was held that: "Tribunal having found that companies from which the share application money had been received by assessee-company were genuinely existing and that the identity of individual investors was also established and they have confirmed the fact of making investment in the shares of the assessee-company, its finding that the assessee had discharged the initial burden and the additions under section 68 could not be sustained was essentially a finding of fact which is not vitiated by law and, therefore, no substantial question of law arises." Similarly, in the case of Shree Barkha Synthetics Ltd. v. Asstt. CIT [2006] 283 ITR 377/155 Taxman 289 (Rai.). it was held that: "Where the share application money is received by the assessee-company through banking channel, the assessee has only to prove the existence of the person in whose name share application is received; additions could not be sustained where the existence of the investors is not doubted and the investment is not sh....
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....account. The Commissioner (Appeals) and the Tribunal had found that the assessee had discharged his burden in proving the source of the money, which had flew from the bank account. It was, further, held that in addition to the source of money from the bank account, both the ladies were the income-tax assessees and assessed to tax under the Amnesty Scheme and the amount deposited in their bank account was as a result of their disclosure of income under the Amnesty Scheme. The Commissioner (Appeals) and the Tribunal found the explanation satisfactory and, accordingly, deleted addition. It was not a case where the assessee claimed any immunity from tax on account of the disclosure of income by the two ladies. It was a case where the assessee was asked to explain the deposits in his books of account about the nature and source, which the assessee had explained. The assessing authority had not accepted the explanation but the Commissioner (Appeals) and the Tribunal had accepted the explanation. The finding of the Tribunal was a finding of fact in that regard and it was not shown that the finding recorded by the Tribunal was perverse. [Para 11]" In the case CIT V. Real Time Mark....
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....the facts of the case where admittedly, more than 75 per cent of the donations were applied for charitable purposes. [Para 10] ii) For the aforesaid reasons, there was no merit in the appeal and no substantial question of law arose from order of the Tribunal. Therefore, the appeal was to be dismissed. [Para 12] It is worth mentioning that the assessee society has furnished the complete list of the members; voluntarily paid the membership fee and contributed towards the corpus fund. The fund/fee to the extent of 99% was applied towards the charitable objects of the society. The intention of the legislature as clarified in the above cited case laws emphasizes on the utilization of the amount instead of the source from where the amount has been received. Your honor will kindly appreciate that in the appellant's case not only the list of donors/members with their complete address was filed but all the members have confirmed their contribution thus on the facts of the case the additions made by the Ld. A.O. are against the settled law. Further in the another case of Director of Income Tax (Exemption) V. Moti Bagh Mutual Aid Education [2007 (163 Taxmann) 490] ....
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....ns made by the Ld. A.O. by holding that amount of donation/membership fee voluntarily paid by the members was the unexplained income of the society is mere presumption which is not sustainable in the interest of natural justice. In this context the appellant like to submit that; The Ld. AO himself has given the contradictory findings in the body of the assessment order; (i) by making the addition u/s 68 of the IT Act and (ii) admitting that the case law is not applicable in view of the amendment of the IT Act and insertion of section 115BBC. 1. The AO in the assessment order at many places has referred the provisions of section 68 read with section 115BBC are applicable. In this regard, it is most kindly submitted that these two sections are neither corollary of one another nor are related sections/sub sections. We are unable to understand as to whether the AO was trying to make the additions u/s 68 or attracting the provisions of section 115BBC. The very fact is that when the Ld. AO failed to notice any discrepancy as per the provisions of section II5BBC, which is inserted w.e.f. 01.04.2007 in the case of trust/societies in place of section 68, he referr....
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....fter examining the objects and the receipt of funds and utilization thereof. The Ld. A.O. has not properly appreciated these facts in passing the order u/s 143(3) under appeal. 2. The Assessing Officer has made the addition for unexplained cash credits u/s 68 of the IT Act, without appreciating the facts that society did not start the educational activity during the previous year and the source of receipts of funds was the voluntary capital contribution made by the members of the society/donors. 3. The basic facts relevant in the appellant's case have been completely ignored by the Ld. A.O. are; A. Trust is registered u/s I2AA of the Income Tax Act, 1961, B. The funds received from the members/donors have been utilized for the purchase of land and to start charitable activities i.e. imparting the education, qualifies for deduction under section 11 of the Income Tax Act, 1961. Since there is no activity other than the purchase of land during the year under consideration, the assessee could not generate black money or purchase the entries as alleged in the Assessment order. 4. Ld. AO out of the total corpus fund of Rs. 1,08,71,826....
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....tion 164(3) would also not attract the provisions of section 167B. Accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate. (Circular No.577 dated 4-9-1990) The provisions are clear that they not applicable in the case of the society registered under the Societies Registration Act 1860. Therefore, the order of the Ld. A.O. for charging income tax as per the section 167B is against the law which may kindly be appreciated and necessary direction to the Ld. A.O. may kindly be issued on this issue. It is requested that submission on this point may kindly be considered as a ground of appeal no.5. With the above submissions, the appellant very earnestly requests your honor that the impugned addition made u/s 68 of the IT Act in the case of society may kindly be deleted. The appellant also pray that benefits of provisions of section 11 and 12 of the IT Act may kindly be allowed and oblige. The appellant also submits (ANNEXURE-A) herewith; the brief facts in respect of individual members of the society whose membership fund/associate membership fund disc....
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....t income is found to be applied towards charitable activities!! The cleanness of the funds used is as important as is the utilization of those funds. Otherwise, there would open a floodgate of channeling the black money into the areas of charitable activities. Law neither permits that, nor would that be in the long-term interest of the society. As cannot be denied, there are fast developing and wide prevailing commercial interests in the area of educations field, in today's world. Apparently, that in one of the objective of section 115 BBC, which is operative from A.Y. 2007-08 onwards. As of now, the appellant cannot get away from purview of Section 68/69/69C. If borrowings/donations/investments are unproved, they may well be treated as Income unaccounted and brought to tax u/s 11(4) r.w. 68/69/69C. This can be looked even from another point of view. A trust/society cannot be held as doing charitable activities, if it is raising bogus funds, because none of its objectives/activities allows suspicious means/sources. The moment, an assessee is charged with raising income from undisclosed sources; it can be held as not catering to its avowed charitable activities. If....
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....contribution and such other particulars as may be prescribed." That the provisions of section 115BBC will not be applicable in our case because the member's contribution cannot be termed as anonymous donation u/s 115BBC since we have furnished all the proofs in respect of identity of the members who have contributed towards the corpus fund as per list annexed thereto." 12. The Provisions of Section 68 of the Act reads as under: "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the (Assessing) Officer, satisfactory, the sum so credited may be charted to Income-tax as the income of the assessee of that previous year". As per the plain reading of the section assessee has to provide the following for the genuineness of the credit entries in the books of accounts during the previous year: i) The nature of entries ii) The sources of the entries iii) And the explanation as per the satisfaction of the AO. 13. The assessee's contention that after the ....
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.... but had also submitted a list of donors and the AO proceeded to treat the same as anonymous donations only for the reason that the notices u/s 133(6) of the Act were returned un-served and the assessee did not produce the donors when it was called upon to do so were held to be not liable to provisions of Section 115BBC of the Act. In that case, since the donations were duly treated as income by the assessee, it was held that section 68 could not have been invoked in view of the judgment of the Hon'ble Delhi High Court in the case of DIT (Exemptions) vs. Keshav Social & Charitable Trust. Further, the assessee's case also does not fall in the mischief of section 115BBC because as per sub section (3), anonymous donations are those donations for which no details of the donors are maintained by the assessee. 17. We have perused the judgment of Hon'ble delhi High Court in the case of CIT(E) Vs Keshav Social and Charitable Foundation 146 taxmann.com 569. 18. It was held that Section 68 of the Act has no application to the facts of the case because the assessee had in fact disclosed the donations as its income and it cannot be disputed that all receipts, other than corpus donations,....