TaxTMI 
TaxTMI 
2019 (10) TMI 306
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....estment 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 trust. 4. The main objects of the society is to impart education to the u....
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.... 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 Singh 1,00,000 No details and evidence 09. Sh. Radhey Shyam 99,000 No evidence of his work experience and income thereof-contradictory statement (asse....
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....ow 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 genuineness of the fee & corpus fund, received. It may once again submitted that the members from different cities viz. Jhansi, Firozabad, Mainpuri and Delhi etc. have attended the office of the Ld. Assessing Officer and confirmed the pay....
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....d 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 shown to have been made by somebody else." IN THE CASE OF C1T V. FIRST POINT FINANCE LTD. [2006] 286 ITR 477 (RAJ.), IT WAS HELD THAT: "Tribunal having found that the investors are genuinely existing persons and they have filed confirmations in respect of investments made by them and th....
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....cheme 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 Marketing (P) Ltd. Hon'ble Delhi High court observed that "There is a finding of fact given by the two authorities namely CIT(A) and the Tribunal to the effect that 'The confirmation of M/s. ACL has been filed by the assessee. The said company was assessed to tax. The source of ACL had been explained as out of transfer of funds from the accounts of M/s. BTL. ....
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....omplete 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] In this case also the Hon'ble Delhi High court has dismissed the departmental appeal by observing:- a) As regards the second discrepancy, the Tribunal had noted that confirmations of donations were produced as certificates and it was not necessary for the assessee to produce the donors themselves, more particularly since the donations were in the nature of 'Gupt Daan'. [Para 6] b) There was no ....
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....t 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 referred to the combination of section 68 and section 115BBC of the IT Act. It is once again requested that these two sections are independent sections and cannot be applied as a proviso to the other. Actually, in our case the provisions of section 68 were not applicable and the AO was unable to pin point any deficiency u/s 115BBC, the applicable section. 2. It is further submitted that the total receipts towards the corpus fund was Rs. 1.08 cr. out of which Rs. 0.4....
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.... 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/- has accepted a part of the corpus fund as genuine contribution of the members of the society. He has also accepted the application of the funds towards acquisition of land of the society purchased for establishment of educational institute. The corpus fund amounting to Rs. 50,14,056/- has been considered as applied towards the charitable objects within the meaning of section 11 of the IT Act. Thus the Ld. AO has himself accepted the charitable nature of the society and has treated this amount as applied for charitable purpose and ....
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....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 disclosed as corpus fund; by invoking provisions of section 68 of the I.T. Act, by the Ld. Assessing Officer has been assessed as income of the society. The appellant requests your honor that facts submitted in the Annexure-A may kindly be considered along with the present written argument and oblige." 9. The ld. DR relied on the order of the ld. CIT (A) and argued that Section 115BBC of the Act in a domain of unanimous donation while Section 68 of the Act is applicable in the domain of any cash credit including any donation or voluntarily contribution in cases where assessee is unable to....
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....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 donations are fake; how can activities be genuine; those would be anti-law and anti-nation/society!! Thus, also, it would be held as violating its entitlement for exemption u/s 11. Such dubious activities of either raising unaccounted/unexplained funds or of not applying their income towards charitable activities come to knowledge of the Department when AO makes scrutiny/verification during assessment proceedings, and, thus, AO is well within his rights and legal duty to bring such violations to tax by denying exemption u/s 11. 7.4 At the same time, it cannot be denied that a trust/society is generally & ....
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....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 introduction of Section 115BBC, Section 68 is not applicable to the case of society is also equally faulty. Ld.CIT(A) held that Section 115BBC acts in domain of anonymous donation as referred earlier; while Section 68 is applicable in the domain of any cash credit, including any donation or voluntary contribution in case assessee is not able to explain the source properly. Even if names and addresses of the creditors/donors are furnished; still the proof regarding identity of the donors, and the genuineness of transaction showing such donation, and, above all, creditworthiness of such donors-are essential to be laid down before the AO. 14. Thus, it was held that Section 115BBC....
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....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, would be income in the hands of the assessed. There was, therefore, full disclosure of income by the assessee and also application of the donations for charitable purposes. It is not in dispute that the objects and activities of the assessee were charitable in nature, since it was duly registered under the provisions of section 12A of the Act. 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, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee and also ap....