TaxTMI 
TaxTMI 
2010 (8) TMI 1154
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....egistration Act, 1973. The assessee society was also granted registration under section 12AA of the Act on 15.10.2001 and approval under section 80G on 18th March, 2002. It was pointed out that the assessee received donations from various persons amounting to Rs. 1,86,83,248/- whereas the assessee applied Rs. 1,94,42,849/- during the financial year 2001-02. A survey under section 133A of the Act was carried out at the premises of the assessee on 3.9.2002 wherein the books of accounts, ledger, cash book, vouchers of expenses along with tax audit report were impounded. The learned counsel for the assessee pointed out that the assessee duly maintained the books of accounts on the computer for the financial years 2001-02 and 2002-03. The receipts/receipt books containing carbon copies of the donations received by the assessee were also found during survey. Our specific attention was invited to the order of the learned first appellate authority wherein it was opined that "it appears that assessee has not received any donation and expenses are bogus" [page 12 of the order of the CIT(A)]. It was strongly pointed out that the donations were received by the assessee in cash and the factum o....
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.... were never confronted to the assessee. It was strongly pleaded that various Sarpanchs confirmed free distribution of clothes, medicines, etc. Our attention was invited to pages 1155 to 1174 (volume III of the paper book ). It was contended that even the Assessing Officer did not consider it necessary to examine the statements which were favorable to the assessee and the bills of medicines, clothes, kirana items were duly found during survey (pages 1652 to 2412 paper book vol. IV). A strong plea was raised that the learned Commissioner of Income tax (Appeals) obtained the statements of 19 Sarpanchs on the typed proforma containing 5 questions each wherein also out of 19 Sarpanchs only 2,namely, Shri Dinanath Tiwari and Raghvendra Singh Sengar confirmed the activities of the trust (statements refer to page 1172 of volume III) and for the remaining persons either the statements do not contain the answers posed by the revenue or the questions were left blank and only signatures were put at the end of the typed statements by further pointing out that these statements are attached with the order of the learned Commissioner of Income tax (Appeals). The learned counsel strongly pleaded th....
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....oduced before the revenue authorities and entries are duly reflected in the books of accounts of the suppliers. The learned counsel for the assessee relied upon certain decisions which will be discussed while concluding the issue. 4. We have considered the rival submissions and perused the material available on record. Brief facts are that the assessee NGO/society is a voluntary organisation/Samiti registered under the M.P. Societies Registration Act, 1973. The assessee is also getting grants from State Government of Madhya Pradesh for smooth running of certain programmes for the upliftment of women and children. The activities of the assessee are monitored by the programme Officers working with the office of the District Collector. The activities of the assessee also include training to Anganwadi workers and various other activities for the upliftment of women welfare. There is no dispute to the fact that the assessee society/Samiti is regularly filing its returns since assessment year 2000-01. After being satisfied with the activities of the assessee it was granted registration vide order dated 15.10.2001 under section 12A of the Act (F.No.CIT-II/JBP/Tech/4/01-02). The asse....
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....nt years and subsequent years. 6. During the course of survey conducted under section 133A, at the office premises of the assessee on 3.9.2002, the books of accounts like cash book, ledger, expenditure vouchers, etc. along with copy of tax audit report for the financial year 2000-01 were found and impounded along with the books of accounts maintained in computer for the financial years 2001-02 and 2002-03 and also receipt books containing carbon copies of receipts so issued for getting donations. It is pertinent to mention here that the case of the assessee for the assessment year 2002-03 was selected for scrutiny and in the meantime on the basis of some inquiries made by the department, the registration granted under section 12A and approval/recognition under section 80G of the Act was withdrawn vide order dated 12.8.2003 which was restored by the Tribunal vide order dated 27.2.2004 under section 12A of the Act (order in ITA No. 198/Jab/03). The whole issue revolves around suspicion by the learned Commissioner of Income Tax (Appeals) in disbelieving the receipts of donations on the reasons stated in the assessment order which are as under : - (i) the donations were rec....
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....(page 12) the learned first appellate authority has observed as under :- "Voluntary contributions to religious or charitable trusts are deemed to be its income. Department is not required to disprove the same even if circumstances surrounding the receipt of donations appear extremely suspicious. Law requires that only expenditure to the extent the trust has incurred for the charitable purposes is to be allowed." In view of the above findings, the learned Commissioner of Income Tax (Appeals), enhanced the returned income to Rs. 1,86,83,48/-. 8. If the totality of the facts, arguments advanced by the learned respective counsels and the material available on record are kept in juxta-position and analysed, following facts are oozing out. (i) From the certificates/statements issued/tendered by the Sarpanchs of different villages it is seen that some of them have confirmed that the assessee Samiti distributed free food, clothes and medicines (volume III paper book pages 1155 to 1174) (ii) The learned CIT(A) either did not think it appropriate to further examine the correctness of the aforesaid material evidence or deliberately avoided to mention the....
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....the assessee regarding celebration of national days' functions. 9. It is not the case of the department that something has been managed after completion of survey. Even otherwise, impounding of such receipts during survey has not been controverted by the revenue at any stage right from the assessment, first appellate stage and even before the Tribunal. The expenditure was disallowed and enhanced to Rs. 1,86,26,203/- by the learned Commissioner of Income Tax (Appeals) by observing that the claimed expenditure was bogus. The ld. Counsel for the assessee claimed that the expenses were in fact incurred and the income was applied for charitable purposes, for which our attention was invited to the following pages of the paper book :- S. No. Details of expenditure Page numbers (i) Medicines purchases 1652 - 1766 (ii) Bills for purchase of stationary, furniture and expenditure for courier service 1767 - 1843 (iii) Payments to visitors 1844 - 1856 (iv) Medical bills for purchase of medicines 1857 - 1864 (v) Audit fee receipts 1865 - 1866 (vi) Payment to sweepers, dry cleaners, stipend to workers and salary to staff 1867 - 188....
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....ooks of the parties from whom the goods were taken. Even otherwise the income tax returns filed by the suppliers have been accepted by the department on the income/money/amounts received from the assessee. It is strange that the same payments made to suppliers are being suspected in the case of the assessee, which were duly supported by bills/proper vouchers. Consequently, on the same analogy, the department is not permitted to take a contrary stand in the case of the assessee to falsify its stand. Even otherwise, if this issue is analysed with the doctrine of consistency, the assessee is fortified by the ratio laid down in the following cases :- 1. Union of India v. Satish Panalal Shah; 249 ITR 221 (SC) 2. Union of India v. Kaumudini Narayan Dalal; 249 ITR 219 (SC) 3. CIT v. A.R.J. Security Printers; 264 ITR 276 (Del) 4. CIT v. Neo Poly Pack(P) Ltd.; 245 ITR 492 (Del) 5. CIT v. Roxy Indl. Corporation; 289 ITR 318 (P&H) 6. Berger Paints India Ltd.; 266 ITR 99 (SC) 7. DCIT v. United Vanaspati Ltd.; 275 ITR 124 (AT) (Chd) 8. CIT v. Narendra Doshi; 254 ITR 606 (SC) para 11 9. CIT v. Shivsagar Estate; 257 ITR 59 (SC) 10.Pradip Ramanlal Sheth v. Union of In....
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....d to provide opportunity to the assessee in respect of material gathered or being used against the assessee, which was not done by the department for the reasons best known to it. The reports of the Inspectors and statements gathered/obtained through them ought to have been supplied to the assessee. It was the bounden duty of the revenue to provide opportunity to rebut the same before the material is used against the assessee. The assessee is further supported by the following decisions :- 1. Guduthur Bros. v. ITO; 40 ITR 298 (SC) 2. Kapurchand Shrimal v. CIT; 131 ITR 451 (SC) 3. CIT v. United Towers(I)(P)Ltd.; 172 Taxman 267 4. ITA Nos. 458 to 468/Jd/04 Even otherwise, it is the bounden duty of the other party to provide opportunity to cross examine the evidence/material/witnesses against whom such material/statement is used. Our view is supported by the decision of the Delhi Bench of the Tribunal in the case of Rose International (2004) 88 ITD 95 (Del). 13. The whole case of the revenue is based on suspicion that either the donations are fictitious or the purchases are bogus. We are of the view that once the list of donors was furnished by the assessee, the purc....
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.... explain further as to how or in what circumstances the third party obtained the money and however or why he came to make an advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the instant case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source." Hon'ble Bombay High court in the case of CIT VS. United Tyres India Private Limited (2008) 172 Taxman 267 held that principles of natural justice require that before any material is used against a party, it should be put to the party and thus the learned Commissioner(A) was under a statutory obligation to put any additional material/evidence taken on record by him to the other party. Our view further finds support from the decision in the case of Tejraj Chopada v. ITO; (2006) 100 TTJ (Jd) 922. Hon'ble High Court of Kerala in P.S. Abdul Majeed vs. Agricultural Incometax an....
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....see and the training programmes of Anganwadi workers have been mentioned along with Anganwadi workers programme. From these photos it appears that various distinguished persons graced the occasion. These photographs have not been controverted by the revenue. 16. Under the aforesaid facts, the statements recorded from various persons who supplied the goods/material to the assessee needs to be analysed. One such person is Shri Anuj Pratap Singh, owner of tent house who supplied tents to the assessee for conducting various programmes. The said statement is available at pages 84 to 87 of the paper book. The relevant portion of the statement recorded by the revenue on 4.1.2007 is reproduced hereunder :- "Q. 22. Account of Namra Mahila Evam Bal Kalyan Samiti show that they paid you Rs. 22,15,126/- in FY 2001-02. Did you get the entire amount of Rs. 22,15,126/- in one instalment or were you receiving the payments periodically ? A- Amount was received in multiple instalments, but towards the end of the year. Q. 23 - Did you receive any amount prior to December, 2001 ? A. I received nominal amounts to compensat for transportation expenses and labour pa....
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....the other parties now deny that you have not paid them any amount, you will be required to pay tax on the expenditure not proved ? A. Yes I am prepared to pay tax on the same" 17. The statement of Shri Ritesh Singh has been recorded on 09/09/2002 wherein he has stated that he had supplied cloth worth Rs. 43,86,260/-. He has also stated that purchase is made by him from local market and through agents and he has filed return declaring total income at Rs. 51,226/- on 31/10/2002 and aforesaid return has been accompanied with audited statement of account. A.O. has also noted that Sarpanch of various villages have given evidence with regard to activities of trust. The A.O. however, in respect to such legal evidence has observed that such statements do not establish that funds are received and distributed within short span of time. A.O. has further observed that funds are not actually received and thus could not be corresponding expenditure either. A perusal of assessment order indicates that there was evidence on record in terms of statement of Shri Ritesh Singh admitting that amount received by him towards supply of cloth and also statement of Sarpanch with regard to dis....
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....rt of incurring of expenditure by assessee. A.O. at page 6 para 5 of the assessment order has noted the filing of return of income by Shri Surya Prakash Sharma on 31/10/2002. On query from Bench about return of Shri Sharma, it was explained that return filed by Surya Prakash Sharma has not been disputed by Revenue Authorities. The Revenue having accepted the return of income of Shri Surya Prakash Sharma wherein sales made by him to assessee trust having been accepted. Therefore, we are of the view that the expenditure in the hands of assessee trust cannot be disputed. Considering the above facts and evidence on record, we are of the opinion that assessee has satisfactorily discharged the onus of explaining application of income to the extent of Rs. 37.71 lacs . 19. In the case of Shri Mathura Pd. Gupta payment made are Rs. 31.37 lacs. His statement was recorded on 18/9/2002 in which it is stated that he has supplied goods worth Rs. 31 to 33 lacs. A.O. has observed that he has filed return of income on 31/10/2002. He also appeared before the CIT(A) on 4/1/2007 and again affirmed that he has sold goods to assessee trust for Rs. 31 to 33 lacs. The A.O. has made similar observation ....
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....he assessee trust has received donation in cash and also applied the same in cash towards expenditure by making payments to various parties as recorded in books of account. The major payment which has been doubted/disputed by A.O. is in respect of payments made towards cloth purchase, tent expenditure, medicines and kirana. The A.O. has discussed the aforesaid payments at page 15 to 17 of the assessment order. A perusal of assessment order indicates that statement of above persons have been recorded pursuance to survey proceedings at the premises of assessee u/s 133A on 03/09/2002. 21. Various documents placed in paper book at volume 1 comprising of 810 pages clearly demonstrate that assessee trust has carried out various activities of charitable nature. The assessee trust is registered with Registrar of Socieities and also Directorate of Women & Child Development of Madhya Pradesh. The assessee trust has maintained regular books of account which are duly audited by Chartered accountant from time to time. The assessee has placed on record certificates and communications issued by various State Government's agencies with regard to charitable activities of the trust. A.O. has not ....
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....udited profit & loss account. There was no justification for the A.O. as well as the CIT(A) to dispute various expenses as shown in income and expenditure account for which there was no adverse observation in assessment order of A.O. nor in the order of the CIT(A). We are, therefore, of the view that the assessee has clearly discharged its onus rather it shifts on the revenue to disprove the claim of the assessee. Even one Shri Subhash Misra working as Administrative Officer at the relevant time was called by the office of the learned Commissioner (A) where he has duly confirmed that during the relevant time he was posted in Rewa and from July, 1995 to September, 2001 he attended various functions of the assessee and confirmed the photographs shown to him of special occasions like Independence Day/republic day. 23. The learned CIT(A) in para 7 of the impugned order has observed as under :- "7. It is quite clear from the discussion Above that the AO passing the assessment order of the appellant knows nothing about the provisions of the incometax act relating to assessment of trust. This is because section 2(24) of the I.T. Act, 1961 which defines income being within its ....
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.... Even the assessee society is getting financial grants from the State Government for implementation of its charitable activities. All these activities are supervised by various Officers of the State Government from time to time and the grants are disbursed through the District Collector. One inspection report duly signed by the authorized Officer who supervised the work (available at page 5 to 7of the paper book Volume I) is as under :- If the aforesaid report submitted by the office of the Programme Officer, Mahila Avum Bal Vikas, District Rewa (M.P.) dated 19.2.2001 is analysed, in view of the facts stated above, certain facts are oozing out that the assessee was maintaining six rooms like office, kitchen, store room, Anganwadi workers residential accommodation, training hall, three lavatories, etc. On the upper floor of the building the assessee is also maintaining legal advice centre in two rooms. Ultimately, there is a specific mention that on verification the assessee society was found to have been discharging its responsibilities fully. 24. In view of the above facts, it can be said that the activities of the assessee are genuine and if the activities are genuine, then....
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....see. The copies of confirmations and affidavits are available at page 1175 to 1258 (before AO) and pages 1596 to 1651 (before the CIT(A) of Vol. III and IV respectively. Therefore, the observation of the learned Commissioner of Income Tax (Appeals) that the suppliers never supplied the goods is unsubstantiated. During hearing the ld. Counsel for the assessee also claimed that the statements were recorded from the suppliers at the back of the assessee and the assessee was never confronted with the same nor it was allowed to cross-examine the suppliers. Therefore, from this angle also, no addition is justified. 25. All the donors, in question, were examined by the authority of the department and their statements were recorded. Such statements/affidavits are available in Volume III pages 1259 to 1374. Their assessments were completed after issuing notice u/s 148/143(2) of the Act wherever applicable, and these donors were allowed exemption u/s 80-G either in assessment so completed or in revision proceedings u/s 264 of the Act. In view of these facts, it can be said that the assessee actually received donation. Therefore, there is no question of assumption that the donations are....
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.... 2399 to 2412 of the paper book. Our attention was further invited to various cuttings of newspaper substantiating that the assessee was engaged in charitable activities. These papers may be read as part and parcel of this order also and are not being attached with the order as the same are available on record. Another fact which is pertinent to mention here is that in furtherance of its objects, as per bye-laws, the assessee was granted registration u/s 12A vide order dated 15.10.2001 and approval u/s 80G vide order dated 18.3.2002 by the learned CIT. Another fact pertinent to mention here is that after approval of recognition u/s 80G(v) of the Act, the assessee received donation from 723 persons aggregating to Rs. 1,86,83,248/- against which the assessee claimed to have applied an amount of Rs. 1,94,42,849/- during the financial year 2001-02 (A.Y. 2002-03). 27. Now the question arises as to whether the income/donations were applied for charitable purposes ? This is the moot question to be examined by us. If the totality of facts is analysed, broadly it can be said that if the department itself is suspecting the accumulation/receipt of donation, then there is no question of ....
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....ble Court considered the following cases :- 1. Ashok Pal Daga (HUF) v. CIT; 220 ITR 45; (MP) Para 9 2. CIT v. Kohinood Tobacco Products P. Ltd.; 234 ITR 557 (M.P.) Para 12. 3. CIT Vs.Mehrotra Brothers; 270 ITR 157 (MP) Para 12 4. CIT v. Metachem Industries; 245 ITR 160 (MP) Para 7 5. Gee Vee Enterprises v. Addl. CIT; 99 ITR 375 (Del) Para 12 6. Orient Trading Company v. CIT; 49 ITR 723 (Bom) Para 9 7. Malabar Industrial Company Limited v. CIT; 243 ITR 83 (SC) Para 12 28. The learned CIT DR raised another objection that the majority of income from donation was spent within 10 days at the close of the year which is not possible. We are of the view that firstly it depends on the availability of funds and secondly there is no bar u/s 11(1)(a) for incurring the expenditure that it has to be incurred throughout the year. Even if there is reimbursement of expenditure of earlier year out of the income of the current year, still it is application of income as was held in CIT v. Shri plot Swatambar Moorti Pujak Jain; 119 CTR (Guj) 144 and CIT v. Maharana of Mewar Charitable Foundation; 164 ITR 439 (Raj.). Even the repayment of....
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....pages 1880 to 1887 there is a record of payment of salary to various workers/staff. At pages 1888 to 2092 there are bills for kirana and general store items. At pages 2093 to 2105 there is a list of payment of salary. At pages 2107 to 2141 there is a list of food expenses. At pages 2142 to 2167 there is a list of payment to various persons. At pages 2171 and 2172 there is a copy of railway tickets. Again at pages 2175 to 2177 there is a list of expenses on various items. At pages 2178 to 2225 there are payments to transporters issued to Ashu Travels. At pages 2226 to 2386 there are bills of cloth, etc. issued by Vimal Cloth Store. Considering the totality of facts and circumstances narrated above, we are of the view that the assessee has explained the application of donation/income received by it. Therefore, the enhancement made by the learned CIT(A) is unjustified and is deleted. Finally, the appeal of the assessee is allowed. Order pronounced in the open Court on 3rd August, 2010. ============= Document 1 9. संसà¥à¤¥à¤¾ का नाम :- २. निरीकà¥à¤·à¤£ करà¥à....
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