TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 890
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....ceedings. 2. Whether, on the facts and in the circumstances of the case and in law, the Id. CIT(A) was justified in restoring the exemption U/s. 11 of the I.T. Act denied by the AO for violation of provisions of section 36A(3) of the Bombay Public Trust Act, 1950 and also on the ground that the activities are illegal and non-genuine and/or not in accordance with the objects, merely on the basis of AO's findings in the Remand Report that there are no borrowings and ignoring the findings of AO in assessment order and other facts and evidences, which include :- a) The AO, in remand report, also stated that the assessee's subsequent Balance Sheet of undisclosed Bank Account in original Balance Sheet, itself shows liability in terms of savings accounts, which is akin to borrowings; b) The ledgers of depositors clearly show that the amounts are returnable and therefore, it amounts to borrowings; c) The assessee has not taken statutory permission of Charity Commissioner required for such borrowings u/s. 36A of the Bombay Public Trust Act, 1950; d) The borrowings and the transactions in the Bank Account were not even reflected in the Balance Sheet/ Income & Expenditure Ac....
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....of the case and in law, the Ld. CIT(A) was justified in not adjudicating the issue of rejection of books of accounts u/s 145 of the I. Act, 1961 without appreciating the fact that the books of account of the assessee is incomplete in all respects due to non-disclosure of four bank accounts and no consolidated Balance Sheet or Audited reports were submitted either in the form prescribed in I. T. Law or Bombay Charitable Trust Law.. 8. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-I, Mumbai be set aside and that of the Assessing Officer be restored." 02 The brief facts of the case shows that assessee is a trust. It is registered u/s 12 A of The Income Tax Act [The Act] and also with the charity commissioner Mumbai under The Bombay Public Trust Act, 1950 [The BPT ACT]. It filed its return of income on 7/9/2012 along with income and expenditure account, balance sheet and audit report in form number 10B declaring its total income of Rs. Nil. Case of the assessee was picked up for scrutiny. 03 During the course of assessment proceedings, the learned AO raised several issues. i. He observed that the assessee trust had taken interest free loan of Rs.1....
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....erates on the principle of mutuality. Assessee also contested that there has been no escapement of income and all the loans given and the repayment thereof are by the account payee cheques only. The learned assessing officer rejected the contention of the assessee. He was of the view that it is clear that there are undisclosed bank accounts admitted by the trust, hence, assessee is engaged in the activities which are not genuine. Thus according to him, activities of trust are not in accordance with the object of the trust. Therefore, he made a proposal for withdrawal of registration u/s 12 A of the Income Tax Act to the Principal Commissioner of Income Tax (Exemptions), Mumbai. With respect to the taxability of the amount deposited in the undisclosed accounts where 4 (four) accounts not taken into account at the time of preparation of the balance-sheet and income and expenditure account which are audited, he issued a show cause notice on 13/3/2015 asking the assessee that why the benefit of Section 11 of the Act should not be withdrawn and the amount involved in those bank accounts should not be regarded as undisclosed income and taxed accordingly. He also proposed to apply the pro....
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.... pertaining to those bank accounts. He further noted that assessee has also not filed any revised return to incorporate those data hence, same are not considered. He also noted that the data submitted by the assessee are merely printouts from the computer database and therefore assessee trust has intentionally kept these accounts separate and failed to disclose in the return of income filed. He therefore, held that the total deposit amounting to Rs.15,95,82,806/- are not disclosed in the audit report and in form number 10 B . Therefore, he treated four undisclosed bank accounts deposits as covered under the provisions of Section 69A and 69B as unexplained money and amount of investment not fully disclosed in the accounts of the assessee as per provisions of the law. iv. He also considered the explanation of the assessee of mutual concern. He noted that assessee is providing interest free loan to its members and also to non-members and therefore, relying on the decision of the Hon'ble Supreme Court in case of Bangalore club Vs. CIT (Civil Appeal No. 124 of 2007) dated 14.01.2013, he held that the principle of the mutuality is not satisfied for the reason that (1) there is no c....
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....fied in rejecting the exemption u/s 11 of the Income Tax Act for the reason that assessee has not violated the provisions of the Bombay Public Trust Act. With respect to the addition of Rs.15,95,82,806/- u/s 69A and 69B of the Act, after considering the submission of the assessee and also the remand report submitted by the learned Assessing Officer held that those sum are deposited in the bank account never had any element of income and therefore, provisions of Section 69A and 69B of the Act does not arise. He reached such a conclusion for the reason that assessee has been following Quranic provisions and a principle where one of the main objects of the assessee trusts is self-help. The amounts were collected in small installments from various members and those were distributed by way of self-help amongst the needy members. Those persons who have obtained the self-help loan are required to repay the same in the prescribed installment and no interest was either charged or paid. He further noted that assessee was separately maintaining books of accounts of these self-help schemes were also audited separately. Unfortunately, assessee could not incorporate the above accounts of self-he....
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....of CIT Vs. Dawoodi Bohra Jamat 364 ITR 31 held that the trust is not created for the benefit of any particular religious community but the trust membership is available to the public at large and therefore there is no relation of provisions of Section 13 (1) (b) of the Act. With respect to the applicability of the provisions of Section 13 (1) (C) of the Act, he held that no income of the trust is applied either directly or indirectly for the benefit of persons referred to in subsection (3) because the above activity of self-help did not have any income and further as held by the learned Assessing Officer himself while assessing the u/s 147 of the Act for assessment years 2008 - 09 and 2009 - 10 and further, u/s 143 (3) of the Act for assessment year 2014-15 which were all passed after the impugned order of the Assessing Officer, accepting the claim of the assessee therefore, the learned assessing officer is not justified in denying the exemption u/s 11 of the Act stating that the provisions of Section 13 (1) (c) of the Act are violated. Accordingly, he allowed the appeal of the assessee. 06 The learned AO is aggrieved with the order of the learned CIT (A) and has preferred this ap....
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....t submitted by the learned Assessing Officer dated 30.05.2016 clearly clinches the issue in favour of the assessee. He referred to paragraph number 3 for admission of additional evidences by the learned CIT(A) and submitted that the learned CIT(A) is perfectly within his right to admit the additional evidences and further, he referred to the order of the learned Assessing Officer whereas, several box files were submitted before him. He referred to page number 19 wherein, paragraph number 4, the learned Assessing Officer has completely verified and enquired the information for the period from financial years 2007 - 08 to 2011 - 12 therefore, assessment year 2012 - 13 was also verified by him and therefore, it is not proper to say that the data for the relevant assessment year were not verified. He further referred to paragraph number 5 of the remand report where the learned Assessing Officer admitted that activity of self-help did not result any profit or loss to the assessee. He submitted for that reason the assessee did not include the same in its regular books of accounts submitted before the Assessing Officer. He further referred to page number 21 of the paper book wherein in pa....
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....24 - 26 of the paper book which is an assessment order passed u/s 143 (3) of the Act for assessment year 2016 - 17, page number 27 - 28 of the paper book which is an assessment order for assessment year 2014 - 15 and page number 29 - 36 being the assessment order for assessment year 2008 - 09 which is passed u/s 143 (3) of the Act read with Section 147 of the Act. He submitted that all these orders have been passed after the impugned assessment order in case of the assessee accepting claim of the assessee under similar circumstances and facts. He further referred to page number 37 where the penalty proceedings for assessment year 16-17 were also dropped. He therefore submitted that there is no violation of the provisions of Section 13 (1) (b) and (c) of the Act as no benefits has accrued to the trustees. He therefore vehemently supported the order of the learned CIT (A). 08 In the rejoinder, the learned Departmental Representative vehemently supported that each assessment year is separate and therefore the findings given by the learned Assessing Officer in the earlier and subsequent assessment years cannot help the claim of the assessee. He submitted that there is a contradiction ....
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....aced at page number 18 - 23 of the paper book is pertaining to assessment year 2012 - 13 and submitted in response to the direction of the learned CIT(A) dated 26.10.2015. Thus, it clearly shows that whatever stated in the remand report by the learned Assessing Officer is pertaining to the impugned assessment year also, if not exclusively. 10 First ground of appeal is against the admission of additional evidences by the LD CIT (A). The learned Assessing Officer with respect to the admission of the additional evidence by the learned CIT (A) did not raise any serious objection and did not mention that these additional evidences should not have been admitted by the learned CIT (A). The learned Departmental Representative could not show us that why the CIT(A) is not within his rights to admit the additional evidences with respect to the Rule 46A of the Income Tax Rules, 1962. This so, because of the reason that the learned CIT (A) has given the complete opportunity to the learned Assessing Officer to examine the same and thereafter LD AO submitted his remand report on those additional evidences. When, technicalities are pitted against the merits of the case, generally, the merit shoul....
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....emption u/s 11 of the Income Tax Act. Learned Assessing Officer in the remand report accepted that no loans were taken by the trust during the relevant year and no property of the trust has been utilized for the advantage of the trustees. Thus, in absence of any contrary evidence produced before us, we do not find any reason to not to agree with the order of the learned CIT (A) that assessee has not violated provisions of Section 36A of the Bombay Public Trust Act. Therefore, ground number 2 of the appeal is dismissed. 12 Coming to ground numbers 3-4 of the appeal with respect to the addition of Rs.15,95,82,806/- made u/s 69A and 69B of the Income Tax Act by the learned Assessing Officer, We find that the assessee has though deposited sums in the bank account, However, such sums deposited were found to be pertaining to the self-help activities of the assessee where the contribution is made by the members of the trust of its self-help activities and the self-help amount is disbursed also to the members. There is no contribution from any outsider and there is no advance of loan to any outsider. During the course of remand proceedings the amount of cash deposited as contribution in t....
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....uring the course of remand proceedings and based on that the learned CIT (A) has correctly deleted the addition u/s 69B of the Act. Accordingly, ground number 3 and 4 of the appeal of the learned Assessing Officer are dismissed. 13 Coming to ground number 5 wherein, the learned Assessing Officer was of the view that that the trust exists only for a specified community, We find that this aspect has been dealt with by the learned CIT(A) as per paragraph number 8.3 of his order. The categorical finding was given that the membership of the trust was given to any person who carries on any business or commercial activity in a particular area irrespective of any caste etc. The learned CIT(A) following the decision of the Hon'ble Supreme Court in 364 ITR 331 has clearly come to conclusion that the assessee trust was not created for the benefit of any particular religious community but was open to public at large carrying on any trade or commerce in a particular area. Therefore, in absence of any contrary evidence placed before us, we hold that the learned CIT (A) is correct that the provisions of Section 13 (1) (b) of the Income Tax Act are not attracted in the case of the assessee. A....