ANGIKA DEVELOPMENT SOCIETY vs. DEPUTY DIRECTOR OF INCOME TAX

During the year under consideration, the appellant had shown receipt of Rs.1,08,46,000/- in the corpus. An amount of Rs.95 lakhs, it was claimed, was received from a society, namely, Locus for Educational and Academic Research Network (LEARN) of Paralyzed Academic Complex, Moirangkom, Imphal. The appellant society is based in Delhi and the office bearers are not common. The said donation was received by way of bank drafts issued by Bank of India, Ghaziabad. The Assessing Officer wrote a letter to LEARN and received a communication dated 21.8.2001, written by the Chairman of LEARN. They totally disagreed with the facts stated by the appellant. The Assessing Officer obtained copy of the bank statement from the Bank of India (Ghaziabad) who had issued the pay orders. From the bank statement, it was noticed that from 13.9.2004 to 11.12.2004 there were cash deposits worth Rs.2,14,80,000/- in the accounts which were thereafter to be debited after deposits were made. Further investigations revealed that the accounts were maintained in the joint name of Karam Surjakanti Singh, the Chairman and Sh. Mayanglamvam . Prafullo Singh, Secretary of LEARN. In the meanwhile, the Assessing Officer received another letter from Karam Surjakanti Singh, Chairman, which reads as under: . ?Please refer to your letter dated 24.10.2007, addressed to the undersigned on the above subject. As for your kind information our Organization got exemption on Tax under Section 35-AC of the Income Tax Act 1961 vide Order No. S.O.839 (E) date the 24th July 2003 for assessment years 2004-05, 2005-06 and 2006-07 i.e. for three years by the Ministry of Finance, Department of Revenue, Government of India. This is for the construction of School Building, Infra Structure Development and running of the Project. During the year of which it is said that a donation received by Angika Development Society from our side through our Treasurer, we were in search of Donations from different sources for the above mentioned purpose and after much time had been spent fruitlessly we came across a Chartered Accountant of whose office is situated near the said Bank of India, Ghaziabad (U.P.). As per his promise to make necessary arrangements for the required Donation for us, he open an Account in the name of our Society with his own money and ask us to give a Cheque Book signed by us for their necessary arrangements and which we did it. Also they demanded Letter Head of the Society. After much time awaited it prove to be fruitless again and losing hope of getting any Donations on due to shortage of finance in putting up out the state for a long time, we left the place and came back. As for the case of the Account, we did not take much notice as it was opened by their own money. After that I receive your letter and I was shocked to hear the news of our donation to Angika. Furthermore, the Executive committee of our Society permits only the Chairman and the Secretary to receive Donations and thereby signed the relevant documents. The Treasurer is not authorized to do so and that too for receiving only not for giving Donations. Above all, we are not in any position give Donations to any organizations since out needs are yet to be fulfilled. Again the Signature of the Treasurer as seen in the document is not the same as the original signature of our Treasurer, and also it does not have the seal and the Round Seal of our Society. . Thus I think your kind self can understand the situation of the case and as far as our Society is concerned I have written the reality. . Thanking you in anticipation. ? . Yours Faithfully, . . Karam Surjakanti Singh . Chairman . LEARN. ? . . .

The Assessing Officer accordingly held that the appellant have not been able to establish their claim that they had received donation of Rs.95 lakhs from LEARN and made an addition.

The CIT(Appeals), however, deleted the said addition on the ground that the Assessing Officer had drawn an adverse inference on the basis of communication of Chairman of LEARN, without proper investigation and proper verification. He further observed that opportunity for clarification and cross-examination was not granted. He held that there was no material against the appellant to dispute the correctness of the donation. .

Revenue preferred the appeal before the tribunal. The tribunal in paragraph 7 of the impugned order has observed as under : . ?7. We have heard both the parties and gone through the material available on record. The assessee had alleged to have received donations of Rs.95,00,000/- from Locus for Educational and Academic Research Network [LEARN] of Paralyzed Academy Complex, Moirangkom, Imphal. M/s LEARN is registered under section 35-AC of the Income-tax Act, 1961. The short issue for consideration revolves around the fact whether the receipt of Rs. 95, 00,000/- from M/s LEARN is genuine or it is a case of introduction of the funds in grab of donations. The assessee had produced confirmations from M/s. LEARN that the amount of Rs.95, 00,000/- was received from M/s. LEARN. The assessee had filed copy of the resolution of meeting of the executive members of the organization held on 29th August, 2004 for the purpose of opening and operations of current account with the Bank of India, Ghaziabad branch. The assessee has filed copies of letters dated 1/10/2004 sending the donation by way of demand draft of Rs. 20,00,000/- and Rs. 25,00,000/-; dated 4/10/2004 for Rs.30,00,000/- and 11/12/2004 for Rs.20,00,000/-. These letters have been signed by Konsom Rosie Devi. The said demand drafts are drawn on Bank of India. On the other hand, Shri Karam Surjakanti Singh has informed the assessing officer that M/s. LEARN has not given any donations as they were in need of money. M/s LEARN is registered under section 35-AC. It is not understood under what circumstances an institution getting registration under section 35-AC would pass on the huge amount to another institution by way of donations since the Chairman of M/s. LEARN has denied to have given any donations. The issue is not free from doubts. The assessing officer carried out enquiries from Bank of India, Ghaziabad. The bank vide its letter dated 30/10/2007 had confirmed that there were cash deposit entries immediately prior to payment of donation to the assessee society. As per the bank statement for the period from 13/9/2004 till 11/12/2004 there were cash deposits worth Rs. 2,14,80,000/- in the bank account of M/s. LEARN. Since the issue of source of deposit in the bank account are in doubt and Shri Karam Surjakanti Singh, the Chairman of M/s. LEARN had denied to have given any donations to the society and according to him, one Chartered Accountant who approached M/S. LEARN in helping to get donations might be behind the entire activities. Therefore, in our considered opinion, further investigations in the matter are required to be conducted with reference to activities of the assessee ? society. The assessing officer should examine the paying slips for depositing the cash in the bank account, the application for making demand drafts, examining the persons making deposits in the bank account and obtaining the demand drafts from . the bank. The balance sheet of M/s. LEARN has to be investigated whether they have shown the bank account with Bank of India Ghaziabad and the deposits in the bank account as their receipts and had applied the income by way of donations. Since investigation had not been carried out by the assessing officer in order to arrive at the correct decision, we feel it proper to set aside the matter to the file of the assessing officer with the directions to examine the case further in the light of the above observations. The assessing officer will conduct thorough enquires from M/s. LEARN in the matter and decide the issue expeditiously after providing the assessee a reasonable opportunity of being heard.? .

Looking at facts we do not see any reason to entertain the present appeal against the order passed by the tribunal. No substantial question of law arises. We refrain from expressing and making further observation as on order of remit has been passed. The appeal is dismissed. No costs. . . . SANJIV KHANNA,J . . . . . . . R.V.EASWAR, J . DECEMBER 16, 2011 . vld . . . $ 2 .