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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A), Rohtak dated 30.05.2016 for the Assessment Year 2012-13. 2. The revenue has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in ignoring the fact that the assessee has some source of income which have not been disclosed to the department and same is being utilized in construction of building.”
3. The facts of the case shows that assessee is a registered trust u/s 12 AA of the income tax act. During the year it has received a donation of land of registered value of INR 4,800,000 but the same has been entered in the books of account at Rs. 28852500/– as per valuation report dated 15/1/2011. Further it was also noted on examination of the valuation report that the assessee has a building of INR 12716396/– on 15/1/2011 whereas as per books of accounts the same has been shown at INR 3 830573/– on 31/3/2011. Therefore the learned assessing officer reached at the conclusion that the assessee has income from some sources which has not been disclosed to the Department which is being utilised in construction of building. Therefore the surplus shown by the assessee of INR 4025929/– ITO(E)\ Vs Radiant Educational Trust (Assessment Year: 2012-13) was brought to tax at maximum marginal rate treating the assessee as income of association of person. Further the assessee has received contribution from trustee of Rs. 2175000/- as well as donation from certain other persons of Rs. 5569000/-. The learned Assessing Officer noted that prior to giving donation/contribution to the assessee, all these persons have deposited cash in their bank account. Therefore, the learned assessing officer made an addition of Rs. 2175000/– out of the contribution by the trustee and an addition of INR 4099000/– out of the total donation received of INR 5569000/–. Further, with respect to the unsecured loan the addition of INR 800,000/- was made. Thus the total income of the assessee was assessed at Rs. 11099930/– as per order u/s 143 (3) of the Income Tax Act on 23/3/2015.
4. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT – A. The learned CIT appeals held that the excess of income over the expenditure cannot be denied the benefit of section 11 of the income tax act merely for the reason that because of the valuation there is a difference in the value of building in the books of accounts and the valuation report prepared by the registered value. The assessee has submitted that the valuation was made for the purpose of getting finance from bank at market rate for expansion of the activities of the trust. The learned CIT – A held that it cannot be said to be valid ground for denial of benefit of section 11 if the AO had any cogent material that establishes that the trust is having income from undisclosed sources, even then the benefit allowed u/s 11 cannot be denied by the AO but was, she can recommend to the competent authority to withdraw the registration of the trust which has not been done. Therefore the addition made by the learned assessing officer was deleted by granting benefit of section 11 and 12 to the assessee trust. With respect to the contribution received from trustee of Rs. 2175000/- and donation received from various other persons of INR 4099000/- the appellant trust had already shown the above receipt in the computation of the taxable income and therefore they cannot be 1 gain added to the total income of the assessee. Therefore, this addition was also deleted. The addition of unsecured loan of INR 800,000/- was also Page | 2 ITO(E)\ Vs Radiant Educational Trust (Assessment Year: 2012-13)
deleted as according to the learned CIT(A) appellant has discharged its onus regarding the source of the funds. Accordingly, appeal of the assessee was partly allowed. The revenue aggrieved with the order of the learned CIT(A) has preferred this appeal before us.
The learned departmental representative vehemently relied upon the order of the learned assessing officer and submitted that there is a vast difference between the value of building entered into the books of accounts and the valuation report value. He submitted that that learned assessing officer has clearly stated that there is an undisclosed income on by the assessee society source of which has not been disclosed. With respect to the loans/contributions and donation he submitted that all these depositors have deposited cash in their bank account and from that bank account a made RTGS to the account of the assessee. He submitted that though the amount of donation has been credited in the books of account and assessee has shown same as income of the assessee trust however when the source of the source has not been proved by the assessee trust, the learned assessing officer has correctly made addition.
The learned authorised representative relied upon the order of the learned CIT – capital and submitted that it is merely a difference in the value of building recorded in the books of accounts and as determined by the registered value of for which the bank finance was to be obtained. Therefore according to our opinion to obtain the bank finance the market value of the land and building is required to be determined for the security to the bank. She submitted that there is no evidence available with the learned assessing officer that assessee has earned any income which is outside the books of accounts. With respect to the donation and the contribution it was submitted that same is also been shown as income in the income and expenditure account therefore it cannot be once again added to the income of the assessee.
We have carefully considered the rival contention and perused the orders of the lower authorities. On plain reading of the order of the learned assessing officer it is amply clear that the addition has been made in the hands of the assessee by denying the benefit of section 11 and 12 of the act for the sole Page | 3 ITO(E)\ Vs Radiant Educational Trust (Assessment Year: 2012-13)
reason that assessee has a land and building which was valued by the registered value at higher value than the value which is recorded in the books of accounts. There is no real income accruing to the assessee. The valuation was made at the market rate by the registered value for the purpose of obtaining the bank finance and security to the bankers. There is no inflow of the funds in the books of accounts of the assessee. The assessee was denied benefit of section 11 and 12 of the act for the sole reason that there is a difference between the market value of the assets owned by the assessee then what is recorded in the books of the assessee. The learned assessing officer has clearly failed to note that the value recorded in the books of account is actual cost, whereas the value shown in the valuation report of the registered value is the market value of the property for the purpose of obtaining the bank finance. Therefore we do not find any infirmity in the order of the learned CIT(A) in allowing assessee the benefit of section 11 and 12 of the act.
With respect to the contribution of the trustees and donation received from several persons, assessee has already recorded these donations as income of the assessee in the income and expenditure account. The learned assessing officer has not invoked the provisions of section 68 of the income tax act. The learned assessing officer has also not verified source of money received by these persons for which the donation has been given to the assessee trust. In fact assessee has already offered this sum as its income. It is for those donors to show the source of cash deposited in their bank account. The learned assessing officer could also have invoked the provisions of section 68 of the income tax act. Same has not been invoked. Further it is also not the case of the AO, that donation received by assessee is an anonymous donation, because assessee has clearly stated the name of such donors and the bank account of such donors are available with the assessing officer. In view of this, we do not find any reason to upset the order of the learned CIT(A). Even the grounds of appeal
submitted before us clearly alleges that assessee has some source of income which has not been disclosed to the Department and same is being utilised in construction of building. Such statement has been made by the learned assessing officer Page |
4. ITO(E)\ Vs Radiant Educational Trust (Assessment Year: 2012-13)