SHAIKSHANIK KEISHANK SAMAJ,GHAZIABAD vs. ADDL. CIT, GHAZIABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI Before Sh. Amit Shukla, Judicial Member Dr. B. R. R. Kumar, Accountant Member ITA No. 650/Del/2012 : Asstt. Year : 2008-09 Shaikshanik Krishank Samaj, Vs Additional Commissioner of A-202, Euro Apartment, Income Tax, Range-II, Sector-4, Rajinder Nagar, Ghaziabad Ghaziabad (APPELLANT) (RESPONDENT) PAN No. AADAS1074L Assessee by : Sh. Praveen Singhal, CA & Ms. Smita Goel, CA Revenue by : Sh. N. K. Bansal, Sr. DR Date of Hearing: 18.09.2019 Date of Pronouncement: 26.09.2019 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the revenue against the order of the ld. CIT(A), Ghaziabad dated 24.11.2011.

ITA No.650/Del/2012 2 Shaikshanik Krishank Samaj land or investment 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.

ITA No.650/Del/2012 3 Shaikshanik Krishank Samaj members of the society. The assessee has applied this fund in the purchase of land to start the charitable objectives as per the objects of the society.

S. No. Name of the person/depositor Amount Comment/my conclusion 1. Sh. Pritash Ranjan Singh 2,17,000 PAN, but no I.T. return filed; ITRs of father does not help donor’s creditworthiness, as the donor has not contended that donation was given from the father’s fund—thus, creditworthiness is not proved. The AO has added only Rs. 92,000/-; but once creditworthiness is unproved; the entire amount of this donation of Rs. 2,17,000/- 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.

ITA No.650/Del/2012 4 Shaikshanik Krishank Samaj 2. Smt. Neelam Singh 1,50,000 No bank a/c; no ITR filed—thus, 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 No detail and evidence 1,00,000 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) Sh. Mahesh Singh No details and evidence 8. 1,00,000 09. Sh. Radhey Shyam 99,000 No evidence of his work experience and income thereof—contradictory statement (assessee says donor is agriculturist while donor’s affidavit says something else) 10. Sh. Sunil Kumar 98,000 No details and evidence 11. Meghmala 94,000 No details and evidence Nirmala Devi 75,000 No details and evidence 12. 13. Pushpa Singh 49,000 No details and evidence 14. Smt. Usha Devi 94,500 No details and evidence Total 16,16,500/- Aggrieved with the order of the ld. CIT (A) the assessee is before us.

ITA No.650/Del/2012 5 Shaikshanik Krishank Samaj the details pertaining to all the donors have been submitted before the lower authorities and details pertaining to the donors whose donations have been confirmed u/s 68 have also been duly furnished before the ld. CIT (A). It was argued that the PAN number, ITRs, Identities have been given in order to prove the identity, genuineness and creditworthiness of the donors and hence the action of the ld. CIT (A) confirming the amounts is not sustainable. It was also argued that in case the amounts are added u/s 68 of the Act, the computational provisions pertaining to the Act may be allowed. The ld. AR has also relied on various judgments taken up before the ld. CIT (A) and vehemently argued that Section 68 of the Act cannot be invoked at all in the case of charitable organization. The submissions of the ld. AR before the revenue authorities are as under: “It is brought to your honor’s kind notice that in the chart given in the body of assessment order, the Ld. AO has referred to the documents filed in respect to the membership fee of the members of the society. It may kindly be noted that in most of the cases, the confirmation of the member, his identity and the source of income has been furnished. The Assessing Officer has observed that transactions relating to membership fee and contribution towards corpus funds are bogus as the cash flow could not be produced by the concerned members. It is very apparent that many of the members donating for the society are agriculturist by profession; managing their affairs in cash as they are receiving sale proceeds of their agricultural crops in cash only. Thus, the failure to furnish the cash flow 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

ITA No.650/Del/2012 6 Shaikshanik Krishank Samaj 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 payments towards the corpus funds. On the facts of the case and the evidences placed on records the observation made by the Ld. A.O. that “It is basically purchased entry and the nature of which has unexplained” is uncalled for; against the law as well as the facts brought before the Ld. A.O.; hence, deserves to be struck off from the assessment order. The term “satisfaction of the Assessing Officer” is completely a discretionary factor and the Ld. AO was not satisfied 'even after producing almost all relevant documents required by him. Besides as desired by the Ld. AO, production of members who paid the amount to the society; the Ld. Assessing Officer has taken a indifferent view, instead of appreciating the real fact that all the members of the society have been associated for a charitable object and noble cause in the utmost manner, so that the educational institution could be established for the general public utility. It is further brought to your honor’s kind notice that the Ld. Assessing Officer has treated the corpus fund as unexplained cash credit and has made the addition under section 68 of the IT Act; although after the introduction of section 115BBC of the IT Act w.e.f. 01.04.2007 especially for the society/trust; the provisions of section 68 are not applicable in the case of the society/trust. In respect of Section 68 of the IT Act; kind attention of your honor is also invited to the following land mark decisions of the Hon’ble Courts: In various decisions the Hon’ble Supreme Court and High Court decided that if the existence of the person who gave the money is proved then amount so received cannot be treated as unexplained income in the hand assessee.

ITA No.650/Del/2012 7 Shaikshanik Krishank Samaj In the case of Uma Polymers (P.) Ltd. v. Dy. CIT [2006] 100 ITD 1 (Jd.) (TM) it was held that: “In respect of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received and there is no further burden on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name; distinction between a public company and a private company is not very material for this purpose.” In the case of CIT v. Shree Barkha Synthetics Ltd. [2004] 270 1TR 477 (Raj.) it was held that: “Tribunal having found that companies from which the share application money had 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 their statements were also recorded, the amount of share capital/share application money

ITA No.650/Del/2012 8 Shaikshanik Krishank Samaj could not be treated as unexplained cash credits and no addition could be made under section 68.” In the case of Hindustan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289/129 Taxman 601 (Cal.), it was held that: “Addition under section 68 can be made only if the assessee offers no explanation regarding the source of the credit or the explanation is not found satisfactory; once the assessee- company had given the income-tax file numbers of the subscribers to its capital, it was for the ITO to enquire about it and find out the creditworthiness of the subscribers and the genuineness of the transactions except in respect of persons who were not found at the addresses given.” In the case of CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268 (Delhi), it was held that: “Assessee-company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company’s own income from undisclosed sources.” In the case of CIT v. Illac Investment (P.) Ltd. [2006] 287 ITR 135 (Delhi), it was held that: “Commissioner (Appeals) and the Tribunal having recorded concurrent findings of fact that the assessee-company has satisfactorily established the identity of the share subscribers and deleted the addition under section 68, no substantial question of law arises for consideration.” Further in the case of [CIT V. Jauharimal Goel [2005] 147 Taxman 48 (All.)] the similar view was taken by the Hon’ble Allahabad High court: “In the instant case, the assessee offered the explanation both about the nature and source of the money. It was explained that the money was deposited by the two ladies, which they had deposited after withdrawing from their bank account. The

ITA No.650/Del/2012 9 Shaikshanik Krishank Samaj Commissioner (Appeals) and the Tribunal had found that the assessee had discharged his burden in proving the source of the money, which had flew from the bank account. It was, further, held that in addition to the source of money from the bank account, both the ladies were the income-tax assessees and assessed to tax under the Amnesty Scheme 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. Thus, the assessee discharged its burden of proving identity, capacity and genuineness of the transaction. The Assessing Officer has not brought any material to show that the funds to ACL were provided by the assessee. Under the circumstances, it cannot be said that the cash credit in question has remained unexplained. There is absolutely no material to link the assessee with the sum of Rs. 22,97,000 deposited in cash in the bank account of M/s. FBSL. [para no. 8] In view of the concurrent findings of the fact given by the two authorities that there is no material to link the assessee with a sum of Rs. 22,97,000 deposited in cash in the bank account of M/s. FBSL, as such, no case is made out for making addition under section 68 of the Act, since there was no material with the Assessing Officer to come to the conclusion regarding any

ITA No.650/Del/2012 10 Shaikshanik Krishank Samaj genuineness or fictitious identity of the entries or non-capacity of the lender. [para no. 9] It is further submitted that we referred to some of the case laws discussed below during the course of assessment proceedings also. The below mentioned case law applicable in the case of society as referred to before the Ld. AO during the course of assessment proceedings, which the AO has failed to appreciate. The decision of Hon’ble Delhi High Court in the case Director of Income Tax (Exemption) V. Keshav Social and Charitable Foundation [2005] 146 Taxmann) 569] in which Hon’ble High court dismissed the appeal of the department on the following grounds: i) To obtain the benefit of the exemption under section 11, an assessee is required to show that the donations were voluntary. In the instant case, the assessee had not only disclosed its donations, but had also submitted a list of donors. The fact that the complete list of donors was not filed or that the donors were not produced, did not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. That was more particularly so in the facts of the case where admittedly, more than 75 per cent of the donations were applied for charitable purposes. [Para 10] ii) For the aforesaid reasons, there was no merit in the appeal and no substantial question of law arose from order of the Tribunal. Therefore, the appeal was to be dismissed. [Para 12] It is worth mentioning that the assessee society has furnished the complete 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

ITA No.650/Del/2012 11 Shaikshanik Krishank Samaj 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 dispute about the fact that the donations were utilized for construction of the building of the school, which was clearly an educational purpose. By no stretch of imagination could it be said that the donations were received with some, profit motive. [Para 8] c) Moreover, the amount in question was not an outflow from the corpus of the assessee, but an inflow into its corpus for the purposes of construction of a building. It could not be said that the receipts were with a profit motive, more particularly when the donations were utilized for educational purposes. [Para 9] Further the conclusion of the case is where a charitable institution had received donation, but was unable to establish the identity of the donors; the issue arose whether such amount can be added as unaccounted of unexplained income. The amounts received by way of donations are bound to be treated as income liable to utilized for the professed purpose for which it is formed. In the result, if it has been so utilized, there can be no further liability as was pointed out in this case. In the case of S.RM.M.CT.M Tiruppani Trust Vs. CIT, where it was decided that in view of deduction available for donations, which are applied for charitable purpose, even if such donation are taxable, where it is applied for the purpose of charity, such

ITA No.650/Del/2012 12 Shaikshanik Krishank Samaj applied income will be deductible, so as to neutralize the addition. [1998 (96 Taxman) 635 (SC)]. The Ld. AO inspite of appreciating the case law referred to the above has simply quoted that the case law which are not applicable in the appellant’s case; in view of the amendment in Income-tax Act, 1961 and the insertion of section 115BBC. The intention of the legislature is very clear that the amendment is to tax the black money introduced in the books of account of the society. Your honor will kindly appreciate that appellant society did not start any activity during the relevant period and as such the additions made by the Ld. A.O. by holding that amount of donation/membership fee voluntarily paid by the members was the unexplained income of the society is mere presumption which is not sustainable in the interest of natural justice. In this context the appellant like to submit that; The Ld. AO himself has given the contradictory findings in the body of the assessment order; (i) by making the addition u/s 68 of the IT Act and (ii) admitting that 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.0.49 cr was held

ITA No.650/Del/2012 13 Shaikshanik Krishank Samaj to be genuine and applied for charitable purpose. Thus the AO has himself agreed that the society is running for charitable activity and hence the provisions of section 11 and 12 are applicable in our case. The contention of the AO in treating the unexplained amount as income from other sources itself qualifies the same for exemption u/s 11 and 12 of the IT Act as Ld. AO himself has agreed to the charitable nature of the society. 3. The Form of return of income very clearly indicates that the exemption u/s 11 and 12 are placed after the calculation of the income from all sources and thus even if this is presumed to be the income, the applicability of section 11 and 12 cannot be denied. The Ld. AO has referred to the case law of CIT Vs. M/s. Queens Educational Society, ITA to 103 and 104 of 2007 wherein it has been held that where a society is making systematic profit, even though that profit is utilized only for charitable purpose, yet it cannot be said that it could claim exemption if merely qualitative test is applied to the society, even school which are run on commercial basis making profit would go out of the purview of taxation and would demand exemption. In reference to this observation of the Ld. A.O. it is submitted that during the previous year ending 31-03-2008; there is no other activity except applying the voluntary contribution towards purchase of land; hence the presumption of the Ld. A.O. relating to the earning of profit by the society is without basis. Thus your honor will kindly appreciate that the ease law relied upon by Ld. AO is not all applicable in appellant’s case being having distinguished facts. Summing up the submissions; the appellant requests your honor’s kindly judiciously adjudicate the following issues; 1. The Registration u/s 12AA of the IT Act to the society has been granted by the Ld. CIT, Ghaziabad after examining the objects and the receipt of funds and utilization thereof. The Ld. A.O. has not properly appreciated these facts in passing the order u/s 143(3) under appeal.

ITA No.650/Del/2012 14 Shaikshanik Krishank Samaj 2. The Assessing Officer has made the addition for unexplained cash credits u/s 68 of the IT Act, without appreciating the facts that society did not start the educational activity during the previous year and the source of receipts of funds was the voluntary capital contribution made by the members of the society/donors. 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 exempt from tax as per the provisions of section 11 and 12 of the IT Act. Thus, the Ld. AO is has contradicted his own decision by considering the other part of the corpus fund as unexplained cash credit in the hands of the society. 5. The Ld. Assessing Officer has failed to appreciate the fact that after the insertion of section 115BBC in the IT Act applicable in the case of societies/trusts w.e.f. 01.04.2007, the provisions of section 68 are not applicable. Further, the AO has not pointed out in the assessment order that provisions of section 115BBC are applicable to make addition in the case of the appellant.

ITA No.650/Del/2012 15 Shaikshanik Krishank Samaj 6. The Ld. Assessing Officer has considered the assessee society an Association of Person within the meaning of section 167B of the Act; although the members of the society have not to receive any benefit from the society. The society has been registered under the Societies Registration Act 1860 and also u/s 12AA of the Act, and in case of any benefit is given by the society to its partners provisions of section 13 of the Act are applicable. Provisions of Section 167B read as under; Charge of tax where shares of members in association of persons or body of individuals unknown etc. 167B. (1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860(2) of I860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate; Similarly, other cases covered by the first proviso to section 164(1) and the first proviso to section 164(3) would also not attract the provisions of section 167B. Accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate. (Circular No.577 dated 4-9-1990) The provisions are clear that they not applicable in the case of the society registered under the Societies Registration Act 1860. Therefore, the order of the Ld. A.O. for charging income tax as per the section 167B is against the law which may kindly be appreciated and necessary direction to the Ld. A.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.

ITA No.650/Del/2012 16 Shaikshanik Krishank Samaj 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 explain the source properly. He argued that if the genuineness of the transaction and creditworthiness of the donors is not proved then the amount is liable to the provisions of Section 68 of the Act. Taking cue from the order of the ld. CIT (A), he argued that Section 115BBC of the Act and Section 68 are mutually exclusive and both can operate in their own domain as per facts and circumstances of the case. He further took us to the order of the ld. CIT (A) which is as under: “if the assessee fails to discharge its onus, as placed on it by the provisions of Section 68 i.e. of proving the identity of the donor, genuineness of the transaction of donation and also, the creditworthiness of the donor; such unexplained credit entries, appearing in assessee’s books would be deemed income from undisclosed sources. Important it is to mention that Section 68 to 69D are all deeming sections, placed after all sections, dealing with Income from various heads, end; meaning, thereby, that Section 11 to 13 cannot be looked and operated, in isolation; Section 68 to 69D would apply even in cases of trusts/Societies, as these apply to any other assesee. After all, law does not permit to give amnesty to these trusts/societies, which are formed for doing charitable social religious & educational activities in the Society. They are given privileges in the Act, but at the same time, they are expected to conform to their promise of doing not only lawful, but also, morally and socially lofty deeds, beneficial to the society. Such lofty expectations would be belied, if they raise funds through

ITA No.650/Del/2012 17 Shaikshanik Krishank Samaj dubious/unclean mans; if they launder unaccounted/suspicious funds of their own or any member of the society. The courts can not shut their eyes to income-side of their activities, even if that income is found to be applied towards charitable activities!! The cleanness of the funds used is as important as is the utilization of those funds. Otherwise, there would open a floodgate of channeling the black money into the areas of charitable activities. Law neither permits that, nor would that be in the long-term interest of the society. As cannot be denied, there are fast developing and wide prevailing commercial interests in the area of educations field, in today’s world. Apparently, that in one of the objective of section 115 BBC, which is operative from A.Y. 2007-08 onwards. As of now, 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 & genuinely required to accumulate/solicit donation for being able to carry out its social and charitable activities. Thus, for making a lawful and practical balance between the twin objectives; of raising funds from participative stake-

ITA No.650/Del/2012 18 Shaikshanik Krishank Samaj holders and, of avoiding unaccounted/black money, it would be a prudent legal requirement that in the cases where assessee society is able to place documents including confirmation, proving the identity of the donors; and the genuineness of the transaction claimed as donation made towards corpus fund; then the onus would shift on to revenue to prove that the donors/persons are of no/low means to the extent that they are not capable of giving the respective amount as donation , and thereby it has to be inferred that the fund, in the garb of donation, is actually some unexplained/unaccounted fund; which part is, then required to be added back as unexplained/unaccounted fund of the assessee. Also as the assessee is not supposed to indulge in accumulation of black money; so, such addition would imply that the society is not carrying out avowed social or charitable activity, and, thus, is not entitled for exemption u/s 11, to that extent, even if that unexplained fund is found to be applied towards avowed activities.” 10. Heard the arguments of both the parties and perused the material available on record.

"Anonymous donation means any voluntary contribution referred to in sub clause (iia) of clause (29) of section2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed." That the provisions of section 115BBC will not be applicable in our case because the member's contribution cannot be termed as anonymous donation u/s 115BBC since we have furnished all the proofs in respect of identity of the members who have contributed towards the corpus fund as per list annexed thereto.” 12. The Provisions of Section 68 of the Act reads as under: "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no

ITA No.650/Del/2012 19 Shaikshanik Krishank Samaj explanation about the nature and source thereof or the explanation offered by him 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.

ITA No.650/Del/2012 20 Shaikshanik Krishank Samaj and identity of the donors, the addition cannot be made u/s 68 of the income tax act in the case of the trust as it has already been offered as an income. The anonymous donations will not be covered if donations received by any trust or institution created or established wholly for religious purposes or donations received by any trust or institution created or established for both religious as well as charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution. Sub-section (3) defines “anonymous donation” to mean any voluntary contribution referred to in section 2(24)(iia), where a person receiving such contribution does not maintain a record consisting of the identity of the person making such contribution indicating the name and address of the person and such other particulars as may be prescribed. The central board of direct tax as prescribed any particulars which is required to be maintained by the assessee trust.

ITA No.650/Del/2012 21 Shaikshanik Krishank Samaj

ITA No.650/Del/2012 22 Shaikshanik Krishank Samaj expenditure for the purpose of the trust, no addition u/s 68 of the Act is warranted. However, the judgments do not accord any such privilege to the corpus donations received by the trust or institution. The judgment of Keshav Social and Charitable Foundation (supra) specifically excluded corpus donations and held that only the donations included in the income and expenditure statement are precluded from the purview of Section 68 of the Act. Hence, we hereby uphold the action of the ld. CIT (A).

Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 26/09/2019 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR