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Income Tax Appellate Tribunal, DELHI BENCH : E : NEW DELHI
Before: SHRI R.K. PANDA & SHRI K. NARASIMHA CHARY
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER Assessment Year: 2012-13 Maharaja Agrasen Public School, Vs ITO, Bawana Road, Ward-1(4), Narela, New Delhi. Delhi. PAN: AABTM0400H (Appellant) (Respondent) Assessee by : Shri B.L. Gupta, Advocate Revenue by : Ms Rakhi Vimal, Sr. DR Date of Hearing : 21.11.2019 Date of Pronouncement : 29.11.2019 ORDER
PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the order dated 30th March, 2017 of the CIT(A)-40, Delhi relating to assessment year 2012-13.
Facts of the case, in brief, are that the assessee is a society registered by the Registrar of Societies, vide Registration No.S/10895 of 1980 dated 02.04.1980. It is running school in the name of Maharaja Agrasen Public School which is situated at Narela, Delhi. The main aims and objects of the society are to establish educational institutions, to open schools, colleges, to work for the development of the society, etc. It filed its return of income on 21st March, 2013 declaring nil income. During the course of assessment proceedings, the Assessing Officer observed from the balance sheet of the assessee that it has introduced corpus donation to the extent of Rs.13,53,600/-. He, therefore, asked the assessee to substantiate the same with documentary evidences in the shape of copy of ledger account, copy of bills/receipts issued and copy of confirmation of the parties.
According to the Assessing Officer, the assessee simply filed copy of the ledger account maintained by the assessee. Since, according to him, the confirmations were not filed from any of the parties, the Assessing Officer made addition of Rs.13,53,600/- to the total income of the assessee.
Similarly, the Assessing Officer found from the balance sheet that the assessee has shown loans and advances to the extent of Rs.60 lakhs, the bifurcation of which is as under:-
S.No. Name Amount 1. Ashwani Shah 100000 2. Asha Gupta 100000 3. Asha Sharma 100000 4. Harinder kaur 100000 5. Pushpa Saini 100000 6. Reena Joon 100000 7. Urmila Gupta 100000 8. Lakhi Ram Shiv Narayan 2000000 9. Murli Enterprises 300000 10. Radhe Sham Ajay Kumar 1200000
Radhe Sham Ajay Kumar – Plot 800000 12. Rishi Prakash Garg 300000 13 Vash Bhatta Company 700000 TOTAL 6000000
He noted that the persons named at Sl. No.1 to 7 are working employees of the assessee/trust and they have been provided loan on a necessity for their services being provided to the society and no interest has been charged. The assessee filed confirmations from the said employees for which the Assessing Officer accepted the same. In respect of the balance loan given by the assessee to the extent of Rs.53 lakhs, the Assessing Officer asked the assessee to justify the same by filing evidences such as purpose of giving the loan, whether it is interest free, the mode of payment, the return of income and confirmations, etc. However, the assessee stated that the loan/advance has been given to them for some construction purpose and there is no written agreement. The assessee also filed the copy of confirmation from the said persons that they have received loan from the assessee to the extent mentioned above. However, according to the Assessing Officer, the assessee could not give the purpose of such loan to the extent of Rs.53 lakhs and the services being provided by the parties to whom the loan has been advanced by the assessee.
According to him, merely filing the copy of confirmation or that the same has been subsequently returned is not sufficient. The statement of the assessee that the said loan was refunded by the parties in the subsequent year was also rejected by the Assessing Officer in absence of the copy of the bank account for the relevant period when such loans were refunded. He accordingly made addition of Rs.53 lakhs to the total income of the assessee.
In appeal, the ld.CIT(A) confirmed both the additions made by the Assessing Officer. So far as the addition of Rs.53 lakhs made by the Assessing Officer being advances given to various parties are concerned, the ld.CIT(A) sustained the addition made by the Assessing Officer by observing as under:-
“6.1.3 1 have considered the assessment order and also the submissions of the appellant. It is an admitted fact that the advances were given allegedly for the purposes of construction of the school for creating extra space which as on date has still not been done. It is also an admitted fact that there were no written agreements with the persons to whom the advances had been given or the purpose for which the advances were give. Even in the submissions made during the appellate proceedings, no details of why the amounts were advanced were given.
6.1.4 In the case of Commissioner of Income-tax, Thiruvananthapuram v. Shree P. Subramoniam Religious Trust [(2009) 179 Taxman 144 (Kerala)], the Hon'ble Kerala High Court have, inter alia, held as under in Para 3 of the order: "3. ...There is nothing wrong in advancing funds for purchase of cement, if the cement is to be utilised for construction purpose for the trust. However, in this case except payment made to a trader, there is nothing to indicate as to the terms or the time for purchase of cement. The trader has no doubt confirmed receipt of advance for supply of cement. However there is nothing to indicate that any approval permission is granted or is expected within a reasonable time for construction to justify the advance made to the trader. We are of the view that this advance is only siphoning off funds of the trust and there is no immediate requirement of cement as no concrete proposal was there for construction of pilgrim centre. Even at the time of hearing appeals by the CIT (Appeals) which is after 5-6 years of expiry of the assessment year the assesses has no case that the finds advanced were in fact utilised for the purpose for which it was advanced. At the maximum it is in the form of an investment or deposit which does not qualify for deduction under section I3(l)(d) of the Act...."
6.1.5 In the case of the appellant, there is nothing on record to show that the advances were made by the assessee for construction activity, there were no written agreements with any of the parties/entities to whom the amounts had 4 been advanced and there has been no construction or addition to fixed assets even as of today, which has been done by the assessee on its own In view of the facts and circumstances of the case, the material available on record and also the decision of the Hon'ble Kerala High Court in the case of Commissioner of Income-tax Thiruvananthapuram v. Shree P. Subramoniam Religious Trust (supra), it is held that the amount of advance given of Rs. 53 lakhs is an investment or deposit which is not in one of the modes as specified under section 11(5) and is a violation under section 13(l)(d). The addition made by the Assessing Officer is confirmed.”
5.1 So far as the addition of Rs.38,53,600/- made by the Assessing Officer on account of corpus donation is concerned, the ld.CIT(A) upheld the addition made by the Assessing Officer without admitting additional evidences filed before him in the shape of confirmations from the donors. The relevant observation of the CIT(A) at para 6.2.2. of the order reads as under:-
“6.2.2 During the appellate proceedings, an application for admitting additional evidence under Rule 46A of the Income-tax Rules, 1962 was filed to furnish confirmations from the donors and give the requisite details which as per the appellant could not be furnished during the assessment proceedings. The said application under Rule 46A of the Income-tax Rules, 1962 has been rejected as per the discussion in paras 5.1 to 5.7 above. The appellant has also challenged initiation of penalty proceedings under section 271 (l)(c) on the addition made which is also dismissed since an appeal only lies against an order levying penalty and not against initiation of penalty. Ground No. (b) of the appeal is, therefore, dismissed.”
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal raising the following grounds:-
“1) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) was incorrect and unjustified in:- a) Rejecting the additional evidences file during the course of proceedings. b) Rejecting application made by the assessee under rule 46A even without any opportunity and also without any reason.
2) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) eared in holding that the amount of advances given of Rs. 53,00,000/- was investment or deposit even when the same has been received back as evidenced by the books of accounts. 3) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) was incorrect and unjustified in holding that the amount of Rs. 53,00,000/- was taxable since it was in-violation of section 13(l)(d) and also it was not one of the modes as specified u/s 11(5). 4) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) was incorrect and unjustified in dismissing the ground of appeal relating to corpus donations of Rs. 13,53,600/- received during the relevant period. 5) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) was incorrect and unjustified in sustaining the addition of Rs. 13,53,600/- made by the assessing officer even without considering various submissions during the appeal proceedings. 6) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) was incorrect and unjustified in initiating penalty proceedings u/s 271(l)(c).”
The ld. counsel for the assessee strongly objected to the addition sustained by the CIT(A). So far as the addition of Rs.53 lakh is concerned, the ld. counsel for the assessee, referring to the order of the Assessing Officer as well as the CIT(A), submitted that whatever advances were given to the various persons have already been returned back by those persons. Further, the assessee has not claimed any exemption on account of such payments. Had there been any misappropriation of funds by the assessee, the Assessing Officer would have disallowed the exemption which he has not done. Further, the persons to whom such loans were given are not persons covered u/s 13(1)(c) of the IT Act, 1961. Therefore, the addition made by the Assessing Officer and sustained by the CIT(A) deserves to be deleted. So far as the decision relied on by the ld.CIT(A) is concerned, he submitted that the said decision is not applicable to the facts of the present case and is distinguishable.
7.1 So far as the disallowance of corpus donation is concerned, he submitted that the assessee has received corpus donation from 54 members @ Rs.25,000/- each. The assessee has filed the affidavits of all these persons and the ld.CIT(A) has called for a remand report from the Assessing Officer. However, the ld.CIT(A) without admitting the additional evidences filed before him, sustained the addition made by the Assessing Officer which is not correct. He accordingly submitted that both the additions made by the Assessing Officer and sustained by the CIT(A) should be deleted.
The ld. DR, on the other hand, heavily relied on the order of the Assessing Officer and CIT(A).
We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the decision relied on by the ld.CIT(A) in the body of the order. We find the Assessing Officer, in the instant case, made addition of Rs53 lakhs being the loan given by the assessee to six persons on the ground that the assessee could not substantiate the purpose of giving the loan to the extent of Rs.53 lakhs to the above persons and the services being provided by the parties to whom loans and advances were given. Similarly, the Assessing Officer 7 made addition of Rs.13,53,600/- being the corpus donation received from 54 members on the ground that the assessee was unable to file any confirmation of any of the parties. We find the ld.CIT(A) rejected the additional evidences filed before him in shape of affidavits of all members giving corpus donation. He also rejected the submissions giving the nature and details of the advances and upheld the action of the Assessing Officer, the reasons for which have already been reproduced in the preceding paragraph. It is the submission of the ld. counsel that the amount of Rs.53 lakhs being given as advances to different parties for some construction purposes were returned back in the subsequent year and there is no misappropriation of funds since the exemption u/s 11 has not been denied and, therefore, the addition of the same is not correct. Similarly, an amount of Rs.13,53,600/- being corpus donation received by the assessee from its own members being a capital receipt cannot be considered as income of the assessee.
So far as the addition of Rs.53 lakh made by the Assessing Officer on account of advances given to six parties are concerned, it is an admitted fact that the assessee had filed the copy of confirmation and the bank statement of the assessee. It was also submitted before the Assessing Officer that the advances were returned back in the subsequent year. However, in absence of copy of the bank account of the relevant period, the Assessing Officer did not accept the same.
We find, before the CIT(A), the assessee had filed all the details and the ld.CIT(A) had called for a remand report from the Assessing Officer. The availability of funds with the assessee to the tune of Rs.53 lakhs is not in dispute. It is also not the case of the Revenue that there is any misappropriation of funds since had there been any misappropriation of funds, the Assessing Officer would have disallowed the claim of exemption u/s 11/12 and 12A which has not been done in the instant case. Under these circumstances, we are of the considered opinion that the addition made by the Assessing Officer and sustained by the CIT(A) is not justified. However, since the allegation of the Assessing Officer is that the assessee had not given any bank statement of the subsequent year to substantiate that the amount had been refunded back, therefore, we restore the issue to the file of the Assessing Officer with a direction to verify the bank account of the assessee of the subsequent year and once the assessee proves that the amounts were, in fact, returned by those parties in subsequent year, the Assessing Officer is directed to delete the addition.
10.1 So far as the decision relied on by the ld.CIT(A) in the case of CIT vs. Shree P. Subramoniam Religious Trust (supra) is concerned, the same, in our opinion, is not applicable to the facts of the present case since, in that case, the Hon'ble High Court has observed that the advance is only siphoning off funds and even after a gap of 5-6 years of expiry of the assessment year when the appeal was heard before the CIT(A), it was not proved that the advances so made were utilized for the purpose for which it was advanced. However, in the instant case, the advances which were given for purchase of plot for construction purpose were returned back immediately in the subsequent year and, therefore, the decision relied on by the CIT(A) is distinguishable and not applicable to the facts of the present case. The ground of appeal No.2 and 3 filed by the assessee are accordingly allowed for statistical purposes.
11. So far as the addition of Rs.13,53,600/- being corpus donation received from the members of the society are concerned, we find the Assessing Officer disallowed the same on the ground that the assessee did not file any confirmation from the said persons. We find the ld.CIT(A) did not accept the additional evidences in the shape of affidavits filed before him and sustained the addition so made by the Assessing Officer. We find merit in the submission of the ld. counsel for the assessee that corpus donation from members cannot be treated as income of the assessee. However, the same needs to be substantiated in the shape of confirmations from the member donors of the society. We, therefore, restore this issue to the file of the Assessing Officer with a direction to grant opportunity to the assessee to file the confirmations of the said donors and, in case the assessee is able to furnish the confirmations of the donors, the Assessing Officer shall consider the allowability of the same as per law. We hold and direct accordingly.
The other grounds raised by the assessee being general in nature are dismissed.
In the result, the appeal filed by the assessee is allowed for statistical purposes. The decision was pronounced in the open court on 29.11.2019.