M/S. NAVJYOTI VIKAS SANSTHAN,GHAZIABAD vs. ADDL. CIT, GHAZIABAD

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ITA 4185/DEL/2016Status: DisposedITAT Delhi10 July 2019AY 2007-088 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that both appeals by the assessee are without merit and dismissed them. The Tribunal noted that the assessee had not been granted registration under Section 12AA of the Income Tax Act, rendering it ineligible for any exemption under Section 11. The authorities below had found unexplained deposits in the assessee's bank accounts for both years, with no satisfactory explanation of their source. Furthermore, the Tribunal observed that the bank accounts were managed by professionals who induced office bearers to accept unexplained deposits and transfer them to other societies for a commission of 10%. This indicated that the assessee society had no income and was not conducting activities aligned with its stated objects, characterizing the situation as money laundering through a systematic arrangement. The assessee failed to explain the source of the funds and their subsequent transfer. Consequently, no interference was warranted in the orders of the authorities below, and both appeals were dismissed.

What were the facts?

The assessee, Navijyoti Vikas Sansthan, filed appeals against the orders of the CIT(A), Ghaziabad, for Assessment Years (AY) 2006-2007 and 2007-2008. The appeals challenged additions of Rs. 1,66,05,000 and Rs. 15 lakhs, respectively, on account of unexplained bank deposits. The assessee did not appear for hearings, and proceedings were conducted ex-parte. The Assessing Officer (AO) reopened the assessment based on information that the assessee society had advanced donations. Investigations revealed huge cash deposits and other transactions in the assessee's bank account, with introducers and addresses of associated concerns found to be bogus. Joint account holders stated that income tax practitioners promised a 10% commission for using the society's bank account for entries. The AO noted that the assessee produced no documents and added Rs. 1,57,00,000 as disallowed expenses due to unexplained withdrawals. The CIT(A) enhanced the addition to Rs. 1,66,05,000 for AY 2006-2007, noting the assessee's ineligibility for registration under Section 12AA and failure to explain the source of deposits. For AY 2007-2008, the addition was restricted to Rs. 15 lakhs.

What were the issues?

1. Whether the addition of Rs. 1,66,05,000 on account of unexplained bank deposits for AY 2006-2007 is justified, considering the assessee's failure to explain the source of funds and the alleged involvement in money laundering activities, and whether the CIT(A) was justified in enhancing the addition. (Question of law and fact, concerning Sections 68, 11, 12AA of the Income Tax Act, 1961). Assessee's contentions: The assessee did not appear to present any arguments. The judgment notes that the assessee's counsel was allegedly in possession of all documents and refused to return them, preventing the filing of a return of income. The assessee also contended that donees were the real providers of entries. Revenue's contentions: The revenue, through the Sr. D.R., argued that the assessee had not been granted registration under Section 12AA, making it ineligible for exemptions under Sections 11 to 13. The revenue contended that the assessee failed to explain the source of deposits and that the bank accounts were used for money laundering through a systematic arrangement involving commissions.

Which sections of the Income-tax Act were involved?

Section 68,Section 11,Section 12AA,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES “E”: DELHI

Before: SHRI BHAVNESH SAINI & DR. B.R.R. KUMAR

PER BHAVNESH SAINI, J.M.

1.

Both the appeals by the Assessee are directed against the different Orders of the Ld. CIT(A), Ghaziabad, Dated 11.02.2016, for the A.Ys. 2006-2007 and 2007-2008, challenging the addition of Rs.1,66,05,000/-and Rs.15 lakhs on account of unexplained bank deposits.

2 ITA.Nos.4184 & 4185/Del./2016 Navijyoti Vikas Sansthan, Ghaziabad. 2. The assessee has been notified the date of hearing twice through registered post. However, none appeared on behalf of the assessee. The assessee is, therefore, proceeded ex-parte.

3.

We have heard the Ld. D.R. and perused the findings of the authorities below. The Ld. D.R. stated that facts are same in both the appeals.

4.

The A.O. noted in the assessment order for A.Y. 2006-2007 that assessee is registered with the Registrar of Societies and later on name was changed. Memorandum of the Society shows its main objects are for educational purposes. The assessee did not file return of income. Notice under section 148 of the I.T. Act was issued and served upon the Secretary of the assessee society. Information regarding advancement of donation from the assessee was received by the A.O. on the basis of which assessment was reopened. It is noted that while completing the assessment proceedings of M/s. Bankey Bihari Educational Society, it was noticed that assessee society had advanced donations. The verifications of the bank accounts of the society reveal

3 ITA.Nos.4184 & 4185/Del./2016 Navijyoti Vikas Sansthan, Ghaziabad. that huge cash deposits and other transactions were reflected in its bank account maintained with Nainital Bank, Ghaziabad. Further enquiries in the case revealed that the introducer Shri Vineet Kumar was not in existence and further transfer entries from M/s Varun Trade Centre, M/s Sharma Associates and M/s Sunil Associates to assessee society were revealed. The addresses of the account holders of these concerns were also found bogus. The statement on oath were recorded of Shri Devendra Singh Chauhan and Shri Madan Giri, the joint account holders of the bank account of the society, it was stated that the income tax practitioner Shri Sandeep Garg and Advocate Shri Vinod Dixit had promised to pay 10% commission on the entire transactions for providing entry through the bank account of the assessee society and for this purpose blanked signed cheques were given by the assessee society. It was further stated that the assessee society has no Income and no donation have been given to any society because there is no source of income and no activity is being done by the assessee society. The statements of Shri Vinod Dixit and 4 ITA.Nos.4184 & 4185/Del./2016 Navijyoti Vikas Sansthan, Ghaziabad. Shri Sandeep Garg were also recorded. They denied allegations against them. The A.O. noted that no documents have been produced before him. Shri Madan Giri, Secretary of the assessee society appeared before A.O. and filed an affidavit that their Counsel Shri Sanjeev/Sandeep Garg, CA who were looking after the affairs of the society had all the documents like copy of bank account, bank passbook, PAN card and bank statement etc. are in their possession and that they refused to give back the required documents, therefore, assessee society is unable to file the return of income. The A.O. in such circumstances, proceed to frame ex-parte assessment. The A.O. noted that in the account of the society, there are deposits of Rs.1,66,05,000/- which were deposited through the clearing entries of Delhi State Cooperative bank and Mahamedha Urban Cooperative bank. One of the account of the Investor were also introduced by Shri Vinod Kumar Gupta, Proprietor of M/s. Varun Trade Centre, Ghaziabad. Out of this amount, various cheques have been issued in the names of Fateh Chand Charitable Trust totaling to Rs.1,57,00,000/-. Both

5 ITA.Nos.4184 & 4185/Del./2016 Navijyoti Vikas Sansthan, Ghaziabad. the signatory to the bank account of the assessee society denied to have any knowledge of issue of cheques to Fateh Chand Charitable Trust. The A.O. also noted that confirmation filed in this regard is stated to be forged. The A.O, therefore, noted that amount of Rs.1,57,00,000/- has been withdrawn from the bank account of the assessee society for which no utilization have been explained, therefore, same was added on account of expenses disallowed in a sum of Rs.1,57,00,000/-. The addition was challenged before the Ld. CIT(A). The submissions of the assessee are reproduced in the appellate order. The Ld. CIT(A), however, did not accept the contention of the assessee and noted that assessee has not been granted registration under section 12AA of the I.T. Act, therefore, it is not eligible for any deduction under section 11 to 13 of the I.T. Act. It was also found that assessee failed to prove satisfactorily the amount of Rs.1,66,05,000/- deposited in the account of the society through explained sources. The Ld. CIT(A), therefore, held that assessee failed to explain the source of the amount deposited in their bank account. The 6 ITA.Nos.4184 & 4185/Del./2016 Navijyoti Vikas Sansthan, Ghaziabad. Ld. CIT(A) also recorded that in the submission of the assessee, assessee contended that donees were the real providers of the entries. The Ld. CIT(A) issued enhancement notice to the assessee as to why the addition should not be enhanced to the full amount deposited in the bank account of the assessee. The Ld. CIT(A), accordingly, enhanced the addition to Rs.1,66,05,000/- which is the amount of unexplained deposited in the bank account of the assessee. The appeal for the A.Y. 2006-2007 was accordingly dismissed.

5.

The facts are same in A.Y. 2007-2008 in which the A.O. made the addition of Rs.24 lakhs. The Ld. CIT(A) however found that since addition is enhanced in A.Y. 2006- 2007 to Rs.1,66,05,000/-, therefore, opening balance could not have been added. The addition was, therefore, restricted to Rs.15 lakhs. The appeal of assessee was partly allowed.

6.

After considering the submissions of the Ld. D.R. we do not find any merit in both the appeals of the assessee. It is a fact that assessee has not been granted registration under section 12AA of the I.T. Act, therefore, assessee would

7 ITA.Nos.4184 & 4185/Del./2016 Navijyoti Vikas Sansthan, Ghaziabad. not get any exemption under section 11 of the I.T. Act. The authorities below found that there are unexplained deposits in the bank accounts of the assessee for both the years for which no source have been explained. Further, it was found that the bank accounts were managed by the professionals who allured Office Bearers of the assessee society to take unexplained deposits in the account of the assessee and transferred the same to another society for commission of 10%. These facts clearly show that assessee society was having no income and no activities have been done pursuant to its objects. It is a case of money laundering through systematic arrangement. The assessee, therefore, failed to explain source of the same and transfer of money to other societies as per Law. No interference is called for in the matter. We, accordingly, dismiss both the appeals.

7.

In the result, both the appeals of the Assessee are dismissed.

8 ITA.Nos.4184 & 4185/Del./2016 Navijyoti Vikas Sansthan, Ghaziabad. Order pronounced in the open Court.

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