BRIJBASI EDUCATION AND WELFARE SOCIETY vs. PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL III, NEW DELHI

This common order will dispose of the present appeals preferred under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] to assail the common order dated 18th September, 2019 [hereinafter referred to as ‘Impugned Order’] passed by the Income Tax Appellate Tribunal [hereinafter referred to as ‘ITAT’] in Income Tax Appeal No. ITA 4572-73/Del/2017 in respect of Assessment Years 2006-07 and 2007-08 respectively.

The factual background leading to the filing of the present appeals is summarized as follows:

The Appellant is an educational trust, duly registered under the provisions of Section 12AA of the Act and is enjoying exemption under Section 80G thereof. The Appellant filed its return of income on 14th September, 2006 declaring nil income. The case was selected for scrutiny, and pursuant thereto, an Assessment Order under section 143(3) was passed on 15th December 2008. The Assessee preferred an appeal before Commissioner of Income Tax Appeals [hereinafter referred to as ‘CIT(A)’] who confirmed the same vide order dated 29th July 2009. The Assessee then preferred further appeal before

Subsequently, on 28th March, 2013 the Additional Commissioner of Income Tax, Range 1, Ghaziabad issued a notice under Section 148, for reopening of assessment, followed by notices under Section 143(2) of the Act. The reason to believe that the income of the Appellant chargeable to tax has escaped assessment, emanated from the information received from the Deputy Director of Income Tax (Inv.) – II , vide letters dated 22nd June 2012 and 21st January 2013, which in turn stemmed from a report of Central Bureau of Investigation (CBI). The Joint Director of Income tax (Investigation) informed that a Regular Case (RC) has been registered against one Shri Manoj Kumar Aggarwal. In the CBI report it was disclosed that Shri S. K. Sharma, Chairman of the Appellant Trust, along with other entities, had fraudulently and with the intent to evade tax, made huge cash deposits in the accounts of the Appellant. It was further divulged that Shri S.K. Sharma gave Rs. 35 lacs (belonging to Shri Manoj Kumar Aggarwal against whom the CBI inquiry was instituted) to one Shri Mahesh Garg, who deposited the said amount in different accounts, and issued cheques favouring Brijbasi Education & Welfare Society, amounting to Rs. 35 lacs, thereby creating

Pursuant to the notice for reassessment, the Additional Commissioner of Income Tax, Range 1, Ghaziabad called upon the Appellant to provide the clarification of the source of Rs. 40 lacs received by the Appellant as donations. In response thereto the Appellant appeared and submitted a reply dated 19th February, 2014. Thereafter, on 28th February, 2014, the assessment was completed under Section 147/143(3) of the Act, determining the total income of the Assessee at Rs. 75,00,000/- (Rs. 40,00,000/- added under Section 68 of the Act + Rs. 35,00,000/- as unexplained receipts). Aggrieved with the aforesaid order, the Assessee preferred an appeal before the CIT(A) on the issue of reopening of assessment as well as on the merits of the addition of Rs. 75 lacs. The CIT(A) vide order dated 16th March 2017 upheld the reopening of the assessment and also the action of the AO making addition of Rs. 40 lacs under Section 68 of the Act. As regards addition of Rs. 35 lacs on account of unexplained receipts, the Appeal was allowed and addition was deleted on the ground that the aforesaid amount received from Sh. Mahesh Garg, during the Financial Year 2006-07 was assessable in AY 2007-08 and therefore, the addition cannot be made in AY 2006-07. It was further noticed that the appeal of the Assessee for AY 2007-08 had been disposed of enhancing the taxable income by Rs. 35 lacs. The Assessee then preferred an appeal before the ITAT impugning the order of CIT(A).

For AY 2007-08, the Appellant filed its return of income on 24th August 2008 declaring nil income. Assessment was completed u/s 143(3) on 29th December, 2009 and total income was assessed as NIL. Subsequently, on 23rd March, 2014, the Additional Commissioner (Appeals) issued a notice under Section 148 for reopening the assessment. This action also originated from the information received from the Joint Director of Income Tax vide letter dated 21st January, 2013, which, in turn was based on the above noted CBI report.

Re-assessment was completed on 20th March 2015, under Section 147 r/w 143(3) of the Act. It was held that the Appellant had failed to explain the donation of Rs. 95,00,000/- in terms of Section 68 of the Act. Accordingly, addition of Rs. 60,00,000/- was made on account of unexplained cash credit, thereby determining the total taxable income as Rs. 60 Lakhs. Aggrieved with the aforesaid order, the Assessee preferred an appeal before the CIT(A) on the issue of reopening of assessment as well as on the merits of the addition of Rs.60 lacs on account of unexplained cash credit. The CIT(A), vide order dated 16th March 2017, upheld the reopening of the assessment. It was observed that while the Appellant has received Rs. 95,00,000/- as donations during the year (including Rs. 35,00,000/- received through Sh. Mahesh Garg), the amount of Rs. 35,00,000/- added by the AO for AY 2006-07 had been deleted and held to be chargeable in AY 2007-08. Hence, as a matter of fact, the Appellant had received total donation of Rs. 95,00,000/- but AO had made an addition only of Rs. 60,00,000/- for AY 2006-07. Accordingly, the income of the Appellant was enhanced to Rs. 95,00,000/- u/s 68 of the Act. The Assessee then preferred an appeal before the ITAT.

The Tribunal, vide the Impugned Order dismissed the appeals of the Appellant for both the AYs through a common order, and upheld the orders of the CIT(A). The Appellant has now preferred the present appeals, assailing the aforesaid impugned order.

Mr. Bharat Rai Chandani, learned counsel appearing for the Appellant, submitted that the impugned order is unsustainable in law and is wholly erroneous and perverse. He submitted that the Tribunal has failed to appreciate the evidences in the nature of confirmation of the donations along with relevant bank statements reflecting bank transactions and other details which prove the genuineness, creditworthiness and identity of the donors. Therefore, the additions under Section 68 of the Act were unwarranted and unsubstantiated. He further argued that the reason for reopening the assessment under Section 147 of the Act was totally unsustainable in law, particularly in light of the fact that the AO did not make any independent enquiry before the issuance of the purported notice for reassessment under Section 148 of the Act. The Appellant had successfully proved the genuineness of the donations of Rs. 40 lacs and established proper identification and creditworthiness of the donor. In support of his submission, Mr. Chandani submitted that the Tribunal in its earlier order dated 29th January, 2010 had correctly observed that the donations received by the Appellant from the donors were true, proper and in conformity with law. The Appellant had successfully proved the source of donations, furnishing the

We have duly considered the submissions advanced by Mr. Chandani. The Appellant proposes nearly identical, substantial questions of law in both the appeals, except for the changes in the figures in the question number (iii). For the sake of convenience, the questions of law in ITA No. 164/2020 are reproduced hereinbelow:

The first two questions put forward by the Appellant deal with the assumption of jurisdiction by the AO for reopening the assessment under Section 148 of the Act. The third question deals with the addition of income under Section 68 of the Act. With respect to the aforesaid questions, the ITAT in the impugned order has giving the following findings: “11. We have carefully perused the rival contention and perused the orders of the lower authorities. No doubt, the reasons were recorded on 28/03/2013, i.e. after the expiry of 4

(…) During the year the assessee has received from 38 persons amount ranging between Rs. 1,00,000 - 1,50,000 amounting in all to INR 4,000,000. In the list of donor, assessee has given the address of those donors as well as the date of donation. The above amount has not been credited to the income and expenditure account of the trust but is shown as a general fund account in the balance sheet. Therefore, the above amount was not shown as income in the income and expenditure account but was carried to the balance sheet as a general fund. Concurrent lower authorities have held that assessee has failed to show the genuineness of the transaction. The assessing officer has made addition u/s. 68 of the Income Tax Act which has been confirmed by the learned CIT-A. No further evidences were produced before us. … if the donation is not credited to the income and expenditure account on provisions of Section 68 are rightly applied by the lower authorities.

In view of the above facts, we confirm the actions of lower authorities in taxing the sum of INR 4,000,000 as unexplained income being bogus donation credited to the general fund in the balance sheet. In the result ground number 2 of the appeal is dismissed.

We have carefully considered the rival contentions and perused the orders of the lower authorities. During the year, the assessee has received a donation from 122 persons amounting

The perusal of the aforesaid extracted portion of the impugned order reveals that the assumption of jurisdiction by the AO has credible basis, being the letter dated 22nd June 2012, issued by the Joint Director of Income Tax (Investigation) informing that a Regular Case (RC) was registered against one Shri Manoj Kumar Aggarwal. This case disclosed the nexus between the suspect and the Appellant and brought to light the startling facts that contradicted the earlier findings arrived at in the scrutiny assessment. The credibility of witnesses was brought into the open during the CBI investigation. One of the witness, Sh. Mahesh Garg, stated that the money was paid in cash for arranging donation in favour of the Appellant. The other witnesses stated that they had not given any donation to the Appellant. This revelation controverted the factual foundation set up by the Appellant, and falsified the information disclosed by the Appellant during the course of the prior assessment. The AO thus had specific information about cash deposits, supported by statement of witnesses which confirmed that the donors were bogus. These facts disclose a vital link and nexus between the information received by the AO and the reason to believe for reopening the assessment, which fulfilled the threshold required for assuming jurisdiction by the AO in order to reopen the assessment. There was, thus, some tangible material with the AO to form a prima facie opinion that the income of the Appellant had indeed escaped assessment, thereby justifying the action under Section 147. There is no perversity in the reasoning given by the Tribunal, based on

In fact, during the course of arguments, Mr. Chandani to some extent relented that the information with AO justified initiation of the action u/s 147 of the Act, but he argued there was then no reason for the tax authorities to uphold the addition. He dwelled considerably on the third proposed question of law, and argued strenuously that the Appellant had proved the identification, genuineness and credit worthiness of all the donors, and that the same had been correctly accepted by a co-ordinate bench of the Tribunal in its earlier order dated 29th January, 2010.

The law regarding reopening of assessment is well-settled. The reliance placed upon the findings of the earlier assessment proceedings is misplaced. If the assumption of jurisdiction is held to be valid, the Appellant cannot place undue credence on the earlier assessment proceedings. Once an assessment is reopened, the initial order for assessment ceases to be operative and the proceedings start afresh. The Appellant’s contention that since the AO had originally accepted the donations to be genuine, he is precluded from treating them to be bogus and making additions, is untenable. The Tribunal has noted that though the Assessee had initially submitted the confirmation of donation at the time of original assessment, however during investigation by the CBI, some of the donors have confessed that they have not given any such donation. Under interrogation of the donors it was unearthed that the donation detail submitted by the Assessee in the original assessment proceedings was false. Thus, the genuineness of the donors could not be established. This case invited

In our opinion, no question of law, much less any substantial question of law arises for our consideration. Accordingly, the appeals and the applications are dismissed.