ITO, (E) -II, KOLKATA, KOLKATA vs. DEBI KAMAL ESTATE TRUST, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “B”, BENCH KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAINI, AM आयकर अपील सं./ITA No.862/Kol/2013 ("नधा"रण वष" /Assessment Year:2004-05) ITO(E)-II Vs. Debi Kamal Estate Trust, Kolkata 5th , 10B, 7, Queens Park, Middleton Row, Kolkata-700020 Kolkata-700071 "थायी लेखा सं./जीआइआर सं./PAN/GIR No.: AAATD 7600 F .. (अपीलाथ" /Appellant) (""यथ" / Respondent)

Cross Objection No.68/Kol/2013 Arising out of ITA No. 862/Kol/2013 ("नधा"रण वष" /Assessment Year:2004-05) Debi Kamal Estate Trust, Vs. ITO(E)-II Kolkata 5th , 10B, 7, Queens Park, Kolkata-700020 Middleton Row, Kolkata-700071 "थायी लेखा सं./जीआइआर सं./PAN/GIR No.: AAATD 7600 F .. (अपीलाथ" /Appellant) (""यथ" / Respondent)

Revenue by : Shri R.P.Nag, JCIT, Sr.DR Assessee by : Shri Animesh Mukherjee, FCA & Shri Anindranath Chatterjee, FCA सुनवाई क" तार"ख / Date of Hearing : 10/01/2017 घोषणा क" तार"ख/Date of Pronouncement 05/04/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, AM: The captioned appeal filed by the Revenue and Cross objections filed by the Assessee, pertaining to the Assessment Year 2004-2005, are directed against the order passed by ld. Commissioner of Income Tax (Appeals)-Jalpaiguri, in appeal No.83/CIT(A)-XIV/2009-10, dated 13.02.2013, which in turn arises out of an order passed by the DDIT (E )- 1, Kolkata Under Section 144/147 of the Income Tax Act, 1961 (hereinafter referred to as the Act) dated, 09.07.2009

2 Co.No.68/Kol/2013 Debi Kamal Estate Trust 2. Brief facts of the case qua the assessee are that the assessee filed

its return of income for assessment year 2004-05 on dated 31.03.2005

declaring total income at Nil. The Return of income of the assesse was processed U/s 143(1) on dated 18.03.2007. Subsequently, it was found

by the Assessing Officer that as per TDS certificates attached with the return the assesse received interest from Syndicate Bank amounting to Rs.2,29,48,404. But from the Income & Expenditure Account filed along

with the return, it was seen that the assesse disclosed interest income to the tune of Rs.12,68,226/- only. As per Assessing officer, since it was gross suppression of income, therefore, the case was reopened U/s 147

of the I.T. Act by issuing a notice U/s 148 of the I.T.Act. The Assessing

Officer observed that TDS certificate shows that the gross interest income

for the A.Y. 2004-05 is Rs.2,29,48,404/-. However, the accumulated

interest as per the balance sheet figure come to Rs. 2,51,33,855/-. Since

the assesse has disclosed interest income in the A.Y.2004-05 amounting

to Rs.12,68,226/-, the balance interest of Rs.2,38,65,620/- is treated as suppressed interest income and added to the total income of the assesse

as “Income from other sources”.

before the ld. CIT(A), who has deleted the addition made by AO partly

observing the followings :-

3 Co.No.68/Kol/2013 Debi Kamal Estate Trust and the result of the assessments after the search are not the subject matter of the either assessment proceedings before AO or appellate proceedings before undersigned. The accounts remained frozen for about 23 years. Assessee filed a writ before the Hon. High Court Kolkata and the Hon. Court vide its order dated 18-06-2003 revoked the attachment. The assessee could not have access to its accounts as late as 2009 as the Banks could not provide the statements due to technical reasons. The technical reason cited by Banks is the introduction of Core Banking System. The assessee could get complete details of accounts after 2009 i.e. much later that the due date of filing returns for AY 2004-05. For AY 2005-06, the details have been filed during the appellate proceedings before CIT(A) and the CIT(A) has accepted the reconciliation of interests done by the assessee after receipt of bank statements. 5.1- As submitted by the assessee, the CBDT has clarified in Circular no. 100 dated 24th January 1973; the repayment of loan originally taken to fulfill one of the objects of the trust would be treated as application of income. Accordingly, AO is directed to treat the repayment of loan to the extent of Rs.84,44,684/- as expenditure as well as application of income. The activities of the assessee during the year were found to be charitable. Therefore, the AO is directed to allow exemption u/s 11 (1}(a). 5.2- Assessee has filed Form number 10 alongwith the application for condonation of delay and pleaded to give exemption u/s 11(2). There is no provision for filing the Form Number 10 during the appellate proceedings. The time limits for filing the Form 10 has been laid down by the Hon. Supreme Court in the Nagpur Hotel Owners Association case (247 ITR 201) according to which the Form number 10 can be filed before the completion of assessment by AO. In view of this, the claim of the assessee cannot be accepted and this ground of appeal is dismissed. 5.3 This ground deals with charge of interest u/s 234A & B. No submissions have been given on this point. In any case charging of interests u/s 234A & B are of consequential nature and the of charging these interests by AO cannot be disputed in appeal. This ground is therefore dismissed as infructuous. 5.4 Regarding the wrong disclosure of interest in the return of income, the assessee has submitted that it was beyond his control to have given the correct value of interest as the accounts were attached by the Income Tax Department. For the AY 2005-06 also, the assessee had given the exact figures of interest earned during the period in proceedings before CIT(A). The CIT(A) had directed to consider the figures submitted before him to be taken as actual interest income earned. During the proceedings before the undersigned, the assessee has given the actual figures of interest earned in the period relevant to AY 2004-05 duly supported by copies of the bank statement and TDS certificates. As per the details submitted, the interest earned during the period relevant to AY 2004-05 is Rs. 68,99,280/- Assessee had disclosed the interest income of Rs. 12,69,268 in the return of income. AO is therefore, directed to take Rs. 68,99,280 as interest income for AY 2004-05 and calculate total income after allowing the exemption u/s.11(1)(a). 6. Appeal is partly allowed.”

4 Co.No.68/Kol/2013 Debi Kamal Estate Trust 4. Not being satisfied with the order of ld. CIT(A), the Revenue is in appeal before us and has taken the following grounds of appeal :-

furnished by the assessee along with the return of income.

5.1 Ld DR for the Revenue has submitted before us that interest income

amounting to Rs.2,30,41,124/-, has been wrongly deleted by the ld

CIT(A). The ld CIT(A) did not give proper justification to delete the same.

The said interest income was clearly reflected from the TDS certificates

furnished by the assessee along with the return of income and analysis of the Balance Sheets of A.Y 2004-05 and 2003-04 of the assessee

reflected an interest income of Rs.2,38,65,629/-. The ld CIT(A) accepted

the interest income at Rs. 68,99,280/- whereas the total accrued interest

shown by the assesse in the Balance sheet is at Rs. 2,38,65,629/-. This 5 Co.No.68/Kol/2013 Debi Kamal Estate Trust way, the ld DR for the Revenue has primarily relied on the stand taken by the Assessing Officer.

5.2 On the other hand, the ld AR for the assesse has vehemently

submitted that what is accrued income for the A.Y.2004-05 can be offered

by the assesse for taxation purpose and not the accumulated interest of the preceding previous years which is shown in the Balance Sheet of the assesse for the A.Y.2004-05. That is, the Balance Sheets of A.Y 2004-05

and 2003-04 of the assessee reflected an interest income of Rs.2,38,65,629/- which belonged to preceding previous years cannot be taxed in the A.Y.2004-05. For the Assessment year under consideration

the interest income of Rs. 68,99,280/- is relevant, which is accrued for the A.Y. 2004-05 and the assesse has offered the same for taxation

purposes. Therefore, the interest income of Rs.2,38,65,629/- pertains to preceding previous years and is not liable to tax in the assessment year

under consideration.

5.3 Having heard the rival submissions, pursed the material available on record, we are of the view that there is merit in the submissions of the assesse, as the propositions canvassed by the ld AR for the assesse are supported by the facts narrated by him. As ld AR for the assessee has pointed out that the interest income of Rs.2,38,65,629/- pertains to preceding previous years and is not liable to tax in the assessment year

under consideration. The accrued interest pertains to A.Y 2004-05, is at Rs. 68,99,280/- and the same has been offered by the assesse for 6 Co.No.68/Kol/2013 Debi Kamal Estate Trust taxation purposes, therefore, the order passed by the ld CIT(A) is a reasoned order and does not require interference. Therefore, we confirm

the order passed by the ld CIT(A).

5.4 In the result, the appeal filed by the Revenue on ground No.1, is dismissed.

of the matter is that assessee was not able to establish the nature and utilization of the loans either at the time of assessment or at the time of appeal proceedings. The Ld. CIT(A) has accepted the submissions of the assesse blindly and order passed by him is not proper and justifiable. The assesse did not prove how and when the loan in question was availed.

More importantly the manner in which the amounts borrowed were used

for charitable purpose. The assesse also did not produce any bill,

voucher, and expense details to show that expenses were incurred by him to carry out the charitable activities. The ld CIT (A) has blindly

provided the relief to the assesse based on the circular No. 100 dated 24-

01-1973 issued by CBDT without verifying the evidences. This circular

says that “the repayment of loan originally taken to fulfil one of the objects

of the trust would be treated as application of income”, but all the loans

taken by the trust and repaid by the trust were not for charitable purpose,

7 Co.No.68/Kol/2013 Debi Kamal Estate Trust hence these loans were not utilized for the objects of the trust. The assesse did not produce any evidence is respect of charitable activities

done by it and application of loan. This circular will be applicable only

when the assessee proves with documentary evidences that the amount

was utilised for charitable purposes and repayment of loan taken

originally to fulfil objects of the trust. In order to avail the benefit of the said circular the assesse should prove with documentary evidence that Loans taken by the trust and utilization thereof were for the objects of the trust but the assesse had not proved these with documentary evidences

before the ld CIT(A). Moreover, the ld CIT (A) failed to ask the assesse to produce these documentary evidences therefore the order passed by the ld CIT(A) is not justifiable. The assesse has failed to establish with documentary evidence that whether he has fulfilled objects of the trust,

that is, what objects of the trust have been fulfilled by the assesse have not been established by any documentary evidence therefore the said

circular does not apply to the assessee. In fact the family members and relatives were utilising the trust funds unlawfully. As already stated that the Assessee has clearly admitted before the Income Tax Authorities, on its inability to produce evidence to prove borrowing and that the loans

borrowed were spent for charitable activities and nature of those

charitable activities. The mere assertion of the Assessee in this regard

without evidence cannot be the basis to uphold the claim of the Assessee

in this regard.

8 Co.No.68/Kol/2013 Debi Kamal Estate Trust In addition to this the ld DR for the Revenue has relied on the following

judgment of ITAT in assessee`s own case viz: Devi Kamal trust Estate

Kolkata, ITA No. 137/kol/ 2009, Kolkata, dated 16.12.2015, wherein the Tribunal has held as under:

“19. We have given a very careful consideration to the rival submissions. In so far as Gr.No.1 raised by the revenue is concerned, it is a fact that the Assessee did not file return of income before AY 2002-03. It is not the case of the Assessee that the accumulated deficit was determined in assessments completed after AY 2002-03 when from the Assessee started filing return of income. The accumulated deficit is claimed on the basis of Balance Sheet as on 31.3.1996 in which loans and advances received in cash or kind is shown at Rs.9,29,50,000/-. As to what is the opening balance as on 1.4.1995 is also not found in this Balance Sheet. The accumulated deficit as per this balance sheet is shown at Rs.8,63,10,133/-. The accumulated deficit is thereafter carried forward from AY 96-97 to AY 2004-05 and stands reduced to Rs.8,54,16,519 as on 31.3.2005 which is sought to be set off against the income of AY 2005-06. It is also pertinent to note that the aforesaid claim was not made in the return of income filed by the Assessee nor in the proceedings before the AO. The claim was made for the first time before CIT(A). The CIT(A)'s findings on this aspect have already been given in the earlier part of this order. The evidence referred to in the findings of CIT(A) are relevant only with regard to the claim of the Assessee that Rs.4,54,11,300/- was repayment of loans which had been taken by the Assessee in the earlier AYs and used for charitable purpose and repaid during the PY. There is no material on record to substantiate the claim of the Assessee that a sum of Rs.8,54,26,519/- was accumulated deficit. Admittedly such accumulated deficit has not been determined in any assessment proceedings and therefore the claim of the Assessee in this regard was wrongly allowed by the CIT(A). Gr.No.1 raised by the revenue is accordingly allowed.

A matching of loan and charitable activities done by the trust during the last 23 years w.e.f. from the date of search in 1980 and to the day of release in 2003 by filing every year balance sheets was also filed. It was submitted that the charitable activities done long back and it was not possible to preserve the documentary records for these charitable activities for a long period as the records are weeded out every 10 years for paucity of space to preserve the same. At page-26 to 29 is the ledger account of Advance/Loans Received from 1.4.2004 to 31.3.2005. Perusal of the same shows that the opening credit balance was Rs.8,69,47,276 and the Assessee has repaid loans to the extent of Rs.4,54,11,300 to the following persons during the previous year:

The balances in all these confirmations are opening balance. These do not prove how and when the loan in question was availed. More importantly the manner in which the amounts borrowed were used for charitable purpose. The loans were stated to be availed between the year 1980 to June, 2003 when the Assessee did not have funds to carry out charitable activities. In the year in which the loans were availed, there was no scrutiny assessment. In fact the Assessee has started filing returns of income only after AY 2002-03. Therefore the factum of borrowing and the utilization of the funds borrowed were never subjected to scrutiny in the past. There is no evidence filed by the Assessee in this regard. The CIT(A) has referred to the following evidence in upholding the claim of the Assessee

10 Co.No.68/Kol/2013 Debi Kamal Estate Trust viz., (a) details of expenses along with evidence; (b) Loan confirmation; (c) balance sheet for last eight years; (d) Bank statements; ( e) list of repayment of loan, (f) write-up on purpose for acquiring loans. As already stated the Assessee has clearly admitted before the CIT(A) on its inability to produce evidence to prove borrowing and that the loans borrowed were spent for charitable activities and nature of those charitable activities. The mere assertion of the Assessee in this regard without evidence cannot be the basis to uphold the claim of the Assessee in this regard. We therefore do not agree with the conclusions of the CIT(A) in this regard. We therefore reverse the order of the CIT(A) and restore the order of the AO in this regard. 6.2. On the other hand, the Ld. AR for the assessee has submitted before

us that the assesse trust took the loan to run the charitable activities. As submitted by the assesse before the ld CIT(A) that the CBDT has clarified

in Circular no. 100 dated 24th January 1973; that the repayment of loan

originally taken to fulfill one of the objects of the trust would be treated as application of income. Therefore, the repayment of loan to the extent of Rs.84,44,684/- is an expenditure as well as application of income.

6.3. Having heard the rival submissions, perused the material available

on record, we are of the view that there is merit in the submissions of ld.

DR for the Revenue, as the propositions canvassed by the ld. DR for the Revenue are supported by Judgment cited by him in assesse`s own case,

in ITA NO. 137/kol/ 2009, Kolkata, dated 16.12.2015, Debi Kamal Estate

Trust (supra). As ld DR for the Revenue has pointed out that as per

Tribunal judgment cited (supra), the original loans taken by the assesse

were not for charitable purpose, how repayment of these said loans can

become charitable purpose. Moreover, the assesse did not submit before

CIT(A), any documentary evidences for application of income. Just to cite

11 Co.No.68/Kol/2013 Debi Kamal Estate Trust the circular of the CBDT is not sufficient, the assesse needs to explain

with documentary evidences that money has been utilized for charitable

purpose and objects of the trust have fulfilled. Besides, this is an additional ground raised by the assesse before the ld CIT(A) which was never dealt with by the Assessing Officer, in his order, under section 147/148 ( for which the assesse was in appeal before the ld CIT(A) ).

In addition to this, assessee was not able to establish the nature and utilization of the loans either at the time of assessment or at the time of appeal proceedings, therefore ld CIT(A) was not justified in directing the AO to allow exemption to the assesse under consideration U/s 11 (1) (a)

of the Act. The CBDT Circular No.100 dated 24.01.1973 clearly states

that ‘the repayment of loan originally taken to fulfill one of the objects of the trust

would be treated as application of income.’ But what we have observed in assessee`s case under consideration is that original loan itself was not utilized for the objects of the trust therefore how the repayment of the said

loan can become for the objects of the trust and for the purpose of charitable activities. Therefore, respectfully following the Judgment cited

by ld DR for the Revenue, in assesse`s own case, in ITA NO. 137/kol/

2009, Kolkata, dated 16.12.2015, Debi Kamal Estate Trust (supra), we

allow the ground No. 2 raised by the Revenue. We therefore reverse the order of the CIT(A) and restore the order of the AO in this regard.

6.4. In the result, appeal filed by the Revenue on ground No. 2, is allowed.

12 Co.No.68/Kol/2013 Debi Kamal Estate Trust 7. The Cross Objections raised by the assesse in CO. No.68/Kol/2013 read as under: “ 1. For that in view of the facts and in the circumstances, the ld CIT(A) was justified in directing to take the interest income of Rs.68,99,280/- in accordance with the related period bank statements and TDS certificates. 2. For that in view of the facts and in the circumstances, the ld CIT(A) was justified in accepting the repayments of loans as genuine. 3. For that in view of the facts and in the circumstances, the ld CIT(A) was justified in directing to allow the repayment of loan as expenditure and allow the exemption U/s 11(1) (a).”

Regarding Cross objection No. 1 raised by the assessee, as we have already dismissed the ground No. 1 raised by the assesse in para No.6.4 of this order therefore, we allow the cross objection filed by the assessee.

Regarding Cross objection Nos. 2 and 3 raised by the assessee, as we have already allowed the ground No. 2 raised by the Revenue in para No.7.4 of this order therefore, we dismiss the cross objections Nos. 2 and 3 filed by the assessee. 7.1 In the result, the cross objections filed by the assessee, are partly allowed. 7.2 In the result, the appeal filed by the Revenue, is partly allowed

Order pronounced in the open court on this 05/04/2017. (S.S.VISWANETHRA RAVI) (DR. A.L.SAINI) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER कोलकाता /Kolkata; "दनांक Dated 05/04/2017 "काश "म"ा/Prakash Mishra,"न.स/ PS

13 Co.No.68/Kol/2013

आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant-Debi Kamal Estate Trust 2. ""यथ" / The Respondent.- DCIT, Circle-7(1), Kolkata 3. आयकर आयु"त(अपील) / The CIT(A), Kolkata. 4. आयकर आयु"त / CIT "वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, कोलकाता / DR, ITAT, Kolkata 5. आदेशानुसार/ BY ORDER, 6. गाड" फाईल / Guard file. स"या"पत ""त //// उप/सहायक पंजीकार (Asstt.