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Facts
The Revenue appealed against the CIT(A)'s order deleting the addition of Rs.2,11,00,000/- on account of unexplained advances and the disallowance of exemption claimed under Section 10(23C) of the Act for Rs.84,22,244/-. The advances were made for a land purchase that did not materialize, and the trustees claimed the amounts were their individual investments.
Held
The Tribunal upheld the CIT(A)'s order. Regarding the advances, it was found that the CIT(A) had rightly considered them as loans in the absence of the land transaction materializing and supported by evidence. For the exemption claim, the Tribunal agreed with the CIT(A) that the assessee's activities were educational and consistency with previous years' orders should be maintained.
Key Issues
Whether the advances made for a failed land transaction were unexplained, and whether the assessee was entitled to exemption under Section 10(23C) of the Act.
Sections Cited
10(23C), 12AA, 153C
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Income Tax Appellate Tribunal, DELHI BENCH “C”, DELHI
Before: SHRI VIKAS AWASTHY & SHRI AVDHESH KUMAR MISHRA
(A.Y.2011-12) Deputy Commissioner of Income Tax, Central Circle, Aayakar Bhawan, Near Bhainsali Ground, ...... अपीलाथ�/Appellant Meerut, Uttar Pradesh 250001 बनाम Vs. Umalok Charitable Trust, C-111, Samart Place, Garh Road, Meerut, ..... �ितवादी/Respondent Uttar Pradesh 250004 PAN: AAATU-1532-F अपीलाथ� �ारा/Appellant by : Shri Dayainder Singh Sidhu, CIT(DR) �ितवादी�ारा/Respondent by : Shri Kalrav Mehrotra, Advocate सुनवाई क� ितिथ/ Date of hearing : 24/07/2025 घोषणा क� ितिथ/ Date of pronouncement : : 24/07/2025 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-3, Noida [in short ‘the CIT(A)’] dated 14.02.2024, for Assessment Year 2011-12.
The Revenue in appeal has primarily assailed the order of CIT(A) on two counts:- (i) Deleting the addition of Rs.2,11,00,000/- made on account of unexplained advances; & (ii) Deleting the disallowance of exemption claimed by the assessee u/s.10(23C)of the Act Rs.84,22,244/-.
(A.Y. 2011-12) 3. Shri Dayainder Singh Sidhu, representing the department vehemently defended the assessment order and prayed for reversing findings of the CIT(A). The ld. DR submitted that the assessee has not been able to substantiate the source of advances made by the assessee to Shree Ram Welfare Charitable Trust. He submitted that from the submissions made by the assessee it is evident that the trustees Shri Alok Bhatnagar, Smt. Uma Bhatnagar and Shri Abhinav Bhatnagar have made investment in Shree Ram Welfare Charitable Trust in their individual capacity and not on behalf of the assessee trust. Hence, the investment made by the trustee cannot be considered as source of investment by the assessee trust. 3.1. In respect of disallowance of assessee’s claim of exemption u/s.10(23)(c) of the Act, the ld. DR submits that a perusal of Registration Certificate u/s. 12AA of the Act issued by the Principal Commissioner of Income Tax, Central Kanpur would show that the registration u/s. 12AA of the Act was granted to the assessee w.e.f. 30.03.2015 i.e. relevant to AY 2015-16 onwards. The year under consideration i.e. AY 2011-12 does not fall within the period of Registration Certificate. Hence, the Assessing Officer (AO) rightly disallowed assessee’s claim of exemption u/s.10(23C) of the Act for impugned assessment year.
Per contra, Shri Kalrav Mehrotra appearing on behalf of the assessee vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. Counsel reiterated findings of the CIT(A) in deleting the additions/disallowances.
Both sides heard, orders of the authorities below examined. This is second round of litigation before the Tribunal. Earlier the appeal of assessee was restored back to the AO by the Tribunal vide order dated 24.08.2020 in ITA No. (A.Y. 2011-12) 2337/Del/2015. The Tribunal had remanded the file back to the AO with a direction to carry out proper verification of documents/evidences produced by the assesese during the assessment proceedings and also verify the claim of assessee granting registration u/s. 12AA of the Act. The AO passed the assessment order in second round making the same additions/disallowances again. The assessee carried the issue in appeal before the CIT(A). The CIT(A) after examining facts of the case and after seeking remand report from the AO deleted the additions.
The first issue in appeal by the Revenue is against deleting addition of Rs.2,11,00,000/-on account of alleged unexplained advances. Consequent to survey operation in the case of M/s. Subharti KKB Charitable Trust and Dr. Atul Krishna Group of cases, the original assessment in the case of assessee was made u/s. 153C of the Act. During the year under consideration an agreement was signed between the assessee and Shree Ram Social Welfare Trust for the purchase of land. In this connection Rs.2.00 crores was paid as advance. Rs.11,00,000/- were paid by the assessee by way of two demand draft and Rs.1.90 crores were paid by the trustees on behalf of the assessee. Subsequently, the transaction did not materialize; hence, the transfer of land did not take place. During scrutiny assessment proceedings, the Assessing Officer asked the assessee to explain the source of advance paid to Shree Ram Social Welfare Trust. The assessee explained the source of advances of Rs.2,00,00,000/- as under:- S.No Amount of Advance Date of payment Instrument no. Name of payers 1 9,00,000 11.10.2010 250894(DD) Umalok Charitable Trust 2 2,00,000 11.10.2010 250895(DD) Umalok Charitable Trust 3 74,00,000 08.11.2010 10313000662 Sh. Alok Bhatnagar (RTGS) 4 40,00,000 08.11.2010 10312000566 Sh. Abhinav Bhatnagar (RTGS)
(A.Y. 2011-12) 5 75,00,000 08.11.2010 10312000442 Smt. Uma Bhatnagar (RTGS) Total 2,00,00,000 7. The AO held that the amounts advanced by the trustees are in there individual capacity and such advance does not represent the advances made by the assessee trust. Thus, the AO made addition of Rs.2,00,00,000/- in the hands of the assessee. In First Appellate proceedings, the assessee not only explained the transaction but also substantiated the source of source for making investments by the trustees on behalf of the assessee trust. It was also explained that since the transaction did not materialized the advances made by the trustees on behalf of the assessee are now held in there individual capacity as investments in Shree Ram Social Welfare Trust. The CIT(A) after examining the records also sought remand report from the AO after making inquiries from the trustees i.e. Shri Alok Bhatnagar, Smt. Uma Bhatnagar and Shri Abhinav Bhatnagar and also to make inquiries from Shree Ram Social Welfare Charitable Trust. The CIT(A) after examining the facts of the case and report furnished by the AO held that the addition made by the AO in the hands of the assessee as unexplained advances is unjustified and deleted the same. The CIT(A) gave positive finding of fact that as the deal did not materialize, the money advanced was considered as loan in the books of account of Shree Ram Social Welfare Trust and the property still exists in the name of Shree Ram Social Welfare Trust. We find that the reasons given by the CIT(A) in para 4.1.8 of the impugned order for deleting the additions are justified and have not been contoverted by the Department. We see no reason to interfere with findings of the CIT(A) on this issue. The ground no.1 raised by the Revenue in appeal is devoid of any merit, hence, dismissed.
The second issue in appeal is with regard to deleting disallowance of Rs.84,22,244/- after rejecting assessee’s claim of exemption u/s. 10(23C) of the (A.Y. 2011-12) Act. We find that the CIT(A) has reversed finding of the AO in rejecting assessee’s claim of exemption u/s. 10(23C) of the Act as in the immediate subsequent assessment year i.e. AY 2012-13 and 2013-14 for similar reasons, the assessee’s claim of exemption was rejected by the AO and the CIT(A) had deleted the said disallowance. The Revenue accepted the same and no further appeal was filed by the Department on the said issue. It is pointed by the CIT(A) that there is no change in the objects of the assessee trust since 2011-12 till 2016-17. These facts have not been rebutted by the Revenue. Further, the CIT(A) has given a categoric finding that the nature of activities carried out by the assessee being ‘educational’ has already been examined in detail by the CIT(A) in AY 2012-13, 2013-14, and the AO in AY 2016-17 has accepted assessee’s nature of activities to be ‘educational’. Thus, for the aforesaid reasons and to maintain the principle of consistency the CIT(A) allowed assessee’s claim of exemption u/s.10(23C) of the Act, the receipts being less than Rs.1,00,00,000/-. Thus, in light of above facts and no contrary material being brought before us by the Revenue, we find no infirmity in the order of CIT(A).