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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM ITA No. 37/NAG/2016 Assessment Year: 2011-12 Late Vasantrao Gopalrao Ghonge Vs. The DCIT Thru Legal Heir Vilas Vasantrao Ghonge Central Circle 1 (1) Gharpure Layout, Nagri Bank Colony, Nagpur Warda PAN No.:AIWPG 6212 C Appellant Respondent Revenue by :Shri Piyush Kolhe (CIT-DR) Assessee by: Shri K.P. Dewani, Adv Date of Hearing: 26/04/2022 Date of Pronouncement: 28 /06 /2022 ORDER PER: SANDEEP GOSAIN, J.M. This is an appeal filed by the appellant against order of learned Commissioner of Income Tax (Appeals)-3, Nagpur dated 21/12/2015 in Appeal Nos. CIT(A)-3/242/2013-14 for Asstt. Year 2011-12. Grounds of appeal raised by the appellant for Asstt. Year 2011-12 are as under:- “a) The learned A.O. was wrong and unjustified in making an addition of Samarpan Nidhi of Rs.20,79,936/- to the total income of the undersigned assessee as net business / vocational income. b) The learned A.O. was wrong arbitrary and unjustified in making an addition of receipts of B.S.Y. Vasantrao Gopalrao Ghonge Maharaj Nyas of Rs.5,21,349/- to the total income of the undersigned assessee on the presumption that those receipts belong to the undersigned.
2 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur c) The learned A.O. was wrong, arbitrary and unjustified in making an addition of Rs.1,49,997/- as receipt not disclosed to the total income of the undersigned assessee on the ground that the estimation of the search party and that of the learned A.O. is 100% correct. d) The learned A.O. was wrong, arbitrary and unjustified in making an addition of Rs.85,31,700/- as unexplained cash found during the search operation. e) The CIT(A) appeal did not give proper opportunity in the interest of natural justice. f) If there is any delay in filing the appeal due to some reasonable cause, the same may be condoned. g) The appellant may be allowed to raise any other ground and additional ground during the course of hearing.” 1. The appellant has expired on 13/12/2017. Legal heir has submitted revised Form 36 along with grounds of appeal in terms of Rule 26 of Income Tax Appeal Tribunal Rules on 18/04/2022 along with death certificate. Grounds of appeal in revised form 36 for Asstt. Year 2011-12 are same as reproduced hereinabove at para 1.
Brief facts of the case are that appellant is individual. In case of appellant search and seizure u/s 132 of I.T. Act 1961 was conducted at the premises of appellant on 28/01/2011 and proceeding u/s 153A of I.T. Act 1961 were initiated for block period. Appellant has filed return of income u/s 139(1) on 12/03/2012 declaring total income at Rs.98,520/- and agricultural income at Rs.50,000/-. In the case of appellant, assessment has been framed u/s 143(3) of I.T. Act 1961
3 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur determining total income at Rs.1,13,81,500/-. A.O. in assessment framed has made various additions as under: Samparpan Nidhi 20,79,936/- Income of Trust 5,21,349/- Samparpan Nidhi 1,49,997/- Unexplained cash 85,31,700/- 3. In respect to order passed by A.O. appellant has filed appeal before learned CIT(A). In appeal addition made by A.O. has been upheld and appeal of appellant was dismissed.
Aggrieved by order of ld. CIT(A) for assessment year appellant is in appeal before us on grounds of appeal mentioned hereinabove. 6. In the case of appellant A.O. has made addition of Rs.20,79,936/- being amount of Samarpan Nidhi for the detailed reasons indicated at para 4 of the assessment order. The A.O. on the basis of seized documents in relation of Samarpan Nidhi has computed further sum of Rs.1,49,997/- being amount received in the nature of Samarpan Nidhi at para 6 to be brought to tax at the hands of appellant. The A.O. has not accepted explanation of appellant for receipt of Samarpan Nidhi as capital receipt. Sum of Rs.20,79,936/- was shown in the capital account and was claimed as capital receipt at the hands of appellant in the return of income. The A.O. has thus made addition at Rs.20,79,936/- and Rs.1,49,997/- on account of Samarpan Nidhi.
4 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur 7. The A.O. has determined the income of trust known as BSY Vasantrao Gopalrao Ghonge Maharaj Nyas. The aforesaid trust had submitted independent return of income for the Asstt. Year 2011-12 claiming exemption u/s 11 of I.T. Act 1961. A.O. on the basis of financial statement of the said trust has computed income at Rs.5,21,349/-. The A.O. has observed that the activity of trust in fact is income of the appellant and therefore Rs.5,21,349/- computed from the income and expenditure account and balance sheet of trust has been assessed at the hands of appellant by observing income diverted to trust. 8. The A.O. at para 7 of the assessment order has discussed the cash found on the date of search at Rs.85,31,700/-. The A.O. has not accepted the explanation of appellant that cash found is as per books of account and financial statements submitted by the appellant for various years and concluded that aforesaid sum is liable to be assessed as unexplained cash found on the date of search. The A.O. has accordingly made addition at Rs.85,31,700/-. 9. We have considered the submission made by the parties and perused the materials available on record. The appellant has expired on 13/12/2017. Legal heir has submitted revised Form 36 in terms of Rule 26 of Income Tax Appeal Tribunal Rules on 18/04/2022 along with legal heir certificate issued by 2nd Jt. Civil Judge, Junior Division, Wardha on 30/07/2021. The legal heir is taken on
5 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur record and appeal of appellant is adjudicated on various grounds raised in appeal. 10. In the appeal filed by the appellant four substantive grounds of appeal are raised in the memo of appeal in Form 36. At the time of hearing, Counsel of appellant has submitted gist of submission wherein grounds raised by appellant at (a) & (c) have been not pressed. The grounds of appeal at (a) & (c) are thus dismissed as not pressed.
In ground (b) appellant has challenged the addition made by the A.O. at Rs.5,21,349/- being income of charitable trust namely Bhaktavatsal Sadguru Yogiraj Vasantrao Gopalrao Ghonge Maharaj Nyas. The A.O. has discussed the addition at para 5 of the assessment order. The A.O. has observed that action u/s 132(1) was taken in the case of appellant on 28/01/2011. It was found that appellant is carrying on activity of organising “Shivirs” and income arising there from is not being shown in the return. The aforesaid income was being claimed in the return as capital receipts. Similar types of receipts were recorded in the books of account of trust. It was observed that all the activities of trust are also being managed by appellant and thus the income shown in the accounts of trust also belongs to appellant. The A.O. at para 5.1 has computed the income as per financial statement of trust to determine the same at Rs.5,21,349/-. Donation and interest shown in the accounts of trust after reducing expenses is
6 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur the net income computed at Rs.5,21,349/-. The A.O. has concluded that it is this income which is diverted to trust and is liable to be assessed at the hands of appellant. Before ld. CIT(A) it was submitted that trust is independent entity and income of trust ought not to have been added in the case of appellant. The Learned CIT(A) was not persuaded with submission of appellant and he proceeded to uphold the action of addition made by the A.O. at the hands of appellant by observing that trust has shown income in its hands subsequent to search u/s 132 and is after thought. 12. The counsel of appellant before us has made submission which is reproduced hereunder:
i) Trust is independent entity and is a Registered Body. ii) Trust is holding Registration u/s 12A of I.T. Act 1961 effective from 01/04/2006 and same is not disturbed even after search action u/s 132(1) on 28/01/2011.
iii) Trust has been granted fresh registration on 23/09/2021 for Asstt. Year 2022 to 23 to 2026-27.
iv) Audited Financial Statement submitted along with Audit Report in Form 10B. All figures as per financial statement accepted without inviting any adverse observation.
7 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur v) In subsequent years income of Trust accepted at the hands of Trust and no addition is made in the case of assessee in subsequent years. vi) Assessee has expired on 13/12/2017 and this is the only year of dispute. vii) Income & Expenditure account reveals that receipt and expenditure are on objects of Trust.
viii) Assets of Trust are property of Trust. No adverse observation as to assets and properties of Trust. All assets are on the record of Charity Commissioner. ix) No evidence on record to show that income of Trust belongs to assessee or has been used for the benefit of assessee. x) It is settled position of law that apparent is real. Reliance on: i) (1973) 87 ITR 0349 (SC) CIT vs. Daulat Ram Rawatmull (P. 1 to 9) (8) [Vol.-II] xi) Returns of trust u/s 139 up to Asstt. Year 2009-10 are submitted along with financial statements and Form B claiming income to be exempt u/s 11 much before the date of search. Observation of CIT(A) that income shown by trust is after thought in view of search is not justified.
xii) Reliance on CBDT circular that income accepted in past on submission of application under Vivad Se Vishwas Scheme cannot be viewed adversely for challenging addition made in subsequent years. CBDT Circular dated 22/04/2020 Answer to Qu. No.52.
8 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur (P. 56) [Vol.- II] 13. The learned DR referred to various facts observed in assessment order. The learned DR placed strong reliance on the order of lower authorities. 14. We have considered the submission made by the Counsel of appellant and found that trust is independent entity and is registered body. Trust is holding registration under Bombay Charitable Trust Act 1950 and holding Registration No.E330 dated 20/04/2006. Trust is registered u/s 12A of I.T. Act 1961 by order of Commissioner of Income Tax, Nagpur at Sr. No.31/59/0607. Trust has been granted fresh registration on 23/09/2021 for Asstt. Years 2022-23 to 2026-27. Trust has submitted audited financial statement along with audit report in Form10B. Various figures taken by A.O. for making addition in the case of appellant is as per financial statement submitted by trust. Financial statements of trust are accepted by A.O. in respect to receipts, expenditures, income, assets and liabilities without finding any fault in the same. In subsequent years income of trust has been accepted at the hands of trust and no addition is made in the case of appellant in subsequent years. Appellant has expired on 13/12/2017 and this is the only year of dispute which requires consideration in as much as in earlier years assessment made is settled under Vivad se Vishwas Scheme. Income and expenditure account of trust reveals that income and expenditure are on objects of trust. Fixed assets of trust are on the record of Charity
9 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur Commissioner and they are not under control of appellant, nor it is alleged that appellant is enjoying benefits in respect to any of the assets held by trust. There is nothing on record to show that income of trust belongs to appellant or is being used for his personal benefits. It is settled proposition of law that apparent is real. This proposition is in terms of law laid down by the Hon’ble Apex Court in the case of CIT vs Daulat Ram Rawatmull reported at 87 ITR 349(SC). Returns of trust have been filed upto Asstt. Year 2009-10 along with financial statement much before the date of search and thus observation of CIT(A) that income shown by the trust is after thought in view of search is unjustified. In the case of appellant upto earlier assessment years pending appeals have been settled by filing application under Vivad-se-Vishwas Scheme. In terms of clarification issued by CBDT in Circular dated 22/04/2020 in particular Answer to Question 52 acceptance of addition in past assessment years cannot deny appellant to argue in appeal that income of trust is not exigible to tax at the hands of appellant. We agree with submission of appellant and has considered the various documents and evidence placed on record. It is also noted that trust is operating its activities even after death of appellant which further establishes the bonafide and genuineness of trust being an independent entity. It is also noted that trust has been granted fresh registration by order dated 23/09/2021 for a period from Asstt. Year 2022-23 to 2026-27. Trust is juristic person and there is
10 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur ample evidence available on record to demonstrate its income which needs to be assessed and determined in its own case and cannot be held to be belonging to appellant. We are of the considered opinion that income as per financial accounts of trust needs to be assessed and determined at the hands of trust and cannot be held to be belonging to appellant. In appeal filed by trust in appeal No.ITA 40/Nag/2017 for Asstt. Year 2011-12 we have held that it is a valid charitable institution eligible for benefit of its income being exempt u/s 11 of I.T. Act 1961. Considering totality of facts and circumstances, addition made by A.O. in respect to income of trust is therefore directed to be deleted. Such income is directed be considered at the hands of trust. Grounds (b) of appeal of appellant is allowed. 15. In Ground (d) appellant has challenged the addition made by the A.O. at Rs.85,31,700/- in the assessment framed. The A.O. has discussed the addition at para 7 of assessment order. The A.O. has noted that cash seized and found during the course of search at Rs.85,31,700/- remains unexplained as no books of account were found at the time of search and appellant was unable to explain the source of same at the time of search and post search proceedings. The learned CIT(A) had upheld the addition in his appellate order. 16. The counsel of appellant before us has made submission which is reproduced hereunder
11 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur A) A.O. has made addition as according to him cash is found and remain unexplained. Explanation of assessee is after thought. B) CIT(A) has not given any independent reason for rejecting the ground of appeal of assessee. C) Assessee after search has prepared financial statements for all the years of block period and submitted in the course of assessment proceedings. D) A.O. has found no fault in the financial statements submitted in the course of assessment proceeding. In fact A.O. has determined income on the basis of Financial Statement.
E) Credit taken in capital account was assessed to tax in assessment framed which was being claimed by assessee to be capital receipt. Figures assessed are as shown in financial statement and thus cash balance available in balance sheet cannot be faulted or denied. F) In the case of assessee up to Asstt. Year 2010-11 assessee has accepted the income assessed by filing application under Vivad Se Vishwas Scheme. Appeals filed are withdrawn as is evident form order of ITAT dated 08/01/2021. G) Cash balance available in balance sheet at Rs.80,24,609/- (80,00,000/- seized + 24,609/- cash in hand) explains the cash found and seized. H) In Asstt. Year 2010-11 addition of Rs.11,04,990/- (P. 181) (154) accepted by filing application under Vivad Se Vishwas Scheme and such sum is not taken in financial statement. It is available to explain cash found on principle of telescoping.
12 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur I) In Asstt. Year 2011-12 Ground No.(c) at Rs.1,49,987/- not pressed and thus it is available to explain cash found on principle of telescoping.
J) Reliance on: i) ITAT order in IT(SS) No.50/Nag/2006 in the case of Shri Sewakram K. Gurbaxani vide order dated 25/01/2007. (P. 10 – 18 (16, 17) [Vol.-II] ii) (1993) 201 ITR 1010 (Ker.) CIT vs. K. Sreedharan (P. 19 – 26) (25) [Vol. – II] iii) Hon’ble Bombay High Court in ITA No.166 of 2017 in the case of M/s. Arth Housing Development Pvt. Ltd. vide order dated 15/04/2019. (P. 39 – 44) (44) [Vol.-II] iv) ITAT order in ITA No.6764/Mum/2010 in the case of Arth Housing Development Pvt. Ltd. vide order dated 30/10/2015. (P. 27 – 38 (36 – 37) [Vol.-II] K) Total Fund Available Cash balance as per Balance Sheet 80,24,609/- Addition undisclosed receipts (Asstt. Year 2010-11) 11,04,990/- Addition undisclosed receipts (Asstt. Year 2011-12) 1,49,987/- ---------------- 92,79,586/- ========= L) Entire addition for cash found stands explained. It is prayed that addition made be deleted as it is not unexplained.”
13 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur 17. The learned DR referred to various facts observed in assessment order. The learned DR placed strong reliance on the order of lower authorities.
We have considered the submission made by both parties and perused the materials available on record. It is seen from the record that appellant had submitted financial statement for the various assessment years for the block period. In the financial statement in the capital account appellant had shown varying amounts as ‘Samarpan Nidhi’ in various years of block period. Appellant had taken stand in the return that aforesaid receipts of amount is capital receipts and is not chargeable to tax. In the financial statement aforesaid amount of ‘Samarpan Nidhi’ resulted into availability of cash in the respective assessment years. The capital statement prepared by appellant during post search proceedings were submitted in the course of assessment proceedings to show that the appellant was in possession of cash in hand at Rs.80,24,609/- during Asstt. Year 2011-12 out of which Rs.80 lacs is cash seized by department at the time of search. The Counsel of appellant had placed financial statement of all the years along with assessment orders from Asstt. Year 2005-06 onwards in the paper book. In each of assessment year it is seen that ‘Samarpan Nidhi’ which was shown in the capital account has been assessed to tax by the A.O. by not accepting the claim of appellant that it is capital receipts. It is evident from the assessment order that capital account and financial statement submitted by
14 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur appellant in the course of assessment proceedings have been accepted by the A.O. in the respective assessment years without inviting any adverse observation and income has been determined taking the transaction as shown in the financial statement submitted by the appellant. Various figures of ‘Samarpan Nidhi’ which were shown in the capital account as capital receipt and not exigible to tax has been added in the assessment order. The assessment order passed by the A.O. in the case of appellant for Asstt. Year 2005-06 and 2010-11 have achieved finality in view of appellant having filed application under Vivad Se Vishwas Scheme of Central Government. Financial statement on the basis of which assessment have been made cannot be disputed in view of appellant having paid taxes under Vivad-se-vishwas Scheme. Availability of cash in respect to income assessed at the hands of appellant cannot be denied to explain the cash found during the course of search. In the case of appellant in assessment order for Asstt. Year 2010-11 sum of Rs.11,04,990/- has been subjected to tax by A.O. being amount in addition to amount of receipt shown in the capital account on the basis of certain seized documents. It is noted that sum of Rs.11,04,990/- income assessed in the Asstt. Year 2010-11 on account of undisclosed receipts not having been part of capital account and thus aforesaid sum assessed at the hands of appellant can be considered as available to explain any investment/out going at the time of search in view of settled principle of telescoping. Similarly
15 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur for the year under consideration A.O. has made addition at Rs.1,49,987/- on account of additional undisclosed receipts which are not part of financial statement submitted in the course of assessment proceedings. Appellant has accepted the aforesaid addition and therefore such amount of addition is available to appellant to explain the cash found at the time of search. Income assessed on account of Samarpan Nidhi in various years is as under: Asstt. Year 2005-06 Rs. 14,97,350/- Asstt. Year 2006-07 Rs. 17,20,211/- Asstt. Year 2007-08 Rs. 19,29,551/- Asstt. Year 2008-09 Rs. 14,19,100/- Asstt. Year 2009-10 Rs. 15,20,915/- Asstt. Year 2010-11 Rs. 18,20,370/- Asstt. Year 2011-12 Rs. 20,79,936/- ------------------------ Total Rs. 1,19,87,433/- ------------------------ 19. It is noted that the amount of Samarpan Nidhi assessed in Asstt. Year 2005-06 to 2011-12 is Rs.1,19,87,433/-. Above income is considered in financial statement and on asset side cash of Rs.80,00,000/- seized on the date of search is shown as amount of Income Tax. Income assessed in the case of appellant in assessment framed for Asstt. Year 2010-11 and 2011-12 is Rs.12,53,977/- (Rs.11,04,990/- + Rs.1,48,987/-). Considering the income determined and assessed at the hands of appellant cash found on the date of search at Rs.85,31,700/- cannot remain unexplained cash for which any addition can be made at the hands of appellant. The following decisions relied upon by the
16 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur Counsel of appellant fully support the submission that availability of income assessed/determined in the case of appellant needs to be telescoped with the assets found in the course of search. i) ITAT order in IT(SS) A No.50/Nag/2006 in the case of Shri Sewakram K. Gurbaxani vide order dated 25/01/2007. ii) (1993) 201 ITR 1010 (Ker) CIT vs. K. Sreedharan iii) ITAT order in ITA No.6764/Mum/2010 in the case of Arth Housing Development Pvt. Ltd. vide order dated 30/10/2015. iv) Hon’ble Bombay High Court in ITA (IT) No.166 of 2017 in the case of M/s Arth Housing Development Pvt. Ltd. vide order dated 15/04/2019. Ratio laid down by the aforesaid judgments squarely applies to facts in the case of appellant. Considering the same cash found on the date of search at Rs.85,31,700/- cannot be considered as unexplained cash for which any addition would be made at the hands of appellant. Considering totality of facts and evidence on record and respectfully following judicial precedents discussed hereinabove we are of considered opinion that cash found at Rs.85,31,700/- is not unexplained cash which can be brought to tax at the hands of appellant. Addition made by the A.O. and upheld by the CIT(A) is unjustified and is therefore directed to be deleted. Ground of appeal of appellant at (d) is allowed.
17 ITA37/NAG/2016 Late Shri Vasantrao Gopalrao Ghonge L/h Vilas Vasantrao Ghonge vs DCIT. CC-1(1), Nagpur 20. In the result, assessee’s appeal is partly allowed. Order pronounced in the open court on 28/06/2022 Sd/- Sd/- Sd/- Sd/- (ARUN KHODPIA) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER
Nagpur DATED: 28 /06 /2022 *Mishra Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order
Assistant Registrar ITAT, Nagpur