TMI Blog2010 (8) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration under section 12AA of the Act on 15.10.2001 and approval under section 80G on 18th March, 2002. It was pointed out that the assessee received donations from various persons amounting to ₹ 1,86,83,248/- whereas the assessee applied ₹ 1,94,42,849/- during the financial year 2001-02. A survey under section 133A of the Act was carried out at the premises of the assessee on 3.9.2002 wherein the books of accounts, ledger, cash book, vouchers of expenses along with tax audit report were impounded. The learned counsel for the assessee pointed out that the assessee duly maintained the books of accounts on the computer for the financial years 2001-02 and 2002-03. The receipts/receipt books containing carbon copies of the donations received by the assessee were also found during survey. Our specific attention was invited to the order of the learned first appellate authority wherein it was opined that it appears that assessee has not received any donation and expenses are bogus [page 12 of the order of the CIT(A)]. It was strongly pointed out that the donations were received by the assessee in cash and the factum of donation was duly proved by the assessee. A plea was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y pleaded that various Sarpanchs confirmed free distribution of clothes, medicines, etc. Our attention was invited to pages 1155 to 1174 (volume III of the paper book ). It was contended that even the Assessing Officer did not consider it necessary to examine the statements which were favorable to the assessee and the bills of medicines, clothes, kirana items were duly found during survey (pages 1652 to 2412 paper book vol. IV). A strong plea was raised that the learned Commissioner of Income tax (Appeals) obtained the statements of 19 Sarpanchs on the typed proforma containing 5 questions each wherein also out of 19 Sarpanchs only 2,namely, Shri Dinanath Tiwari and Raghvendra Singh Sengar confirmed the activities of the trust (statements refer to page 1172 of volume III) and for the remaining persons either the statements do not contain the answers posed by the revenue or the questions were left blank and only signatures were put at the end of the typed statements by further pointing out that these statements are attached with the order of the learned Commissioner of Income tax (Appeals). The learned counsel strongly pleaded that these persons were never put to cross-examination t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly reflected in the books of accounts of the suppliers. The learned counsel for the assessee relied upon certain decisions which will be discussed while concluding the issue. 4. We have considered the rival submissions and perused the material available on record. Brief facts are that the assessee NGO/society is a voluntary organisation/Samiti registered under the M.P. Societies Registration Act, 1973. The assessee is also getting grants from State Government of Madhya Pradesh for smooth running of certain programmes for the upliftment of women and children. The activities of the assessee are monitored by the programme Officers working with the office of the District Collector. The activities of the assessee also include training to Anganwadi workers and various other activities for the upliftment of women welfare. There is no dispute to the fact that the assessee society/Samiti is regularly filing its returns since assessment year 2000-01. After being satisfied with the activities of the assessee it was granted registration vide order dated 15.10.2001 under section 12A of the Act (F.No.CIT-II/JBP/Tech/4/01-02). The assessee was also granted approval vide order dated 18.3.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of survey conducted under section 133A, at the office premises of the assessee on 3.9.2002, the books of accounts like cash book, ledger, expenditure vouchers, etc. along with copy of tax audit report for the financial year 2000-01 were found and impounded along with the books of accounts maintained in computer for the financial years 2001-02 and 2002-03 and also receipt books containing carbon copies of receipts so issued for getting donations. It is pertinent to mention here that the case of the assessee for the assessment year 2002-03 was selected for scrutiny and in the meantime on the basis of some inquiries made by the department, the registration granted under section 12A and approval/recognition under section 80G of the Act was withdrawn vide order dated 12.8.2003 which was restored by the Tribunal vide order dated 27.2.2004 under section 12A of the Act (order in ITA No. 198/Jab/03). The whole issue revolves around suspicion by the learned Commissioner of Income Tax (Appeals) in disbelieving the receipts of donations on the reasons stated in the assessment order which are as under : (i) the donations were received in cash and the same were deposited in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under :- Voluntary contributions to religious or charitable trusts are deemed to be its income. Department is not required to disprove the same even if circumstances surrounding the receipt of donations appear extremely suspicious. Law requires that only expenditure to the extent the trust has incurred for the charitable purposes is to be allowed. In view of the above findings, the learned Commissioner of Income Tax (Appeals), enhanced the returned income to ₹ 1,86,83,48/-. 8. If the totality of the facts, arguments advanced by the learned respective counsels and the material available on record are kept in juxta-position and analysed, following facts are oozing out. (i) From the certificates/statements issued/tendered by the Sarpanchs of different villages it is seen that some of them have confirmed that the assessee Samiti distributed free food, clothes and medicines (volume III paper book pages 1155 to 1174) (ii) The learned CIT(A) either did not think it appropriate to further examine the correctness of the aforesaid material evidence or deliberately avoided to mention the same simply to disbelieve the claim of the assessee. (iii) The stereo-type prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been managed after completion of survey. Even otherwise, impounding of such receipts during survey has not been controverted by the revenue at any stage right from the assessment, first appellate stage and even before the Tribunal. The expenditure was disallowed and enhanced to ₹ 1,86,26,203/- by the learned Commissioner of Income Tax (Appeals) by observing that the claimed expenditure was bogus. The ld. Counsel for the assessee claimed that the expenses were in fact incurred and the income was applied for charitable purposes, for which our attention was invited to the following pages of the paper book :- S. No. Details of expenditure Page numbers (i) Medicines purchases 1652 1766 (ii) Bills for purchase of stationary, furniture and expenditure for courier service 1767 1843 (iii) Payments to visitors 1844 1856 (iv) Medical bills for purchase of medicines 1857 1864 (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court in the case of CIT v. P.K. Noorjahan; 237 ITR 570. We have found that the factum of receipt of donation is not untrue since the carbon copies of such donations were impounded during the course of survey. Consequently, the expenditure cannot be said to be bogus especially when the receipt and expenses are supported by bills/vouchers/ donations/ receipts/ books of accounts of supplies and the entry of such payments/expenses in the books of the parties from whom the goods were taken. Even otherwise the income tax returns filed by the suppliers have been accepted by the department on the income/money/amounts received from the assessee. It is strange that the same payments made to suppliers are being suspected in the case of the assessee, which were duly supported by bills/proper vouchers. Consequently, on the same analogy, the department is not permitted to take a contrary stand in the case of the assessee to falsify its stand. Even otherwise, if this issue is analysed with the doctrine of consistency, the assessee is fortified by the ratio laid down in the following cases :- 1. Union of India v. Satish Panalal Shah; 249 ITR 221 (SC) 2. Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the assessee and thus went upon to falsify the claim of the assessee. Under these circumstances, the assessee gets support from the ratio laid down in the cases of Addl ITO v. Ponkunnam Traders; 102 ITR 366 (ker) wherein it was held that the reliability of entries as evidence against the assessee can be proved only after examination, (P.S. Abdul Majeed v. Agricultural Incometax and salestax Officer; 209 ITR 821 (Ker) and even otherwise the revenue was bound to provide opportunity to the assessee in respect of material gathered or being used against the assessee, which was not done by the department for the reasons best known to it. The reports of the Inspectors and statements gathered/obtained through them ought to have been supplied to the assessee. It was the bounden duty of the revenue to provide opportunity to rebut the same before the material is used against the assessee. The assessee is further supported by the following decisions :- 1. Guduthur Bros. v. ITO; 40 ITR 298 (SC) 2. Kapurchand Shrimal v. CIT; 131 ITR 451 (SC) 3. CIT v. United Towers(I)(P)Ltd.; 172 Taxman 267 4. ITA Nos. 458 to 468/Jd/04 Even otherwise, it is the bounden duty of the other party t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Patna) (para 10) 14 In the case of Sarogi Credit Corporation; 103 ITR 344) the Hon ble Court at page 349 held Once the identity of the third party is established before the Incometax Officer and other such evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money and however or why he came to make an advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the instant case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the department to show as to why the assessee s case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source. Hon ble Bombay High court in the case of CIT VS. United Tyres India Private Limited (2008) 172 Taxman 267 held that principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply dated 28.11.06 that the amount was outstanding on 31stMarch 2001 which was expended in April 2001 and thereis no amount balance with the society.Assessee society is engaged in social work for State Government of MP and payments are made by State Government for the work done by the Society. 15. The assessee has furnished photocopies of certain photographs (pages 125 to 138 of the paper book) wherein various activities done by the assessee and the training programmes of Anganwadi workers have been mentioned along with Anganwadi workers programme. From these photos it appears that various distinguished persons graced the occasion. These photographs have not been controverted by the revenue. 16. Under the aforesaid facts, the statements recorded from various persons who supplied the goods/material to the assessee needs to be analysed. One such person is Shri Anuj Pratap Singh, owner of tent house who supplied tents to the assessee for conducting various programmes. The said statement is available at pages 84 to 87 of the paper book. The relevant portion of the statement recorded by the revenue on 4.1.2007 is reproduced hereunder :- Q. 22. Account of Namra Mahila Evam Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on hire by cheque ? A. It was paid by cash Q. 34. When did you make ? A. At the end of the year. That is in the end of March, 2002 Q. 35. Did you obtain the signature in Token to giving the cash ? A. I had taken signature of some parties, not all Q. 36 Are you aware that if the other parties now deny that you have not paid them any amount, you will be required to pay tax on the expenditure not proved ? A. Yes I am prepared to pay tax on the same 17. The statement of Shri Ritesh Singh has been recorded on 09/09/2002 wherein he has stated that he had supplied cloth worth ₹ 43,86,260/-. He has also stated that purchase is made by him from local market and through agents and he has filed return declaring total income at ₹ 51,226/- on 31/10/2002 and aforesaid return has been accompanied with audited statement of account. A.O. has also noted that Sarpanch of various villages have given evidence with regard to activities of trust. The A.O. however, in respect to such legal evidence has observed that such statements do not establish that funds are received and distributed within short span of time. A.O. has further observed that funds are not act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hartered Accountants. The supplier has submitted return of income on 31/10/2002. The A.O. has not accepted the above expenditure on mere probabilities. The evidence placed on record cannot be rejected on suspicion and surmises. The statements of recipient of payments before A.O. are corroborative evidence in support of incurring of expenditure by assessee. A.O. at page 6 para 5 of the assessment order has noted the filing of return of income by Shri Surya Prakash Sharma on 31/10/2002. On query from Bench about return of Shri Sharma, it was explained that return filed by Surya Prakash Sharma has not been disputed by Revenue Authorities. The Revenue having accepted the return of income of Shri Surya Prakash Sharma wherein sales made by him to assessee trust having been accepted. Therefore, we are of the view that the expenditure in the hands of assessee trust cannot be disputed. Considering the above facts and evidence on record, we are of the opinion that assessee has satisfactorily discharged the onus of explaining application of income to the extent of ₹ 37.71 lacs . 19. In the case of Shri Mathura Pd. Gupta payment made are ₹ 31.37 lacs. His statement was recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of assessee approval u/s 80G of I.T. Act 1961 has been granted by CIT, Jabalpur, vide his order dated 18/3/2002. The assessee subsequent to obtaining of recognition u/s 80G of I.T. Act 1961 had received donations from various persons which has been utilized for incurring the expenditure towards objects of trust. The assessee trust has received donation in cash and also applied the same in cash towards expenditure by making payments to various parties as recorded in books of account. The major payment which has been doubted/disputed by A.O. is in respect of payments made towards cloth purchase, tent expenditure, medicines and kirana. The A.O. has discussed the aforesaid payments at page 15 to 17 of the assessment order. A perusal of assessment order indicates that statement of above persons have been recorded pursuance to survey proceedings at the premises of assessee u/s 133A on 03/09/2002. 21. Various documents placed in paper book at volume 1 comprising of 810 pages clearly demonstrate that assessee trust has carried out various activities of charitable nature. The assessee trust is registered with Registrar of Socieities and also Directorate of Women Child Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment framed. On the basis of facts it can be seen that although the assessee has incurred aggregate expenditure of ₹ 194.42 lacs as recorded in books of account, but the A.O. has expressed doubt with regard to a sum of ₹ 135.10 lacs only and A.O. has not made any adverse remark with regard to any other expenditure as shown in audited profit loss account. There was no justification for the A.O. as well as the CIT(A) to dispute various expenses as shown in income and expenditure account for which there was no adverse observation in assessment order of A.O. nor in the order of the CIT(A). We are, therefore, of the view that the assessee has clearly discharged its onus rather it shifts on the revenue to disprove the claim of the assessee. Even one Shri Subhash Misra working as Administrative Officer at the relevant time was called by the office of the learned Commissioner (A) where he has duly confirmed that during the relevant time he was posted in Rewa and from July, 1995 to September, 2001 he attended various functions of the assessee and confirmed the photographs shown to him of special occasions like Independence Day/republic day. 23. The learned CIT(A) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e donations were received on various dates and the work was done through-out the year and not within 10 days as has been alleged by the revenue. Even if it is presumed that some of the payments remained outstanding or paid at the later stage does not mean that no activity was done by the assessee or the money so received was not expended at all. Even the assessee society is getting financial grants from the State Government for implementation of its charitable activities. All these activities are supervised by various Officers of the State Government from time to time and the grants are disbursed through the District Collector. One inspection report duly signed by the authorized Officer who supervised the work (available at page 5 to 7of the paper book Volume I) is as under :- If the aforesaid report submitted by the office of the Programme Officer, Mahila Avum Bal Vikas, District Rewa (M.P.) dated 19.2.2001 is analysed, in view of the facts stated above, certain facts are oozing out that the assessee was maintaining six rooms like office, kitchen, store room, Anganwadi workers residential accommodation, training hall, three lavatories, etc. On the upper floor of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26,88,756 8. Seminar expenses 2,04,770 9. TA DA to visitors 17,73,309 10. Kirana goods 31,37,750 T O T A L = 1,86,26,203 It was further explained that an expenditure of ₹ 37,042/- was incurred in subsequent year. The list of donors is available in Volume III, Paper Book pages 1412 to 1490. The details of expenditure such as bills/vouchers are available in paper book Volume IV pages 165 to 2412. The copies of ledger accounts regarding expenditure incurred towards supplies. It was claimed that all the suppliers are assessed to tax and they have filed their confirmations and affidavits to the effect that they supplied the respective goods to the assessee. The copies of confirmations and affidavits are available at page 1175 to 1258 (before AO) and pages 1596 to 1651 (before the CIT(A) of Vol. III and IV respectively. Therefore, the observation of the learned Commissioner of Income Tax (Appeals) that the suppliers never supplied the goods is unsubstantiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in question. The other relevant documents, books of accounts were also impounded which were maintained during regular course of activities of the trust which cannot simply be brushed aside. 26. During hearing before us, the learned CIT DR has posed a tempting question that even such a huge expenditure was done by the assessee then there must be some photographs of functions, etc. The learned CIT DR asserted that no such photographs were produced at any stage. In response, the learned counsel invited our attention to various pages of the paper book wherein various photographs of different occasions attended by high ranking politicians, bureaucrats were showed by further claiming that in some of the functions even the officials of the Income Tax Department also participated. These photographs were not controverted by the revenue. These photographs are available at page 2399 to 2412 of the paper book. Our attention was further invited to various cuttings of newspaper substantiating that the assessee was engaged in charitable activities. These papers may be read as part and parcel of this order also and are not being attached with the order as the same are available on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point which prompted the learned Commissioner of Income Tax (Appeals) is that charity cannot be carried out on credit. When aforementioned facts it is proved that in fact donations were received by the assessee where is the question of credit. Even otherwise, it depends on the market value/face value of the assessee and sometimes even the goods can be supplied on credit. There is a possibility that the payments might have been made at later dates and when the funds were available. Our view is further fortified from the ratio laid down in the decision of the Hon ble jurisdictional High Court in Sumerchand Jain v. CIT (292 ITR 241) wherein on the issue of transaction of purchase and income from undisclosed sources, the names of purchasers were furnished. It was held that the assessee need not to prove that the assessee had the necessary funds. While coming to this conclusion, the Hon ble Court considered the following cases :- 1. Ashok Pal Daga (HUF) v. CIT; 220 ITR 45; (MP) Para 9 2. CIT v. Kohinood Tobacco Products P. Ltd.; 234 ITR 557 (M.P.) Para 12. 3. CIT Vs.Mehrotra Brothers; 270 ITR 157 (MP) Para 12 4. CIT v. Metachem Industries; 245 ITR 160 (MP) Para 7 5. Gee V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pients makes it evident that amount of donation received is applied on the objects of trust. We have perused various pages of paper book Volume IV containing pages 1596 to 2439 containing certain statements recorded by the department and photocopies of various bills. At pages 1652 to 1766 there are bills of medicines purchased from medical store. At pages 1767 to 1787 there are various bills of kirana items. At page 1788 there are certain transportation bills. At pages 1790 to 1831 there are bills of stationary/courier, etc. From pages 1832 to 1842 there are certain bills of supply of timber used for the purpose of erecting the Shamiyanas. At pages 1844 to 1856 there are certain hand-receipts for various expenses. At pages 1857 to 1864 again there are certain medical bills. At pages 1867 to 1879 there are miscellaneous bills of expenses. At pages 1880 to 1887 there is a record of payment of salary to various workers/staff. At pages 1888 to 2092 there are bills for kirana and general store items. At pages 2093 to 2105 there is a list of payment of salary. At pages 2107 to 2141 there is a list of food expenses. At pages 2142 to 2167 there is a list of payment to various persons. At p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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