TMI Blog2015 (3) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... case the assessee is engaged in business activities. It is the contention of the assessee that income from letting out of the properties is income from house property and therefore such income is exempt under section 11 of the Act. Application of section 11(4A) arises only when the assessee carries on business. Therefore the question of maintaining separate books of accounts comes only when the assessee is carrying on business activity. Hence, it is the contention of the assessee that it is not carrying on any business activity and the income earned on letting out of property is only incidental and is income from property and exempt under section 11 of the Act. Therefore, the question of maintaining separate books of account does not arise when the assessee is earning income from letting out of property and when such income is exempt under section 11 of the Act, as income from house property. Since we have already directed the Assessing Officer to examine the nature of activity and its income i.e. whether the income is derived as incidental to the objects of the assessee or as a separate business, this can be examined by the Assessing Officer in the light of our above observations. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the identity is proved, the genuineness of the transaction is proved, therefore, it cannot be said that the loan amount of ₹ 25,00,000/- is unaccounted income of the assessee. We also notice from the assessment order that the cash loans introduced by the assessee from other than Smt. Meenakshi have been considered as unexplained credits by the Assessing Officer which shows that the cash loans obtained from Smt. Meenakshi is genuine loan and no such treatment was given to this loan of ₹ 25,00,000/- by the Assessing Officer while completing the assessment. We also find that the assessee was forced to avail cash loans in order to meet the requirements of payments to bank for reducing the credit limit and to honour the cheques already issued. The Department has not filed any evidence to rebut the findings of the Commissioner of Income Tax (Appeals). In the circumstances, we sustain the order of the Commissioner of Income Tax (Appeals) in deleting the penalty levied under section 271D of the Act and no interference is called for. - Decided in favour of assessee. - 294/Mds/2012, 1661/Mds/2012, 2002/Mds/2012, 2003/Mds/2012, 2004/Mds/2012, 1888/Mds/2012 - - - Dated:- 29-4-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption under section 11. In so far as the issue of advancing monies to other trusts is concerned, the Commissioner of Income Tax (Appeals) held that since the trusts to whom the assessee advanced monies are also registered under section 12A and having similar objects, there is no violation under section 13(1)(d) of the Act. As far as the cash credits are concerned, the Commissioner of Income Tax (Appeals) for the assessment year 2008-09 held that ₹ 14,60,000/- cannot be considered as unexplained cash credits within the meaning of section 68 since these cash loans were obtained from General Secretary of the assessee Mr. G. Ebinesan and the same were repaid to Mr. Ebinesan which was also confirmed by Mr. Ebinesan and therefore the same cannot be considered as income from other sources. In so far as the cash credits of ₹ 1,16,18,000/- for the assessment year 2009-10 is concerned, the Commissioner of Income Tax (Appeals) held that out of the said ₹ 1,16,18,000/-, ₹ 16,18,000/- cannot be considered as cash credit as this amount was obtained from General Secretary Mr. Ebinesan and the same was also repaid to Mr. Ebinesan which was also confirmed by him. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The Assessing Officer also held that the assessee has obtained loans from the General Secretary and also from unknown persons and therefore this is in violation of section 11of the Act. He treated these loans obtained by the assessee as cash credits of the assessee under section 68/69 of the Act. The Commissioner of Income Tax (Appeals) in his order after considering the submissions of the assessee and the case law relied on held that the assessee has complied with the provisions of section 11 / 12 / 12A / 12AA of the Act. The Commissioner of Income Tax (Appeals) also observed that there is no violation under section 13(1) / 13(3) of the Act. As far as the letting out of properties was concerned, the Commissioner of Income Tax (Appeals) held that the rental income derived by the assessee is only a property income of the assessee assessable under the head ' income from house property' and not under the head 'business income'. The Commissioner of Income Tax (Appeals) was of the view that the assessee has let out these properties to the members and non-members temporarily and it cannot be held that such letting out of properties is business activity of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the view that this matter should go back to the Assessing Officer to examine afresh on these lines. 7. In so far as the contention of the Assessing Officer that the assessee has advanced monies to other associations/trusts, therefore, there is a violation under section 13(1)(d) is concerned, we are not in agreement with the Assessing Officer since monies advanced by the assessee were to the other charitable organizations which were registered under section 12A and having similar objects. We find that the co-ordinate Bench of this Tribunal in the case of ACIT Vs. Mamallan Educational Trust in ITA No.456/Mds/2012 dated 10.5.2012 had considered a similar situation where the assessee a charitable organization registered under section 12A advanced money to another charitable institution, which was also registered under section 12A and whether in such circumstances the money advanced by one institution to other can be said to be in violation of provisions of section 13(1) and consequently the exemption under section 11 can be denied. The Tribunal also held as under:- 3. In its appeal before CIT(Appeals), argument of the assessee was that Section 13(1)(c)(ii) could be inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property and income therefrom for the benefit of beneficiaries and not for themselves. We cannot say that just because two Trusts are having common trustees, they are related concerns. Trust will not fall within the concept of concern mentioned in clause (e) of sub-section (3) of Section 13 of the Act. Invocation of Section 13(1), in such a situation, was not at all warranted. CIT(Appeals) was justified in relying on the decision of co-ordinate Bench of this Tribunal in the case of Jeppiaar Educational Trust (supra) and holding that assessee was eligible for exemption under Sections 11 and 12 of the Act. We find no reason to interfere with the order of CIT(Appeals). 8. In view of the above decision of this Tribunal, we hold that the monies advanced by the assessee to the other trusts which are registered under section 12A and having similar objects cannot be said to be in violation of provisions of section 13(1) of the Act. Therefore, we direct the Assessing Officer to examine whether other organizations to whom the assessee has lent monies are registered under section 12A and in case, such organizations are registered under section 12A, the exemption under section 11 cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order held that cash credits of ₹ 1,16,18,000/-is assessed under the head income from other sources . In the course of appellate proceedings, the Commissioner of Income Tax (Appeals) proposed to consider this loan of ₹ 1 crores received in cash as unexplained credits and assessable as 'income from other sources' for which the assessee has submitted its reply stating that the assessee had received ₹ 1.00 crore from unknown persons and ₹ 16,18,000/- from General Secretary Mr. Ebinesan and it had repaid ₹ 16,18,000/- to Mr. Ebinesan. It was also submitted that out of ₹ 1.00 crore obtained by the assessee, it had in fact, repaid ₹ 50.00 lakhs. The assessee could not provide names from whom the loans were taken as these loans were obtained by General Secretary Mr. Ebinesan on behalf of the assessee for repayment of loan of ₹ 1.5 crores taken by the assessee from M/s. India Cements Ltd. It was the submission of the assessee that the names of the persons from whom loans were taken was known only to General Secretary Mr. Ebinesan who expired later in the course of assessment proceedings, therefore, the names could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought to tax as a unexplained cash creditsujs.68 of the Act, assessable under the head income from other sources . The assessee, vide its written submissions, furnished its explanations and claimed that though the said loans are genuine but due to the sudden death of the then General Secretary Shri Ebinesan on 16.09.2009, the society is not in a position to file the details. Considering the facts the assessee submitted that no addition u/s.68 of the Act is warranted. The assessee's submissions are considered carefully. As discussed in the' foregoing paragraph no.6, loans to the extent of ₹ 16, 18,000/-, were received from Shri Ebinesan and were also repaid to him only, as could be seen from the repayment vouchers are signed 'by Shri Ebenesan. Further, for the reasons narrated therein, it is held that these loans (to the extent of ₹ 16,18,000/-) can not constitute unexplained cash credits within the meaning of sec.68 of the Act. However, regarding the other loan of Rs.l,00,00,000/-, claimed to have been received by way of cash during the F.Y.2008- 09 and also claimed to have been partly repaid (Rs.50,00,000/-) in cash, the assessee organization has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) also held that the said ₹ 1.00 crore introduced by the assessee as credits also cannot be considered as application of income since this amount is not received by the assessee by way of any donation. This income is treated as deemed income under section 68 of the Act. 15. On going through the above observations of the Commissioner of Income Tax (Appeals), we find no good reason to interfere with the order of the Commissioner of Income Tax (Appeals) in sustaining the addition. In the result, grounds of the assessee on this issue are rejected. 16. In the result, the appeal of the assessee is dismissed. ITA Nos. 1661 2003/Mds/2012 (A.Y. 2009-10):- 17. The only issue in these two appeals of the Revenue is that the Commissioner of Income Tax (Appeals) erred in deleting penalty levied under section 271D / 271E of the Act. 18. The Assessing Officer while completing the assessment for the assessment year 2009-10 assessed ₹ 1.00 crore as unexplained credit being cash received from unknown persons as stated in the above appeal for the assessment year 2009-10. The Assessing Officer levied penalty under section 271D for violation of provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutions which may be necessary for the purpose of the objects. iv) To promote cooperation and coordination among Christian brotherhood. v) To establish and maintain study centres, literature, arts science, research centres, industrial art exhibition, art galleries, cinema, television and dramatic performances, sports and generally any undertaking for the spiritual, mental, moral or physical improvement of the members. vi) To borrow money on the security of the property. vii) To aid charitable institutions. 2. The day-to-day affairs of the Appellant Association are managed by the General Secretary appointed by the Board of Directors of the Association. 3. The Appellant has been regularly assessed to Income-tax under section 11 of the Income-tax Act, 1961. For the Assessment Year 2009-10, the Appellant had filed the Return of Income on 17-12-2009, admitting NIL income. Pending assessment Under Section 143 (3) of the Income-tax Act, before the Joint Commissioner of Income-tax (OSD) (Exemptions) - If, the Joint Director of Income-tax (Exemptions) has initiated penalty proceedings Under Section 271 D of the Act and has passed penalty order dated 23-12-2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then General Secretary has raised short term cash advances of ₹ 1,00,00,000/- on 02-04-2008 and deposited the same in the bank account of the Appellant to honour the cheques, that were issued on 28-03-2008. 6. It is submitted that, as the cheques were already issued, Late. Shri. G.Ebinesan, the then General Secretary had to mobilize cash advance for not dishonouring the payments thereby safeguarding the integrity and credit worthiness of the Appellant, which is a charitable orqanisation of international repute and affiliation and in existence for more than 120 years. Late. Shri. G.Ebinesan, the then General Secretary, had to mobilize temporary cash advances, the sources of which are known only to him, to avoid embarrassment on dishonour of the cheques already issued, as he was the person instrumental, by his letter dated 10-12-2007,in obtaining the loan for the Appellant from M/ s. India Cements Limited, for meeting the capital expenditure. 7. In the similar facts in the case of ITO vs. Akik Titles Private Limited (2005) 96 TTJ (Ahd) 670, the funds were accepted in cash under the compelling circumstances to honour the cheque already issued otherwise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. It is submitted that in view of the fact that, the Appellant is a charitable organization and the then General Secretary had mobilized cash advances and the identity of the persons and their addresses from whom these temporary advances were mobilized were not known to the Appellant, the default if any, is of technical and venial nature, and the invocation of Section 271D of the Income-tax Act, 1961, is uncalled for. 12. It is submitted that Section 271D read with Section 273B, would clearly show that the contravention of the provisions of the Section 271D due to reasonable cause would absolve the Appellant from the liability of penalty. Specifically Sections 271D have evidently been encompassed in Section 2?qB. In the view of the specific mentioning of Section 271D in Section 273B, penalty is not leviable Under Section 271D, in obtaining loans/ deposits in excess of the limit prescribed therein, in case there is reasonable cause for offending Section 269SS of the Act 13. It is submitted that in the letter dated th (Inv. I), issued by Under Secretary, Ministry of Finance to Chief Commissioner of Income-tax and Director General of Income-tax, the Central Board of Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our view, they can be more appropriately referred to as temporary advances. Such temporary advances are outside the purview of Section 269SS. Thus in our considered opinion and in view of the various judicial pronouncements on this matter, we hold that the transaction of this case on hand cannot be considered as loan so as to attract Section 269SS and Section 271D of the Act . Applying the ratio of the above decision in the Appellant's case, the temporary advances mobilized by the then General Secretary cannot be termed as loan or deposit so as to attract Section 269SS and Section 271D of the Act. 16. It is submitted that the Assessing Officer, while assessing the income of the Appellant for the Assessment Year 2009-10, Under Section 143 (3) read with section 1480f the Act, has categorically stated in the assessment order that the temporary advances mobilized by the then General Secretary are in the nature of unexplained cash credits and liable to be assessed Under Section 68 of the Income-tax Act, 1961. The relevant portion of the order is extracted hereunder:- The cash credit of ₹ 1, 16, 18,000/ - from unexplained and unidentified sources received in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is considered as unexplained cash credit u/s.68 of the Act. Similarly, if an amount claimed by way of loan is treated as an unexplained cash credit u/s.68 of the Act and brought to tax, the presumption is that the amount represents assessee's own income from unexplained/unknown sources. In such a case, the entire concept of loan ( or claim of loan from others) gets demolished. This is so because the very presumption, in bringing the sums to tax as unexplained cash credit, is that the amount actually belongs to the assessee but brought into books by way of loans from others. Thus, when the receipt of loan (claimed by the assessee) itself is disbelieved and discarded by the revenue the other (secondary) ingredients of the said loans are of no consequence. In other words, if a particular claim of loan of the assessee is rejected and brought to tax as an unexplained cash credit u/s.68 of the Act, the other issues like - whether the amounts are shown as received by cash or cheque etc. are of no consequence, as the said sums have already been treated as the assessee's own money. Therefore, in the instant case of the assessee, as the above mentioned amount of ₹ 1.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment and at the same time to treat it as a loan for the purpose of section 269SS read with section 271D and subject the transaction to penalty. For non-compliance with the provisions of section 269SS, the genuineness of the transaction as loan was doubted by the Assessing Officer and so the amount was surrendered by the assessee. The surrender was accepted by the Assessing Officer as income of the assessee, it ceased to be a loan and, therefore, the very foundation for initiating the proceedings for and levying penalty under section 271D was lost. Therefore, penalty imposed under section 271D read with section 269SS could not be sustained. 25. In view of the above, we sustain the order of the Commissioner of Income Tax (Appeals) in deleting the penalty levied under section 271D / 271E of the Act in respect of the addition made towards unexplained credits by the Assessing Officer. 26. In the result, both the appeals of the Revenue are dismissed. ITA No. 2002/Mds/2012 (A.Y. 2008-09):- 27. This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-XII, Chennai dated 18.07.2012 for the assessment year 2008-09. 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. 29. The DR vehemently supported the order of the Assessing Officer in levying penalty under section 271D. He submits that the assessee has not proved any compelling circumstances for accepting the cash loans. 30. We have perused the orders of the lower authorities. The assessee has made elaborate submissions before the Commissioner of Income Tax (Appeals). The assessee submitted that the then General Secretary during the year under consideration has mobilized cash advances of ₹ 39,60,000/- to meet the pressing payment of contractors and also to reduce bank overdraft facility. It was the submission that cash advance mobilization was deposited in bank account to honour the prior commitments in order to keep up the reputation of the institution which is 120 years old. It was contended that the Assessing Officer assessed ₹ 14,60,000/- as unexplained cash credit under the provisions of section 68 and the balance of ₹ 25,00,000/- borrowed from Smt. S.Meenakshi has been accepted as genuine loan. The assessee submitted that the cash loan of ₹ 25,00,000/- was obtained from Smt. S.Meenakshi by the then General Secretary Mr. Ebinesan on 6.12.2007 and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contractors and also to reduce the bank overdraft facility. As the assessee had undertaken substantial construction/ developmental activities during the financial year 2007-08, there was a need for funds. As there was a delay in obtaining the bank loans and the contractors were pressurizing for payments the assessee was forced to avail cash loans. Further, as the assessee has already over exploited the bank overdraft facility, the was a pressure from the bankers too to reduce the overdraft. Under these circumstances, it cannot be held that the assessee has no exceptional circumstances forcing him to go for cash loans. In this regard, reliance is placed on the judgment of ITAT - B- bench, Mumbai, in the case of ITO Smt. T.Visalakshi, Ward II (4) vs. P. Visalam Traders, Madurai, in ITA No.1172jMdsj2010, (A.Y. 2004-05), order dated 04-02- 2011, in para '8', held as under: We have considered the rival submissions. A perusal of the penalty order clearly shows that the penalty has been levied Oil account of the repayment of the loans in cash to 13 persons. A perusal of the orders of the learned CIT(A) and the Assessing Officer clearly shows that the assessee has produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case, the loan has been accepted by the Assessing Officer as a genuine one. Reliance is also placed on the following judgments: a) ClT v. Balaji Traders [2008] 303 ITR 312 (Mad.): 8ection 271D of the Income-tax Act, 1961 - Penalty - For failure to comply with section 26988 - Assessment year 1993- 94- Assessing Officer found that assessee had availed cash borrowings exceeding ₹ 20,000 for about 36 times during year - Considering assessee's act to be in violation of section 26988, Assessing Officer imposed penalty upon assessee under section 271D - Tribunal found that there was business exigency forcing assessee to take cash loans for purpose of honouring its cheque commitments; creditors were genuine persons and transactions were satisfactorily explained by assessee; and there was no revenue loss to State exchequer - Tribunal accordingly, set aside penalty . High Court held that the Tribunal was justified. b) CIT v. Maheshwari Nirman Udyog [2008)302 ITR 201) (Raj.) Where the transactions were genuine and there was reasonable cause for accepting loan in cash and, no penalty was exigible. c) OMEC Engineers v. CIT [2007] ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He, in turn, arranged amount from bank in cash and deposited same in assessee's account Assessing Officer observed that assessee had violated provisions of section 269SS as deposit of ₹ 5 lakhs was accepted in cash and, accordingly, issued show-cause notice under section 271 D for levying penalty. Assessee contended that it had reasonable cause inasmuch as amount was received in cash to ensure that cheques given by it, if bounced, would have adverse effect on its business interests - Assessing Officer, however, levied penalty which was challenged in first appeal where it was confirmed Held: Since assessee was prevented by sufficient cause, penalty under section 271D was to be deleted. In instant case, there is a reasonable cause for accepting the loans from Mrs Meenkshi and also the transaction was genuine. Hence, in view of the above judicial pronouncements, the same is covered by exceptional circumstances and hence penalty u/s.271D Call not be imposed. Therefore, the Assessing Officer is not justified in treating the same as a loan received in cash in violations of sec.269SS of the Act, before levying penalty of ₹ 25,00,000j- u/s.271D of the Act. He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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