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Income Tax Officer (E) , Delhi Versus Janak Charitable & Education Society

2015 (9) TMI 319 - ITAT DELHI

Addition made u/s 68 - assessee trust has violated the conditions for grant of exemption u/s 12A - CIT(A) deleted the addition - Held that:- . On a consideration thereof on facts, we are of the view that the impugned order cannot stand in the eyes of the law. The CIT(A) has failed to address the speaking findings on record made by the AO namely that the assessee had collected funds through illegal means. The so called donations through entry operators who admittedly did no business whatsoever an .....

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on record and also the judicial precedent cited by the Ld. Sr. DR who has placed reliance on the judgement of the Delhi High Court in the case of CIT vs Sh. Vishwa Vigyan Telugu Linguistic Minority Education Society (2012 (6) TMI 542 - DELHI HIGH COURT ).

Accordingly in view of the detailed reasons given hereinabove, we find that the departmental appeal deserves to be allowed. The impugned order having failed to address the relevant crucial facts considering the judicial precedent is .....

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e two appeals filed by the Revenue assail the correctness of the separate orders dated 30.03.2012 of the CIT(A)-XII, New Delhi in 2002-03 & 2004-05 assessment years on identical grounds. For ready-reference, we reproduce the grounds raised in ITA No.-2945/Del/2012 hereunder:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made u/s 68 of the Act as the assessee trust has violated the conditions for grant of exemption u/s 12A .....

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e assailed the said order before the ITAT wherein the Co-ordinate Bench vide its order in ITA No.-3347/Del/2008 dated 19.06.2009 restored the issue back to the file to the AO with the following observations:- We have considered the facts of the case and rival submissions. From the facts mentioned in the assessment order, it does not appeal to us that the assessee has tried to enter unaccounted money in the books of account as donations. Inspite of repeated opportunities, no explanation was filed .....

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after hearing the assessee. 2.1. In this factual background the AO examined the claim of the assessee that donations had been received totaling to ₹ 24,93,000/- from 24 persons, the details of which were referred in the original assessment order. These alleged donations were found to have been received in a span of 5 to 10 days i. E during the period 05.09.2001 to 11.09.2001. Referring to facts recorded in the original assessment proceedings where letters u/s 133(6) were issued to these a .....

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ter dated 03.12.2012 is found to have offered the following explanation, the same is extracted from the assessment order:- M/s Janak Charitable & Education Society has accepted donations of ₹ 24.93 lakh, during AY 2002-03 and claimed exemption of ₹ 24.74 lakh (i. E. excess of income over expenses) on the basis of actual utilization for defined purpose i. E. for purchase of school land from DDA for the purpose of carrying school activities. Actual utilization was duly submitted ea .....

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R. D. Gupta duly confronted to the assessee concluded that the assessee had collected funds through illegal means and from entry operators who have provided only bogus accommodation entries. Referring to the statement of Sh. Mukesh Gupta, Son of Sh. R. D. Gupta, the entry operator who maintained/controlled a number of bank accounts concerned with the help of number of associates who on record had admitted that no real business was done and the books of accounts were never produced in regard to t .....

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urpose of arranging the funds also incurred out of undisclosed sources of income was also made. 2.4. In the second round before the CIT(A) which is the order under challenge the assessee again succeeded. The Ld. CIT(A) held that the AO could not specify which conditions of Section 11 & 12 has not been complied. She was also of the view that the issue was covered by the decision of the Hon ble Delhi High Court in the case of DIT Vs. Kehsav Social Charitable Foundation (2005) 146 Taxman 569 an .....

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that the assessee had declared a NIL income. After issuing notice u/s 148 & 143(2) etc. the assessee in the scrutiny assessment was required to explain the alleged donations. The AO taking note of the fact that the assessee society was formed in 1994 was registered u/s 12A(a) of the I. T. Act, 1961 vide No. J-353-1994-365 had shown receipts of ₹ 63,73,880/-against which excess of income over expenditure has been shown at ₹ 62,81,564/-. During the course of assessment proceedings .....

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of conditions precedent to allowing exemption u/s 12A of the Act. 3.1. Herein also referring to the statement of Sh. Mukesh Gupta, the entry operator the AO concluded that the assessee had collected funds through illegal means. He took note of the fact that a perusal of the bank accounts of these entry operators revealed that there was a cash deposit of ₹ 5,00,000/-in the bank account of M/s Ethnic Creations Pvt. Ltd. and there was a credit entry of ₹ 5,01,000/- in the bank account o .....

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t and debit entries were in crores of rupees whereas there was nothing on record to show that these parties had the means to enter into such huge transactions. The assessee was also found to have failed to furnish the details of other parties from whom donations have been received during the year. Therefore, it was held that the genuineness remained unverified. The reasons recorded for reopening of the case it was held were provided to the assessee. 3.2. Accordingly it was held that the assessee .....

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efore the Tribunal in both the years. 5. The ld. Sr. DR relying upon the findings recorded in the assessment order by the AO in both the years submitted that the Ld. CIT(A) on facts has granted relief solely relying upon the decision of the Hon ble Delhi High Court (cited supra) and has failed to address the remaining crucial findings on record namely that the so called alleged donations were arranged through entry operators. The statement recorded in the assessment order confronted to the asses .....

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odation entries were provided. The funds as per record it was submitted were so arranged admittedly due to the financial need of assessee to make payment to DDA. 5.1. Inviting attention to the judgment dated 06.03.2012 of the Delhi High Court in the case of CIT vs Sh. Vishwa Vigyan Telugu Linguistic Minority Education Society in ITA No.-17/2010 (copy filed), it was submitted that the impugned order deserves to be set aside. 5.2. Reliance was also placed on the decision rendered in the Writ Petit .....

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estored to the AO as the said requirement has not been fulfilled. No arguments canvassing a contrary view were advanced in the face of the judicial precedent cited by the Ld. Sr. DR. 7. The Ld. Sr. DR in reply submitted that the order is explicit as when the alleged donation was not voluntary which is the specific requirement of the Act thus where evidently the funds have been facilitated through entry operators violation stands demonstrated. The need for the funds at the relevant point of time .....

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who admittedly did no business whatsoever and only provided accommodation entries cannot be termed as donations let alone voluntary donations in the eyes of law. It is a matter of record that at the relevant point of time the assessee was in need of funds for making payments to DDA and the urgency in the need of funds as per record was addressed by arranging the funds through illegal means in contravention of law. These facts on record have not been addressed by the CIT(A). The impugned order in .....

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bunal was right in deleting the addition of ₹ 88,32,845/- made by the Assessing officer and holding that Section 68 is not applicable? 8.1.1. Considering the fact that the donors as per the finding of the AO did not have adequate funds, the Hon ble High Court remanded the matter back to the AO. Herein also the AO had made addition u/s 68. The Hon ble High Court considering the findings of the ITAT, it is seen remanded the matter back with the following finding:- The findings recorded by th .....

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hat we have not expressed any view on merits. (emphasis provided) 8.2. The view taken to set aside the impugned order in both the years is further strengthened by the judgement of the Hon ble Allahabad High Court in M/s Fateh Chand Charitable Trust (cited supra) wherein the assessee challenged the validity of the notice issued u/s 148 in Writ proceeding before the Hon ble High Court which was dismissed with strictures against the respective tax authorities. The facts taken into consideration by .....

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and fact was relied upon to seek a quashing by way of writ the issuance of notice u/s 148. The departmental stand in the face of bogus entries which were shown as donations through accommodation entries provided by paying commission to the entry operator was strongly censured by the Hon ble High Court as the donations through the conduit pipe of cheques by entry providers moved the Hon ble High Court to make the following serious observations:- It is shocking to note that the Commissioner of Inc .....

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n the present petition the order dated 25.1.2008 is not in issue. We are not at all impressed by the said argument. When there as a transaction of ₹ 1,57,00,000/- a speaking order even dropping the proceeding at least was required. We, therefore, hold that the petitioner cannot derive any advantage from the aforesaid order. The income tax authorities are required to administer the Act. The right to administer, cannot obviously include the right to mal-administer. Thus, we find no words to .....

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