TMI Blog2019 (10) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... rs-are essential to be laid down before the AO. Thus, it was held that Section 115BBC and Section 68 are mutually exclusive and can both operate in their own domain as per facts and circumstances of the case. In the case of Shree Shiv Vankeshawar Educational Social Welfare Trust Vs ACIT [ 2019 (5) TMI 1057 - ITAT DELHI] it was held that corpus donation is never credited to the income and expenditure account of the trust whereas the normal donation is credited to the income and expenditure account as income. If a normal donation is doubted by the AO about its genuineness, and identity of the donors, the addition cannot be made u/s 68 of the income tax act in the case of the trust as it has already been offered as an income. The anonymous donations will not be covered if donations received by any trust or institution created or established wholly for religious purposes or donations received by any trust or institution created or established for both religious as well as charitable purposes other than any anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds and after insertion of section 115BC of the Income tax Act, 1961 w.e.f. 01.04.2007 provisions of section 68 of the Income Tax Act, 1961, are not applicable in the case of the society. 4. The Ld. CIT (A) has erred in law and on the facts by ignoring that in some cases contribution allowed by Ld. AO, was disallowed and added us 68 of the Income tax Act. 5. Any other ground may be taken during the appellate proceedings if arose out of order u/s 250 of Income Tax Act, 1961dated 24/11/2011. 3. The assessee is a society registered under the UP Society registration Act w.e.f. 23/08/2007. The Assessee is also registered u/s section 12AA of the Income Tax Act, effective from 23/08/2007 i.e. from the date of its incorporation as per the certificate of registration granted by the Ld. Commissioner of Income tax Ghaziabad. This is the first year of the assessment of the assessee trust. 4. The main objects of the society is to impart education to the under privileged society of all cast creed and religion. For achieving its object, a piece of land at Sikandrabad, Distt Bulandsahar has been acquired by the society for the total consideration paid of ₹ 10871826/- d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d-thus, only identity proved but neither creditworthiness, nor any prima-facie source of fund explained-no worthwhile evidence on record. 3. Smt. Sudha Sharma 2,45,000 Only identity on record; no worthwhile evidence of creditworthiness; source of cash deposit used for donation not explained. The AO has added only ₹ 90,000/-; but once creditworthiness is unproved; the entire amount of this donation of ₹ 2,45,000/- is to be added-this amounts to enhancement for this particular donation, but not over all enhancement-in any case specific opportunity to the counsel has been given to explain this case. 4. Sushila Verma 1,00,000 Only election card submitted; no detail or evidence; at all, regarding creditworthiness. 5. Sh. Ajay Kumar 1,00,000 No detail and evidence 6. Sh. A.P. Singh 95,000 No detail and evidence 7. Sh. Kiran Pal Singh 1,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the ld. AR before the revenue authorities are as under: It is brought to your honor s kind notice that in the chart given in the body of assessment order, the Ld. AO has referred to the documents filed in respect to the membership fee of the members of the society. It may kindly be noted that in most of the cases, the confirmation of the member, his identity and the source of income has been furnished. The Assessing Officer has observed that transactions relating to membership fee and contribution towards corpus funds are bogus as the cash flow could not be produced by the concerned members. It is very apparent that many of the members donating for the society are agriculturist by profession; managing their affairs in cash as they are receiving sale proceeds of their agricultural crops in cash only. Thus, the failure to furnish the cash flow may not be considered a valid reason to hold that no cash could be available with the concerned member (s) for paying the membership fee. It may further kindly be noted that if the contention of the Ld. Assessing officer is accepted and it is assumed that he was right in holding that the members were not having sufficient funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court and High Court decided that if the existence of the person who gave the money is proved then amount so received cannot be treated as unexplained income in the hand assessee. In the case of Uma Polymers (P.) Ltd. v. Dy. CIT [2006] 100 ITD 1 (Jd.) (TM) it was held that: In respect of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received and there is no further burden on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name; distinction between a public company and a private company is not very material for this purpose. In the case of CIT v. Shree Barkha Synthetics Ltd. [2004] 270 1TR 477 (Raj.) it was held that: Tribunal having found that companies from which the share application money had been received by assessee-company were genuinely existing and that the identity of individual investors was also established and they have confirmed the fact of making investment in the shares of the assessee-company, its finding that the assessee had discharged the initial burden and the additions under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company has satisfactorily established the identity of the share subscribers and deleted the addition under section 68, no substantial question of law arises for consideration. Further in the case of [CIT V. Jauharimal Goel [2005] 147 Taxman 48 (All.)] the similar view was taken by the Hon ble Allahabad High court: In the instant case, the assessee offered the explanation both about the nature and source of the money. It was explained that the money was deposited by the two ladies, which they had deposited after withdrawing from their bank account. The Commissioner (Appeals) and the Tribunal had found that the assessee had discharged his burden in proving the source of the money, which had flew from the bank account. It was, further, held that in addition to the source of money from the bank account, both the ladies were the income-tax assessees and assessed to tax under the Amnesty Scheme and the amount deposited in their bank account was as a result of their disclosure of income under the Amnesty Scheme. The Commissioner (Appeals) and the Tribunal found the explanation satisfactory and, accordingly, deleted addition. It was not a case where the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the appeal of the department on the following grounds: i) To obtain the benefit of the exemption under section 11, an assessee is required to show that the donations were voluntary. In the instant case, the assessee had not only disclosed its donations, but had also submitted a list of donors. The fact that the complete list of donors was not filed or that the donors were not produced, did not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. That was more particularly so in the facts of the case where admittedly, more than 75 per cent of the donations were applied for charitable purposes. [Para 10] ii) For the aforesaid reasons, there was no merit in the appeal and no substantial question of law arose from order of the Tribunal. Therefore, the appeal was to be dismissed. [Para 12] It is worth mentioning that the assessee society has furnished the complete list of the members; voluntarily paid the membership fee and contributed towards the corpus fund. The fund/fee to the extent of 99% was applied towards the charitable objects of the society. The intention of the legislature as clarifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 635 (SC)]. The Ld. AO inspite of appreciating the case law referred to the above has simply quoted that the case law which are not applicable in the appellant s case; in view of the amendment in Income-tax Act, 1961 and the insertion of section 115BBC. The intention of the legislature is very clear that the amendment is to tax the black money introduced in the books of account of the society. Your honor will kindly appreciate that appellant society did not start any activity during the relevant period and as such the additions made by the Ld. A.O. by holding that amount of donation/membership fee voluntarily paid by the members was the unexplained income of the society is mere presumption which is not sustainable in the interest of natural justice. In this context the appellant like to submit that; The Ld. AO himself has given the contradictory findings in the body of the assessment order; (i) by making the addition u/s 68 of the IT Act and (ii) admitting that the case law is not applicable in view of the amendment of the IT Act and insertion of section 115BBC. 1. The AO in the assessment order at many places has referred the provisions of section 68 read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards purchase of land; hence the presumption of the Ld. A.O. relating to the earning of profit by the society is without basis. Thus your honor will kindly appreciate that the ease law relied upon by Ld. AO is not all applicable in appellant s case being having distinguished facts. Summing up the submissions; the appellant requests your honor s kindly judiciously adjudicate the following issues; 1. The Registration u/s 12AA of the IT Act to the society has been granted by the Ld. CIT, Ghaziabad after examining the objects and the receipt of funds and utilization thereof. The Ld. A.O. has not properly appreciated these facts in passing the order u/s 143(3) under appeal. 2. The Assessing Officer has made the addition for unexplained cash credits u/s 68 of the IT Act, without appreciating the facts that society did not start the educational activity during the previous year and the source of receipts of funds was the voluntary capital contribution made by the members of the society/donors. 3. The basic facts relevant in the appellant s case have been completely ignored by the Ld. A.O. are; A. Trust is registered u/s I2AA of the Income Tax Act, 1961, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company or a co-operative society or a society registered under the Societies Registration Act, 1860(2) of I860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate; Similarly, other cases covered by the first proviso to section 164(1) and the first proviso to section 164(3) would also not attract the provisions of section 167B. Accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate. (Circular No.577 dated 4-9-1990) The provisions are clear that they not applicable in the case of the society registered under the Societies Registration Act 1860. Therefore, the order of the Ld. A.O. for charging income tax as per the section 167B is against the law which may kindly be appreciated and necessary direction to the Ld. A.O. may kindly be issued on this issue. It is requested that submission on this point may kindly be considered as a ground of appeal n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society. They are given privileges in the Act, but at the same time, they are expected to conform to their promise of doing not only lawful, but also, morally and socially lofty deeds, beneficial to the society. Such lofty expectations would be belied, if they raise funds through dubious/unclean mans; if they launder unaccounted/suspicious funds of their own or any member of the society. The courts can not shut their eyes to income-side of their activities, even if that income is found to be applied towards charitable activities!! The cleanness of the funds used is as important as is the utilization of those funds. Otherwise, there would open a floodgate of channeling the black money into the areas of charitable activities. Law neither permits that, nor would that be in the long-term interest of the society. As cannot be denied, there are fast developing and wide prevailing commercial interests in the area of educations field, in today s world. Apparently, that in one of the objective of section 115 BBC, which is operative from A.Y. 2007-08 onwards. As of now, the appellant cannot get away from purview of Section 68/69/69C. If borrowings/donations/investments are unproved, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties and perused the material available on record. 11. We have perused the provisions of Sections 115BBC and 68 of the Act. The Provisions of Section 115BBC of the Act reads as under: Anonymous donation means any voluntary contribution referred to in sub clause (iia) of clause (29) of section2, where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. That the provisions of section 115BBC will not be applicable in our case because the member's contribution cannot be termed as anonymous donation u/s 115BBC since we have furnished all the proofs in respect of identity of the members who have contributed towards the corpus fund as per list annexed thereto. 12. The Provisions of Section 68 of the Act reads as under: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the (Assessing) Officer, satisfactory, the sum so credited may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution does not maintain a record consisting of the identity of the person making such contribution indicating the name and address of the person and such other particulars as may be prescribed. The central board of direct tax as prescribed any particulars which is required to be maintained by the assessee trust. 16. In the case of Shanti Niketan Trust Vs ACIT (ITAT Delhi) wherein the assessee had not only disclosed its donations, but had also submitted a list of donors and the AO proceeded to treat the same as anonymous donations only for the reason that the notices u/s 133(6) of the Act were returned un-served and the assessee did not produce the donors when it was called upon to do so were held to be not liable to provisions of Section 115BBC of the Act. In that case, since the donations were duly treated as income by the assessee, it was held that section 68 could not have been invoked in view of the judgment of the Hon ble Delhi High Court in the case of DIT (Exemptions) vs. Keshav Social Charitable Trust. Further, the assessee s case also does not fall in the mischief of section 115BBC because as per sub section (3), anonymous donations are those donations for which n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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