TMI Blog2022 (1) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there is no error on the part of the learned CIT (A) in admitting that confirmation which are merely supporting evidences in admitting them in deciding the same after giving the learned Assessing Officer opportunity to examine the same. Accordingly, ground number 1 of the appeal of the learned Assessing Officer is dismissed. Violation of the provisions of Section 36A (3) of the Bombay Public Trust Act - CIT (A) clearly noted that the assessee trust has taken a returnable interest free loans - claim of the AO is that the assessee should have taken a permission of the charity commissioner and as it has violated the provisions of the Bombay Public Trust Act, the assessee should be denied exemption u/s 11 of the Income Tax Act. Learned Assessing Officer in the remand report accepted that no loans were taken by the trust during the relevant year and no property of the trust has been utilized for the advantage of the trustees. Thus, in absence of any contrary evidence produced before us, we do not find any reason to not to agree with the order of the learned CIT (A) that assessee has not violated provisions of Section 36A of the Bombay Public Trust Act. Therefore, ground numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust also. The loan was also given to the trustees on the same terms and conditions as it was given to any other members of the society. Therefore, no special benefits were given to the trustees - identical issue has been accepted by the learned Assessing Officer in the reassessment proceedings for earlier years and assessment proceedings for subsequent years, the learned and CIT(A) has held that no income of the trust was applied for the benefit of the trustees. In view of this, we do not find any infirmity in the order of the learned CIT(A) in holding that there is no violation of the provisions of Section 13 (1) (C) and Section 13 (2) of the Act and therefore, the exemption u/s 11 of the Act cannot be denied to the trust. Accordingly, ground number 6 of the appeal is dismissed. Not adjudicating the rejection of the books of account u/s 145 - in view of our decision on the earlier grounds, wherein we have held that the assessee is entitled to the exemption u/s 11 of the Act on the accounting entries covered in those bank accounts also which were not disclosed before the learned Assessing Officer, we find that this ground becomes merely academic in nature and the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner or Audit Report in Form 10 B. 3. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 15,95,82,806/- made u/s. 69A 69B of the Income-tax Act, 1961, mainly on the basis of additional evidence and Remand Report though the admission of additional evidence is not in accordance with the Rule 46A of I. T. Rules, 1962. 4. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 15,95,82,806/- made u/s 69A 69B of the Income Tax Act, 1961 without appreciating the fact that the addition has been made on the basis of non disclosure of bank accounts and also transactions were not recorded/ disclosed in the Balance Sheet or in the Audit Report in Form No.10B. 5. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the exemption u/s 11 of the I. T. Act, 1961 on the basis of objects of Trust, which do not bar benefit to other communities, without appreciating the fact that the exemption u/s. 11 was denied on the ground that in reality, the actual b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377;1,79,97,000/- which are repayable. The learned AO also asked the assessee to produce permission taken from the Charity Commissioner in accordance with the provisions of the Bombay Public Trust Act, 1950. Assessee submitted that it did not have any such permission. Therefore, the learned AO noted that assessee has violated the provisions of Section 36A of the Bombay Public Trust Act and noted that though the object of the trust are Quardan Hasana , but the assessee is required to take the permission from the Charity Commissioner. Therefore, according to the Assessing Officer it was in violation of the provisions of Section 11 of the Income Tax Act and hence, he rejected the exemption to the assessee under that Section. ii. The learned AO further examined balance-sheet of the assessee and observed that assessee has maintained various bank accounts however, on verification of the details, it was observed that there were certain cash deposits in the Axis Bank Account of the assessee of ₹1,631,180/ as per Annual Information Return [AIR] information. Therefore, the assessee was asked to produce complete details of cash deposits and sources of the same. Copy of the AIR in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the provisions of Section 145 (3) of the Act. Assessee submitted a reply on 23/3/2015. The main contention of the assessee is that the amount received in the said bank accounts are contribution and subscriptions received from the members and against the same the assessee trust is providing loans and other charities to the needy members of the trust itself therefore, those are not undisclosed receipts. It was also pleaded that exemption u/s 11 of the Act cannot be denied. Assessee submitted the complete list of contributions received from the members along with the confirmation of accounts for the loan given by the trust to the various members of the trust. Assessee also submitted that it works towards the object of the trust, it is covered by Quardan Hasana and neither interest is charged and nor interest is paid, therefore, there is no income arising out of that. Assessee also submitted that for the same bank accounts separate books of accounts maintained and the balance sheets are drawn, every contribution in disbursement is accounted for. Assessee submitted entire members contribution and payments made along with the balance sheet and receipts and payments of those bank ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reason that (1) there is no complete identity between the contributors and participants , (2) it is not in furtherance of the object of the trust and (3) there must not be any scope of profiteering or the transaction should not be tainted with commerciality. v. He further held that there is a violation of the provisions of Section 13 (1) (b) of the Act as the advances were given for the benefit of a particular community. He further held that there is a violation of provisions of Section 13 (1) (C) and 13 (2) of the Act in respect of direct benefits to the trustees for the reason that assessee submitted that the persons referred to in Section 13 (3) of the Act are also eligible to the loan as those are also members of the society and no distinction can be made amongst them. Assessee also submitted that those persons have also availed the loan facility in the last three years. 04 In the nutshell, he treated the assessee trust as an Association of person denying exemption u/s 11 of the Act and thereafter applying provisions of Section 145 (3) of the Act and rejected the books of account. Further, in the circumstances that he had made a proposal for withdrawal of registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not incorporate the above accounts of self-help schemes in its books of accounts produced before the Income-tax authorities, as since inception, same were not included. He further noted that during the appellate proceedings for the Financial Years 2007 08 to 2013 14, assessee has submitted additional evidences in the form of confirmation from all the members of the activities of the trust. Those additional evidences were sent to the assessing officer for remand report. On perusal of the remand report the learned CIT(A) noted that assessee has submitted the copy of the bank statements of those four bank accounts and reconciled them with the books of accounts, the learned AO verified all the debit and credit entries in those four bank accounts and further, reopened the assessment u/s 147 of the Act for Assessment Years 2008 09 and 2009 10, the learned Assessing Officer summoned 78 persons on a random basis, who appeared before him, their statements were recorded and the learned AO reconciled the transactions of these members with the debit and credit entries in those undisclosed bank accounts. He further referred to paragraph number 16 of the remand report that clearly st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the learned CIT (A) and has preferred this appeal before us. The learned CIT DR , Departmental Representative took us to the assessment order passed by the learned Assessing Officer stating that the learned Assessing Officer has held that there is a violation of the provisions of the Bombay Public Trust Act, 1950, four bank accounts were not disclosed in the regular books of accounts wherein, substantial cash was deposited, on being questioned and confronted, assessee submitted that these are the mutual concerns and therefore out of sheer ignorance were not included in the regular books of accounts. The Assessing Officer examined the provisions of the Act along with the documents provided by the assessee and found that there is a clear-cut violation of the provisions of Section 13 (1) (b) (c) of the Act and therefore, the benefit of Section 11 and 12 of the Income Tax Act were not given to the assessee. He further referred to the remand report and stated that the loan contributions made by the persons of all the accounts were not verified by the Assessing Officer. He further stated that ignorance could not be a plea, which can be accepted when such huge transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er referred to page number 21 of the paper book wherein in paragraph number 8 that there were around 1600 members involved in the mutual health help activity and confirmation have been filed from the said members regarding the transactions made during the year. He therefore submitted that complete information was duly confirmed submitted before the assessing officer. He further referred to paragraph number 9 wherein, during the reassessment proceedings for assessment year 2008 09 the learned assessing officer summoned u/s 131 of the Act to 78 members randomly who appeared and filed confirmation of the transactions with the trust and the statement were also recorded of those parties confirming the same. He further submitted that in the same paragraph the learned Assessing Officer confirmed that he has verified the information for financial years 2007 08 to 2011 12. He further referred to the several judicial precedents cited before the learned Assessing Officer during the remand proceedings and coming to paragraph number 13 where the Assessing Officer has confirmed that considering all the facts in totality it is seen that the activity conducted by the assessee trust of self-h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee. He submitted that there is a contradiction in the statement of the assessee that whether these bank accounts were already disclosed or not. He further submitted that when there is undisclosed cash deposited in the bank account, the addition deserves to be upheld. He further referred to the remand report and submitted that it does not speak about for the impugned assessment year, which is in appeal before the Coordinate Bench. In the end, she submitted that it is related to a particular community and these facts are required to be proved by the assessee, otherwise, before the assessing officer. She therefore submitted that the order of the learned Assessing Officer deserves to be sustained. 09 We have carefully considered the rival contention and perused the orders of the lower authorities as well as the several judicial precedents cited before us. As the facts culled out from the orders lies in a narrow compass. The assessee is a trust registered with the Bombay Public Trust Act as well as with the Commissioner of Income Tax u/s 12 A of the Act. During the course of examination of the accounts of the assessee, it was found that the assessee trust has four dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pitted against the merits of the case, generally, the merit should be granted precedence, unless there are warranting and compelling circumstances otherwise. We do not find that any such circumstances exist in this case where the additional evidences should not have been admitted. Even otherwise, the learned Assessing Officer was supplied with complete details by the assessee. Coming to page number 29 of the order of the learned and CIT (A) wherein the assessee submitted during the course of appellate proceedings the copy of confirmation from all the members and made a request for admission of this evidences. The assessee also pleaded that during the course of assessment proceedings the assessee was not given sufficient opportunity to present these evidences. Those evidences were merely supporting the original claim of the assessee that there is no activity generating any profit/income to the assessee or were a mutual concern exists for mutual benefit of contributors and the beneficiaries. In the remand report, objecting to the admission of the additional evidence merely stated that the assessee was given an opportunity from January 2015 to substantiate claims but assessee did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of remand proceedings the amount of cash deposited as contribution in those bank accounts were confirmed by the contributors. In some of the reassessment and assessment proceedings for earlier and subsequent years, the learned Assessing Officer examined the contributors by issuing summons u/s 131 of the Act, who confirmed the transaction. Before us, it was not shown that any of the sums deposited in the bank account of the assessee where the contributors are not identified and the contribution made by any person is not genuine. It is also not shown to us that the any amount of self-help loan given to the beneficiaries is also not genuine. The assessee produced before the learned Assessing Officer during the course of remand proceedings the separate books of accounts for self-help activities and it were audited separately. From the self-help activity, no income is generated as assessee neither charges interest and nor pays any interest. The learned Assessing Officer verified all the debit and credit entries in the books of accounts with respect to those bank accounts. Further, in the reassessment proceedings for assessment years 2008 09 and 2009 10 and as well as in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 (1) (b) of the Income Tax Act are not attracted in the case of the assessee. Accordingly, ground number 5 of the appeal is dismissed. 14 Coming to ground number 6 of the appeal, where there is a violation of the provisions of Section 13 (1) (C) and Section 13 (2) of the Act was challenged, we find that the activity of the self-help where the loan is given by assessee without interest to the needy members of the society. Such needy persons may be the trustees of the trust also. The loan was also given to the trustees on the same terms and conditions as it was given to any other members of the society. Therefore, no special benefits were given to the trustees. Furthermore, the identical issue has been accepted by the learned Assessing Officer in the reassessment proceedings for earlier years and assessment proceedings for subsequent years, the learned and CIT(A) has held that no income of the trust was applied for the benefit of the trustees. In view of this, we do not find any infirmity in the order of the learned CIT(A) in holding that there is no violation of the provisions of Section 13 (1) (C) and Section 13 (2) of the Act and therefore, the exemption u/s 11 of the Act can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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