Satluj Shiksha Samiti, Berli Kalan, Rewari v. Commissioner Of Income Tax, Rohtak

ITA-471-2018 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-471-2018 (O&M) Date of Decision: 2.4.2019 Satluj Shiksha Samiti, Berli Kalan, Rewari Versus ....Appellant. Commissioner of Income Tax, Rohtak ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Pankaj Jain, Senior Advocate with Mr. Sachin Bhardwaj, Advocate and Mr. Divya Suri, Advocate for the appellant.Mr. Sachin Bhardwaj, Advocate and Mr. Divya Suri, Advocate for the appellant. *** AJAY KUMAR MITTAL, J. 1.Delay of 47 days in refiling the appeal is condoned. 2.This appeal has been filed by the assessee under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order dated29.9.2017 (Annexure A-10) passed by the Income Tax Appellate Tribunal,Delhi Bench 'G', New Delhi (hereinafter referred to as “the Tribunal”) inITA No. 777/DEL/2016, for the assessment year 2011-12, claiming thefollowing substantial questions of law:- I.Whether on examining Schedule 7 List III Entry25, 28 of Constitution of India, can the deemingfiction of law be utilized to the detriment of theapplicant charitable society fulfilling the 'test ofpredominant object', by treating the explained25, 28 of Constitution of India, can the deemingfiction of law be utilized to the detriment of theapplicant charitable society fulfilling the 'test ofpredominant object', by treating the explained transactions as cash credit u/s 68 to increase thelimit specified (1 cr), for denial of exemption u/s10(23C)(iiiad) r.w. Rule 2BC of the Income TaxAct, 1961, Income Tax Rules 1962? II.Whether the Tribunal order is unreasonable whileconcurring with the findings of CIT(A) that theissue in dispute 'is not clear' & not assigningreasoning to clarify the dispute hence in suchcircumstances the case should have been remandedfor resolving the controversy in accordance withthe procedure of law?concurring with the findings of CIT(A) that theissue in dispute 'is not clear' & not assigningreasoning to clarify the dispute hence in suchcircumstances the case should have been remandedfor resolving the controversy in accordance withthe procedure of law? 3.A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee has been incorporated withthe object to promote child education specially for minority community andunder privileged sections of the society and is registered as is clear from thecertificate of registration along with memorandum of association (AnnexureA-1). The assessee for the assessment year 2011-12 filed its return on15.10.2011 at 'nil' income. The said return was processed under Section143(1) of the Act. Since the date of incorporation on 1.9.1989, till theassessment year 2011-12, the assessee had been filing the returns of incomeregularly as required under Section 139(1) of the Act. During the pendencyof the assessment proceedings, the assessee filed written pleadings dated18.2.2014, 27.2.2014 1.3.2014 and 26.3.2014 (Annexure A-2 Colly). TheAssessing Officer vide order dated 28.3.2014 (Annexure A-3) framed theassessment at ` 75,64,750/- as unsecured cash loan of ` 67,75,000/-remained unexplained and, thus, added under Section 68 of the Act. After ITA-471-2018 -3- ITA-471-2018 -3- adding this amount of ` 67,75,000/- to the gross receipts from fees andinterest at ` 72,28,382/-, the gross annual receipts came to ` 1,40,03,382/-which exceeded ` 1 crore. Accordingly, the assessee was not entitled toclaim exemption under Section 10(23C)(iiiad) of the Act. Feeling aggrievedby the order, Annexure A-3, the assessee filed an appeal on 30.4.2014(Annexure A-4) before the Commissioner of Income Tax (Appeals) [forbrevity “the CIT(A)”]. The assessee also furnished written pleadings dated15.5.2015 and 25.6.2015 (Annexure A-5 Colly) before the CIT(A).Pursuant thereto, the CIT(A) sought remand report from the AssessingOfficer who issued notice dated 6.8.2015 (Annexure A-6), wherein theAssessing Officer had called 6 of the unsecured loanees to record theirstatements to verify the genuineness of the cash transactions. It wasrecorded in the remand report that in response to summons to these persons,the assessee produced only five persons and their statements were recordedunder Section 131 of the Act. All these persons had neither produced copyof any income tax return filed by them nor furnished/produced anydocumentary evidence in respect of source of cash deposits made in theirbank accounts. It was noticed in the remand report that the assessee had notadded or produced anything new in respect of the sources of cash depositsmade and against which loans have been advanced to the assessee. The CIT(A) vide order dated 27.1.2016 (Annexure A-8) dismissed the appeal of theassessee. Still dissatisfied, the assessee filed an appeal before the Tribunalon 12.2.2016 (Annexure A-9). The Tribunal vide order dated 29.9.2017(Annexure A-10) dismissed the appeal of the assessee. Hence, the presentappeal. After hearing learned counsel for the assessee, we do not find ITA-471-2018 any merit in the appeal. 5.The assessee had received unsecured loan in cash amounting to` 67,75,000/- from various persons. The assessee had failed to discharge itsonus in respect of the unsecured loan of ` 67,75,000/- and, therefore, theAssessing Officer had rightly treated the said income as unexplained incomeand added to the returned income of the assessee under Section 68 of theAct. Further, during the year under consideration, the assessee had grossreceipts from fees and interest at ` 72,28,382/-. Since the assessee had failedto discharge its onus qua unsecured loan, thus, on adding the same with itsreceipts from fees and interest, the gross annual receipts amounted to` 1,40,03,382/- (` 67,75,000/- + ` 72,28,382/-) which exceeded ` 1 crore.Consequently, a notice dated 24.3.2014 was issued to the assessee to showcause as to why the exemption claimed under Section 10(23C)(iiiad) of theAct be not disallowed and excess of income over expenditure be taxed, asthe gross receipts of the assessee were exceeding ` 1 crore and the assesseehad not taken prior approval from the Chief Commissioner of Income Tax,Panchkula under Section 10(23C)(iiiad) of the Act. The said exemption wasdisallowed to the assessee and the excess of income over expenditure of` 7,89,745/- along with the unexplained unsecured loan of ` 67,75,000/-was added to the returned income of the assessee. Accordingly, theAssessing Officer framed the assessment at ` 75,64,750/-. The CIT(A) videorder dated 27.1.2016 (Annexure A-8) affirmed the aforesaid additionsmade by the Assessing Officer in the following terms:- “I have examined the facts and circumstances of the case.A sum of ` 67,75,000/- has been added on account ofunsecured loans received. As stated in the assessment “I have examined the facts and circumstances of the case.A sum of ` 67,75,000/- has been added on account ofunsecured loans received. As stated in the assessment order, as well as in the remand report dated 27.11.2015, itis apparent that the lenders of funds have not, at anystage discharged their onus in furnishing documentaryevidence in respect of cash deposits made in theiraccounts and against which loans were advanced to theappellant. It is absolutely clear that the creditworthinessof the lenders and the genuineness of the transaction isnot clear. Moreover, the lenders who were summonedhave not submitted their ITRs. In view of the facts laidout above, I confirm the addition of ` 67,75,000/-. Also an addition of ` 7,89,745/- was made on a/c of theamount confirmed as excess of income over expenditureafter withdrawal of exemption u/s 10(23C)(iiiad) as thereceipts in view of the addition of ` 67,75,000/- exceeded` One Crore. Since, the appellant had not submitted thecorrect position of its gross annual receipts, the findingby the AO which pags the turnover at above ` One Croreautomatically necessitates the requirement of an approvalof the Ld. Pr. CCIT, Panchkula. Since this approval hasnot been sought, the AO was correct in not allowing theclaim of expenditure. The addition of ` 7,89,745/- isconfirmed.” 6.The Tribunal while confirming the addition of ` 67,75,000/-made on account of unsecured loan received, had noticed that the lenders of ITA-471-2018-6- and against which loans were advanced to the assessee. Thecreditworthiness of the lenders and the genuineness of the transaction wasnot clear and even the lenders summoned by the Assessing Officer had notsubmitted their income tax returns. Therefore, the addition made by theAssessing Officer under Section 68 of the Act was rightly confirmed by theCIT(A) and did not call for any interference by the Tribunal. The Tribunalhad observed that the assessee had shown gross receipts from fees andinterest of ` 72,28,382/- and after debiting the expenses under various headsincluding depreciation of ` 64,38,637/-, the excess of income overexpenditure had been shown at ` 7,89,745/- which was claimed as exemptunder Section 10(23C)(iiiad) of the Act. Since the assessee had failed todischarge its onus in respect of unsecured loan, therefore, on adding thesame with its receipts from fees and interest, the gross receipts amounted to` 1,40,03,382/- (` 67,75,000/- + ` 72,28,382/-) which exceeded ` one crore.Since, the gross annual receipts of the assessee exceeded ` one crore and theassessee having not taken prior approval from the Chief Commissioner ofIncome Tax, Panchkula, thus, the assessee was not eligible for exemptionunder Section 10(23C)(iiiad) of the Act. Therefore, the said exemption wasrightly disallowed and as a consequence the excess of income overexpenditure shown at ` 7,89,745/- was also rightly added to theunsubstantiated unsecured loan and the taxable income of the assesseedetermined. The findings recorded by the Tribunal read thus:- “6.We have heard both the parties and perused therecords and gone through the orders of the authoritiesbelow, especially the contention raised in the grounds ofappeal and the contentions raised in the Synopsis and “6.We have heard both the parties and perused therecords and gone through the orders of the authoritiesbelow, especially the contention raised in the grounds ofappeal and the contentions raised in the Synopsis and case laws cited therein as well as the contentions raisedin the written submissions filed by the Ld. DR and thecase laws cited therein. We find that a sum of` 67,65,000/- has been added on account of unsecuredloan received. We further find that after perusing theassessment records, appellate order and the RemandReport, it is apparent that the lenders of funds have not,at any stage, discharged their onus in furnishingdocumentary evidence in respect of cash deposits madein their accounts and against which loans were advancedto the assessee. We further note that in this case thecreditworthiness of the lenders and the genuineness ofthe transaction is not clear. Moreover, the lenders whowere summoned by the AO have not submitted theirIncome Tax Returns. In view of the above facts andcircumstances, in our considered opinion, Ld. CIT(A) hasrightly confirmed the addition in dispute made by the AOu/s. 68 of the Act, which does not need any interferenceon our part, hence, we upheld the order of the Ld. CIT(A)on the issue in dispute and reject the ground no.2 raisedby the assessee. 6.1.With regard to ground no.3 relating to upholdingthe action of the AO in denying exemption u/s 10(23C)(iiiad) to the assessee amounting to ` 7,89,745/- claimedby the assessee despite the assessee being eligible for thesame is concerned, we note that the society has shown gross receipts from fees and interest of ` 72,28,382/-.After debiting the expense under the various headsincluding depreciation of ` 64,38,637/-, the excess ofincome over expenditure has been shown at ` 7,89,745/-and the same has been claimed as exempt u/s 10(23C)(iiiad) of the Income Tax Act, 1961. In view of above,the society has failed to discharge its onus in respect ofso called unsecured loan, therefore, on adding the samewith its receipts from fees and interest, the gross annualreceipts comes at ` 1,40,03,382/- (67,75,000 +72,28,382) which exceeds ` One crore. Keeping in viewthe above, a notice dated 24.03.2014 was issued andassessee society was asked to show cause as to why theexemption claimed u/s 10(23C)(iiiad) should not bewithdrawn and excess of income over expenditure shouldnot be taxed as per the provisions of Income Tax Act asthe gross receipts of the society are exceeding ` Onecrore and the society has not taken prior approval fromthe Ld. CCIT, Panchkula u/s 10(23C)(vi) of the IncomeTax Act, 1961 which is mandatory for claimingexemption. In response, the society filed its written replystating therein that receipt of our school should be kept at` 72,28,382/- which is prescribed limit explained inSection 10(23C)(iiiad) of the Income Tax Act, 1961.This contention of the assessee is not genuine because,the gross annual receipts of the society exceeding ` One -9- crore and society has not taken prior approval from theLd. CCIT, Panchkula. Therefore, the society is noteligible for exemption u/s 10(23C)(iiiad) of the Act,hence, the same exemption was withdrawn and theexcess of income over expenditure shown at ` 7,89,745/-was added to the returned income of the assessee and thesame was rightly confirmed by the Ld. CIT(A), whichdoes not need any interference on our part, hence, weuphold the order of the Ld. CIT(A) on the issue indispute.” -9- crore and society has not taken prior approval from theLd. CCIT, Panchkula. Therefore, the society is noteligible for exemption u/s 10(23C)(iiiad) of the Act,hence, the same exemption was withdrawn and theexcess of income over expenditure shown at ` 7,89,745/-was added to the returned income of the assessee and thesame was rightly confirmed by the Ld. CIT(A), whichdoes not need any interference on our part, hence, weuphold the order of the Ld. CIT(A) on the issue indispute.” 7.An effort was made by learned counsel for the appellant todemonstrate that the conclusions and the concurrent findings of factrecorded by the Assessing Officer, the CIT(A) and the Tribunal waserroneous and perverse. The aforesaid findings of fact recorded by theauthorities cannot be held to be perverse based on non-appreciation ofmaterial or based on the misreading of any evidence on record which maywarrant interference by this Court. No question of law, much less,substantial question of law arises in the appeal. 8.Accordingly, finding no merit in the present appeal, the same ishereby dismissed. (AJAY KUMAR MITTAL) JUDGE April 2, 2019(MANJARI NEHRU KAUL)gbsJUDGE Whether Speaking/ReasonedYesWhether ReportableYes