Income Tax Appellate Tribunal - Jodhpur
Assistant Commissioner Of Income Tax vs Geetanjali Education Society on 8 November, 2007
Equivalent citations: (2008)114TTJ(JODH)697
ORDER
Hari Om Maratha, J.M.
1. The appeal by the Revenue and the cross-objection (CO) by the assessee are directed against the Order of the CIT(A), Udaipur, dt. 28th March, 2007 pertaining to asst. yr. 2004-05.
2. Briefly stated, the facts of this case are that the assessee is a public educational society duly registered under the Rajasthan Societies Act, 1958. It is also registered under Section 12AA of the IT Act, 1961 (hereinafter referred to as the Act' for short) by the CIT, Udaipur vide No. 919, dt. 24th Feb., 2003. It has claimed exemption under Section 11 of the Act as it has been established for charitable purposes. The assessee society filed its return of income on 1st Nov., 2004, showing loss of Rs. 33,65,846. During the year under consideration the assessee society has been running an engineering college in the name of "Geetanjali Institute of Technology and Science". It has shown a total receipt of Rs. 1,07,37,085 from Geetanjali Institute of Technology and Science from tuition fees, hostel fees, conveyance fees, etc., and Rs. 5,60,02,537 from Geetanjali Educational Society out of donations and interest etc. Against the above receipts the assessee society has booked total expenditure of Rs. 4,59,47,088 which includes Rs. 4,26,58,933 being capital expenditure; thus the total income of the assessee comes to Rs. 1,61,89,727, which after setting off of excess of expenditure over income of asst. yr. 2003-04 of Rs. 1,98,55,573 results into a net loss of Rs. 36,65,846. The AO has noted that the perusal of the balance sheet revealed that the assessee society has received corpus donations of Rs. 1,97,34,112 and other donations of Rs. 5,36,98,553.
3. When asked to, the assessee society filed the list of donors, corpus and non-corpus, along with their complete addresses. PAN, mode of receipts etc. from the examination of which, the AO has made the following observations:
1. The donation received includes quantum ranging from Rs. 3,000 to Rs. 51 lakhs.
2. Some of the donations received include donation received in cash and also in the form of DDs and cheques.
3. The donations include donation from various trusts also for example Krishan Devi Philanthropical Trust, Kolkata, Rs. 15 lakhs, Shri Padmanabha Charitable Trust, Mumbai, Rs. 15 lakhs, Anandi Lal Poddar Trust, Mumbai above Rs. 17 lakhs, Lachman Das Sewa Ram Charities, Mumbai above Rs. 15 lakhs.
The donations received include donations received from various companies such as Gold Star Jewellary Ltd., Mumbai above Rs. 25 lakhs, IPCA Lab. Ltd. Rs. 51 lakhs, Alok Industries Ltd., Rs. 20 lakhs, Diam Star Jewellary India (P) Ltd., Mumbai, Rs. 10 lakhs, Under Water Services, Mumbai, Rs. 25 lakhs.
4. It is further seen that there are hundreds of donors from the city of Raipur who are shown to have given amounts ranging from Rs. 15,000 to Rs. 50,000. It is further seen that these donations have been paid in the form of DDs/postal Orders issued from a single bank in a single day and which are serially numbered.
From the above a suspicion aroused in the mind of the AO about the genuineness of these donations. The AO got further inquiries conducted. The ITO (Inv.), Raipur recorded the statements of five of the donors, when commission issued under Section 131(d) to the ITO (Inv.), Raipur. From their statements (relevant parts of which are reproduced in the assessment Order) the AO came to the conclusion that the donations are not genuine. The AO also got information collected under Section 133(6) of the Act in respect of some of the donors residing in Udaipur from which the AO drew an inference that the society is engaged in issuing bogus donation receipts and in fact it has introduced its unaccounted money in the form of donations He also opined that the donors have at the same time, claimed deduction under Section 80G in respect of their donation receipts from their incomes. The AO finally came to the conclusion that the society has lost charitable purpose. For that purpose, he issued a show-cause letter dt. 26th Dec., 2006 to the assessee society. The society filed its replies on 26th Dec., 2006 and 27th Dec, 2006, which are reproduced verbatim in the assessment Order. Finally, he came to the conclusion that the assessee society is not eligible for exemption under Section 11, therefore, he rejected the claim of the assessee and assessed it as AOP at the maximum marginal rate as per the provisions of Section 167B of the Act at a total-income of Rs. 7,43,39,750.
4. The learned CIT(A), on the contrary, accepted the claim of exemption of the assessee. He has observed that an exemption under Section 11 of the Act cannot be denied to the assessee on the basis of fake donations, and it cannot be treated as the income of the assessee under Section 68 of the Act or any other section of the Act. There is no express provision in any of the relevant Sections 11, 12 and 13 of the Act to that effect. He has further observed that the exemption under Section 11 of the Act can be denied only in the circumstances if (i) the activities of the trust are not genuine and (ii) the activities are not being carried out in accordance with the objects of the trust. The learned CIT(A) has clearly observed that the AO has not given such a finding. He goes on adding that till the time the society remains registered under Section 12AA of the Act, any income received by it has to be treated as exempt under Section 11 of the Act. Uncross-examined version of the donors has been held to be not relevant. Resultantly, he has allowed the claim of the assessee society under Section 11 of the Act. The Revenue is aggrieved.
5. We have heard rival submissions and have perused the available materials on record carefully. We have also perused the paper book and the written submission filed before us.
The learned CIT-Departmental Representative, Shri K.R. Meghwal, has repeated the facts and the reasoning given by learned AO, in its entirety. According to him the claim of the assessee society is not allowable. On the other hand, learned Authorised Representative, Shri Sanjay Jhawar, has relied on the Order of the learned CIT(A) in this regard. He has further submitted that the AO has neither doubted the genuineness of the activities carried out by the assessee society nor has alleged that the society has not carried out its activities as per its objectives. It is the case of learned Authorised Representative that the donations received by it were wholly for charitable purposes and have been utilized for charitable purposes.
Having cogitated the entire evidences available on record vis-a-vis the oral submissions, we are of the opinion that nowhere the learned AO has noted or found that the assessee society did not carry out its activities as per its objectives. He has also not doubled genuineness of the activities of the assessee society. In such circumstances, when the institution is engaged in the charitable activities, receives a donation or contribution in respect of which the particulars or the identity of donors has not been established, the IT law, as it stood before 1st April, 2007, does not deny the exemption of such income if the same has been applied for charitable purposes. From 1st April, 2007 onwards anonymous donations or contributions may result in denial of exemption under Section 11 of the Act by virtue of Sub-section (7) inserted in Section 13 of the Act and Section 115BBC by the Finance Act, 2006. This amendment also clarifies that hitherto such anonymous donations/contributions did not lead to rejection of the claim of the assessee. The Hon'ble Rajasthan High Court in the case of Dy. CIT v. Cosmopolitan Education Society has held, by dismissing the appeal of the Revenue and by affirming the findings of the Tribunal and that of learned CIT(A), that in case of any misutilisation of the funds of the society or mismanagement of the activities of the society, action can be taken against the members of the society as per the provisions of various statutes governing the society but, this cannot be made a basis for the rejection of the claim of exemption made by the assessee society. The Special Leave Petition against this Judgment was also dismissed by the Hon'ble Supreme Court and the decision is reported in (2000) 241 ITR (St) 132. The Jodhpur Bench of the Tribunal has taken a similar view while deciding the case of ITO v. Sankripa Sanathan Sansthan in ITA No. 578/Jd/2006 wherein it has been held that Section 11(1)(d) of the Act does not demand that the assessee trust should establish creditworthiness and financial capacity of donors and explanations about their sources and genuineness of their contributions. The strict proof as required under Section 68 of the Act is not applicable in such cases. Once the identity of the donor is shown the donation has to be held as genuine. So long as the assessee society enjoys the registration under Section 12AA of the Act and applies its income for charitable purposes it cannot be denied exemption under Section 11 of the Act. In another case the Jodhpur Bench while deciding the ITO v. Udaipur Udyog Ltd. Provident Fund Trust in ITA No. 575/Jd/2006 has held that so long as the provident fund continued to remain recognized, any income received by the trustees has to be treated as exempt. It was also held that on going through the language of Schedule IVth it becomes apparent that the power to grant or withdraw recognition lies with the Chief CIT and the AO has absolutely no jurisdiction to consider this aspect of the matter. So long as the assessee remains recognized, its income cannot be held to be taxable. This was the admitted case by both the parties that the recognition under Section 12AA of the Act remains in operation and the AO has not disputed the application of the income for charitable purposes.
6. We are in agreement with the observations of learned CIT(A) when he says that exemption under Section 11 cannot be denied to the assessee on the basis of fake donations. The impugned claim of exemption can only be denied if (i) the activities of the trust are not genuine and (ii) its activities are not being carried out in accordance with the objects of the trust. Admittedly, no finding has been given by learned AO in this regard. He has not touched these ingredients, which are sine qua non for grant of impugned exemption. It is also a fact that registration granted under Section 12AA of the Act has not been withdrawn by CIT. None of the allegations contained in the assessment Order for asst. yr. 2004-05 under consideration relates to the activities carried on by the society. Rather, the activities of the society are being carried out as per Rules, stand confirmed from the following evidences:
1. Approval by AICTE and affiliation from Mohan Lal Sukhadia University, Udaipur (PB 1-11)
2. State Government letter for approval of the society as educational institute and other permission letters (PB 12-25)
3. Campus placement details (26)
4. Details of students in the institutions run by the society (PB 27)
5. Newspaper clippings and newsletters and brochures (PB 28-97) A copy of concession of the society has also been included at pp. 50-72. The Hon'ble Delhi Bench of the Tribunal, in the case of Manav Shiksha Samiti v. Dy. CIT in ITA No. 1343/Del/2006 has held that if the assessee satisfies the condition that it is existing solely for education purposes about which no dispute was raised by the AO then all its income from whatever source, is to be granted exemption under the law. It has been further held that an educational society where total income is exempt is unlikely to have any undisclosed income. Similar view Has been expressed by the Hon'ble Allahabad High Court while deciding the case of CIT v. Kamla Town Trust . It is also clear from the record that no opportunity to cross-examine the donors, whose statements were relied on by the AO for denying exemption under Section 11 of the Act, was given to the assessee society. Therefore, these statements cannot be made basis for rejecting the claim of the assessee society in view of the decision of the case of State of Kerala v. K.T. Suaduli Grocery Dealer, etc. 1977 CTR (SC) 260 and also by the Hon'ble Delhi High Court in the case of CIT v. SMC Share Brokers Ltd. (2007) 210 CTR (Del) 353 : (2007) 288 ITR 345 (Del). The assessee society has produced names and addresses, PAN confirmations, etc., during the assessment proceedings of all the donors for the year under consideration. Entire details have also been filed before us at pp. 130-151 of the PB. The AO has conducted small enquiries which were also not subjected to cross-check by the assessee and has further, observed in his Order that it was neither practical nor feasible to verify each and every donation. It was the duty of the AO to make such verification from the individual donors and without making such verification, he could not come to the conclusion that donations are bogus. Most of the donations having been received by drafts/cheques through banking channels, in the normal course, from existing assessees, confirmations having been filed no enquiry having been conducted in the correct perspective, the action in holding such donations as bogus is also in the violation of principles of natural justice. The onus of proving that the apparent was not the real lies on the party who claimed it to be so. It is a long cherished ruling of the Hon'ble Supreme Court which was given in the Judgment of CIT v. Daulatram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC). Still further, the Hon'ble Delhi High Court has held, while deciding the case of Director of IT (Exemption) v. Keshav Social & Charitable Foundation (2005) 278 ITR 152 (Del), that when the assessee has not only disclosed its donations, but has also submitted a list of donors, the fact that the complete list of donors was not filed or that the donors were not produced, does not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. The learned Authorised Representative has further placed reliance on various other decisions of the Hon'ble Patna, Gujarat and other High Courts to support the claim of the assessee. It is a fact that no verification was made from the donors whose confirmations were filed and who remitted by cheques/drafts. Some of the donors to whom the AO called for information under Section 133(6), namely, Shri Ashok Choudhary and Shri Chater Singh Babel and others admitted the donation (PB 161-164). The AO has failed to bring these facts on record although all these evidences were filed on record. The AO ignored the statements filed by the society in which there was nothing incriminating and the Order was passed on the basis of statements recorded by him and were against the society. It is a clear case that the, AO did not make any enquiry in respect of the donations received from the trusts, companies and celebrities and other donors, which were received by account payee cheques/drafts. These donors are existing assessees and have claimed deduction under Section 80G of the Act for the donation made to the assessee. Merely by recording statements of few persons on the back of the assessee, without producing them for cross-examination, the entire donations cannot be treated as bogus and as unexplained money of the society. The IT authorities cannot be allowed to take advantage of their own inaction to the prejudice of the assessee, in respect of the allegation that the assessee society has received donations from various trusts, well known companies and certain celebrities. The society has been working for the purpose of attaching its objects by carrying out various activities in the field of education. Therefore, there is nothing wrong to make donations to assessee society keeping in mind the charitable activity by it. In the totality of the foregoing discussions, we are of the considered opinion that there is no infirmity in the finding of the learned CIT(A) insofar as the appeal of the Revenue is concerned. The issue in question is squarely covered by the abovementioned decisions of this Bench of the Tribunal and is also covered by the other decisions mentioned as above. Therefore, we confirm the impugned finding and dismiss the ground raised by the Revenue. As a result, the appeal of the Revenue is dismissed.
C.O. No. 48/Jd/2007.
7. The assessee has raised only one ground in its cross-objection which reads as under:
Under the facts and in the circumstances of the case, the learned CIT(A) has erred in stating that not providing the opportunity of cross-examination to the assessee society is technical lapse/lacunae instead of holding that without providing the same the statements of the donors do not become admissible evidence against the assessee society.
8. As we have already observed while deciding the appeal of the Revenue that not providing the opportunity of cross-examination is a serious lacuna and not technical lapse an unscrutinised statement is not a statement at all and cannot be used against a person who was not given an opportunity to cross-examine the deponent in this case no such opportunity was given. Therefore, we amend the observations so made by the learned CIT(A) and allow this ground of cross-objection.
In the result, the appeal of the Revenue is dismissed and the cross-objection is allowed.