Income Tax Appellate Tribunal - Delhi
M.R. Education Society, New Delhi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
SHRI R.P. TOLANI, JUDICIAL MEMBER
and
BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.1148/Del./2010
(Assessment Year : 2006-07)
ACIT, Central Circle - 1, vs. M/s. Manav Rachna Educational Society,
Faridabad. 1073, Sector 15,
Faridabad.
(PAN : AAATM9177E)
ITA No.1841/Del./2011
(Assessment Year : 2007-08)
M/s. M.R. Educational Society, vs. ACIT,
5E/1A, B.P. NIT, Faridabad.
Faridabad.
(PAN : AAATM9177E)
ITA No.793/Del./2011
M/s. M.R. Educational Society, vs. CIT, Central Circle,
Sector 43, Suraj Kund Road, Ludhiana.
Faridabad.
ITA No.972/Del/2011
M/s. M.R. Educational Society, vs. CIT, Central Circle,
Sector 43, Suraj Kund Road, Ludhiana.
Faridabad.
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Ashwani Taneja, Advocate
REVENUE by : Shri Raj Tandon, CIT DR and
Shri R.S. Negi, Senior DR
ORDER
2 ITA No.756/Del./2009
ITA No.1148/Del./2010
ITA Nos.7 93 & 972, 1841/Del./2010
PER B.C. MEENA, ACCOUNTANT MEMBER :
ITA No.1148/Del/2010
The assessee is a trust running various educational institutions at Faridabad including Faridabad Institute of Technology (F.I.T.), Career Institute of Technology and Management (C.I.T.M.), The Indo-Canadian School of Advanced Technology (ICSAT), Manav Rachna College of Education (MRCED), Manav Rachna International School (MRIS), Manav Rachna Dental College (MRDC) and Uthan Educational Society. The assessee trust was granted registration u/s 12AA(2) of the Income-tax Act, 1961 (hereinafter referred to 'the Act') by the CIT, Rohtak on 27.03.2001. The trust was also granted exemption u/s 80G(5) of the Act by CIT, Rohtak vide its order dated 31.05.2002. Its exemption certificate u/s 80G was valid for a period w.e.f. 01.04.2002 to 31.03.2007. A search operation u/s 132 was carried out at the premises of the assessee as well as at the residence of the trustees on 04.08.2005. The assessments for Assessment Year 2005-06 and 2006-07 were completed on 28.12.2007. As per these orders, an addition of Rs.2,50,000/- was made for Assessment Year 2005-06 and Rs.22,69,450/- made for the Assessment Year 2006-07. The renewal of exemption u/s 80G was declined on 29.11.2007. The registration granted u/s 12AA(3) was also cancelled on 30.01.2008 by holding that the assessee trust is not a genuine 3 ITA No.756/Del./2009 ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010 and activities are not carried out in accordance with the object of charity. The assessee trust has been again granted registration u/s 12AA on 12.06.2008 and also allowed exemption u/s 80G vide order dated 18.07.2008 for a period from 01.04.2008 to 31.03.2012. The additions made in the Assessment Years 2005-06 and 2006-07 were challenged before the CIT (A) who had deleted the addition in both the years. No appeal filed by the revenue against the orders of the CIT (A) for Assessment Years 2005-06. However, for the Assessment Year 2006-07, the revenue is in appeal before us in ITA No.1148/Del/2010. The grounds taken by the revenue are as under:-
"1. The Ld. CIT(A) has erred both in law and on facts of the case in deleting an addition of Rs.9,30,850/- made by the A.O. (on protective basis) u/s 69A of the LT. Act on account of unexplained cash/money.
2. The Ld. CIT(A) has erred both in law and on facts of the case in deleting an addition of Rs.13,38,600/- made on account of unexplained cash entries.
3. The Ld. CIT(A) has erred both in law and on facts of the case in allowing the registration u/s 12AA without appreciating that the assessee has not applied 85% of additional income of Rs.13,38,600/- towards charity or religious purpose in the previous year relevant to A.Y.2006-07.
4. The Appellant craves leave to add or amend the grounds of appeal on or before the appeal is heard and disposed off.4 ITA No.756/Del./2009
ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010
5. It is prayed that the order of the Commissioner of Income-tax (Appeals) be set-aside and that of the A.O. be restored."
2. Ground No.1 in this appeal is against the deletion of the addition of Rs.9,30,850/- made by the Assessing Officer on account of unexplained cash found at the time of search. The Assessing Officer made substantive addition of the cash found at the time of search in the hands of S/Shri O.P. Bhalla, Amit Bhalla and Prashant Bhalla. In the assessee's case, a protective addition was made treating the cash as unexplained money. The Ld. DR submitted that during the search operation on 04.08.2005, the statement of O.P. Bhalla, the Chairman of assessee trust was recorded. In this statement, Shri Bhalla has stated that money was belonging to Manav Rachna Educational Society and M/s. Techplast India Pvt. Ltd. but relevant cash books were not produced at the time of the search. The amount was found at different rooms of the house. Therefore, it cannot be said that this amount was brought from the premises of the assessee trust and kept at the residence of the trustees for safety. This was an amount which was siphoned of by the trustees and kept in their premises, therefore, there is a clear violation of the provisions of section 13(2)(a), (b) & (g). The CIT (A) is not justified in deleting the addition.
3. On the other hand, the ld. AR relied on the order of the CIT (A) and also pleaded that the amount of Rs.9,30,850/- was found at the residence of 5 ITA No.756/Del./2009 ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010 the trustees, Shri O.P. Bhalla and his sons (Amit Bhalla and Prashant Bhalla). The separate additions have been made in the hands of Shri O.P. Bhalla, Shri Amit Bhalla and Shri Prashant Bhalla aggregating to Rs.9,30,850/- on substantive basis. In the case of Shri O.P. Bhalla, the addition of Rs.1,90,650/- was made and it has been deleted by the CIT (A). The relevant order of the CIT (A) is placed at pages 29 to 41 of the paper book, Volume-1 wherein the CIT (A) has categorically stated that the money was belonging to Manav Rachna Educational Society and M/s. Techplast India Pvt. Ltd. and the cash books were duly produced before the Assessing Officer and additions cannot be sustained on the suspicion of possibility of any manipulation in the cash books. There was no specific finding that there was any manipulation in the cash book. Ld. AR also pleaded that in the cases of Shri Amit Bhalla and Shri Prashant Bhalla, the addition was deleted by CIT (A) and the revenue has accepted the order of the CIT (A). Revenue has not filed further appeals. Ld. AR pleaded that the cash was brought and kept at the residence of trustees at the night due to security reasons. The cash was belonging to the assessee Trust which was duly reflected in its cash books. Ld. AR pleaded to sustain the order of the CIT (A).
4. We have heard both the sides in detail. In assessee's case, the assessment was made on protective basis. At the time of search itself, the trustee, Shri O.P. Bhalla has stated that part of the money was belonging to 6 ITA No.756/Del./2009 ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010 the assessee trust. The cash was from the available balance in the books of the account of the assessee. The revenue has failed to pinpoint any specific defects in the books of account. The allegation of the manipulation in the cash book could not be established. No evidence of manipulation has been brought on record. Simply stating that there may be possibility of manipulation in the cash books cannot be made sole basis for making the addition. The evidences filed by the assessee show that assessee society was having cash in hand of Rs.7,65,000/-. In the statements at the time of search itself, the part of money found was stated to be belonging to the assessee trust. The reasons for keeping the cash at the residence are also explained and the same is acceptable reason as the location of the institutions run by Trust is at the periphery of the city. Due to security reasons, the cash was kept at the residence of the Trustee. Further, in the assessee's case, the addition was only on protective basis. Keeping all these facts in view, we find no merit in the revenue's ground, therefore, we dismiss this ground.
5. The second ground is related to the deletion of Rs.13,38,600/- made on the basis of Annexure A-47 on the ground that amount appearing in Annexure A-47 are not appearing in the books of account of the assessee.
6. Ld. DR relied on the order of the Assessing Officer. Ld. AR relied on the order of the CIT (A).
7 ITA No.756/Del./2009
ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010
7. We have heard both the sides. The documents seized as Annexure A- 47 is a daybook. This daybook was maintained for the period 02.07.2005 to 02.08.2005 where cash transfer entries in the name of various institutions run by the assessee has been made. These daybooks show cash entries of four institutions run by Trust and in fact these are division of assessee's Trust itself. All the entries appearing in the Annexure A-47 are part of the books of account of these divisions. Before us, the ld. AR was able to demonstrate and to show us the various entries found in the Annexure A-47 are also reflected in the cash book of various institutions run by the assessee. For examination, the cash of Rs.1,30,000/- entered in the daybook on 22.07.2005 belonging to CITM and Rs.1,40,000/- in the name of MRES are reflected in respective cash book. Similarly, other entries were also reflected in the cashbook. Therefore, in our considered view, the CIT (A) has rightly deleted the addition and we find no merit in the revenue's appeal.
8. Ground No.3 is related to canceling the registration and then working out the 85% of the additional income applied towards the charity for the year under consideration. Since we have dismissed the revenue's appeal on the issues of additions made no additional income remains in the hands of assessee which can be considered for working out the application of income up to 85%., therefore, this ground becomes infructuous and the same is dismissed.
8 ITA No.756/Del./2009
ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010
9. Ground Nos.4 & 5 are general in nature and do not required adjudication.
10. In the result, the appeal being ITA No.1148/Del/2010) filed by the revenue is dismissed.
ITA No.1841/Del/2011
11. This appeal filed by the assessee for the Assessment Year 2007-08. The CIT (A) has confirmed the addition made by holding as under :-
"4.3 I have considered the facts of the case as per assessment order. As far as ground of appeal No. 2 is concerned, it is seen from asstt order that notice u/s 143(2) of the Act was issued on 12-6-2008 which was served upon the assessee fixing the date of hearing on 18-6-2008. In this case the return declaring nil income was filed on 31-10-2007. It is therefore, seen that notice u/s 143(2) has been issued and served within the time and hence the ground No.2 is dismissed.
4.4 As regard the addition of Rs.7,89,96,478/- made on account of corporate donation received no submissions have been filed by the AR/ assessee. It is seen from facts discussed in the asstt order that the assessee M/s M.R. Education Society was registered u/s 12AA of the Act and assessee accordingly claimed that income arising from activities of society was exempt u/s 11 of the Act. Assessee society inter-alia received corpus fund amounting to Rs.7,89,96,478/- during the year under consideration which has been treated by AO as assessee's income by disallowing exemption u/s 11(2) of the Act on the ground that registration of the society u/s 12AA of the Act has been cancelled by CIT, Central, Ludhiana. Assessee filed appeal against the cancellation of registration before Hon'ble ITAT Bench "B" New Delhi. Hon'ble Tribunal while disposing of the appeal of the assessee vide order dated 15-2-2010 set aside the issue back to the file of CIT, Central 9 ITA No.756/Del./2009 ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010 Ludhiana for fresh consideration. Accordingly, CIT, Central Ludhiana after providing an opportunity to assessee society held that activities of trust were not genuine and not carried on in accordance with objects of charity. Accordingly, she declined to restore back the registration granted to the trust u/s 12AA (2) of the Act and thus held that order of cancellation u/s 12AA (3) dated 30-1-2008 effective from 01-10-2004 stands.
4.4.1 In view of above, it is clear that since the registration u/s 12AA has been cancelled, AD has denied the exemption u/s 11(2) of the Act and has rightly taxed the income of Rs.7,89,96,478/- and the same is upheld. Ground No.3 of appeal is dismissed.
12. The grounds of appeal read as under :-
"1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in treating the amount of Rs.7,89,96,478/- received as corpus donations, as income of the assessee and has further erred in denying the benefit of section 11 and 12 by treating it as AOP at maximum marginal rate.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned order being illegal and void ab initio and passed without providing an adequate opportunity of being heard and by not observing the principles of natural justice.
3. That in any case and in any view of the matter action of Ld. CIT(A) in confirming the action of Ld. AO in passing the impugned order being contrary to law and facts, void ab initio, beyond jurisdiction and the same is not sustainable on various legal and factual grounds.
4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing 10 ITA No.756/Del./2009 ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010 the action of Ld. AO in charging interest u/s 234B of the Income Tax Act, 1961.
5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other."
13. While pleading on behalf of the assessee, the Ld. AR submitted that the assessee trust was granted registration on 27.03.2001. The search was conducted on 04.08.2005 and additions made in the hands of the assessee for the Assessment Year 2004-05 had been deleted by the CIT (A) and the revenue has now preferred the appeal with the higher forum. For the Assessment Year 2006-07 also, the CIT (A) deleted all the additions made. The registration was cancelled vide order dated 30.01.2008 and it has been again granted on 12.06.2008 which is evident from page 20 of the paper book. It is the same officer, i.e., CIT, Central, Ludhiana who cancelled the registration and granted again. While granting registration the CIT has recorded that he is satisfied with the genuineness of the Society/Trust and of its present activities. Further, even after the search operation on the premises of assessee trust and its trustees, nothing adverse has been found. No addition was sustained even up to the level of CIT(A) which could be made a basis for cancellation of the registration. None of the allegations, on the basis of which the registration has been cancelled, has been found correct even at the first appellate level itself. The subsequent assessment for the Assessment Year 11 ITA No.756/Del./2009 ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010 2008-09 has been finalized at the nil income by accepting the return of income filed by the assessee. The order u/s 143(3) for Assessment Year 2008-09 dated 31.10.2011 is placed on record wherein the Assessing Officer has found the activities of the society as qualified for exemption u/s 11 of the Act and assessee was found to have fulfilled all the conditions laid down u/s 11 of the Act.
14. Ld. DR relied on the orders of the CIT (A).
15. We have heard both the sides in detail. The addition was based on the cancellation of the assessee trust u/s 12AA and denying the exemption u/s 11 of the Act. Since we have allowed the appeal of the assessee for granting the registration, therefore, we set aside the orders of the authorities below.
16. In the result, the appeal being ITA No.1841/Del/2011 filed by the assessee is allowed.
ITA No.793/Del/2011
17. This is an appeal field by the assessee against the order of the CIT (Central), Ludhiana dated 23.12.2010. The grounds of appeal read as under:-
"1. That having regard to the facts and circumstances of the case, Ld. CIT(Central) has erred in law and on facts in cancelling the registration granted to the assessee trust for the purpose of exemption u/s 12AA and holding that the activities of the trust are not genuine and charitable, allegedly on account of the additions made during assessment proceedings in the case of the assessee for A.Y 05-06 & 06-07 and that too retrospectively from 1-10-2004.12 ITA No.756/Del./2009
ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010
2. In any view of the matter and in any case the cancellation of registration granted, U/S 12AA is bad in law and against the facts and circumstances of the case and that too retrospectively from 1-10-2004.
3. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other."
18. We have heard both the sides in detail. The registration of the assessee which was granted on 27.03.2001 was cancelled by the order dated 30.01.2008. This cancellation was based on the three additions made to the income of the assessee for Assessment Year 2005-06 and 2006-07. The first addition was in respect of unaccounted cash found and seized from the residence of trustees of assessee. In the quantum appeal, we have dismissed the revenue's appeal by confirming the relief granted to assessee, therefore, this ground for cancellation no more survive before us. Secondly, the unaccounted payment of Rs.8 lacs made to M/s. R.K. Engineering Works has also been deleted and no appeal has been filed against the deletion of the addition. Therefore, in our considered view, this ground also does not survive. The third ground of unexplained cash transfer entry has been also decided in favour of the assessee. Therefore, all the issues on which registration was cancelled did not survive. The assessee has been granted registration again on 30.11.2008 although it was made effective from 13 ITA No.756/Del./2009 ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010 Assessment Year 2008-09. The CIT has found the trust and its activities as genuine and the objectives have been found charitable. These objectives were found charitable at the time of initial registration. The additions made to the income of Trust have been deleted in the quantum appeal. Nothing survives which can be made basis for denial of registration. Therefore, in our considered view, there is nothing on record on which the assessee can be denied the continuation of the registration.
19. In the result, we allow the assessee's appeal being ITA No.793/Del/2011.
ITA No.972/Del/2011
20. This appeal filed by the assessee against the order of the CIT, Central, Ludhiana for denying the approval of exemption u/s 80G. The grounds of appeal read as under :-
"1. That having regard to the facts and circumstances of the case, Ld. CIT(Central) has erred in law and on facts in declining approval to the assessee trust for the purpose of exemption U/S 80G and restoring back the earlier order dated 29.11.2007 declining approval of exemption U/S 80G and not granting approval u/s 80G.
2. In any view of the matter and in any case declining the approval U/S 80G and restoring back the order dated 29.11.2007 declining approval of exemption u/s 80G is bad in law and against the facts and circumstances of the case.14 ITA No.756/Del./2009
ITA No.1148/Del./2010 ITA Nos.7 93 & 972, 1841/Del./2010
3. In any view of the matter and in any case the order under appeal is bad in law and against the facts and circumstances of the case.
4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other."
21. We have heard both the sides on the issue. The CIT, Central, Ludhiana declined the approval of the assessee for exemption u/s 80G on the basis of the cancellation of registration of the assessee trust u/s 12AA. Since we have allowed the assessee's appeal against the cancellation of registration, therefore, we allow the assessee's appeal on this ground also and set aside the order of the CIT and direct to grant the exemption u/s 80G.
22. In the result, the appeal being ITA No.972/Del/2011 filed by the assessee is allowed.
23. In the result, the appeal of revenue in ITA No.1148/Del/2010 is dismissed and appeals of assessee in ITA No.1841/Del/2011, ITA No.793/Del/2011 and ITA No.972/Del/2011 are allowed.
Order pronounced in open court on this 25th day of May, 2012.
Sd/- sd/-
(R.P. TOLANI) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 25th day of May, 2012
TS
15 ITA No.756/Del./2009
ITA No.1148/Del./2010
ITA Nos.7 93 & 972, 1841/Del./2010
Copy forwarded to:
1.Appellant p
2.Respondent
3.CIT
4.CIT (A)
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.